Hazardous Waste: Funding of Postclosure Liabilities Remains Uncertain

Published by the Government Accountability Office on 1990-06-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Funding of Postclosure
Liabilities Remains
    I&sources, (hmummity, and
    Economic Development Division


    June 1,lQQO

    To the President of the Senate and the
    Speaker of the House of Representatives

    The Superfund Amendments and Reauthorization Act of 1986 directed that we study options
    for a program to manage liabilities associated with hazardous waste disposal facilities after
    closure which complements the policies set forth in the Hazardous and Solid Waste
    Amendments of 1984 and assures the protection of human health and the environment. This
    report presents the results of our review by discussing

. the likelihood that permitted hazardous waste disposal facilities will leak after closure,
l the magnitude of liabilities that may be incurred,
l the adequacy of current postclosure funding assurance requirements, and
l the feasibility of other mechanisms that could provide greater postclosure funding

    Copies are being sent to appropriate House and Senate Committees; the Administrator,
    Environmental Protection Agency; and other interested parties. Copies will also be made
    available to others upon request.

    This report was prepared under the direction of Richard L. Hembra, Director of
    Environmental Protection Issues, who may be contacted at (202) 276-6111. Other major
    contributors are listed in appendix II.

    J. Dexter Peach                   /
    Assistant Comptroller General
Executive Summary

             Although past land disposal of hazardous waste has resulted in major
Purpose      environmental contamination and serious health effects, land disposal of
             these wastes continues. About 13 million metric tons of hazardous waste
             is land disposed each year. Better disposal practices-including   treat-
             ment of wastes to reduce toxicity-and    containment methods are now
             required at operating hazardous waste disposal facilities; nevertheless,
             the possibility exists that hazardous substances will eventually leak
             from these facilities and costly cleanup actions would be required to
             protect the public health and environment.

             Concerned about the funding of longterm liabilities-co&,      damages, or
             other expenses -that may be associated with permitted hazardous
             waste facilities once they have closed, the Congress required GAOto con-
             duct a study of options for managing postclosure liabilities. GAOfocused
             its study on the extent and magnitude to which postclosure liabilities
             are expected to occur at permitted facilities when closed and the need
             for, and viability of, options for funding these liabilities.

             The Resource Conservation and Recovery Act (RCRA)regulates the man-
Background   agement and disposal of hazardous waste. As implemented by the Envi-
             ronmental Protection Agency (EPA), the act requires owners/operators of
             disposal facilities to obtain an operating permit in order to continue
             waste disposal operations. To obtain a permit, facilities must meet cer-
             tain standards intended to prevent and/or detect leakage to the environ-
             ment. About 200 land disposal facilities have, or are expected to obtain,
             operating permits.

             After a disposal facility ceases operation, EPArequires that closure
             activities be performed, including the installation of covers over the dis-
             posed waste. EPAfurther requires the owner/operator to perform main-
             tenance and monitoring activities at the facility for a 30-year
             postclosure period. Owners/operators must provide financial assurance
             that funds will be available to conduct mandatory postclosure activities.

             Certain liabilities, such as costs for cleanup and third-party damages,
             may result during postclosure if facilities leak and contaminate the
             groundwater. A postclosure liability trust fund to manage these costs
             was established under the Comprehensive Environmental Response,
             Compensation, and Liability Act of 1980 (CERCLA).However, concerned
             that, as structured, the postclosure fund may not provide sufficient
             resources, the Congress suspended the transfer of any liability to the

             Page2                                          GAO/RCED-90-64

                        The long-term effectiveness of current land disposal practices in control-
Results in Brief        ling the migration of hazardous waste is not known, but EPAand others
                        believe it is likely that some of the permitted hazardous waste disposal
                        facilities will release hazardous substances into the environment at some
                        period after they close. However, the timing and magnitude of any
                        resulting postclosure liabilities- such as the costs of corrective action
                        and off-site damages-are uncertain.

                        Although EPAis aware of the potential for releases, it has not developed
                        a strategy for addressing long-term postciosure concerns. EPAhas given
                        this issue a low priority in the RCRAprogram because of limited
                        resources and the lack of historical data on the magnitude and extent of
                        the potential problem.

                        EPAdoes require funding assurances for mandatory postclosure care and
                        known corrective action costs, but it does not require funding assur-
                        ances for potential but unknown postclosure liabilities. Although there
                        are several options for funding postclosure liabilities, few of these are
                        currently viable in large part because the risk associated with closed
                        hazardous waste facilities is difficult to quantify. As data on long-term
                        risks become available, the Congress will be in a better position to decide
                        on the need for additional postclosure funding mechanisms.

Principal Findings

Extent of Liabilities   EPArequires facilities obtaining operating permits to design and con-
Uncertain               struct disposal units with waste migration prevention measures, such as
                        liners and covers, intended to mitigate releases into the environmeht.
                        Little experience-based data exist, however, on the long-term perform-
                        ance of these technology requirements in preventing waste migration.
                        Although at least one company producing liner and cover material esti-
                        mates that the material will last hundreds of years, EPAand others
                        believe that permanent containment of wastes is not possible and that
                        leakage will occur at some time after the 30-year postclosure period.
                        (See ch. 2.)

                        When leakage occurs, liabilities could be incurred for extended mainte-
                        nance and monitoring, compliance monitoring, corrective action, and
                        third-party damages. However, the extent of any liabilities will be con-
                        tingent on factors that cannot currently be assessed, such as the rate

                        Page3                                          GAO/RCED-90-64

                     and timing of leakages, the magnitude of contamination by hazardous
                     substances, and the exposure to such contamination.

                     EPAofficials have identified activities, such as extended postclosure care
                     and long-term research, that may be required to identify and reduce the
                     potential for leakage after facilities close. However, EPAhas not devel-
                     oped a strategy to comprehensively obtain data on the effectiveness of
                     current disposal requirements and examine long-term postclosure issues
                     because (1) experience with current disposal requirements is limited and
                     (2) available resources have been needed in other RCRAprogram efforts
                     that address more immediate environmental concerns. Such a strategy
                     needs to be developed and implemented in a timely manner in order to
                     assure that actions needed to reduce postclosure concerns are promptly

Funding Mechanisms   Owners/operators are liable for any postclosure costs that may occur.
Questionable         However, few funding assurances exist for postclosure liabilities. EPA
                     only requires funding assurances for maintenance and monitoring costs
                     for 30 years after closure and corrective action costs once a problem is
                     identified. No financial assurances exist for potential but unknown cor-
                     rective actions, off-site damages, or other liabilities that may occur after
                     the established postclosure period. EPAcould require funding assurances
                     for certain potential liabilities, but it does not believe it would be appro-
                     priate to require a facility to provide funding assurances for liabilities
                     that may not occur. (See ch. 3.)

                     Options such as insurance and risk pooling could be pursued to better
                     assure funding of postclosure liabilities; however, their availability is
                     limited because the risks involved with postclosure are viewed as high
                     and very difficult to assess and quantify. Federally administered pro-
                     grams-such as a modified postclosure trust fund or federal insurance
                     -could also be established; however, the appropriate structure for any
                     such program cannot be assessed because of the lack of data on the
                     extent and magnitude of postclosure liabilities. Such information can
                     only be obtained when EPAimplements a strategic plan for developing
                     data and measures to assess postclosure risks. As EPAcollects and ana-
                     lyzes the data, the need for and structure of a postclosure funding mech-
                     anism can be better determined.

                     It is important that EPAdeal with the issue of long-term postclosure lia-
                     bility in an orderly, reasonable, and timely manner. GAOanticipates that
                     EPAcan develop a strategic plan to address the postclosure liability issue


                  in time for the debate on the reauthorization of CERCLAwhich is
                  expected in 1991. Moreover, EPAshould be prepared to take interim mea-
                  sures-such as extending the postclosure care period-to provide
                  greater protection to the public health and the environment until more
                  definitive data are developed.

                  GAOrecommends that the Administrator,      EPA,develop and implement a
Recommendation    strategy to address the long-term effectiveness of current hazardous
                  waste disposal requirements so that decisions can be made about post-
                  closure liability funding mechanisms. Such a strategy should outline the
                  activities EPAneeds to undertake and/or complete to assess postclosure
                  risks, evaluate actions such as extended postclosure care to reduce risks,
                  and assess available alternatives for funding postclosure liabilities. The
                  strategy should also identify required EPAresources and establish time
                  frames for completing such activities. Further, GAOrecommends that the
                  Administrator periodically report to the Congress the agency’s progress
                  in obtaining the necessary data on the effectiveness of current disposal
                  requirements and as information becomes available, be prepared to take
                  interim measures to provide greater public protection until more defini-
                  tive data are developed.

                  In its comments on a draft of this report (see app. I), EPAstated that
Agency Comments   sufficient information to implement a strategic plan will probably not be
                  obtained in time for the CERCLAreauthorization. GAO,however, does not
                  anticipate EPAimplementing the strategic plan before CERCLA
                  reauthorization and only intends that the strategy be developed in time
                  for anticipated 1991 hearings. EPAshould implement the plan after dis-
                  cussing the strategy with the Congress.

                  GAOclarified statements in the final report to address other EPA

                  Page5                                         GAO/RCED-9084

Executive Summary                                                                              2

Chapter 1                                                                                      8
Introduction              Current Hazardous Waste Disposal Program
                          Requirements for Postclosure
                          Objectives, Scope, and Methodology                                  11

Chapter 2                                                                                     16
Extent Of Postclosure     Current Requirements May Not Prevent Leakage After                  15
Liabilities Unknown       Magnitude of Postclosure Liabilities Not Determinable               20
                          EPA Does Not Have a Strategy for Addressing Long-Term               24
                              Postclosure Concerns

Chapter 3                                                                                     27
Options for Funding       Little Assurance That Funds Will Be Available for                   27
                                Postclosure Liabilities
Postclosure Liabilities   Options for Funding Postclosure Liabilities                        30

Chapter 4                                                                                    38
ConElusionsand            Recommendation                                                     40
                          EPA Comments and Our Response                                      41
Appendixes                Appendix I: Comments From the Environmental                        42
                              Protection Agency
                          Appendix II: Major Contributors to This Report                     45

Figure                    Figure 2.1: Cross-Sectional View of a Typical Permitted             17
                               RCRA Hazardous Waste Disposal Unit After Closure

                          Page6                                        GAO/RCED-90-M
II   Contenta


     CERCLA Comprehensive Environmental     Response, Compensation, and
                Liability Act of 1980
     EDF    Environmental Defense Fund
     EPA    Environmental Protection Agency
     F’J3MA Federal Emergency Management Agency
     F-IA   Federal Insurance Administration
     GAO    General Accounting Office
     HSWA   Hazardous and Solid Waste Amendments of 1984
     NRC    Nuclear Regulatory Commission
     NSWMA National Solid Wastes Management Association
     OSW    Office of Solid Waste
     PCLTF  Postclosure Liability Trust Fund
     RCRA   Resource Conservation and Recovery Act
     SARA   Superfund Amendments and Reauthorization Act of 1986

     Page7                                     GAO/RCED-9064
Chapter 1

Introduction                                                                                      C

                    As evidenced by the events at Love Canal, Times Beach, and thousands
                    of other sites contaminated by hazardous wastes, land disposal of these
                    wastes presents a significant threat to human health and the environ-
                    ment. Hazardous waste disposal can contaminate the land as well as
                    ground and surface waters. Once contaminated, cleanup of a hazardous
                    waste site can cost millions, take many years to complete, and in some
                    cases it may not be possible to remove all contamination. Moreover,
                    many contaminants are toxic, may lead to cancer, or have other adverse
                    human health effects.

