Environmental Cleanup at DOD: Better Cost-Sharing Guidance Needed at DOD
Government-Owned, Contractor-Operated Sites (Letter Report, 03/27/97,
GAO/NSIAD-97-32).

Pursuant to a congressional request, GAO examined the Department of
Defense's (DOD) policies and practices regarding cleanup of
environmental contamination at government-owned, contractor-operated
(GOCO) plants, as a followup to its previous reports that showed
inconsistent policies and practices on cost sharing. GAO reviewed nine
higher-cost case studies at the Defense Logistics Agency (DLA) and the
military services to: (1) assess the consistency of cost-sharing
practices across DOD; and (2) compare the service cleanup estimates
against DOD's.

GAO noted that: (1) the services' policies and practices for having
contractors share cleanup costs still vary widely; (2) notwithstanding
GAO's recommendations to do so, DOD has not given the services adequate
guidance for making decisions on whether and when to seek recovery of
environmental cleanup costs incurred by DOD from contractors and other
parties at GOCO facilities; (3) the Army authorized indemnifying its
operating contractors from cleanup costs at ammunition plants; (4) the
Navy policy requires cost-recovery efforts, but has not initiated timely
requests for cost sharing or followed up; (5) the Air Force is beginning
to seek participation in cleanup costs from its operating contractors;
(6) regarding cleanup at GOCO facilities GAO visited, DOD's fiscal year
(FY) 1994 report to Congress included cleanup costs that were closer to
the military services' supporting data than DOD's reported FY 1993
estimates; (7) DOD's estimates for cleaning up the 78 GOCO facilities
increased from $1.4 billion in FY 1993 to $3.6 billion in 1994, but
decreased somewhat to $3.3 billion in 1995; (8) although DOD and the
services have addressed GAO's recommendations to improve cost
information, their estimates of past and projected costs still differ,
and not all costs were included; (9) for example, the 1995 estimate
decreased in part because DOD excluded $19.1 million in unfunded Navy
cleanup requirements that should have been reported, and DLA cleanup
costs totalling $101 million in FY 1994 that would be funded by customer
surcharges; (10) GAO also found many additional expenses that were not
included in either DOD or service cost estimates; (11) because Superfund
holds parties liable for the billions of dollars needed to remediate
past contamination regardless of wrongdoing, it is important that DLA
and the services deal with potentially responsible parties on the basis
of consistent policy and accurate data; (12) however, the lack of DOD
guidance on cost sharing has permitted inconsistencies in approaches to
cost-sharing, and the potential for some parties to be held responsible
for cleanup costs, while others in similar situations are not; and (13)
if cost-sharing agreements are reached, omissions in historical
information and cost data may inhibit the recovery of all appropriate
costs.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-97-32
     TITLE:  Environmental Cleanup at DOD: Better Cost-Sharing Guidance 
             Needed at DOD Government-Owned, Contractor-Operated
             Sites
      DATE:  03/27/97
   SUBJECT:  GOCO
             Radioactive waste disposal
             Contractor responsibility
             Liability (legal)
             Department of Defense contractors
             Cost sharing (finance)
             Cost analysis
             Damages (legal)
IDENTIFIER:  DOD Environmental Restoration Program
             DOD Environmental Restoration Account
             Superfund Program
             
******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO report.  Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved.  Major          **
** divisions and subdivisions of the text, such as Chapters,    **
** Sections, and Appendixes, are identified by double and       **
** single lines.  The numbers on the right end of these lines   **
** indicate the position of each of the subsections in the      **
** document outline.  These numbers do NOT correspond with the  **
** page numbers of the printed product.                         **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
** A printed copy of this report may be obtained from the GAO   **
** Document Distribution Center.  For further details, please   **
** send an e-mail message to:                                   **
**                                                              **
**                                            **
**                                                              **
** with the message 'info' in the body.                         **
******************************************************************


Cover
================================================================ COVER


Report to the Subcommittee on National Security, International
Affairs, and Criminal Justice, Committee on Government Reform and
Oversight, House of Representatives

March 1997

ENVIRONMENTAL CLEANUP AT DOD -
BETTER COST-SHARING GUIDANCE
NEEDED AT GOVERNMENT-OWNED,
CONTRACTOR-OPERATED SITES

GAO/NSIAD-97-32

Environmental Cleanup At DOD

(709124)


Abbreviations
=============================================================== ABBREV

