2011 adc winter forum | page 2 formerly used defense sites

2011 ADC WINTER FORUM | PAGE 2

Formerly Used Formerly Used Defense SitesDefense Sites


Barry Steinberg, Senior PartnerBarry Steinberg, Senior PartnerKutak Rock LLPKutak Rock LLP

Jeff Swanson, PresidentJeff Swanson, PresidentWestcliffe Engineers, Inc.Westcliffe Engineers, Inc.

Cliff Yeckes, Senior Vice PresidentCliff Yeckes, Senior Vice PresidentWILLISWILLIS


Formerly Used Defense SitesFormerly Used Defense Sites(FUDS)(FUDS)

What are they and should you care?What are they and should you care?


FUDS: Legal FoundationFUDS: Legal Foundation• Recognized in the Defense Environmental Recognized in the Defense Environmental

Restoration legislation as a specific account for Restoration legislation as a specific account for funding – 10 United States Code, 2703(a)(5)funding – 10 United States Code, 2703(a)(5)

• Title 10 U.S.C., Section 2701(C)Title 10 U.S.C., Section 2701(C)1.1. Basic Responsibility. – The Secretary shall carry out (in Basic Responsibility. – The Secretary shall carry out (in

accordance with the provisions of this chapter and accordance with the provisions of this chapter and CERCLA) all response actions with respect to release of CERCLA) all response actions with respect to release of hazardous substances from each of the following:hazardous substances from each of the following:……(B) Each facility or site which was under the jurisdiction (B) Each facility or site which was under the jurisdiction of the Secretary and owned by, leased to, or otherwise of the Secretary and owned by, leased to, or otherwise possessed by the United States at the time of actions possessed by the United States at the time of actions leading to contamination by hazardous substances.leading to contamination by hazardous substances.


Defining FUDSDefining FUDS• Secretary of Defense delegated program Secretary of Defense delegated program

responsibility to Army Corps of Engineers.responsibility to Army Corps of Engineers.• Corps’ Definition:Corps’ Definition:

A)A) Real PropertyReal PropertyB)B) Under the jurisdiction of the Secretary of Defense or a Under the jurisdiction of the Secretary of Defense or a

Secretary of a military departmentSecretary of a military departmentC)C) ----

1.1. Owned by, orOwned by, or2.2. Leased by, orLeased by, or3.3. Otherwise possessed by the United States, orOtherwise possessed by the United States, or4.4. Those real properties where accountability rested with DOD Those real properties where accountability rested with DOD

but where the activities at the property were conducted by but where the activities at the property were conducted by government owned contractor operated (GOCO)government owned contractor operated (GOCO)

D)D) Transferred from DOD control prior to 17 October 1986Transferred from DOD control prior to 17 October 1986


Statutory Protection of Current OwnerStatutory Protection of Current Owner

A)A) CERCLA warranty does not apply to property CERCLA warranty does not apply to property transferred prior to 17 October 1986transferred prior to 17 October 1986

1.1. Superfund amendments became lawSuperfund amendments became law2.2. No retroactive application for deeds already executedNo retroactive application for deeds already executed

B)B) 330 Indemnity330 Indemnity1.1. Applies for deeds executed between 1 Applies for deeds executed between 1

August 1977 (Enactment of 10 U.S.C. 2687) and 17 August 1977 (Enactment of 10 U.S.C. 2687) and 17 October 1986October 1986

C) Funding competition with BRAC and active base C) Funding competition with BRAC and active base remediationremediation


Magnitude of the ProblemMagnitude of the Problem• > 9000 FUDS sites identified> 9000 FUDS sites identified

• Approximately 4700 sites with clean up Approximately 4700 sites with clean up responsibilities as of March 2010responsibilities as of March 2010

• Increase of 200 sites needing cleanup since Increase of 200 sites needing cleanup since July 2001July 2001

• More???More???


