CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

STUD Y
S U M M A R

CONGRESSIONAL

BUDGET OFFICE

Second and D Streets, S. W. \

Washington, D.C. 20515 I

January 1994

THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES

The effort to clean up the nation's hazardous waste sites has proved to be more costly and time-consuming

than expected in 1980, when the Congress created the Superfund program. According to a new

Congressional Budget Office (CBO) study, The Total Costs of Cleaning Up Nonfederal Superfund Sites,

future Superfund costs could reach $75 billion or more and could continue through the year 2075. These

costs include all public and private Superfund expenditures except those associated with cleaning up federal

facilities (such as military bases or weapons production facilities) and are in discounted dollars-a measure

that takes into account the time value of money.

Future Superfund costs are highly uncertain, mainly because of uncertainty about the number of

additional contaminated sites that will be discovered and placed on the National Priorities List (NPL) for

cleanup. Accordingly, CBO analyzed three scenarios chosen to represent the range of plausible

assumptions about the number of sites and the costs of cleanup. In the absence of changes in policy or

breakthroughs in technology, which the scenarios do not consider, the study finds that Superfund's

remaining costs are large under all circumstances.

CBO's base case assumes that a total of 4,500 nonfederal sites are ultimately placed on the NPL,

roughly four times the current number, and estimates that Superfund will cost the public and private sectors

about $75 billion from fiscal year 1993 onward, in discounted dollars (using a 7 percent annual discount

rate). Parties liable for cleanup at individual sites and state governments directly pay more than half of

the total; the federal government, which can seek to recover its costs from liable parties, initially pays for

38 percent, or close to $30 billion.

The low case differs from the base case most significantly in assuming that the Environmental

Protection Agency (EPA) ultimately places 2,300 nonfederal sites on the NPL; estimated low-case costs

from 1993 on are roughly $40 billion in discounted dollars. The high case assumes a total of 7,800

nonfederal NPL sites and yields an estimate of $120 billion.

The study's estimates imply that most Superfund costs are still to come. Combined public and private

spending commitments made between 1981 and 1992 total less than $30 billion in discounted terms. This

represents roughly 20 percent to 40 percent of the economic value of the program's total costs. In real

dollars (adjusted for inflation but not discounted), commitments through 1992 constitute only 5 percent to

17 percent of the ultimate total.

Under CBO's base-case and high-case assumptions, Superfund will need large increases in its budget

to avoid a growing backlog of sites awaiting study and cleanup. Annual Superfund spending by the federal

government, which reached $1.7 billion in 1992, is estimated to double by the year 2003 in the base case,

in the absence of constraints on funding, and to triple by 2003 in the high case. Costs to liable parties rise

even more sharply over the same period. In all three cases that CBO analyzed, required contributions by

the states rise dramatically from current levels, although they remain a relatively small share of total costs.

CBO's estimates of future Superfund costs are more comprehensive than earlier estimates developed

by EPA and academic researchers. Measured in undiscounted dollars for comparability, the CBO base-case

estimate is larger than its predecessors. CBO's analysis estimates lower average cleanup costs per site,

however, in part because it assumes that fewer of the most expensive waste sites remain to be found and

that cleanups conducted by liable private parties cost less than they would if conducted by EPA.

Questions about the study should be directed to Perry Beider of CBO's Natural Resources and

Commerce Division at (202) 226-2946. The Office of Intergovernmental Relations is CBO's Congressional

liaison office and can be reached at 226-2600. For additional copies of the study, please call the CBO

Publications Office at 226-2809.
THE TOTAL COSTS OF CLEANING UP

NONFEDERAL SUPERFUND SITES

The Congress of the United States

Congressional Budget Office

For sale by the U.S. Government Printing Office

Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328

ISBN 0-16-043071-2
NOTES

Numbers in the text and tables of this study may not add to totals because of

rounding.

Except for references to legislation, all of the years referred to in this study are

federal fiscal years.

Cover photo shows drums at an abandoned waste site in New Jersey that ranked

high on Superfund's National Priorities List. (Photo by S.C. Delaney, Environmental Protection Agency.)
Preface

T

he federal Superfund program to clean up the nation's worst hazardous waste

sites has been controversial since its creation in 1980. As the Congress begins

to consider reauthorizing Superfund, which is due to expire on September 30,

1994, it is giving increased scrutiny to several aspects of the program, including the cost.

This study, written at the request of the ranking Member of the House Committee on the

Budget, analyzes the future costs to the public and private sectors that can be expected

under Superfund's current policies. In keeping with the mandate of the Congressional

Budget Office (CBO) to provide objective analysis, the study makes no recommendations.

Perry Beider of CBO's Natural Resources and Commerce Division wrote the study,

under the supervision of Jan Paul Acton and Roger Hitchner. David Cooper, Dave Evans,

Bruce Pumphrey, and many other staff members at the Environmental Protection Agency

gave the author extensive cooperation with his research. Many valuable comments were

made by Kim Cawley, Elizabeth Pinkston, Linda Radey, and Christopher Williams within

CBO, and by William Colglazier, Dave Evans, Charles Openchowski, Kate Probst, and

Bruce Pumphrey outside the agency.

Christian Hewlett Spoor edited the manuscript. Gwen Coleman and Donna Wood

typed the tables. Kathryn Quattrone, with the assistance of Martina Wojak-Piotrow,

prepared the study for publication.

Robert D. Reischauer

Director

January 1994

Contents

ONE

TWO

THREE

APPENDIXES

A

B

SUMMARY

THE SUPERFUND PROGRAM

AND ITS TYPES OF COSTS

Superfund in Brief 1

Types of Costs and Expenditures to Date 7

Other Groups' Estimates of Superfund Costs

IX

11

ESTIMATES OF FUTURE SUPERFUND COSTS

Overview of the Methods for Estimating Costs 13

The Cost Estimates 14

Assumptions About Numbers of Sites 18

Assumptions About Direct Response Costs 25

Assumptions About Transaction and

Enforcement Costs 30

Assumptions About Federal Program Costs 31

Assumptions About the Discount Rate 32

COMPARISONS WITH OTHER ESTIMATES

AND IMPLICATIONS FOR POLICY

Why do the CBO, EPA, and

Tennessee Estimates Differ? 35

Implications for Federal Cleanup Policy 37

Superfund Costs Under Alternative Policies 40

A Summary of the Different Assumptions

Used in the Three Scenarios 43

A Glossary of Superfund Terms 45

13

35
vi THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

TABLES

1.

2.

3.

4.

5.

6.

Federal Superfund Outlays and Obligations,

Fiscal Years 1981-1992

Superfund Obligations in Fiscal Year 1992

Future Superfund Costs, by Initial Payer

Future Superfund Costs, by Category

Assumed Distribution of NPL Sites, by Cost Category

Average Present- Worth Costs per Site for Fund-Lead

8

9

16

17

23

7.

8.

9.

10.

A-l.

Remedial Action, by Site Type

Sensitivity of Present-Worth Cost Estimates

to Assumptions About Remedial Action Costs

Scenario-Specific Assumptions About

Remedial Action Costs

Assumed Unit Enforcement Costs, by Source

Present-Worth Costs at Alternative Discount Rates

Assumptions of the Three Cases

26

27

28

31

33

44

FIGURES

1.

2.

3.

4.

5.

Cumulative Trust Fund Resources,

Fiscal Years 1981-1992

Total Superfund Expenditures,

Fiscal Years 1993-2075

Actual and Assumed Additions to the

Superfund Screening Inventory

Required State Contributions to Superfund,

Fiscal Years 1993-2075

Federal Superfund Expenditures,

Fiscal Years 1993-2075

15

19

38

39
CONTENTS vii

BOXES

1. Other Federal Laws Governing Cleanup 3

2. Examples of Mega-, Major, and Minor Sites 22

Summary

T

he cost of cleaning up the nation's hazardous

waste sites is far greater than the Congress

expected in 1980 when it passed the federal

law governing such cleanup. The magnitude of

remaining costs is an important issue as the Congress

reviews the progress and prospects of the federal

Superfund program, set to expire on October 1,1994.

This study seeks to inform the Congressional and

public reauthorization debate by estimating Superfund's future costs under existing policies.

Unlike most federal environmental laws, which

focus on reducing new emissions of hazardous

substances, Superfund focuses on cleaning up sites

that are already contaminated. The Environmental

Protection Agency (EPA) has evaluated thousands of

contamination problems and placed nearly 1,300 of

the worst sites on the National Priorities List (NPL)

for intensive cleanup. The differences in type and

extent of contamination at NPL sites lead to a range

of cleanup costs per site from the millions of dollars

to the hundreds of millions. Under the Superfund

law, certain "responsible parties" are liable for a

site's costs; EPA can enforce this liability either by

having the responsible parties perform the cleanup

under its oversight or by conducting its own cleanup

(with the government of the state in which the site is

located paying a required share) and recovering the

costs afterward.

Data gained from the first 12 years of Superfund's operation underpin the estimates reported in

this study. Yet much remains uncertain-particularly

the number of sites that will ultimately be identified as needing cleanup. Lesser sources of uncertainty in the estimates are the costs of evaluating and

cleaning up each site and the public and private costs

of administering the program, including the costs of

establishing or contesting liability for cleanup. The

Congressional Budget Office's (CBO's) analysis

reflects these uncertainties by reporting estimates for

three scenarios based on differing assumptions.

None of the scenarios, however, incorporate major

changes in policy or breakthroughs in cleanup technologies.

Estimates of Future Costs

CBO's base-case estimate is that Superfund cleanups

will cost the public and private sectors about $75

billion from fiscal year 1993 onward. This figure

includes all Superfund-related expenditures except

those associated with cleaning up federal facilities

and is in discounted, present-worth dollars—a measure that is useful in summarizing costs incurred over

many years because it takes into account the time

value of money. (For comparison, the estimated

present worth of spending obligations from the

beginning of Superfund through 1992 is less than

$30 billion.) Estimated direct costs to the various

payers, not including subsequent cost recoveries, are

$43 billion (58 percent) to responsible parties, $28

billion (38 percent) to the federal government, and

$3 billion (4 percent) to the states for required

contributions to cleanups conducted by EPA. State
x THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

and local governments that are liable at specific sites

will also pay some share of the responsible-party

costs.

The present-worth estimate of about $75 billion

assumes a real discount rate of 7 percent per year;

the corresponding figure in real dollars (adjusted for

inflation but not discounted) is roughly $230 billion.

These costs are incurred through the year 2070;

hence, annual costs over the entire 78-year period

average $2.9 billion, which closely matches current

combined public and private spending for Superfund.

This simple average can be misleading, however,

because some expenditures must precede others.

Average costs before 2047, the year in which the last

cleanup project is assumed to move into the operations and maintenance phase, are estimated to be

$4.2 billion per year. Moreover, assuming no

constraints on funding, annual spending could rise

over the next decade to a peak of $9.1 billion in

2003.

Estimates other than the base-case figures were

developed using alternative assumptions—the most

important concerning the number of sites to be

discovered and cleaned up. The base case assumes

that EPA ultimately places 4,500 nonfederal sites on

the NPL, a fourfold increase over the 1,149 such

sites included by the end of 1992. This assumption

comes from an extrapolation of the number of sites

screened for the NPL so far and a rough estimate by

EPA staff of the percentage of screening sites that

may be placed on the NPL. Plausible variations in

the assumptions about future screening sites and the

placement rate lead to a total of 2,300 NPL sites in

the low case and 7,800 sites in the high case. Total

estimated costs in the low case are $42 billion in

present-worth terms, of which the federal government's share is $17 billion. In the high case, the

estimated total is $120 billion, including $43 billion

spent by the federal government.

Site investigation and cleanup account for about

65 percent of future Superfund costs in all three

scenarios. Costs for litigation, negotiation, and other

activities associated with the liability system represent about 24 percent of the total. This share is

consistent with CBO's analysis of expenditures

through 1992, which does not support the common

perception that most Superfund money has been

spent on attorneys' fees. The remaining 10 percent

to 12 percent of estimated future costs reflect federal

costs for management, support, and research.

How Does This Study Differ

from Previous Analyses of

Superfund Costs?

The Environmental Protection Agency and a group

of researchers at the University of Tennessee have

both published partial estimates of Superfund's future

costs. The CBO estimates differ from these predecessors in four ways.

o CBO's estimates are more comprehensive, including public and private administrative and

legal costs and cleanup costs for sites not yet

discovered.

o CBO's analysis separates NPL sites into three

cost groups. The Superfund experience to date

shows that some sites are hundreds of times

more expensive than others; the base-case estimate of the average cost for a small minority of

"mega-sites" is $169 million in cleanups conducted by EPA, compared with a $24 million

average for all other sites. Evidence suggests

that relatively fewer mega-sites have been discovered since the early years of the program,

which leads CBO to expect a downward trend in

average cleanup costs as time passes.

o The estimates consider the time path of Superfund expenditures in order to calculate their

discounted present worth.

o The analysis of cleanup costs incorporates recent

EPA data on the differences between initial

estimates and final costs. It also allows for the

possibility that private-sector cleanups may cost

less than those performed by the government.

The wider coverage and the use of discounted

dollars in CBO's analysis yield very different costs

than the EPA and Tennessee estimates of $16 billion

and $151 billion, respectively. The EPA figure is

restricted to costs incurred by the federal government
SUMMARY XI

during cleanup of the first 1,236 NPL sites; the

Tennessee figure gives past and future costs of

cleaning up 3,000 nonfederal NPL sites in undiscounted dollars, omitting administrative and legal

costs. In terms of average cleanup costs per site, the

CBO estimates are lower than comparable EPA and

Tennessee figures, primarily because of the assumptions about the future incidence of mega-sites and the

costs saved in private-sector cleanups.

Implications for Federal

Cleanup Policy

CBO's analysis of future Superfund costs has several

important implications for the federal government's

cleanup policy.

o Estimates of total Superfund costs depend strongly on the ultimate number of sites to be cleaned

up—a number that remains highly uncertain.

The CBO scenarios assume that the total number

of nonfederal NPL sites could be as low as 2,300

or as high as 7,800; largely as a result, presentworth costs vary by a factor of almost three

between the low case and the high case. More

extreme numbers of NPL sites are less likely

than those assumed here, but they cannot be

ruled out from the data now available.

o Under any plausible assumptions, Superfund

expenditures are not even halfway complete;

thus, the Congress may be justified in considering policy changes that involve short-term transition costs but long-term benefits. CBO's analysis implies that the funds obligated through fiscal

year 1992 represent between 19 percent and 40

percent of the economic value of Superfund's

total costs, measured in present-worth dollars. In

undiscounted dollars, these obligations constitute

only an estimated 5 percent to 17 percent of the

ultimate total.

o Required contributions by the states mil remain

a relatively small share of total costs, but they

will rise dramatically from current levels. The

estimated state share of future costs is 4 percent

to 5 percent in present-worth terms (8 percent to

9 percent in undiscounted dollars). The observed

share to date is much lower—less than 1 percent—

because state contributions are concentrated at

the end of the cleanup process. EPA data and

studies indicate that these contributions totaled

about $0.1 billion through 1992, whereas the

base-case estimate of future state costs is $3.3

billion in present-worth terms, or $19 billion in

undiscounted dollars.

o Under CBO's base-case and high-case assumptions, but not its low-case assumptions, EPA will

need large increases in funding to avoid a

growing backlog of sites awaiting study and

cleanup. The base case assumes that roughly

900 sites—14 percent of those in the final, "decision-pending" stage of EPA's screening processwere awaiting placement on the NPL at the end

of 1992. Adding these sites to the list over a 10-

year period while expeditiously cleaning up

current NPL sites and processing new sites

brought to EPA's attention would require federal

Superfund spending to double by the year 2003.

(Total public and private spending would triple.)

Keeping pace with the site work load in the high

case would require federal spending to triple

(and total spending to increase almost fivefold).

When the current Superfund law was enacted,

little information was available about the ultimate

costs to the taxpayer and the economy. Now that the

general order of magnitude of public and private

Superfund obligations is becoming clearer, the

program's balance of benefits and costs may warrant

a second look.

The estimates described in this study do not

evaluate policy alternatives that might be less costly

than current law, but they do provide a baseline

against which alternatives could be evaluated.

Alternatives that have been discussed include narrowing the range of sites handled by the federal program, revising cleanup standards, reordering priorities among sites or within sites, giving local communities more say in decisions about cleanup, narrowing

or eliminating the law's liability provisions, and

encouraging or requiring EPA to make greater use of

settlement tools available in the current law.

Chapter One

The Superfund Program

and Its Types of Costs

T

he federal Superfund program to clean up

the nation's worst hazardous waste sites was

created by the Congress in 1980, partly in

response to reported threats to human health and the

environment at the Love Canal site in Niagara Falls,

New York. The problem of cleaning up waste

hazards has proved to be larger and more expensive

than the Congress originally expected, and the end is

not yet in sight. During its first 12 years, the

Superfund program completed close to 2,500 removal

actions, which include responses to emergencies such

as chemical spills and leaking barrels and interim

steps to eliminate the immediate threats posed by

more complex hazards. The program also placed

1,275 sites on the National Priorities List (NPL) for

longer and more extensive remedial cleanups. But

despite public and private spending of more than $13

billion through 1992, only 149 of the 1,275 NPL

sites had completed all construction work related to

the cleanup remedies, and just 40 had been fully

cleaned up. Furthermore, estimates of the ultimate

number of NPL sites range between 2,100 and

10,000.*

The potential size of the Superfund program

raises important questions about its likely costs and

benefits. To shed some light on these questions, this

study estimates the future costs to the public and

See Milton Russell, E. William Colglazier, and Mary R. English,

Hazardous Waste Remediation: The Task Ahead (Knoxville, Tenn.:

University of Tennessee, Waste Management Research and

Education Institute, 1991); and Office of Technology Assessment,

Coming Clean: Superfund Problems Can Be Solved. . . (October

1989).

private sectors of Superfund cleanups at all sites not

owned by the federal government. (The costs of

cleaning up federal facilities are borne not by the

Superfund program but by the agencies that operate

the sites—principally the Departments of Energy,

Defense, and the Interior—and pose some different

policy issues.)2 This study does not try to estimate

the benefits of cleanup; a 1991 report by the National Research Council suggested that reliable estimates

of the benefits may not be possible given the present

state of toxicological knowledge.3

Superfund in Brief

The Superfund law is the broadest federal statute

governing cleanup of waste hazards—or, more formally, sites contaminated with hazardous sub3.