  CERCLA - Comprehensive Environmental Response, Compensation, and
     Liability Act
  DERA - Defense Environmental Restoration Account
  DLA - Defense Logistics Agency
  DOD - Department of Defense
  EPA - Environmental Protection Agency
  GOCO - government-owned, contractor-operated

Letter
=============================================================== LETTER


B-272542

March 27, 1997

The Honorable J.  Dennis Hastert
Chairman
The Honorable Thomas M.  Barrett
Ranking Minority Member
Subcommittee on National Security,
 International Affairs, and Criminal Justice
Committee on Government Reform and Oversight
House of Representatives

This report responds to your subcommittee's request that we examine
Department of Defense (DOD) policies and practices regarding cleanup
of environmental contamination at government-owned,
contractor-operated (GOCO) plants, as a follow up to our previous
reports that showed inconsistent policies and practices on cost
sharing.  We reviewed nine higher-cost case studies at the Defense
Logistics Agency (DLA) and the military services (1) to assess the
consistency of cost-sharing practices across DOD and (2) to compare
the service cleanup estimates against DOD's.  Specifically, we
identified the actions taken and the types of arrangements for
sharing cleanup costs between the government and other responsible
parties, and examined site-specific cleanup cost data. 


   BACKGROUND
------------------------------------------------------------ Letter :1

Since 1992, we have reported that the government could pay hundreds
of millions of dollars to and on behalf of DOD contractors for
cleanup resulting from their operations.  In October 1992, we
reported that DOD reimburses contractors for cleanup expenses at
their private property in different ways, with wide variances in
reimbursement decisions and in investigations into possible
wrongdoing by contractors.\1 In July 1994, we reported that DOD had
also incurred cleanup expenses in cases where contractors and other
private parties were involved in contamination of government
property.\2 DOD had inconsistent policies and practices for
recovering costs from other responsible parties.  In both reports, we
recommended that the Secretary of Defense provide guidance to resolve
the disparities. 

One of the principal laws governing responsibility for hazardous
waste cleanup at federal facilities is the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA) of
1980, as amended (42 U.S.C.  9601).  This act, commonly known as
Superfund, holds owners, operators, and other responsible parties,
including federal agencies, liable for cleanup of past contamination. 
Cleanup at federal facilities is also subject to the legal
requirements of the Resource Conservation and Recovery Act of 1976,
as amended (42 U.S.C.  6901), and applicable state laws. 

DOD's Defense Environmental Restoration Program addresses
identification, investigation, and cleanup of past contamination on
DOD installations.  Funding for the cleanup has come primarily
through the Defense Environmental Restoration Account (DERA).\3 The
individual services and DLA are responsible for cleaning up their
respective installations, while the Army Corps of Engineers is
responsible for cleaning up formerly used DOD sites. 


--------------------
\1 Environmental Cleanup:  Observations on Consistency of
Reimbursements to DOD Contractors (GAO/NSIAD-93-77, Oct.  22, 1992). 

\2 Environmental Cleanup:  Inconsistent Sharing Arrangements May
Increase Defense Costs (GAO/NSIAD-94-231, July 7, 1994). 

\3 Most cleanup actions are funded through DERA and the Base
Realignment and Closure Account.  Congress established DERA in 1984
to fund the cleanup of inactive contamination sites on DOD
installations.  Through fiscal year 1995, DOD reports that about $10
billion has been invested from DERA and $2.6 billion from the Base
Realignment and Closure Account for closing installations. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

The services' policies and practices for having contractors share
cleanup costs still vary widely.  Not withstanding our
recommendations to do so, DOD has not given the services adequate
guidance for making decisions on whether and when to seek recovery of
environmental cleanup costs incurred by DOD from contractors and
other parties at GOCO facilities.  The Army authorized indemnifying\4
its operating contractors from cleanup costs at ammunition plants;
the Navy policy requires cost-recovery efforts, but has not initiated
timely requests for cost sharing or followed up; and the Air Force is
beginning to seek participation in cleanup costs from its operating
contractors. 

Regarding cleanup at GOCO facilities we visited, DOD's fiscal year
1994 report to Congress included cleanup costs that were closer to
the military services' supporting data than DOD's reported fiscal
year 1993 estimates.  DOD's estimates for cleaning up the 78 GOCO
facilities increased from
$1.4 billion in fiscal year 1993 to $3.6 billion in 1994, but
decreased somewhat to $3.3 billion in 1995.\5 Although DOD and the
services have addressed our recommendations to improve cost
information, their estimates of past and projected costs still
differ, and not all costs were included.  For example, the 1995
estimate decreased in part because DOD excluded $19.1 million in
unfunded Navy cleanup requirements that should have been reported,
and DLA cleanup costs totaling $101 million in fiscal year 1994 that
would be funded by customer surcharges.  Also, we found many
additional expenses that were not included in either DOD or service
cost estimates. 