FUDS Program OverviewFUDS Program Overview• Established in 1986 by SARA as part of Defense

Environmental Restoration Program (DERP)– Requires DoD to investigate and remediate past

environmental releases and hazards• Program elements

– Installation Restoration Program (IRP)– Military Munitions Response Program (MMRP)– Building Demolition/Debris Removal (BD/DR)• Army designated Executive Agent for FUDS– Executed by US Army Corps of Engineers– Regulatory oversight by State’s and EPA


FUDS InventoryFUDS Inventory

Source: J. Chu, USACE E2S2 Conference May 2010


FUDS InventoryFUDS Inventory



FUDS Program Site StatusFUDS Program Site Status

Source: DERP Environmental Report to Congress 2009


FUDS Cleanup LiabilityFUDS Cleanup Liability


Total FUDS (FY11)Cost-to-Complete• $2.7B HTRW• $10.4B MMRP• $1.2B Prog. Mgmt.• $14.6B Total FUDS


FUDS Program Goals & FundingFUDS Program Goals & Funding



FUDS Program Goals & FundingFUDS Program Goals & Funding• FUDS-IRP

• Remedy in Place– High RR 2007– Medium RR 2011– Low RR 2014

• FUDS-MMRP• Initial Assessments– PA 2007– SI 2010• Remedy in Place– All Sites 2020

Source: J. Chu, USACE E2S2 Conference May 2010RR = Relative RiskIRP = Installation Restoration ProgramMMRP = Military Munitions Response ProgramHTRW = Hazardous, Toxic, Radioactive Waste


FUDS Program UncertaintyFUDS Program Uncertainty

•Site identification•Eligibility & Priority•Disclosure•Record Keeping

•Site identification•Eligibility & Priority•Disclosure•Record Keeping

•Approach•Level of Effort•Documentation•Uncertainty

•Approach•Level of Effort•Documentation•Uncertainty

•Standards•Concurrence•Residual risks•NDAI decision

•Standards•Concurrence•Residual risks•NDAI decision

•Responsibility•Monitoring•Use restrictions•Liability

•Responsibility•Monitoring•Use restrictions•Liability


FUDS Challenges for FUDS Challenges for Landowners & CommunitiesLandowners & Communities

• Engagement in FUDS Process- “Getting a seat at the table”- Access to decision makers- Disclosures, information

• Prioritization and Funding- RRSP and MRSPP vs. “Squeaky wheel”- Sequencing = Politics- Interim Risk Management

• Managing Uncertainty & Liability Concerns- Scope of investigation and remediation- CERCLA responsibility- “NDAI” decision point


FUDS Site PrioritizationFUDS Site Prioritization

Relative Risk Site Evaluation (RRSE)

• Prioritize IRP sites• High, Medium, Low• Based on contaminants, migration,

potential impacts on population.

Relative Risk Site Evaluation (RRSE)

• Prioritize IRP sites• High, Medium, Low• Based on contaminants, migration,

potential impacts on population.

Munitions Response Site Prioritization Protocol (MRSPP)

• Prioritize MMRP sites• Three modules: EH, CWM, MC;

Scores from 1-8; 1 = CWM• Based on relative hazards and

potential impacts on population

Munitions Response Site Prioritization Protocol (MRSPP)

• Prioritize MMRP sites• Three modules: EH, CWM, MC;

Scores from 1-8; 1 = CWM• Based on relative hazards and

potential impacts on population

• DoD prioritizes funding to clean up sites that pose the greatest threats first – “Worst First”

• Sequencing of sites for clean up:- RRSE & MRSPP to determine site’s relative risks - Economics, programmatic and stakeholder concerns may

also affect clean up priority- Preference to complete existing sites before starting new


How Do FUDS Issues Arise?How Do FUDS Issues Arise?

• Inadvertent discovery – problem unearthed Inadvertent discovery – problem unearthed – No disclosure in transfer documentsNo disclosure in transfer documents– Prior use, military presence lost in the fog of Prior use, military presence lost in the fog of

historyhistory• Increased due diligence – FUDS now reported Increased due diligence – FUDS now reported

on Phase I EDRon Phase I EDR• WWII air fields, industrial plants, old Army WWII air fields, industrial plants, old Army

training areastraining areas


RecourseRecourse

• FUDS, but underfundedFUDS, but underfunded

• CERCLA Section 107 – PRP Status of United CERCLA Section 107 – PRP Status of United StatesStates

• Environmental InsuranceEnvironmental Insurance


FUDS Risk Transfer FUDS Risk Transfer Owner ConsiderationsOwner Considerations

• Pre-1986 Deed Indemnification Language (including Pre-1986 Deed Indemnification Language (including liability-shifting or restriction clauses) liability-shifting or restriction clauses) does notdoes not mitigate DoD’s responsibilities under CERCLA.mitigate DoD’s responsibilities under CERCLA.

