Superfund: Information on Cost and Other Issues Related to the Cleanup of the Federal Creosote Site
Released: 2010-03-29T00:00:00

Letter

Background

Creosote is derived by distilling tar; the type of creosote most commonly used for wood-treating is manufactured from coal tar. Polycyclic aromatic hydrocarbons—chemicals formed during the incomplete burning of coal, oil, gas, or other organic substances—generally make up 85 percent of the chemical composition of creosote. EPA classifies some of the polycyclic aromatic hydrocarbons in creosote, such as benzo(a)pyrene, as probable human carcinogens. Some polycyclic aromatic hydrocarbons also may have noncarcinogenic health effects, such as decreased liver or kidney weight.

From approximately the early 1910s to the mid-1950s, the Federal Creosote site was a wood-treatment facility. Untreated railroad ties were delivered to the site and, to preserve them, coal tar creosote was applied to the railroad ties at a treatment plant located on the western portion of the property (see fig. 1 for an illustration of the site). Residual creosote from the treatment process was discharged into two canals that led to two lagoons on the northern and southern parts of the site, respectively. After treatment, the railroad ties were moved to the central portion of the property, where excess creosote from the treated wood dripped onto the ground. The treatment plant ceased operations in the mid-1950s. During the late 1950s and early 1960s, the area where the treatment plant was formerly located was developed into a 15-acre commercial and retail property known as the Rustic Mall. Through the mid-1960s, other areas of the property, including the former canal, lagoon, and drip areas, were developed into a 35-acre residential neighborhood known as the Claremont Development, which was made up of 137 single-family homes that housed several hundred residents.

Issues with creosote contamination at the site became apparent in April 1996, when the New Jersey Department of Environmental Protection (NJDEP) responded to an incident involving the discharge of an unknown thick, tarry substance from a sump located at one of the residences in the Claremont Development. Later, in January 1997, the Borough of Manville responded to complaints that a sinkhole had developed around a sewer pipe in the Claremont Development. Excavation of the soil around the sewer pipe identified a black, tar-like material in the soil. After an initial site investigation, EPA found contamination in both the surface and subsurface soils as well as in the groundwater beneath the site. In 1999, EPA placed the site on the NPL and divided it into three smaller units, called operable units (OU). OU1 consisted of the source contamination (free-product creosote) in the lagoon and canal areas of the Claremont Development. OU2 included other soil contamination in the Claremont Development, such as residually contaminated soil at properties over and near the lagoon and canal areas and the drip area of the former wood- treatment facility. OU2 also included contamination at a nearby day-care facility. OU3 included the Rustic Mall soil contamination as well as groundwater contamination throughout the site.

EPA completed all major site cleanup work in November 2007, and the site was declared “construction complete” in March 2008. Ultimately, EPA performed cleanup activities on 93 of the 137 properties in the residential area as well as on the commercial portion of the site. EPA’s ongoing activities at the site include monitoring groundwater contamination, conducting 5-year reviews of contamination levels to ensure that the remedy remains protective of human health and the environment, and selling properties that EPA acquired during the remedial action. According to EPA officials, the agency could remove the site from the NPL as early as 2011; however, this decision will depend on the results of contamination monitoring at the site.

Most Superfund sites progress through the cleanup process in roughly the same way, although EPA may take different approaches on the basis of site-specific conditions. After listing a site on the NPL, EPA initiates a process to assess the extent of the contamination, decides on the actions that will be taken to address that contamination, and implements those actions. Figure 2 outlines the process EPA typically follows, from listing a site on the NPL through deletion from the NPL.

In the site study phase of the cleanup, EPA or a responsible party conducts a two-part remedial investigation/feasibility study (RI/FS) process. The first part of this process—the remedial investigation— consists of data collection efforts to characterize site conditions, determine the nature of the waste, assess risks to human health and the environment, and conduct treatability testing as necessary to evaluate the potential performance and cost of the treatment technologies that are being considered. During the second part of the RI/FS process—the feasibility study—EPA identifies and evaluates various options to address the problems identified through the remedial investigation. EPA also develops cleanup goals, which include qualitative remedial action objectives that provide a general description of what the action will accomplish (e.g., preventing contamination from reaching groundwater) as well as preliminary quantitative remediation goals that describe the level of cleanup to be achieved. According to EPA guidance, it may be necessary to screen out certain options to reduce the number of technologies that will be analyzed in detail to minimize the resources dedicated to evaluating less promising options. EPA screens technologies on the basis of the following three criteria: effectiveness: the potential effectiveness of technologies in meeting the cleanup goals, the potential impacts on human health and the environment during implementation, and how proven and reliable the technology is with respect to the contaminants and conditions at the site; implementability: the technical and administrative feasibility of the technology, including the evaluation of treatment requirements and the relative ease or difficulty in achieving operation and maintenance requirements; and cost: the capital and operation and maintenance costs of a technology (i.e., each technology is evaluated to determine whether its costs are high, moderate, or low relative to other options within the same category).

After screening the technologies that it has identified, EPA combines selected technologies into remedial alternatives. EPA may develop alternatives to address a contaminated medium (e.g., groundwater), a specific area of the site (e.g., a waste lagoon or contaminated hot spot), or the entire site. EPA guidance states that a range of alternatives should be developed, varying primarily in the extent to which they rely on the long- term management of contamination and untreated wastes. In addition, containment options involving little or no treatment, as well as a no-action alternative, should be developed. EPA then evaluates alternatives using the nine evaluation criteria shown in table 1 and documents its selected alternative in a record of decision (ROD).

Next, either EPA or a responsible party may initiate the remedial action that was documented in the ROD. Like the RI/FS, implementation of the remedial action is divided into two phases. The first phase is the remedial design, which involves a series of engineering reports, documents, and specifications that detail the steps to be taken during the remedial action to meet the cleanup goals established for the site. For EPA-led remedial actions, EPA may either select a private contractor to perform the remedial design or, under a 1984 interagency agreement with the Corps, assign responsibility for designing the remedial action to the Corps, which may select and oversee a private contractor to perform the design work. The second phase is the remedial action phase, where the selected remedy, as defined by the remedial design, is implemented. Similar to the design phase, for EPA-led remedial actions, EPA may either select a private contractor to perform the remedial action or assign the remedial action to the Corps, which would be responsible for contractor selection and oversight during the remedial construction.

When physical construction of all remedial actions is complete and other criteria are met, EPA deems the site to be “construction complete.” Most sites then enter into an operation and maintenance phase, when the responsible party or the state maintains the remedy while EPA conducts periodic reviews to ensure that the remedy continues to protect human health and the environment. For example, at a site with soil contamination, the remedial action could be to build a cap over the contamination, while the operation and maintenance phase would consist of monitoring and maintaining the cap. Eventually, when EPA determines, with state concurrence, that no further remedial activities at the site are appropriate, EPA may delete the site from the NPL.

EPA’s Risk Assessment, Remedy Selection, and Prioritization Decisions for the Federal Creosote Site Were Primarily Influenced by the Extent of the Contamination in a Residential Area

The extent of the contamination in a residential area at the Federal Creosote site was the primary factor that influenced EPA’s risk assessment conclusions, remedy selection decisions, and site work priorities. EPA determined that risk levels were unacceptable given the site’s residential use. EPA then selected remedies for the site, taking into account space constraints and other challenges associated with a residential cleanup. Finally, EPA placed a high priority on scheduling and funding site work because the contaminated area was residential, thereby reaching key cleanup milestones relatively quickly.

EPA Assessed Risks and Selected Cleanup Goals on the Basis of the Site’s Residential Use

From the spring of 1997 to the summer of 2001, EPA conducted multiple rounds of sampling and risk assessment at the Federal Creosote site and concluded that human health risks exceeded acceptable levels. Specifically, EPA assessed the air, groundwater, surface soil, and subsurface soil as part of an initial site investigation and an RI/FS process. See appendix III for a timeline of EPA’s risk assessment activities.

EPA’s initial investigation of site contamination, which began in 1997, included such efforts as assessing whether contamination was affecting public drinking water supplies; investigating the nature of the bedrock and the aquifer underlying the site; collecting soil samples from 30 properties selected on the basis of their proximity to the lagoons, canals, and drip area of the former wood-treatment facility; and collecting approximately 1,350 surface soil samples (up to 3 inches below the ground surface) from 133 properties in and near the residential development. From this initial investigation, EPA concluded that site contamination posed unacceptable human health risks. For example, while EPA found that contamination did not pose short-term health risks that could require an evacuation of residents, EPA found that the contamination was extensive and uncontrolled; had impacted soil, sediment, and groundwater in the area; and likely posed long-term health risks. For soil contamination in particular, EPA determined that, in some areas, the contamination was within 2 to 3 feet of the ground surface; in other areas, EPA found that the contamination was covered by little or no fill material. According to a site document, one resident had discovered a large amount of buried tar when installing a fence on his property. As a result of its concerns that surface soil contamination could pose a risk to residents, EPA developed a surface soil risk assessment in January 1999. EPA concluded that soil contamination levels at 27 properties in the residential area posed long- term human health risks, including carcinogenic or noncarcinogenic risks (or both), that exceeded acceptable levels. In addition to soil contamination, EPA’s initial investigation determined that creosote had contaminated groundwater in the soil as well as in fractures in the bedrock underlying the site, which was a potential source of drinking water. Furthermore, EPA’s aquifer investigation showed that groundwater from the site had the potential to influence the Borough of Manville’s municipal water supply wells, although Region 2 officials said the nature of the fractures made it difficult for EPA to determine whether site contamination would actually affect the wells.

