22 ELR 10763 | Environmental Law Reporter | copyright © 1992 | All rights reserved

Contesting of CERCLA Costs by Responsible Parties — There Is No Contest

Editors' Summary: In recent years, fewer and fewer parties liable for Superfund site cleanup have successfully challenged the costs of cleanup reflected in claims made against them by the government. The government's burden in CERCLA cost recovery is to establish the amount of its response costs by a preponderance of the evidence. In this Article, the authors, who are U.S. Justice Department lawyers, assert that the government has better prepared cleanup cost summaries, making them generally sufficient to obtain summary judgment for the United States with respect to the amount of response costs. Still, the high financial stakes involved in Superfund cleanup tempt many liable parties to challenge the government, and the authors argue that once liability for CERCLA costs has been established, defendants squander time and money flyspecking costs during settlement negotiations and litigation. The authors first detail the procedures by which proof of response costs, which include intramural and extramural costs, is assembled, and then review the treatment of such cost packages by the courts, noting that, to their knowledge, in no action has recovery been denied for EPA intramural or extramural costs because of inadequate documentation of expenses. The authors next analyze the inability of liable parties to challenge the recover-ability of proven costs. Examining the statutory language of CERCLA §§ 107 and 113, the authors note Congress' intent to limit challenges defendants may make in cost recovery actions under § 107, and find no contradiction between the two sections, concluding that § 113 provides the standard to be used in determining consistency of response costs with the NCP. The authors also examine the relevant cases and conclude that they provide the government favorable standards in proving costs and limiting judicial standards of review. They conclude that though the cost recovery provisions of CERCLA appear to be harsh and unfair, they seem no harsher than CERCLA's imposition of strict, joint, and several liability.

Messrs. Beehler, Gold, and Novick are trial attorneys at the U.S. Department of Justice, Environment and Natural Resources Division, Environmental Enforcement Section, in Washington, D.C. The opinions reflected in this Article are those of the authors only and not of the Department of Justice. The authors wish to express special appreciation to EES paralegal Julie Hennick, who provided invaluable assistance for this Article.

[22 ELR 10763]

One of the most successful federal programs in recent years in terms of return on budget has been the civil environmental enforcement activities of the Environment and Natural Resources Division, U.S. Department of Justice. The predominate activity driving such high returns has been enforcement of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), or Superfund, by the Division's Environmental Enforcement Section (EES).¹

For instance, in fiscal year 1991, the EES budget, including both funding from Superfund and regular appropriations, totaled $46.6 million.² Yet the value of what the EES achieved for all enforcement activities in terms of money to be returned to the U.S. Treasury and various federal trust funds (through court awards and collections) as well as commitments (through court decisions and negotiated settlements) to cleanup activities at Superfund sites was $1.2 billion.³ This represents a 26 to 1 return on the investment in the budgets of Superfund and the EES.⁴ Of the $1.2 [22 ELR 10764] billion, over $1.1 billion was derived from Superfund enforcement activity.⁵

The high financial stakes involved in Superfund cleanup has tempted many parties found liable for a Superfund site cleanup to challenge the costs of cleanup reflected in claims made against them by the government. Not surprisingly, certain segments of the private bar and environmental consulting professionals encourage such challenges.⁶ However, such challenges by liable parties are ill-advised and, in effect, no contest against the government.

This Article argues that once the liability for costs has been established under CERCLA § 107(a),⁷ defendants waste time and money by litigating the amount of costs involved and, by flyspecking costs during settlement negotiations concerning the amount of costs to be paid by the responsible parties. The underlying support for these propositions is based on the relevant statutory⁸ and case law⁹ which both provide the government favorable standards in proving costs and limit judicial standards of review of such proof.¹⁰ In addressing the cost phase of such enforcement actions, this Article assumes that liability of the parties has already been established.

Cost Recovery Litigation Statistics

Before delving into specific aspects of the proof required of the government to recover costs for Superfund cleanups, presentation of some cost recovery litigation statistics is appropriate.

According to the Department of Justice (DOJ) figures,¹¹ from October 1, 1987, through May 26, 1992, the United States collected some $430 million from over 1,200 responsible parties through cost recovery settlements and judicial orders. Ninety-eight percent of this money consisted of recoveries of the government's Superfund related cleanup costs. The remaining two percent consisted mostly of recovery of civil penalties plus treble damages, natural resource damages, and prejudgment interest. Of the approximately 300 matters involved, courts rendered decisions affecting recovery of cost in 15 cases. In 14 of these 15 cases, the United States was awarded at least 95 percent of all contested costs.

To the extent annual trends are discernible, as the government continues to file increasing numbers of CERCLA cost recovery cases, the amount of money it annually recoups from settlements and collections in this type of action has, unsurprisingly, risen. Moreover, the average dollar recovery per case has increased as well. For instance, in Fiscal Year 1987, the first post-Superfund Amendments Reauthorization Act (SARA) year, the EES filed 56 CERCLA civil cases, the highest yearly total at that time,¹² while the government received approximately $46 million in cost recovery settlements and collections.¹³ By Fiscal Year 1991, the EES increased its filings almost three-fold, to 154,¹⁴ while the government increased its recovery settlements and collections more than six-fold to over $300 million.¹⁵

Proof of Response Costs

Elements of Proof and Recoverable Costs

A defendant found liable in a CERCLA cost recovery action [22 ELR 10765] "shall be liable for — (A) all costs of removal or remedial action incurred by the United States Government … not inconsistent with the national contingency plan."¹⁶ Accordingly, the government's burden in the cost phase of CERCLA litigation is to establish the amount of its response costs¹⁷ by a preponderance of the evidence.¹⁸

The statutory definitions of "remove," "removal," "remedy," and "remedial action," — collectively, "response" actions — are extremely broad.¹⁹ Consistent with these definitions, courts have found that any cost incurred in furtherance of CERCLA cleanups is a "response" cost recoverable unless proven inconsistent with the national contingency plan (NCP). For example, the costs of investigating, monitoring, and testing to determine the existence or extent of releases or threatened releases of hazardous substances are recoverable,²⁰ as are the costs of the actual physical removal or remediation of hazardous substance contamination.²¹ Costs are equally recoverable whether they are "intramural" (incurred by government personnel) or "extramural" (paid to contractors or other entities).²² Thus, EPA might typically assign a contractor to conduct a Remedial Investigation and Feasibility Study (RI/FS) for a site. EPA would review the RI/FS and select a remedial action, then ask a second contractor to design and implement the remedial action chosen. The payments made to both contractors, the cost of EPA employees' time spent in reviewing the RI/FS and selecting the remedy, and the "administrative" labor and travel costs incurred in supervising the contractors' work are all response costs.²³

In addition to such "direct" costs, courts have unanimously held that overhead costs necessary to run the Superfund program are response costs, even if such costs are not incurred specifically for a given cleanup.²⁴ EPA accounts for these expenses under the "indirect costs" rubric. Indirect costs include expenses of running government offices that do not perform specific site-related tasks but are nevertheless essential to performance of the government's duties under CERCLA, such as the EPA finance offices that track billings and payments. In addition, certain expenses incurred by CERCLA program offices, for example rent, are, by their nature, never incurred solely for a particular site; other costs, for example office paper, might theoretically be tracked on a site-specific basis, but only at tremendous expense and administrative burden.

EPA allocates a fraction of these overhead expenses to the Superfund program in each Region using a multistep accounting procedure based on recommendations of the C.P.A. firm Ernst & Whinney.²⁵ At each stage of the process, a portion of the overhead expense is winnowed out. For example, a fraction of the finance office costs might be allocated to EPA's other program offices,²⁶ assigning only the remainder to create the Superfund "indirect-cost pool." The Superfund indirect-cost pool is then distributed to sites by allocation based on labor time reporting by CERCLA program personnel; in other words, the more EPA effort a particular site requires, the greater the indirect costs allocated to that site. Every court that has considered the issue has found, as a matter of fact, that EPA's indirect-cost accounting methodology is adequate, fair, and accurate.²⁷

[22 ELR 10766]

Currently, the indirect-cost pool is divided by all EPA program labor hours, including such non-site hours as vacation time, sick leave, training, and administrative time. As a result, EPA distributes less than 35 percent of the Superfund indirect-cost pool to sites for recovery from responsible parties.²⁸ The conservatism of this accounting approach, which has been judicially acknowledged,²⁹ has also been strongly criticized.³⁰ In response to this criticism, EPA has proposed a new rule for computing indirect costs in a manner that would fully allocate indirect costs to sites.³¹

In addition to actual cleanup work, CERCLA defines "response," "remedial action," and "removal" to "include enforcement activities related thereto."³² Accordingly, courts have uniformly held that the costs of CERCLA enforcement activities, including the costs of bringing cost recovery actions, are within the scope of response costs the government is entitled to recover.³³ These costs include the direct labor costs of the DOJ's attorneys and paralegals who bill their time to specific cases, as well as the direct expenses charged to cases, such as travel and litigation support, and indirect costs.³⁴ EPA's enforcement-related costs, for example, costs of investigations (often carried out by contractors) to identify potentially responsible parties in connection with a particular site, are recoverable as well.³⁵

Finally, CERCLA provides for recovery from liable parties of "the costs of any health assessment or health effects study" carried out by the Federal Agency for Toxic Substances and Disease Registry.³⁶ These costs, where incurred, are typically accounted for in the EPA cost summary.

The "Cost Summary" and Other Evidence of Costs

EPA is the lead agency to which most authority under CERCLA is delegated³⁷ and so typically undertakes the assembly of virtually all the evidence establishing the amount of response costs in CERCLA cases.³⁸ EPA uses a variety of methods to ensure that costs incurred are accounted for on a site-specific basis. During litigation, EPA follows a set of standard procedures for compiling the costs incurred for response actions in connection with the relevant site, assembling documentation in support of those costs, and preparing a "cost summary" that demonstrates each category of costs, the amount incurred, and the manner in which each cost was billed or accounted for.

EPA generally makes the cost summary available to CERCLA defendants early in litigation (sometimes even before litigation, for settlement purposes), or, in bifurcated cases, early in the cost phase of the case. The early version of the cost summary provides an accurate overview of response costs incurred up to a specified date. The cost summary is constantly updated as new cleanup or enforcement costs are incurred. This constant reviewing and fine-tuning of the cost summary by EPA staff occasionally turns up erroneous cost entries that should be excluded, or uncovers costs properly chargeable to a site that were absent from the early summary. EPA adjusts the cost summary as needed to reflect these relatively rare changes.

Our experience has been that EPA cost summaries provided to defendants are overwhelmingly accurate, the occasional adjustment notwithstanding. The initial data on the summary are derived from EPA's accounting system, which is subject to internal controls and procedures to ensure accurate recording.³⁹ [22 ELR 10767] To protect further against erroneous data entry, EPA's normal procedures require confirmation of each item on the cost summary against supporting documentation. Thus, for example, if the cost summary shows that a certain cleanup contractor was paid $100,000 for work at a site on seven separate invoices, EPA, almost without exception, will be able to retrieve from its files the seven invoices showing the amounts billed to the site totalling $100,000 and proof that those invoices were paid.