                    Despite the acknowledged problems of hazardous waste, land disposal
                    of some of these wastes continues. About 275 million metric tons of haz-
                    ardous waste are managed annually. Although a national hazardous
                    waste management program has been established to minimize the dispo-
                    sal and environmental impacts of hazardous waste, about 13 million
                    metric tons are still land-disposed each year.

                    Through the enactment of the Resource Conservation and Recovery Act
Current Hazardous   (RCRA),the Congress imposed strict controls over hazardous waste to
Waste Disposal      protect human health and the environment. Subtitle C of RCRAestab-
Program             lishes a “cradle-to-grave” system for managing hazardous waste from
                    the time it is generated until its ultimate disposal. This system regulates
                    the generation, transportation, treatment, storage, and disposal of haz-
                    ardous wastes. The Environmental Protection Agency (EPA),which is
                    responsible for implementing RCRA,has defined as hazardous any solid
                    waste that is either ignitable, reactive, corrosive, or contains certain
                    toxic constituents such as arsenic or lead. A solid waste is also consid-
                    ered hazardous if it is a “listed” waste; that is, if it is named on one of
                    three lists of EPA-tested wastes and chemical products. Listed wastes
                    include pesticides, acids, and other specifically identified wastes.

                    The hazardous waste facilities of greatest concern are land disposal
                    facilities-facilities that place the wastes in the ground for permanent
                    burial. RCRAestablished strong controls over hazardous waste disposal
                    facilities to prevent the recurrence of past leakage problems. The act
                    requires any owner/operator of a hazardous waste disposal facility to
                    obtain a permit to operate. Further, land disposal facilities must meet
                    certain standards for construction, operation, and closing of the facility
                    in order to obtain the permit and remain in compliance with the permit
                    conditions. The following standards are among those required for haz-
                    ardous waste land disposal facilities:

                    Page8                                           GAO/RCED-9084

. Waste migration protection measures, most notably the installation of a
  liner and leachate collection system,’ to prevent the contamination of
l Groundwater monitoring around the facility to detect leakage of hazard-
  ous constituents.
l Proper closure of facilities, including the placement of caps or covers
  over landfills to prevent the inflow of liquids that could generate
  leachate and result in environmental contamination.

    Further, owners/operators obtaining a permit for a new facility must
    comply with location standards that prohibit the siting of new facilities
    in areas that could be affected by floods or earthquakes.

    RCRA    allowed hazardous waste disposal facilities in operation on or
    before November 19, 1980, to continue operating under interim status
    until a final permit had been issued or denied. Of the 1,467 RCRA hazard-
    ous waste land disposal facilities known to EPA,~relatively few sought
    and obtained permits to continue operations. As of January 1990, a total
    of 277 disposal facilities were on EPA’S“permit track,” of which 172
    facilities had obtained the required operating permit, 24 facilities were
    under permit application and review, and 81 facilities had their operat-
    ing permits denied. The remaining 1,190 facilities did not seek an oper-
    ating permit.

    Recent changes to RCRA have further strengthened the controls over the
    disposal of hazardous wastes. The Hazardous and Solid Waste Amend-
    ments of 1984 (HSWA)imposed several additional requirements over the
    construction of facilities and the disposal of hazardous wastes. HSWA
    required that any new or replacement facilities be constructed with two
    or more liners and leachate collection systems. Further, the amendments
    prohibited the disposal of bulk or noncontainerized liquid hazardous
    waste in any landfill. The amendments also established the objective to
    minimize the disposal of hazardous wastes in the land. In this regard,
    HSWArequires the treatment of wastes before they are disposed of to
    make them less hazardous or less likely to migrate.

    ‘Leachate is any liquid that has percolated through or drained from hazardous wastes.

    “The total number of RCRA disposal facilities is continually changing because some facilities are
    “clean closed” and are therefore no longer considered subject to RCRA regulations, while additional
    facilities become subject to RCRA as they are made known to EPA.

    Page9                                                           GAO/RCED-90-64

                       As part of the regulation of hazardous waste under RCRA,EPAestablished
Requirements for       closure and postclosure requirements for owners/operators of disposal
Postclosure            facilities, Closure is the period when wastes are no longer accepted at a
                       facility, and during which the owner/operator must properly apply final
                       covers to or cap the landfill, decontaminate or remove all contaminated
                       equipment and structures, and certify that the facility has been prop-
                       erly closed. These activities are required to ensure that facilities are
                       closed in a manner that (1) minimizes the need for additional care and
                       (2) controls, minimizes, or eliminates the potential escape of hazardous
                       substances to the environment.

                       To assure that hazardous waste land disposal facilities do not pose envi-
                       ronmental or public health hazards after closure, such facilities must
                       enter into a postclosure care period. During this period, owners/opera-
                       tors conduct maintenance and monitoring activities to ensure the integ-
                       rity of the facility. As required by EPA,postclosure care consists of at

                   . groundwater monitoring and reporting,
                   l maintenance and monitoring of the waste containment systems, and
                   l security around the facility when access may pose a hazard to human

                       EPArequires that these postclosure activities be conducted for a 30-year
                       period following the closure certification. All disposal facilities must
                       develop a plan outlining the postclosure activities and have the plan
                       approved by EPA.Further, owners/operators must prepare postclosure
                       cost estimates and demonstrate the financial ability to pay these costs
                       before they can obtain a permit.

                       Despite the protective measures now required at facilities and the
                       requirements for postclosure care and monitoring, longstanding con-
                       cerns exist over the liabilities that could occur after closure and the abil-
                       ity of owners/operators to pay for such liabilities. The Congress
                       addressed this issue with the enactment of the Comprehensive Environ-
                       mental Response, Compensation, and Liability Act of 1980 (CERCLA).The
                       act, which established the Superfund program, also established a Post-
                       closure Liability Trust Fund (PCLTF)to assume the liabilities at permitted
                       hazardous waste disposal facilities after closure. Liability would be
                       transferred to the fund within 6 years after closure and after demon-
                       stration of no likelihood of migration or release. After transfer of liabil-
                       ity, the fund, generated from a tax on disposed hazardous waste, would
                       pay for damages, such as groundwater contamination and necessary

                       Page10                                          GAO/RCED-9084
                        chapter 1

                        cleanup actions, resulting from a release. The fund would also pay for
                        monitoring and maintenance beyond the 30-year postclosure period. The
                        balance in the fund was limited to $200 million, although additional
                        taxes could be collected if the balance dropped below that amount.

                        However, concerns about PCLTFand the unlimited liability that could be
                        transferred to the government were raised in the deliberations on
                        reauthorizing CERCLAin 1986. In particular, the Congress and EPAwere
                        concerned that the fund would not have sufficient resources to pay the
                        liabilities. Subsequently, under Section 201 of the Superfund Amend-
                        ments and Reauthorization Act (SARA),the Congress suspended the
                        transfer of liability to the PCLTF.Further, the Congress repealed the tax
                        and the trust fund and authorized the refund of the amounts collected to
                        the owners/operators who had paid into the fund. CERCLAwill be up for
                        reauthorization in 1991.

                        With the repeal of the Postclosure Liability Trust Fund, the Congress
Objectives, Scope,and   required us to study options for a program to manage postclosure liabili-
Methodology             ties. SARASection 201 established the general requirements that a post-
                        closure program should assure (1) incentives are created and maintained
                        for the safe management and disposal of hazardous wastes, (2) the pub-
                        lic will have reasonable confidence that hazardous wastes will be man-
                        aged and disposed of safely and resources will be available to address
                        any problems that may arise and will cover the costs of long-term care,
                        and (3) owners/operators of hazardous waste disposal facilities will be
                        able to manage their potential future liabilities and attract investment
                        capital necessary to build, operate, and close such facilities in a manner
                        that assures protection of human health and the environment. Another
                        provision of section 201 was that separate assessments be made for dif-
                        ferent classes of treatment, storage, and disposal facilities that have
                        been or probably will be issued a permit. Such assessments were to
                        address the current and future financial capabilities of owners/opera-
                        tors, the current and future costs associated with facilities, and the
                        availability of mechanisms to assure these costs can be financed.

                        In conducting our study, we found that several of these requirements
                        could not be fully addressed. As discussed later in this report, data nec-
                        essary to assess future costs and financial capabilities are not available.
                        Consequently, to best address the overall issue of postclosure liability
                        and provide the Congress now with a meaningful perspective on liability
                        questions, we focused our work on addressing the following questions.

                        Page11                                         GAO/RCED-90-64
    Chapter 1                                                                           I

. What is the likelihood that permitted hazardous waste disposal facilities
  will leak in the postclosure period and/or beyond?
. What is the magnitude of liabilities that may be incurred after these
  facilities close?
l Do current mechanisms provide adequate funding assurances for these
9 How feasible are other mechanisms that could be used to provide
  greater assurance that funds will be available to address postclosure

    Further, in conducting our work, we found it necessary to limit our
    study to one class of facilities; specifically, facilities that have been
    granted a permit for land disposal of hazardous wastes. Other permitted
    facilities, such as treatment or storage facilities, are generally expected
    to “clean close” and remove all hazardous waste from the site. In clean
    closure situations, there are presumed to be no postclosure concerns.
    However, for various reasons these facilities may not be able to clean
    close, and in such situations these facilities become disposal facilities
    and must meet the postclosure requirements of all disposal facilities. For
    our study, we did not try to determine the extent to which such facilities
    will be required to become disposal facilities.

    Because we limited the objectives of our review, we contacted the staff
    of the Senate Committee on Environment and Public Works and the
    House Committee on Energy and Commerce to discuss our objectives
    and to ensure that our review would satisfy the SARArequirements as
    well as the needs of the Congress.