For example, the issue of permanent isolation as an alternative to

cleanup has been raised for some remote and technically difficult

sites in the Energy Department's nuclear weapons complex.

Conversely, the controversies surrounding the Superfund liability

system generally do not apply to federal sites. For analyses of

cleanup problems at federal facilities, see Congressional Budget

Office, Cleaning Up the Department of Energy's Nuclear Weapons

Complex (forthcoming), "Environmental Cleanup Issues Associated

with Closing Military Bases," CBO Staff Memorandum (August

1992), and Federal Liabilities Under Hazardous Waste Laws (May

1990); and Office of Technology Assessment, Complex Cleanup:

The Environmental Legacy of Nuclear Weapons Production

(February 1991).

National Research Council, Committee on Environmental Epidemiology, Environmental Epidemiology, vol. 1, Public Health and

Hazardous Wastes (Washington, D.C.: National Academy Press,

1991).
2 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

stances.4 The program is administered by the Environmental Protection Agency (EPA), which evaluates

the need for cleanup at sites brought to its attention,

identifies parties liable for the costs of cleanup, and

oversees site studies and cleanups conducted either

by its own contractors or by the liable parties.

Funding for these EPA activities comes primarily

from specific business taxes earmarked for a trust

fund, officially named the Hazardous Substance

Superfund.

Superfund was created by the Comprehensive

Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) to complement other

federal environmental laws that emphasize reducing

new emissions of hazardous substances or cleaning

up narrower categories of sites (see Box 1). The

Congress amended the program, greatly increasing

the size of the trust fund, in the Superfund Amendments and Reauthorization Act of 1986 (SARA). In

1990, the Congress renewed Superfund for fiscal

years 1992 through 1994 and extended its taxation

authority through calendar year 1995.

What Does the Superfund

Program Do?

The Superfund program focuses on two types of

waste-hazard cleanups: removal actions and remedial

actions. Removal actions include emergency responses to immediate threats (from spills or leaking

barrels, for example) and limited, interim steps

toward full cleanup (such as draining a surface

lagoon). Under SARA, removals financed by the

federal government are limited to one year and $2

million unless EPA finds that continued action is

immediately necessary or is appropriate and consistent with its plans for subsequent remediation. (The

ceilings on duration and cost do not apply to removal

actions undertaken by liable private parties.) For

many sites, removals are sufficient to complete the

necessary cleanup.

Sites that are more costly to clean up and pose

large enough threats to human health and the environment can be placed by EPA on the National

Priorities List for remedial response. Examples of

remedial cleanups include capping and monitoring

landfills, excavating and disposing of river sediments, pumping and treating groundwater, and

incinerating or biologically treating soils. A significant policy change introduced in SARA requires

EPA to give preference to remedial treatments that

permanently and significantly reduce the volume,

toxicity, or mobility of the hazardous substances,

especially over remedial options that involve off-site

disposal of untreated substances.

EPA selects sites for the NPL using a multistage

screening process that culminates in a score under

the Hazard Ranking System (HRS). Each site

brought to EPA's attention-typically by a state or

local government, site owner, or neighbor—first

receives a preliminary assessment (PA), which

includes a review of available documents and reconnaissance of the site. A site that is neither eliminated from further consideration after the PA nor

referred to another cleanup program receives a site

inspection (SI), which involves collecting and analyzing samples of soil and water, as appropriate. In

some cases, the SI is supplemented by an expanded

site inspection, which yields more data. Finally,

EPA uses the collected data to assign the site an

HRS score; in general, a site is placed on the NPL if

it scores at least 28.5.5

The National Priorities List is itself a multistage

process, commonly called a pipeline. Once a site is

on the list, it passes through several major phases or

milestones.

o The remedial investigation and feasibility study

(RI/FS) maps out the nature and extent of a

site's waste hazards and evaluates alternative

responses.

4. The term "hazardous waste" is given a specific legal definition in

the Resource Conservation and Recovery Act (42 U.S.C. 6903, 90

Stat. 2799). Superfund cleanups can be triggered by a broader class

of substances, some of which can be considered products or

feedstocks rather than wastes.

One site in each state may be placed on the NPL, regardless of its

HRS score, by being designated the top priority of the state

government. Also, a rarely used mechanism allows a site to be

placed on the NPL if the Agency for Toxic Substances and Disease

Registry issues a health advisory recommending that people be

removed from the site. Some sites that would score above 28.5 are

referred to another cleanup program (see Box 1) instead of being

placed on the NPL.
CHAPTER ONE THE SUPERFUND PROGRAM AND ITS TYPES OF COSTS 3

Box 1.

Other Federal Laws Governing Cleanup

The Resource Conservation and Recovery Act of

1976 (RCRA), which amended the Solid Waste

Disposal Act of 1965, established in its Title C a

national program for tracking and managing hazardous wastes and a corrective action program requiring

cleanup of such wastes released into the environment

at treatment, storage, or disposal (TSD) facilities,

which include many industrial plants. The corrective

action program is defined more narrowly than the

Superfund program, which covers a broader class of

hazardous substances and is not limited to releases

occurring at facilities; also, some TSD facilities are

likely to end up as Superfund sites because their

owners and operators are unable or unwilling to

comply with the corrective action requirements.

Nonetheless, the large number of TSD facilities

potentially requiring cleanup may make total cleanup

costs under RCRA higher than under Superfund.

The initial RCRA statute did not direct the

Environmental Protection Agency (EPA) to regulate

underground storage tanks containing chemical

products as opposed to wastes; nor did the 1980

Superfund law authorize the agency to clean up leaks

of petroleum and petroleum products (which are

generally excluded from the Superfund definition of

hazardous substances) from such tanks. These gaps

in authorization were filled in 1984 and 1986.

Among the many changes made to RCRA by the

Hazardous and Solid Waste Amendments of 1984

were provisions requiring EPA to set standards for

the design, operation, and cleanup of underground

tanks containing petroleum or hazardous products.

Authorization for EPA to clean up leaks from petroleum tanks was included in the 1986 amendments to

Superfund, which also created a smaller Leaking

Underground Storage Tank Trust Fund to finance

such cleanups.

The Clean Water Act, formally the Federal Water

Pollution Control Act Amendments of 1972, created

the federal authority to regulate cleanup of oil spills

that pose a threat to surface water. The Oil Pollution

Act of 1990 authorized using the existing Oil Spill

Liability Trust Fund to pay for cleanup, raised

existing limits on spillers' federal liability, and

authorized the Coast Guard to require that owners and

operators of oil-related facilities and vessels have

plans for containing and removing such spills in

coastal areas.

The 1976 Toxic Substances Control Act (TSCA)

authorized EPA to regulate both the use, labeling, and

disposal of new and existing chemicals used in

manufacturing and commerce and the cleanup of

spills of polychlorinated biphenyls (PCBs). The

Asbestos Hazard Emergency Response Act amended

TSCA in 1986, adding requirements that EPA set

standards for cleaning up asbestos in school buildings.

Superfund cleanups must meet the TSCA standards

where applicable or "relevant and appropriate."

The Surface Mining Control and Reclamation Act

of 1977 established a permitting program in the

Department of the Interior to require active coalmining operations to meet environmental and reclamation standards. It also placed a tax on current coal

production to fund reclamation of mines abandoned

before 1977 or before enactment of the regulations

implementing the law. The tax money, however,

cannot be used to clean up mines for which a responsible former operator could pay; in such cases,

cleanup can proceed only under Superfund or state

authorization. Amendments passed in 1990 also

prohibit this money from being used to clean up

mines listed as NPL sites, even if no solvent operators exist.

The Uranium Mill Tailings Radiation Control Act

of 1978 (UMTRCA) directed the Department of

Energy to clean up sandlike tailings left from uranium-processing operations at 24 specific inactive sites.

These sites are excluded from the Superfund program,

as are any releases of radioactive substances from

nuclear power plants. Other radioactive wastes,

including uranium tailings at milling sites not included in the UMTRCA list, can be cleaned up under

either Superfund or the Atomic Energy Act of 1954,

as amended.
4 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

o The record of decision (ROD) documents EPA's

selection of a particular remedy.

o The remedial design (RD) develops the detailed

engineering plan for carrying out the selected

remedy.

o The remedial action (RA), which often includes

"construction" and "operations and maintenance"

phases, is the actual implementation of the

remedy.

This description of the NPL pipeline requires two

qualifications. First, many sites are divided into

multiple "operable units" that correspond to different

areas or media to be cleaned up and that undergo the

RI/FS-ROD-RD-RA sequence separately. A site's

surface soil and groundwater might constitute two

operable units, for example. Second, a site or

operable unit that has reached a given stage in the

pipeline may return to an earlier stage as a result of

further evaluation or new information.

Besides these screening, study, and cleanup

efforts at individual sites-sometimes called direct

response activities-many technical, legal, and managerial activities in both the public and private sectors

are part of the Superfund program. The liability

system, discussed next, spurs searches for liable

parties and negotiation and litigation over cleanup

work and cost allocation. Other activities include

research and development, technology dissemination,

laboratory analysis, community relations, technical

assistance grants, contract management, policy

development, and budget planning.

Who Pays for Superfund Cleanups?

CERCLA takes a two-pronged approach to the

problem of who should pay to clean up hazardous

waste sites: it makes four types of parties liable for

the costs of cleanup, and it establishes the Superfund

trust fund to finance responses at sites for which the

liable parties cannot be found or lack sufficient

resources. The four types of "responsible parties"

(RPs) are a site's present owners and operators, its

previous owners and operators from periods during

which it received hazardous substances, the generators of such substances, and any waste transporters

responsible for choosing the site.6

Liability under CERCLA is retroactive, strict,

and joint and several. Strict liability places responsibility without regard to care or negligence; for

example, a party cannot escape Superfund liability by

showing that its waste disposal practices obeyed all

laws and regulations that were in force at the time.

Joint-and-several liability means that any responsible

party can be assessed the total costs for a contaminated site (unless his or her contribution can be

shown to have produced a separate, divisible result).

This liability scheme serves two goals of Superfund's

designers: it minimizes the ultimate burden on

federal taxpayers, and it gives handlers of hazardous

substances additional reason to avoid creating future

hazards.

In administering the Superfund program, the

Environmental Protection Agency can enforce the

liability of responsible parties in either of two ways.

It can have them perform the necessary cleanup

directly, under government supervision; such "RPlead" or "enforcement-lead" cleanups can occur either

through a negotiated settlement or as a result of an

administrative or judicial order. Alternatively, EPA

can conduct the cleanup itself and then negotiate or

sue to recover its costs from the responsible parties

after the fact. Such cleanups are referred to as

"fund-lead."

Fund-lead cleanups and other federal Superfund

expenditures are financed with money appropriated

from the trust fund, which receives most of its

revenue from excise taxes on petroleum and certain

chemicals and a tax on corporate income. In fiscal

year 1992, these taxes brought in $1.2 billion;

cumulatively, they account for $8 billion of the $12

billion in total Superfund receipts through 1992, or

67 percent (see Figure 1). Other sources of money

to the trust fund are general Treasury revenues (14

percent of the total), interest on the fund balance (8

Because liability is often contested, the term "potentially responsible parties" is also commonly used. The present study follows the

EPA style in referring to "RP-lead" cleanup and study projects; no

confusion is intended with the definition of "responsible party" used

in the Oil Pollution Act.
CHAPTER ONE THE SUPERFUND PROGRAM AND ITS TYPES OF COSTS 5

Figure 1.

Cumulative Trust Fund Resources,

Fiscal Years 1981-1992

(In billions of dollars)

Chemical Tax

(2.4)

Corporate Tax

(2.2)

Recoveries

(0.5)

Advances

(0.7)

Interest

(1.0)

General Revenues

(1.7)

Total Receipts: 12.0

SOURCE: Congressional Budget Office based on data from the

Department of Treasury.

percent), repayable advances from the general fund

(6 percent), and recoveries, fines, and penalties from

responsible parties (5 percent).

One important difference between fund-lead and

RP-lead cleanups is that the state in which a site is

located is required to share the cost of a fund-lead

cleanup. States pay 10 percent of costs for the

construction phase of a remedial action (50 percent

or more for sites that were operated by the state or a

local government during the disposal of hazardous

substances) plus all maintenance of the remedy. In

carrying out this provision of the law, EPA defines

the first 10 years of pump-and-treat remedies (commonly used in cleaning groundwater) as long-term

remedial actions, requiring only the 10 percent state

contribution, rather than as maintenance.

EPA has de-emphasized the fund-lead option

since 1989, when it adopted its "enforcement-first"

policy. Under that policy, the agency seeks to

maximize cleanups by responsible parties (thus

minimizing demands on the trust fund and the need

for cost recovery) by routinely issuing administrative

orders to compel cleanup when settlements are not

reached by the end of the statutory moratorium for

negotiations. More recently, EPA has announced

efforts to encourage settlements by increasing its use

of some of the incentives and negotiating tools

authorized in SARA.

Progress of Cleanups to Date

Although few NPL sites have been completely

cleaned up in Superfund's first 12 years, the program's record of accomplishment is arguably better

than its image would suggest. EPA has evaluated

close to 24,000 nonfederal sites for possible inclusion

on the NPL and has begun evaluating another 9,000

sites. Combined, these cases represent 94 percent of

the nonfederal sites that had been brought to the

agency's attention through fiscal year 1992. Together with cooperating responsible parties, EPA has

finished 2,639 removal actions at 2,142 nonfederal

sites-431 NPL sites and 1,711 non-NPL sites. Also,

EPA has placed 1,149 nonfederal sites on the proposed or final NPL and has started one or more

stages of the remedial pipeline at all but 56 of these

sites. (The NPL also includes 126 federal sites, of

which 116 have begun one or more stages of the

remedial pipeline. Through 1992, 56 removal actions had been completed at 21 federal NPL sites.)

Measuring progress at sites once they have

entered the NPL pipeline is complicated by the

common EPA practice of dividing sites into operable

units. Agency statistics typically report cleanup

status in terms of the progress of each site's most

advanced operable unit. Hence, reporting that 1,093

nonfederal NPL sites (95 percent of the total) were

at or beyond the remedial investigation/feasibility

study stage at the end of 1992 really means that

1,093 sites had started (if not completed) at least one

RI/FS, but not necessarily all of the RI/FSs required

for the site. Other EPA statistics as of the end of

1992 show that the most advanced operable unit

o had passed the record-of-decision stage at 766

sites (67 percent);

o had reached or passed the remedial design stage

at 698 sites (61 percent); and
6 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

o had reached or completed the remedial action

stage at 501 sites (44 percent).7

These statistics do not reveal how much of the work

remains to be done at the 1,149 sites, however,

because they do not indicate the number of operable

units into which the sites will ultimately be divided.

One statistic on NPL progress that encompasses

all of a site's operable units is the number of construction completions. EPA is still refining the

definition of this term; it currently includes sites

deleted from the list after the completion of all

necessary response actions (other than routine operation and maintenance of the remedy), sites awaiting

formal deletion, and sites at which all remedies are

in place but long-term operations and maintenance

are ongoing. (Pump-and-treat operations to clean

groundwater, for example, may require 30 years or

more to attain the cleanup goals.) At the end of

fiscal year 1992, EPA counted 148 nonfederal sites

as construction completions-up sharply from 63 the

previous year but still less than 13 percent of the

nonfederal NPL. Of these 148 sites, 40 have been

deleted from the list, 83 are awaiting deletion, and

25 are undergoing long-term remediation.8

Controversies and Options

Since its inception, Superfund has been subject to

many criticisms, not all of them consistent. Some of

the more common criticisms, outlined below, reflect

dissatisfaction with the program's overall ratio of

benefits to costs; others primarily involve the distri7. These pipeline statistics include sites at which an operable unit

skipped over the indicated stage rather than passing through it. A

few early sites went directly to remediation without going through

the RI/FS and ROD steps. Other sites are counted as being past the

remedial design stage because a "no-action" ROD for one of their

operable units indicated that no further cleanup (and hence no

design work) was necessary.

8. In addition, one federal NPL site awaits deletion. A recent review

by the General Accounting Office reported that 23 of the 149 cases

are sites that received neither removal nor remedial action because

EPA found that they posed no threat to health or the environment

and had been listed on the NPL in error (because of mistakes in

sampling, for example). Another 28 NPL sites had reached

construction completion based on removal actions alone. See

General Accounting Office, Superfund: Cleanups Nearing Completion Indicate Future Challenges (September 1993).

bution of the benefits and costs among affected

parties.

Slow Pace of Cleanup. The view that NPL sites are

not getting cleaned up fast enough can be argued by

referring to the above figures on deleted sites and

construction completions. Alternatively, critics can

point to the durations of average cleanup projects,

which have risen steadily in recent years. At the end

of 1992, EPA estimated that the average operable

unit takes nine years and four months from the start

of its remedial investigation/feasibility study to the

completion of its remedial action. This figure

suggests that the average time per site between

placement on the NPL and completion of cleanup

construction at the last operable unit may be about

12 years.

Unfairness. Superfund's liability system has been

criticized as unfair on various grounds. Some

observers argue that the fundamental concept of

retroactive liability (or retroactive liability for actions

that are not negligent) is unjust. Others claim that

retroactivity can be justified but that joint-and-several

liability is unfair. A third position says that a

basically fair liability scheme is being wrongly

interpreted in cases involving specific types of

parties—particularly local governments, lenders, or

contributors of very small volumes of waste.

Litigiousness. Another criticism of the liability

system focuses on the transaction costs incurred in

assigning and allocating liability.9 Among these are

the costs of negotiations and litigation among a site's

potentially responsible parties, between the parties

and EPA, and between the parties and their insurers.

EPA's efforts to identify and locate responsible

parties and to gather site data suitable for use in

litigation are also transaction costs; so are unofficial

RI/FSs conducted by responsible parties as a check

on EPA's own work and the additional layer of

oversight involved when both RPs and EPA monitor

the work of contractors performing RP-lead cleanups.