Such cost documents, of course, are products of EPA's billing and accounting system, which, like any such system, has its own language, internal structure, and codes. Therefore, the documents can be difficult to comprehend without knowledge of the system and the codes. Misunderstanding of the documents in the "cost package" can lead to unnecessary litigation expense and to the taking of ill-advised legal positions. For example, in United States v. American Cyanamid Co.,⁴⁰ defendants brought an expert accountant witness before the court who admitted that until the trial of the case he had no knowledge of EPA's accounting system, of the nature of the documents in the cost package, or of the meaning of any of the codes on the documents. Of course, defendants can educate themselves formally — and expensively — by deposing the EPA witnesses who assemble and verify cost packages. However, informal education, lawyer to lawyer, across a negotiating table will generally answer basic questions about how EPA costs are tracked when incurred and then compiled for a cost recovery case.⁴¹

Intramural Costs. EPA's intramural costs consist of its direct payroll costs, indirect costs, and travel costs of EPA employees for work on a particular site. EPA tracks these costs, as they are incurred, through its accounting system.

Payroll costs are tracked through biweekly timesheets. EPA employees bill their time to work on specific sites using account numbers to identify the sites on which they work. The account number for a particular site includes that site's identification number as assigned by the EPA Region involved. To prepare site-specific labor costs, EPA's accounting system matches the employee's reported hours to his or her hourly payroll cost for the relevant pay periods. These hours and amounts are reported on a printout that becomes one of the detail sections of the cost summary. To verify the payroll cost, EPA ensures that a matching timesheet exists for each entry on the payroll report.

Indirect costs are calculated based on EPA payroll data and the indirect-cost rate determined in the process previously described.⁴² EPA expresses the indirect-cost rate for each Region for each fiscal year as a rate per hour of Superfund program work. Thus, to obtain the indirect costs associated with a particular site, EPA's cost accounting program simply multiplies the pertinent indirect rate by the number of hours worked by EPA program staff on the site as reported in the payroll summary.⁴³ Because the hours themselves are documented by the timesheets, the indirect costs are also verified.

Travel costs are supported by paid travel vouchers submitted by the travelling employee. In verifying the summary, EPA ensures that the voucher indicates travel related to the site being charged and that the amount matches the amount contained in the summary entry.

Extramural Costs. EPA incurs extramural costs through contracts or purchase orders with private vendors, federal interagency agreements, and cooperative agreements with states. In most cases, the contracts or agreements are highly generic, providing only that certain types of services will be provided for Superfund work related to sites in a particular geographic area, and including no information on what is to be done at or in connection with particular sites. For this reason, contracts are generally not included in the cost package, because they provide no information relevant to the incurrence of site-specific response costs.⁴⁴

All extramural costs are currently billed to EPA on a site-specific basis, though for convenience the invoices or vouchers often consolidate billings for numerous sites. The contractor⁴⁵ provides detail sheets showing the amount billed for work at each site. An EPA Project Officer reviews the bills, including the site-specific breakdown, and approves the bill for payment. Payment is then made and confirmed through communications between EPA and the Department of the Treasury. EPA enters the site-specific payments into its accounting system and maintains the billing and payment documents.⁴⁶ Later, when the accounting system is used to prepare the cost summary, EPA checks each invoice or voucher on the printout and ensures that the corresponding invoice, with a site-specific page matching the site amount shown on the summary, a Project Officer [22 ELR 10768] approval form or equivalent, and proof of payment⁴⁷ are included in the documentation package.

EPA's recently proposed rule on CERCLA cost documentation clarifies that the existing cost package satisfies the requirement that documentation be sufficient to account for costs incurred.⁴⁸ The proposed rule states, "Information that provides an accurate accounting of federal costs incurred for each site-specific response action,"⁴⁹ together with information describing the response actions taken,⁵⁰ "shall be sufficient to form the basis for an EPA cost recovery action."⁵¹ The proposed rule would also conform to current judicial practice by providing, "Where certain documentation and information [ordinarily required by the rule] are not available, EPA shall identify other documentation and/or information which describes the response action taken and provides an accurate accounting of costs incurred."⁵²

Department of Justice Costs. Costs incurred by the DOJ for CERCLA enforcement actions are not claimed on the EPA cost summary in litigation but are established separately. The DOJ's Environment and Natural Resources Division (ENRD) retains an independent accounting firm to compile the DOJ's CERCLA costs on a case-specific basis and to produce cost summaries and supporting documentation for sites as required in litigation. The DOJ's costs are categorized as direct labor costs, other direct costs, and indirect costs.

The DOJ's direct labor costs are computed and documented in a manner generally similar to EPA's labor costs. The DOJ's attorneys and paralegals keep timesheets indicating the account numbers of the cases on which they work. Those data are entered into a computer system from which the DOJ's accountant routinely reports all hours spent on a particular case. Computerized salary data is then used to calculate an hourly rate for each attorney and paralegal, resulting in a printout that shows the labor hours, the hourly rate, and the total direct labor cost (hours multiplied by rate). The sum of all attorneys' and paralegals' weekly labor costs over the relevant time period is the total the DOJ direct labor cost for a given case. The DOJ's accountant verifies the electronic data by comparing it with copies of the DOJ's employees' timesheets.

The DOJ's "other direct costs" are costs of travel and of case-specific purchases, such as court or deposition transcripts, litigation support, and expert witnesses. These are tracked by the DOJ's accounting system, compiled by the independent accountant, and verified by obtaining copies of the travel vouchers, invoices, or other documents showing the particular expenditure involved.

The DOJ's indirect costs are calculated much as EPA's indirect costs are, by spreading the overhead costs used to support Superfund litigation across the case hours worked.⁵³ The DOJ's indirect cost rate is expressed as a percentage of the direct labor costs for a case, rather than an hourly rate. As with EPA indirect costs, the documents supporting the direct labor costs for a case also serve to support the indirect costs, which are calculated by simply multiplying the direct labor costs by the indirect rate.

Cost Packages in the Courts

Although defendants have used a number of approaches to try to argue that additional documents beyond those described above are needed to prove the amount of response costs incurred, these attempts have invariably failed where the costs involved were supported by the standard, verified package of documents just described. EPA's and the DOJ's verified cost summaries, supported by declarations describing the response actions for which the costs were incurred, generally suffice to obtain summary judgment for the United States with respect to the amount of response costs.⁵⁴ To the extent that summary judgment is not granted, similar evidence proves sufficient at trial.⁵⁵

For example, in United States v. Bell Petroleum Services, Inc., defendants attempted to avoid summary judgment by making a broad-based argument that "absence of proper accounting documentation should bar any recovery by the Government for its response costs."⁵⁶ The court rejected the argument, relying instead on the cost summary:

The accounting summaries used by the Government reflect the man hours expended and the rate per hour and were submitted in lieu of extensive documentation as requested by [defendant]. The Court notes the underlying records have been made available to the Defendants by the Government and thus, forcing the Government to go to the additional expense of compiling more detailed summaries would only increase costs unnecessarily.⁵⁷

Similarly, in Hardage I, the United States sought summary judgment based on affidavits and summaries supported [22 ELR 10769] by standard documentation.⁵⁸ Although defendants argued that "summary judgment is improper, because the United States failed to document that the purposes of some of these costs were for response activities at the Hardage site," the court "reviewed the affidavits filed by the United States, and [found] the United States [had] presented a prima facie case that the response costs were incurred at the Hardage site."⁵⁹ Accordingly, because defendants failed to raise a genuine issue of disputed material fact as to the United States' response costs, the court granted summary judgment.⁶⁰

Two recent cases demonstrate that courts continue to reject fundamental challenges to EPA's cost documentation procedures. First, in United States v. American Cyanamid Co., defendants mounted a wholesale attack on EPA's standard cost package, urging the court to find that virtually all costs, other than those to which defendants had previously stipulated, were inadequately documented.⁶¹ The court specifically rejected this frontal assault, finding that the challenged EPA payroll and indirect costs, and EPA contract costs supported by site-specific invoices, and interagency agreement costs supported by interagency vouchers had been established by adequate documentation.⁶²

Second, in United States v. Gurley Refining Co., defendants tried an evidentiary attack, arguing that the United States' cost summaries should not have been admitted at the trial.⁶³ The court rejected that argument, and held "that the cost summaries are admissible, and that the United States … provided adequate documentation to support its claim for costs."⁶⁴

In sum, by the time CERCLA cost recovery cases are ripe for summary judgment or trial, documentation of every part of the government's cost claim, shown as a line item on EPA's and the DOJ's cost summaries, is virtually always in hand. We are unaware of any case in which recovery was denied for any EPA intramural or any DOJ cost due to inadequate documentation. As to EPA extramural costs, to the best of our knowledge, no court has ever denied recovery based on inadequate documentation for any expense fully supported by the standard set of extramural cost documentation described above.⁶⁵

In some cases, EPA procedures call for documenting certain extramural costs in a different manner than described above. One approach used for certain costs is a "letter report," prepared by the outside contractor, which reports the amounts paid to that contractor for work at or in connection with a particular site. The United States has successfully recovered costs documented by letter reports supported by site-specific billing information.⁶⁶

"Historic costs" are the only other atypical items likely to appear on EPA cost summaries, and then only for sites with long histories. Prior to October 1, 1985, in CERCLA's youth, EPA's accounting system was unable to track contractor payments on a site-specific basis. EPA undertook the so-called historic costs project to reconstruct those payments site-specifically, verify and reconcile the amounts, and enter the amounts into EPA's accounting system. EPA is implementing procedures designed to ensure the availability of thorough documentation of all historic costs, in addition to the accounting entries, in future lawsuits.⁶⁷

Thus, parties liable to the government in CERCLA cost recovery cases have relatively little to gain by attempting to use judicial proceedings to "flyspeck" the documentation of costs claimed. In most instances, the cost summary will only include costs that are properly supported under prevailing judicial standards; the exceptions will rarely provide savings worth the cost of discovering them. For example, in American Cyanamid, the defendants, having earlier been found liable, essayed a broad-based attack on the adequacy of the United States' cost documentation and put the United States to its proof in a trial that heard 10 days of testimony. As liable parties, the American Cyanamid defendants will be liable for the costs the government incurred for the trial of that case, approximately $600,000. The year of delay caused by the trial added over $100,000 to the interest due to the government.⁶⁸ In addition, the defendants incurred [22 ELR 10770] both the costs of the Special Master involved in that case⁶⁹ and fees for their own attorneys and experts. Even though the government did not recover its initial claim in full, there can be little doubt that the American Cyanamid defendants paid more by forcing a trial on cost issues than they would have paid by settling, even had they settled for the full amount of the government's claim.⁷⁰ The same is even more likely to hold true in cases that involve sites where the response action and accounting is more recent than that which was at issue in American Cyanamid, in which costs at the Picillo Site, the first Superfund site in New England, were contested. Moreover, as is discussed in the next section, attempts to show that proven costs are not recoverable are as unlikely to succeed as challenges to proof of the amounts incurred.