    In addressing these issues, we relied primarily on information from EPA'S
    Office of Solid Waste (OSW),which is responsible for managing the RCRA
    program, and contacted other government agencies such as the Depart-
    ments of Commerce, Treasury, and the Interior and the Federal Emer-
    gency Management Agency (FEMA)and the Nuclear Regulatory
    Commission (NRC) concerning various aspects of our review. In addition,
    we gathered opinions and data on the postclosure liability issue from
    two environmental groups and the commercial hazardous waste man-
    agement and treatment industries’ associations. We also spoke with
    owners/operators of hazardous waste facilities, including one who both
    generates and disposes of hazardous waste and others who only treat
    and/or dispose of hazardous waste.

    To determine the likelihood of leakage at permitted hazardous waste
    facilities, we focused on the status of data collection and research in this

    Page 12                                         GAO/RCED90-64   Hazardous   Waste
Chapter 1

area by EPA'SLand Disposal Technology Section in the Office of Solid
Waste, Science Advisory Board, Office of Research and Development,
and Risk Reduction Engineering Laboratory in Cincinnati, Ohio. We
obtained information on the current technology requirements for haz-
ardous waste disposal facilities and the long-term effectiveness of these
requirements. We also obtained information from these offices on the
data still needed to address concerns with the performance of the cur-
rent technology requirements and the plans for obtaining these data. In
addition, we gathered data and opinions about the durability of land-
disposal technology requirements from researchers at the Geosynthetic
Research Institute at Drexel University and Texas A & M University. We
also spoke with representatives of the Office of Technology Assessment,
the National Solid Wastes Management Association, the Hazardous
Waste Treatment Council, and the Nuclear Regulatory Commission’s
Division of Low-Level Waste Management and Decommissioning con-
cerning the likelihood of leakage from facilities constructed in accor-
dance with current EPArequirements.

To determine the liabilities that may be incurred after permitted facili-
ties close, we focused on obtaining available cost data on five areas-
routine maintenance and monitoring, compliance monitoring, corrective
action, third-party damages, and natural resource damages. Centralized
data on these cost areas are not available from EPA.However, to provide
a perspective on postclosure costs, we obtained data from the Permits
Branch in the Office of Solid Waste, EPARegions IV and VI, and from
owners/operators on estimated routine postclosure maintenance and
monitoring costs at 12 facilities. Data on other postclosure liabilities,
however, were generally unavailable from EPAor other sources. Never-
theless, we obtained summary data on estimated corrective action costs
from EPAand discussed natural resource damages with officials in the
Department of the Interior’s Office of Environmental Project Review
involved in the development of regulations for assessing natural
resource damages.

To address the third question, we discussed financial assurance mecha-
nisms with OSW'SClosure and Financial Responsibility Section in the Per-
mits and State Programs Division. We also obtained opinions on long-
term financial assurance concerns from seven owners/operators, three
financial analysts from investment-related firms, three environmental

Page 13                                       GAO/RCED-90-04   Hazardous   Waste
Chapter 1                                                                                         I)

groups, and three trade associations. We also reviewed data we had col-
lected during previous reviews that addressed financial assurance

To address the final question on options that could be pursued to pro-
vide reasonable confidence of postclosure liability funding, we talked
with officials from EPA'SPermits and State Programs Division as well as
ICF, Inc., the EPAcontractor for its 1986 postclosure liability trust fund
model. We obtained their views and perspectives on the trust fund
option, as well m EPA’S policy regarding the liabilities of owners/opera-
tors. We also obtained and reviewed two studies related to options for
funding postclosure liabilities, EPA’S 1985 Report to the Congress on the
Post-Closure Liability Trust Fund and the Treasury Department’s 1982
report, Hazardous Substance Liability Insurance. To determine the
availability of private insurance to cover postclosure liabilities, we
spoke with representatives of the American Insurance Association and
with the senior economist at the Treasury Department responsible for
developing the 1982 report on the availability of insurance for post-
closure liabilities. We also attended a February 1989 hazardous sub-
stances insurance conference and reviewed conference papers on
environmental pollution insurance availability. Further, we discussed
the possibility of federal insurance to cover these liabilities with NRCand

Our review was conducted between October 1988 and June 1989, with
selected updates through January 1990, in accordance with generally
accepted government auditing standards. We provided a draft of this
report to EPA for formal review and comment. EPA’S comments and our
responses are in appendix I.

“Hazardous Waste: Environmental Safeguards Jeopardized When Facilities Cease Operating (GAO/
      - . 77 Feb. 11,1986) and Hazardous Waste: Issues Surrounding Insurance Availability (GAO/
RCED-88-2, bet. 16,1987).

Page 14                                                     GAO/RCED-90-64    Hazardous   Waste
Chapter 2

‘Extent Of Postclosure Liabilities Unknown

                       EPArequires permitted facilities to meet certain requirements intended
                       to prevent the leakage of hazardous substances into the environment.
                       The requirements for liners, leachate collection systems, covers, and
                       postclosure maintenance are believed capable of preventing leakage in
                       the short term. However, for the long term-beyond     30 years-there
                       are questions about the effectiveness of EPA'Scurrent requirements and
                       concerns that leakage may occur.

                       Leakage that does occur after closure could result in significant liabili-
                       ties such as corrective action costs and off-site damage claims. However,
                       because of a lack of experience-based information, insufficient data
                       exist on the extent and timing of potential leakage as well as the actions
                       required to correct such leakage. Consequently, the magnitude of post-
                       closure liabilities that could be incurred simply cannot be measured at
                       this time.

                       EPAis concerned about the effectiveness of its standards for the long-
                       term prevention of waste migration and the potential for postclosure lia-
                       bilities. Both GAOand EPA'SScience Advisory Board have recommended
                       the development of a strategy-describing   activities and time frames
                       for their completion- to address such concerns. However, because post-
                       closure at currently operating hazardous waste disposal facilities is not
                       viewed as a current environmental problem, EPAhas made this issue a
                       lower priority in the RCRAprogram and has not developed the necessary

                       The land disposal of hazardous waste presents the possibility that haz-
Current Requirements   ardous substances may migrate from the disposal facility and pose a
May Not Prevent        risk to human health and the environment. To reduce this risk before
Leakage After          the wastes are placed in the ground, hazardous waste must meet speci-
                       fied treatment standards to make it less toxic and mobile. HSWAprohibits
Postclosure            the disposal of untreated hazardous wastes beyond specified dates and
                       requires EPAto establish treatment standards after which waste treated
                       in accordance with the standards could be land disposed. Treatment
                       standards have been established for most hazardous wastes and stan-
                       dards for all remaining wastes are scheduled for issuance in May 1990.

                       Nevertheless, although some wastes degrade or can be made less hazard-
                       ous through treatment, some substances remain hazardous forever. Con-
                       sequently, in order to reduce the potential for leakage of these
                       substances from permitted disposal facilities after they close, all such
                       facilities must meet a number of construction standards to prevent

                       Page 16                                        GAO/RCED-9084   Hazardous   Waste
    chapter 2
    Extent   Of   PoatclosureLiabilities   Unknown

    and/or reduce the migration of hazardous wastes. These standards
    require, according to EPAguidance, that all owners/operators must do
    the following:

. Place double liners under any new landfill unit or any replacement or
  expansion of an existing unit.’ Draft EPAguidance for double liners
  directs that the top liner be constructed of a flexible synthetic material,
  such as high-density polyethylene, and the bottom liner be constructed
  of either compacted low-permeability soil or a combination of a syn-
  thetic material and compacted low-permeability soil.
. Install leachate collection systems over the top liner and between the
  two liners. Leachate collection systems consist of a drainage layer to col-
  lect liquids generated in the disposal unit and a mechanism such as a
  pump to remove them.
l Cover the disposal units at closure. EPA’Sminimum technology guidance
  recommends that covers be of a multilayer design that includes a syn-
  thetic material and compacted soil.

    A cross-sectional view of a typical closed hazardous waste disposal unit
    built to current EPArequirements is shown in figure 2.1.

    ‘The double liner requirements may be waived by EPA for certain monofill facilities and for facilities
    that can demonstrate that alternative design and operating practices will prevent waste migration as
    effectively as liners.

    Page 16                                                          GAO/RCED-9084      Hazardous   Waste
                                              clulptm    2
                                              EXteAt    Of R08tcloaure
                                                                     Liabjlitier, Unknown

Figure 2.1: Crobr-Sectlonsl   View of a Typical Permitted RCRA Hazardous Waste Disposal Unit After Closure



                                                                                                             Ground   Level

                     Native Soil Foundation

                                              Source: GAO illustration based on EPA data

                                              These waste containment measures are intended to minimize the migra-
                                              tion of hazardous substances through the end of the postclosure period
                                              and beyond. The liners and leachate collection systems are intended to
                                              prevent waste migration by collecting and removing leachate before it

                                              Page17                                            GAO/RCED-M-64
                          Chapter 2
                          Extent Of Postdosure   Liabilities   Unknown

                          can migrate during the unit’s active life and postclosure period. The
                          cover is expected to prevent the inflow of liquids, primarily rain water,
                          into the waste unit after closure and thereby reduce the amount of
                          leachate generated.

                          In addition to the design requirements, EPArequires that owners and
                          operators perform maintenance and monitoring activities during a 30-
                          year postclosure period. During this period, the owners/operators collect
                          and dispose of any leachate generated in the unit, monitor the ground-
                          water surrounding the unit to determine if the facility is leaking, and
                          maintain the facility to ensure that the migration protection measures
                          remain intact.

Long-Term Effectiveness   Under the current requirements, hazardous waste disposal units are
of Waste Containment      expected to be effective in preventing leakage of hazardous constituents
                          into the environment through the 30-year postclosure period. EPA’S
Measures Unknown          design and operating requirements for land disposal units specify that
                          liners be constructed of materials to prevent the migration of any haz-
                          ardous constituent through the liner during a unit’s active life and post-
                          closure period. The chief of OSW'SDisposal Technology Section said that
                          although little data are available on the actual use of liners in hazardous
                          waste applications, EPA is confident that the current technology will be
                          effective in preventing waste migration through the 30-year postclosure
                          period. He said that properly closed units, with the required mainte-
                          nance and leachate removal, will gradually “dewater” and dry out dur-
                          ing the early years of postclosure and substantially reduce the
                          likelihood of leakage during the 30-year postclosure period.

                          However, for the longer term- beyond the 30-year postclosure period-
                          the effectiveness of the current technology requirements in preventing
                          leakage is questionable. As stated in EPA’S March 1986 proposed rule to
                          assist in implementing the statutory provisions of HSWA

                          “EPA’s position was, and still is, that absolute prevention of migration forever, or
                          for the long term, is beyond the current technical state of the art. Thus, at some
                          time, some migration through the liner will probably occur.”