According to Region 2 officials, the purpose of a remedial investigation is to collect enough data to determine whether there is a need to take a remedial action. These officials said that an RI/FS for OU1 was not necessary because EPA had obtained much more information from its initial investigation on the extent of contamination at properties over the lagoon and canal source areas than is typically available to support taking an action. Also, according to EPA, the data that were collected during this initial investigation were equivalent in scope to that of a remedial investigation. Therefore, because EPA was trying to address the source contamination in the residential area on an expedited basis, the agency chose to incorporate these data into an Engineering Evaluation/Cost Analysis because it allowed EPA to evaluate remedial alternatives in a more streamlined way, as compared with an RI/FS report. However, for OU2 and OU3, EPA initiated an RI/FS process in 1998 to more fully characterize the extent of soil and groundwater contamination throughout the site. EPA’s OU2 soil evaluation determined that elevated levels of creosote contamination close to the surface in the residential area were generally found near the lagoons and canals, while the drip area generally had residual levels of contamination close to the surface. Underlying the site, EPA found that free-product creosote rested on a clay layer approximately 6 to 10 feet below the surface, although in some areas the layer was not continuous, and the creosote had migrated as deep as the bedrock, roughly 25 to 35 feet underground. On the basis of these findings, in April 2000, EPA developed a human health risk assessment for soil contamination in the residential area using a sample of six representative properties: two properties each represented the lagoon and canal areas, the drip area, and the remaining residential area, respectively. EPA found that soil contamination exceeded acceptable risk levels at the lagoon and canal and drip areas, but not at properties representing other areas of the Claremont Development.

Furthermore, EPA’s OU3 soil analysis revealed that contamination was generally in three main areas of the mall, with several other “hot spots” of contaminated material. EPA also determined that most of the soil contamination was within the first 2 feet below the ground surface; however, in certain areas, contamination was as deep as 35 feet below the surface. EPA noted that it did not collect soil samples from under the mall buildings, although, according to a site document, EPA thought it likely that contamination remained under at least a portion of one of the buildings. EPA assessed the human health risks from exposure to soil contamination in June 2001. At the time of EPA’s assessment, OU3 was a commercial area. However, the Borough of Manville and the mall owner had indicated that the area could be redeveloped for a mixed residential/commercial use. Therefore, EPA evaluated risks for OU3 under both residential and commercial use scenarios, and found that risks exceeded acceptable levels for residential use at some areas of the mall and for commercial use at one area.

Finally, EPA’s OU3 RI/FS investigation determined that contaminated groundwater in the soil above the bedrock had not migrated far from the original source areas of the lagoons and canals. However, free-product creosote had penetrated as deep as 120 feet into the fractured bedrock, and groundwater contamination in the bedrock had moved through the fractures toward two nearby rivers. On the basis of these results, in July 2001, EPA evaluated the potential human health risks from groundwater contamination to on-site and off-site residents (i.e., residents who lived on or near the site) and commercial workers, and found that risks for on-site residents and workers exceeded acceptable levels for carcinogenic and noncarcinogenic contaminants.

The Department of Health and Human Services’ Agency for Toxic Substances and Disease Registry (ATSDR) also evaluated the risks from site contamination and published a series of studies that expressed concern about site contamination levels. Between May 1997 and February 1999, ATSDR published five health consultations that responded to EPA requests to answer specific questions, such as whether consuming vegetables grown in site soils posed a health threat. For example, ATSDR’s first consultation concluded that subsurface soil contamination levels posed a threat to residents if the contamination was dug up, or if similar levels of contamination were discovered in surface soils. Then, in September 2000, ATSDR published a public health assessment that evaluated site contamination and concluded that past and present exposures to surface soil (at that time) did not represent an apparent health hazard. However, the assessment also stated that this conclusion did not rule out the need for remedial action because subsurface contamination posed a long-term hazard if soil 2 feet below the ground in certain areas was disturbed.

ATSDR and EPA officials told us that ATSDR’s conclusion that surface soil contamination did not pose a public health hazard did not mean that EPA’s action to remediate the site was unwarranted. In particular, officials from both agencies cited differences in the agencies’ risk assessment views and processes as a reason why they could reach alternative conclusions about site risks. For example, ATSDR officials indicated that ATSDR’s assessment focused on conditions in the first 6 inches of soil to evaluate what contamination exposures residents may have been subject to in the past and at the time of the assessment. However, the officials said that EPA’s risk assessment would have been more focused on the hypothetical situation where subsurface soil contamination is brought to the surface in the future. Therefore, the officials said that, in fact, ATSDR would have had very serious concerns if the site had not been remediated because of the potential for high levels of contamination in the subsurface soil to be brought to the surface through activities such as tree planting or house remodeling. ATSDR also had concerns about potential exposures to groundwater contamination. As a result, the officials stated that ATSDR’s assessment recommended that EPA continue its plans to implement a remedial action to remove source material from the site.

On the basis of its conclusions about site risks, EPA set cleanup goals for different areas of the site that, when achieved, would reduce risks to acceptable levels for residential use. For example, EPA established site- specific qualitative objectives for its remedial actions, such as preventing human exposure to contamination, cleaning up areas of source contamination to allow for unrestricted land use and prevent future impacts to groundwater quality, and minimizing disturbance to residents and occupants of the Rustic Mall during a remedial action. EPA also developed quantitative remediation goals to identify the level at which remedial actions would need to be implemented to protect human health. According to site documents, there were no federal or state cleanup standards for soil contamination at the time of the cleanup effort. Therefore, EPA established risk-based remediation goals that would reduce excess carcinogenic risks to a level of 1 in 1 million, and that were consistent with New Jersey guidance for residential direct contact with soil. For the groundwater contamination, EPA used both federal and state chemical-specific standards to set risk-based remediation goals.

According to site documents and Region 2 officials, risk levels required a remedial action regardless of the site’s future use. The officials said that EPA considered what level of waste could be left on-site while still allowing for unrestricted residential use of properties; however, they noted that, with unrestricted residential use, there is a very low threshold for the level of waste that can be left on-site. They said that even the residually contaminated soil was sufficiently contaminated that EPA dug between 10 and 14 feet deep to allow for unrestricted use of residents’ properties. Similarly, EPA determined that source material in the Rustic Mall needed to be remediated because of the potential future residential use of the site. According to a site document, EPA determined that, under a current use scenario (at the time of its risk assessment in 2001), there were likely no unacceptable human health risks from contamination under the mall because contaminants were covered by buildings and pavement. However, the contamination could be exposed if these co were removed during site redevelopment. Therefore, EPA identified the level of site cleanup required on the basis of the most conservative futu use scenario.

EPA’s Remedy Selection Decisions Were Influenced by the Residential Nature of the Site

To select remedies to address the soil and groundwater contamination at the Federal Creosote site, EPA identified potential remedial technologies from agency guidance as well as from other publications and databases that listed potentially available technologies. After identifying potential technologies, EPA screened out less viable technologies, combined selected technologies into remedial alternatives, evaluated the alternatives, and selected a preferred remedy for each OU. See appendix III for a timeline of EPA’s remedy selection efforts.

Region 2 officials told us that, to identify technologies for site remediation, EPA identifies a range of technologies on a site-specific basis. According to agency guidance, EPA prefers three technologies for treating the type of soil contamination found at the Federal Creosote site: bioremediation— using microbes to degrade contaminants and convert them to carbon dioxide, water, microbial cell matter, and other products; low temperature thermal desorption (LTTD)—heating contaminated material to temperatures less than 1,000 degrees Fahrenheit to physically separate contaminants from soils; and incineration—heating contaminated material to temperatures greater than 1,000 degrees Fahrenheit to destroy contaminants. EPA also identified other technologies to cap, contain, excavate, extract, treat, or dispose of site soil or groundwater contamination, including a number of emerging or innovative technologies.

For the soil contamination, the range of technologies EPA considered varied among the OUs at the site. During its remedy selection process for OU1, EPA primarily evaluated the three technologies preferred by agency guidance for soil contamination at wood-treatment sites. According to Region 2 officials, EPA considered a limited range of technologies for OU1 because, originally, the agency was evaluating whether it would need to evacuate residents to protect them from site contamination. Consequently, EPA conducted a more streamlined remedy selection process for OU1 to speed decision making. Alternatively, for OU2 (and later for OU3), EPA evaluated a wider range of technologies, including several emerging technologies. In addition, Region 2 officials stated that differences in the contamination between the OUs impacted the range of technologies considered. Specifically, the officials said that the OU1 material was the more sludge-like, free-product creosote, whereas the OU2 contamination might not have been visible. The officials noted that, with less contaminated soils, more treatment options might become viable, since some options that might have difficulty treating more highly contaminated material might successfully treat less contaminated material. However, while EPA considered a wider range of technologies for OU2 and OU3, in general, EPA screened out the emerging technologies in favor of those that were identified as preferred in its guidelines. Ultimately, EPA determined that off-site thermal treatment and disposal of the soil contamination would best achieve its cleanup goals and were consistent with residential use of the site. In implementing this remedy, EPA determined that it would need to purchase some houses—where contamination was inaccessible without demolishing the houses—and permanently relocate these residents, while residents in other houses would only need to be relocated temporarily.