Challenges to Recoverability of Proven Costs Do Not Succeed

Statutory Language

Although the DOJ's lawyers might like to believe otherwise, the government's success in cost recovery cases is primarily due not to the speed, strength, or skill of its attorneys, but to the good offices of the wordsmiths of the U.S. Congress. The language of CERCLA § 107 declares Congress' intent to limit defendants' arguments in cost recovery cases. "Notwithstanding any other provision or rule of law," § 107 begins, "and subject only to the defenses set forth in subsection (b) of this section," persons falling within the categories of liable parties are liable for "all costs of removal or remedial action incurred by the United States Government or a State … not inconsistent with the National Contingency Plan."⁷¹

The language of other provisions of the statute indicates that this language was intended to be taken literally. The "all costs" language of § 107(a)(4)(A) stands in contrast to the language of § 107(a)(4)(B), which provides that nongovernmental parties are entitled to "necessary costs of response consistent with the National Contingency Plan."⁷² It also can be contrasted with the language of § 106(b)(2)(A), (C), and (D), which provide that in certain circumstances a private party which has performed a response action pursuant to an administrative order may recover the "reasonable costs" of that action. Thus, when Congress intended that a party should only recover "reasonable" or "necessary" costs, it said so. The logical conclusion is that when Congress stated that the government is entitled to recover "all costs … not inconsistent with the National Contingency Plan," it intended that defendants would not be able to avoid payment of the government's costs on the grounds that those costs are "unreasonable" or "unnecessary."

The language of CERCLA § 113(j), enacted as an aspect of SARA in 1986,⁷³ also indicates that the words of § 107 are to be taken literally. Subsection 113(j)(2) states that if a party in a "judicial action under this chapter" challenges the President's selection of a response action, "the Court shall uphold the President's decision … unless the objecting party can demonstrate on the administrative record, that the decision was arbitrary and capricious or otherwise not in accordance with law."⁷⁴ Absent further guidance from Congress, this language might lead a careful CERCLA reader to believe that the suggestion that a court can strike down a response action choice which is "otherwise not in accordance with law" contradicts § 107, which imposes liability "notwithstanding any other provision or rule of law." Subsection (j)(3), however, quickly clarifies this point. It states that if the court does "find] [ that the selection of the response action was arbitrary and capricious or otherwise not in accordance with law, the court shall award (A) only the response costs or damages that are not inconsistent with the National Contingency Plan …."⁷⁵ Thus, § 113(j) reemphasizes the point that in the context of a § 107 action, the only relevant "law" is the NCP.⁷⁶

What, then, does the "arbitrary and capricious … otherwise not in accordance with law" standard mean in the context of a § 107 action? The express purpose of § 113 is to limit the attacks that a defendant can make on the government's remedy selection process, by restricting any challenge to the administrative record and giving the government the benefit of the "arbitrary and capricious" standard. In the context of a § 107 action, § 107 already limits the attacks a defendant can make; a defendant can only attack the remedy selection process (or any other aspect of the government's response action) by arguing that it is "inconsistent with the National Contingency Plan." Thus, the only logical, and permissible, way to apply the § 113 standard in [22 ELR 10771] the § 107 context is for courts to apply the standard in determining whether the selection of a response action was "inconsistent with the National Contingency Plan."

A review of the NCP demonstrates that the idea of applying the § 113 standard to the issue of inconsistency with the NCP makes perfect sense. The critical provisions of the NCP (1) establish certain procedures for the government to follow in selecting a remedy and (2) set forth criteria to be used in making the final choice.⁷⁷ The government is to follow a set of procedures to identify remedial alternatives and then choose a cost-effective remedy which is protective of human health and the environment.

Applying § 113 to the issue of whether the choice of a response action is "inconsistent with the NCP," a court could only find a choice "inconsistent" with the NCP if it was "arbitrary and capricious" or "otherwise not in accordance with law." The "arbitrary and capricious" standard can only apply to a choice over which the government has some discretionary authority; in the context of the NCP remedy selection, the major discretionary choice is the final selection of a remedy from among alternatives. Thus, courts must apply the arbitrary and capricious standard to the issue of whether the final choice of remedy was cost-effective and protective. A court may not substitute its own judgment for that of the agency and may only uphold a defendant's challenge to the remedy selection if it concludes, in effect, that "it was arbitrary and capricious to think that this choice was cost-effective and protective."⁷⁸

Moreover, because the procedural provisions of the NCP on remedy selection are largely mandatory — saying, in effect, "thou shalt considerthe following criteria," or "thou shalt develop a list of alternatives" — the phrase "otherwise not in accordance with law" also has relevance in the context of a § 107 action. If the government fails to follow any of those mandatory provisions, the remedy selection process would be "otherwise not in accordance with" those provisions of the NCP.

Thus, there is no contradiction between § 113 and § 107 — as § 113(j)(3) makes clear. Section 113 simply provides the standard to be used in determining consistency with the NCP; and a review of the provisions of the NCP suggests how both parts of that standard can be applied.

Section 113(j)(4) provides even more evidence that § 113 was not intended to undermine § 107; indeed, it provides substantial additional evidence of Congress' determination to place strict limits on the variety of challenges defendants may make in cost recovery cases. That section states, "In reviewing alleged procedural errors, the court may disallow costs or damages only if the errors were so serious and related to matters of such central relevance to the action that the action would have been significantly changed had such errors not been made."⁷⁹

In the context of a cost recovery case, of course, the only "procedures" at issue would be the procedures discussed in the NCP. Section 113(j)(4) indicates that Congress did not intend for defendants to be able to avoid liability for costs simply by demonstrating that the United States did not dot its NCP "i"s and cross its NCP "t"s; defendants would have to establish that the departure from the NCP procedures "significantly changed" the action. Again, this makes sense in the context of a § 107 action, because there is no logical reason why a defendant should have to pay less as a result of a procedural departure from the NCP if that departure did not serve to inflate the cost of the remedy.

In light of the language of these provisions, it is hardly surprising that the United States has had a great deal of success in cost recovery actions. The statute leaves defendants in these actions little room to maneuver. The United States is entitled to "all costs" not inconsistent with the NCP — not reasonable costs, or necessary costs, but all costs. Liability is imposed "notwithstanding any other provision of law, and [is] subject only to the defenses" in § 107; defendants cannot defeat the United States' costs claims by arguing that the government has failed to follow laws and regulations other than the NCP. Moreover, as § 113 states, the United States can select a remedy in an arbitrary and capricious fashion, but still recover such costs as are "not inconsistent with the NCP." Finally, under § 113(j)(4), even if the United States departs from the "procedural" instructions of the NCP, it can still recover its costs, unless the defendants establish that the action would have been significantly changed if the "procedural error" had not occurred.

The story of the case law that has developed under § 107 is the story of the judiciary's faithful adherence to the language of the statute. Courts have addressed virtually all of the issues discussed in this provision, and their rulings have been uniformly consistent with the statutory language. When defendants have dared to suggest that "all" does not mean "all," or to invoke "other provision[s] or rule[s] of law" in an attempt to limit their liability for costs, courts have repeatedly struck them down.

Case Law

"All Costs." The leading case on the issue of "reasonableness" is still United States v. Northeastern Pharmaceutical and Chemical Co. (NEPACCO II).⁸⁰ In that case, the Eighth Circuit Court of Appeals affirmed the district court's conclusion that, as long as the government's response actions are not inconsistent with the NCP, defendants cannot challenge the government's cost claims on grounds that they are "unreasonable." The court stated, "The statutory [22 ELR 10772] language also supports the district court's reasoning that under CERCLA § 107(a)(4)(A), 42 U.S.C. § 9607(a)(4)(A), 'all costs' incurred by the government that are not inconsistent with the NCP are conclusively presumed to be reasonable. CERCLA does not refer to 'all reasonable costs' but simply to 'all costs.'"⁸¹ The NEPACCO II court noted that courts which construed the phrase "actual costs incurred" as set forth in the Federal Water Pollution Control Act⁸² had concluded that the phrase applied a "conclusive presumption of reasonableness."⁸³

Four years later, in United States v. Bell Petroleum Services, Inc.,⁸⁴ a district court reiterated the NEPACCO II conclusion on the "reasonableness" issue, stating,

This Court disagrees with [defendant's] premise that the Government's costs must be shown to be reasonable and necessary. Subsection B of Section 9607 [referring to "necessary costs"] refers to costs incurred "by any other person." This Court reads such language to apply to costs incurred consequent to private party cleanup actions, not EPA response costs. Thus, the Government need only maintain consistency with the NCP to recover its costs under a CERCLA action.

In United States v. Hardage (Hardage I),⁸⁵ the defendants did not argue directly that the government's costs were "unreasonable" or "unnecessary." Instead, using a minor variation, they sought to evade liability for costs by attacking the quality of the government's work. They argued that the studies the United States performed were "unnecessary or improperly performed, the data was unacceptable or unusable, or the results were not useful to remediation."⁸⁶ They did not, however, relate any of these "quality" criticisms to any provisions of the NCP. The court, relying on the "all costs" language of the statute, rejected these arguments as irrelevant. The court observed that defendants "failed to produce any evidence demonstrating that the United States' actions were inconsistent with the NCP," and that "arguments regarding the efficiency or redundant efficacy of the United States' actions do not bar summary judgment [for response costs]."⁸⁷ The court granted summary judgment for the United States.

The Hardage I ruling is an obvious corollary to the Bell Petroleum ruling; the Hardage I defendants' arguments are just as inconsistent with the words of the statute as those of the Bell Petroleum defendants. In Bell Petroleum, the defendants attempted to change "all costs" into "all reasonable costs" — despite the clear congressional intent that "reasonableness" was not to be an issue. In Hardage I, the defendants attempted to change "all costs of removal or remedial action not inconsistent with the NCP" into "all costs of properly performed, useful, and necessary removal or remedial action." As the court recognized, this argument ignored the fact that Congress had made it clear that in the context of a § 107 action, "inconsistency with the NCP" would be the only standard by which to measure the work performed by the government.

In United States v. Marisol,⁸⁸ the court granted a motion to strike the defense that certain costs were not "proper." The court stated, "The sole standard for recoverability of costs is that they must be consistent with the NCP," and that "[d]efendants [be] able to point to no statutory provision or to any court decisions which allow CERCLA defendants to raise defenses based on the propriety of response costs without reference to the NCP."⁸⁹ In United States v. Kramer,⁹⁰ the court similarly held, also in the context of a motion to strike, that:

[T]he only criterion for the recoverability of response costs under CERCLA is whether costs are consistent with the [NCP]. All response costs not inconsistent with the NCP are recoverable…. Defendants have the burden to prove that response costs are inconsistent with the NCP…. Therefore, terms used by defendants … such as "proper" or "improper," "remote, speculative and contingent," and "unreasonable, duplicative and not cost-effective," do not state an appropriate challenge to the propriety of the government's response costs, and will be stricken.

More recently, in United States v. American Cyanamid Co.,⁹¹ a court observed that "CERCLA imposes no obligation on the United States to minimize its response costs for the benefit of responsible parties who are liable for the costs."⁹²

Supreme Court Justice Hugo Black used to say that his First Amendment philosophy was simple: "'No law' means 'no law.'" The courts which have interpreted § 107(a)(4)(A) of CERCLA have taken a Blackian approach to the subject. "All costs," they have concluded, means "all costs."

