De Minimis Settlements Under Superfund: An Empirical Study

De Minimis Settlements Under Superfund: An Empirical Study

Description

This chapter reports the results of an empirical study of de minimis settlements entered on or before June 30, 1992. We analyzed the settlement documents and other site-specific information for virtually all of the de minimis settlements entered through June 30, 1992, as well as various databases prepared by the U.S. Environmental Protection Agency (EPA) that contain information about sites on the National Priorities List (NPL). We also interviewed the attorneys charged with primary responsibility for de minimis settlements at each of the EPA regional offices, as well as selected representative of potentially responsible parties (PRPs) in Superfund actions, both de minimis and non-de minimis. We focus on three principal questions: How many de minimis settlements were entered, as a percentage of the universe of sites for which such settlements would be appropriate? When, during the long process of cleanup, were settlements entered? What variations were there in the terms of the settlements? Unfortunately, our conclusions are far from encourage. EPA has vastly underutilized de minimis settlements, using this tool in only about one-fifth of the sites likely to benefit from such settlements. Even in those instances, it has settled late in the cleanup process, after many years of legal wrangling have greatly reduced the benefits of settlement. It has also failed to follow its own policy of standardizing the form of the settlements, thus creating incentives for costly negotiations over the terms of the de minimis settlements and for conflict between de minimis and non-de minimis defendants. Moreover, the variations in settlement practices cannot be explained on the basis that the de minimis program is administered in a decentralized fashion by the EPA regions (the agency has ten regional offices with geographic jurisdiction); there are substantial variations even within single regions. The questions addressed in this chapter are important to an evaluation of the merits of the Superfund liability scheme, which has been criticized for the high transaction costs that it imposed on the affected parties. This criticism is most apt in the case of parties that bear a small share of the liability at a site. RAND recently studied transaction-cost shares (the ratio of a firm’s transaction costs to the sum of its transaction costs and remediation costs) for various types of PRPs. If found that a firm’s transaction-cost share increases significantly as its volumetric share at a site falls (Dixon, Drezner, and Hammitt 1993, 35-37). Thus, de minimis parties bear a disproportionate amount of transaction costs. This problem could be alleviated considerably by a well-functioning de minimis settlement program. Unfortunately, our study establishes that the program has been seriously underutilized and mismanaged.

Source Publication

Analyzing Superfund: Economics, Science, and Law

Source Editors/Authors

Richard L. Revesz, Richard B. Stewart

Publication Date

1995

De Minimis Settlements Under Superfund: An Empirical Study

Find @ NYU

Share

COinS