For the groundwater contamination, Region 2 officials said that EPA tried to determine how to clean up the contaminated groundwater in the fractured bedrock but ultimately concluded that none of the options would be effective; moreover, many of the options would be expensive and take a long time to implement. As a result, EPA determined that attenuation of the groundwater contamination over time, long-term monitoring, and institutional controls to prevent the installation of wells at the site would be the best alternative to address contamination in the fractured bedrock. To select this remedy, EPA invoked a waiver for technical impracticability, which allowed it to select an alternative that would not comply with requirements to clean up the groundwater to levels that would meet site cleanup goals. Region 2 officials stated that one of the presumptions EPA makes in using a waiver for technical impracticability is that it has put forth its best effort to remove source contamination. Therefore, according to the officials, on the basis of agency guidance, EPA needed to clean up the source material that was contaminating the groundwater to justify a waiver for technical impracticability. Moreover, the officials said that by removing the source material, EPA may have helped prevent the contaminated groundwater area from getting larger. Also, the officials said that, in their judgment, EPA’s action would help the contamination in the bedrock attenuate more quickly, although they were unable to quantify this impact.

In selecting these remedies, EPA’s decisions were influenced by several challenges associated with a residential cleanup, including (1) space constraints that limited on-site implementation of actions, (2) a determination that some options would not achieve the site cleanup goals, and (3) concerns about some options’ community impacts.

Space constraints. According to Region 2 officials, space constraints posed by the residential nature of the site limited EPA’s ability to remediate contamination on-site. For example, the officials said that soil contamination in the lagoons and canals was interspersed throughout the residential area. As a result of the lack of available open land and the residential nature of the site, a site document indicated that options for on- site treatment and disposal of excavated material were not considered for OU1. Also, while EPA considered on-site treatment technologies and alternatives for OU2 and OU3, Region 2 officials said EPA did not consider buying additional houses to create more open space. They said that once EPA determined that the majority of houses in the residential area could be saved, it tried to avoid demolishing as many homes as possible. The officials also noted that EPA could have placed a treatment facility in a corner of the Rustic Mall, but that the mall was still a functioning commercial area at the time EPA was selecting remedies. The mall was in the middle of the town, and, according to the officials, feedback from local citizens indicated that the community relied heavily on the mall. As a result, EPA did not formally consider taking over additional areas of the mall to create more open space as part of a remedial alternative. Region 2 officials acknowledged that, after EPA began the cleanup, the owner decided to demolish the mall. However, they stated that, when EPA made its remedy selection decisions, it did not have sufficient justification to purchase or demolish the mall.

In particular, EPA Region 2 officials told us that the challenge of space constraints was a key factor in why EPA chose not to implement bioremediation or LTTD—two of EPA’s preferred remedies for treating creosote contamination—on-site. For example, the officials noted that bioremediation of excavated material on-site would have required a lot of space to store the material while it was being treated with microbes that would help degrade the contamination. Similarly, the officials said that there was not sufficient space to stockpile material for treatment using LTTD. That is, to operate an LTTD unit efficiently, the officials said that EPA would have needed to feed material into the unit constantly. However, they said doing so was not possible at the site because, while EPA might excavate 100 tons of soil on some days, on other days, EPA was unable to excavate as much since it needed to work by hand around residents’ houses. Given EPA’s inconsistent rate of excavation, the agency would have needed to stockpile material to ensure a constant flow into an LTTD unit. However, according to Region 2 officials, there was not enough space to stockpile contaminated material awaiting treatment, and, as a result, the officials estimated that EPA could have operated an on-site LTTD unit only 25 percent of the time, which they said would not have been cost-effective. Specifically, the officials said that it would take around 60,000 square feet for all of the operations associated with an LTTD unit. They noted that a space roughly this size was available in the northeast corner of the Rustic Mall. However, because of constraints, such as fire code access requirements for a bowling alley that bordered this area, the officials estimated that the total available space was actually only about 43,000 square feet. Also, EPA would have needed additional space for other facilities related to the cleanup. In addition, while EPA determined that bioremediation and LTTD could be used to treat contamination off-site, EPA found that they would be difficult to implement because of a lack of permitted commercial facilities. As a result, EPA relied on incineration because incineration facilities were the most readily available for off-site treatment of material from the site.

Level of cleanup required. EPA had concerns about whether certain technologies would effectively treat contamination to required levels, given the residential nature of the site. For example, EPA determined it was unlikely that such technologies as bioremediation of contaminated material in place would achieve the agency’s soil remediation goals, because EPA was uncertain whether the bioremediation microbes could be distributed evenly in contaminated areas since some of the contamination was under residents’ homes. Region 2 officials also said it was unlikely that EPA could have achieved its cleanup goals using bioremediation because of the high levels of soil contamination at the site. They said that if contamination levels are high, the microbes introduced into the soil could be killed before they have a chance to degrade the contaminants. Moreover, because of the high contamination levels and treatment requirements at the site, the officials said they had concerns about the effectiveness of using LTTD. They stated that LTTD treats material using lower temperatures than incineration, and that it removes about 80 percent of the contamination each time material is passed through the unit. As a result, sometimes material must be treated multiple times before it meets residential standards. The officials indicated that this would have probably been the case with the Federal Creosote material because it was so highly contaminated. They said, given the nature of the contamination at the site, incineration was a more efficient method of treatment to achieve the agency’s remediation goals.

While the high treatment levels required because of the residential nature of the site impacted EPA’s choices about individual soil remediation technologies, they also influenced decisions about whether to dispose of treated and untreated material on-site, or at an off-site location. According to Region 2 officials, if EPA disposed of excavated material on-site, the agency would have had to ensure, through treatment and testing, that the soil met residential standards. Consequently, the officials concluded that if EPA disposed of excavated material on-site, it would have had to treat and test the material more extensively than it did for off-site disposal. The officials said that only about 35 percent of the material excavated from the site needed to be thermally treated before it could be disposed of off-site. The rest of the excavated material could be disposed of without treatment at a hazardous or nonhazardous waste landfill. However, they said, if EPA had disposed of material on-site, it would have had to test and possibly treat 100 percent of the material to ensure that it met residential standards. Due to the potential expense of additional treatment and sampling, EPA determined that off-site disposal would be more cost- effective.

For the groundwater contamination, according to site documents, EPA found that none of its remedial alternatives, including those based on extracting or treating the contamination in place, would be able to achieve its cleanup goals effectively and reliably within a reasonable time frame. For example, EPA found that some of the groundwater contaminants could take decades to move through the groundwater, and, as a result, it would take an extremely long time to remediate these contaminants using an extraction technology. Moreover, EPA estimated that the technology that was most likely to be able to achieve its remediation goals— extracting contaminants using steam—would cause significant disruption to the residential neighborhood and would be much more expensive than EPA’s other alternatives. On the basis of its experience at other sites, EPA determined that complete removal of the groundwater contamination in the bedrock at the site was not practicable. In addition, EPA found that several of the treatment technologies it considered would not be effective at treating the highly contaminated free-product creosote found in portions of the site.

Community impacts. The residential nature of the site and the importance of the Rustic Mall to the community also influenced EPA’s remedy selection, given the effects that different technologies and alternatives might have on the community. For example, according to EPA, some of the substances that could be used to immobilize soil contamination in the ground were potentially more toxic than the creosote contamination. Also, certain options that treated contamination in place or extracted it from the soil or groundwater would have emitted heat or gas that could have posed risks to residents and the community. Moreover, EPA determined that some options would have significantly disrupted the community because of the need to install equipment, wells, and piping throughout the residential and commercial areas.

Also, because EPA was implementing a remedial action in a residential neighborhood at the site, it was concerned about the length of the cleanup and other timing impacts on the community. Region 2 officials said that EPA generally does not use certain alternatives unless the agency has the flexibility to accomplish remediation over a long time frame on the basis of the current land use (e.g., the site is abandoned). Under these circumstances, EPA could use a remedy like bioremediation of contaminated material in place, which would cause long-term disruption if implemented in a residential neighborhood. Also, Region 2 officials said that, if EPA had used on-site LTTD to treat contaminated material, it could not have operated the unit in the most efficient way—24 hours a day— because the residents in houses within 200 feet of where the unit would have been located would have been negatively affected by its lights and noise during the night. However, the officials said, if EPA had only run the LTTD unit 8 hours a day, the cleanup effort would have taken much longer. The length of time involved was a particular concern in EPA’s evaluation of groundwater remediation alternatives. According to the Region 2 officials, the best alternative to extract contaminated groundwater from the bedrock would have taken 18 to 20 years to implement and would have covered the site with machinery.

