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September 16, 2005: 

The Honorable James M. Inhofe: 
Chairman, Committee on Environment and Public Works: 
United States Senate: 

Subject: Environmental Cleanup: Transfer of Contaminated Federal 
Property and Recovery of Cleanup Costs: 

Dear Mr. Chairman: 

Ammonium perchlorate (perchlorate) is a primary ingredient in solid 
rocket propellant and has been used for decades by the Department of 
Defense (DOD), the National Aeronautics and Space Administration, and 
the defense industry in the manufacturing, testing, and firing of 
rockets and missiles. Perchlorate has been found in the drinking water, 
groundwater, surface water, or soil in 35 states, the District of 
Columbia, and 2 commonwealths of the United States. Exposure to 
perchlorate affects the human thyroid, and certain levels of exposure 
may result in hyperthyroidism in adults and developmental delays in 
children. Although there is no specific federal requirement to clean up 
perchlorate, the Environmental Protection Agency (EPA) and state 
regulatory agencies have used various environmental laws and 
regulations to require cleanup of perchlorate by responsible parties. 

Between 1942 and 1945, new military uses for perchlorate led to an 
increase in the production of perchlorate in the United States. Between 
1945 and 1967, the U.S. Navy, Western Electrochemical Company, and the 
American Potash and Chemical Company manufactured perchlorate at a 
facility in Henderson, Nevada. The United States owned part of the 
facility from 1953 to 1962. In 1967, the Kerr-McGee Corporation 
acquired the facility and continued to manufacture perchlorate until 
1998, when it ceased production after the chemical was found in nearby 
groundwater. Kerr-McGee is presently cleaning up perchlorate 
contamination under a consent order with the Nevada state environmental 
agency. The American Pacific Corporation also manufactured perchlorate 
near Henderson from 1958 until 1988, when its facility was destroyed in 
an explosion. American Pacific relocated its perchlorate production to 
Utah and is currently the sole manufacturer of perchlorate in the 
United States. 

In your recent letter to GAO, you asked us to report on the following: 

1. What portion of the perchlorate compounds produced at Henderson, 
Nevada, from 1945 until the present went to supply the U.S. 
government's defense and space programs, either directly through prime 
contracts or indirectly through subcontracts under prime contracts? 

2. From 1945 until the present, what ties did the U.S. government have 
to perchlorate production facilities in Henderson, Nevada, including, 
but not limited to, ownership of land, buildings and production 
equipment, and subsidization of plant capacity expansions? 

3. What was the role of the United States and its prime contractors in 
"making" or "influencing" the market for perchlorate compounds, either 
by determining a large portion of the total demand for perchlorate 
compounds, or by other means? 

4. What costs have been incurred to date by private companies and by 
the United States to remediate perchlorate contamination at the 
Henderson, Nevada, facilities, and what is the best current estimate of 
potential future remediation costs in Henderson? 

5. What financial responsibility, if any, should the United States 
assume for perchlorate contamination at sites that produced perchlorate 
compounds for federal governmental programs? 

The issue of liability for perchlorate cleanup is currently the subject 
of litigation between the Kerr-McGee Corporation and the United States. 
In 2000, Kerr-McGee initiated litigation against the United States, 
seeking reimbursement for cleanup costs. The case is still in the 
pretrial stage. The information you requested above is among the issues 
being addressed as part of the pending court case. It is a long- 
standing GAO policy to refrain from taking a position on or addressing 
matters that are pending in litigation. 

During a June 2005 meeting with your staff, we agreed to document why 
we could not undertake the study you originally requested, and we also 
agreed to report on general issues relating to the federal government's 
responsibility for environmental cleanup on land that it transfers or 
sells to other parties. This report discusses (1) laws governing the 
transfer of contaminated federal property to private parties, both 
before and after the enactment of a 1986 amendment to the Comprehensive 
Environmental Response, Compensation, and Liability Act of 1980 
(CERCLA) that specifically governs such transfers, and (2) the degree 
to which private parties not subject to civil actions under CERCLA may 
seek environmental cleanup costs from other responsible parties in the 
wake of the recent Supreme Court decision in Cooper Industries v. 
Aviall Services, and subsequent cases. In conducting our work, we 
examined statutes and regulations governing the cleanup and transfer of 
contaminated federal property. We also researched and analyzed court 
cases addressing the degree to which private parties may recover the 
costs they incur in cleaning up contaminated properties. 