Because Superfund holds parties liable for the billions of dollars
needed to remediate past contamination regardless of wrongdoing, it
is important that DLA and the services deal with potentially
responsible parties on the basis of consistent policy and accurate
data.  However, the lack of DOD guidance on cost sharing has
permitted inconsistencies in approaches to cost sharing, and the
potential for some parties to be held responsible for cleanup costs,
while others in similar situations are not.  If cost-sharing
agreements are reached, omissions in historical information and cost
data may inhibit the recovery of all appropriate costs. 


--------------------
\4 Under Public Law 85-804, the National Defense Contracts Act of
1958, as implemented by Executive Order 10789 and the Federal
Acquisition Regulation, three major types of actions may be taken: 
advance payments; contract adjustments; and any other actions under
authority of the act, referred to as residual powers.  A frequently
reported action under residual powers is indemnification of
contractors against losses from unusually hazardous or nuclear risks
that are not otherwise insured. 

\5 Cost taken from the Defense Environmental Cleanup Program, Annual
Report to Congress, dated March 31, 1994, for fiscal year 1993 and
the Defense Environmental Restoration Program, Annual Report to
Congress, dated March 31, 1995, for fiscal year 1994 and May 15,
1996, for fiscal year 1995. 


   INCONSISTENT TREATMENT REMAINS
   DESPITE SOME SERVICE PROGRESS
   IN DEVELOPING COST-SHARING
   GUIDANCE
------------------------------------------------------------ Letter :3

In the absence of sufficient DOD guidance, the services have taken
different approaches in asking parties associated with GOCOs to share
the cost of cleaning up contaminated sites and wide disparities still
remain.  Since our 1992 report, the Air Force has issued guidance for
dealing with other responsible parties at its facilities.  The Air
Force, the Navy, and the Army Corps of Engineers have policies or
guidance in place to encourage cost sharing with contractor operators
and other responsible parties, while the Army itself and DLA
generally do not.  Except for the Navy, each service has obtained
some cost sharing at GOCO facilities with other responsible parties. 
However, only the Air Force and the Army Corps of Engineers have
achieved cost sharing with contractors that operated government-owned
facilities. 


      ARMY POLICIES AND PRACTICES
---------------------------------------------------------- Letter :3.1

The Army has no servicewide policy regarding cleanup cost sharing. 
However, in a series of actions, the Secretary of the Army approved
indemnification of ammunition plant operators from financial
liability for environmental cleanup.  Army officials state that there
has been no actual payment to operators under indemnification because
the Army pays for the cleanups directly out of its own funds.  In
fiscal year 1994, Army ammunition plants accounted for $3.1 billion
(86 percent) of the $3.6 billion in past and future cleanup costs
reported by DOD. 

Pursuant to the Secretary's approval, the Army authorized the
inclusion of Public Law 85-804 indemnification clauses in its
contracts with ammunition plant operators.  These clauses indemnified
the contractors against unusually hazardous risks, including
environmental releases.  According to Army officials, contingency
clauses in the contracts also protect ammunition plant operators
against environmental liability. 

The Army has not negotiated any cost-sharing agreements with
contractor operators at the ammunition plants.  However, the Army
negotiated a cost-sharing settlement with a contractor who produced
ammunition for the Army as a tenant at one plant we visited.  Also,
as discussed in our July 1994 report, the Army Corps of Engineers
negotiated a cost-sharing settlement with contractors and other
private parties at formerly used defense sites. 


      NAVY POLICIES AND PRACTICES
---------------------------------------------------------- Letter :3.2

Since 1989, Navy policy has required major command officials to
immediately negotiate cost-sharing arrangements with contractors as
soon as the need for cleanup is identified.  The policy requires that
past and current GOCO contractors pay "any and all" cleanup costs
associated with their operation of Navy facilities.  However, the
Navy has not initiated timely requests for cost sharing or followed
up. 

For example, although Navy's 1989 policy required officials to begin
negotiation on cost-sharing arrangements at the two facilities we
visited, the Navy has not initiated timely requests for contractor
participation in the cleanup.  The Navy did not send a letter
requesting contractor participation in cleanup at the Allegany
Ballistics Laboratory in West Virginia until 1994, and has not begun
as of March 6, 1997, the required negotiations with the contractor at
the Naval Industrial Reserve Ordnance Plant in Fridley, Minnesota. 
Neither operator plans to pay any cleanup costs involving Navy
property. 