Finally, EPA factored future land use impacts into its remedy selection decisions. For example, EPA found that options that relied on containment or deed restrictions, but that left contamination under and around the residential community, were not viable alternatives. Region 2 officials said capping the contamination would not have supported use of the land as a residential area because residents would have had to sign agreements not to disturb the cap, which would have restricted their use of the properties. Also, because of these restrictions, the officials said it is likely that some owners would have refused to sign the necessary agreements, and EPA would have had to take an enforcement action. Similarly, EPA avoided certain remedies for the Rustic Mall because of the impacts that they could have on the community’s ability to redevelop the mall as well as on the operation of the mall. A Borough of Manville official told us that the Rustic Mall was the “hub of the town” and was located directly behind buildings on the town’s Main Street. As a result, he said the community was very opposed to alternatives that would have left or treated contamination on-site. He said that, in the town’s view, the contamination under the mall needed to be cleaned up. Otherwise, it would have been difficult to get tenants into the mall in the future, and the town might have ended up with a blighted area in the center of the community. He also said the community was concerned that no one would want to come and shop at the mall if there was a treatment facility in the parking lot.

EPA Placed a High Priority on Cleaning Up the Federal Creosote Site

EPA placed a high priority on scheduling and funding the Federal Creosote site work because the contamination was in a residential area. According to Region 2 officials, it is rare to find source contamination, such as the free-product creosote, under a residential area, and most sites with the level and extent of contamination found at the Federal Creosote site are abandoned. The officials said EPA places the highest priority on addressing the principal threats at residential sites first. As evidence of this prioritization, EPA initiated efforts to study, select a remedy for, and begin cleanup of the residential part of the site before undertaking similar efforts for the Rustic Mall. For example, Region 2 officials said that EPA decided relatively early in the cleanup process to break the site into three OUs to allow work to proceed as quickly as possible. EPA determined that it needed to get to work immediately on OU1, and that the groundwater contamination and commercial area could wait until after EPA had decided what to do with the residential area. The Region 2 officials said that breaking the site into different OUs was important because EPA knew that it needed to relocate some OU1 residents, and this process can be time-consuming—one official noted that residents who must permanently relocate have 1 year to do so. While this process took less time at the Federal Creosote site, EPA did not know that would be the case initially. Moreover, the Region 2 officials said that the first couple of years EPA spent studying the site caused a great deal of anxiety for residents, because they did not understand the risks of remaining in their homes and could not sell their homes if the homes would need to be demolished. The officials said the OU1 ROD informed residents that most of the homes in the neighborhood would not need to be demolished, and this helped reduce residents’ anxiety.

EPA also took steps to shorten the time needed to select, design, and implement the remedial actions. For example, Region 2 officials said that, because of the residential nature of the site, the site investigation process was both unusually extensive and expedited in comparison to other sites. Region 2 officials said that EPA began sampling early because, when the site was discovered, the agency was concerned that contamination risks could be so significant that residents might need to be evacuated. As a result, they said that the agency gathered a large amount of information about site contamination before listing the site on the NPL. The officials said this data collection effort helped EPA move forward with site work quickly because, with a large amount of data to use to gauge its overall approach to the site, EPA was able to compress the removal evaluation, listing process, and RI/FS into a relatively short amount of time. In addition, EPA tried to streamline work by configuring its sampling efforts to satisfy postexcavation requirements to confirm that contaminated material no longer remained on-site. Specifically, site documents show that to meet New Jersey requirements, EPA took samples on 30-by-30 foot grids to confirm that contamination was no longer present along the sides and bottom of an excavated area. Rather than wait until the excavation was completed to take additional samples to confirm that contamination was not present, EPA incorporated these requirements into earlier sampling efforts. As a result, if samples were clean, EPA could immediately backfill an area, which reduced the overall length of the cleanup effort. Finally, in an effort to expedite the cleanup effort, EPA Region 2 officials said that more of the region’s resources were devoted to the site relative to other sites that the region needed to address at that time.

As a result of these efforts to prioritize and expedite site cleanup work, the Federal Creosote site reached key cleanup milestones in less time than some other site cleanups. Region 2 officials said that they completed the three RODs for the site in about 3 years, which they said is a very quick time frame to complete such analyses. They noted that issuing a ROD is an intensive process that at another site, for example, took over a decade. Also, the Federal Creosote site reached EPA’s construction complete stage more quickly than other megasites—that is, sites at which actual or expected total cleanup costs, including removal and remedial action costs, are expected to amount to $50 million or more. In July 2009, we reported that, based on EPA data through fiscal year 2007, the median length of time it took for megasites to reach construction complete after NPL listing was 14.8 years. However, according to EPA data, the Federal Creosote site reached construction complete in just over 9 years.

Total Site Costs Exceeded Early Construction Cost Estimates Largely because of the Nature of these Estimates and the Discovery of Additional Contamination

Total site costs exceeded construction estimates at the Federal Creosote site by roughly $233 million, primarily because (1) EPA’s early construction estimates were not designed to include all site-related expenses and (2) additional quantities of contaminated material were discovered during the cleanup effort. Other factors, such as methodological variation for estimating site costs and contractor fraud, accounted for a smaller portion of the cost difference.

Total Site Costs Exceeded Construction Estimates by Approximately $233 Million

According to our analysis, total site-related costs, including remedial construction and other response costs at the Federal Creosote site through the spring of 2009, were approximately $338 million, a roughly $233 million difference from the estimated remedial construction costs of $105 million. Total site costs were higher than construction estimates for several reasons. As shown in figure 3, of the $233 million difference, 39.6 percent (or about $92 million) is due to other response costs that were not included in EPA’s construction estimates; 47.5 percent (or about $111 million) is from an increase in remedial construction costs—mostly directly related to the discovery of additional contaminated material; and 12.9 percent (or about $30 million) is due to other factors—primarily differences in cost estimation methodology and, to a smaller extent, to a smaller extent, contractor fraud. contractor fraud.

Other response costs not included in construction estimates (about $92 million)

Remedial construction costs potentially related to greater contaminated soil quantities (about $111 million)

EPA’s Construction Cost Estimates Intentionally Did Not Include All Site Costs

EPA intentionally included only costs related to the construction and maintenance of the selected remedies rather than total sitewide costs in its early cost estimates, which follows its guidance, according to the agency. EPA prepares these preliminary estimates during the remedy selection process to compare projected construction costs across different remedial action alternatives. Specifically, the National Contingency Plan directs EPA to consider the capital costs of construction and any long-term operation and maintenance costs as part of the remedial alternative screening process. According to EPA guidance, these estimates are not intended to include all site-related expenses, and certain expenses, such as early site investigation and EPA enforcement costs, are beyond the scope of these early estimates because these costs are not linked to a specific remedial alternative and, therefore, would not affect the relative comparison of alternatives. For example, while site investigation studies were conducted for each operable unit, these studies were completed prior to remedy selection to inform the selection process and, therefore, were not linked to any particular remedy. Similarly, the removal cleanup of surface soils in the residential area occurred prior to remedy selection and, therefore, was not related to the construction costs of any particular remedial alternative. Table 2 summarizes costs for activities that were not included in EPA’s remedial construction cost estimates—other response costs—at the Federal Creosote site.

The Need to Remediate Greater-than-Expected Quantities of Contaminated Material Contributed Most to the Gap between Estimated and Actual Construction Costs

During excavation, contractors discovered greater-than-expected amounts of contaminated material requiring remediation across all OUs, which contributed most to the difference between estimated and actual construction costs. Based on our analysis of EPA documents, the initial ROD estimates for the site indicated that approximately 154,100 to 164,400 tons of material would need to be excavated for treatment or disposal; however, EPA ultimately found that roughly 456,600 tons of material needed to be excavated—an increase of at least 178 percent. As shown in table 3, according to our analysis, increased amounts excavated from the OU1 and OU3 areas contributed the most to the difference between the estimated and actual excavated amounts across the site as a whole.

According to EPA officials, it is common for EPA to remove more soil than originally estimated at Superfund sites because of the uncertainty inherent in using soil samples to estimate the extent of underground contamination. For example, EPA guidance indicates that the scope of a remedial action is expected to be continuously refined as the project progresses into the design stage and as additional site characterization data and information become available. However, both Corps and EPA officials stated that the Federal Creosote site posed a particular challenge for estimating soil quantities prior to excavation because of the way in which the waste moved at the site and, in some cases, because of access restrictions during sampling. According to EPA’s Remedial Project Manager (RPM) for the site, soil contaminants generally either stay in place or migrate straight down; however, while some of the creosote waste at the site stayed in place, some of the waste migrated both horizontally and vertically. The RPM said that this migration made it difficult to predict the waste’s location through sampling. For example, during excavation, contractors found seams of contaminated material, some of which led to additional pockets of creosote waste, while others did not. Given the diameter of the sampling boreholes (which were generally 2 to 4 inches wide) and the width of the seams of creosote waste (which in some cases were only 6 inches wide), the sampling process could not detect all of the creosote seams at the site, despite what EPA officials considered to be the extensive sampling during the early site investigations that formed the basis for the initial cost estimates. Additionally, sampling during the site investigations for the residential area as well as the Rustic Mall was limited by the location of buildings and access restrictions, according to EPA’s RPM. For example, site documents indicate that no samples could be taken from under the mall during the OU3 soil investigation because the buildings were being used. It was not until the mall owners decided to demolish the existing structures as part of a town revitalization plan that mall tenants left and EPA was able to take samples in the areas covered by the buildings. These areas were found to contain additional areas of creosote waste, as shown in figure 4.

Although the mobility of the waste in the subsurface soil and sampling limitations hindered EPA’s ability to determine the total quantity of material requiring excavation during the pre-ROD site investigation when the initial cost estimates were prepared, soil sampling during this stage was generally successful at identifying which residential properties contained contamination, according to our analysis of site documents. For example, pre-ROD soil sampling allowed EPA to correctly identify 83 of the 93 residential properties that would eventually require remediation, as shown in figure 5.