Three Principal Federal Laws Govern the Transfer of Contaminated 
Federal Property to Private Parties: 

While there are numerous laws that have some impact on the transfer of 
contaminated federal property to private parties,[Footnote 1] the 
following three federal statutes (and associated regulations) 
specifically require some combination of cleanup actions, notice of 
contamination, and retained federal cleanup responsibility following 
transfer of the property: 

* Federal Property and Administrative Services Act of 1949 (Federal 
Property Act. 

* Comprehensive Environmental Response, Compensation, and Liability Act 
of 1980 (CERCLA). 

* Superfund Amendments and Reauthorization Act of 1986 (SARA). 

Under the Federal Property Act, each federal agency has a continuing 
responsibility to identify property that has become excess--no longer 
needed by the agency to carry out its programs or activities. The 
agency must report such property to the General Services Administration 
(GSA). GSA then must determine if any other federal agency, mixed- 
ownership government corporations,[Footnote 2] or the District of 
Columbia has a need for the property. If no other agency needs the 
property, GSA declares it unneeded by the government and identifies it 
as surplus. Generally, surplus property must be disposed of after 
publicly advertising for bids. 

Regulations under the Federal Property Act have long recognized the 
importance of decontaminating federal property prior to transfer, but 
the regulations were initially drafted in very general terms and 
provided no specific procedures for ensuring compliance. For example, 
since 1964, GSA regulations have required any agency reporting excess 
property that is dangerous or hazardous to health and safety to state 
the extent of such contamination, the plans for decontamination, and 
the extent to which the property could be used without further 
decontamination.[Footnote 3] The 1964 regulations made the landholding 
agency responsible for all expense to the government and for 
supervising the decontamination of excess and surplus property under 
the agency's jurisdiction. The regulations required the agency to 
inform GSA of any hazards related to such property ģin order to protect 
the general public from such hazards and to preclude the government 
from any and all liability resulting from indiscriminate disposal or 
mishandling of contaminated property.ī However, the regulations did not 
specifically oblige the government to transfer the property free of 
contamination, notify the transferee of the contamination, or provide 
any procedures for making claims against the government in the event 
the property was contaminated. In addition, any potential legal action 
against the government would have been impeded by the federal 
government's sovereign immunity. [Footnote 4] 

CERCLA established the Superfund program to clean up highly 
contaminated hazardous waste sites.[Footnote 5] CERCLA authorizes EPA 
to compel parties responsible for the contamination to clean up the 
sites; allows EPA to pay for cleanups and seek reimbursement from 
responsible parties; and establishes a trust fund (known as the 
Superfund) to help EPA pay for cleanups and related program 
activities.[Footnote 6] The law also allows responsible parties who 
have undertaken efforts to clean up properties contaminated by 
hazardous substances to seek contribution from other parties liable 
under CERCLA for cleanup costs incurred. 

CERCLA established that past owners or operators of contaminated 
property, including the U.S. government, may be held responsible for 
the contamination. The law waived the federal government's sovereign 
immunity, providing that each agency shall be subject to and must 
comply with the act in the same manner and to the same: 

extent, both procedurally and substantively, as a nongovernmental 
entity, including with regard to liability. As a result of the 
sovereign immunity waiver and CERCLA's broad definition of liability, 
the government has in some instances been held liable under CERCLA for 
cleanup costs at properties that are privately owned. 

Court cases assessing whether the federal government is liable for 
cleanup costs have engaged in fact-intensive inquiries. For example, in 
FMC v. Department of Commerce, a federal appellate court held that the 
federal government had substantial control over a facility producing 
war-related products during World War II because, among other things, 
the government determined what product the facility would manufacture 
and controlled the supply and price of the facility's raw materials 
and, thus, could be considered operator of the facility under 
CERCLA.[Footnote 7] However, in East Bay Municipal Utility District v. 
U.S. Department of Commerce, a federal appellate court held that the 
federal government did not exercise actual control over operations at a 
zinc mine during World War II, so as to render it liable as an 
operator, even though it imposed price and labor restrictions intended 
to protect its efforts to acquire zinc for munitions production, 
provided financial backing for the mine and, entered into an output 
contract with the mine[Footnote 8]. 