"Notwithstanding Any Other Provision of Law." The case law which has developed under § 107 has also firmly established that the introductory language of § 107(a) — liability under that section is imposed "notwithstanding any other provision of law" — is to be read quite literally. A party's liability for response costs will not be affected by the failure, or alleged failure, of the government to comply with "other provisions of law" — statutory and regulatory provisions other than the NCP. Allegations that the government has failed to comply with some "provision of law" other than the NCP have been dismissed as irrelevant.

The leading case on this issue — the NEPACCO equivalent of the phrase "notwithstanding any other provision of law" — is United States v. Reilly Tar.⁹³ In Reilly Tar, defendants sought "to limit liability under section 107(a) to those costs for which response fund expenditures may be made under section 111,"⁹⁴ and argued that the government had not satisfied the requirements of § 111. The court firmly disagreed, stating, "Reilly Tar errs in attempting to link liability under section 107 to the authorized uses of the Fund provided in section 111. Liability under section 107(a) is independent …."⁹⁵ Citing the introductory language of [22 ELR 10773] § 107(a), "notwithstanding any other provision of law," the court observed:

From this language it is apparent that … 'Section 107(a) was meant to stand by itself; liability under it can be determined without the numerous inquiries [as to whether the Government had complied with other provisions of CERCLA] suggested by the defendant. The plain language of the statute says so. Liability for the specified response costs under section 107(a) is absolute, ….⁹⁶

In United States v. Hardage (Hardage I),⁹⁷ the court did not directly invoke the introductory language of § 107, but applied effectively the same reasoning to defendants' allegations that the United States had violated federal procurement regulations in awarding contracts to some of the contractors that worked on the Hardage Site. The court found that these allegations were not relevant to the issue of defendants' liability for response costs, because the NCP does not contain any reference to federal procurement regulations. The court stated:

[Defendants] provid[e] the Court no authority showing that this factor is to be considered in awarding response costs…. It is not this Court's role to make an independent review of the United States' procurement processes at the Hardage site…. The Court's consideration is limited to whether the costs were in fact incurred in connection with the Hardage site, and whether the costs were inconsistent with the N.C.P.⁹⁸

Thus, federal procurement regulations — like the provisions of § 111 of CERCLA — are "other provisions of law," whichhave no effect on a defendant's liability for costs in a § 107 action.

In a more recent case, United States v. Fairchild Industries, Inc.,⁹⁹ the court concluded that defendants' allegations that the United States had failed to comply with the notice requirements of §§ 104, 111, and 112 could not affect their liability for response costs under § 107.¹⁰⁰ The Fairchild court concluded, "the specific procedures of [section] 112 which are necessary to conserve the limited resources of the Superfund do not apply to cost recovery actions against private parties."¹⁰¹ The court added, "Defendants may try to prove that the government's response costs are inconsistent with the NCP, but this will involve an analysis of the NCP and its provisions and defendants cannot refer to other sections of CERCLA as a substitute."¹⁰²

The Fairchild court also rejected an argument by the defendants that § 113(j) itself imposed limitations on cost recovery beyond those in § 107. The defendants argued that "42 U.S.C. § 9613(j) provides an independent basis for challenging the propriety of the government's response."¹⁰³ After observing that § 113(j) does apply to cost recovery actions, and quoting § 113(j)(2), the court noted:

If the court finds that the government's decision was arbitrary and capricious, the remedy is to "award (A) only the response costs or damages that are not inconsistent with the National Contingency Plan…." § 113(j)(3). Thus, § 113 adds nothing to the defense of inconsistency with the NCP as the same inquiry is the end result.¹⁰⁴

Thus, these statements of the Fairchild court confirm our analysis of § 113, discussed previously: Section 113 does not impose any limitation on cost recovery beyond that imposed by § 107 itself — the requirement that costs be "not inconsistent with the NCP." It is that lone restriction to which we will now turn.

"Not Inconsistent With the NCP." The courts which have addressed the issue of what it means for a cost to be "not inconsistent with the NCP," like the courts which have interpreted the phrases "all costs" and "notwithstanding any other provision of law," have taken a literal approach to the "inconsistency" phrase. The courts have insisted that defendants base allegations of "inconsistency" on specific provisions of the NCP; have read the NCP provisions carefully and rejected defendants' unjustifiably broad interpretations of certain NCP provisions; and have held that even if defendants can prove that the government acted in a manner inconsistent with the NCP, in order to prove that costs are inconsistent with the NCP, defendants must explain how such inconsistency led to "demonstrable excess costs."

Some early cost recovery decisions, while not addressing specific allegations of "inconsistency," previewed later courts' literal interpretation of the "inconsistency" requirement by recognizing that the NCP simply does not contain any provisions limiting "costs" per se. The principal provisions of the NCP instruct the government as to what types of response actions are appropriate, and how to go about selecting response actions to perform.¹⁰⁵ Thus, in NEPACCO I, the court stated, "As long as the actions taken by the government were in harmony with the national contingency plan, the costs incurred pursuant to those actions are presumed to be reasonable and therefore recoverable."¹⁰⁶ And in United States v. Shell Oil Co.,¹⁰⁷ the court stated that "the [NCP] consistency requirement addresses the nature of the response action for which costs can be recovered."¹⁰⁸

[22 ELR 10774]

In more recent decisions, courts have consistently rejected attempts by defendants to "invent" provisions of the NCP: to pretend that the NCP says things that it does not say. In Fairchild, the defendants invoked, as alleged defenses to liability for costs, the United States' alleged failure to comply with other provisions of CERCLA, such as those of § 111 ("Use of Fund") and § 112 (establishing procedures for claims against the Fund). The Fairchild defendants argued that provisions upon which they based their "defenses" were

"[C]losely related to and clarif[ied]" the affirmative defense of inconsistency with the NCP…. As stated above, "close to" is not close enough. Defendants may try to prove that the government's response costs are inconsistent with the NCP, but this will involve an analysis of the NCP and its provisions and defendants cannot refer to other sections of CERCLA as a substitute.¹⁰⁹

The language of the district court in United States v. American Cyanamid Co., echoes that of the Fairchild court. "The burden of proving inconsistency with the NCP is on the defendants…. To meet that burden, defendants must identify a particular provision in the NCP with which a specific response action is inconsistent."¹¹⁰

The "Cost-Effective" Requirement. In the past year, three courts have discussed, in increasing levels of detail, an NCP requirement that defendants have repeatedly invoked in an attempt to limit their liability for costs: the "cost-effectiveness" requirement. The NCP has contained varying versions of a requirement that the government choose as a remedial alternative that is "cost-effective."¹¹¹

Some defendants have attempted to invoke this provision as a sort of back-door "reasonableness" requirement: they have attempted to challenge specific governmental expenditures on the grounds that such expenditures were "not cost-effective." But in a series of recent decisions, several district courts have reviewed the NCP provisions referring to "cost-effectiveness" and have clarified the nature of the cost-effectiveness requirement. The courts have recognized that the requirement is not a limitation on specific expenditures; rather, "cost-effectiveness" is simply one of the criteria to be followed in the remedy selection process.

The first blow to the "cost-effectiveness defense" was struck by the court in United States v. Consolidation Coal Co.¹¹² In that case, the defendant asserted as an "affirmative defense" "that plaintiff's costs were not cost-effective."¹¹³ The United States moved to strike the defense. The court concluded that "this defense must be stricken as contrary to the standard under CERCLA by which costs are recoverable — inconsistency with the NCP …. [W]hether costs are 'necessary' or 'cost-effective' are relevant only to the extent the NCP imposes those requirements."¹¹⁴ If the defense bar read this decision carefully — and proceeded to look up the references to cost-effectiveness in the NCP itself — they would have recognized that trying to use cost-effectiveness as a back door to "reasonableness" would not be easy.

A month later, the court in United States v. Velsicol Chemical Corp.¹¹⁵ took a look at the 1985 NCP and observed that the "cost-effectiveness" requirement therein was rather limited. The defendants sought discovery on the issue of whether the costs incurred by the United States in implementing a remedy had been "cost-effective." A magistrate, at the urging of the United States, previously issued a ruling precluding such discovery. The district court affirmed. It stated that although "[t]he NCP provides that the EPA should choose a 'cost-effective' remedy … the NCP does not provide that the costs incurred in implementation of that remedy must be cost-effective."¹¹⁶

This ruling by the Velsicol court was a straightforward interpretation of the cost-effectiveness provision of the NCP — there, the 1985 NCP.¹¹⁷ Sections 300.64-68 of the 1985 NCP describe the types of response actions which the government may conduct at Superfund sites. The only references to "cost-effectiveness" occur in certain subsections of 40 C.F.R. § 300.68, entitled "Remedial Action," which sets forth a detailed process for selection of the permanent remedy for a site. Subsection (g) provides that once EPA has identified various alternatives for remedial action, cost [22 ELR 10775] shall be one of the criteria used in the initial screening to narrow the list of potential remedial actions for further analysis.¹¹⁸ Subsection (h) then provides that, in conducting the detailed evaluation of alternatives which remain after initial screening, the responsible agency must "develop detailed cost estimation."¹¹⁹ Finally, subsection (i), "Selection of Remedy," states, "The appropriate extent of remedy shall be determined by the lead agency's selection of a cost-effective remedial alternative that effectively mitigates and minimizes threats to and provides adequate protection of public health and welfare and the environment."¹²⁰

Thus, a careful reading of the NCP reveals that if EPA properly considers cost prospectively in selecting the remedial action, it has fully complied with the cost-effectiveness provisions of the NCP. As the Velsicol court recognized, the cost-effectiveness provisions do not provide any basis for a retrospective review of the costs of implementing the remedial action to determine if those costs were "cost-effective." Similarly, the provision of the 1990 NCP which refers to "cost" and "cost-effectiveness"¹²¹ identifies cost as one criterion, and cost-effectiveness as a goal, in the selection process, but does not require "cost-effective implementation."¹²²

In the third, and more recent in the trio of "cost-effectiveness" decisions, United States v. American Cyanamid Co., a district court adopted precisely this reasoning:

Cost effectiveness is a criteria for the EPA only when choosing a permanent remedy for a site among competing alternatives. This is the only reference to cost-effectiveness of hazardous substance response actions in the NCP. 40 C.F.R. § 300.68(j) (1983); 40 C.F.R. § 300.68(i) (1985); 40 C.F.R. § 300.430(f)(1)(ii)(d) (1990). The NCP directs EPA to prospectively choose a remedial action that EPA believes will clean-up the site for the least cost. Once EPA validly chooses a permanent remedy for a site, cost-effectiveness is no longer a viable challenge to the implementation of that remedy.¹²³

The American Cyanamid decision should be the death knell for the idea of "cost-effectiveness" as a "reasonableness" substitute. If, as the Fairchild and American Cyanamid courts have stated, a defense of "inconsistency with the NCP" must be based on the language of the actual provisions of the NCP, the "cost-effectiveness defense" is limited to an argument that the government did not properly consider the prospective cost-effectiveness of the remedy at the time of selection. Under the standard of review for remedy selection issues set forth in § 113, defendants would have to prove that the government's conclusion, at the time of selection, that the chosen remedy would be cost-effective as compared to alternative remedies, was arbitrary and capricious. If defendants could not make such a showing, the issue of cost-effectiveness would vanish from the case.¹²⁴

What, however, would happen if a defendant could prove — even under the arbitrary and capricious standard — that the government chose a remedy that was not cost-effective? What would be the effect on the government's ability to recover costs? We next examine the little-discussed issue in CERCLA cost recovery actions of what it means for a cost to be inconsistent with the NCP.