According to EPA guidance, because of the inherent uncertainty in estimating the extent of site contamination from early investigation data, cost estimates prepared during the RI/FS stage are based on a conceptual rather than a detailed idea of the remedial action under consideration. The guidance states that these estimates, therefore, are expected to provide sufficient information for EPA to compare alternatives on an “order of magnitude” basis, rather than to provide an exact estimate of a particular remedy’s costs. For example, the guidance also states that preliminary cost estimates prepared to compare remedial alternatives during the detailed analysis phase of the RI/FS process are expected to range from 30 percent below to 50 percent above actual costs.

However, at the Federal Creosote site, actual construction costs were more than twice what EPA estimated. Specifically, we found that sitewide remedial construction costs increased by $141 million over EPA’s estimated amounts. According to site documents, increases in the quantity of material requiring excavation, transportation, treatment, or disposal resulted in higher construction costs across all OUs. Our analysis of site cost data indicated that construction costs potentially associated with the additional quantity of contaminated material accounted for most of this increase ($111 million, or about 78.7 percent). In particular, soil excavation, transportation, treatment, and disposal costs constituted approximately 56.1 percent ($62 million) of the increased construction costs potentially related to additional quantities of material, and 26.7 percent of the overall $233 million difference between estimated construction and total site costs, as shown in figure 6.

According to EPA’s RPM, both the need to excavate greater amounts of material and the reclassification of excavated material from nonhazardous waste to hazardous waste affected excavation, transportation, treatment, and disposal costs. For example, the discovery of additional pockets of creosote waste increased the overall amount of material requiring excavation and treatment or disposal because, in addition to removing the waste itself, any soil overlying the contamination needed to be removed and disposed of to access the creosote waste. Additionally, if a pocket of creosote waste was unexpectedly discovered in an area of soil that had already been designated for excavation and disposal in a landfill without treatment because prior sampling indicated it was less contaminated, the overall amount of soil to be excavated would not be affected, but costs would increase because treatment is more expensive than landfill disposal.

In addition, EPA and Corps officials said that the need to remediate greater quantities of material contributed to increases in other sitewide construction costs, such as general construction requirements and site restoration costs. Our analysis showed that such costs accounted for another 20.9 percent of the difference between estimated construction costs and total site costs—although the exact extent to which additional amounts of material contributed to the difference in costs is not clear. EPA’s RPM stated that the effect of increased quantities varied, depending on the OU. However, EPA and Corps officials said that in general, more extensive excavation would increase design engineering, inspection, and other costs as well as costs for general construction requirements and for site restoration, as shown in table 4. For example, the decision to remediate additional contaminated material under the Rustic Mall buildings led to increased design engineering costs because the original excavation plans were created under the assumption that the mall would remain standing, and further rounds of design sampling were needed to identify the extent and location of contamination once the buildings were demolished. Additionally, our analysis of site documents indicated that the increased time required to excavate additional material could have led to greater project costs for general construction requirements, such as temporary facility rental, site security, and health and safety costs. Similarly, site restoration costs, such as costs for backfill soil, could have increased because more backfill would be required to restore the site after excavation.

According to the RPM, EPA and the Corps instituted certain controls at the site to minimize costs. In particular, the RPM stated that the Corps took steps to ensure that material was not unnecessarily excavated and sent for treatment and disposal. For example, if contractors found an unexpected pocket of creosote waste during excavation, they were required to notify the Corps official on-site, who would decide whether additional excavation was required depending upon visual inspection and additional testing, as needed. The contractor was not allowed to excavate beyond the original excavation limits without Corps approval. According to the RPM, the Corps’ approach of reevaluating the original excavation depth on the basis of additional sampling results and a visual inspection of the soil led to cost savings because in some areas less material needed to be excavated than originally planned. Furthermore, EPA and Corp officials stated that this process minimized unnecessary treatment and disposal costs that might be incurred if “clean” soil was sent for treatment or hazardous waste disposal. Additionally, EPA’s decision in November 2002 to allow treated soil to be disposed of in a nonhazardous waste facility if it met the facility’s criteria for contamination levels helped reduce unit costs for treatment and disposal because disposing of soil at a hazardous waste facility is more expensive. For example, in a bid for a contract to treat and dispose of soil following EPA’s decision, the selected subcontractor submitted a unit price for treatment and disposal at a nonhazardous waste facility that was $80 (or 16 percent) less than its unit price for treatment and disposal at a hazardous waste facility—which for that particular contract saved $800,000.

Furthermore, on the basis of information gathered from site documents and from statements made by EPA and Corps officials, EPA and the Corps took other steps intended to minimize costs. For example, a Corps official said that reducing the duration of the project could help minimize certain site costs. Specifically, according to our analysis of site documents, to reduce the amount of time spent waiting for sampling results prior to backfilling an excavated area, EPA and the Corps incorporated state postexcavation sampling requirements into their design sampling plans for earlier investigations. Accordingly, unless additional excavation was required to meet the cleanup goals, these samples could be used to confirm that the boundaries of the excavation areas had been tested for contamination. Additionally, our analysis of site documents showed that the Corps tested various odor control measures before beginning excavation at certain areas of the site, which allowed it to use less expensive odor control alternatives than originally planned and saved approximately $1.1 million in implementation costs. These measures also helped to speed up the construction work. Finally, according to the RPM, the Corps was able to minimize costs by managing the work to avoid costly contractor demobilization and remobilization expenses. For example, the Corps dissuaded the contractors from removing idle equipment and worked with the RPM to resolve administrative or funding issues or questions about the work as they arose to prevent an expensive work stoppage.

Contrasting Cost- Estimating Methodologies and Contractor Fraud Explain a Smaller Portion of the Difference between Estimated Construction and Total Site Costs

Other factors, including different cost-estimating methodologies and contractor fraud, explain a smaller portion of the difference between estimated construction and total site costs at the Federal Creosote site. In developing its estimates, EPA followed agency guidance, which states that as a simplifying assumption, most early cost estimates assume that all construction costs will be incurred in a single year. According to EPA, since the estimated implementation periods for EPA’s remedial actions were relatively short periods of time, EPA did not discount future construction costs in its estimates, and, therefore, these estimates were higher than they would have been otherwise. In accordance with our best practices regarding the use of discounting, we adjusted the initial cost estimates to reflect that costs were projected to accrue over several years and that, therefore, future costs should be discounted. However, by discounting future construction costs prior to adjusting for inflation, our discounted values were lower than EPA’s original estimates in site documents. According to our analysis, discounting estimated costs accounted for approximately 12 percent of the $233 million difference between estimated construction and total site costs (see fig. 7).

Contractor fraud also contributed to the difference between estimated construction and total site costs, but to a small degree. However, while some parties have pled guilty to fraud, the full extent of the effect of fraud on site costs will not be known until all investigations are complete. Court documents alleged that employees of the prime contractor at the site, as well as some subcontractors, were engaged in various kickback and fraud schemes, which resulted in inflated prices for certain subcontractor services. For example, a subcontractor for soil treatment and disposal agreed to pay approximately $1.7 million in restitution to EPA for fraud in inflating its bid prices. In addition, court documents alleged that fraudulent price inflation also affected other site costs, including certain subcontracts for items such as wastewater treatment, backfill, landscaping services, and utilities. To date, our analysis of available court documents indicated that at least approximately $2.1 million in inflated payments may be directly attributable to fraud at the Federal Creosote site. On the basis of currently available information, this figure represents less than 1 percent of the difference between estimated construction and total site costs. However, since the fraud investigations are ongoing and additional charges may be filed, the full extent of contractor fraud is not currently known. See appendix I for more information about site-related fraud investigations.

EPA Provided Overall Project Management and Communicated with Residents, while the Corps Oversaw Contractor Implementation of the Remedy

EPA managed the overall cleanup and communicated with residents through a dedicated on-site staff presence, among other actions. The Corps implemented the cleanup work by hiring and overseeing contractors; the Corps was less involved in selecting and overseeing subcontractors at the site.

EPA Managed the Cleanup and Communicated with Residents

According to a 1984 interagency agreement between EPA and the Corps for the cleanup of Superfund sites, EPA maintains statutory responsibility for implementing the Superfund program. In addition to selecting the remedy at a site, EPA provides overall management of the cleanup, ensures that adequate funding is available, and manages relationships with other interested parties, such as residents. If EPA decides that Corps assistance is needed to conduct cleanup work, EPA establishes site- specific interagency agreements. These agreements outline the specific tasks and responsibilities of the Corps at the site and provide a proposed budget for the activities listed. Once the site-specific agreements are established, EPA’s primary responsibilities are to make sure that the work continues without interruption and that adequate funding is available, according to EPA officials. EPA officials also noted that the agency does not have the authority to direct Corps contractors at the site; rather, all instruction and direction to contractors goes through the Corps.