In 1986, Congress passed SARA which amended CERCLA and contained 
provisions authorizing, and in some cases requiring, the cleanup of 
federal property prior to its transfer into private hands. 
Specifically, the law added section 120, which established a program 
for cleaning up federal facilities, including section 120(h), which 
governs the transfer of certain contaminated federal property. 

Under section 120 of CERCLA, EPA must, where appropriate, evaluate 
hazardous waste sites at federal facilities to determine whether the 
waste sites qualify for inclusion on the National Priorities List, 
which is EPA's list of the nation's most serious hazardous waste sites. 
For each facility listed on the National Priorities List, section 
120(e)(2) of CERCLA requires the landholding agency to enter into an 
interagency agreement with EPA for the completion of all necessary 
remedial actions. The interagency agreement must include, among other 
things, the selection of and schedule for the completion of the 
remedial actions. 

Moreover, section 120(h)(3) requires that the federal government 
include in any deed transferring property to a private party after 
October 16, 1990, a covenant warranting that: 

(i) all remedial actions necessary to protect human health and the 
environment with respect to any hazardous substance remaining on the 
property have been taken before the date of transfer and: 

(ii) any additional remedial action found to be necessary after the 
date of such transfer shall be conducted by the United States.[Footnote 

Section 120(h)(3) only applies to federal property on which hazardous 
substances were (a) stored for 1 year or more, (b) known to have been 
released, or (c) disposed of. Thus, some contaminated federal 
properties are not covered by section 120(h)(3). For example, because 
the definition of hazardous substance excludes petroleum, those 
properties contaminated solely with petroleum would not be covered. 

Section 211 of SARA established the Defense Environmental Restoration 
Program that requires DOD to identify, investigate, and clean up 
environmental contamination and other hazards at active and closing 
installations as well as formerly used defense sites.[Footnote 10] 
DOD's policies for administering cleanup programs are outlined in its 
guidance for managing its environmental restoration program and 
generally follow the CERCLA process for identifying, investigating, and 
remediating sites contaminated by hazardous substances. 

Parties Who Carry Out Voluntary Cleanups Have Limited Ability to 
Recover Cleanup Costs: 

Courts have interpreted the liability of responsible parties under 
CERCLA to be joint and several. Under joint and several liability, when 
the harm done is indivisible, one party can be held responsible for the 
full cost of the cleanup, even though that party may be responsible for 
only a portion of the hazardous substances at the site. Such a party 
may then seek to recover a portion of its cleanup costs from other 
responsible parties. However, a recent Supreme Court decision has 
limited the ability of responsible parties who voluntarily clean up 
their property to recover costs from other responsible parties under 
CERCLA [Footnote 11] 

Between 1980 and 1986, several courts held that a voluntary party--that 
is a private party that has incurred cleanup costs, but that has done 
so voluntarily and is not itself subject to suit under CERCLA--could 
seek to recover some of those cleanup costs from other parties under 
section 107(a), which is the CERCLA provision that establishes cleanup 
liability.[Footnote 12] In 1986, CERCLA was amended to include a 
specific action for "contribution," codified as section 113(f) of 
CERCLA.[Footnote 13] Section 113(f)(1) states that "any person may seek 
contribution from any other person who is liable or potentially liable 
under section 107(a) of this title, during or following any civil 
action" under CERCLA.[Footnote 14] 

In 2004, the Supreme Court in Cooper Industries v. Aviall Services held 
that this statutory language prohibits a voluntary party from seeking 
contribution from another responsible party.[Footnote 15] The plaintiff 
in Aviall, Aviall Services, purchased an aircraft maintenance business 
from the defendant, Cooper Industries, and continued operating the 
business for a number of years. When Aviall Services learned that it 
and Cooper Industries had polluted the site, Aviall Services notified 
the Texas state environmental agency. The state then instructed Aviall 
Services to clean up the site under the threat of an enforcement 
action. Aviall Services cleaned up the site and then filed suit against 
Cooper Industries under section 113(f)(1), seeking contribution. Since 
Texas did not take formal enforcement action against Aviall Services, 
its cleanup action is considered to be voluntary. 