Under the facilities-use contracts at these locations, GOCO
contractors provide goods and services to the Navy, and the service
does not directly manage their operations.  Navy documents show that
operational decisions, including those involving waste disposal, are
made by the contractor. 

To date, the Navy has taken responsibility for cleanup costs.  Navy
officials said the Navy intends to clean up the facilities first and
then decide whether to pursue contractors to recover a share of the
costs.  Cost-recovery decisions are to be based on evidence,
litigation risk, the contractor's level of responsibility, and other
factors.  However, Navy officials stated that the Navy is reluctant
to pursue GOCO contractors because of concerns they will pass costs
back to the government as an allowable expense or through overhead
charges.  They also said that a divisive liability issue could slow
cleanup operations and hurt relations between the Navy and its
contractors. 


      AIR FORCE POLICIES AND
      PRACTICES
---------------------------------------------------------- Letter :3.3

In December 1995, the Air Force General Counsel's office developed
guidance that recognizes that past and present contractors, as
generators of contaminants and operators at federal facilities, share
the liability for environmental contamination.  The guidance calls
for sharing remediation costs, based on the facts of each situation. 
In commenting on this guidance, Air Force officials stated that the
Air Force approved a practice similar to the Navy policy for cost
sharing.  Air Force officials stated that the practice is intended to
share cleanup costs equally with operators unless conditions warrant
otherwise. 

At the two locations we visited, the Air Force was paying all cleanup
costs, but may later pursue other parties.  However, at two other
locations, the Air Force had agreed with the facility operators to
share costs.  According to Air Force officials, the settlement
agreement prohibits the contractors from charging their environmental
cleanup costs back to a government contract.  Air Force officials
also stated that the absence of federal guidance governing how to
treat environmental cleanup costs, together with inconsistent
treatments and allowances throughout DOD, have slowed cost-sharing
negotiations with contractors. 


      DLA POLICIES AND PRACTICES
---------------------------------------------------------- Letter :3.4

DLA's policy requires current operating contractors to pay cleanup
costs in cases of wrongdoing, but allows fuel customers to pay for
past contamination through a surcharge.\6 However, DLA does not have
a specific policy for its fuel supply centers to address those cases
in which parties other than contractors, such as lessees or tenants,
are responsible for contamination.  DLA has considered developing
such cost-sharing guidance, but had not done so as of March 1997. 

The Norwalk center we visited has been negotiating for the recovery
of costs.  Officials are negotiating with a lessee to pay for most of
the facility's cleanup costs.  However, the facility did not gather
sufficient evidence to determine whether to seek recovery from
another party for $10 million in environmental damage at an off-post
location. 


--------------------
\6 To recover most cleanup costs for past contamination, DLA assesses
a 1-cent per barrel surcharge to its customers. 


      DOD-WIDE POLICY ISSUES
---------------------------------------------------------- Letter :3.5

Even though we recommended in 1992 and again in 1994 that DOD issue
guidance to resolve disparities between DLA's and the military
services' cleanup policies and procedures, DOD has not done so.  In a
letter dated January 9, 1995, responding to our 1994 report, the
Deputy Under Secretary of Defense (Environmental Security) stated
that DOD's policy for cost sharing is to comply with the Federal
Acquisition Regulation, which provides for the allowability of costs
incurred by government contractors.  However, the regulation only
applies to costs incurred by contractors.  It does not prescribe an
approach for seeking contractor contributions to DOD cleanup efforts. 

The policies and practices for seeking contractor participation in
cleanup efforts continue to vary widely among the services and DLA. 
Some variances, such as DLA's policy to pay for old contamination
(not from current operations) through a surcharge to customers, may
be justified where no specific evidence identifies the responsible
party or when other case-specific factors, such as frequent changes
in contractors, may preclude assigning responsibility.  However, we
continue to believe that uniform guidance from DOD would help resolve
disparities among DLA and service cleanup policies and practices. 