To fulfill its project management and community outreach responsibilities, EPA dedicated a full-time RPM to the Federal Creosote site, according to Region 2 officials. Although RPMs generally have two or more sites for which they are responsible at any given time, Region 2 officials stated that the size and complexity of the site required a higher level of EPA involvement. For example, the officials said that the relatively large size of the site and stringent cleanup goals meant that a large area was excavated, and the complexity of the cleanup process led to a greater number of questions from the Corps and its contractors that required EPA’s attention. According to the officials, the RPM was on-site at least two to three times per week; however, during some segments of the work, he was on-site almost every day. They noted that the design phase in particular required close coordination with the Corps because design activities for different areas of the site occurred simultaneously and were often concurrent with construction. Consequently, the RPM said he was on-site working with the Corps and its design contractor to design new phases of the work; revise existing designs; and answer any questions regarding ongoing construction activity, such as whether to excavate additional pockets of waste found during the construction phase. According to the RPM, although the Corps was required to ask EPA for approval only to expand excavation to properties that were not included in the RODs, in practice, Corps officials kept him informed whenever additional excavation was required, and, in many cases, he made the decision regarding whether to broaden or deepen the excavated area.

To monitor project progress and funding, the RPM had weekly on-site meetings with the Corps and received weekly and monthly reports on progress and site expenditures, according to EPA officials. At the weekly meetings, the RPM would answer Corps questions regarding the work and be informed of any contracting or subcontracting issues that might delay or stop work at the site. Moreover, as part of EPA’s oversight of site progress, the RPM said he reviewed Corps documents regarding any changes in the scope of the work. Because EPA provided funding to the Corps on an incremental basis, the RPM also closely monitored the rate of Corps expenditures to ensure sufficient funding to continue the work, according to EPA officials. The RPM explained that he also reviewed Corps cost information for unusual charges and, with the exception of a few instances of labor charge discrepancies, most of the time the Corps reports did not contain anything surprising. In the few instances where the RPM found a discrepancy, he contacted Corps officials, and they were able to explain the reason for the discrepancy—for example, a problem with the Corps’ billing software. The RPM stated that, under the interagency agreement with the Corps, he did not review contractor invoices or expenditures because the Corps had both the responsibility and the expertise necessary to determine whether the contractor charges were appropriate, given the assigned work.

Additionally, EPA officials stated that the residential nature of the site necessitated a substantial investment in community relations to manage residents’ concerns about the contaminated material under their homes and the Rustic Mall. As part of these efforts, EPA used such tools as flyers, newsletters, resident meetings, and media interviews to communicate with concerned citizens. According to the RPM, managing community relations required the second largest commitment of his time, after designing the work. He said that he spent a great deal of time working with residents to help them understand the situation during the early site investigation stage, when it was not clear who was going to need to move out of their homes and residents were concerned about their health and property. The RPM said that he also worked personally with residents during the design and implementation of the remedy to minimize the impact to the community and to inform it of any additional actions needed, such as excavating contamination across a property line or closing roads.

According to site documents and a local official, EPA’s community relations efforts were successful at reducing residents’ anxieties. For example, in a summary of lessons learned from the cleanup effort, site documents indicate that EPA’s policy of promptly responding to community inquiries and the regular presence of EPA personnel at the site helped to establish and preserve a high level of public acceptance and trust with the community. Also, a Borough of Manville official noted that the continuity provided by having one RPM dedicated to the site for the duration of the project was particularly helpful in maintaining good communication because it allowed EPA officials to know almost all of the residents on a first-name basis and encouraged their participation in the cleanup process. For example, the RPM stated that he worked closely with residents to address their concerns and minimize impacts to the community during the excavation of contaminated material and the restoration of affected areas of the neighborhood. Similarly, according to the Borough of Manville official, EPA and the contractors effectively coordinated with town officials to ensure that the cleanup effort went smoothly. For example, to minimize disruption, EPA consulted with town officials about which roads would be best to use, considering the routes and weight limitations of trucks leaving the site. In the official’s view, EPA’s outreach efforts ensured that residents and the community as a whole had sufficient information to feel comfortable about the cleanup. Consequently, despite the size and scope of the cleanup effort, the official could recall very few complaints from residents.

The Corps Selected and Oversaw Contractors’ Design and Implementation of the Remedy but Had a Limited Role in the Subcontracting Process

At the Federal Creosote site, the Corps selected and oversaw private contractors’ design and implementation of the remedial action; however, the Corps was less involved in the subcontracting process. Under the 1984 interagency agreement with EPA, the Corps selects and oversees private contractors for all design, construction, and other related tasks at Superfund sites, in accordance with Corps procedures and procurement regulations. According to Corps officials, the Corps selected a contractor to perform the design for the three OUs at the Federal Creosote site from a list of qualified vendors and then negotiated a price for the contracts. For construction, the Corps selected a prime contractor from a pool of eligible contractors under a cost-reimbursement, indefinite-delivery/indefinite- quantity (IDIQ) contract. According to EPA and Corps guidance, this system provides more flexible and responsive contracting capabilities for Superfund sites, which may require a quick response and often lack a sufficiently defined scope of work for price negotiation.

The Corps’ prime contractor performed some of the work and subcontracted some tasks to other companies. For example, the prime contractor excavated contaminated material but awarded subcontracts for transportation, treatment, and disposal of the excavated material. Other subcontracted services included providing backfill soil and landscaping for site restoration, and treating wastewater. To subcontract, the prime contractor solicited bids from potential vendors and, for smaller subcontracts, provided the Corps with advance notification of the award. To award larger subcontracts, the prime contractor requested Corps approval.

To carry out its oversight responsibilities, the Corps monitored changes in the scope of the work, contractor progress and costs, and work quality. For example, Corps officials stated the following: The Corps had to approve any changes in project scope, such as excavating greater quantities of material, or any increases in other construction services or materials beyond the amounts originally negotiated between the Corps and the prime contractor. According to EPA officials, this chain of command helped prevent any unauthorized expansion of work at the site.

To monitor project progress and contractor costs during construction, the Corps reviewed prime contractor cost summary reports for each phase of the work. These reports contained detailed information on contractor costs and work progress, and, according to Corps officials, they were updated, reviewed, and corrected if necessary on a daily, weekly, and monthly basis. For example, Corps officials explained that they reviewed the daily reports primarily for accuracy and unallowable costs. For weekly and monthly reports, the Corps also examined whether the contractor was incurring costs more quickly than expected, which could indicate that a cost was incorrectly attributed or that a change in project scope was necessary (i.e., because particular aspects of the work were more costly than anticipated, and, therefore, a scope revision was needed to complete planned activities). However, Corps officials commented that the contractor data were generally accurate, and that errors were infrequent. The officials also said that, during the most active periods of the work, they discussed the cost reports and project progress, including any potential changes in unit costs, during the weekly meetings with the contractor.

The Corps also monitored work quality at the site. According to site documents, the Corps was required to implement a quality assurance plan as part of its oversight responsibilities and had a quality assurance representative at the site during construction. For example, in a July 2002 notice to the prime contractor, the Corps identified several workmanship deficiencies that the contractor had to address to retain its contract for that portion of the work.

According to Corps guidance and officials, the Corps had a limited role in the subcontracting process at the Federal Creosote site. For example, the prime contractor was responsible for selecting and overseeing subcontractors. In particular, Corps guidance states that since subcontracts are agreements solely between the prime contractor and the subcontractor, the Corps does not have the authority to enforce the subcontract provisions. Rather, the guidance indicates that the Corps oversees the prime contractor’s management systems for awarding and administering subcontracts through periodic reviews of the contractor’s subcontracting processes and ongoing reviews of subcontract awards. According to Corps officials, the Corps’ main responsibility in the subcontracting process at the Federal Creosote site was to review subcontract decisions and approve subcontracts above a certain dollar threshold. As Corps officials explained, subcontracts between $25,000 and $100,000 did not need to be approved by the Corps; rather, the prime contractor sent the Corps an “advance notification” package, which documented that the contractor had competitively solicited the work and why the contractor selected a particular subcontractor over others. However, for subcontracts greater than $100,000, the prime contractor had to submit a “request for consent” package to the Corps, which contained similar documentation as an advance notification but required Corps approval prior to awarding a subcontract.

According to federal acquisition regulations and policies, when evaluating request for consent packages, Corps contracting officers should consider whether there was sufficient price competition, adequate cost or price comparison, and a sound basis for selecting a particular subcontractor over others, among other factors. Early in the project, the Corps identified several issues with the prime contractor’s performance at the site, including the award of subcontracts. According to a letter the Corps sent to the prime contractor, the Corps noted that after repeated unsuccessful attempts to address these issues, the Corps would initiate proceedings to terminate the contract for site work unless the contractor took corrective action. However, Corps officials said the contractor demonstrated sufficient improvement in its documentation practices. Then, in 2003, the Corps raised the request for consent threshold from $100,000 to $500,000 because of the high volume of these packages that the Corps was receiving. A Corps official noted that while the Corps reviews and consents to the subcontracting decisions of its contractors as appropriate, it avoids becoming too involved in the subcontracting process because of bid protest rules regarding agency involvement in that process. According to the official, under these rules, a subcontract bidder cannot protest a subcontract award unless it can show that the overseeing agency was overly involved in the subcontracting process.