In reversing a lower court decision, the Supreme Court held that Aviall 
Services was not entitled to seek recovery under section 113(f)(1) 
because Aviall Services had not been sued under CERCLA. The Court 
focused on the language in the provision stating that "any person may 
seek contribution . . . during or following any civil action" under 
CERCLA.[Footnote 16] The Supreme Court explained that reading the 
statute to allow contribution claims to occur in the absence of such an 
action at any time would render the italicized language superfluous. 

After the Court's decision in Aviall, voluntary parties have instead 
sought contribution from other responsible parties under section 
107(a), which had previously been used in some cases before the 
enactment of section 113. However, a majority of district courts 
confronting the issue since Aviall have held that voluntary parties may 
not pursue contribution actions against other responsible parties under 
section 107. For example, in Mercury Mall Associates v. Nick's Market, 
the district court held that section 113(f) provided the only avenue 
for a responsible party to seek cleanup costs from another.[Footnote 
17] The court noted that in a pre-Aviall case, the Fourth Circuit had 
held that section 113(f) was the only CERCLA provision under which one 
responsible party could sue another, and that nothing in the Aviall 
case had changed that result. However, the court also observed that 
leaving voluntary parties without a remedy against other responsible 
parties "seems to undermine the twin purposes of the statute, which are 
to promote prompt and effective cleanup of hazardous waste sites and 
the sharing of financial responsibility among the parties whose actions 
created the hazard."[Footnote 18] 

In contrast, a few courts have held that voluntary parties may continue 
to recover costs from other parties under section 107. For example, in 
Vine Street LLC v. Keeling, the court held that the current owner of a 
contaminated lot could maintain a claim against another potentially 
responsible party (in this case, a chemical company) under section 107, 
despite the fact that the current owner was also a potentially 
responsible party.[Footnote 19] The court explained that section 107 
specifically authorizes voluntary parties to seek costs from other 
responsible parties, while section 113(f) created a separate cause of 
action, allowing parties that have been subject to cost recovery 
actions to allocate liability among themselves. 

No federal appellate courts have ruled on this issue since 
Avill,[Footnote 20] making it difficult to determine the case's impact 
on voluntary cleanup activities. The Aviall decision may complicate 
efforts to clean up contaminated properties by providing a disincentive 
for parties to voluntarily carry out such cleanups. On the other hand, 
the decision may provide an incentive for parties to settle their 
CERCLA liability with the federal government since parties who enter 
into an administrative or judicially approved settlement with the 
government may obtain contribution under CERCLA. Nonetheless, as the 
court in Mercury Mall observed, the result of the Aviall decision is 
not likely to facilitate the prompt and effective cleanup of 
contaminated properties. 

As agreed with your office, we plan no further distribution of this 
report until 30 days after the date of this report. At that time, the 
report will be available on GAO's home page at If 
you have any questions, please contact me at (202) 512-3841. 

Sincerely yours, 

Signed by: 

Anu K. Mittal: 
Director, Natural Resources and Environment: 



[1] For a comprehensive list of statutes affecting federal property 
transfers, including environmental statutes, see GAO, Real Property 
Dispositions: Flexibility Afforded to Meet Disposition Objectives 
Varies, GAO/GGD-92-144FS (Washington, D.C.: Sept. 18, 1992). 

[2] Mixed-ownership corporations include such entities as the Federal 
Deposit Insurance Corporation and the Federal Home Loan Banks. 

[3] The 1964 regulations defined "decontamination" to mean "the 
complete removal or destruction by flashing or explosive powders; the 
neutralizing and cleaning out of acid and corrosive materials; the 
removal, destruction or neutralizing of toxic or infectious substances; 
and the complete removal and destruction by burning or detonation of 
live ammunition from contaminated areas and buildings." 41 C.F.R. § 101-
47.103-5 (1964). This definition remains the same today. 41 C.F.R. § 
102-71.20 (2004). Current GSA regulations contain more detailed 
provisions governing the decontamination of property to be transferred 
out of federal ownership, much of which reflects the language of 
section 120(h) of CERCLA, which we discuss in more detail below. See, 
for example, 41 C.F.R. § 102-75.125 (property title report must include 
a statement indicating whether any hazardous substance activity took 
place during the time that the property was owned by the United 
States); 41 C.F.R. § 102-75.340(b) (property conveyance document must 
include a statement that the government has taken all cleanup action 
necessary to protect human health and the environment); and 41 C.F.R. § 
102-75.955 (landholding agency is responsible for supervising 
decontamination of excess and surplus real property that has been 
contaminated with hazardous materials of any sort). 