What Does it Mean for a Cost to Be "Inconsistent" With the NCP? As noted above, § 113(j)(4) states, "In reviewing alleged procedural errors, the court may disallow costs or damages only if the errors were so serious and related to matters of such central relevance to the action that the action would have been significantly changed had such errors not been made." In O'Neil v. Picillo,¹²⁵ the court defined what it means for a cost to be "inconsistent with" the NCP: "defendants have the burden of proving that the clean-up, because of some variance from the [NCP], resulted in demonstrable excess costs for which they should not be responsible." In other words, defendants must first prove that the government's actions were at "variance" with the NCP, and second, that as a result of that variance, the government incurred "demonstrable excess costs" — more costs than it would have if it had followed the NCP. These "excess costs" would be considered to be inconsistent with the NCP. In the American Cyanamid decision, the same Rhode Island district court reiterated this statement. "Even if a response action is shown to be inconsistent with the NCP, defendants still havenot triumphed," it stated, and then quoted the O'Neil sentence recited above.

The O'Neil/American Cyanamid rule provides an eminently sensible definition of what it means for a "cost" to be inconsistent with the NCP. In the context of a statutory scheme so heavily weighted toward government recovery of "all costs," it would make little sense for a defendant to be able to avoid liability for all the costs of a response action by identifying some "inconsistency" in the selection or conduct of the action, even if that "inconsistency" did not, in fact, inflate the costs of the cleanup. Section 113(j)(4), although not cited in either of the Rhode Island district court decisions, supports their conclusion. It establishes that Congress did not intend for defendants to avoid liability for costs by identifying "procedural errors" — such as failure to follow the procedural requirements of the NCP — which did not significantly change the response action.

[22 ELR 10776]

Policy Considerations Supporting Section 107

Congress' decision that the United States or a state is entitled to recover all costs not inconsistent with the NCP, rather than "all reasonable costs" of response actions, and that liability under CERCLA § 107 applies "notwithstanding any other provision of law," reflects one of the fundamental purposes of CERCLA: to encourage swift recovery of the costs of response actions. The purpose of CERCLA's joint and several liability scheme is to ensure that "the Government … obtain the full costs of cleanup from those it targets for enforcement, and leave remaining costs to be recovered in private contribution actions between settling and nonsettling parties."¹²⁶ In enacting § 107, Congress intended to provide for the quickest possible means for recovering CERCLA funds expended in cleaning up hazardous waste sites.¹²⁷ The First Circuit expressly recognized this general principle in Dedham Water Co. v. Cumberland Farms Dairy, Inc.,¹²⁸ when it identified one of the "overriding purposes of the statute" as not "delaying recovery of response costs from responsible parties …."¹²⁹

Providing for government recovery of "all costs" serves another purpose of CERCLA: encouraging private parties to undertake response actions wherever possible. As the Bell Petroleum court observed in defending its ruling that "reasonableness" and "necessity" are not valid defenses to government cost recovery claims:

Taking a broader look at the purposes behind CERCLA, the Court does not find therein Congress' desire to allow a responsible party to sit back and watch the Government sift through the rubble of a polluted site, formulate a remedial solution and take action and then attack every cost associated therewith …. [T]he Court keeps in mind the fact the wrongdoers herein had the option of taking responsibility for their own actions at the outset, which, had they done so, would unquestionably have limited certain costs. Our Government, God bless her, is a bureaucratic monster which, by definition, runs inefficiently. Forcing the Government's hand at the Chromium I Site naturally increased costs because the EPA had to gear up its various support staffs and offices … and then begin the arduous process toward recovery including the infamous study, comment period, etc. Many, many costs would have been unnecessary had the Defendants shouldered the burden and sought to quickly and efficiently clean up the mess they had made…. For the Defendants to come to the Court now with white gloves and complain of dust is, in this Court's opinion, unbecoming of any member of this society. In a free country such as ours, all citizens owe a duty to take responsibility for their actions.¹³⁰

The Bell Petroleum court identifies at least one possible rationale for Congress' refusal to permit defendants to challenge "reasonableness" — Congress' desire, made manifest by § 122 of CERCLA, advocating settlements providing for private party cleanups "whenever practicable," defendants should shoulder the burden of cleanup themselves. The prospect of reimbursing the government for "all costs" is a powerful incentive for private party cleanup; if a defendant sits back and lets the government do the work, it runs the risk that the government — and ultimately the defendant — will spend more than the defendant might have to do the same work. But if defendants were permitted to challenge the "reasonableness" of the governments' costs in § 107 actions, it would obviously reduce their incentive to undertake the cleanup themselves. Why would they bother if they could sit back and watch the government do the work and then have an opportunity to convince a court to reduce their bill by complaining, in time-honored private-sector fashion, of government waste, fraud, inefficiency, and abuse?

The Bell Petroleum court might have added that the government's ability to recover "all costs" serves another purpose of CERCLA: encouraging swift response actions at CERCLA sites. If government recovery were limited to "reasonable" and "necessary" costs, a substantial "chilling effect" on government response actions could result: fearing that "unreasonable" costs would not be recoverable, federal officials might be afraid to take the kind of immediate action which is often required at hazardous waste sites. In a "reasonable costs" world, the opening stages of a federal response action could consist of weeks of reviewing contracting regulations, clipping coupons, and looking for "generic" versions of brandname products. In the "all costs" world, if potentially responsible parties are unavailable, unable, or unwilling to undertake a response action, the federal (or state or tribal) government can take the actions it deems necessary without worrying about coupon clipping.

The fact that § 107 defendants are not allowed to challenge the "reasonableness" of the governments' costs, or to avoid liability by arguing that the United States failed to comply with procurement regulations, or other provisions of CERCLA, does not mean that Congress intended the governments' expenditures at Superfund sites to go unchecked. On the contrary, federal auditors conduct regular audits of Superfund contractors and of the Superfund program in general.¹³¹ Superfund contractors are, in fact, subject to the same procurement regulations as other government contractors; and the provisions of CERCLA which govern expenditures from the Superfund, such as §§ 104 and 111, are intended to regulate such expenditures.

Congress decided, however, that in § 107 actions it would rely primarily on such internal controls, rather than on defendants, to monitor the costs of the Superfund program. Congress decided that it would not permit defendants to try to duplicate, or supplement, the governments' own cost-control efforts by making § 107 actions into endless debates on the "reasonableness" of the governments' costs, or on EPA procurement practices. Instead, Congress intended to limit the issues in § 107 actions to whether the United States or a state in fact incurred the costs claimed for removal or remedial action at the site in question; whether the government [22 ELR 10777] acted inconsistently with the NCP; and whether that inconsistency led to "demonstrable excess costs."

If defendants were permitted to challenge the governments' cost recovery claims on the grounds that the costs were "unreasonable," that specific costs were not "cost-effective," or that the United States did not follow procurement regulations, courts could expect CERCLA cost recovery cases to be endless. Defendants would ask the courts to scrutinize tens of thousands of invoices, individually, to determine if the charges for the work performed were "reasonable" or "cost-effective." Challenges to cost recovery claims based on allegations of violations of procurement regulations¹³² would be particularly arduous. To rule on such a challenge, a court would have to (a) review EPA's original request for bids; (b) review all the bids submitted; (c) review the documents reflecting EPA's analysis of the bids; and (d) review the procurement regulations and determine whether EPA had properly applied the regulations. Thus, the courts would be forced to resolve, as a side issue in a cost recovery case, complex issues which should be litigated, if at all, by the unsuccessful bidders for the contracts in question, before government contracting boards. The courts would have to undertake this exercise not just for a single contract per site, but for every contract the defendant chose to attack.¹³³

Finally, in cases where courts did determine that EPA failed to apply the procurement regulations properly, it would then have to place a dollar value on the effect of that failure on the specific costs claim before the court. The courts would have the unenviable task of trying to decide exactly how the initial failure to follow procurement regulations — in awarding a contract for work to beS performed at numerous sites — affected the amounts paid to the contractor for work performed at the specific site at issue. In other words, the courts would have to fill the role of final auditor.

It is not an exaggeration to say that if the courts had attempted to "soften" CERCLA's cost recovery provisions by refusing to apply the language of § 107 literally, they would have turned § 107 cases into endless nightmares. Moreover, they would have undercut Congress' goal of encouraging swift, private-party response actions.

Conclusion

Defendants undoubtedly consider the CERCLA cost recovery provisions to be harsh and unfair; but we find them no harsher than CERCLA's imposition of strict, joint and several liability. As the court in American Cyanamid observed, in a closing passage that could act as a model coda for every cost recovery case:

There is much about CERCLA that, at times, is fundamentally unfair to all parties….

For defendants involved in hazardous waste sites, CERCLA deals a harsh blow by imposing strict liability…. No matter how careful one is about disposing hazardous waste, the liability remains. CERCLA liability is also joint and several…. Therefore, the proportionate amount of waste one is responsible for is rendered immaterial. It is no wonder that defendants, faced with large clean-up costs, litigate matters even when the case against them is clear cut.

However, with all the dollar figures in this section of the case, it is easy to lose sight of the underlying purpose of CERCLA and of this action. The attention of the United States has recently focused on the increased environmental degradation of our land. The EPA, using Superfund money, can immediately begin to clean-up a polluted site…. Not only does quick response save financial resources, but it saves further environmental trauma to land, water, animals, people.

In the future, Congress may act to change CERCLA and related environmental statutes. The policy decisions involved in rewriting such legislation will be important and far-reaching. Until that time, CERCLA remains the avenue of response to hazardous waste sites. Defendants American Cyanamid and Rohm & Haas are liable for the amounts discussed above and listed in Table 1.¹³⁴

1. CERCLA §§ 9601-9675, 42 U.S.C. §§ 9601-9675, ELR STAT. CERCLA 001-075.

2. U.S. DEP'T OF JUSTICE, ENVIRONMENT AND NATURAL RESOURCES DIVISION STATISTICAL REPORT, FISCAL YEAR 1991 23 (1991).

3. Id.

4. Id.

5. Memorandum from Ross L. Conneally, Ass't Chief, Environmental Enforcement Section, to Barry M. Hartman, Acting Ass't Attorney General, U.S. Dep't of Justice, Environment and Natural Resources Division 2, October 10, 1991 (on file with author) [hereinafter Conneally Memorandum].

6. See, e.g., Dale R. Jensen & Andrew W. Savitz, How Owners, Operators Contest CERCLA Costs, NAT'L L.J., May 18, 1992, S6, S8 (written by two members of an environmental consulting practice).

7. 42 U.S.C. § 9607(a), ELR STAT. CERCLA 024. Section 107(a) imposes liability on past and present owners and operators of hazardous substances facilities, generators of hazardous substances, and transporters of hazardous substances for costs including:

all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan.

Id. § 107(a)(4)(A). The national contingency plan ("NCP"), promulgated pursuant to 42 U.S.C. § 9605, ELR STAT. CERCLA 021, outlines procedures for selecting response actions to hazardous substance releases.