                          Officials in osw’s Disposal Technology Section and EPA’S Risk Reduction
                          Engineering Laboratory in Ohio told us that several concerns exist over
                          the long-term viability of liners for preventing waste migration. They
                          said that concerns include the cracking and tearing of the liners result-
                          ing from the stresses on the materials from landfill environments and

                          Page 18                                               GAO/RCED4lO84    Hazardous   Waste
Extent   Of Poetcloeure   Liabilities   Unknown

the durability of seams in the liner, both of which would allow the
release of hazardous constituents. Further, as stated in a May 1988 EPA-
contractor report on the service life of synthetic construction materials
in landfill environments, other potential problems include the softening
and perforation of liners and the inability to remove leachate from dis-
posal units because of clogging of leachate collection systems.

Because of the potential for leakage through the liner in the long term,
EPAviews the covers as the mechanism to prevent leakage during the
established postclosure period. Officials from osw and the Risk Reduc-
tion Engineering Laboratory said that the cover will prevent the inflow
of liquids that could leach hazardous constituents to the environment.
They said that if liquids are prevented from entering the disposal unit,
there is little chance of any significant leakage even if the liner fails.
However, osw officials said that they do not know the long-term effec-
tiveness of covers.

EPAofficials could not provide an estimate of how long properly
designed and constructed disposal units will be able to contain wastes
before leaking. They said that because of the lack of information on the
long-term use of this technology, the effectiveness of current waste con-
tainment measures is unknown. However, the Chief of the Disposal
Technology Section added that the materials used in disposal facilities is
constantly improving and that at least one manufacturer has estimated
that its liner material will last for 400 years. EPAofficials said that
although such estimates are hard to support, they are now optimistic
that facilities will be able to contain wastes 100 years or more.

Industry officials believe that any risk of leakage from current facilities
after the postclosure care period is minimal. According to representa-
tives of the National Solid Wastes Management Association (NSWMA)and
members of its Institute of Chemical Waste Management, the technology
now being used will control the release of hazardous constituents for
100 years or more. They said that some applications of this technology
have been in use for over 60 years with no leakage or degradation
problems and that although these are not hazardous waste applications,
they anticipate that no problems will occur using liners in hazardous
waste facilities.

Others believe that the current disposal technology will be less effective
over the long term. Officials in the Nuclear Regulatory Commission
responsible for the disposal of low-level nuclear waste told us that their
agency has concerns about the long-term integrity of waste containment

Page 19                                           GAO/RCED-9984   Hazardous   Waste
                          Chapter 2
                          Extent Of Poetclomre   Liabilities   Unknown                                       ,

                          measures, particularly with regard to cover materials. According to the
                          Chief of the Regulatory Branch in NRC'SDivision of Low-Level Waste
                          Management and Decommissioning, the NRCis concerned that the covers
                          will leak before the liners and result in a “bathtub” effect where the
                          facility fills up with liquid and overflows. Because of this, NRCgenerally
                          does not advocate the use of liners in low-level nuclear waste disposal
                          facilities but instead requires that the waste be made structurally stable,
                          including encapsulation, before it is placed in the ground. The NRCoffi-
                          cial said that EPA'Sapproach of using liners to contain wastes will neces-
                          sitate permanent maintenance and monitoring of facilities to prevent
                          leakage of leachate as long as the waste stays hazardous.

                          University researchers we talked with also said that problems may exist
                          with the long-term effectiveness of current waste containment technol-
                          ogy. One researcher said that there is little doubt that current hazardous
                          waste facilities will leak. He said that present research shows that these
                          systems will fail at some point, particularly after postclosure care ends,
                          and that he views today’s disposal of hazardous waste as merely a stor-
                          age mechanism for hazardous waste that may have to be removed even-
                          tually. Another university researcher told us that the technology used
                          today is the best available but that it is simply unknown if it will keep
                          wastes in place.

                          Postclosure liabilities are for the most part directly related to the leak-
Magnitude of              ages that may occur before and after a facility closes. Only one post-
Postclosure Liabilities   closure liability-maintenance      and monitoring-is   required in all
Not Determinable          situations and can be estimated. Other postclosure liabilities that may be
                          incurred-compliance       monitoring, corrective action, third-party dam-
                          ages, and natural resource damages- cannot be determined because of
                          the unknown extent and timing of potential leakages and, in some cases,
                          a lack of available data.

Maintenance and           Maintenance and monitoring costs during the postclosure phase include
Monitoring Costs          the costs of groundwater monitoring and maintenance activities to
                          ensure the integrity of the site. Owners/operators are required to main-
                          tain and monitor their facilities for 30 years after closure, although the
                          cognizant EPARegional Administrator can extend this period if neces-
                          sary to protect human health and the environment or shorten it if pro-
            ”             tection is no longer necessary. As a part of the permitting process,
                          owners/operators are required to estimate the costs of maintenance and
                          monitoring during the postclosure phase.

                          Page 20                                        GAO/RCED-!MM4   Hazardous   Waste
                         Chapter 2
                         Extant Of Postclomre   Jdabilltiee   Unknown

                         EPA,however, does not maintain centralized data on the postclosure cost
                         estimates prepared by permitted facilities. According to officials in
                         OSW’SFinancial Responsibility Section, these estimates are updated
                         anmmlly and EPAdoes not want to place an additional reporting burden
                         on industry by requiring that these data be sent to headquarters. They
                         said that these data are consequently available only at each facility or
                         at the appropriate state or EPAregional office.

                         We did obtain postclosure cost estimates on 12 facilities to provide some
                         perspective on the magnitude of these costs. These estimates show that
                         postclosure maintenance and monitoring costs are very site-specific and
                         depend on factors such as facility size and the extent of groundwater
                         monitoring required. For example, the cost estimates ranged from
                         $116,000 for 30 years at one facility to $22.6 million for the same time
                         period at another.

Compliance Monitoring    Compliance monitoring is required at RCRAfacilities if groundwater con-
costs                    tamination is detected through routine maintenance and monitoring.
                         Under a compliance monitoring program, an owner/operator is to evalu-
                         ate the concentration of certain hazardous substances to determine if
                         the facility complies with the groundwater protection standard estab-
                         lished for that facility.

                         According to osw officials, compliance monitoring costs cannot be esti-
                         mated with any certainty. They pointed out that compliance monitoring
                         will be required only when contamination is detected and can involve
                         the installation of additional monitoring wells, more frequent testing,
                         and analysis of samples for a wider range of hazardous constituents.
                         Moreover, the compliance monitoring costs that will occur during post-
                         closure will be specific to the facility and the hazardous constituents
                         involved and cannot be predicted for permitted facilities currently oper-
                         ating. They added that costs may range from very small if no new wells
                         are needed to very large if a significant compliance program is required.
                         For example, data obtained from one EPAregion show a facility cur-
                         rently in postclosure is conducting a compliance and postclosure care
                         program estimated to cost $4.9 million-$129,000       per year-over a 62-
                         year period.

Corrective ANion Costs   A major cost of a leaking facility is associated with corrective action;
                         that is, the activities taken to halt and repair the problem and to bring
                         groundwater back into compliance with the groundwater protection

                         Page 21                                        GAO/RCED-90-64   Hazardous   Waste
                      Chapter 2
                      Extent Of Postdoeure   Liabilities   Unknown

                      standard contained in the facility’s permit. Corrective action remedies at
                      hazardous waste disposal facilities can range from actions such as
                      repairing liners to prevent leakage, pumping of groundwater to remove
                      contamination, or removing the hazardous substances.

                      Corrective action costs can be substantial. Costs to cleanup Superfund
                      sites average over $10 million per hazardous waste site and are increas-
                      ing. Further, EPAestimates that 30 percent of the closing RCRA facilities
                      probably will require clean-up action at an average cost of $6.3 million
                      per facility. However, these costs may not be comparable to those that
                      may be incurred in the future at currently operating disposal units. osw
                      officials point out that past unpermitted hazardous waste disposal facil-
                      ities were (1) poorly located, (2) contained untreated and liquid wastes,
                      and (3) not built to prevent the migration of wastes. As a consequence,
                      the officials believe that the corrective action at these older facilities
                      will be more substantial than that which may be required at state-of-
                      the-art disposal units.

                      EPAofficials could not estimate what range of corrective action costs
                      would be required. They said that this can only be done once experience
                      is gained on the effectiveness of current measures for preventing waste
                      migration. Further, the RCRA corrective action program is being imple-
                      mented in the absence of regulations because the draft regulations are
                      currently under review at the Office of Management and Budget. There-
                      fore, according to EPAofficials, future corrective action costs cannot be

Third-Party Damages   Third-party damages include personal injury, economic loss, and prop-
                      erty damage claims where disposal facilities can be sued by third parties
                      for damages resulting from leakages that migrate off-site.

                      As discussed in our recent reports on insurance availability, data on pol-
                      lution liability claims by third parties are not available.2 The insurance
                      industry does not maintain centralized pollution claims data. In our
                      reports we suggested, among other things, that to determine the cost and
                      extent of third-party liabilities, the Congress consider requiring insurers
                      or responsible parties, as appropriate, to report to EPAthe amounts of
                      indemnity payments made to cover pollution cleanup and related third-

                      ‘Hazardous Waste: Issues Surrounding Insurance Availability (GAO/RCED-88-2, Oct. 16,1987) and
                      Hazardous Waste: The Cost and Availability of Pollution Insurance (GAO/PEMD-89-6, Oct. 28,

                      Page 22                                                    GAO/RCED-90-64    Hazardous   Waste
                          chapter 2
                          Extent OP Poetclomre    IJabilities   Unknown

                          party bodily injury and property damage, Until such information
                          becomes more available, there remains no basis for projecting the poten-
                          tial for such claims.

Natural ResourceDamages   Leakage from hazardous waste facilities could also result in damages to
                          natural resources. As defined by CERCLA, natural resources are land,
                          fish, wildlife, biota, air, water, groundwater, and other such resources
                          belonging to or otherwise controlled by the United States, any state or
                          local government, or any foreign government.

                          The Department of the Interior is responsible for assessing natural
                          resource damages resulting from the release of hazardous substances.
                          Assessments for natural resource damages are meant to supplement cor-
                          rective action responses, and in this regard represent those damages and
                          costs above and beyond cleanup costs undertaken to protect public
                          health. According to Interior’s August 1, 1986, final rule implementing
                          its natural resource damage assessments, these assessments provide a
                          process for determining proper compensation to the public for injury to
                          natural resources.