   CLEANUP ESTIMATES IMPROVING,
   BUT PROBLEMS REMAIN
------------------------------------------------------------ Letter :4

Following our July 1994 report that cleanup at GOCO plants would take
longer and cost far more than DOD's estimate, DOD increased its
fiscal year 1993 estimate of $1.4 billion to $3.6 billion in fiscal
year 1994.  For example, in fiscal year 1993, DOD estimated the Twin
Cities Army Ammunition Plant would be cleaned up by the year 2000 at
a total cost of $154 million, which was not consistent with
supporting data showing costs of about $600 million through 2052. 
DOD's fiscal year 1994 report was more consistent with supporting
data, showing estimated completion by 2080 at a total cost of about
$773.2 million. 

Although DOD's report to Congress and service estimates for our case
studies were relatively close in total, table 1 shows significant
differences for individual locations for fiscal year 1994.  Some of
the reasons for these cost differences include different estimating
methodologies, an input error, and the inclusion of more accurate
future cost estimates. 



                                Table 1
                
                DOD's and the Services' Estimated Total
                      Cleanup Costs for Nine GOCOs

                         (Dollars in millions)


                                                            Percentage
                                                                    of
                                     Component    Estimate    estimate
Facility                DOD report    estimate  difference  difference
----------------------  ----------  ----------  ----------  ----------
Army
----------------------------------------------------------------------
Twin Cities plant           $773.2      $810.9     ($37.7)       (4.9)
Lake City plant\a            339.2       168.1       171.1        50.4
Newport plant                 55.5        41.5        14.0        25.2

Navy
----------------------------------------------------------------------
Allegany                      30.7        27.8         2.9         9.4
Fridley                       37.9        30.7         7.2        19.0

Air Force
----------------------------------------------------------------------
Plant 4                       63.0        79.6      (16.6)      (26.3)
Plant 44                      61.3        90.9      (29.6)      (48.3)

DLA
----------------------------------------------------------------------
Norwalk                       16.5        16.5           0           0
Ozol                           6.4         6.4           0           0
======================================================================
Total                     $1,383.7    $1,272.4      $111.3           8
----------------------------------------------------------------------
\a DOD cleanup estimates decreased at Lake City Ammunition Plant from
$339.2 million in fiscal year 1994 to $139.4 million in fiscal year
1995. 

Source:  Service officials and the Defense Environmental Restoration
Program Annual Report to Congress ( Mar.  31, 1995) for fiscal year
1994. 

In addition, cleanup expenses not identified in either DOD or service
component estimates included: 

  -- $120 million to decontaminate and dispose of the chemical plant
     at the Newport Army Ammunition Plant;

  -- $6 million in cleanup costs for uranium-tipped bullets at the
     Lake City Army Ammunition Plant;

  -- $4 million in 1983 and 1984, which was paid for cleanup costs at
     Air Force Plant 4 before DERA funds were available;

  -- $836,000 already spent on a cleanup study at the Navy's Allegany
     Ballistics Laboratory; and

  -- money paid to the Environmental Protection Agency (EPA) and
     state regulatory agencies for overseeing the cleanup at several
     sites (as an example, at the Fridley Naval Industrial Reserve
     Ordanance Plant, $481,000 was paid to EPA and $106,000 was paid
     to the state of Minnesota). 

DOD's report for fiscal year 1995, dated May 15, 1996, showed that
total cleanup cost estimates for GOCO facilities decreased from $3.6
billion to $3.3 billion, but it did not include cleanup costs for our
2 DLA case studies, or with 1 exception, any of the 21 DLA facilities
reflected in prior DOD reports.  According to DOD officials, these
facilities were excluded from the latest report because customer
surcharges rather than DERA funds paid for cleanup costs.  DLA
cleanup costs totaled $101 million in DOD's fiscal
year 1994 report. 

We recognize that cleanup estimates for facilities will be
preliminary until DOD fully characterizes contaminants, selects a
remedy, and finances the remedy.  However, most of the cost
differences noted in our case studies can be accounted for given the
stage of cleanup in each case. 

Furthermore, excluding environmental cleanup costs from DOD's
restoration program report because the funding source is other than
DERA can be misleading.  For example, the DLA cleanups excluded from
DOD's report for fiscal year 1995 are, except for funding source,
similar to cleanups still reported for the military services.  Also,
DOD's report still includes cost for cleanups totaling $624 million
in 1995 that were funded by its base realignment and closure account
rather than DERA.  Finally, the services' stated plans to later
obtain cost sharing from other responsible parties require that
complete cost data be readily available. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :5

To address the inconsistencies in cost-sharing approaches and the
potential for disparate treatment of other responsible parties
described in this and past reports, we recommend that the Secretary
of Defense issue guidance to DOD components to resolve current
disparities and to promote future consistent treatment of all parties
in cost recovery decisions. 

