Legal Expenses for Cleanup-Related Activities of Major U.S. Corporations Gao ID: RCED-95-46 December 23, 1994

Under the Superfund program, parties responsible for hazardous waste sites that are contaminating the environment are liable for cleanup costs. Responsible parties can include generators of hazardous waste deposited at the sites, transporters of the waste, and site owners and operators. In addition to cleanup costs, responsible parties must also pay legal expenses to allocate the cleanup costs among themselves, to settle with the government, or to litigate liability for cleanups. Responsible parties have complained that these costs--called transaction costs--are high and represent too large a portion of their total Superfund expenditures. GAO surveyed Fortune 500 companies to determine how much responsible parties have spent on cleanup and legal costs at Superfund sites and to identify factors that these parties believe have increased or decreased their legal costs.

GAO found that: (1) about one-half of the firms responding to the GAO survey spent a median of $1.5 million in cleanup and legal costs since January 1987; (2) the firms spent about two-thirds of their total expenses on site cleanups and one-third on legal costs; (3) the firms' cleanup and legal expenses varied widely; (4) in general, the firms that spent more on site cleanups also spent more on legal costs, however, responsible parties with minor shares of cleanup costs paid proportionally higher legal expenses than did major contaminators; (5) most of the firms incurred legal costs in allocating cleanup costs among responsible parties, negotiating with EPA over responsibility and cleanup remedies, and pursuing or defending third-party legal actions; (6) EPA failure to identify and enforce the cleanup obligations of potentially responsible parties, the lack of data on all parties' waste contributions, and the pursuit of other responsible parties for cleanup contributions also increased legal costs; and (7) some firms formed negotiating groups with other responsible parties and used alternative dispute resolution techniques to decrease their legal costs.

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