9. Economists define transaction costs as those costs incurred in order

to engage in a transaction (such as the costs of search time,

bidding, and contracting) in contrast to the costs of the goods or

services actually exchanged. The Superfund case stretches the term

a bit: in this context, the "transactions" are not trades in the

marketplace but legal assignments and allocations of liability.
CHAPTER ONE THE SUPERFUND PROGRAM AND ITS TYPES OF COSTS 7

Selection of Inappropriate Remedies. Several

competing criticisms allege that too many of EPA's

Superfund remedies are inappropriate. Some people

fault the remedies primarily for insufficient thoroughness and permanence. Others argue that many

remedies are excessively thorough and hence too

expensive, sometimes because EPA's assumptions

about human exposure to a site's hazardous substances are based on unrealistic scenarios for future

land use. A third perspective focuses less on the

results of the remedy selections than on the process,

arguing that EPA's decisions should take more

account of the desires of affected local communities.

Low Environmental Priority. The above criticisms

regarding slow cleanups, litigiousness, and inappropriate remedies can be interpreted as arguments that

Superfund's benefits are lower than they could be or

that its costs are higher than necessary. Another

criticism holds that even if the above issues were

resolved, a more fundamental cost-benefit problem

would remain. In this view, hazardous wastes

represent a relatively low risk to humans and the

environment (compared with other threats such as

indoor radon exposure, pesticide residues on foods,

non-point-source water pollution, and tropical deforestation) and should fall much lower on the nation's

list of budget priorities.

These criticisms have led to a wide variety of

proposals for reforming Superfund. Among the

options under discussion are the following:

o narrowing the range of sites handled by the

federal program, leaving more sites to the discretion of the states;

o revising the cleanup standards, perhaps to take

explicit account of future land use;

o making greater use of priority-setting systems to

defer work at some sites or operable units where

cleanup is less urgent, thus reducing current

funding needs;

o giving local communities more say in cleanup

decisions;

o beefing up the trust fund and dropping retroactive liability;

o reducing the emphasis on joint-and-several

liability, with increased government funding to

pay the shares of liable parties who are bankrupt

or cannot be identified; and

o capping liability for municipalities or eliminating

liability for contributors of very small volumes

of waste.

The estimates given in this study do not evaluate

Superfund costs under any of these alternative

policies, but they do provide a baseline against which

the changes could be compared. The baseline itself

can help to indicate whether the remaining Superfund

problem is large enough to justify the near-term costs

of disruption involved in changing to a new policy

regime.

Types of Costs and

Expenditures to Date

The Superfund costs included in this study are those

incurred by the private sector and federal and state

governments for both site cleanup work and ancillary

activities. The Congressional Budget Office (CBO)

estimates that nominal-dollar outlays (that is, actual

spending) by private parties and state governments

over Superfund's first dozen years were roughly $6.3

billion and $0.1 billion, respectively. Firmer figures

indicate that the federal government spent $7.0

billion, excluding costs fronted or reimbursed by

liable parties. Cumulative obligations-immediate or

multiyear spending commitments—may be on the

order of $20 billion for all payers combined.

As noted earlier, the figures considered here do

not include the costs of cleaning up federal facilities.

(In 1992, the environmental restoration programs of

the Departments of Defense and Energy obligated on

the order of $3 billion, roughly equaling the combined public and private Superfund obligations.)

Two other types of costs that might be attributed to

the program are also not covered: Superfund-induced

spending on hazard prevention is excluded for lack

of data, as are the economic costs of loans not made

and properties not resold or reused because of

concerns about potential Superfund liability.
8 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

Federal Expenditures

Total federal Superfund outlays over the program's

first 12 years were $7.7 billion in nominal terms, or

$8.6 billion in constant 1992 dollars (see Table 1).

These totals include $0.5 billion (nominal) subsequently recovered from responsible parties and $0.2

billion funded by cash-out settlements, in which RPs

settle their liability by paying in advance for cleanup

work to be done by EPA.10 Cumulative obligations

were $10.5 billion and $11.9 billion in nominal and

1992 dollars, respectively. Both measures of costs

grew sharply in the initial years after SARA, when

the Congress authorized a fivefold increase in the

size of the trust fund. In 1992, annual outlays and

obligations reached new highs of $1.5 billion and

$1.7 billion.11

The $1.7 billion in 1992 Superfund obligations

represents roughly one-quarter of EPA's total budget.

EPA addresses most other environmental problems

through regulation rather than direct government

action; accordingly, Superfund obligations greatly

exceed the amounts spent by the agency on other

problems. An EPA analysis of its 1992 budget

request found $450 million targeted for air pollution,

for example, $109 million for pesticide problems,

and $28 million for indoor radon exposure. The

Superfund budget was second only to the $2.1 billion

for treatment of point-source water problems, most of

which constituted grants to the states for constructing

municipal wastewater treatment plants.12

If 1992 Superfund obligations are classified

according to the categories used in this study for

estimates of future costs, direct response costs

account for 52 percent of the program's budget (see

Table 1.

Federal Superfund Outlays and

Obligations, Fiscal Years 1981-1992

(In thousands of 1993 dollars)

Outlays Obligations8

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

8,039

79,576

150,214

285,471

363,023

442,352

544,890

832,870

964,978

1,160,459b'

c

1,431,608blC

1.466.507b'°

40,283

180,114

227,199

453,818

455,485

359,927

1,039,451

1,456,350

1,522,681

1,484,947b'

d

1,589,557b'

d

1.737.340bd

Total

Approximate

Total in 1992

Dollars

7,729,987

8,610,000

10,547,152

11,875,000

SOURCE: Congressional Budget Office based on data from the

President's budget, various years.

NOTE: Figures were derived by subtracting from total outlays and

obligations those related to contaminated federal facilities

for which the Environmental Protection Agency was

reimbursed by other agencies.

a. Net of recoveries of prior-year obligations not spent.

b. The reimbursements from other federal agencies that were

subtracted in this case are CBO estimates.

c. Includes outlays for the Office of Inspector General from

Treasury Department reports on the Superfund trust fund.

d. includes obligations for the Office of Inspector General from the

President's budget.

10. The totals exclude an estimated $0.1 billion in Superfund outlays

reimbursed by other federal agencies for such activities as assistance in setting up data systems for hazardous waste sites. The

figure of $7.0 billion in nominal federal outlays avoids doublecounting by also excluding RP payments.

11. Table 1 shows 1992 obligations of $1.737 billion, well above the

1992 appropriation of $1.615 billion. This high-water mark was

reached with the aid of a high level of cash-out settlements, which

appear as offsetting collections in the budget and are not subject to

the appropriation process.

12. Environmental Protection Agency, Office of Policy, Planning, and

Evaluation, "Environmental Problem Area Profiles" (July 20,1991).

Table 2).13 Total site-based costs are arguably as

high as 59 percent when laboratory analysis, site

mapping, compensation of EPA workers who oversee

site cleanups, and services of the Army Corps of

Engineers and Bureau of Reclamation are included.

13. The data in Table 2, based on an internal EPA management report,

yield higher total obligations than those shown in Table 1, primarily

because they do not subtract funds recovered by canceling previous

obligations.
CHAPTER ONE THE SUPERFUND PROGRAM AND ITS TYPES OF COSTS 9

Table 2.

Superfund Obligations in Fiscal Year 1992

Type of Cost

Direct Response

Screening

Removals

Remedial investigations/feasibility studies

Remedial designs8

Remedial actions*

Subtotal

Response Support

OSWER salaries, excluding enforcement6

Remedial supportb>c

Removal support5-

01

Laboratory analysis

Other EPA support6

Supporting federal agencies9

Subtotal

Enforcement

Oversight of RP-lead RDs and RAsa

Office of Waste Programs Enforcement

EPA Offices of Enforcement, General Counsel

Department of Justice'

Subtotal

Research and Development

EPA research and development

National Institute of Environmental Health Sciences5

Subtotal

Management and Administration

OSWER management5'

1

General administration1"

Office of Inspector General1

Subtotal

Total

Millions of

Dollars

81.9

199.8

70.5

62.8

515.0

930.0

68.0

75.2

54.1

44.8

9.5

65.3

317.0

36.7

124.7

77.4

32.3

271.1

68.0

51.1

119.1

43.1

100.8

13.2

157.1

1,794.3

Percentage of

Superfund Budget

5

11

4

3

29

52

4

4

3

2

f

4

18

2

7

4

2

15

4

3

7

2

6

1

9

100

SOURCE: Congressional Budget Office using data from the Environmental Protection Agency's (EPA's) final 1992 Superfund budget, except

where noted.

NOTE: OSWER = EPA Office of Solid Waste and Emergency Response; RP = responsible party; RD = remedial design; RA = remedial action.

a. Obligations for oversight of RP-lead projects were estimated by applying percentage shares from EPA's 1993 budget justification to the 1992

totals.

b. Estimated by combining final 1992 figures with percentage shares from the earlier 1992 operating plan.

c. Includes administrative costs of cleanup contractors, services from the Army Corps of Engineers and Bureau of Reclamation, technical

assistance grants to local communities, state grants, contractor services for mapping and for support of policy development, and so on.

d. Includes contractor services for technical assistance, support of policy development and waiver requests, and so on.

e. Includes the EPA Offices of Water, Air, and Radiation; Policy, Planning, and Evaluation; and the Administrator.

f. Less than 0.5 percent.

g. Includes the Agency for Toxic Substances and Disease Registry, Coast Guard, National Oceanic and Atmospheric Administration, Federal

Emergency Management Agency, Department of the Interior, and Occupational Safety and Health Administration.

h. Includes an estimated $33 million (2 percent) for the EPA Office of Federal Facilities Enforcement,

i. Taken from the 1992 operating plan in EPA's 1993 budget justification.

j. Includes contractor services, computer time, and equipment purchases for training, budgeting, planning, dissemination of new technologies,

emergency preparedness, and so on.

k. Includes rent, utilities, financial management, contract management, computer services, and so on.

I. Actual 1992 obligations from the President's 1994 budget request.
10 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

Enforcement costs account for 15 percent of the

total, including 2 percent for oversight of RP-lead

remedial designs and remedial actions. As noted

before, the additional level of oversight involved in

RP-lead projects is one source of transaction costs

resulting from the enforcement system.

Most of the Superfund budget is spent outside

EPA; the agency relies extensively on external

contractors to supplement its own work force. All of

the costs shown in Table 2 for direct response,

remedial support, removal support, laboratory analysis, oversight of RP-lead RDs and RAs, and Office

of Solid Waste and Emergency Response (OSWER)

management are dollars spent on external services

and purchases, as are the majority of funds for the

OSWER Office of Waste Programs Enforcement.

These external costs account for an estimated $1.3

billion, or 91 percent of the OSWER Superfund total

of $1.4 billion. Taking EPA's Superfund budget as

a whole (including the non-OSWER costs for general

administration, research and development, enforcement, and support), the 1992 appropriation guaranteed that external costs would be at least 84 percent

of the total by capping internal costs at roughly 16

percent.

State and Private Expenditures

State and private-sector Superfund spending is easier

to classify than federal spending but harder to

estimate. State costs related to the federal program

are largely the required contributions for remedy

construction and operations and maintenance (O&M)

at fund-lead sites, and EPA does not directly monitor

the O&M costs. The estimate of $0.1 billion in state

costs to date comes from a 1991 EPA estimate of

$40 million (in 1990 dollars) for cumulative O&M

costs through 1992 plus the observed $76 million (in

nominal dollars) paid to the agency as matching

shares of construction costs. (Many states also have

their own cleanup programs, which incur a full range

of legal and administrative expenses. The costs of

these programs are not included here.) EPA spent

$2.6 billion on remedial actions over the same

period, according to agency data, including roughly

$0.1 billion to $0.2 billion for oversight of RP-lead

actions; the $76 million in state matching contributions therefore represents only 3 percent of total

public spending on construction of fund-lead RAs.

The gap between this 3 percent and the statutory 10

percent requirement is explained by EPA's willingness to negotiate multiyear or deferred payment plans

with the states.

Total Superfund costs to the private sector

include three components:

o payments made to the government for fines,

penalties, cash-out settlements, and recoveries of

fund-lead expenditures;

o costs of RP-lead cleanup studies and actions; and

o transaction costs incurred by responsible parties

and their insurers in efforts to minimize their

individual liability.

EPA does not directly observe the second and third

types of costs. The agency estimates the value of RP

cleanup commitments but does not require RPs to

report how closely actual spending matches its

estimates; nor does it track private transaction costs.

The directly observed costs for fines, penalties, cashout settlements, and cost recoveries represent only

the tip of the iceberg of total private Superfund costs.

Moreover, these costs are mere "transfer payments11--

in that they do not reflect additional costs to the

economy as a whole but only a shift of funds from

the private sector to the government—and thus are

irrelevant to an analysis of total Superfund costs.

The rough figure of $6.3 billion in private-sector

costs to date comes from an observed $0.5 billion in

cost recoveries and estimates of approximately $3.7

billion in RP-lead cleanup projects and $2.0 billion

in transaction costs. The $3.7 billion figure for

cleanup costs was derived by assuming that EPA's

estimated value of almost $7.5 billion in responsibleparty work commitments accurately predicts dollar

outlays—in effect, assuming that any cost savings

from private-sector efficiencies balance any increases

from underestimating the scope of the cleanup
CHAPTER ONE THE SUPERFUND PROGRAM AND ITS TYPES OF COSTS 11

problems—and that half of the commitments remain

to be spent over the next five years.14

The estimate of $2.0 billion in transaction costs

was extrapolated from data in a recent RAND study

of five large industrial RPs and four property/

casualty insurers.15 The RAND study found that 17

percent of the dollars spent through 1989 by the

responsible parties at sites with total expenditures

over $100,000 were transaction costs. CBO assumed

that this ratio applies to expenditures by all RPs

through 1992; with estimated RP spending on nontransaction costs totaling $4.1 billion (including

payments to EPA but excluding cleanup work funded

by RPs' insurers), their estimated transaction costs

are $4.1*0.177(1 - 0.17) = $0.8 billion.16

The RAND study also estimated that the insurance industry as a whole spent $410 million in 1989

on transaction costs at all hazardous waste sites. Of

this total, an estimated 40 percent was sparked by

NPL sites and 60 percent by non-NPL sites, including Superfund removal sites. Also, 21 percent of

costs resulted from claims for bodily injury and

property damage rather than claims for cleanup costs

under CERCLA. CBO assumed that 1989 costs

represented one-seventh of the total between 1981

and 1992 (because costs in the early years were

relatively low) and that NPL and Superfund removal

sites together accounted for $210 million in 1989

insurer transaction costs-roughly half of the total.

Subtracting the costs related to injury and damage

claims, this yields $0.21*7*(1 - 0.21) = $1.2 billion.

Other Groups' Estimates

of Superfund Costs

The EPA and a group of researchers at the University of Tennessee have also produced estimates of

future Superfund costs. These estimates are not

comparable with each other, however, nor are they as

comprehensive as the ones presented here.

In its annual report to the Congress on Superfund

for 1990 (the most recent available), EPA projected

funding requirements of $16.4 billion in fiscal years

1993 and beyond and a cumulative total since 1981

of $27.2 billion. These estimates are restricted to

costs incurred by the federal Superfund budget and

exclude costs for cleaning up future NPL sites (that

is, sites not listed at the end of fiscal year 1990).

The University of Tennessee researchers released

reports in December 1991 that contained a "bestguess" estimate of $151 billion for cumulative costs

to clean up 3,000 nonfederal NPL sites.17 The Tennessee studies examined the implications of alternative cleanup policies, estimating that greater use of

containment methods could reduce future costs to

$90 billion, and that greater reliance on treatment

methods could raise them to $352 billion. These

figures cover a different set of costs than does the

smaller EPA estimate: they include state and private

remediation costs for NPL sites as well as federal

costs, but they omit expenditures on non-NPL

removal sites and EPA's enforcement and management activities.

14. Given the time required for engineering design before a remedy can

be carried out, the following five-year spendout pattern was

assumed: zero the first year, 20 percent each in the second and

third years, and 30 percent each in the fourth and fifth years.

15. Jan Paul Acton and Lloyd S. Dixon, Superfund and Transaction

Costs (Santa Monica, Calif.: RAND, 1992).

16. A follow-up study restricted to 18 NPL sites suggests that smaller

firms might have higher shares of transaction costs and that the

national average might be 32 percent. See Lloyd S. Dixon,

Deborah S. Drezner, and James K. Hammitt, Private-Sector

Cleanup Expenditures and Transaction Costs at 18 Superfund Sites

(Santa Monica, Calif.: RAND, 1993).

The present CBO study seeks to improve on its

EPA and Tennessee predecessors in four ways. First,

it covers a broader range of costs, including state and

private-sector cleanup expenditures and the costs

associated with future NPL sites (excluded from the

EPA estimate), federal implementation costs (not

17. See Russell, Colglazier, and English, Hazardous Waste

Remediation] and E. W, Colglazier, T. Cox, and K. Davis, Estimating Resource Requirements for NPL Sites (Knoxville, Tenn.:

University of Tennessee, Waste Management Research and

Education Institute, 1991).
12 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

covered in the Tennessee study), and private transaction costs (omitted from both). Second, because a

relatively few "mega-sites" have had a major impact

on Superfund costs to date, CBO's estimate incorporates possible trends in the average characteristics of

future NPL sites. Third, cumulative future expenditures are reported in discounted, present-worth

dollars, which take into account the time value of

money and thereby provide a more useful measure of

the expenditures' cost to the economy. Fourth,

CBO's analysis of average cleanup costs incorporates

recent EPA data on the differences between initial

estimates and final costs and allows for the possibility that private-sector cleanups may cost less than

those performed by the government.
Chapter Two

Estimates of Future Superfund Costs

T

he Congressional Budget Office analyzed

three scenarios for Superfund costs after

1992, reflecting present levels of uncertainty

about the size of the remaining cleanup problem.

The base-case estimate is $74 billion in discounted,

present-worth dollars; the low-case and high-case

estimates are $42 billion and $120 billion, respectively. Annual undiscounted costs in the base case

peak at $9.1 billion in 2003 and average $2.9 billion

per year through 2070.

A major factor in these estimates is the assumed

number of sites on the National Priorities List; the

assumptions of 2,300 nonfederal NPL sites in the

low case, 4,500 in the base case, and 7,800 in the

high case explain most of the differences in estimated costs. Other assumptions that have a major

impact on costs are those regarding the average

cleanup costs per NPL site and the discount rate.