So that sufficient data will be available for cost-sharing
negotiations and program oversight, we also recommend that the
Secretary direct the military services and DLA to: 

  -- Identify, to the extent it has not already been done, whether
     parties other than the government were involved with any
     contamination, as part of environmental cleanup preliminary
     assessments at GOCO facilities. 

  -- Obtain all relevant data regarding other responsible parties
     identified, whether or not wrongdoing is an issue. 

  -- Gather and maintain the most timely and accurate DOD cost data
     available in DLA, military service, and other agencies' records. 

  -- Provide consistent estimates, including all cleanup costs for
     DOD's environmental reports to Congress, regardless of the
     source of funds. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :6

In commenting on a draft of this report, DOD stated that it was
generally complying with all five of our recommendations under
existing practices.  However, as we detailed below, DOD has not fully
addressed the issues and specific cases discussed in this report and
we continue to believe that DOD needs to take additional actions on
each of our recommendations. 

Regarding the need for DOD guidance on the recovery of cleanup costs,
DOD stated that its policy is to comply with the Federal Acquisition
Regulation and that the Defense Contract Audit Agency issued audit
guidance for field auditors in 1992 on how to interpret the
regulation.  However, as we stated in this and prior reports, federal
acquisition laws, regulations, and policies do not provide specific
guidance to decision-makers on how to treat environmental cleanup
costs.  In the absence of guidance that explicitly addresses the
sharing of DOD cleanup costs, the services and DLA have taken
different approaches to deciding whether and when to seek
contributions from contractors and other responsible parties.  We
continue to believe that a DOD-wide policy is needed to address these
disparities and promote consistent treatment of all parties in the
recovery of DOD-incurred cleanup costs. 

DOD stated that it is already identifying parties involved with
contamination and obtaining all relevant data for other responsible
parties, in line with our second and third recommendations.  However,
our case studies indicate that searches for potentially responsible
parties were not done and services had not obtained all relevant
information.  DOD's comments did not identify what actions it had
taken to resolve such cases or the Air Force concerns about the lack
of DOD guidance.  Thus, we continue to believe that more should be
done in this area. 

DOD indicated that it did not believe it should gather costs incurred
by all non-DOD organizations.  We agree and modified our
recommendation to focus primarily on DOD costs.  Nevertheless, if
another federal agency has pertinent information on added DOD cleanup
costs, as we found in each case study, efforts should be made to
gather and maintain that information. 

DOD stated that its report to Congress is not intended to represent
all expenses associated with other funding sources, with the
exception of the Base Closure and Realignment Account.  DOD also
stated that there is no value added to reconstructing past non-DERA
expenses.  We agree that it may not be worthwhile to reconstruct
minor costs incurred prior to availability of DERA funds.  However,
excluding all cleanup expenses of an entire agency such as DLA simply
because the money to pay those expenses came from a different federal
account results in reports that materially understate federal
expenses for cleanup costs.  It may also lead to omissions by the
military service where they funded cleanups from business operating
funds.  The use of business operating funds for cleanup is already
prevalent in the Navy.  Finally, complete cost data is necessary for
the military services' stated plans to obtain cost sharing from other
responsible parties.  DOD's comments are reprinted in their entirety
in appendix V. 


   MATTER FOR CONGRESSIONAL
   CONSIDERATION
------------------------------------------------------------ Letter :7

The high cleanup costs, coupled with inconsistent policies and
practices for recovering costs from other parties, can lead to
adverse budget consequences.  Because DOD's comments indicate that it
does not plan to take any actions to address the problems set forth
in this report, Congress may wish to call upon the Secretary of
Defense to issue guidance to address inconsistencies in cost-sharing
approaches and to promote future consistent treatment of all parties
in cost recovery decisions. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

We conducted our work at the Washington, D.C., area headquarters
offices of DOD, DLA, and the military services and at selected
commands and field installations.  The Washington, D.C., area
commands included the Naval Air Systems Command, Naval Sea Systems
Command, and the Defense Fuel Supply Center.  We also visited the
Army Environmental Center in Aberdeen, Maryland; the Air Force
Acquisition Environmental Management Directorate in Dayton, Ohio; and
the Naval Facilities Engineering Command Southern Division in
Charleston, South Carolina. 

At headquarters, command, and field locations, we interviewed DOD,
contractor, state agency, and EPA officials.  To assess consistency
of cost-sharing practices, we compared headquarters policies and
field practices at case study locations identified below.  To examine
cleanup cost estimates, we obtained data on DOD environmental cleanup
program status and costs, noted differences among organizations, and
examined supporting documents, but did not independently determine
actual costs. 