8. Under CERCLA § 104, the U.S. Environmental Protection Agency (EPA) is authorized to undertake "response" activities to address the release or threatened release of a hazardous substance into the environment. 42 U.S.C. § 9604, ELR STAT. CERCLA 012. Under CERCLA § 101(25), "response" activities include "removal" and "remedial" actions. 42 U.S.C. § 9601(25), ELR STAT. CERCLA 009. CERCLA § 107(a), as mentioned supra, in note 7, allows the government to recover all of its incurred costs related to response activities from parties found liable. 42 U.S.C. § 9607(a), ELR STAT. CERCLA 024.

9. One of the most recent and favorable decisions, for the government, which examined a wide variety of cost recovery issues, is United States v. American Cyanamid Co., 786 F. Supp. 152, 22 ELR 20976 (D.R.I. 1992) (no appeal taken).

10. The Superfund Amendments and Reauthorization Act of 1986 (SARA), includes a new provision for judicial review in § 113(j), which states:

In considering objections raised in any judicial action under this chapter, the court shall uphold the [government's] decision in selecting the response action unless the objecting party can demonstrate, on the administrative record, that the decision was arbitrary and capricious or otherwise not in accordance with law.

42 U.S.C. § 9613(j)(2), ELR STAT. CERCLA 040.

11. This information is derived form the computerized Lands Docket Tracking System, and is on file with the authors. This footnote pertains to information in the entire paragraph.

12. Conneally Memorandum, supra note 5, at 1.

13. Based on information obtained from the Office of Superfund Financial Management, Office of Waste Programs Management, EPA Headquarters, Arlington, Virginia, May 1992 (on file with authors).

14. Conneally Memorandum, supra note 5, at 1.

15. Id. Moreover, these figures do not include the value of injunctive relief under CERCLA § 106(a), by which EPA, through court or administrative order or settlement requires responsible parties to abate actual or threatened releases of hazardous substances or take other appropriate actions. 42 U.S.C. § 9606(a), ELR STAT. CERCLA 024. However, this component also has been dramatically increasing in recent years. According to information obtained from EPA's Comprehensive Environmental Response, Compensation, and Liability Information System (CERCLIS), since the passage of CERCLA in 1980, government enforcement efforts have resulted in commitments from responsible parties to conduct site work worth a total of nearly $4 billion, of which commitments for $3 billion have occurred since 1987. Moreover, CERCLIS figures reveal that while in Fiscal Year 1987 the responsible parties were undertaking up front barely 30 percent of the ongoing cleanup design and construction work, with the government and the trust fund initially undertaking the remainder, by Fiscal Year 1990 the responsible parties had doubled their upfront involvement. Based on these figures, it appears that responsible parties, as a group, are becoming more forthcoming and less litigious about accepting their Superfund cleanup obligations and related costs.

16. 42 U.S.C. § 9607(a)(4)(A), ELR STAT. CERCLA 024.

17. "Response" under CERCLA means "removal … and remedial action." 42 U.S.C. § 9601(25), ELR STAT. CERCLA 009.

18. Courts have unanimously held that by specifying that in CERCLA cases brought by the government that all costs "not inconsistent with the National Contingency Plan" (NCP) are recoverable, Congress placed the burden on defendants to prove specified costs inconsistent with the NCP; proving that costs were consistent with the NCP is not part of the government's prima facie case. See infra discussion accompanying notes 78 & 91.

19. See 42 U.S.C. §§ 9601(23), 9601(24), and 9601(25), ELR STAT. CERCLA 008-009.

20. See, e.g., United States v. R.W. Meyer, Inc., 889 F.2d 1497, 1505, 20 ELR 20319, 20324 (6th Cir. 1989); United States v. Gurley Refining Co., 788 F. Supp. 1473, 1483, 22 ELR 21244, 21249 (E.D. Ark. 1992); United States v. Northeastern Pharmaceutical & Chem. Co. (NEPACCO I), 579 F. Supp. 823, 850, 14 ELR 20212, 20223-24 (W.D. Mo. 1984), aff'd in part and rev'd in part on other grounds, 810 F.2d 726, 17 ELR 20603 (8th Cir. 1986) (NEPACCO II), cert. denied, 484 U.S. 848 (1987).

21. See, e.g., NEPACCO I, 579 F. Supp. at 850, 14 ELR at 20223-24. The proposition that "all costs of removal or remedial action," 42 U.S.C. § 9607(a)(4)(A), ELR STAT. CERCLA 024, includes the costs of the actual physical cleanup of hazardous substances is so obvious that courts rarely state it explicitly. For examples of cases in which such costs have been awarded, see United States v. American Cyanamid Co., 786 F. Supp. 152, 167, 22 ELR 20976, 20982 (D.R.I. 1992) (listing contractors); United States v. Serafini, No. 3:CV-86-1591, slip op. 2-7 (M.D. Pa. June 5, 1992), in addition to virtually all the other cases cited in this discussion.

22. See, e.g., American Cyanamid, 786 F. Supp. at 166, 22 ELR at 20981 (intramural and extramural costs awards); United States v. Hardage, 733 F. Supp. 1424, 1433, 20 ELR 21307, 21310 (W.D. Okla. 1989) (Hardage I) (response costs include EPA payroll, travel, and contract costs).

23. See R.W. Meyer, 889 F.2d at 1501, 20 ELR at 20321; NEPACCO I, 579 F. Supp. at 850, 14 ELR at 20223-24; Gurley Refining, 788 F. Supp. at 1483, 22 ELR at 21249 (administrative costs recoverable; payroll and travel costs awarded).

24. See, e.g., United States v. Ottati & Goss, Inc., 900 F.2d 429, 444 (1st Cir. 1990) (holding that "ordinarily courts should allow recovery of these indirect costs" and remanding for explanation as to whether denial of indirect cost recovery was imposed as sanction justifiably); R.W. Meyer, 889 F.2d at 1502-05, 20 ELR at 20322-24; United States v. Bell Petroleum Servs., Inc., 734 F. Supp. 771, 782-84, 20 ELR 21120, 21124-25 (W.D. Tex. 1990); American Cyanamid, 786 F. Supp. at 157, 22 ELR at 20977; United States v. Hardage, 750 F. Supp. 1460, 1504, 21 ELR 20721, 20744-45 (W.D. Okla. 1990) (Hardage II).

25. See R. W. Meyer, 889 F.2d at 1503-05, 20 ELR at 20323; Bell Petroleum, 734 F. Supp. at 782, 20 ELR at 21124.

26. Examples of such offices are those that administer the Clean Air Act or the Federal Water Pollution Control Act.

27. EPA's indirect-cost methodology is described in R. W. Meyer, 889 F.2d at 1502-04, 20 ELR at 20322-23, and in great detail in Hardage II, 750 F. Supp. at 1502-04, 21 ELR at 20743-45. EPA's indirect costs, calculated as described here, have been granted on summary judgment in among others, Bell Petroleum, 734 F. Supp. at 782-83, 20 ELR at 21124; United States v. Northernaire Plating Co., 685 F. Supp. 1410, 1418-20, 18 ELR 21338, 21341-43 (W.D. Mich. 1988), aff'd, R. W. Meyer, 889 F.2d at 1502-04, 20 ELR at 20322-23; United States v. Alcan Aluminum Corp., 755 F. Supp. 531, 541, 21 ELR 20767, 20771-72 (N.D.N.Y. 1991), and after trial in, for example, Gurley Refining, 788 F. Supp. at 1484, 22 ELR at 21250; American Cyanamid, 786 F. Supp. at 159, 22 ELR at 20978; and Hardage II, 750 F. Supp. at 1504, 21 ELR at 20744-45. In addition to these cases, which discuss indirect costs explicitly, numerous courts have awarded indirect costs as part of more general rulings awarding response costs. See, e.g., United States v. South Carolina Recycling & Disposal, Inc. (SCRDI), 653 F. Supp. 984, 14 ELR 20272 (D.S.C. 1985), aff'd sub nom. United States v. Monsanto Co., 858 F.2d 160, 19 ELR 20085 (4th Cir. 1988).

The only case of which we are aware that refused recovery of EPA indirect costs under CERCLA is United States v. Ottati & Goss, Inc., 694 F. Supp. 977, 995, 1004 (D.N.H. 1988). As noted supra, the First Circuit Court of Appeals held that indirect costs are recoverable response costs, concluded that the district court had denied recovery of indirect costs as a sanction, and remanded for an explanation of whether and why the sanction was appropriate. Ottati & Goss, 900 F.2d at 444. We are unaware of any case in which a court has adopted defendants' substantive critiques of EPA's indirect-cost accounting. For example, "It can be argued that fixed costs that do not change on the basis of activity are not caused by, or associated with, a specific site and cannot properly be said to have been incurred as the result of a specific cleanup," Jensen & Savitz, supra note 6, (emphasis added), but to the best of our knowledge, that argument has never been successful. Indeed, it has been rejected by courts that have acknowledged the inclusion of "fixed" overhead costs such as rent in the indirect-cost pool. See, e.g., R. W. Meyer, 889 F.2d at 1502, 1503, 20 ELR at 20322-23 ("Contrary to Meyer's assertions, the challenged indirect costs are attributable to its cleanup site."); Hardage II, 750 F. Supp. at 1497, 21 ELR at 20741 (awarding recovery of EPA indirect costs over argument that "on-going cost of government [and] rent charges" were included).

28. See Hardage II, 750 F. Supp. at 1503, 21 ELR at 20744.

29. See id.

30. See GOVERNMENT ACCOUNTING OFFICE, SUPERFUND: A MORE VIGOROUS AND BETTER MANAGED ENPORCEMENT PROGRAM IS NEEDED (1989).

31. 57 Fed. Reg. 34742, 34746, 34754-55 (to be codified at 40 C.F.R. § 308.50) (proposed Aug. 6, 1992).

32. 42 U.S.C. § 9601(25), ELR STAT. CERCLA 009.

33. See, e.g., United States v. American Cyanamid Co., 786 F. Supp. 152, 157, 22 ELR 20976, 20977 (D.R.I. 1992): United States v. South Carolina Recycling & Disposal, Inc. (SCRDI), 653 F. Supp. 984, 1009, 17 ELR 20843, 20847 (D.S.C. 1985); United States v. Hardage, 733 F. Supp. 1424, 1432, 20 ELR 21307, 21310 (W.D. Okla.) (Hardage I); Hardage II, 750 F. Supp. at 1499-1502, 21 ELR at 20742-43; United States v. Northeastern Pharmaceutical & Chem. Co., 579 F. Supp. 823, 851, 14 ELR 20212, 20224 (W.D. Mo. 1984) (NEPACCO I); United States v. Alcan Aluminum Corp., 755 F. Supp. 531, 541, 21 ELR 20767, 20771-72 (N.D.N.Y. 1991); United States v. Northernaire Plating Co., 685 F. Supp. 1410, 1417, 18 ELR 21338, 21341 (W.D. Mich. 1988).

