EPA diverts money from shared Superfund pool

Introduction

The Environmental Protection Agency has diverted $709 million collected from possible Superfund polluters over the past seven years to special accounts, putting hundreds of millions of dollars out of reach of other Superfund sites waiting for cleanup.

Before 2000, all money recovered from companies for site cleanup work performed by the EPA went back to the Superfund trust fund to be spent on cleaning up other sites. But a little-noticed change in agency policy that year allowed cleanup reimbursements reached in settlements to be tucked away into site-specific accounts to be used only for future work at those sites. There are hundreds of these accounts, and the EPA doesn’t need Congressional approval to spend the money in them, unlike the Superfund trust fund.

The EPA gave the Center a listing by year of cleanup reimbursements deposited in these site-specific accounts, but declined to provide any supporting documentation. Until the EPA released this information, there were no publicly available documents clearly breaking down cleanup reimbursements, balances in these accounts or how the money is used. The EPA says its internal documents detailing this information can be obtained only through filing a Freedom of Information Act request, which the Center has done.

The EPA Inspector General’s office, which has criticized the agency for holding all of these funds in special accounts longer than needed, is currently reviewing how the money is managed. Other federal oversight agencies also are scrutinizing the accounts.

Since the policy change, the amount of money returned to the trust fund has fallen, while amounts held in the special accounts have grown, a Center analysis shows. In the first two years after the policy change, nearly $250 million collected from companies went into these accounts, and $680 million back into the trust. By 2004, more collected funds were placed into special accounts than into the trust. In 2006, the trust got $60 million, special accounts $173 million.

Agency officials have refused multiple requests from the Center for information on the special accounts. They would not even confirm the number of accounts, but an August 2005 agency memo put them at more than 500 at that time.

The EPA disclosed a limited breakdown of the site-specific funds in response to a Center investigation of Superfund released late last month that reported a significant decline in the amount of money Superfund is recovering from companies for the trust fund. The agency said it has continued to collect reimbursements from companies and much of it was landing in these special accounts.

“This flies in the face of the way Superfund is supposed to work,” said John Pendergrass, senior attorney at the Environmental Law Institute. “Putting money into [a special account] is a windfall for one site and siphoning money away from the [Superfund] trust fund.”

Special accounts revealed

In its report, “Wasting Away,” the Center found that reimbursements from companies for site cleanups fell by half in the past six fiscal years, compared with the previous six years, 1995 through 2000. At its peak, the Superfund trust fund was collecting $320 million a year in fiscal years 1998 and 1999, but that dropped to $60 million a year in 2005 and 2006. Meanwhile, the backlog of sites needing cleanup is growing, while the money allocated to do the work is running out, the Center’s investigation showed.

The Center confirmed these cost recovery numbers in several public sources — the federal budget, Treasury department reports and reports by the Congressional Research Service — detailing how much recovered money was sent back to the trust fund.

The Center had asked the EPA on several occasions for comment on the declining cost recovery money, but the agency did not mention the site-specific accounts. After the Center released its study on April 26, the agency provided some information on the special accounts to other reporters. The agency finally gave the same information to the Center about a week later.

“The primary advantage to placing funds into a special account is that EPA can directly access the special account to provide funds for future work at the site,” agency spokeswoman Jessica Emond wrote in an e-mail to the Center.

EPA officials overseeing Superfund cleanups say that the special accounts are vital to keeping cleanup work going at sites as Superfund money runs low. Money in special accounts also conserve limited trust fund resources by not drawing on them for expenses at sites that have special accounts, they say.

When recovered costs went back to the trust fund, EPA officials said, there was no guarantee what specific sites the money would pay for. Decisions on where to allocate money from the trust fund are made by EPA headquarters, but site project managers themselves decide how to spend money from special accounts.

“To the people on the ground, money going into the trust fund doesn’t mean anything to them, because they may never see it again,” said Tom Voltaggio, an environmental consultant and former EPA regional deputy administrator.

John Frisco, a Region 2 remedial project manager who oversees cleanup work, said the special accounts are “a slightly more efficient process than the old days” when money went into the trust fund. “Back then, we would have to go to Washington to bring the money back, now it just goes back to the site.”

But the growing use of the special accounts has left an unknown number of Superfund sites without a special account or a financially viable company associated with it. The “orphan sites” have had to compete for money left over from other cleanups, and these dwindling funds are distributed during closed deliberations by the agency to a fraction of the sites that need the money.

Change of heart

A major revision of the Superfund law in 1986 provided for these site-specific accounts. At first, the only funds the EPA allowed in the accounts were from settlements that won administrative costs in advance or from “cash-outs” — money that a company gave the EPA as part of a settlement to absolve it from further obligations at the site.

In 1997, an agency memo specified that “past costs,” or money recovered by the EPA in settlements, had to go back to the trust fund, and not to special accounts.

But in 2000, the agency reversed that policy. A memo dated Jan. 27, 2000, said, “The statute … does not distinguish between past and future costs. This means that the entire [settlement] payment, even if it consists only of payments for past costs, may be placed in a special account at the Agency’s discretion.” After the site is cleaned up, EPA apparently also could, in its discretion, move any unused money to the Superfund trust fund.

Since the policy change, the EPA has continued to develop guidelines for these accounts. In August 2005, regional offices were ordered to report to headquarters all the information they had about special accounts. The memo said that compiling this information would help the agency answer any inquiries from Congress, the Office of Management and Budget and the EPA’s inspector general.

Inquiries of these accounts were already under way. Four months earlier, during a national meeting of regional project managers, Superfund official Michael B. Cook told the gathering that the IG, OMB and the Government Accountability Office were “scrutinizing Superfund accounting practices,” including the special accounts.

Experts say that by claiming the money in special funds should be counted as cost recovery money, the EPA is trying to make it appear as though there is more money available through cost recovery than there really is.

Rena Steinzor, a University of Maryland environmental law professor who as a congressional staffer helped write the reauthorization of the Superfund law in 1986 sees the special funds as a diversionary tactic. “The long and short of it is that EPA’s efforts to outsmart its political overseers, and pretend that the agency has plenty of money for cleanup, are misleading and further undermine the agency’s already fragile credibility in that area.”