We used a case study methodology at selected field facilities.  We
visited nine GOCO facilities to determine the status and cost of
cleanup, and the extent of cost sharing for environmental cleanup at
the facilities.  We selected facilities with larger total cleanup
costs, managed by each of the military departments and DLA.  We
determined whether site specific data identified all known costs and
compared the data to military service records and DOD reports.  We
reviewed cost-sharing practices across the locations visited, but did
not independently evaluate liability issues or the merits of
cost-sharing decisions in individual cases. 

Army

  -- Lake City Army Ammunition Plant, Missouri

  -- Newport Army Ammunition Plant, Indiana

  -- Twin Cities Army Ammunition Plant, Minnesota

Air Force

  -- Air Force Plant 4, Fort Worth, Texas

  -- Air Force Plant 44, Tucson, Arizona

Navy

  -- Allegany Ballistics Laboratory, West Virginia

  -- Naval Industrial Reserve Ordnance Plant, Fridley, Minnesota

DLA

  -- Defense Fuel Support Point Norwalk, California

  -- Defense Fuel Support Point Ozol, California


---------------------------------------------------------- Letter :8.1

We performed our work from June 1995 through March 1997 in accordance
with generally accepted government auditing standards. 

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 30 days after its issue date.  At
that time, we will send copies to the appropriate congressional
committees; the Secretaries of Defense, the Army, the Navy, and the
Air Force; and the Directors of DLA and the Office of Management and
Budget.  We will also make copies available to others upon request. 

Please contact me on (202) 512-8412 if you or your staff have any
questions concerning this report.  Major contributors to this report
are listed in appendix VI. 

Sincerely yours,

Henry L.  Hinton, Jr.
Assistant Comptroller General


ARMY CASE STUDIES
=========================================================== Appendix I

We visited three Army ammunition plants--one active plant, two
inactive--still owned by the Army.  The Lake City Army Ammunition
Plant, Independence, Missouri, was active.  The Newport Army
Ammunition Plant, Newport, Indiana, and the Twin Cities Army
Ammunition Plant, Arden Hills, Minnesota, no longer produce
ammunition.  The Army owns a total of 27 government-owned,
contractor-operated (GOCO) plants, of which 24 are ammunition plants. 
Seven of the 24 are currently active. 


   AGENCY COST-SHARING POLICY
--------------------------------------------------------- Appendix I:1

The Army has no overall policy for sharing costs with other parties
and does not plan to pursue current or past GOCO operators to share
environmental cleanup costs at the case study facilities.  However,
at one plant we visited, the Army negotiated cost-sharing
arrangements with contractors who are not considered operators and is
seeking reimbursement from the operator's insurance company.\1

According to Army officials, the ammunition plant operators are
protected against environmental liability by protective clauses in
their contracts, such as the "Responsibility of Contractor -
Contingencies" clause, and by an indemnification clause, which was
recently added.  The Secretary of the Army authorized the
indemnification clauses under Public Law 85-804 in a series of
memoranda.  For the three locations we visited, we found relevant
memoranda dated May 1985, November 1990, and November 1992.  Army
officials stated that the indemnification provision would allow
ammunition plant operators to claim recovery of cleanup costs, but
that such a claim has not been made because the Army has assumed all
cleanup costs at its ammunition plants. 

Army officials said that the Army, as the landowner, should be
responsible for cleaning up the property.  They stated that it would
be inappropriate to hold former contractors liable for the cleanup
costs because contamination resulted not from bad faith or willful
misconduct, but from industrial practices that used to be considered
acceptable.  Army officials stated that indemnification of ammunition
plant contractors was justified by the unusually high risk they
encountered in handling explosives and reactive and hazardous
materials. 

Despite the Army's view, a finding of wrongdoing is not a required
condition for cost sharing under the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA).  Owners and
operators at private facilities have not been relieved of liability
on that basis. 

Although the Army has not achieved cost sharing by its ammunition
plant operators, it has pursued other responsible parties.  For
example, at the Twin Cities facility, the Army is attempting to
recover more than $10 million from one GOCO operator's insurance
company.  The Army did negotiate a settlement with a contractor who
was a tenant at this facility.  This contractor--like the GOCO
operator--produced ammunition for the Army for decades, but did so
under a "facility contract," that did not indemnify the tenant. 
Under an agreement, the tenant contractor must pay all cleanup costs
associated with its production and a percentage of the cleanup for
areas in which the source of contamination is unclear. 