Concerning contractors at the Federal Creosote site, the Department of Justice and EPA’s Office of Inspector General have ongoing investigations, some of which have resulted in allegations of fraud committed by employees of the prime contractor and several subcontracting firms. For example, court documents alleged bid-rigging, kickbacks, and other fraudulent activity related to the award of several subcontracts for a variety of services and materials. According to Corps officials, the Corps did not suspect issues of fraud in the subcontracting process until 2004 when, in one instance, a subcontract bidder objected to the award of a soil transportation, treatment, and disposal subcontract to another firm whose bid was substantially higher. Upon further review of the documents, Corps officials found that the prime contractor had not conducted a proper evaluation of the bid proposals, and the Corps withdrew its consent to the subcontract—ultimately requesting that the prime contractor solicit bids under a different process. In the revised bidding process, the firm that had won the earlier subcontract reduced its price from $482.50 to $401.00 per ton of contaminated material—only 70 cents below the competing bid submitted by the firm that had protested the original subcontract. On this basis, the prime contractor again requested consent to subcontract with the firm to which it had awarded the earlier subcontract. According to a Corps official, the Corps was suspicious of illegal activity given how close the two bids were, and Corps officials discussed whether to take formal action against the prime contractor. However, Corps officials decided they did not have sufficient evidence of wrongdoing to support a serious action but did cooperate with others’ investigations of fraud at the site. For more information on site-related fraud, see appendix I.

Agency Comments and Our Evaluation

We provided a draft of this report to the Secretary of the Army and the Administrator of the Environmental Protection Agency for review and comment. The Secretary, on behalf of the Corps of Engineers, had no comments on the draft report. EPA generally agreed with our findings regarding the agency’s actions and costs to clean up the Federal Creosote site, and provided a number of technical comments, which we incorporated as appropriate. EPA’s written comments are presented in appendix IV.

In its comments, EPA noted that the draft report accurately described the cleanup of the site and correctly compared the site’s estimated and final remedial construction costs. However, EPA stated that comparing estimated remedial construction costs to total site costs is not an “apples to apples” comparison because some costs, such as amounts spent on removal actions or EPA personnel salaries (referred to as “other response costs” in this report), are purposely excluded from EPA’s early estimates of remedial construction costs. We agree that to identify the extent to which site costs increased over agency estimates, one should only compare estimated and actual remedial construction costs, as we do in table 4 of this report. However, our objective was, more broadly, to identify what factors contributed to the difference between the estimated remedial construction costs ($105 million) and the actual total site costs ($338 million). We found that the difference between these two amounts was $141 million in remedial construction cost increases—which were largely due to increases in the amount of contaminated material requiring remediation—and $92 million in other response costs that were not included in EPA’s original estimates. We believe it was necessary to provide information on these other response costs to more fully answer our objective and to provide a more informative accounting of the total costs that EPA incurred in cleaning up the Federal Creosote site.

As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution of it until 30 days from the date of this report. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of the Army, the Administrator of the Environmental Protection Agency, and other interested parties. In addition, the report will be available at no charge on GAO’s Web site at http://www.gao.gov.

If you or your staffs have any questions about this report, please contact me at (202) 512-3841 or stephensonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix V.

Appendix I: Summary of Criminal and Civil Litigation Related to the Federal Creosote Site

Court records show that several cases have been brought concerning the Federal Creosote site cleanup. First, the Department of Justice (Justice) and the state of New Jersey have filed claims to recover cleanup costs. Second, Justice has brought criminal charges in a series of cases against one employee of the prime contractor, three subcontractor companies, and eight associated individuals involved in the cleanup, alleging fraud, among other things. Third, the prime contractor has brought a civil suit against a former employee alleged to have committed fraud and other offenses during his employment as well as against associated subcontractors. The information in this appendix provides a brief summary of known actions related to the Federal Creosote site cleanup.

Cost Recovery and Natural Resources Damages Claims

United States v. Tronox, LLC: The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) provides that parties incurring costs to respond to a release or threatened release of a hazardous substance may recover such costs from legally responsible parties, including persons who owned or operated a site, among others. In this regard, the Environmental Protection Agency (EPA) identified Tronox, LLC, the successor to the companies that owned and operated the Federal Creosote site, and, for 2 years, EPA and Tronox participated in alternative dispute resolution concerning EPA’s cost recovery claims. In August 2008, Justice, on behalf of EPA, filed a civil action in the United States District Court for the District of New Jersey against Tronox, seeking recovery of costs that the government incurred for the Federal Creosote site cleanup. The complaint asserted that the government had incurred at least $280 million in response costs and would incur additional costs. In October 2008, the New Jersey Department of Environmental Protection and the Administrator of the New Jersey Spill Compensation Fund filed suit in the same court against Tronox, seeking recovery of costs incurred for the site, as well as damages for injury to natural resources—under both CERCLA and the New Jersey Spill Compensation Act—and public nuisance and trespass claims. In December 2008, the federal and state cases were consolidated. Tronox has stated its intent to vigorously defend against these claims. In early 2009, Tronox filed for voluntary Chapter 11 bankruptcy in federal bankruptcy court and initiated an adversary proceeding in that court, seeking a declaratory judgment on the status of the EPA and New Jersey claims with respect to the bankruptcy.

Subsequently, both courts entered a stipulation filed by both the government plaintiffs and Tronox to stay the cost recovery case as well as the adversary proceeding to allow the parties to resolve the claims. As of the date of this report, the stays remain in effect.

Criminal Cases Involving Alleged Contractor Fraud at the Site

United States v. Stoerr: Norman Stoerr, a former employee of the prime contractor at the Federal Creosote site, pled guilty to three counts related to his activities as a contracts administrator at the site. Court documents alleged that over a 1-year period, the employee conspired with others to rig bids for one subcontractor at the site, resulting in EPA being charged inflated prices. In addition, the documents alleged that over several years, the employee solicited and accepted kickbacks from certain subcontractors at the Federal Creosote site and another site, and allowed the kickbacks to be fraudulently included in subcontract prices that were charged to EPA. To date, Stoerr has not been sentenced.

United States v. McDonald et al: In August 2009, the United States indicted Gordon McDonald—a former employee of the prime contractor at the Federal Creosote site—as well as representatives of two subcontractors who worked at the site, for various counts, including kickbacks and fraud. The indictment charged that the prime contractor’s employee, a project manager, solicited and accepted kickbacks from certain subcontractors in exchange for the award of site work, and that these kickbacks resulted in EPA being charged an inflated price for the subcontractors’ work. The indictment also charged that the project manager disclosed the bid prices of other vendors during the subcontracting process, which resulted in the government paying a higher price for services than it would have otherwise paid. One of the indicted employees (James Haas)—representing a subcontractor who provided backfill material to the site—has pled guilty of providing kickbacks and submitting a bid that was fraudulently inflated by at least $0.50 per ton of material. Haas agreed to pay more than $53,000 in restitution to EPA as part of his guilty plea, and has been sentenced to serve 33 months in jail and to pay a $30,000 criminal fine. McDonald’s case is proceeding, and charges against a third defendant are still pending.

United States v. Bennett Environmental, Inc.: Bennett Environm Inc. (BEI), a subcontractor providing soil treatment and disposal services to the Federal Creosote site cleanup, entered a plea agreement admitting to one count of fraud conspiracy. Court documents alleged that over 2 years, the company paid kickbacks to an employee or employees of the prime contractor, in return for receiving favorable treatment in the award of subcontracts, and inflated its prices charged to EPA. BEI was sentence to 5 years’ probation and ordered to pay $1.662 million in restitution to EPA, plus a $1 million fine.

United States v. Tejpar: Zul Tejpar, a former employee of BEI, entered a plea of guilty to one count of fraud conspiracy. Court documents alleged that Tejpar, along with coconspirators, provided kickbacks to employees of the prime contractor to influence the award of subcontracts at the site and fraudulently inflated the company’s bid price after an employee of the prime contractor revealed the other bid prices. To date, T ejpar is awaiting sentencing.

United States v. Griffiths: Robert P. Griffiths entered a plea of guilty to three counts related to fraudulent activity at the Federal Creosote site when he was an officer of BEI. Griffiths, along with coconspirators, provided kickbacks to employees of the prime contractor to influence the award of subcontracts at the site, fraudulently inflated the company’s invoices that the prime contractor charged to EPA, and fraudulently received the bid prices of other bidders prior to award of a subcontract. To date, Griffiths is awaiting sentencing.

United States v. JMJ Environmental, Inc.: JMJ Environmental, Inc., a subcontractor providing wastewater treatment supplies and services, and John Drimak, Jr., its president, entered guilty pleas related to fraudulent activity at the Federal Creosote site and another site. At the Federal Creosote site, JMJ Environmental and Drimak, along with coconspirators, provided kickbacks to employees of the prime contractor to influence the award of subcontracts at the site, fraudulently inflated the company’s prices that the prime contractor charged to EPA, and arranged for intentionally high, noncompetitive bids from other vendors. To date, JMJ Environmental and Drimak are awaiting sentencing.

United States v. Tranchina: Christopher Tranchina, an employee of subcontractor Ray Angelini, Inc., which provided electrical services and supplies, entered a plea of guilty to fraud conspiracy for activities at the Federal Creosote site. Tranchina, along with coconspirators, provided kickbacks to employees of the prime contractor to influence the award of subcontracts at the site and fraudulently inflated the company’s prices that the prime contractor charged to EPA. Tranchina was sentenced to imprisonment of 20 months and ordered to pay $154,597 in restitution to EPA.