                          However, at this time, no assessments of natural resource damages
                          resulting from the release of hazardous wastes have been made by the
                          Department. According to officials from Interior’s Office of Environmen-
                          tal Project Review, the Department’s policy is to settle natural resource
                          cases before they reach the assessment stage, and to date no cases of
                          natural resource damages resulting from hazardous waste have been
                          brought before them for settlement or assessment. The Interior officials
                          could not provide an estimate of a “typical” natural resource damage
                          claim resulting from leakage at a hazardous waste facility because each
                          assessment of natural resource damages is site-specific.

                          Additionally, portions of Interior’s regulations for assessing natural
                          resource damages have recently been declared invalid by the U.S. Court
                          of Appeals for the District of Columbia Circuit.3 As a result of the
                          court’s July 14, 1989, rulings, Interior must revise its regulations and,
                          according to Interior officials, such a revision could increase the
                          amounts assessed in natural resource damage claims.

                          “Ohio v. United States Dep’tof the Interior, 880 F.2d 432 (DC. Cir. 1989) and Colorado v. United
                          States Dep’t of the Interior, 880 F.2d 481 (DC. Cir. 1989).

                          Page 23                                                        GAO/RCED-9064       Hazardous   Waste
                       Chapter 2
                       Extent Of Poetclomre   Liabilities   Unknown

                       EPAis aware of the potential liability problems that may occur after
EPA Does Not Have a    operating facilities close. osw officials said that they want to prevent a
Strategy for           recurrence of the problems that led to the creation of the Superfund,
Addressing Long-Term   and they believe the current measures for controlling the migration of
                       hazardous constituents is the best technology available to do this. Nev-
Postclosure Concerns   ertheless, they are unsure of the long-term effectiveness of liners and
                       covers and are concerned that leakage of hazardous constituents could
                       occur. The osw officials said that because of these concerns, they intend
                       to examine this issue over the next few years.

                       However, EPA has not developed a strategic plan for addressing this
                       issue. As stated in our report Hazardous Waste: New Approach Needed
                       to Manage the Resource Conservation and Recovery Act (G~O/~c~~-88-116,
                       July 19, 19SS), the RCRAprogram needs strategic planning that identifies
                       measurable goals, tasks necessary to accomplish the goals, milestones,
                       resources, organizational responsibilities, and a system for measuring
                       performance. With regard to the long-term prevention of hazardous
                       waste migration, such a strategy would include identifying and resolving
                       technological concerns, gathering data on the effectiveness of current
                       applications, and considering revisions to postclosure care requirements
                       to better ensure that the integrity of facilities is maintained.

                       The need for strategic planning in the area of hazardous waste disposal
                       has also been raised by EPA'SScience Advisory Board, a public advisory
                       group that provides advice to EPA.In an October 1987 report on EPA'S
                       land disposal research program, the Board determined that it is difficult
                       to predict that improved land disposal will be protective of human
                       health and the environment for the long-term future. The report con-
                       cluded that there is a need to evaluate and understand the long-term
                       performance of what are now considered environmentally sound land
                       disposal practices to ensure that these practices are environmentally
                       sound for many decades. The report further concluded that there is an
                       absence of a waste management strategy-detailing       projects, timetables,
                       and funding-necessary     to develop the scientific and technical knowl-
                       edge for developing land disposal guidance and regulations.

                       According to EPAofficials, a comprehensive strategy for addressing long-
                       term postclosure concerns at permitted hazardous waste facilities has
                       not been developed. The officials stated that no strategy exists in large
                       part because postclosure concerns at operating facilities currently have
                       a low priority relative to other aspects of the RCRAprogram. They
                       pointed out that EPA is conducting several activities that have statutorily

                       Page 24                                         GAO/RCED90-64   Hazardous   Waste
    chapter   2
    Extent Of Postclosure   Liabiltth   Unknown

    mandated deadlines, such as the permitting of incinerators and the issu-
    ance of hazardous waste treatment standards and that these activities
    have been given high priority by EPA.One official added that the remain-
    ing EPAresources are directed at issues that provide the most environ-
    mental benefit and that postclosure concerns at operating facilities is
    not a current environmental problem.

    Moreover, if resources were available, EPAbelieves that it would be inap-
    propriate at this time to develop such a strategy. The Director, Permits
    and State Programs Division, said that it is simply too early to develop
    and/or obtain the data necessary to assess how long liner and cover
    materials will last. He said that EPAshould be in a better position to
    make such judgments in a few years when data on actual uses of liners
    in hazardous waste applications are available. Consequently, EPAwill
    take a “wait and see” attitude on the performance of the systems,

    Nevertheless, the osw officials pointed out that several efforts have
    been initiated, or will be initiated, that will address postclosure liability
    concerns, including the following.

. Development of the leak detection rule that would require all disposal
  facilities to report leakage through the first liner to EPA.This informa-
  tion should enable EPAto obtain a better perspective on the performance
  of double liner systems in actual applications.
9 Research on the long-term performance of liners and covers. Such
  research will provide better data on the potential problems that may
  occur with these systems and identify measures to prevent such
l Extension of the postclosure maintenance and monitoring period. EPA
  has already issued a proposed rule that would extend the 30-year post-
  closure period at solid waste facilities-which     dispose of household gar-
  bage, commercial refuse, and other generally nonhazardous wastes-
  because of the potential for leakage from these facilities after the post-
  closure care period ends. Under this proposal, owners/operators must
  conduct a second, less intensive phase of postclosure care for a period to
  be determined by the appropriate state. EPAhas stated that it is consid-
  ering a similar extension for certain hazardous waste facilities.

    However, EPAofficials were unable to provide information on when
    these activities will be undertaken and/or completed. For example, they
    said that the leak detection rule is currently on hold and little effort is
    being put towards completion and issuance of the rule because of other
    priorities within EPA.Consequently, they do not know when they will be

    Page 25                                           GAO/RCED-9984   Hazardous   Waste
Extent Of PostclomreLiabilities Unknown

collecting complete data on the performance of liner systems in actual
applications. Similarly, osw officials were unable to estimate when the
agency will be considering an extension to the postclosure period for
hazardous waste facilities. It is generally assumed that the postclosure
maintenance and monitoring period will be longer than 30 years, but EPA
currently does not have firm plans for extending the postclosure care
period at hazardous waste facilities.

Page26                                       GAO/RCED-90434
Chapter 3

Options for F’unding Postclosure Liabilities

                              Although it is likely that some permitted hazardous waste disposal facil-
                              ities will leak, what is not known is when and if such leakage will
                              release hazardous constituents and threaten human health and the envi-
                              ronment. However, should leakage resulting in significant postclosure
                              liabilities occur, there is little assurance that funds will be available to
                              pay for these liabilities. Current EPAfinancial assurance requirements do
                              not provide secure funding for known postclosure liabilities-required,
                              identified, and quantifiable costs such as maintenance and monitoring-
                              nor do they cover unknown liabilities such as potential on-site cleanups
                              or off-site damages.

                              There are private and public sector funding options that could be pur-
                              sued to better ensure that any needed postclosure liability funds would
                              be available. Many of these options, however, have limited applicability.
                              Currently, public sector options- in particular a modified postclosure
                              liability trust fund-appear   to be the most viable approach to providing
                              postclosure funding assurance. However, structuring such a fund at this
                              time is hampered because the liabilities are still very difficult to

                              As directed by RCRA,EPAhas established financial requirements to
Little Assurance That         assure funds are available to pay for certain postclosure liabilities. As
IFundsWill Be                 provided by its regulations, EPAallows owners/operators to use any of
Available for                 five mechanisms to provide financial assurance based on the estimated
                              cost of maintenance and monitoring activities during the postclosure
Postclosure Liabilities       period. These five mechanisms are as follows.

                          . Trust fund: ar agreement with an authorized bank or other institution
                            to act as a trustee of payments made by the facility owner/operator. EPA
                            requires that annual payments be made into this account for either ‘20
                            years or the remaining operating life of the facility, whichever is
                            shorter. The trust fund should contain a sum equal to the postclosure
                            cost estimate after the end of the pay-in period,
                          . Surety bond: a contract with a qualified surety company that guaran-
                            tees payment for, or performance of, postclosure activities if the owner/
                            operator is unable to do so.
                          . Letter of credit: a letter issued by an authorized bank or other institu-
                            tion in which payment of postclosure costs is guaranteed by the issuer if
                            the owner/operator is unable to do so.
                          . Postclosure insurance: Insurance issued by a licensed company to pay
                            postclosure costs for the owner/operator, with payment limited to the
                            face value of the policy.

                              Page 27                                        GAO/RCED-90-64   Hazardous   Waste
                               Chapter   3
                               Options   for Funding   Poatcloeure   Linbilitles

                           l   Financial test/corporate guarantee: A method of demonstrating ade-
                               quate resources to cover postclosure costs, through a combination of
                               assets, net worth and net worth multipliers, financial ratios, and/or
                               bond ratings. A parent company of an owner/operator may instead pro-
                               vide a written guarantee that sufficient postclosure funds are available
                               if it meets the financial test.

                               In addition, EPAallows owners/operators to use state-authorized mecha-
                               nisms that provide assurance equivalent to the mechanisms specified
                               above. In this regard, states allow modifications of the above assurance
                               mechanisms and/or disallow the use of others such as the financial test.

Financial Assurances for       EPAallows the use of any of these five mechanisms to assure funding for
                               known postclosure maintenance and monitoring activities and has pro-
Known Postclosure              posed allowing all mechanisms but insurance and surety bonds to assure
Liabilities Not Secure         postclosure corrective actions once they are identified. However, most of
                               these mechanisms are not currently viable for postclosure liabilities. On
                               the basis of our past reports and information provided by representa-
                               tives of the American Insurance Association and owners/operators,
                               postclosure insurance, surety bonds, and letters of credit are currently
                               limited in their use as financial mechanisms because providers of these
                               mechanisms are concerned that they may be held liable for large
                               cleanup costs should leakage occur.

                               As a result, owners/operators either use the financial test or the trust
                               fund, which may not provide secure funding assurance. As discussed in
                               a February 1986 report,’ the financial test was most often used to meet
                               Rcn.4financial assurance requirements for closure/postclosure costs. EPA
                               has no centralized data that identify the financial assurance mecha-
                               nisms used by owners/operators for postclosure care costs; however,
                               officials from osw’s Closure and Financial Responsibility Section told us
                               that the financial test is the primary mechanism used for postclosure
                               liabilities. Representatives of one owner/operator we talked with during
                               our review said that the financial test is the preferred mechanism
                               because it is the most readily available and does not require a dedicated
                               fund that ties up resources that could be used for other business

                               ‘Hazardous Waste: Environmental Safeguards Jeopardized When Facilities Cease Operating   (GAO/
                                     -86 -77, Feb. 11,lSSS).

