Formerly Used Defense Sites

2. Formerly Used Defense Sites

3. Barry Steinberg, Senior PartnerKutak Rock LLPJeff Swanson, PresidentWestcliffe Engineers, Inc.Cliff Yeckes, Senior Vice PresidentWILLIS

4. What are they and should you care? Formerly Used Defense Sites(FUDS)

5. FUDS: Legal Foundation Recognized in the Defense Environmental Restoration legislation as a specific account for funding – 10 United States Code, 2703(a)(5) Title 10 U.S.C., Section 2701(C) Basic Responsibility. – The Secretary shall carry out (in accordance with the provisions of this chapter and CERCLA) all response actions with respect to release of hazardous substances from each of the following: … (B) Each facility or site which was under the jurisdiction of the Secretary and owned by, leased to, or otherwise possessed by the United States at the time of actions leading to contamination by hazardous substances.

6. Defining FUDS Secretary of Defense delegated program responsibility to Army Corps of Engineers. Corps’ Definition: Real Property Under the jurisdiction of the Secretary of Defense or a Secretary of a military department -- Owned by, or Leased by, or Otherwise possessed by the United States, or Those real properties where accountability rested with DOD but where the activities at the property were conducted by government owned contractor operated (GOCO) Transferred from DOD control prior to 17 October 1986

7. Statutory Protection of Current Owner CERCLA warranty does not apply to property transferred prior to 17 October 1986 Superfund amendments became law No retroactive application for deeds already executed 330 Indemnity Applies for deeds executed between 1 August 1977 (Enactment of 10 U.S.C. 2687) and 17 October 1986 C) Funding competition with BRAC and active base remediation

8. Magnitude of the Problem > 9000 FUDS sites identified Approximately 4700 sites with clean up responsibilities as of March 2010 Increase of 200 sites needing cleanup since July 2001 More???

9. 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 Program Overview

10. FUDS Inventory Source: J. Chu, USACE E2S2 Conference May 2010

11. FUDS Inventory Source: J. Chu, USACE E2S2 Conference May 2010

12. FUDS Program Site Status Source: DERP Environmental Report to Congress 2009

13. FUDS Cleanup Liability • Total FUDS (FY11) • Cost-to-Complete • $2.7B HTRW • $10.4B MMRP • $1.2B Prog. Mgmt. • $14.6B Total FUDS Source: J. Chu, USACE E2S2 Conference May 2010

14. FUDS Program Goals & Funding Source: J. Chu, USACE E2S2 Conference May 2010

15. FUDS 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 2010 RR = Relative Risk IRP = Installation Restoration Program MMRP = Military Munitions Response Program HTRW = Hazardous, Toxic, Radioactive Waste

16. FUDS Program Uncertainty • Site identification • Eligibility & Priority • Disclosure • Record Keeping • Approach • Level of Effort • Documentation • Uncertainty • Standards • Concurrence • Residual risks • NDAI decision • Responsibility • Monitoring • Use restrictions • Liability

17. FUDS Challenges for Landowners & 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

18. FUDS Site Prioritization Relative Risk Site Evaluation (RRSE) Prioritize IRP sites High, Medium, Low Based on contaminants, migration, 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 • 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

19. How Do FUDS Issues Arise? Inadvertent discovery – problem unearthed No disclosure in transfer documents Prior use, military presence lost in the fog of history Increased due diligence – FUDS now reported on Phase I EDR WWII air fields, industrial plants, old Army training areas

20. Recourse FUDS, but underfunded CERCLA Section 107 – PRP Status of United States Environmental Insurance

21. FUDS Risk Transfer Owner Considerations Pre-1986 Deed Indemnification Language (including liability-shifting or restriction clauses) does not mitigate DoD’s responsibilities under CERCLA. USACE, as agent for the DoD, is liable for remediation of any release that occurred during their ownership under CERCLA, regardless of PRP’s. Many FUDS sites were transferred long ago, with non statutory deed restrictions or institutional controls which may not hold up with time.

22. FUDS Risk Transfer Understand the Game Depending upon age, because of statutory uncertainty, all environmental costs may not be covered by DoD - investigate all sources for recovery. Expedite $ recovery process - long USACE time frame for CERCLA investigation, remediation and closure process. Which regulatory framework best drives the investigation and cleanup and maximizes the contributions of others, including insurers. Explore Ability to Pay settlements with the USACE. Consider minimizing USACE investigation and remediation costs by 3rd party review.

23. Owner or PRP in a FUDS! Maximize Insurance Coverage Determine the Chain of Title since transfer. Assess current and historic insurance policies for potential environmental coverage. Some Pollution Coverage may be available in CGL policies issued prior to the Categorical Exclusions of the 1970’s and the Absolute Pollution Exclusion of 1986.

24. Owner or PRP in a FUDS! Maximize Insurance Coverage Consider acquiring Environmental Site Liability coverage, if none exists. Provide environmental site data. Carriers often like FUDS because they are generally small, and have been developed for some time. Develop new coverage: Remediation of unknown conditions Remediation of known conditions (excess of failure to respond of available DOD indemnity) Potential Tort Exposures (3rd party BI, PD) Non-indemnified Exposures – (NRD, 3rd Party DIV) Defense Costs

25. Owner or PRP in a FUDSOther considerations If older policies exist, explore opportunities for claims recovery where applicable. Consider liability transfer, guaranteed fixed price remediations with engineering firms or third parties.

26. Responsibilities of U.S. for Environmental Condition on Real Property After Transfer of Title to Non Federal Entity