• USACE, as agent for the DoD, is liable for USACE, as agent for the DoD, is liable for remediation of any release that occurred during remediation of any release that occurred during their ownership under CERCLA, regardless of PRP’s. their ownership under CERCLA, regardless of PRP’s.

• Many FUDS sites were transferred long ago, with Many FUDS sites were transferred long ago, with non statutorynon statutory deed restrictions or institutional deed restrictions or institutional controls which may not hold up with time.controls which may not hold up with time.


FUDS Risk Transfer FUDS Risk Transfer Understand the GameUnderstand the Game

• Depending upon age, because of statutory uncertainty, all Depending upon age, because of statutory uncertainty, all environmental costs may environmental costs may notnot be covered by DoD - investigate be covered by DoD - investigate all sources for recovery. all sources for recovery.

• Expedite $ recovery process - long USACE time frame for Expedite $ recovery process - long USACE time frame for CERCLA investigation, remediation and closure process.CERCLA investigation, remediation and closure process.

• Which regulatory framework best drives the investigation and Which regulatory framework best drives the investigation and cleanup and maximizes the contributions of others, including cleanup and maximizes the contributions of others, including insurers.insurers.

• Explore Ability to Pay settlements with the USACE.Explore Ability to Pay settlements with the USACE.• Consider minimizing USACE investigation and remediation Consider minimizing USACE investigation and remediation

costs by 3costs by 3rdrd party review. party review.


Owner or PRP in a FUDS!Owner or PRP in a FUDS! Maximize Insurance Coverage Maximize Insurance Coverage

• Determine the Chain of Title since transfer.Determine the Chain of Title since transfer.• Assess current and historic insurance policies Assess current and historic insurance policies

for potential environmental coverage. for potential environmental coverage. – Some Pollution Coverage Some Pollution Coverage maymay be available in CGL be available in CGL

policies issued prior to the Categorical Exclusions policies issued prior to the Categorical Exclusions of the 1970’s and the Absolute Pollution of the 1970’s and the Absolute Pollution Exclusion of 1986. Exclusion of 1986.


Owner or PRP in a FUDS!Owner or PRP in a FUDS! Maximize Insurance Coverage Maximize Insurance Coverage

• Consider acquiring Environmental Site Liability Consider acquiring Environmental Site Liability coverage, if none exists.coverage, if none exists.– Provide environmental site data.Provide environmental site data.– Carriers often like FUDS because they are generally small, and Carriers often like FUDS because they are generally small, and

have been developed for some time.have been developed for some time.– Develop new coverage:Develop new coverage:

• Remediation of unknown conditionsRemediation of unknown conditions• Remediation of known conditions (excess of failure to respond of Remediation of known conditions (excess of failure to respond of

available DOD indemnity)available DOD indemnity)• Potential Tort Exposures (3rd party BI, PD)Potential Tort Exposures (3rd party BI, PD)• Non-indemnified Exposures – (NRD, 3rd Party DIV)Non-indemnified Exposures – (NRD, 3rd Party DIV)• Defense CostsDefense Costs


Owner or PRP in a FUDSOwner or PRP in a FUDSOther considerationsOther considerations

• If older policies exist, explore opportunities for If older policies exist, explore opportunities for claims recovery where applicable. claims recovery where applicable.

• Consider liability transfer, guaranteed fixed price Consider liability transfer, guaranteed fixed price remediations with engineering firms or third remediations with engineering firms or third parties. parties.


Responsibilities of U.S. for Environmental Responsibilities of U.S. for Environmental Condition on Real Property After Transfer of Condition on Real Property After Transfer of

Title to Non Federal EntityTitle to Non Federal Entity

Authority for United States' Obligation

Date of Transfer of Title

CERCLA 120(h)(3)*

Section 330, FY '93

National Def. Auth.

Act CERCLA 107 PRP Contractual

Prior to 1 August 1977 No No Yes

Between 1 August 1977 and 17 October 1986 No Yes Yes

After 17 October 1986 Yes Yes Yes

*Remediation Obligation Only

2011 adc winter forum | page 2 formerly used defense sites

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