                               Page 28                                                     GAO/RCED-90434    Hazardous   Waste
                         Options for Funa   Postdosure   Liabilities

                         However, the financial test may not be an adequate mechanism for
                         establishing financial responsibility. As discussed in our February 1986
                         report, if the financial strength of facilities changes rapidly, the test
                         may not be a good predictor that adequate funds will be available. We
                         recommended that EPAmonitor and periodically reevaluate the use of
                         the financial test. The Environmental Defense Fund (EDF) also believes
                         that the financial test is not a secure postclosure funding mechanism.
                         EDFrepresentatives stated that unsecured “self-insurance” provides
                         financial assurance only if it can be assumed that the self-insuring firms
                         will remain solvent and that even extremely large and well established
                         corporations are not immune to significant financial shocks.

                         EPAconsiders the financial test to be a viable approach to financial
                         responsibility. The Chief of osw’s Financial Responsibility Section
                         pointed out that because an owner/operator’s financial status is
                         reviewed by EPAregions or authorized state programs every year, a
                         facility that has received a permit and does not meet its annual financial
                         test review will be required to provide alternative assurance of its abil-
                         ity to fund postclosure costs. If it cannot provide other funding assur-
                         ances, the facility will be closed. Nevertheless, osw officials said that six
                         states have disallowed the use of the financial test because the states
                         want a firmer set-aside of moneys than the test provides. Further,
                         although EPAdoes not plan to disallow use of the financial test, it is cur-
                         rently reviewing this mechanism and will modify it in a proposed rule
                         that is expected to be issued in the spring of 1990. An osw official said
                         that the test will be revised to make it both more viable for use by more
                         owners/operators and render it a better predictor of bankruptcy.

                         The other most widely used mechanism, the trust fund, is allowed by
                         EPAto provide a financial assurance mechanism affordable to owners/
                         operators with limited resources who generally cannot qualify for other
                         mechanisms, such as the financial test. As stated in our 1986 report, the
                         trust fund mechanism may not provide funding assurance. Because the
                         trust fund can be paid into over a 20-year period, sufficient funds may
                         not be available if a facility should close during the early years of the
                         pay-in period.

No Financial Assurance   Postclosure financial assurance is currently required by EPAonly for 30-
                         year maintenance and monitoring as well as identified corrective action
Requirements for         costs. Financial assurances are not required, however, for potential but
Unknown Lidbilities      unknown postclosure liabilities such as on-site cleanup or off-site dam-
                         ages. According to the Director, Permits and State Programs Division,

                         Page 29                                         GAO/RCED-9044   Hazardous   Waste
                          Options   for Funding   Po&clom.re   Liabilities                                       ,

                          EPAonly requires owners/operators to set aside funds for known contin-
                          gencies; EPAdoes not believe it would be appropriate to require funds be
                          set aside for unknown contingencies. Consequently, although EPAdoes
                          not want situations to occur in the future where funds are not available
                          to cover liabilities, it does not require large amounts of funds be set
                          aside for liabilities that may not occur. The director added that such
                          additional financial responsibility requirements could cause facilities to
                          close, which would have serious negative effects such as reducing haz-
                          ardous waste disposal capacity and increasing illegal dumping.

                          Nevertheless, osw officials stated that there is no assurance that funds
                          would be available for unknown liabilities that may occur after permit-
                          ted facilities close. They said that no one can predict what the future
                          financial situation of any owner/operator will be in the long-term with
                          any certainty, and if an owner/operator were to become bankrupt or
                          otherwise go out of business, there is little likelihood that funding would
                          be available for unanticipated postclosure costs.

                          The osw officials added that these facilities can qualify for coverage
                          under the Superfund in situations where the owner/operator is unable
                          or unwilling to pay for cleanup actions. However, Superfund moneys are
                          limited, and leaking RCRAsites would have to be on the National Priori-
                          ties List-a listing of the worst hazardous waste sites needing priority
                          cleanup actions-to receive funding. Further, Superfund pays only for
                          cleanup actions and natural resource damages and does not provide
                          compensation for personal injury and economic losses that may result
                          from releases of hazardous wastes.

                          EPAhas the authority to require additional financial assurances for cer-
                          tain unknown liabilities. Section 3004(a) of RCRAauthorizes EPAto pro-
                          mulgate financial requirements for corrective action as it deems
                          necessary or desirable. According to EPA,this authority is not limited to
                          known releases. However, although EPAhas issued a proposed corrective
                          action rule in October 1986 that would require facilities with known
                          releases to provide corrective action funding assurances, at that time
                          EPAstated that it will not pursue such financial assurances for unknown
                          releases until more analysis on the issue is completed.

                          There are various options for funding postclosure liability costs that
Options for Funding       have been, or could be, pursued. These options are as follows.
Postclosure Liabilities

                          Page 30                                            GAO/RCED-9084   Hazardous   Waste
                             Chapter   3
                             Optionefor FundingPomlosure       Liabilitiee

                         l Private sector funding options, such as insurance, coinsurance, reinsur-
                           ante, and risk pooling.
                         . Public sector options, such as federal insurance and modifications to the
                           terminated postclosure liability trust fund,

Private Sector Options       Private sector options for funding postclosure liabilities include private
                             insurance, coinsurance, reinsurance, and voluntary risk pooling.
                             Because of the unknown liabilities and perceived risk associated with
                             hazardous waste disposal facilities after they close, these postclosure
                             funding mechanisms are currently not viable options. Private insurance,
                             coinsurance, and reinsurance are currently unavailable for postclosure
                             liability coverage. Voluntary risk pools to cover postclosure liabilities
                             have proved to be unsuccessful and are generally believed inappropriate
                             for the hazardous waste disposal industry.

Private Insurance            Private insurance has been unavailable for closed hazardous waste facil-
                             ities for many years. The Treasury Department reported in 1982 that a
                             system of private insurance for postclosure financial responsibility was
                             not feasible.2 The Treasury report, mandated by Section 107(k)(4)(A) of
                             CERCLA, found that insurers would not (1) accept uncertain and poten-
                             tially unlimited liability, (2) provide financial assurance for liability in
                             perpetuity, and (3) assume all managerial liabilities for insured sites.
                             For these reasons, the report concluded that this type of comprehensive
                             private insurance was not feasible for the foreseeable future.

                             More recently, we issued two reports that addressed the availability of
                             pollution insurance.” Although these reports did not directly address the
                             availability of postclosure insurance, they concluded that the insurance
                             industry generally regarded pollution risks as uninsurable at that time
                             and therefore insurance for hazardous waste facilities was extremely

                             A representative of the American Insurance Association stated that the
                             postclosure insurance market does not exist, and they did not foresee
                             that this market would open up anytime in the near future. According to
                             the representative, the unavailability of private hazardous waste insur-
                             ance is primarily due to the following factors.

                             ‘Hazardous Substance Liability Insurance, U.S. Department of the Treasury, March 1982.

                             :‘Hazardous Waste: Issues Surrounding Insurance Availability (GAO/RCED-88-2, Oct. 16,1987) and
                             Hazardous Waste: The Cost and Availability of Pollution Insurance (GAO/PEMD-89-6, Oct. 28,

                             Page 31                                                      GAO/RCED-90-64    Hazardous   Waste
                               Chapter   3
                               Options   for Funding   Poetclosure   Liabilities

                           l The inability to measure or quantify the liability exposure at hazardous
                             waste facilities along with a perception by the insurance industry that
                             liabilities are certain to occur after these facilities close.
                           . An unwillingness by the industry to guarantee coverage on a perpetual,
                             noncancellable basis to cover the entire 30-year postclosure period.
                           . The financial liability of the insurance industry in the pollution arena,
                             where the conduct of the policyholder is no longer relevant and insurers
                             would be ultimately liable for cleanup costs.

                               EPAhas also determined that private insurance for postclosure is not
                               available. In its October 1986 proposed rule for corrective action, EPA
                               indicated that it was aware of only one company that had offered post-
                               closure insurance and that this company stopped offering such insur-
                               ance as of 1986.

Private Coinsurance and        Both coinsurance and reinsurance are types of insurance that spread the
Reinsurance                    risks associated with any potential insurance losses. In a coinsurance
                               scheme, an owner/operator would share the losses sustained under an
                               insurance policy with the insurance company. Reinsurers share in the
                               risks of insuring potential losses with insurance companies in exchange
                               for a portion of the premium.

                               Neither coinsurance nor reinsurance is a viable option for assuring post-
                               closure liability funding. As stated in the 1982 Treasury study, other
                               private sector insurance arrangements such as coinsurance and reinsur-
                               ante encounter many of the same shortcomings as private insurance,
                               and consequently these options are not feasible in the foreseeable
                               future. The senior economist responsible for the study told us that the
                               feasibility of both coinsurance and reinsurance is dependent upon the
                               existence of a robust private insurance market to cover these liabilities.
                               As previously discussed, this market does not exist.

                               As discussed in our October 1987 report, the availability of reinsurance
                               for hazardous waste facilities has been limited since 1984, when foreign
                               reinsurers began to leave the reinsurance market. A representative of
                               the American Insurance Association stated that the association does not
                               expect a resurgence in the reinsurance market for pollution liabilities.

Voluntary   Risk Pooling       A risk pool is a group of riskbearers who spread and finance losses
                               among themselves when private insurance is not available or prohibi-
                               tively expensive. Risk retention groups, which are a form of risk pool-
                               ing, can be established as insurance companies licensed by states. The
                               Risk Retention Amendments of 1986 allow a broad range of firms with

                               Page 32                                             GAO/RCED-90-64   Hazardous   Waste
                             chnpm 8
                             Optionsfor FundingPostclo8ureLi&illtie44

                             similar liability risks to form self-insurance pools. In addition, Section
                             210 of SARAstates that risk retention groups may operate to provide pol-
                             lution liability insurance.

                             As discussed in the 1982 Treasury report, risk pooling is not a viable
                             option for postclosure liability funding. Because postclosure liability is
                             uncertain and potentially unlimited, Treasury determined that under-
                             writing the risk of postclosure is no more acceptable to mutual associa-
                             tions than to individual insurance companies.

                             Representatives of hazardous waste disposal firms and NSWMAalso
                             pointed out that risk pooling was not a practical option for postclosure
                             liabilities. In 1986 an attempt was made by NSWMAto establish a risk
                             pool for operating hazardous waste facilities. The risk pool, Waste Insur-
                             ance Liability Limited, failed to attract sufficient participation and was
                             terminated because the association was unable to set initial capital con-
                             tributions and annual premiums the prospective participants considered
                             equitable. The hazardous waste disposal industry is composed of a very
                             few large companies and many small companies, and some potential par-
                             ticipants view the insurance coverage provided by the risk pool to be
                             disproportionate with the financial commitment they would be required
                             to make.