[4] Absent a statutory waiver, sovereign immunity shields the federal 
government and its agencies from suit. For example, Department of Army 
v. Blue Fox, 525 U.S. 255, 260 (1999). 

[5] EPA places the nation's most seriously contaminated sites, which 
typically are expensive and can take many years to clean up, on its 
National Priorities List (NPL). EPA uses its Hazard Ranking System, a 
numerical scoring system that assesses the hazards a site poses to 
human health and the environment, as the principal mechanism for 
determining which sites are eligible for placement on the NPL. 

[6] In addition, the law establishes a process for cleaning up 
hazardous waste at federal facilities, although the Superfund trust 
fund is generally not available to fund these federal cleanups, which 
are funded from federal agency appropriations. 

[7] 29 F.3d 833, 843 (3d Cir. 1994). Also see, FMC v. Department of 
Commerce, 786 F.Supp. 471, 486 (E.D. Pa. 1992) (federal government 
ownership of installations, equipment, and pipelines associated with a 
high-tenacity rayon plant made the government liable as an owner for 
cleanup costs); E.I. Dupont de Nemours v. United States, 365 F.3d 1367, 
1372 (Fed. Cir. 2004) (federal government was liable for CERCLA costs 
under an open-ended contract indemnification clause in the contract 
with the owner and operator of the ordnance plant). 

[8] 142 F.3d 479, 484-85 (D.C. Cir. 1998). 

[9] 42 U.S.C. § 9620(h)(3)(B). Section 120(h) also requires the 
government to notify potential buyers of all known hazardous substances 
on the property. 42 U.S.C. § 9620(h)(3)(A). 

[10] A formerly used defense site is a property that DOD formerly 
owned, leased, possessed, operated, or otherwise controlled, and that 
was transferred from DOD prior to October 17, 1986. 

[11] In this report, we refer to such parties as "voluntary parties." 

[12] See, for example, Wickland Oil Terminals v. Asarco, Inc., 792 F.2d 
887, 890-892 (9th Cir. 1986); and Philadelphia v. Stepan Chemical Co., 
544 F.Supp. 1135, 1140-1143 (E.D. Pa. 1982). In this report, we also 
use the term "voluntary party" to refer to parties subject to 
enforcement action under statutes other than CERCLA, such as parties 
compelled to clean up their facilities under state hazardous waste 
programs under the Resource Conservation and Recovery Act. 

[13] Section 113(f)(1) provides in full as follows: "Any person may 
seek contribution from any other person who is liable or potentially 
liable under section 107(a) of this title, during or following any 
civil action under section 106 of this title or under section 107(a) of 
this title. Such claims shall be brought in accordance with this 
section and the Federal Rules of Civil Procedure, and shall be governed 
by Federal law. In resolving contribution claims, the court may 
allocate response costs among liable parties using such equitable 
factors as the court determines are appropriate. Nothing in this 
subsection shall diminish the right of any person to bring an action 
for contribution in the absence of a civil action under section 106 of 
this title or section 107 of this title." 

[14] Section 113(f)(3)(B) provides that a party who has resolved its 
cleanup liability in a settlement with the federal government or a 
state government may also seek contribution from other responsible 
parties who have not settled. 

[15] 125 S. Ct. 577 (2004). 

[16] 125 S. Ct. 583 (emphasis added). 

[17] 368 F. Supp. 513 (E.D. Va. 2005). 

[18] 368 F. Supp. 513, 519. 

[19] 362 F. Supp.2d 754, 760 (E.D. Tex. 2005). 

[20] In dictum, the United States Court of Appeals for the Tenth 
Circuit in Young v. United States, 394 F.3d 858, 862 (10th Cir. 
2005),indicated that a pre-Aviall Tenth Circuit case that restricted 
responsible party contribution claims to section 113(f) remained the 
controlling precedent.