The cost estimates are less sensitive to assumptions

about removal actions, site studies, administrative

activities, and legal costs.

Overview of the Methods

for Estimating Costs

CBO's estimates of future Superfund costs include

site-based costs for study and investigation, cleanup,

and enforcement combined with federal nonsite costs

for program administration and private transaction

costs. To reflect the time value of money and

important uncertainties about the determinants of

future costs, the estimates are given in discounted,

present-worth dollars and for three scenarios based

on alternative sets of assumptions.

The basic idea underlying the estimates can be

expressed in a simple formula:

Total costs = [(number of sites) x (average

cleanup cost + average investigation and study cost + average

enforcement cost)] + private

transaction costs + federal program costs.1

Because different types of sites have vastly different

average costs, however, it is useful to extend this

formula by distinguishing between NPL sites, nonNPL removal sites, and sites evaluated for possible

inclusion on the NPL. This extension avoids the use

of a single, overall per-site cost that could be unreliable as a basis for extrapolating into the future. As

discussed later in this chapter, vastly different costs

can also be found within the set of NPL sites;

accordingly, CBO further distinguishes three cost

categories of NPL sites—"mega-," "major," and

"minor" sites—to explore possible changes in the mix

of sites and their implications for average cleanup

costs.

Private transaction costs and federal program costs could also be

analyzed in terms of average costs per site. As explained later in

the chapter, however, the CBO analysis treats transaction costs as

a markup on other responsible-party costs rather than as a fixed

cost per site, and it models program costs as a mixture of per-site

costs, annual costs, and markup rates.
14 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

The CBO analysis also goes beyond the simple

formula in taking account of the year in which a cost

is incurred, so as to permit the calculation of discounted, present-worth costs. In measuring the

overall impact of a multiyear stream of benefits or

costs, economists view dollars spent or gained in the

future as less valuable than present dollars, for two

reasons that correspond to supply and demand

factors. First, later dollars are easier to supply, in

that one dollar can be invested now to return more

than one dollar in the future. Second, present dollars

are in greater demand, in that individuals generally

prefer not to delay gratification, all other things

being equal. Accordingly, the estimates reported

here use an annual discount rate to roll back the

entire stream of future costs into an equivalent 1993

present worth.2

The CBO estimates reflect a mix of data and

informed opinion. Where possible, CBO based its

assumptions on regularities and trends identified in

the Superfund program to date that seem likely to

apply to the future. Because data on the many

categories of site-specific and non-site-specific costs

are often scarce or unreliable, however, many assumptions could only be based on subjective judgments reached in consultation with informed sources.

The necessity of subjective judgments prompted

CBO to develop alternative scenarios in which it

could vary key assumptions. The low and high cases

are intended to represent plausibly optimistic and

pessimistic scenarios of Superfund costs, capturing

between them most of the relevant range of uncertainty. Although the resulting estimates do not

provide a statistical 90 percent confidence interval,

CBO believes that future costs are unlikely to lie far

outside their span.

The Cost Estimates

The CBO estimates of future Superfund costs are $42

billion in the low case, $74 billion in the base case,

and $120 billion in the high case.3 These presentworth estimates are calculated using a 7 percent

annual discount rate, and they exclude the costs

associated with cleaning up federal facilities. They

also assume no major changes in policy or breakthroughs in technology; estimates that reflected those

additional sources of uncertainty would span a wider

range.

The present-worth estimates depend not only on

the total dollars spent but also on the pattern of

spending over time. In the absence of funding

constraints, the base and high cases project that

annual costs will rise severalfold through the year

2003 and then decline more gradually. The sharp

increases reflect both timely progress of existing

NPL sites through the cleanup process and a tripling

or quadrupling of the size of the NPL, partly driven

by an assumed backlog of sites in the last stage of

the Environmental Protection Agency's screening

process. Estimated spending increases in the low

case are much more moderate and short-lived.

Responsible parties pay more than half of total

costs in all three scenarios; the federal government's

share is between 36 percent and 40 percent of the

total, and the state share does not exceed 5 percent.

By spending category, site studies and cleanup

account for most of the costs, with remedial actions

at NPL sites alone accounting for half of the total.

Enforcement and transaction costs together represent

just under one-quarter of total costs.

Nationwide Costs in Total

and Over Time

The base-case estimate of $74 billion is closer to the

low-case figure of $42 billion than to the high case's

$120 billion. This reflects a comparable asymmetry

in the assumed numbers of ultimate NPL sites—4,500

in the base case compared with 2,300 in the low case

and 7,800 in the high case. (See Appendix A for a

summary of the different assumptions underlying the

cases.) As discussed later in the section about site

For a more detailed discussion of discounting, see Robert C. Lind,

"A Primer on the Major Issues Relating to the Discount Rate for

Evaluating National Energy Options," in Robert C. Lind, ed.,

Discounting for Time and Risk in Energy Policy (Washington, D.C.:

Resources for the Future, 1982).

3. As used in this study, future "costs" (or "spending" or "expenditures") generally refer to obligations—that is, funding commitments

made at the beginning of a one-year or multiyear project. The only

ongoing outlays resulting from obligations before 1993 that are

included in the estimates of future costs are those for operations

and maintenance of site cleanup projects. Because of their 24-year

duration, O&M costs are tracked as outlays in CBO's analysis.
CHAPTER TWO ESTIMATES OF FUTURE SUPERFUND COSTS 15

assumptions, the range of plausible numbers of NPL

sites is less clearly defined at the high end than at

the low end; this greater uncertainty warrants an

asymmetrically high number of NPL sites in the high

case.

Annual spending in real (that is, inflation-adjusted) but undiscounted dollars peaks in the year 2003

in all three scenarios, as shown in Figure 2. The

height of the peak varies dramatically, howeverfrom $4.4 billion in the low case to $9.1 billion in

the base case and $14.4 billion in the high case.

(For comparison, 1992 obligations were roughly $3

billion.) The paths shown in Figure 2 assume that

funding is not constrained; the consequences of

constraints on the growth of Superfund are considered in Chapter 3.

The rapid growth in estimated spending in the

base and high cases is largely fueled by rapid growth

in the National Priorities List, which adds 2,181 new

nonfederal sites by the year 2003 in the base case

Figure 2.

Total Superfund Expenditures,

Fiscal Years 1993-2075

Billions of Real, Undiscounted Dollars

1993 2003 2013 2023 2033 2043 2053 2063 2073

SOURCE: Congressional Budget Office.

NOTE: See Appendix A for the differences in assumptions underlying the three cases.

and 3,378 new sites in the high case. Roughly onethird of the additions represent sites brought to

EPA's attention for screening after 1992; the other

two-thirds are drawn from the 11,000 sites that began

but did not finish the screening process by the end of

1992, of which 6,400 were in the final, "decisionpending" stage. The assumptions of the base and

high cases imply that the decision-pending group

includes substantial backlogs of sites-roughly 900

and 1,400, respectively-awaiting placement on the

NPL.4 Given adequate funding for cleanup work at

both new and existing sites, the number of projects

rises sharply. The average number of remedial

investigations/feasibility studies started annually from

1993 through 2003 is estimated to be 339 in the base

case and 490 in the high case, whereas the actual

average between 1990 and 1992 was 115. Over the

same period, the average number of new remedial

actions reaches 243 a year in the base case and 291

in the high case, compared with 109 in the 1990-

1992 period.

Cumulatively, the costs shown in Figure 2 total

$106 billion in undiscounted dollars in the low case,

$228 billion in the base case, and $463 billion in the

high case. Costs are incurred through 2062, 2070,

and 2075, respectively; hence, average annual costs

in undiscounted dollars are $1.5 billion, $2.9 billion,

and $5.6 billion. These averages have only limited

significance: because of the necessary sequencing of

cleanup activities, total future costs cannot be paid

out in equal yearly installments. Averages excluding

the final 24 years of spending (during which all

remaining cleanup projects are assumed to be in the

operations and maintenance phase) are roughly 40

percent to 50 percent higher-$2.3 billion, $4.2

billion, and $7.7 billion, respectively.

Costs by Payer and Category

CBO estimates that responsible parties will pay 58

percent of total present-worth costs in the base case

(roughly $43 billion out of $74 billion), with the

government paying 38 percent ($28 billion) and the

4. No significant backlog exists in the low case; as discussed in the

next section, this case assumes a lower value for the percentage of

screening sites ultimately placed on the NPL.
16 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

states paying 4 percent ($3 billion), as shown in

Table 3. These figures reflect costs as initially paid;

subsequent cost recoveries that would increase the

RP share further and decrease the federal share are

not estimated here. Also, the estimated costs to state

governments cover only their required contributions

to "fund-lead" cleanup projects (those performed by

EPA); state or local government contributions to

"enforcement-lead" cleanups (those performed by

responsible parties) resulting from liability for

individual Superfund sites are included in the estimate for costs to liable parties.

These shares vary only a few percentage points

in the other scenarios. In the high case, two factors

increase the share paid by responsible parties to 60

percent and decrease the federal share to 36 percent.

First, the larger number of NPL sites makes cleanup

costs a larger fraction of overall spending, and these

cleanup costs are concentrated among the responsible

parties. Second, as discussed later in the chapter,

CBO's analysis assumes that private cleanups cost

less than those conducted by the government, but the

assumed advantage is smaller in the high case than

in the base case. Conversely, the same two factors

also explain why the RP share falls to 55 percent in

the low case.

When base-case costs are measured in undiscounted dollars, the responsible parties pay 61

percent of the total, the federal government 31

percent, and the states 8 percent. The state share of

total costs in undiscounted dollars is twice the

present-worth figure because discounting has a larger

impact on costs that are more distant in time and

state costs are primarily for operations and mainteTable 3.

Future Superfund Costs, by Initial Payer (In present-worth and undiscounted dollars)

Payer

Base Case Low Case

Billions

of Dollars Percent

Billions

of Dollars Percent

High Case

Billions

of Dollars Percent

Responsible Parties

Federal Government

State Governments8

Total

Present Worth, Discounted at 7 Percent

42.5 58 23.2 55

28.1 38 16.9 40

3.3 _4 2.1 _5

73.9 100 42.2 100

72.4

42.8

5.0

120.1

60

36

_4

100

Undiscounted

Responsible Parties

Federal Government

State Governments51

Total

139.1

69.9

19.2

228.3

61

31

8

100

61.2

35.0

9.8

106.0

58

33

9

100

295.8

130.2

36.8

462.9

64

28

8

100

SOURCE: Congressional Budget Office.

NOTE: See Appendix A for the differences in assumptions underlying the three cases.

a. State contributions to fund-lead cleanups only. Contributions to RP-lead cleanups at sites where state or local governments share direct

liability are included in the figures for responsible parties.
CHAPTER TWO ESTIMATES OF FUTURE SUPERFUND COSTS 17

nance, which occur at the end of the cleanup process.

RP expenditures are similarly back-loaded, although

not to the same extent, and therefore also represent

a larger share of the total in undiscounted dollars.

By expenditure category, base-case costs of

removal and remedial cleanup plus site investigation

and study represent about 64 percent of future

Superfund costs in present-worth dollars (with

remedial action alone accounting for 53 percent);

enforcement and transaction costs account for 24

percent; and federal costs for support activities,

research, and general management make up the

remaining 11 percent (see Table 4). The share

Table 4.

Future Superfund Costs, by Category (In present-worth and undiscounted dollars)

Base Case

Category

Site Studies and Cleanups

Remedial actions

Other

Subtotal

Enforcement

Transaction Costs

Support Activities

Research and

General Management

Total

Billions

of Dollars

39.1

8.5

47.6

4.5

13.4

3.7

4.7

73.9

Percent

Present Worth,

53

11

64

6

18

5

6

100

Low

Billions

of Dollars

Case

Percent

Hiah

Billions

of Dollars

Case

Percent

Discounted at 7 Percent

22.4

4.4

26.8

2.5

7.7

2.6

2.6

42.2

53

11

64

6

18

6

6

100

65.6

13.8

79.4

6.6

21.6

4.9

7.7

120.1

54

12

66

5

18

4

6

100

Undiscounted

Site Studies and Cleanups

Remedial actions

Other

Subtotal

Enforcement

Transaction Costs

Support Activities

Research and

General Management

Total

134.0

17.9

151.9

10.7

43.8

10.4

11.4

228.3

59

8

67

5

19

5

5

100

61.1

7.8

68.9

4.9

20.2

6.7

5.3

106.0

58

7

65

5

19

6

5

100

281.3

35.3

316.6

19.5

88.3

15.8

22.7

462.9

61

7

68

4

19

3

5

100

SOURCE: Congressional Budget Office.

NOTE: See Appendix A for the differences in assumptions underlying the three cases.
18 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

accounted for by enforcement and transaction costs

does not support the belief that most Superfund

money is being devoted to negotiation and litigation,

but is consistent with CBO's analysis of spending

through 1992.5

The share of costs going to study and cleanup is

slightly greater in the high case—again, because the

number of sites is larger and average cleanup costs

per site are higher—or when measured in undiscounted dollars, which give greater weight to O&M

costs. The share of study and cleanup costs is lower

in the low case than in the base case when costs are

measured in undiscounted dollars, but the two are

essentially equal in present-worth dollars, despite the

smaller number of NPL sites in the low case. These

facts reflect the timing of the various expenditures.

Because fewer sites are added in the future, the

existing NPL sites—many of which have already

passed the study and investigation stages—take on

greater relative importance. On average, therefore,

cleanup costs occur earlier in the stream of overall

costs in the low case than in the base case.

Assumptions About

Numbers of Sites

The ultimate numbers of NPL sites, non-NPL removal sites, and screening sites are highly uncertain. The

significance of this uncertainty lies in the fact that

the number of NPL sites is a key determinant of

Superfund's long-run costs. Accordingly, this study

reports estimates based not only on a base case of

4,500 nonfederal NPL sites-almost four times the

current level of 1,149 sites-but also on alternative

scenarios of 2,300 sites and 7,800 sites (twice and

roughly seven times the current level).

5. EPA data suggest that enforcement spending accounted for roughly

$0.9 billion through 1992. As noted in Chapter 1, CBO estimates

that private-sector transaction costs over the same period were $2.0

billion. Hence, total enforcement and transaction costs were on the

order of $2.9 billion, or 22 percent of the estimated $13.4 billion

spent by the public and private sectors.

The enforcement and transaction costs considered here include most

but not all of the out-of-pocket costs resulting from Superfund* s

liability system. Not included are certain of EPA's nonenforcement

expenses, such as the extra costs it incurs to obtain litigationquality data in its site studies.

CBO derived these figures by combining estimates of the number of screening sites brought to

EPA's attention as candidates for cleanup with

estimates of the fraction of these sites accepted by

the NPL screening process. In each scenario, a

second rate was applied to the same pool of candidate sites to estimate the number whose contamination problems will be found not to warrant placement

on the NPL but to be serious enough to require

removal action.

Other assumptions determined the incidence of

future NPL mega-sites (defined here as those for

which the records of decision estimate cleanup costs

of $50 million or more) and distributed sites between

the fund-lead and RP-lead categories. These assumptions influence the estimates of average cleanup costs

per site-in the latter case, because the analysis also

assumes that the private sector has some efficiency

advantage over the government in performing cleanups.

Number of Screening Sites

CBO's base case assumes that 25,394 new sites will

be brought to EPA's attention for screening, in

addition to the 36,814 sites already known to the

agency at the end of fiscal year 1992. The low and

high scenarios assume 15,151 and 50,000 additional

screening sites, respectively.

These assumptions are based on alternative

interpretations of the Superfund experience to date.

Annual additions to the screening inventory between

1981 and 1992 ranged from a high of 3,737 in 1985

to a low of 1,043 in 1991 (see Figure 3).6 The

evidence suggests an overall downward trendparticularly when the 1981-1986 additions are

compared with those from 1987 to 1992-but its

strength cannot be reliably determined from the

handful of data points.

6. EPA also had 8,000 sites in its screening inventory at the end of

fiscal year 1980. CBO does not know why additions to the

inventory were so high in 1985 or so low in 1991; explanations

would have to be sought at the level of the state governments, the

primary channels through which EPA becomes aware of new sites.
CHAPTER TWO ESTIMATES OF FUTURE SUPERFUND COSTS 19

Figure 3.

Actual and Assumed Additions to the

Superfund Screening Inventory

Thousands of Sites

Actual Projected

Low Case

1980 1990 2000 2010 2020 2030 2040

SOURCE: Congressional Budget Office.

NOTE: See Appendix A for the differences in assumptions underlying the three cases.

The base-case estimate of 25,394 additional

screening sites was derived by fitting a curve to the

1981-1992 data and extrapolating it to the year

2027.7 The cutoff point in 2027 was chosen as a

subjective correction for the indefinitely long "tail"

of the curve; it can also be interpreted as a year by

which the flow of new sites will be small enough to

be handled by something other than the present

Superfund program. The low-case figure of 15,151

sites resulted from fitting a similar curve to the data

from the latest six years (1987 to 1992) and extrapolating it to the year 2022. The rationale behind this

alternative is that the more recent data may better

7. With the data smoothed using a three-year moving average, the

resulting exponential-decay curve was l,714*exp(-0.056593*

[t - 1992]), where t indicates the year. The result in the low

scenario, discussed next, was l,497*exp(-0.087737*[f -1992]); data

smoothing was not required for a good fit in this case.

indicate the program's likely future course. Finally,

the high case assumes a slower decline in screening

sites (in a stepwise pattern chosen for simplicity),

with 50,000 new sites added to the inventory by the

year 2032. This case implies a total of 86,814 sites,

counting those already identified, which is roughly

consistent with a draft EPA analysis that estimated a

total of 91,000 sites most likely to need evaluation.8

The number of screening sites is important to the

estimate of total Superfund costs primarily because

of its impact on the assumed numbers of NPL and

removal sites. As discussed in the section about cost

assumptions, screening costs themselves are assumed

to be relatively minor in this analysis, averaging less

than $46,000 per site. Consequently, a 10 percent

increase in the number of future screening sites

alone, holding constant the NPL and removal sites,

would add less than 0.1 percent to total presentworth costs in any of the three scenarios.