Public Sector Options        Public sector funding options- federal insurance or a federally adminis-
                             tered trust fund-could   be used to assure that moneys are available for
                             any unfunded postclosure liabilities that may occur. These options pro-
                             vide the greatest degree of funding assurance since they provide federal
                             funding guarantees. However, public sector options place more financial
                             risk on the federal government.

Federal Insurance Programs   The federal government can, and does, serve as an insurer if private
                             insurance is not available. Federal insurance has been established in
                             several instances where liabilities may be incurred, private insurance
                             for these liabilities could not be obtained, and the federal government
                             believed it was in the national interest to assure funds would be availa-
                             ble to cover any losses. The government can provide funding through a
                             federal insurance program, by mandating risk pooling, and/or as a rein-
                             surer or coinsurer. Such insurance programs have been established in
                             the Federal Emergency Management Agency (FEMA) for flood and crime
                             insurance and in the Nuclear Regulatory Commission for nuclear power
                             plant accidents.

                             Page33                                         GAO/RCRD-9064
    Chapter 3
    Options for Funding   Poatcloeure   Llabllities

    However, although postclosure liabilities at hazardous waste facilities
    are difficult to estimate and private insurance is generally not available,
    federal insurance officials do not believe that it is an area for federal
    insurance coverage. Officials from FEMA’S Federal Insurance Administra-
    tion (FIA) said that federal insurance may not be appropriate for post-
    closure liabilities at hazardous waste disposal facilities. The FIA officials
    cited a number of concerns with establishing a viable postclosure liabil-
    ity insurance program, including the following.

. The lack of actuarial experience with postclosure liability costs. The
  officials said that with flood insurance, for example, risks can be quanti-
  fied based on historical data. However, the lack of experience-based
  data on postclosure liabilities makes it difficult to quantify the risks,
  costs, and coverage.
. Coverage of bodily injury claims. The federal insurance programs FIA
  administers have been limited to property damage only, and it is more
  difficult to quantify the risks associated with bodily injury and poten-
  tially more expensive.
l Certainty of risk. The possibility exists that even if facilities are built to
  current standards leakage will occur.
l The need for perpetual insurance coverage. In other areas insurance has
  a time limit, but postclosure coverage would be forever.

    FIA’S Deputy Administrator added that federal insurance is usually pro-
    vided as a mechanism to influence behaviors and to achieve certain
    objectives while at the same time providing insurance coverage. For
    example, to obtain flood insurance, buildings must be built to certain
    standards which reduce the likelihood of flood damage. However, haz-
    ardous waste facilities already have to meet high standards for con-
    struction and maintenance, and therefore it appears that insurance is
    not needed to change the behaviors of facility owners/operators.

    The deputy administrator told us that before any insurance program can
    be contemplated for postclosure liabilities at hazardous waste facilities,
    public policy objectives must first be established. He said that such a
    policy must determine if it is in the economic interest of the United
    States to establish such insurance and/or whether changes to current
    behavior are needed and would be obtained through the insurance.

    A program based on the nuclear insurance program may also not be
    appropriate. The Price-Anderson Act created an insurance program for
    the nuclear industry to remove the deterrent to private sector participa-
    tion in nuclear energy presented by potentially enormous liability claims

    Page 34                                           GAO/RCED-90-64   Hazardous   Waste
                       Chapter 3
                       Options for Funding   Poatclomre   Liabilities

                       of a catastrophic accident. The act establishes a source of funds to com-
                       pensate personal injury and property damage from a nuclear accident
                       and limits the liability of any entity from such accidents, Price-Ander-
                       son is a combination of private insurance, mandatory risk pooling, and
                       federal coinsurance. Each operating nuclear plant must carry $200 mil-
                       lion in private insurance as “primary” insurance. In cases where dam-
                       ages exceed that amount, each plant may be required to contribute a
                       retrospective premium of up to $63 million per reactor into an industry
                       insurance pool. Because there are currently 114 operating reactors, this
                       “secondary” insurance is equivalent to $7.2 billion. The law contem-
                       plates that the Congress will review public liability exceeding this limit
                       to determine whether additional compensation will be made by the fed-
                       eral government.

                       A Senior Insurance Indemnity Analyst in NRC’S Office of Nuclear Reactor
                       Regulation pointed out that although some aspects of Price-Anderson
                       insurance could be applied to a postclosure liability program, such as
                       coinsurance, this insurance concept is applicable to nuclear facilities
                       only during their operating life. Once a facility gives up its operating
                       license, it is no longer covered by the Price-Anderson provisions.

Modified Postclosure   The Postclosure Liability Trust Fund was established in 1980 to provide
Liability Trust Fund   a mechanism to assume the liabilities of owners/operators at RCRA per-
                       mitted facilities after closure. The PCLTFwas designed to accept the lia-
                       bilities of owners/operators and to assume the costs of long-term
                       monitoring and care at qualified hazardous waste disposal facilities.
                       Moneys in the fund were to be generated through a tax on hazardous
                       waste disposal, but if the fund balance exceeded $200 million in any
                       year, the tax would not be imposed the following year.

                       The ability of the PCLTFto pay for all postclosure liabilities, however,
                       was questionable. EPAconducted a study in 1986 on the viability of the
                       fund4 and determined that there was a 60-percent likelihood that the
                       fund would be unable to maintain a positive balance after 60 years. EPA
                       concluded that it would be difficult to guarantee the adequacy of the
                       fund in perpetuity. Further, EPArecommended, in a letter to the Con-
                       gress in June 1986, eliminating the PCLTFfor the following reasons,

                       4Report to the Congress of the United States on the Post-Closure Liability Trust Fund Under Section
                       301(a)(2Xii) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980
                       (Office of Solid Waste, U.S. EPA, May 1986).

                       Page 36                                                       GAO/RCED-9044HamrdousWaste
  Chapter 3                                                                                .
  0ptIo1’1~ for Funding   Postclosure   LiabilitSes

. The major provision of the PCLTF-the assumption by the fund of
  owner/operator liability within 5 years after a facility closed-was
  inconsistent with EPA’Sbelief that liability should remain with the
. The S-year period to qualify for PCLTFfunds was inconsistent with the
  30-year postclosure maintenance and monitoring phase.

  Modifications to the PCLTFto make it more viable have been suggested by
  the NSWMA.Included among these modifications are the following.

. Remove the fund’s $200-million ceiling. This would provide a larger
  source of funds to pay for any liabilities that occur.
. Restructure the fund similar to coinsurance in which owners/operators
  would pay a deductible of $1 million, the fund would pay out claims
  ranging from $2 million to $30 million, and owners/operators would pay
  claims above $30 million.
9 Require that any facility would have to be in operation for 10 years in
  order to qualify for coverage by the fund.
. Delay implementation of PCLTFcoverage until after the 30-year post-
  closure period.

  However, whether these modifications would make the fund viable are
  subject to question. According to a representative of EPA’Scontractor for
  the 1986 study, it is difficult to determine if the fund would be finan-
  cially viable if such changes were made. He said that the fund would
  have a much greater likelihood of being solvent if the postclosure tax
  was increased or the fund ceiling of $200 million removed.

  The contractor representative said that until data are available on the
  extent and magnitude of the liabilities that could be incurred, it is
  impossible to determine an appropriate structure for the trust fund. The
  representative said that consequently the structure of the fund becomes
  a policy decision.

  EPA,however, does not believe that a modified postclosure trust fund
  would be appropriate federal policy. According to the Director, Permits
  and State Programs Division, a federal trust fund runs counter to the
  objectives of HSWA,which establishes the federal policy of discouraging
  the land disposal of hazardous waste. He said that a trust fund would
  serve as an incentive to land disposal of these wastes and could result in
  increase disposal capacity, which is currently not needed nor is it
  desired by EPA,

  Page 36                                             GAO/RCED-99-94   Hazardous   Waste
.   Chapter 3
    Option.9 for FundSng Polptclomre   LiaMlltiem

    Moreover, the establishment of a federal trust fund would serve as a
    disincentive for owners/operators to take all measures possible to pre-
    vent leakage from their facilities. The director said that EPAbelieves
    that the best mechanism for ensuring that facilities are properly con-
    structed and maintained is the liability that could result from leakage of
    hazardous constituents. Consequently, EPA’Spolicy is that owners/oper-
    ators should retain liability for their facilities and that the federal gov-
    ernment should not be involved with establishing a trust fund that
    would remove such liability.

    Page 37                                         GAO/RCED99-64   Hazardous   Waste
Chapter 4

Conclusions and Recommendation

              The Congress, through the passage of RCRAand its amendments, and EPA,
              through its regulations implementing RCRA,have sought to minimize the
              environmental impacts of continued land disposal of hazardous wastes.
              The permitting of facilities, the development and implementation of
              waste migration prevention measures, and the maintenance and moni-
              toring of facilities after they close are current standards that address
              past hazardous waste management practices that did not seek to mini-
              mize the leakage or release of pollutants to the environment.

              Although these requirements represent a significant improvement in
              hazardous waste disposal practices, it remains likely that some permit-
              ted hazardous waste disposal facilities will leak sometime after they
              close. The current technology used to prevent the migration of waste-
              liners and covers-are not believed capable of preventing waste migra-
              tion forever. In fact, these technologies may fail at some point after
              facilities close and the mandated 30-year maintenance and monitoring
              period has ended. Although treatment of wastes is now being required,
              some currently disposed wastes will remain hazardous for long periods
              and consequently leakage from permitted facilities could pose a risk to
              the public health and the environment.

              If and when leakage does occur from permitted facilities, current post-
              closure funding mechanisms are not adequate for ensuring that suffi-
              cient resources will be available to pay for liabilities resulting from such
              leakages. The only postclosure funding mechanisms in place cover rou-
              tine postclosure care for the established 30-year postclosure period and
              corrective action for known discharges. Should other problems arise
              during postclosure, there is no assurance that funds will be immediately
              available to take necessary actions. Although currently permitted haz-
              ardous waste facilities can pass financial tests, present financial condi-
              tions provide little guarantee that a facility owner/operator will be
              financially able to pay for liabilities 30,50, or more years in the future,

              EPAhas acknowledged for several years that concerns exist over the
              long-term effectiveness of current waste disposal practices in controlling
              the migration of hazardous substances. EPAhas stated that its current
              requirements-particularly    liners-are not permanent leak prevention
              measures and that releases into the environment could occur after the
              established postclosure period ends. However, EPAdoes not have current
              plans to address this issue and better ensure longer term protection to
              the public. EPAofficials generally agree this issue has low priority in the
              RCRAprogram but will be addressed at some future date.

