Environmental Liabilities

Federal, state, and local laws and regulations require the federal government to clean up hazardous and radioactive waste resulting from its ongoing operations (e.g., nuclear submarines and nuclear weapons). The cash deficit reflects cleanup costs when they are paid. The accrual deficit reflects a portion of the estimated probable and measurable environmental cleanup costs associated with assets as they are used, even though cleanup will not actually occur for many years. In addition, the accrual deficit reflects estimates of the costs of cleaning up and disposing of existing contamination and waste resulting from nuclear weapon production during World War II and the Cold War (also called “legacy waste”). Most of these activities are managed by the Departments of Energy (DOE) and Defense (DOD).

The reported environmental liabilities (see table below) represent the estimated future spending associated with this fiscal exposure that has been reflected in the accrual deficit and will be reflected in future cash deficits. The change in the liability from the previous year represents accrued expenses in the current year less payments for current year cleanup activities, which were expensed in the past.

Environmental Liabilities (By Fiscal Year, Dollars in Billions)

Fiscal year
2009 2010 2011 2012 2013
Accrued liabilities $341.8 $321.3 $324.1 $339.0 $349.1
Department of Energy (DOE) 267.6 250.2 250.6 268.4 280.2
Department of Defense (DOD) 66.3 62.9 64.8 62.6 58.4
Others 7.9 8.2 8.7 8.0 10.5
Change in liability from previous year -1.0 -20.5 2.8 14.9 10.1
DOE 1.6 -17.4 0.4 17.8 11.8
DOD -4.2 -3.4 1.9 -2.2 -4.2
Others 1.6 0.3 0.5 -0.7 2.5

Estimates of cleanup costs are inherently uncertain. Estimates must assume the use of current technology and make a number of assumptions about the scope of restoration of the site; detailed projections about the schedule of funding and cleanup activities; and inflation. Costs (and hence the liability) may also change if there is a change in the laws or regulations mandating the level of restoration. For example, restoration to "pristine condition" would have a higher cost than restoration to a point deemed to "pose no near-term health risks."

While the accrual deficit reflects more of the long-term cost of environmental cleanup than does the cash deficit, it does not include all long-term cleanup costs. For example, if project costs cannot be estimated (e.g., the technology does not exist), federal accounting standards do not require agencies to record the liability, though it must be disclosed in the notes to the financial statements. Also, DOD remains unable to estimate with assurance key components of its environmental and disposal liabilities.