Number of NPL Sites

Converting the size of the screening inventory to the

size of the National Priorities List requires estimating

the fraction of screening sites that will ultimately be

placed on the NPL. According to a rough estimate

from knowledgeable Superfund staff, the future

placement rate will be in the neighborhood of 5

percent to 10 percent. Unfortunately, existing data

are not useful in refining this estimate. EPA revised

its screening criteria in March 1991, and too few

data have accumulated since then to allow the

estimate to be confirmed or narrowed.

The results under the original screening criteria

are not useful either. First, the revised criteria may

not yield the same overall acceptance rate as their

predecessors. Second, the data on the performance

Environmental Protection Agency, Office of Emergency and

Remedial Response, Hazardous Site Evaluation Division, "The

Superfund Universe Study: Interim Report" (September 30, 1991).

The estimate includes 58,000 sites in the "Focused Screening

Universe," defined as those sites in categories representing "the

highest priority for possible site discovery and screening efforts,"

and roughly 33,000 sites already in the inventory as of February

1991. An additional 9,000 sites thought to be of low hazard

potential bring a more general "Superfund Evaluation Universe" to

an estimated total of 100,000 current and future sites.
20 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

of the original criteria are distorted because EPA

deferred final decisions on thousands of sites during

the transition to the new system. As of the end of

1992, 3.5 percent of all sites that had entered the

inventory were listed on the NPL, but another 18

percent were in the decision-pending stage, having

survived the earlier preliminary assessment and site

inspection phases, and 15 percent awaited either the

PA or SI.

In the absence of firmer information, CBO chose

placement rates of 8 percent in the base case, 5

percent in the low case, and 10 percent in the high

case. All three scenarios assume that federal facilities, whose costs are excluded from the analysis,

continue to represent 10 percent of all NPL sites.

Multiplying these placement rates by the above

projections of total screening sites, subtracting 10

percent for federal facilities, and rounding to the

nearest hundred sites yields the estimates of 4,500

nonfederal NPL sites in the base case, 2,300 in the

low case, and 7,800 in the high case.9

The difference in assumed NPL size between the

low case and base case (2,200 sites) is notably

smaller than the difference between the high case and

base case (3,300 sites), reflecting the fact that the

range of possible sizes is more clearly defined at the

low end than at the upper end. It is relatively easy

to argue that the ultimate number of nonfederal NPL

sites is unlikely to be much below 2,300. Observed

acceptance rates suggest that even if no more sites

were added to the screening inventory, the National

Priorities List would reach 2,400 sites just on the

basis of the 11,000 incomplete sites in the inventory

at the end of 1992.10

9. The base-case calculation yields (36,814 + 25,394)*0.08*0.90 =

4,479 « 4,500; the low scenario gives (36,814 + 15,151)*0.05*0.90

= 2,338 « 2,300; and the high scenario gives (36,814 +

50,000)*0.10*0.90 = 7,813 - 7,800.

10. Focusing on nonfederal sites, 8,903 sites had reached the site

inspection stage and completed the screening process by the end of

1992, of which 1,149, or 12.9 percent, were placed on the NPL.

Applying this percentage to the 9,040 sites awaiting the SI and

those in the post-Si decision-pending stage yields 1,167 new NPL

sites. Counting the sites that never received a site inspection

because they were screened out at the preliminary assessment stage,

the overall acceptance rate through 1992 was 4.8 percent (1,149

NPL sites out of 24,119 final decisions); applying this rate to the

2,064 sites awaiting the PA yields an additional 98 NPL sites.

The estimates of total present-worth costs are

highly sensitive, though not strictly proportional, to

the numbers of NPL sites; a 10 percent increase in

the assumed level implies cost increases of roughly

7 percent in all three scenarios. The main reason

that estimated costs rise less than 10 percent is an

issue of timing: the increase in ultimate NPL sites

shifts the "center of gravity" of Superfund expenditures farther into the future (since near-term costs

include those for sites already on the NPL), thus

reducing the impact on present-worth costs.11

The variation in assumed size of the NPL is the

main cause of the differences in the scenarios'

estimated costs. Modifying the base case by adopting the NPL size assumptions from the low case

would reduce its estimated present-worth costs by

$25 billion—80 percent of the difference between the

two scenarios. Similarly, substituting the high-case

NPL would raise base-case costs by $38 billion,

eliminating 81 percent of the difference in present

worth. The assumed differences in average cleanup

costs and ancillary activities account for the remaining differences in estimated costs.

NPL Sites by Cost Category

To varying degrees, each of the three scenarios

assumes that the average costliness of remedial

cleanups falls as more sites are added to the NPL.

The rationale for this downward trend is the theory

that a disproportionate number of the worst problems

were discovered and listed in the early years because

of their obviousness and that the program will

increasingly be "scraping the bottom of the barrel" as

additional sites are listed.12

11. In undiscounted dollars, which are unaffected by timing, the

increase ranges from 9.2 percent to 9.4 percent in the three

scenarios. The other factors contributing to the divergence from

strict proportionality are that the costs of screening and removals

at non-NPL sites are unaffected by the change in NPL size; that

some EPA support costs rise less than proportionately; and that the

added sites have lower average cleanup costs than their predecessors as a consequence of the "barrel-scraping effect" discussed in

the next section.

12. An extension of this argument would suggest that all NPL-caliber

contamination problems, not just the worst of the worst, should get

scarcer over time, and thus that the rate at which screening sites are
CHAPTER TWO ESTIMATES OF FUTURE SUPERFUND COSTS 21

Assumptions about the strength of this barrelscraping effect can have a significant impact on

estimates of long-run costs. If the base case had

assumed a fixed distribution of NPL sites by cost

category, its present-worth estimate would have been

$84 billion; hence, the arguably conservative level of

barrel scraping actually used in the scenario lowers

costs by 12 percent. Plausible steeper trends in the

distribution of sites would have larger impacts.

The key fact that makes the barrel-scraping effect

an important issue is that some Superfund NPL sites

can be hundreds of times more "super" than others in

terms of their cleanup costs (see Box 2). Indeed,

evidence suggests that the most expensive 10 percent

of sites have accounted for 50 percent of all cleanup

costs, and the least expensive half of sites have

represented only 10 percent of total costs.13 If this

wide distribution of NPL cleanup costs is likely to

continue relatively unchanged, then estimates of

future costs need only extrapolate from the average

per-site cost observed so far. If not, however, then

changes in the composition of the NPL also must be

taken into account.

The available data suggest that the distribution of

NPL sites is changing. In particular, the incidence of

so-called mega-sites appears to be declining. Defining a mega-site as one with cleanup costs of $50

million or more (as estimated in the records of

decision), EPA staff know or expect 44 of the 711

nonfederal sites proposed for the NPL through

October 1984 to be mega-sites, a ratio of 6.2 percent.

The same can be said of only 0.9 percent (4 of 438)

of the nonfederal sites proposed since 1984.

placed on the NPL should fall. If there exists a large pool of

"lesser" potential NPL sites that are no more obvious than the

average site with less-than-NPL-caliber contamination, however,

then any such reduction in the placement rate might be delayed for

many years or be of limited magnitude.

13. This pattern is observed in two partly overlapping samples of NPL

sites: one sample, developed by EPA, mixes partial and complete

estimates of construction costs at 253 nonfederal sites; the other,

developed by researchers at Resources for the Future, includes

complete estimates of inflation-adjusted cleanup costs (including

operations and maintenance costs) at 168 sites. Outside the

Superfund context, EPA also found 10 percent of sites accounting

for one-half of total costs in an analysis of 79 waste treatment and

disposal facilities subject to corrective action cleanups under the

Resource Conservation and Recovery Act; see Environmental

Protection Agency, "Draft Regulatory Impact Analysis for the Final

Rulemaking on Corrective Action for Solid Waste Management

Units" (March 1993), p. ES-12.

The significance of the apparent drop in the

incidence of mega-sites is hard to determine now, for

three reasons. First, part of the fall could be illusory,

if some recent sites have not yet received enough

attention for EPA staff to know of their true costliness, or if changes in EPA policies have divided

some potential mega-sites into multiple pieces for

listing purposes. Second, the net impact on future

cleanup costs of any barrel-scraping trend could be

reduced by a possible second effect acting in the

opposite direction. This second effect assumes that

early "false-positive" mistakes in the screening

process led to the listing of a comparatively high

number of inexpensive sites not containing NPLcaliber problems and thus artificially lowered the

average costs observed to date. Third, a current

barrel-scraping effect could conceivably be reversed

in the future if a category of mega-sites is newly

discovered or gets increased attention. Large areas

contaminated with mining wastes may prove to be

such a category.14

Although conclusive data are not available, CBO

considers it likely that a significant barrel-scraping

effect is reducing average cleanup costs and will

continue to do so. In light of the current uncertainty,

the three scenarios analyzed here employ different

assumptions about the strength of the effect, with all

three erring on the conservative side by assuming

less barrel scraping than the limited data suggest.

The analysis distinguishes three cost categories of

sites on the NPL: mega-, major, and minor sites,

defined as those with estimated present-worth costs

of $50 million or more, between $20 million and $50

million, and less than $20 million, respectively.

The assumed decline in mega-sites and major

sites occurs most rapidly in the low case and most

14. A recent Congressional report indicated that the Department of the

Interior has just begun surveying its lands for mining sites needing

cleanup or reclamation; see House Committee on Natural Resources, Subcommittee on Oversight and Investigations, "Deep

Pockets: Taxpayer Liability for Environmental Contamination,"

Majority Staff Report (July 1993). The report said that the number

of abandoned mine sites on Interior lands may be in the hundreds

of thousands, but it did not estimate the number needing significant

cleanup or the average cost per site. Such sites contribute to the

total national bill for cleanup but not the Superfund bill, since their

costs are borne by the Interior Department and responsible private

parties.
22 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

Box 2.

Examples of Mega-, Major, and Minor Sites

Mega-site: The 22-acre Whitmoyer Laboratories site

in Jackson Township, Pennsylvania, is in a largely

agricultural area. Portions of the site are in the 100-

year floodplain of the Tulpehocken Creek, and an

estimated 20 residences in the vicinity use the underlying aquifer for drinking water.

Whitmoyer produced organic compounds containing arsenic on the site between 1957 and 1964. In

1964, widespread groundwater contamination was

discovered, leading the owners to place concentrated

wastes in a concrete vault and start a pump-and-treat

operation to clean the groundwater. Sludge from the

groundwater treatment was placed in on-site lagoons

in 1977. In 1986, the Environmental Protection

Agency (EPA) discovered arsenic contamination in

nearby wells and began providing residents with

bottled water. The last owners abandoned the site in

1987.

EPA divided the cleanup work at the site into

three operable units. The first dealt with 69,000

gallons of concentrated liquid wastes in tanks and

pipes near the creek; the second addressed roughly

29,000 cubic yards of vault and lagoon wastes and

miscellaneous chemicals remaining on the site, plus

contaminated buildings and equipment; and the third

focused on 116,000 cubic yards of contaminated soil

and sediment and the contaminated groundwater. The

remedies selected by EPA involved demolition,

excavation, off-site thermal or biological treatment,

on-site incineration and fixation, groundwater treatment (physical, chemical, and possibly biological),

capping, and off-site and on-site disposal. Estimated

present-worth costs for the three operable units

totaled $124 million, which qualifies the site as a

mega-site for purposes of the Congressional Budget

Office's (CBO's) analysis.

Major site: The Northside Landfill occupies 345

acres in a mixed residential and agricultural area of

Spokane, Washington. One-third of the site lies over

a large aquifer that serves the Spokane-Coeur d' Alene

area.

The landfill began accepting residential and light

commercial refuse from the city of Spokane and other

public and private haulers in the 1930s, and it was

still in use when EPA completed its record of decision in 1989. Investigations in 1981 and 1983

revealed the presence of volatile organic compounds

beneath the site and in residential wells northwest of

it. The city responded by supplying the 19 affected

residences with bottled water and then extending

municipal water lines to the area.

The remedy EPA selected for the site included

closing and capping the landfill's four disposal areas,

pumping and treating the groundwater until closure of

the landfill reduces contamination below target levels,

and implementing institutional controls to restrict

access to the site and prevent construction of wells

that would draw on contaminated water. The cost

estimate for this remedy was $30 million, placing the

site in CBO's "major" cost category.

Minor site: The Vogel Paint and Wax site is a twoacre disposal area, part of an 80-acre tract outside

Maurice, Iowa. Adjacent land use is primarily

agricultural. An aquifer beneath the site supplies

private wells and the Southern Sioux County Rural

Water System.

Paint sludge, resins, solvents, and other wastes

from paint manufacturing were disposed of at the site

between 1971 and 1979. Records indicate that

roughly 43,000 gallons of organic chemicals and

6,000 pounds of metal wastes were buried in trenches

during this period. The owner covered the disposal

area with a clay cap in 1984.

EPA's chosen remedy for this site included either

biological or thermal treatment of 3,000 cubic yards

of contaminated soil; off-site incineration, recycling,

or disposal of the wastes themselves; groundwater

pumping and treatment using air stripping; and

monitoring of the air and groundwater. With an

estimated cleanup cost of less than $1.9 million, this

site is a minor site in CBO's classification.

SOURCE: Adapted from Environmental Protection

Agency, ROD Annual Report, various

years.
CHAPTER TWO ESTIMATES OF FUTURE SUPERFUND COSTS 23

gradually in the high case (see Table 5). Nonetheless, the low case has the highest overall proportion

of mega-sites because the smaller number of NPL

sites in that scenario gives the barrel-scraping effect

less of an opportunity to take hold.

The three scenarios also differ in the proportions

of major and minor sites among the first 711 nonfederal NPL sites. Cost estimates for many of these

sites remain incomplete, making it impossible to

know exactly how many will end up in each category. (Estimates for many early mega-sites are also

incomplete, but the greater notoriety of these sites

allows their number to be specified more precisely.

All scenarios assume that mega-sites constitute 6.5

percent of the first 711 sites, or 46 sites in all,

Table 5.

Assumed Distribution of NPL Sites, by Cost Category (In percent)

Mega-Site Major Site Minor Site

First 711 Sites

Next 989 Sites

Next 1,200 Sites

Next 1,600 Sites

All 4,500 Sites

Total Number of Sites

Base Case

6.5

4.0

2.0

2.0

3.1

141

18.7

13.0

8.0

6.0

10.1

454

74.8

83.0

90.0

92.0

86.8

3,905

Low Case

First 711 Sites

Next 789 Sites

Next 800 Sites

All 2,300 Sites

Total Number of Sites

6.5

4.0

2.0

4.1

94

14.0

10.0

6.0

9.9

227

79.5

86.0

92.0

86.0

1,979

High Case

First 711 Sites

Next 1,189 Sites

Next 1,600 Sites

Next 4,300 Sites

All 7,800 Sites

Total Number of Sites

6.5

5.0

3.5

2.0

3.2

247

23.3

20.0

16.5

12.0

15.2

1,184

70.2

75.0

80.0

86.0

81.7

6,369

SOURCE: Congressional Budget Office.

NOTES: Site types are defined by cleanup costs as estimated in the records of decision. Estimated present-worth costs for mega-sites are

$50 million or more; for major sites, between $20 million and $50 million; and for minor sites, less than $20 million.

See Appendix A for the differences in assumptions underlying the three cases.

NPL = National Priorities List.
24 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

thereby building in a small cushion of two additional

cases on top of the 44 already identified.) Based on

data on 273 cleanup projects at 253 nonfederal sites,

the base case here assumes that 20 percent of the

non-mega-sites (or 18.7 percent of all sites) in these

early cohorts will be major sites; the low and high

cases use 15 percent and 25 percent for this ratio,

respectively.

Non-NPL Removal Sites

All three scenarios assume that 7 percent of the sites

in the screening inventory ultimately become nonfederal non-NPL removal sites (those requiring limited

or emergency, but not long-term, cleanup). This

assumption is an extrapolation of experience to date.

Of all sites that had begun the screening process, the

fraction that were nonfederal non-NPL sites with one

or more removals started was 5.8 percent in 1992, up

from 5.4 percent in 1991 and 4.8 percent in 1990.15

The upward trend in recent years suggests that the

ultimate percentage of non-NPL removal sites may

exceed 7 percent; however, many of the sites included in the current 5.8 percent may later be reclassified

as NPL sites.

The reason for using the same assumption in all

scenarios is not that this percentage is known with

precision, but that the uncertainty is relatively unimportant to the estimates of total costs. A 10 percent

increase in the number of future non-NPL removal

sites would add no more than 0.3 percent to projected present-worth costs in any of these scenarios.

The use of NPL placement rates of 5 percent to

10 percent, compared with an assumption of 7

percent for non-NPL removal sites, does not imply

that the national total of "modest" waste problems

that could be handled through EPA's removal authorities is similar to, or even less than, the number of

NPL-caliber problems. Many of the simpler problems are resolved by private voluntary action or by

state agencies rather than through the federal Superfund program.

Sites by Lead Party in Cleanup

This analysis also classifies cleanup projects at NPL

and non-NPL sites as RP leads or fund leads—that is,

as performed (and paid for) by the responsible parties

under EPA supervision, or directly by EPA. The

division of projects by lead party obviously affects

the distribution of costs between the public and

private sectors; it may also affect the cost total if, as

many observers believe, the private sector can

perform the same work less expensively than EPA.16

The distributions of lead parties assumed in this

analysis vary by type of cleanup or study project, but

they do not vary by scenario. Based on the results

observed in the first three years of EPA's enforcement-first policy, CBO's analysis assumes that

responsible parties will take the lead in 25 percent of

future removal projects at non-NPL sites, 40 percent

of removals at NPL sites, 50 percent of remedial

investigations/feasibility studies, and 70 percent of

remedial designs and remedial actions. Total costs

in the three scenarios are not strongly sensitive to

these percentages. Raising the RP-lead share for

RDs and RAs from 70 percent to 75 percent reduces

costs by 1.5 percent in the low case, where the

assumed private-sector cost advantage is the largest,

and less in the other cases—provided that private

transaction costs do not change as a result of the

increase in RP leads. Depending on the relative

contentiousness of RP-lead cleanups and of costis. More precisely, 2,031 non-NPL sites other than federal facilities

had started one or more removals by the end of 1992, and 34,793

federal and nonfederal sites had received at least a preliminary

assessment (the first stage of the screening process) or a prescreening removal.