              Page 38                                         GAO/RCED-90-M   Hazardous   Waste

We understand EPA’Sposition on placing a low priority on long-term
postclosure concerns at permitted hazardous waste land disposal facili-
ties. EPAhas limited resources to deal with the many environmental
problems facing the nation, and focusing its actions to protect the public
from current environmental dangers is a prudent use of resources.
Potential environmental problems that may occur a half century or more
from now may not warrant the most immediate attention.

However, on the basis of past history, we remain concerned that future
EPAefforts directed towards long-term postclosure issues will be insuffi-
cient. It has been over 10 years since the Congress first established a
mechanism-PCLTF-to         ensure funding for postclosure liabilities and
almost 6 years since EPAdetermined that the PCLTFwould not be viable,
yet little has been done to address and resolve long-term liability ques-
tions. In our view, the potential exists that efforts to address this issue
will continue to be deferred as other environmental concerns arise, and
actions needed to ensure that postclosure liability problems do not occur
may be too little, too late. EPA’SScience Advisory Board has expressed
similar concerns about the current knowledge of the long-term effective-
ness of land disposal practices and EPA’Sactions to address this concern.

To best assure that EPAobtains and develops adequate information to
resolve postclosure liability concerns, the agency needs to develop a
strategic plan outlining the activities it intends to take to address long-
term postclosure issues and the time frame for completing these activi-
ties. At a minimum, such a plan should include (1) activities to deter-
mine the current effectiveness of waste migration prevention measures
already in place and (2) research on the long-term performance of liners,
covers, and other technology required to prevent waste migration. In
addition, the plan should also address the issue of extending the post-
closure care period. Extending this period would provide longer term
care and monitoring at these facilities, better ensuring that waste con-
tainment measures are working and that any leakage would be detected.

We recognize that EPAhas already identified some activities to conduct
in these areas and has proposed a rule to collect data on leakage through
liner systems. However, we believe a strategic plan is needed to provide
direction to these efforts while giving assurance to the Congress and
others that the concerns over long-term postclosure liabilities will be
undertaken in an orderly, reasonable, and timely manner. Without such
planning, the completion of all necessary actions to thoroughly assess
the effectiveness of current disposal technology, and the identification

Page39                                         GAO/RCED&MM
                 Chapter 4
                 Conclusiona   and Recommendation

                 and availability of resources needed to conduct such actions, is far from

                 As EPAcollects and analyzes data on long-term postclosure risks and
                 costs, the need for and structure of a mechanism to fund postclosure
                 liabilities can be better determined. On the basis of environmental
                 problems that have occurred from waste disposal in both the public and
                 private sectors, we believe that it is a prudent course of action-from
                 both public policy and financial management perspectives-to        establish
                 a program that better assures funds will be available to pay for future
                 liabilities. However, not enough information is now available to deter-
                 mine the extent of these liabilities; ascertain the most appropriate struc-
                 ture for a postclosure liability funding mechanism; and ensure that, if
                 warranted, funds collected to pay for these liabilities will be sufficient.

                 We anticipate that EPAcan develop a strategic plan to address this issue
                 in time for debates on the reauthorization of CERCLA-the legislation
                 under which the postclosure liability issue has historically been dis-
                 cussed-which     is expected in 1991. As the plan is then implemented and
                 data collected, EPAcan periodically provide data to the Congress to allow
                 for deliberations on the establishment of additional postclosure funding
                 mechanisms. If EPAcannot provide the data in a timely manner, possible
                 interim measures-such as extending the postclosure care period-
                 could be considered to provide greater protection to the public health
                 and the environment until more definitive data are available.

                 The Administrator, EPA,should develop and implement a strategy to
Recommendation   address the long-term effectiveness of current hazardous waste disposal
                 requirements so that decisions can be made about postclosure liability
                 funding mechanisms. Such a strategy should outline the activities EPA
                 needs to undertake and/or complete to assess postclosure risks, require
                 evaluations of actions to reduce risks such as extended postclosure care,
                 and assess available alternatives for funding postclosure liabilities. The
                 strategy should also identify required EPAresources and establish time
                 frames for completing such activities. Further, the Administrator should
                 periodically report to the Congress the agency’s progress in obtaining
                 the necessary data on the effectiveness of current disposal requirements
                 and as information becomes available, be prepared to take interim mea-
                 sures to provide greater public protection until more definitive data are

                 Page 40                                         GAO/RCED-90-04   Hazardous   Waste
                   Chapter 4
                   Conclusions   and Recommendation

                   In EPA'Scomments (see app. I), EPAsaid that if it is our intent that EPA
EPA Comments and   develop and implement a strategic plan to assess the need for a post-
Our Response       closure liability trust fund, sufficient information probably will not be
                   obtained in time for CERCLAreauthorization hearings. According to EPA,
                   substantive information would be unavailable for anticipated hearings
                   since detecting groundwater contamination, necessary to determine the
                   effectiveness of hazardous waste requirements, often takes 20 or more

                   It was not our intent that EPAcollect all the data necessary to assess the
                   long-term effectiveness of current disposal practices and the need for
                   additional postclosure funding mechanisms in time for anticipated CER-
                   CIA reauthorization hearings. We recognize the inherent difficulties in
                   accomplishing such actions in that time frame; consequently, our report
                   recommends that EPAdevelop its strategy for obtaining the needed infor-
                   mation in time for the hearings. We believe the timing for implementing
                   and completing the actions contained in the strategy should be discussed
                   by EPAwith the Congress during the hearings, and need to be considered
                   in light of other environmental concerns that place competing demands
                   on EPAresources.

                   However, it should be noted that EPA'Sstatement that the detection of
                   groundwater contamination often takes 20 years or more underscores
                   our position that actions to address long-term effectiveness of current
                   disposal actions should be initiated in a timely manner. Such long delays
                   in determining whether current waste disposal requirements are effec-
                   tive can result in a false sense of confidence in current hazardous waste
                   management and has the potential to result in another Superfund situa-
                   tion in future years, a situation that the Congress has stated that it
                   wants prevented through the RCRAhazardous waste management

                   Page 41                                       GAO/RCED-SO-64   Hazardous   Waste
Appendix I

Canrnents F’rom the Environmental
Protection Agency

supplementing those in the
report text appear at the
end of this appendix.                     UNITED   STATES ENVIRONMENTAL          PROTECTION        AGENCY
                                                         WASHINGTON,      D.C.   20460

                                                               c8Bi6regl                 POLICY,
                                                                                                         OFFICE OF
                                                                                                    PLANNING   AND EVALUATION

                             Mr. Richard L. Hembra
                             Director,  Environmental Protection Issues
                             Re~OurCeB, community and Economic Development                         Division
                             U.S. General Accounting Office
                             Washington, D.C. 20548
                             Dear Mr. Hembrat
                                     Thank you for the opportunity     to review the General Accounting
                             Office     (GAO) draft report entitled       "Hazardous Waste: Funding of
                             Postclosure      Liabilities      Remains Uncertain"       (GAO/NED-90-64).
                             Pursuant to Public Law 96-226, the Environmental           Protection  Agency
                             is hereby providing          the official   Agency response to the draft
                             report.      Our response concerns specific       sections  of the report as

                                    The opening paragraph of the report , noting the environmental
                             contamination      caused by past land disposal,                states that while
                             better   disposal    and containment     requirements         now apply to land-
                             disposed waste, the possibility        remains for leaks requiring             costly
                             cleanup actions.         However, the paragraph does not reflect                   the
                             requirement6      of the land-disposal         restrictions        program.     Since
                             these treatment8      reduce the toxicity        and mobility       of wastes, they
                             should decrease        the future    liabilities           associated     with   land
                             disposal at least as much as the technical               requirements     for liners
See comment 1.               and covers.    GAOehould note these requirements in conjunction                  with
                             disposal and containment requirements.               subsequent sections of the
                             report do mention the restrictions             program, but not including            it
                             in the Executive        Summary neglects        a key component of the HSWA

Now on pp. 27-37.

                                    This chapter of the draft           report  argues that the current
                             financial   aeaurance requirements        do not provide eecure funding for
                             known postclosure     liabilities      because the Agency allows the use of
See comment 2.               a financial    test.     GAO feels that such a test is inadequate for
                             predicting   the financial        health of a firm in the distant     future
                             when such liabilities         will come due.

                                     Page42                                                        GAO/RCED-90-64
                                Appendix I
                                Comments From the Environmental
                                Protection Agency


                               The Agency concurs that financial           tests may not be good long-
                        term predictors.         For that reason, EPA requires yearly updates of
                        the financial     test to assure that a firm's financial           health has not
                        substantially      deteriorated.      Firms failing     the financial    test must
                        provide an alternative         assurance of its ability       to comply with our
                        requiremente.       GAO's characterization         doea not take into account
                        that failing      the financial      test triggers      the provision     of other
                        financial     aeeurance mechanisms deecribed in the report.
Now on pp. 38-41.

                                  Regarding the first        part of the recommendation,          I have a
                        concern.          If it is GAG's intent          that the Agency develop and
                        implement a strategic            plan to assess the need for a postclosure
                        liability       trust fund, it is unlikely          that sufficient    information
                        could be obtained for CERCLAreauthorization                 hearings,    as the GAO
Now on p. 40.           report      suggests on' page 53.           Substantive    information     would be
                        unavailable        for anticipated    hearinga since detection of groundwater
                        contamination,          necessary     to determine       the effectiveness         of
                        hazardous waste requirements,            often takes 20 or more years.
See comment 3.                Thank you for the opportunity           to respond to the draft      report.

                                                                      Assistant    Administrator



               Appendix     I
               Comments         From the Environmental
               Protection       Agency

               The following are GAO'Scomments on the Assistant Administrator’s       let-
               ter dated February 16,199O.

               1. We revised the report to reflect that required disposal practices
GAO Comments   include the treatment of waste to reduce its toxicity.

               2. We clarified our discussion of financial tests in chapter 3 to note that
               firms failing the financial test must provide an alternative assurance of
               their ability to fund postclosure care costs. However, although such fail-
               ures trigger the imposition of other funding assurance requirements,
               firms may be unable to provide such assurance, particularly in bank-
               ruptcy situations.

               3. Response provided in chapter 4.

               Page 44

’ bzi       Contributors to This Report

                         Peter F. Guerrero, Associate Director
Resources,               Patricia D. Moore, Assistant Director
Community , and          John R. Schulze, Evaluator-in-Charge
                         Sarah E. Veale, Evaluator
Development  Division,   Scott Smith, Economist

Washington, DC.


 (oasrro)                Page 45                                 GAO/RCED-fJO-64   Hazardous   Waste

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