34. See, e.g., United States v. Gurley Refining Co., 788 F. Supp. 1473, 1483-84, 22 ELR 21244, 21249 (E.D. Ark. 1992) (awarding "'salary expenses for time charged to the Hardage case by [E]NRD attorneys and paralegals' and 'other costs charged directly to the Hardage case,' such as 'travel expenses, court reporter fees, and litigation support"', as well as the DOJ indirect costs, including rent component); Hardage II, 750 F. Supp. at 1499, 1500-02, 1504-05, 21 ELR at 20742-45 (same).

35. See, e.g., Gurley Refining, 788 F. Supp. at 1483, 22 ELR at 21249 (awarding recovery of National Enforcement Investigation Center [NEIC] costs); American Cyanamid, 786 F. Supp. at 167, 22 ELR at 20982 (awarding recovery of costs for NEIC contractor Techlaw); Hardage I, 733 F. Supp. at 1442, 20 ELR at 21315 (Techlaw costs among those awarded); United States v. Ottati & Goss, Inc., 694 F. Supp. 977, 988-89, 993-94 (D.N.H. 1988) (contract costs incurred for document production, case file and evidence profile preparation, expert witnesses are recoverable); NEPACCO I, 579 F. Supp. at 850, 14 ELR at 20223-24 (EPA enforcement costs recoverable).

36. 42 U.S.C. § 9607(a)(4)(D), ELR STAT. CERCLA 024. See also id. § 9604(i).

37. See Exec. Order No. 12580, 3 C.F.R. 1987 Comp. 193 (1988), reprinted in 42 U.S.C.A. § 9615 (West Supp. 1988).

38. As described infra at discussion accompanying note 53, the Department of Justice accounts for its CERCLA enforcement costs separately.

39. See 57 Fed. Reg. 34745 (proposed Aug. 6, 1992) (EPA financial management system subject to controls in accordance with 31 U.S.C. § 3512). Review of literally hundreds of individual entries in the accounting system has disclosed barely a handful of instances of inaccurate data entry.

EPA continually upgrades its maintenance and reporting of site-specific cost information. A computer database program called SCORES, now in place in all 10 EPA Regions, retrieves raw data from the accounting system (known as the Integrated Financial Management System) and reports it in the form of a cost summary showing costs by category, by contractor or agency, and by voucher or invoice.

40. 786 F. Supp. 152, 22 ELR 20976 (D.R.I. 1992).

41. The following description of EPA's and the DOJ's cost accounting and documentation processes is based primarily on our experience preparing for litigation with the assistance of EPA Regional and Headquarters staff, the DOJ staff, and the staff of the DOJ's independent accountant, and from testimony and declarations in various cases by representatives of those offices.

42. See supra discussion accompanying note 27.

43. The indirect rate is currently not applied to the hours worked by EPA staff whose function is deemed to support, rather than to participate directly in, site cleanups. For example, the time of EPA's attorneys, who may provide legal advice regarding response action and assist in settlement negotiations or enforcement litigation, is not included in the calculation of site-specific indirect costs.

44. Consultants for CERCLA responsible parties have suggested that cost documentation must include bid records, contracts, and other documents not directly relevant to proving the amount of costs incurred by the United States. Jensen & Savitz, supra note 6, at S8. However, no court has ever held that such documentation is required for the government to meet its burden of proof with respect to the amount of response costs incurred. Cf. United States v. Hardage, 733 F. Supp. 1424, 1435, 20 ELR 21307, 21311 (W.D. Okla. 1989) (Hardage I) ("It is not this Court's role to make an independent review of the United States' procurement processes … when awarding response costs…. [C]onsideration is limited to whether the costs were in fact incurred in connection with the Hardage site, and whether the costs were inconsistent with the N.C.P."). EPA's proposed rule on cost documentation makes clear that contract documents are only pertinent to cost recovery actions if they "describe the response action to be taken," 57 Fed. Reg. 34753 (to be codified at 40 C.F.R. § 300.160(a)(3)) (proposed Aug. 6, 1992), which national or zone contracts, by their nature, do not do. See also id. at 34750.

45. In this discussion, "contractor" refers to any extramural billing source, including federal or state agencies under interagency or cooperative agreements. In most cases, contractor billings constitute the largest single group of response costs.

46. In general, the invoices or vouchers received by EPA list the sites by name and number, EPA adds site-specific account numbers for data entry into the accounting system. These account numbers also generally incorporate the site number.

47. As the Treasury Department has become increasingly computerized, the form of proof of payment documentation has changed dramatically. Generally, however, the cost package will contain, for each contractor payment, a schedule showing EPA's request for issuance of a list of checks including payment of the invoice in question, and a confirming document from the Treasury indicating that the particular schedule (including many checks) has been paid. Thus, the chain of documentation from summary through proof of payment is generally as follows: cost summary (showing voucher number and site-specific amount); voucher (with matching site-specific amount); EPA's request for payment to Treasury (with matching voucher number and gross voucher amount); Treasury's confirmation of payment (with number matching EPA's schedule number or the computer tape used to transmit the request for payment).

48. See United States v. American Cyanamid Co., 786 F. Supp. 152, 156-57, 22 ELR 20976, 20977 (D.R.I. 1992); 40 C.F.R. § 300.69 (1986).

49. 57 Fed. Reg. 34754 (to be codified at 40 C.F.R. § 300.160(a)(4)) (proposed Aug. 6, 1992). The provision continues by describing the standard documentation, as currently collected, for direct and indirect costs and interest.

50. Id. at 34753.

51. 57 Fed. Reg. 34753 (to be codified at 40 C.F.R. § 300.160(a)(2)) (proposed Aug. 6, 1992); see id. at 34749-750.

52. 57 Fed. Reg. at 34754 (to be codified at 40 C.F.R. § 300.160(a)(5)) (proposed Aug. 6, 1992). For judicial application of this principle, see, e.g., American Cyanamid, 786 F. Supp. at 159-60 (allowing certain costs based on fragmentary documentation supplemented by testimony).

53. ENRD's accountant spreads overhead costs across all Division case labor costs. The direct labor costs of CERCLA cases comprise only a fraction of ENRD's total case-specific direct labor costs; thus, this procedure allocates the same fraction of ENRD's indirect costs to CERCLA cases.

54. See cases cited supra notes 44 & 48.

55. See case cited supra note 44.

56. 734 F. Supp. 771, 781, 20 ELR 21120, 21124 (W.D. Tex. 1990).

57. Id., 20 ELR at 21124.

58. United States v. Hardage, 733 F. Supp. 1424, 1433, 20 ELR 21307, 21310 (W.D. Okla. 1989) (Hardage I).

59. Id. at 1435, 20 ELR at 21311.

60. Id. at 1437, 20 ELR at 21312. At trial, the United States prevailed on costs as to which summary judgment was denied or not sought, including the DOJ's and EPA's indirect costs. United States v. Hardage, 750 F. Supp. 1444, 1499-1505, 21 ELR 20714, 20742-45 (W.D. Okla. 1990) (Hardage II).

61. 786 F. Supp. 152, 159, 22 ELR 20976, 20978 (D.R.I. 1992).

62. Id. at 159-61, 22 ELR 20978-79. The relatively small amount of costs disallowed by the court for inadequatedocumentation were all cases in which the documentation available deviated from the standard package. Id.

63. 788 F. Supp. 1473, 1480, 22 ELR 21244, 21247-48 (E.D. Ark. 1992).

64. Id. at 1481, 22 ELR at 21248.

65. Two accountants presenting a defense perspective have stated, "The courts have also required the government to demonstrate that all costs included in the claim are related to the site in question." Jensen & Savitz, supra note 6, at S8. This is true, but, as the cases cited herein demonstrate, the standard cost package ordinarily achieves the necessary result. The case Jensen and Savitz cite, United States v. Ottati & Goss, Inc., 694 F. Supp. 977, 981-84 (D.N.H. 1988), as well as another New Hampshire case, United States v. Burns, No. C-88-94-S, (D.N.H. Mar. 12, 1991) involved two distinct sites that had been combined for cleanup purposes. Both these cases allowed allocation of some, but not all, response costs between the two sites involved. Neither Ottati & Goss nor Burns held that the cost summary had failed to prove the total amount of costs incurred under the joint site identification number.

66. A common example of costs supported by letter reports are expenses incurred for EPA's Contract Laboratory Program. In American Cyanamid, 786 F. Supp. 152, 22 ELR 20976 — which to our knowledge is the only case in which these costs were subject to special, individual scrutiny — the court found these costs adequately proven and awarded recovery of them to the United States. This type of letter report should be distinguished from letter reports sometimes used to document "historic costs."

67. In some earlier cases, the United States has chosen not to pursue claims for historic costs, either before or during judicial proceedings, because of the absence of standardized documentation for them. For example, in American Cyanamid, the United States withdrew claims for about $500,000 in historic costs. 786 F. Supp. at 159, 167, 22 ELR at 20978, 20982. Even in that case, however, the United States successfully recovered certain historic costs that were supported by testimony as well as by documentation. Id. at 159. The preamble to EPA's proposed rule on cost recovery specifically takes such costs into account. See 57 Fed. Reg. 34750.

68. A provision of CERCLA, added to the statute in 1986, authorizes recovery of prejudgment interest on response costs, 42 U.S.C. § 9607(a), ELR STAT. CERCLA 024, as had a number of courts before that addition. See, e.g., United States v. R.W. Meyer, Inc., 889 F.2d 1497, 1505-06, 20 ELR 20319, 20323-24 (6th Cir. 1989) (affirming award of interest on costs incurred prior to amendment); United States v. Northeastern Pharmaceutical & Chem. Co., 579 F. Supp. 823, 852, 14 ELR 20212, 20224 (W.D. Mo. 1984) (NEPACCO I) (awarding interest before amendment). The American Cyanamid court, like others, upheld EPA's straightforward method of calculating prejudgment interest, including annual compounding to conform to the way in which Superfund monies are invested. American Cyanamid, 786 F. Supp. at 164, 22 ELR at 20981. EPA has proposed a rule codifying this calculation method. 57 Fed. Reg. 34755 (to be codified at 40 C.F.R. § 308.60) (proposed Aug. 6, 1992).

69. The defendants, during a conference with the court, agreed to pay the Special Master's costs because even if the government had shared those costs in the first instance, the government's share would ultimately have been a recoverable enforcement cost.

70. This irony has not escaped judicial notice. As the American Cyanamid court noted — after a decade of litigation involving first the state and then the federal government — given CERCLA's liability scheme, "It is no wonder that defendants, faced with large clean-up costs, litigate matters even when the case against them is clear cut." 786 F. Supp. at 164, 22 ELR at 20981. Nevertheless, the adoption of this strategy produces expensive transaction costs for which defendants have only themselves to blame. Although defendants in CERCLA cases may complain, as they did in American Cyanamid, "about the government's callous attitude towards conservation of scarce financial resources," defendants who engage in quixotic litigation tactics "should be embarrassed, after all the proceeding [sic] litigation, to claim that they understand the conservation of financial resources." Id. at 162 n.6, 22 ELR at 20980 n.6. Or, as another court put it:

Many, many costs would have been unnecessary had the Defendants shouldered the burden and sought to quickly and efficiently clean up the mess they made. Instead, their free ride has increased costs exponentially, including all the bureaucratic expenses typical of a large Government, costs of discovery and trial, Court costs … the list is unending.