16. A report released after CBO completed its analysis provides some

support for this belief. The report, commissioned by the Department of Energy, compared 58 "environmental restoration" (ER)

cleanups conducted by the department with 233 other public and

private cleanup projects. Statistical analysis correcting for differences in such factors as volume of waste, contaminated media, and

cleanup technology indicated that the ER projects cost 15 percent

more than the other government cleanups (including fund-lead

Superfund cleanups) and 32 percent more than the private cleanups.

These findings imply that private-sector costs are 13 percent lower

than those in the (non-ER) public sector, within the range of the

CBO assumptions given in Table 8. See Department of Energy,

Office of Environmental Restoration and Waste Management,

"Project Performance Study" (prepared by Independent Project

Analysis, Inc., Reston, Va., November 1993), pp. iii-v.
CHAPTER TWO ESTIMATES OF FUTURE SUPERFUND COSTS 25

recovery efforts after fund-lead cleanups, changes in

transaction costs could supplement, reduce, or even

reverse the direct savings.

The share of remedial actions undertaken by

EPA is a key determinant of future costs to the

states. As noted in Chapter 1, state governments

provide 10 percent of the capital costs of all fundlead RAs and bear all the associated costs for operations and maintenance (except the first 10 years of

costs for a pump-and-treat remedy for groundwater).17

 CBO's assumptions about the types, costs,

and durations of O&M projects imply that states pay

54 percent of the public sector's present-worth costs

for O&M (using a 7 percent discount rate), or 72

percent of the costs measured in undiscounted

dollars. The present-worth share is lower because

discounting gives greater weight to the front-loaded

federal contributions.

Assumptions About

Direct Response Costs

Estimated costs for direct response—that is, for sitespecific screening, study, and removal and remedial

action—constitute the lion's share of total Superfund

costs in all scenarios, with the share ranging from 64

percent in the low case to 66 percent in the high

case. In turn, costs for remedial action (major

cleanup) at NPL sites represent the large majority of

all direct response costs-82 percent or more in the

three cases. Consequently, assumptions about average RA costs are second in importance only to those

about the number of NPL sites in terms of their

impact on total estimated costs.

The analysis described below led CBO to assume

that costs for fund-lead remedial actions in the base

case are $169 million for each mega-site, $50 million

for each major site, and $21 million for each minor

site, with RP-lead cleanups costing 20 percent less

for all three types of sites (see Table 6).18 These

assumptions yield an average cost of $25 million for

the 4,500 NPL sites (or roughly $28 million, before

the 20 percent RP-lead savings). Several factors

make these estimates uncertain. In recognition of

this uncer-tainty, the low and high scenarios make

alternative assumptions that, when coupled with the

distributions of site types shown in Table 5, result in

average costs per site of $23 million in the low case

and $29 million in the high case.

The estimates of total Superfund costs are

sensitive to the assumptions about average RA costs.

For example, a 10 percent increase in the assumed

RA costs for major NPL sites would raise total costs

by 1.4 percent in the base case, as shown in Table 7,

and an increase in the private-sector efficiency

advantage from 20 percent to 25 percent of EPA

costs would reduce total expenditures by 3.6 percent.

The average costs per site for non-RA cleanup

and study are both less uncertain (because the data

are more plentiful and less variable) and less important to an estimate of overall Superfund costs (because non-RA costs are small relative to RA costs).

Consequently, CBO's analysis used the same cost

assumptions for non-RA response activities in all

three scenarios:

Site Screening

Preliminary

assessments

Site inspections

$10,000 per site

$65,000 per site

Removals $600,000 each

Remedial Investigations/

Feasibility Studies

Remedial Designs

$1.2 million each

$1 million each

17. Based on data from EPA and researchers at Resources for the

Future, CBO assumed that 47 percent of remedial actions involve

contaminated groundwater; that present-worth O&M costs for

groundwater remedies average 4.7 times those for other cleanups (at

the 10 percent discount rate commonly used in EPA's records of

decision); and that O&M continues for 30 years in groundwater

cases and 20 years in all others.

18. These average costs appear inconsistent with the cost ranges used

to define major sites (between $20 million and $50 million) and

minor sites (below $20 million). The definitions are based on

cleanup costs as estimated in EPA's records of decision; the

averages used in this analysis incorporate information on cost

growth after the ROD estimates.
26 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

These costs apply to fund-lead activities; enforcement-lead removals, RI/FSs, and remedial designs

cost less, sharing the same private-sector efficiency

advantage assumed in each scenario for remedial

actions.

Estimating the Costs of

Remedial Action

Cleanup has been completed at too few NPL sites for

observed costs to provide a good indication of

average remedial action costs. Accordingly, CBO's

analysis began instead with the estimated costs given

in the records of decision that EPA issues for its

remedial cleanups. In using the RODs to explore

average costs at NPL sites, three problems had to be

addressed.

o The ROD estimates are not always calculated

on a consistent basis and often understate the

actual costs that are ultimately incurred.

o Many RODs only discuss cleanup of an operable unit (subsite), leaving the cost picture

incomplete for the site as a whole.

o The ROD estimates do not attempt to incorporate any private-sector efficiencies that would

Table 6.

Average Present-Worth Costs per Site for Fund-Lead Remedial Action, by Site Type (In millions of dollars)

Base Case Low Case High Case

Mega-Sites

Capital

Operations and maintenance8

Total

Major Sites

Capital

Operations and maintenance8

Total

Minor Sites

Capital

Operations and maintenance8

Total

Memorandum:

Average Total Cost for All NPL Sites,

Before Private-Sector Efficiency Advantage

NPL Average After Private-Sector Advantage

107.6

61.6

169.2

33.0

16.9

49.9

14.0

6.9

20.9

28.5

24.7

102.6

58.9

161.5

28.9

14.8

43.7

14.0

6.9

20.9

28.9

23.3

112.7

65.0

177.7

37.0

19.0

56.0

14.0

6.9

20.9

31.2

29.1

SOURCE: Congressional Budget Office.

NOTES: Site types are defined by cleanup costs as estimated in the records of decision. Estimated present-worth costs for mega-sites are $50

million or more; for major sites, between $20 million and $50 million; and for minor sites, less than $20 million.

See Appendix A for the differences in assumptions underlying the three cases.

NPL = National Priorities List,

a. Operations and maintenance costs are discounted at 7 percent.
CHAPTER TWO ESTIMATES OF FUTURE SUPERFUND COSTS 27

Table 7.

Sensitivity of Present-Worth Cost Estimates to Assumptions About Remedial Action Costs (In percent)

Base Case Low Case High Case

Effect of a 10 Percent Increase in

Remedial Action Costs

Mega-site

Major site

Minor site

All sites

Effect of a 5-Percentage-Point Increase

in the Private-Sector Cost Advantage*

1.4

1.4

42

7.0

-3.6

1.7

1.2

M

7.2

-3.9

1.5

2.2

37

7.4

-3.3

SOURCE: Congressional Budget Office.

NOTES: Site types are defined by cleanup costs as estimated in the records of decision. Estimated present-worth costs for mega-sites are $50

million or more; for major sites, between $20 million and $50 million; and for minor sites, less than $20 miilion.

See Appendix A for the differences in assumptions underlying the three cases,

a. This change affects the cost of enforcement-lead removals and studies, as well as remedial actions.

lower the costs of cleanups led by the responsible parties.

The starting point for CBO's analysis was the

data set EPA uses to underpin its projections of

future costs to Superfund. This data set contains

estimates of capital costs from 273 RODs (not

counting duplicate entries or those for federal facilities). However, problems of reliability and comprehensiveness limited the usefulness of the entries on

mega- and major sites.19 For these sites, CBO relied

instead on a review of individual RODs for all

known or suspected mega-sites and a set of 34 major

sites, updated with information from knowledgeable

EPA staff.

Whenever possible, CBO obtained operations and

maintenance costs for major and mega-sites from

individual RODs. Where information on O&M costs

was lacking, average shares of O&M costs in total

costs, obtained from those RODs with complete

detail, were applied as default values. These default

shares were calculated for different cost categories

and ranged from 14 percent (for RODs with estimated capital costs above $30 million) to 35 percent

(for those with capital costs below $20 million). For

minor sites, a fourth ratio was derived from a data

set developed by researchers at Resources for the

Future; this ratio was based on the 184 RODs with

capital costs below $15 million. In all cases, O&M

spending was assumed to occur in equal installments

over 24 years, the average duration seen among all

214 RODs in the data set.

Because actual cleanup costs commonly exceed

those estimated in a ROD, CBO analyzed preliminary data from an EPA survey of post-ROD changes

in capital costs and gathered site-specific information

from EPA staff. The survey of 226 cases found that

the largest percentage increases in costs tended to

occur at cleanup projects with the least expensive

RODs: whereas the dollar-weighted average increase

for the whole sample was 44 percent, RODs with

estimated capital costs under $13 million showed an

19. When CBO began its review in the summer of 1992, the data set

included duplicate entries, entries that double-counted the costs of

RODs covering two sites, entries that included the costs of

operating and maintaining the remedy as well as the capital costs,

and many entries obtained from unreliable preliminary sources.

(EPA has since taken steps to correct these problems.) Moreover,

the limited sample did not provide complete data on the mega-sites,

whose costs are particularly important to the overall average.
28 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

Table 8.

Scenario-Specific Assumptions About Remedial Action Costs (In percent)

Base Case Low Case High Case

Default Scaling Assumptions Used for Sites

with Cleanup Projects Not Yet Estimated

Mega-sites over $150 million

All other mega-sites

Major sites

Efficiency Advantage of Private Sector

120

135

160

20

110

110

120

30

130

160

200

10

SOURCE: Congressional Budget Office.

NOTES: Site types are defined by cleanup costs as estimated in the records of decision. For mega-sites, the estimated present-worth cleanup

costs are $50 million or more; for major sites, between $20 million and $50 million.

See Appendix A for the differences in assumptions underlying the three cases.

average increase of 80 percent.20 This latter rate was

assumed to apply to all RODs for minor sites.

Where specific information was not available at the

more costly sites, default values of 26 percent, 34

percent, and 12 percent were derived for projects

with estimated capital costs above $44 million,

between $20 million and $44 million, and below $20

million, respectively.21 In all cases, post-ROD

growth of O&M costs was assumed to be half that of

capital costs.

As noted earlier, sites may be divided into

operable units that receive separate RODs; in fact,

EPA estimates that the average site receives 1.8

20. Because of the inverse correlation between a ROD's initial cost

estimate and its subsequent percentage cost growth, the simple

case-by-case average for the whole sample is 157 percent, much

higher than the dollar-weighted average of 44 percent. These

figures must be considered preliminary; at present, for example, the

data contain both intermediate updates of estimated costs and actual

observed costs.

Note that post-ROD cost growth is of interest here only in calculations of average actual cleanup costs. Additional experience might

lead EPA to raise its ROD estimates in the future and thus reduce

average cost growth, but that would have no effect on actual cleanup costs per site.

21. The apparent inverse relationship between ROD estimates and postROD cost growth is violated by the 12 percent average growth

observed for RODs with estimated capital costs between $13

million and $20 million. This deviation from the pattern may result

from small sample size: the data set of 226 cases included only 17

in the $13 million to $20 million range.

RODs. CBO's analysis uses this ratio to convert

from costs per ROD to costs per site at minor NPL

sites. At the more expensive sites, however, evidence suggests that costs are not distributed evenly

among a site's RODs and thus that smaller scaling

factors should be applied to incomplete sites that

already have a very expensive ROD. (Among 19

mega-sites with complete sets of RODs, the first

ROD with costs in the mega-site range-or if none,

the most expensive ROD—accounts for an average of

70 percent of total estimated capital costs.) The

default scaling assumptions vary widely among

scenarios, reflecting the great uncertainty surrounding

this factor (see Table 8). Nonetheless, since the

assumptions are used only where site-specific information is not available, they do not result in large

differences in average RA costs or total Superfund

expenditures.22

Each scenario also assumes a cost advantage for

private-sector studies and cleanups (see Table 8).

Such advantages are widely thought to exist; various

observers argue that responsible parties employ more

22. Default values were used for 12 of 46 mega-sites and 9 of 34 major

sites. Adopting the high-case assumptions in the base case would

raise average present-worth costs from $24.7 million to $25.4

million per site and increase total discounted Superfund costs by

2.5 percent.
CHAPTER TWO ESTIMATES OF FUTURE SUPERFUND COSTS 29

experienced project managers who can respond more

creatively to situations encountered during cleanup,

that government procurement regulations lead to

costly delays or award jobs to low bidders who may

be less efficient, and that certain efficient contractors

choose not to bid on government projects. Although

individual cases can be identified in which a privatesector cleanup cost as little as half the amount of a

similar fund-lead project, no significant data are

available on the overall impact of these advantages.

In the absence of usable data, CBO identified savings

rates of 10 percent to 30 percent as plausible estimates after consulting with experienced cleanup

contractors, RP representatives, and EPA staff. As

noted in Table 7, raising the assumed savings rates

by 5 percentage points would reduce estimated

present-worth costs for the program by 3.3 percent to

3.9 percent. Conversely, eliminating the 20 percent

advantage assumed in the base case would increase

total estimated costs by 14 percent.

Other Direct Response Costs

Direct costs for screening, removals, studies, and

engineering designs account for 11 percent to 12

percent of discounted Superfund costs in the three

scenarios. A 10 percent increase in any of the

assumed unit costs would add no more than 0.6

percent to total costs in the base case.

Screening Costs. As noted earlier, CBO's analysis

assumes an average of roughly $46,000 per site in

screening costs. This average has two components:

each site placed in the inventory incurs $10,000 in

costs for a preliminary assessment, which is primarily a review of available documents concerning the

site's history; and 55 percent of the sites are assumed

to go on to receive a site inspection, involving

collection and analysis of samples, at an average cost

of $65,000. Thanks to the large numbers of sites

EPA has already screened, these unit costs are

subject to less uncertainty than others in this study.

Removal Costs. Fund-lead removal actions at NPL

and non-NPL sites are both assumed to cost

$600,000 each. Although this estimate is higher than

EPA's budget-planning figure of $525,000, EPA staff

regard it as a reasonable estimate of future costs,

given that average costs have risen over time as more

ambitious projects have been handled as removals

rather than remedial actions. (EPA data show that

the average fund-lead removal over the 1987-1992

period cost $440,000, but that the average cost for

1992 alone was $700,000.) Based on rough extrapolations of the evidence to date, CBO's analysis

assumes that 45 percent of NPL sites receive at least

one removal action and that 85 percent of these sites

eventually get two. Also, 20 percent of non-NPL

removal sites are assumed to get a second removal

action.

Study Costs. The unit cost used in CBO's analysis

for each fund-lead remedial investigation/feasibility

study is $1.2 million. This figure was derived by

assuming that the typical RI/FS costs $1 million and

that 5 percent of cases (in all scenarios) are "megaRI/FSs" that cost $5 million. The EPA budgetplanning estimate for a standard RI/FS is $750,000;

EPA staff note, however, that actual costs often

exceed this target. The average NPL site is assumed

to get 1.8 RI/FSs; this is essentially a restatement of

the EPA estimate of 1.8 RODs per site, since every

ROD except an amended one marks the completion

of an RI/FS.

Remedial Design Costs. The unit cost used here is

$1 million per fund-lead remedial design-again,

somewhat higher than EPA's budget-planning estimate of $800,000, in recognition of increases in

actual costs since the passage of the Superfund

Amendments and Reauthorization Act in 1986.

Major and minor sites receive an average of 1.8

designs per site; mega-sites, however, are assumed to

receive 2.67 designs (and subsequent remedial

actions) on average, based on an analysis of projects

started or expected at 43 existing mega-sites. The

latter assumption introduces a minor inconsistency:

in principle, mega-sites should average 2.67 RI/FSs

if they receive that number of designs.23 Resolving

the inconsistency would require tracking the megasites separately at the RI/FS stage. Given the relatively small number of such sites and the relatively

23. Another consequence of the assumption of 2.67 remedial projects

per mega-site is that the NPL as a whole averages slightly more

than 1.8 per site. The number of projects per major and minor site

could be marginally reduced to attain an average of exactly 1.8 for

the current NPL as a whole, but there is no reason to treat the

rough EPA estimate with that level of precision.
30 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

minor cost of each RI/FS, the increase in complexity

would have no noticeable impact on the results.

Assumptions About

Transaction and

Enforcement Costs

CBO estimates that the share of transaction and

enforcement costs in total future spending will be 23

percent to 24 percent in the three scenarios, with

private transaction costs (paid by responsible parties

and their insurers) representing 18 percent (see Table

4 on page 17). These estimates assume that transaction and enforcement costs continue to maintain their

current relationships to response costs; arguments

could also be made for a wide variety of alternative

assumptions.

For the private sector, CBO assumes that transaction costs add 23 percent to responsible parties'

direct costs for studies and cleanups, and that insurers' transaction costs nationwide are tied to those of

the RPs in fixed proportions-1 to 1 in the base case,

1.15 to 1 in the low case, and 0.85 to 1 in the high

case. The figures used in these assumptions come

from the RAND data on five very large industrial

firms and four insurance companies.24 As noted in

Chapter 1, the RAND study estimated that transaction costs represented 17 percent of the dollars spent

by the five RPs at sites with costs exceeding

$100,000; subtracting the 8 percent of RP costs

estimated to be repayments of government expenditures, the ratio of transaction costs to RP-lead cleanups and studies is 177(100 - 17 - 8), or 23 percent.

CBO calculated the proportionality factors that

relate insurer and RP transaction costs by dividing an

estimated $163 million in insurer transaction costs

related to Superfund cleanups in 1989 (based on the

RAND data) by estimated RP transaction costs in

1989. In turn, the RP transaction costs were calculated using the unit costs of the three scenarios for

RP-lead cleanups and studies and an assumption that

the 23 percent ratio of transaction costs to response

costs is the nationwide average for all responsible

parties.

25

Alternative assumptions are certainly possible,

though difficult to quantify with current data. For

example, a higher rate of RP transaction costs could

be chosen on the theory that smaller firms not

represented in the RAND study have relatively

higher legal costs. The theory suggests that legal

expenses have a high fixed component and thus that

the transaction costs incurred by a smaller firm

whose cleanup liability is $200,000 may not be much

less than those of a larger firm facing a liability of

$2 million. Conversely, lower rates could be chosen

on the grounds that the RP data to date are biased

because transaction costs occur earlier in the cleanup

process. The assumptions about insurer transaction

costs used here might turn out to be too low if new

categories of litigation (such as insurer-versus-insurer

or insurer-versus-reinsurer) become important; they

might also be too high, if the courts gradually clarify

the applicability of insurance policies to Superfund

liabilities.