United States v. Landgraber: Frederick Landgraber, president of subcontractor Elite Landscaping, Inc., entered a plea of guilty to fraud conspiracy for activities at the Federal Creosote site. Landgraber, along with coconspirators, provided kickbacks to employees of the prime contractor to influence the award of subcontracts at the site and submitted fraudulent bids from fictitious vendors to give the appearance tive process, resulting in EPA paying higher prices than if of a competi procurement regulations were followed. Landgraber was sentenced to imprisonment of 5 months and ordered to pay $35,000 in restitution to EPA and a $5,000 fine.

United States v. Boski: National Industrial Supply, LLC, a pipe supply company, and coowner Victor Boski entered guilty pleas for fraud conspiracy at the Federal Creosote site and another site. At the Feder Creosote site, National Industrial Supply and Boski, along with coconspirators, provided kickbacks to em to influence the award of subcontracts at the site and fraudulently inflated ms the company’s prices that the prime contractor charged to EPA. The terployees of the prime contractor of the plea agreement require National Industrial Supply and Boski to have available $60,000 to satisfy any restitution or fine imposed by the court, among other items. To date, they are awaiting sentencing.

Prime Contractor Civil Suit

Appendix II: Objectives, Scope, and Methodology

This appendix provides information on the scope of work and methodology used to examine (1) how EPA assessed the risks and selected remedies for the Federal Creosote site, and what priority EPA assigned to site cleanup; (2) what factors contributed to the difference between the estimated and actual remediation costs of the site; and (3) how responsibilities for implementing and overseeing the site work w divided between EPA and the U.S. Army Corps of Engineers (the Corp also discusses our methodology for summarizing criminal and civil litigation related to the Federal Creosote site.

To examine how EPA assessed the risks and selected remedies for the Federal Creosote site, as well as what priority it assigned to the clean we reviewed EPA’s Superfund site investigation and cleanup processes, including applicable statutes, regulations, and agency guidance. We also reviewed documentation from the site’s administrative record, which detailed the agency’s activities and decisions at the site. As part of this review, we analyzed public comments that were documented in site records of decision to identify key issues with the cleanup effort. To obtain additional information on these and other site cleanup issues, we interviewed EPA Region 2 officials involved with the site, including officials from the Emergency and Remedial Response Division, the Public Affairs Division, and the Office of Regional Counsel. Furthermore, we interviewed and reviewed documentation obtained from officials with the Agency for Toxic Substances and Disease Registry regarding its determination of site risks. We also consulted with New Jersey and Borough of Manville officials to obtain their views on the cleanup effort. Finally, we interviewed representatives of the potentially responsible party for the site to obtain the party’s views on EPA’s risk assessment, remedy selection, and site prioritization.

To determine what factors contributed to the differences between the estimated and actual costs of site cleanup, we obtained and analyzed data on estimated and actual site costs from several sources. For estimated site costs, we combined EPA’s estimates for selected remedies from site records of decision and remedial alternative evaluations. In developing these estimates, EPA applied a simplifying assumption that all construction costs would be incurred in a single year, and, therefore did not discount future construction costs, even though work was projected to occur several years into the future as a result of design activities and resident relocations as well as EPA’s estimated constructio time frames. However, our discount rate policy guidance recommends that we apply a discount factor to future costs. Consequently, to convert EPA’s estimated costs into fiscal year 2009 dollars, we (1) conducted present value analysis to discount future site c original estimate (base year) for each remedy, using EPA’s recommended discount rate of 7 percent, and (2) converted the present value of each estimate into fiscal year 2009 dollars. To calculate the present value of osts to the dollar year of the estimated costs, we identified the projected construction time frames for each remedy from site documents. Because the documents did not provid information on how construction costs would be distributed over the projected time frame, we calculated the midpoint of a range of values, assuming that all costs for particular activities comprising EPA’s sele remedies would either be incurred at the beginning of the projected t frame (the maximum value of these costs) or at the end of the projected time frame (the minimum value). To adjust the present values from t base year to fiscal year 2009 constant dollars, we divided the present values by the inflation index for the base year and weighted the calculation to convert the base year from calendar years to fiscal years.

To identify actual sitewide costs, we compiled data from multiple so including EPA’s Superfund Cost Recovery Package Imaging and On-Line System (SCORPIOS) for data on site costs through April 30, 2009; the Corps of Engineers Financial Management System (CEFMS) for data on gh various dates in April and early May, Corps and contractor costs throu 2009; and contractor-generated project cost summary reports for data on urces, contractor costs for each phase of the cleanup through Februar We relied on multiple data sources for our analysis because none of the sources provided a sufficient level of specificity for us to comprehe determine when and for what purpose costs were incurred. In partic the SCORPIOS data provided specific dates of when EPA incurred costs but for some costs, especially those related to site construction work, th e data did not generally provide detailed information on why the costs were incurred. Therefore, to obtain more detailed information on the reason f incurring certain costs, we used the data from CEFMS and the contractor’s project cost summary reports. However, the CEFMS and contractor project cost summary report data did not generally provide specific information on when costs were incurred. Consequently, to determine actual site costs in fiscal year 2009 dollars, we used two approaches. For costs taken from the SCORPIOS data or when detailed information on the date of a particular cost was available, we applied the inflation index f the particular fiscal year in which EPA incurred the cost. For costs take from the other data sources, we used the midpoint of the range of inflation-adjusted values for the construction start and end dates for individual work phases, as recorded in site documents. y 15, 2009.

We worked with EPA Region 2 officials to categorize site costs, includ those that were part of EPA’s original construction estimates as those that were not part of EPA’s estimates. After identifying the costs th were not included in EPA’s original estimates, we took the difference between estimated and actual construction costs, according to categories that we discussed with EPA, to identify where actual costs changed the most from EPA’s estimates. Then, to identify the factors that contribute d the most to the difference in these cost categories, we analyzed the typesof costs in each category and interviewed EPA Region 2 and Corps officials responsible for the cleanup. In addition, we analyzed data from site documents on the estimated and actual amounts of contaminated material at various stages of the cleanup process to obtain further information on the extent to which increased amounts of contaminated material affected site costs. To examine the impact of alternative methodologies on the disparity between estimated and actual costs, we reviewed EPA cost-estimating guidance and calculated the effect of discounting future estimated costs within our analysis. To determine how fraud impacted site costs, we reviewed civil and criminal litigation documents describing the monetary values exchanged in various schemes.

To ensure the reliability of the actual cost data we used for this report, we reviewed the data obtained from the SCORPIOS and CEFMS databases as well as the contractor-generated cost summary reports that the Corps provided. For each of these data sources, we reviewed agency documents and interviewed EPA and Corps officials to obtain information on their data reliability controls. We also electronically reviewed the data and compared them across all sources as well as with other information on sit costs as available. For example, we compared contractor cost data provided by the Corps with similar data from the contractor-generated cost summary reports. Similarly, we compared Corps cost data from CEFMS with analogous data from EPA’s SCORPIOS database. Generally, we found that discrepancies among comparable data from different sources were most likely attributable to the potential delay between when a cost is incurred by a contractor and when it is invoiced and processed, first by the Corps and later by EPA. On the basis of our evaluation of these sources, we concluded that the data we collected and analyzed were sufficiently reliable for our purposes. However, because some costs incurred prior to early May 2009 may not have been processed through the Corps and EPA’s cost-tracking systems at the time of data collection, site cost data in this report are considered to be approximate. Moreover, because our methodology relied on calculating the midpoint of a range of costs for both the present value calculations and adjusting data for inflation, we consider the data we present in this report on estimated and actual costs and the difference between these costs also to be approximate. reviewed agency guidance regarding EPA’s responsibilities at Superf sites. To obtain information on EPA’s oversight actions, we interviewed EPA and Corps officials responsible for site cleanup and contracting We also reviewed site meeting minutes, monthly progress reports, correspond General reports. To further describe the Corps’ responsibilities at the Federal Creosote site, we reviewed Corps guidance for the cleanup of hazardous waste projects, Corps contract management best practices, and t relevant procurement regulations. To obtain information on actions tha the Corps took to implement its site responsibilities, we reviewed Corps correspondence to the contractor and contractor requests for approval o soil treatment and disposal subcontracts. We also interviewed Corps officials responsible for site cleanup and contracting work as well as EPA orps’ Region 2 officials. However, we did not assess the adequacy of the C efforts or its compliance with Corps guidance and federal procurement regulations. work. ence to the Corps, and relevant EPA Office of Inspector To examine issues regarding civil and criminal litigation related to th Federal Creosote site, we collected case data from the Public Access to Court Electronic Records system. We then qualitatively analyzed documents obtained from this system to identify the issues involved and the status of each case as well as the outcomes, if any, of the cases. However, because criminal investigations are ongoing and confidenti could not determine whether any additional criminal charges were under consideration, but relied solely on the publicly available information for charges that had been filed as of November 2009.

Appendix III: Timeline of EPA Actions at the Federal Creosote Site

Appendix IV: Comments from the Environmental Protection Agency

Appendix V: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the individual named above, Vincent P. Price, Assistant Director; Carmen Donohue; Maura Hardy; Christopher Murray; Ira Nichols-Barrer; and Lisa Van Arsdale made key contributions to this report. Elizabeth Beardsley, Nancy Crothers, Alexandra Dew, Richard Johnson, and Anne Stevens also made important contributions.