United States v. Bell Petroleum Servs., Inc., 734 F. Supp. 771, 781, 20 ELR 21120, 21123 (W.D. Tex. 1990).

71. 42 U.S.C. § 9607, ELR STAT. CERCLA 024 (emphasis added).

72. See id. §§ 9607(a)(4)(A) and (B) (emphasis added).

73. 42 U.S.C. § 9613, ELR STAT. CERCLA 038.

74. Id. § 913(j)(2).

75. Id. § 9613(j)(3) (emphasis added).

76. This Article does not address the interesting question of whether a defendant in a § 106 action for injunctive relief may attack the government's selected response action by invoking "provisions of law" other than the NCP.

77. See 40 C.F.R. § 300.64-71 (1985 NCP) and § 300.430-35 (1990 NCP).

78. See United States v. Ward, 618 F. Supp. 884, 900, 16 ELR 20127, 20134 (D.C.N.C. 1985) (discussing defendants' attack on the United States' choice of remedy as not "cost-effective") for an example of a pre-SARA court's analysis of the issue of "inconsistency."

The statute provides liability for costs "not inconsistent" with the NCP. This language requires deference by this court to the judgment of agency professionals. The defendants, therefore, may not seek to have the court substitute its own judgment for that of the EPA. Defendants may only show that the EPA's decision about the method of cleanup was "inconsistent" with the NCP in that the EPA was arbitrary and capricious in the discharge of their duties under the NCP.

Thus, the Ward court, speaking prior to the enactment of SARA, but following general established principles of administrative law, recognized that in determining whether the final remedial choice was "inconsistent with the NCP" — for example, determining whether the choice was "cost-effective" — that it should apply the arbitrary and capricious standard. The Ward decision thus presages the analysis of § 113 offered above.

79. 42 U.S.C. § 9613(j)(4), ELR STAT. CERCLA 038.

80. 810 F.2d 726, 17 ELR 20603 (8th Cir. 1986).

81. Id. at 747-48, 17 ELR at 20614.

82. 33 U.S.C. § 1321(f), ELR STAT. FWPCA 043.

83. NEPACCO II, 810 F.2d at 748, 17 ELR at 20614.

84. 734 F. Supp. 771, 780, 20 ELR 21120, 21123 (W.D. Tex. 1990).

85. 733 F. Supp. 1424, 20 ELR 21307 (W.D. Okla. 1989).

86. Id. at 1434, 20 ELR at 21311.

87. Id., 20 ELR at 21311.

88. 725 F. Supp. 833, 845 (M.D. Pa. 1989).

89. Id.

90. 757 F. Supp. 397, 436, 21 ELR 20879, 20897 (D.N.J. 1991).

91. 786 F. Supp. 152, 22 ELR 20976 (D.R.I. 1992).

92. Id. at 161, 22 ELR at 20979.

93. 546 F. Supp. 1100, 1118, 12 ELR 20954, 20960 (D. Minn. 1982).

94. Id. at 1117, 12 ELR at 20960.

95. Id. at 1118, 12 ELR 20960.

96. Id. at 1118, 12 ELR at 20960. See also Dedham Water Co. v. Cumberland Farms Dairy, Inc., 805 F.2d 1074, 1077-82, 17 ELR 20223, 20224-27 (1st Cir. 1982); United States v. Northeastern Pharmaceutical & Chem. Co., 579 F. Supp. 823, 850, 14 ELR 20212, 20223-24 (W.D. Mo. 1984) (NEPACCO I).

97. 733 F. Supp. 1424, 20 ELR 21307 (W.D. Okla. 1989).

98. Id. at 1435, 20 ELR at 21311.

99. 766 F. Supp. 405 (D. Md. 1991).

100. Id. at 411-13.

101. Id. at 412.

102. Id. at 412-13.

103. Id. at 413 n.12.

104. Id. (emphasis added).

105. See generally 40 C.F.R. § 300.64-71 (1989); 40 C.F.R. § 300.405-435 (1990).

106. 579 F. Supp. 823, 851, 14 ELR 20212, 20224 (W.D. Mo. 1984).

107. 605 F. Supp. 1064, 1074, 15 ELR 20337, 20340 (D. Colo. 1985).

108. Readers of this Article may be familiar with a law review note by Eugene Brantley, note, Superfund Cost Recovery: May the Government Recover "All Costs" Incurred Under Response Contracts?, 59 GEO. WASH. L. REV. 968 (1991). That note attacks the standard articulated in NEPACCO I and affirmed by the Eighth Circuit in NEPACCO II — that as long as the United States' actions are not inconsistent with the NCP, the costs of those actions will be recoverable — and advocates a new "standard" for the recovery of response costs, which the author derives from certain language in United States v. Northernaire Plating Co., 685 F. Supp. 1410, 1415 (W.D. Mich. 1988). The author acknowledges that the NCP does not contain specific provisions addressed to "costs," but argues that courts should review each "decision to incur costs" — by which the author means each payment of an invoice, and each award of a contract — to determine if that "decision" is "arbitrary and capricious." Brantley, supra, at 985-86. Including procurement decisions among those to be "reviewed," the author ignores the introductory language of § 107 — "notwithstanding any other provision of law" — and dismisses Hardage I without analyzing the decision. Id. at 983-84 & n.142.

The author's approach is inconsistent with the NCP. The reason the NEPACCO I court concluded that if the government's actions are not inconsistent with the NCP, its costs are recoverable, was that the actual provisions of the NCP discuss actions, rather than costs per se. Thus, the NEPACCO I standard is the only standard consistent with the words of the statute and the nature of the NCP. The author's proposal to have courts review each decision to pay an invoice, and each procurement decision, cannot be reconciled with the statutory standard, because, as the author admits, the NCP does not discuss such "decisions," and provides no criteria for evaluating them. In effect, the author is proposing a back-door "reasonableness" test, whereby courts will become super auditors, evaluating each of the government's costs without referenceto any provision of the NCP. The likely, nightmarish practical consequences of such an approach are discussed infra.

The author's apparent belief that the Northernaire court intended to override NEPACCO I and revolutionize the law of cost recovery is difficult to defend. The passage in Northernaire, which the author relies on, actually concludes with a quote from NEPACCO II. It seems likely that by "decisions to incur costs," the court did not mean "each decision to pay an invoice," but rather response action selection decisions of the type which the NCP does discuss, which are themselves "decisions to incur costs" in the sense that every decision to take an action is also a decision to spend the money to carry out the action. Nothing in the Northernaire decision suggests that the Court believed that courts in § 107 actions can deny government costs claims regardless of whether the government has acted in a manner "inconsistent with the NCP."

109. Fairchild, 766 F. Supp. at 412-13.

110. 786 F. Supp. 152, 161, 22 ELR 20976, 20979 (D.R.I. 1992).

111. See 40 C.F.R. § 300.68(i)(1) (agency is to "select] [ a cost-effective remedial alternative that effectively mitigates and minimizes threats to and provides adequate protection of public health and welfare and the environment") (1985 NCP); 40 C.F.R. § 300.430(f)(2)(D) ("Each remedial action selected shall be cost-effective, provided that it first satisfies the threshold criteria set forth in § 300.430(f)(1)(ii)(A) and (B).").

112. No. 89-2124 (W.D. Pa. July 8, 1991).

113. Id. slip op. at 17.

114. Id.

115. No. 89-2124 (W.D. Tenn. Aug. 7, 1991).

116. Id. slip op. at 9.

117. Courts have held that the NCP applicable to the determination of "consistency" is the NCP in effect at the time of the response action in question, not at the (subsequent) time of the reviewing court's decision. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898, 16 ELR 20749, 20750 (9th Cir. 1986); Artesian Water Co. v. New Castle County, 659 F. Supp. 1269, 1294, 18 ELR 20785, 20795-96 (D. Del. 1987); see also United States v. Shell Oil Co., 605 F. Supp. 1064, 1074, 15 ELR 20337, 20340 (D. Colo. 1985).

118. 40 C.F.R. § 300.68(g)(1).

119. Id. at § 300.68(h)(2)(ii).

120. Id. at § 300.68(i).

121. Id. at § 300.430 ("Remedial investigation/feasibility study and selection of remedy.").

122. See, in addition to 40 C.F.R. § 300.430(f)(2)(D), 430(e)(7)(iii) (identifying "cost" as one of three criteria to be used in the "developing and screening of remedial alternatives"), § 300.430(e)(9)(iii)(G) (identifying cost as one of nine criteria for evaluation in evaluating alternatives developed in the FS).

123. 786 F. Supp. 152, 162, 22 ELR 20976, 20979-80 (D.R.I. 1992).

124. It should be noted that the NCP's application of the requirement of "cost-effectiveness" only to the remedy selection process reflects congressional intent. The Conference Report on CERCLA § 121, providing for "Cleanup Standards," made clear that "cost-effective" was a term of art applicable to selection of response actions:

The provision that actions under both sections 104 and 106 must be cost-effective is a recognition of EPA's existing policy as embodied in the National Contingency Plan. The term "cost-effective" means that in determining the appropriate level of cleanup the President first determines the appropriate level of environmental and health protection to be achieved and then selects a cost-efficient means of achieving that goal.

H.R. REP. No. 962, 99th Cong., 2d Sess. 245 (1986).

125. 682 F. Supp. 706, 729, 18 ELR 20893, 20904 (D.R.I. 1988), aff'd, 883 F.2d 176, 20 ELR 20115 (1st Cir. 1989), cert. denied, sub nom. American Cyanamid Co. v. O'Neil, 110 S. Ct. 1115 (1990).

126. SENATE CONF. DEBATE, 132 CONG. REC. S14,903 (daily ed. Oct. 3, 1986) (discussing settlement provisions under § 122).

127. See H.R. REP. No. 1016, 96th Cong., 2d Sess. 17 (1980), reprinted in 1980 U.S.C.C.A.N., 6119, 6120.

128. 805 F.2d 1074, 1074-82, 17 ELR 20223, 20224-27 (1st Cir. 1986).

129. See also United States v. South Carolina Recycling & Disposal Inc., 653 F. Supp. 984, 995 n.8, 14 ELR 20272, 20276 n.8 (D.S.C. 1984) ("Making … the Fund whole in the first instance allows costs expended at [hazardous waste sites] to be recouped quickly and applied to other hazardous waste problems."); United States v. Chem-Dyne Corp., 572 F. Supp. 802, 805, 810, 13 ELR 20986, 20986, 20988-89 (S.D. Ohio 1983).

130. United States v. Bell Petroleum Servs., Inc., 734 F. Supp. 771, 780-81, 20 ELR 21120, 21123 (W.D. Tex. 1990).

131. See Brantley, supra note 108, at 975-80 (1991).

132. See Jensen & Savitz, supra note 6; Brantley, supra note 108.

133. Virtually all Superfund sites involve work by several contractors. For example, an enforcement support contractor, sampling analysis contract laboratories, an RI/FS contractor, and a (different) remedial contractor might be several of the contractors involved.

134. United States v. American Cyanamid Co., 786 F. Supp. 152, 164-66, 22 ELR 20976, 20981 (D.R.I. 1992) (citations omitted).

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