CBO's analysis modeled federal enforcement

costs in more detail, assigning unit costs to site-level

activities for RP searches and cost-recovery efforts

and to project-level activities for negotiations and

oversight. Site-level costs were estimated separately

for fund-lead and RP-lead NPL sites and removalonly sites, and specific project-level costs were

calculated for fund-lead and RP-lead removals,

RI/FSs, and RAs (see Table 9). (Fund-lead projects

do not incur enforcement costs for oversight, but

many of them are preceded by negotiations between

EPA and responsible parties over possible RP-lead

24. Jan Paul Acton and Lloyd S. Dixon, Superfund and Transaction

Costs (Santa Monica, Calif.: RAND, 1992).

25. The RAND estimate of 1989 insurer transaction costs related to

waste-hazard sites is $410 million. The $163 million used here

subtracts 21 percent of the total for costs related to claims for

bodily injury and property damage rather than cleanup and assumes

that half of the remainder reflects costs for sites being addressed

under state or federal programs other than CERCLA, or voluntarily.

Taking into account the private-sector advantages in efficiency, the

assumptions of the low, base, and high cases imply RP response

costs in 1989 of $623 million, $734 million, and $853 million,

respectively-which in turn yield estimated RP transaction costs of

$143 million, $169 million, and $196 million.
CHAPTER TWO ESTIMATES OF FUTURE SUPERFUND COSTS 31

responses.) EPA enforcement activities not included

in these categories, such as developing policy and

maintaining data bases, were viewed as indirect costs

and modeled as fixed markups on the direct costs.

CBO's analysis broke down enforcement costs

by federal office, including both headquarters and

regional costs. The unit costs for the Office of

Waste Programs Enforcement, the largest of the four

sources, are based on EPA's budget-planning estimates, as are the RD/RA oversight costs of the

Office of Emergency and Remedial Response. Costs

for the Office of Enforcement were derived from

expected outputs, work years, and subaccount budget

totals in the 1993 operating plan. The Department of

Justice costs are based on rough estimates obtained

from department staff. None of these figures are

known with great precision; however, their relatively

small contribution to total Superfund costs makes the

uncertainties of secondary importance. For the same

reason, moderate gains in efficiency resulting from

the recently announced reorganization of EPA's

enforcement activities would not have a major impact

on total costs.

Assumptions About Federal

Program Costs

V

Federal program costs-those for activities other than

direct response and enforcement—constitute the

remaining 11 percent of estimated future costs in the

Table 9.

Assumed Unit Enforcement Costs, by Source (In thousands of dollars)

Site or Activity Category

Removal Site

Fund-lead

RP-lead

National Priorties List Site

Fund-lead

RP-lead

Removal Action

Fund-lead

RP-lead

EPA Office

of Waste

Programs

Enforcement

56

18

503

327

2

74

EPA Office

of Emergency

and Remedial

Response

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

EPA

Office of

Enforcement

33

5

235

97

4

17

Department

of

Justice

15

n.a.

150

60

n.a.

n.a.

Total

105

24

888

484

7

91

Remedial Investigation/

Feasibility Study

Fund-lead

RP-lead

Remedial Design/

Remedial Action

Fund-lead

RP-lead

53

604

64

134

n.a.

n.a.

n.a.

500

18

28

56

109

n.a.

n.a.

10

240

72

632

131

983

SOURCE: Congressional Budget Office.

NOTE: EPA = Environmental Protection Agency; n.a. = not applicable; RP = responsible party.
32 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

base case, 12 percent in the low scenario, and 10

percent in the high scenario (see Table 4 on page

17). These costs cover a wide spectrum of support,

research, and management activities: some are

closely related to site-level cleanup, and others are

highly centralized and administrative in nature.

Although data on current spending for program

costs are readily available, assumptions about their

future evolution are unavoidably speculative because

the connection between such costs and the flow of

sites through the Superfund pipeline is indirect. In

some cases, CBO's analysis assumes that these costs

rise or fall in strict proportion to certain measures of

program activity. The remaining costs are assumed

to be totally independent of other program activity—

that is, they are fixed, real-dollar amounts over the

life of the program.26 These assumptions of full or

zero proportionality are not intended to be individually accurate but merely simple rules of thumb whose

biases partially compensate for each other.

Using unit costs based on EPA's budget-planning

estimates or on extensions of recent experience, CBO

makes several assumptions about program costs.

o Annual personnel costs for EPA's nonenforcement staff are assumed to equal $68,000 per

NPL site, excluding sites at which remedial

construction is complete. (With 1,500 "active"

NPL sites in a given year, for example, total

salary costs would be $102 million.)

o Removal support costs, including contracts for

technical assistance and support of policy development, are assumed to be $250,000 per fundlead removal action.

o Annual remedial support costs are assumed to

equal $750,000 per fund-lead RA started in that

year plus a fixed component of $40 million.

Such costs include administrative costs of cleanup contractors, technical assistance grants to

local communities, state grants, contracts for

mapping and support of policy development, and

services of the Army Corps of Engineers and the

Bureau of Reclamation.

o Response management is assumed to cost $44

million per year for services and equipment

related to training, budgeting, planning, data

management, policy development, dissemination

of information on new technologies, and emergency preparedness.

o General administration (including financial management, rent, and utilities), research and development, and interagency costs (primarily for the

Agency for Toxic Substances and Disease Registry and the National Institute of Environmental

Health Sciences) are assumed to be a fixed

markup on all other federal costs except operations and maintenance costs. (O&M costs were

excluded as a matter of convenience to avoid the

need for separate spreadsheet columns for federal

and state costs.) General administration expenses

are both larger and harder to predict than the

other types of program costs. Consequently, the

markup factor varies among scenarios, from 20

percent in the low case to 22 percent in the base

case and 24 percent in the high case.

Assumptions About the

Discount Rate

Because the Superfund program can be expected

under present policies to continue for many decades,

the present values of its costs and benefits are

sensitive to the assumed annual discount rate.27 For

26. For this purpose, the end of the program is defined as the point at

which remedial construction is complete at all NPL sites. Costs for

operations and maintenance would continue to be incurred for

another 24 years.

27. As noted earlier, CBO's analysis assumes that sites are added to the

screening inventory for another 30 years in the low scenario, 35

years in the base case, and 40 years in the high scenario, and that

operations and maintenance of each remedy last for 24 years. The

time between a site's inclusion in the screening inventory and its

proposed listing on the NPL is assumed to be four years, and the

time it spends on the NPL before beginning its last O&M project

is assumed to be 9, 12, or 15 years, depending on whether it

receives one, two, or three remedial actions. Consequently,

Superfund expenses continue for as many as 83 years (through

2075) in this analysis.
CHAPTER TWO ESTIMATES OF FUTURE SUPERFUND COSTS 33

Table 10.

Present-Worth Costs at Alternative

Discount Rates (In billions of dollars)

Discount

Rate

10 Percent

7 Percent

4 Percent

2 Percent

0 Percent

Base

Case

52

74

112

156

228

Low

Case

32

42

59

78

106

High

Case

80

120

197

292

463

SOURCE: Congressional Budget Office.

NOTE: See Appendix A for the differences in assumptions underlying the three cases.

example, at a discount rate of 10 percent, the present

worth of estimated costs in the base case would be

$52 billion rather than the $74 billion obtained at 7

percent; in contrast, a 2 percent discount rate would

imply present-worth costs of $156 billion (see Table

10). Although economists agree that future effects

should be discounted in policy analyses, there is less

agreement about the proper discount rate to use in a

given case.

Much of the ambiguity surrounding the choice of

a discount rate arises because income from capital is

taxed, which implies that private-sector investments

must provide a before-tax rate of return higher than

the rate at which investors are willing to trade

present and future gratification in their consumption

patterns (called the pure rate of time preference).

Because of this tax wedge, the discount rate used to

analyze a particular policy should ideally be higher

the more the policy is financed at the expense of

private-sector investment rather than household

consumption. In practice, however, the ultimate

incidence of the policy's costs is generally unknown,

and a simpler rule of thumb must be used.

The 7 percent real discount rate chosen here is

the standard rate used by executive branch agencies

in analyzing regulations and public investments. In

support of this policy, the Office of Management and

Budget (OMB) argues that 7 percent "approximates

the marginal pretax rate of return on an average

investment in the private sector in recent years."28

The argument most commonly made against the

OMB policy is that some share of the funds used for

a public policy is likely to come out of consumption

rather than investment and thus that the 7 percent

rate is too high.

CBO analyzed the sensitivity of present-worth

costs in the base, low, and high cases to alternative

discount rates between zero and 10 percent-a range

chosen to span the set of plausible values (see Table

10).29 Base-case costs vary from $52 billion at 10

percent to $228 billion at zero percent (that is,

without discounting); similarly, the low-case estimates vary from $32 billion to $106 billion, and the

high-case costs range from $80 billion to $463

billion.

Although using a 7 percent discount rate results

in a much lower estimate of present-value costs than

would be obtained at zero or 2 percent, it does not

suggest that Superfund is a better "bargain11—if

anything, the argument cuts the opposite way. A

thorough cost-benefit analysis of the program re28. Office of Management and Budget, "Guidelines and Discount Rates

for Benefit-Cost Analysis of Federal Programs," Circular A-94,

revised (October 29, 1992), p. 9.

29. The 10 percent rate was the OMB standard before October 1992.

At the other end of the range, the zero rate provides a useful

benchmark in undiscounted dollars and can be defended as a

plausible estimate of the consumer rate of time preference, given

the real interest rates now being paid on savings accounts. The

2 percent rate is based on the real interest rate on Treasury securities; in recent years, CBO's analyses of public investments have

used this rate, on the basis of macroeconomic evidence that

government spending was crowding out neither consumption nor

investment in the short term, but rather leading to increased

borrowing abroad. Finally, the 4 percent rate is included simply as

a point between 2 percent and 7 percent, equally far below the

primary assumption of 7 percent as 10 percent is above it

The present study follows OMB's rule of thumb rather than CBO's

on the grounds that in the incidence of its costs, Superfund is more

like a pure regulation than a standard public investment. Over half

of the estimated costs (before discounting) are incurred directly by

the private sector. Moreover, most of the federal costs are funded

from dedicated taxes on business that might not be retained if the

Congress were to cancel the program and whose incidence, again,

is probably closer to that of typical regulatory costs than that of the

average federal dollar.
34 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

quires that its benefits also be discounted, after they

are converted to dollar equivalents.30 To the extent

that the benefits of cleanup are spread over a longer

period of time than the costs are, a higher monetary

discount rate tends to reduce the present value of

benefits more sharply, leading to a lower ratio of

benefits to costs. In general, higher discount rates

favor less investment, whether public or private, and

more consumption.

30. Such an analysis might assume that the dollar equivalents of the

benefits increase over time, on the theory that continued economic

growth will raise the monetary value that individuals place on good

health and a clean environment, but the assumed rate of increase

would be the same for any discount rate.
Chapter Three

Comparisons with Other Estimates

and Implications for Policy

E

stimates by the Congressional Budget Office

of future Superfund costs are very different

from earlier estimates developed by the

Environmental Protection Agency and the University

of Tennessee. The main factors that explain the

differences are CBO's broader coverage of costs and

use of discounted dollars, different average cleanup

costs per site, and different numbers of sites on the

National Priorities List. The CBO estimates of

average cleanup costs are lower than the EPA and

Tennessee figures, primarily because of the assumed

private-sector cost advantage and barrel-scraping

effect.

The estimates presented here have four main

implications for Superfund policy. First, future costs

will remain highly uncertain until the ultimate

number of sites to be cleaned up is known more

precisely. Second, the cleanup job is far from over.

Third, costs to the states will rise dramatically from

current levels, though they will remain a relatively

small share of total Superfund costs. Fourth, under

the assumptions of the base case and high case, large

increases in federal and private spending will be

required over the next decade to avoid a growing

backlog of sites awaiting cleanup.

CBO's analysis provides a baseline estimate that

assumes no significant policy changes. Two administrative changes that are being carried out or discussed by EPA now are unlikely to have major

effects on total costs. Many other policy changes

have been proposed, some of which would have

larger cost implications. Given adequate data, the

costs of these alternatives could be estimated using

the same methods employed in Chapter 2.

Why Do the CBO, EPA, and

Tennessee Estimates Differ?

The CBO, EPA, and University of Tennessee estimates of Superfund costs-$74 billion, $16 billion,

and $151 billion, respectively-are not directly

comparable and rely on many different assumptions

and analyses.1 A handful of key factors explain most

of the differences, however.

Two factors make direct comparisons of the

estimates inappropriate. One is the different coverage of types of costs. The CBO figure includes all

future public and private Superfund expenditures

(including private transaction costs), but the EPA

figure covers only costs to the federal government,

and the Tennessee estimate covers public and private

costs for study and cleanup at NPL sites-including

costs before 1993—omitting administrative and legal

expenses and the costs of screening and removals at

non-NPL sites. The other comparability issue is that

See Environmental Protection Agency, Office of Emergency and

Remedial Response, Progress Toward Implementing Superfund:

Fiscal Year 1990 (February 1992), pp. 33-38; and E. W. Colglazier,

T. Cox, and K. Davis, Estimating Resource Requirements for NPL

Sites (Knoxville, Term.: University of Tennessee, Waste Management Research and Education Institute, 1991).
36 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

the CBO estimate is in present-worth dollars, but the

EPA and Tennessee figures are in undiscounted

dollars.

The estimates also differ in their assumptions and

analyses of the number of sites to be cleaned up, the

average cleanup costs, and the costs of activities

other than cleanup. For example, the CBO base case

assumes 4,500 nonfederal NPL sites, the EPA figure

covers only the 1,120 sites listed through 1990, and

the Tennessee estimate assumes 3,000 sites. Average

cleanup costs per NPL site, measured using a common 10 percent discount rate for operations and

maintenance costs, are $21 million in the CBO base

case, $29 million in the EPA estimate, and $32

million in the Tennessee analysis.2 The Tennessee

study also assumes $1 million per site in "preremedial costs"; the comparable figure in the CBO

analysis, covering removal actions, remedial investigations/feasibility studies, and remedial designs, is

roughly $4 million.

The importance of each of these factors can be

seen in a closer comparison of the CBO and Tennessee cost estimates. In undiscounted dollars, CBO's

estimate is not $74 billion but $228 billion, reversing

the apparent difference from Tennessee's figure of

$151 million. Scaling up the Tennessee estimate

from 3,000 to 4,500 nonfederal NPL sites yields a

cost of $226 billion, almost entirely closing the gap.

The story does not end there, however. The CBO

estimate for only the site-specific costs, past and

future, of studies and cleanup at NPL sites is $161

billion (of which $12 billion is costs before 1993).

The difference between $161 billion and $226 billion

is the result of the Tennessee study's higher remedial

action costs and lower preremedial costs. In percentage terms, the discounting factor accounts for 200

percent of the original gap between the CBO and

Tennessee estimates, the assumptions about NPL size

for negative 97 percent, the cost-coverage factor for

negative 87 percent, and the difference in average

site costs—mostly remedial action costs—for 84

percent.

This examination of the gap between the CBO

and Tennessee estimates raises the question of why

CBO's cleanup costs are lower. Assumptions about

two factors—the efficiency of private-sector cleanups

and future trends in the costliness of sites—explain

most of the difference. Eliminating the 20 percent

efficiency advantage assumed for private-sector

cleanups would raise CBO's estimate of average

costs per site, measured at a 10 percent discount rate,

from $21 million to $24 million. Also eliminating

the assumed downward trend in site costliness (the

barrel-scraping effect) would bring the CBO estimate

as high as $31 million—between the EPA and Tennessee figures of $29 million and $32 million per

site.3 The remaining gaps are attributable to differences in data on the costs of individual cleanup

projects: all three studies combine cost estimates

from records of decision with data on post-ROD cost

overruns, but the sets of projects sampled in the three

analyses, though overlapping, are not identical.

The key CBO assumption of a downward trend

in site costliness receives some support from the fact

that EPA has recently reduced its own estimate of

average cleanup costs per site. The addition of data

on recent cleanups, coupled with corrections to

flawed older data, has led EPA to lower its estimate

of average remedial action costs from $29 million

per site, the figure used in its projection of future

federal costs, to $26 million.4 This revised estimate

is close to the $24 million average estimated by CBO

in the absence of private-sector cost savings-or

equivalently, for cleanups funded by the federal

government.

2. See Federal Register, June 23, 1992, p. 34022; and Colglazier,

Cox, and Davis, Estimating Resource Requirements, Figure 4.13.

The $25 million figure for the CBO base case given in Chapter 2

discounted O&M costs at 7 percent.

4.

CBO's highest figure, $30.6 million, is obtained under the strictest

interpretation of "eliminating the downward trend." In this version,

all sites are assumed to be distributed among the mega, major, and

minor categories in the same proportions as were the first 711 sites

proposed for the NPL. Alternatively, average costs for future

cleanups could be assumed to equal those observed through 1992.

This interpretation would yield a somewhat lower estimate, because

the average through 1992 is already reduced by the lower incidence

of mega-sites among sites listed in later cohorts.

Environmental Protection Agency, Office of Emergency and

Remedial Response, "Overview of the Outyear Liability Model,"

fact sheet (December 1993).
CHAPTER THREE COMPARISONS WITH OTHER ESTIMATES AND IMPLICATIONS FOR POLICY 37

Implications for Federal

Cleanup Policy

Four main policy implications can be derived from

CBO's estimates of future Superfund costs despite

the significant uncertainty represented by the difference between the low and high scenarios. That uncertainty itself is the focus of the first implication.

Superfund Costs Depend on the Size

of the Cleanup Problem, Which

Remains Unknown

Some uncertainty is unavoidable in any attempt to

estimate costs decades into the future. Given the

unpredictability of changes in technology and policy,

such estimates cannot be regarded as forecasts but at

best as extrapolations based on currently observable

trends.

In the case of Superfund, however, so little is

known about the ultimate size of the problem that

estimates of the remaining costs are conditional not

only on technology and policy but also on the

number of sites to be cleaned up. The assumed

numbers of NPL sites in CBO's low and high cases

range from 49 percent below the base-case assumption to 73 percent above it-and more extreme

possibilities cannot be ruled out. This variation in

numbers of NPL sites is the main reason why estimated present-worth costs range almost threefold

between the low and high cases (and undiscounted

costs more than fourfold).5 As noted in Chapter 2,

applying the low-case or high-case NPL assumptions

to the base case eliminates 80 percent of the respective differences in present-worth costs.

One key reason that the ultimate number of

NPL-caliber cleanup problems is so uncertain is that

EPA has not conducted a comprehensive sitediscovery effort. Instead, it has relied primarily on

reports from state and local governments, site owners, and other individuals. Possible alternatives to

this passive approach have been discussed by the

Office of Technology Assessment, which suggested

that historical aerial photographs could provide the

cornerstone of an active federal site-discovery

program.6 EPA's main argument for not making site

discovery a higher priority has been that the passive

approach is already bringing in enough cleanup work

to absorb the current level of funding.

Does the ultimate number of sites matter for

policy purposes? On the one hand, larger numbers

of sites presumably increase the benefits of a cleanup

program as well as the costs. Arguably, therefore,

the uncertainty about ultimate NPL sites is less

important for Superfund policymaking than is the

level of average costs per site (including the appropriate share of overhead costs). On the other hand,

the same inefficiency or inequity seen as regrettable

but not worth the trouble to address in a small or

short-lived program may be totally unacceptable at a

larger scale. For example, setting priorities so that

sites with the worst health effects do not languish at

the back of the queue is presumably more important

when the queue is longer.

Much of the Superfund Job

Remains To Be Done

Despite the uncertainty in the number of sites to be

cleaned up, there is good reason to believe that the

end of the Superfund program is by no means around

the corner. According to the CBO base case, public

and private obligations incurred through 1992 represent less than 30 percent of the total economic value

of Superfund costs, measured in present-worth

dollars, and less than 10 percent of total inflationadjusted but undiscounted dollars. The federal

government's obligations through 1992 represent 35

percent of its share of cumulative costs in presentCost estimates in the three scenarios do not vary in strict proportion

with the number of NPL sites because of assumed economies of

scale in administrative costs, unit-cost assumptions that differ

among scenarios (including assumptions about the barrel-scraping

effect), and discounting.

6. Office of Technology Assessment, Coming Clean: Superfund

Problems Can Be Solved . . . (1989), p. 94. The EPA region

covering Alaska, Idaho, Oregon, and Washington has used

historical business lists and geographic information systems in an

active site-discovery effort; see Environmental Protection Agency,

The Superfund Program: Ten Years of Progress (June 1991), p. 11.
38 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

worth dollars and 14 percent in undiscounted dollars.7

More optimistically, the low scenario suggests

that the economy may be 40 percent of the way

through Super-fund's present-worth costs (though

only 17 percent finished in undiscounted dollars). At

the other end of the spectrum, the high scenario

suggests that 19 percent of the present-worth costs

(and less than 5 percent of the undiscounted costs)

have so far been incurred.

The larger the amount of cleanup work yet to be

done, the greater the potential benefits from improving Superfund policies, compared with the disruption

costs that might be incurred in adopting new policies.

The CBO estimates suggest that the end of the

cleanup problem may be distant enough to justify

some policy changes involving long-term benefits but

short-term costs.

Costs to the States Will

Rise Dramatically

The finding that much of the Superfund job lies

ahead is even more true for the required state contributions to fund-lead cleanups, which are concentrated

at the back end of the cleanup process, than for total

national spending. The low, base, and high estimates

of $2.1 billion, $3.3 billion, and $5.0 billion in future

present-worth costs to the states imply that the obligations incurred through 1992 are 15 percent, 10

percent, and 7 percent of the total, respectively.8

The percentage of cumulative state costs that

were incurred through 1992 is lower in undiscounted

dollars-between 1 percent and 3 percent, given

7. Total obligations between 1981 and 1992 were $19.9 billion in

nominal dollars, $21.7 billion in real 1991 dollars, and $28.3 billion

in 1991 dollars discounted forward to the start of 1993. (The use

of 1991 rather than 1992 as the index year for real dollars allows

a more accurate comparison between past and future costs because

the data underlying CBO's estimates of future costs reflect a mix

of prices from different years.) The federal obligations to date of

$10.3 billion in nominal dollars (excluding offsetting collections)

are equivalent to $11.4 billion in real dollars and $15.1 billion in

discounted dollars.

8. Including state commitments for capital costs not yet paid to EPA,

obligations through 1992 are roughly $0.3 billion in real 1991

dollars and $0.4 billion in 1991 dollars discounted forward to the

start of 1993.

Figure 4.

Required State Contributions to Superfund,

Fiscal Years 1993-2075

Millions of Real, Undiscounted Dollars

1,000

800

600

400

200

High Case

1993 2003 2013 2023 2033 2043 2053 2063 2073

SOURCE: Congressional Budget Office.

NOTE: See Appendix A for the differences in assumptions underlying the three cases.

estimated future costs ranging from $9.8 billion to

$36.8 billion. The contrast between the presentworth and undiscounted results is sharper for state

costs than for total national spending, another consequence of the back-loading of the state contributions.

Whereas yearly national costs reach their peak in

2003 in CBO's analysis (see Figure 2 on page 15),

the state costs rise more gradually and do not peak

until 2014 or 2022 (see Figure 4). The trajectories

of state costs shown in Figure 4 should be considered illustrative; because of the importance of operations and maintenance costs in total state expenditures, a more detailed analysis would require better

data on the average duration of groundwater and

nongroundwater O&M efforts.9

In the absence of adequate data on the duration of O&M costs,

CBO's analysis did not directly model the EPA policy of paying

for the first 10 years of a groundwater pump-and-treat remedy, but

instead assigned the agency a constant share of each year's costs

for all fund-lead O&M. This simplification causes the state cost

trajectory to peak a few years earlier than it would otherwise.
CHAPTER THREE COMPARISONS WITH OTHER ESTIMATES AND IMPLICATIONS FOR POLICY 39

State costs for contributions to fund-lead cleanups are estimated to remain a modest share of the

national total, despite their high growth in relative

terms. These costs represent 4 percent to 5 percent

of the present-worth total, and 8 percent to 9 percent

of total undiscounted costs, in the CBO scenarios.

Current Funding Levels May

Constrain the Pace of Cleanup

As noted in Chapter 2, the assumptions of the base

and high cases imply that a substantial backlog of

sites await placement on the NPL. Current levels of

public and private Superfund spending are too low to

simultaneously drain this backlog over the next 10

years, keep pace with new sites brought to EPA's

attention, and move present sites expeditiously

through the cleanup pipeline.

The growth in total spending necessary to keep

pace with site work loads in the base and high cases

is shown in Figure 2 on page 15; Figure 5 shows a

similar pattern for the federal component of the total.

Federal costs peak at $3.4 billion in the base case

and $5.2 billion in the high case, roughly double or

triple the highest level observed to date ($1.7 billion

in 1992). This growth in federal costs cannot be

avoided by additional emphasis on enforcement-lead

cleanups: since most new projects are already being

undertaken by responsible parties, the potential for

further cost shifting of this type is limited.

Of course, high growth in spending can always

be avoided by stretching the costs out over more

years; in the context of Superfund, a funding

stretchout would have several effects on long-term

costs. Natural dispersion and decay of hazardous

substances would make some cleanups cheaper-or

even unnecessary—and others more expensive. Total

costs would probably rise in undiscounted dollars

because a stretched-out program would have more

years of overhead costs. Total present-worth costs,

however, might fall because of the additional years

of discounting.

Regardless of the impact on long-term costs,

stretching out the program unambiguously delays

cleanup and its attendant benefits. One way to

illustrate the magnitude of the possible delays is to

contrast the results of CBO's low case, in which

federal and total spending levels remain relatively

flat over the next decade, with those of the base and

high cases. The average annual number of remedial

investigations/feasibility studies started from 1993

through the peak cost year of 2003 is 151 in the low

case, 339 in the base case, and 490 in the high case.

Over those 11 years, new remedial actions average

173, 243, and 291 per year in the low, base, and

high cases. Consequently, applying the activity

levels funded in the low case to the site work loads

of the base case would allow only 45 percent of the

ready RI/FS projects and 71 percent of the potential

remedial cleanups to begin by 2003, leaving backlogs

of more than 2,000 RI/FSs and close to 800 RAs.

Similarly, only 31 percent of the RI/FS starts and 59

percent of the RA starts would occur if low-case

activity levels were applied to high-case needs, and

backlogs of roughly 3,700 RI/FSs and 1,300 RAs

would accumulate by the end of 2003.

Figure 5.

Federal Superfund Expenditures,

Fiscal Years 1993-2075

Billions of Real, Undiscounted Dollars

1993 2003 2013 2023 2033 2043 2053 2063 2073

SOURCE: Congressional Budget Office.

NOTE: See Appendix A for the differences in assumptions underlying the three cases.
40 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

Superfund Costs Under

Alternative Policies

Given that the CBO estimates assume a static policy

environment, it is useful to consider how changes in

Superfund policies might affect future costs. Two

current EPA initiatives are unlikely to have a major

impact on total long-run costs but could shift their

distribution by payer and over time. Other proposed

changes could affect total costs as well as their

distribution.

EPA's current initiatives are the Superfund

Accelerated Cleanup Model (SACM) and state

deferral of potential NPL sites. The SACM seeks to

eliminate downtime in the screening process, institute

presumptive remedies for common contamination

problems, and speed risk reduction (as distinct from

environmental restoration) at NPL sites as well as

non-NPL removal sites. The state deferral policy,

now being developed, would allow EPA to delegate

to qualified states the responsibility for addressing

certain "low- or medium-priority NPL-caliber sites,

i.e., sites that EPA would not be able to address for

several years."10

Although both of these initiatives may represent

significant change in other respects, their impact on

Superfund's total costs may be minor. The streamlining called for in the SACM could result in some

cost savings, but the main effect will be to shift

some of the existing costs forward in time (and

perhaps to defer others) in order to speed up the

benefits of reduced risks to health and the environment. Similarly, state deferral could conceivably

reduce overall administrative costs-if the cooperating

10. Environmental Protection Agency, "Superfund Administrative

Improvements: Final Report" (June 23, 1993), p. 34.

state programs are more efficient than EPA's—but the

primary emphasis of the initiative is on speeding up

cleanup by spreading costs, not on reducing costs.

To the extent that either of these policy changes

succeeds in increasing the pace of cleanup, presentworth costs could actually rise, since earlier expenditures have a higher economic value. A thorough

cost-benefit analysis, however, would also show

present-worth benefits rising as a result of the earlier

cleanups. In the absence of enough data on benefits

to allow such an analysis, undiscounted dollars may

provide a more useful measure of the cost effects of

alternative policies.

Other proposed changes in Superfund policies

could have more significant cost implications. For

example, changes in cleanup standards could raise or

lower average cleanup costs (for one or more types

of sites), with secondary effects on administrative

and transaction costs. A shift from the present

liability system to a public-works financing scheme

would eliminate enforcement and transaction costs at

many sites, but it would also eliminate the savings

from any private-sector advantage in efficiency. The

cost effects of these and other alternatives could be

estimated using the framework employed in Chapter 2, given adequate data on the nature of the policy

changes.

The nonfederal sites addressed under the

Superfund program, which are the focus of this

study, are only one component of the overall national

effort to clean up hazardous wastes. The full universe of sites includes federally owned facilities, sites

being addressed under the Resource Conservation

and Recovery Act and other federal laws, and sites

being cleaned up under state programs or voluntary

private efforts. Ideally, attempts to maximize the net

benefits of the nation's waste cleanups should take

this broader context into account.
Appendixes

Appendix A

A Summary of the Different Assumptions

Used in the Three Scenarios

T

able A-l summarizes the differing assumptions that underlie the three Congressional Budget Office

scenarios analyzed in this study. The table includes all of the primary assumptions—those not derived

from more fundamental, underlying assumptions-and some of the key secondary (derivative) assumptions.
44 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

Table A-1.

Assumptions of the Three Cases

Base Case Low Case High Case

Sites Added to the Screening Inventory

Percentage of Screening Sites Placed on the NPL

Total Nonfederal NPL Sites8

25,376

8

4,500

15,151

5

2,300

50,000

10

7,800

Percentage Distribution of Sites

(Mega/major/minor)

First 711 sites

Next 789 sites

Next 200 sites

Next 200 sites

Next 400 sites

Next 600 sites

Next 600 sites

Next 1,000 sites

Next 3,300 sites

All sites

Default Cost-Scaling Factors Used for Sites

with Cleanup Projects Not Yet Estimated (Percent)

Mega-sites greater than $150 million

All other mega-sites

Major sites

Costs per Site for Fund-Lead Cleanups

(Millions of dollars)b

Mega-sites

Capital

Operations and maintenance

Total

Major sites

Capital

Operations and maintenance

Total

Efficiency Advantage of Private Sector (Percent)

Average Cleanup Costs for All Sites

(Millions of dollars)0

Federal Markup for General Administration,

Research, and Non-EPA Costs (Percent)

6.5/18.7/74.8

4.0/13.0/83.0

4.0/13.0/83.0

2.0/8.0/90.0

2.0/8.0/90.0

2.0/8.0/90.0

2.0/6.0/92.0

2.0/6.0/92.0

n.a.

3.1/10.1/86.8

6.5/14.0/79.5

4.0/10.0/86.0

2.0/6.0/92.0

2.0/6.0/92.0

2.0/6.0/92.0

n.a.

n.a.

n.a.

n.a.

4.1/9.9/86.0

6.5/23.3/70.2

5.0/20.0/75.0

5.0/20.0/75.0

5.0/20.0/75.0

3.5/16.5/80.0

3.5/16.5/80.0

3.5/16.5/80.0

2.0/12.0/86.0

2.0/12.0/86.0

3.2/15.2/81.7

120

135

160

107.6

61.6

169.2

33.0

16.9

49.9

20

24.7

22

110

110

120

102.6

58.9

161.5

28.9

14.8

43.7

30

23.3

20

130

160

200

112.7

65.0

177.7

37.0

19.0

56.0

10

29.1

24

SOURCE: Congressional Budget Office.

NOTES: NPL = National Priorities List; n.a. = not applicable; EPA = Environmental Protection Agency.

a. Secondary assumption, derived from the total screening inventory (existing sites and assumed additions) and the assumed acceptance rate

of the screening process. (See Chapter 2 for details.)

b. Secondary assumption, derived from site-specific data and the assumed cost-scaling factors for incomplete sites. (Operations and

maintenance costs are discounted at 7 percent per year.)

c. Secondary assumption, derived from fund-lead costs by site type, the assumed distribution of sites, and the assumed private-sector efficiency

advantage.
Appendix B

A Glossary of Superfund Terms

M

any of the definitions given below are adapted from Environmental Protection Agency, The Superfund

Program: Ten Years of Progress (June 1991).

cash-out settlement: An agreement in which a responsible party settles its liability by paying the Environmental

Protection Agency (EPA) a certain amount toward cleanup work to be done later. It differs from a cost recovery,

in which EPA collects money to reimburse the Superfund trust fund for previous expenditures.

enforcement-first policy: A policy introduced in 1989 under which EPA attempts to maximize the number of

cleanups conducted by responsible parties.

enforcement-lead cleanup: A cleanup conducted by some or all of a site's responsible parties with EPA

oversight; same as RP-lead cleanup. Compare with fund-lead cleanup.

fund-lead cleanup: A cleanup conducted by EPA using money from the trust fund.

Hazard Ranking System (HRS): The system EPA uses to score potential risks to human health and the

environment from releases or threatened releases of hazardous substances. In general, a hazardous waste site must

score at least 28.5 on the HRS to be placed on the National Priorities List for extensive cleanup.

joint-and-several liability: A legal rule under which any liable party may be held fully responsible for a situation

resulting from the actions of multiple liable parties. In the context of Superfund, joint-and-several liability means

that any subset of a site's responsible parties can be required to pay for the entire cleanup of the site (although

such parties are free to seek contributions or reimbursement from the other liable parties).

major site: In the Congressional Budget Office's analysis, a site contaminated with hazardous substances whose

total cleanup costs are expected to be between $20 million and $50 million, as estimated in one or more records

of decision. Compare with mega-site and minor site.

mega-site: A site whose estimated cleanup costs exceed $50 million.

minor site: A site with estimated cleanup costs of less than $20 million.

National Priorities List (NPL): EPA's list of sites eligible for long-term remedial response using money from

the trust fund.
46 THE TOTAL COSTS OF CLEANING UP NONFEDERAL SUPERFUND SITES January 1994

operable unit: An element of an overall site cleanup. EPA may choose to divide a site into multiple operable

units to be cleaned up separately or to treat it as a single unit. Multiple units generally correspond to different

areas or media, such as soil and groundwater.

preliminary assessment (PA): The first stage of EPA's screening process for investigating suspected waste sites,

generally involving review of available documents and site reconnaissance. Followed by a site inspection, when

necessary.

record of decision (ROD): A public document in which EPA identifies the cleanup alternative to be used at an

operable unit of a site on the National Priorities List.

remedial action (RA): The actual construction or implementation phase of cleanup at an operable unit of a site

on the National Priorities List.

remedial design (RD): The engineering work that follows a record of decision to develop the technical drawings

and specifications that will guide subsequent remedial action.

remedial investigation and feasibility study (RI/FS): Related studies that gather data to determine the type and

extent of contamination at an NPL site (or operable unit), establish cleanup criteria, and analyze the feasibility and

cost of alternative cleanup methods.

removal or removal action: An action of short duration (generally under one year) taken to control immediate

threats to people or the environment from a release or threatened release of hazardous substances. Removals may

be undertaken at sites not on the National Priorities List.

responsible party (RP): An individual, business, or other organization legally liable for cleaning up a site. The

four types of responsible parties are a site's present owners and operators, its previous owners and operators from

periods during which it received hazardous substances, the generators of such substances, and any waste

transporters responsible for choosing the site. Because liability is often contested, the term "potentially responsible

party" is also commonly used.

RP-lead cleanup: Same as enforcement-lead cleanup.

site inspection (SI): The second stage of EPA's screening process, which involves collecting and analyzing

samples of soil and water, as appropriate.



ISBN 0-16-043071-2

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