--------------------
\1 As noted in our prior reports, the Army Corps of Engineers also
negotiated cost-sharing settlements with former operators of formerly
used defense sites.  In addition, the Army has obtained more than
$300 million from Shell Oil Company as of December 1995 toward shared
cleanup costs at the Rocky Mountain Arsenal. 


   TWIN CITIES ARMY AMMUNITION
   PLANT
--------------------------------------------------------- Appendix I:2

The Twin Cities Army Ammunition Plant is an inactive facility that
occupies about 2,370 acres in Arden Hills, Minnesota.  Established in
1941, the plant produced ammunition intermittently until 1976. 
Throughout all but the last 1 of the plant's 55 years, the Federal
Cartridge Company was its only operating contractor.  Alliant
Techsystems, a long-standing tenant at the plant, took over as the
GOCO operator in November 1995.  Alliant, formerly Honeywell, had
been a tenant at the Twin Cities plant since the late 1950s,
manufacturing small ammunition for the Department of Defense (DOD). 
Also, the 3M Company, as a lessee, conducted commercial production
activities on the facility between 1950 and 1993. 

The production activities at the Twin Cities facility generated
hazardous waste that contaminated the soil, structures, and
groundwater, including the drinking water for the facility and the
city of New Brighton, Minnesota.  Soil was contaminated with
explosives, metals, polychlorinated biphenyls, and volatile organic
compounds.  Plant property occupied by the lessee was contaminated by
low-level radioactivity.  Groundwater was contaminated with
trichloroethylene and had migrated off the site. 

The Twin Cities plant was placed on the Environmental Protection
Agency's (EPA) National Priorities List in 1983 as part of the New
Brighton/Arden Hills Superfund site, an approximately 36-square-mile
site encompassing the plant and the contaminated groundwater.  The
Superfund site was divided into three main units.  Two of the units
contain distinct plumes of contaminated groundwater, known
respectively as the north plume and the south plume.  The third unit
consists of contaminated soils and groundwater within the plant's
boundary. 

Production waste from the plant also contaminated three privately
owned disposal sites to which the operator sent the waste.  According
to a contractor official, the company had complied with the standards
of the time. 

Also, between 1959 and 1962, over 1,400 drums of waste from
classified munitions and, in 1945, 500 tons of 50-caliber bullets
were disposed of in Lake Superior.  Records about the classified
waste are not available, but Army officials said that the waste had
been packed into 55-gallon drums, transported over land under Army
escort to Duluth, Minnesota, and dumped into the lake from barges. 
The state pollution agency and Corps of Engineers had not yet decided
whether an investigation by the Army of the 50-caliber bullet
disposal was necessary at the time of our review. 


      CLEANUP EFFORTS
------------------------------------------------------- Appendix I:2.1

Investigations at the Twin Cities plant began after the 1981
discovery of contamination in the drinking water supply.  Six interim
remedial actions and three removal actions have been completed at the
facility.  As of December 1996, the final remedy to pump and treat
groundwater from the south plume is in place, and the final remedy
for the north plume has been implemented.  The remedy for cleaning up
contamination within the boundary of the facility has been proposed
and is under evaluation. 


      CLEANUP COST ESTIMATES
------------------------------------------------------- Appendix I:2.2

DOD and Army cleanup cost estimates for fiscal year 1994 ($773.2
million and $810.9 million, respectively) were much closer than in
1993 ($154 million according to DOD, versus about $600 million
according to installation data).  DOD's May 15, 1996, report for
fiscal year 1995 increased the total past and future cleanup cost
estimate to $828.2 million. 

Neither DOD's report nor the Army's estimate included all known
cleanup costs for the Twin Cities plant, with at least an additional
$8.2 million of expenditures. 

Examples where either Defense Environmental Restoration Account
(DERA) funds were not designated as being used for cleanup at the
Twin Cities plant or where non-DERA funds were used for cleanup at
the Twin Cities plant, but not reported, include: 

  -- more than $560,000 paid to regulators, including $125,000 for
     EPA investigations at the Lake Superior disposal site, and about
     $435,650 paid for state regulatory oversight at the plant and

  -- $398,000 expended by the Army Corp of Engineers for work at the
     Lake Superior site. 

Expenditures from Army operations funds and judgment funds that were
not in DOD's and the Army's estimates include: 

  -- As a result of a toxic tort case settlement related to
     contaminated drinking water at the site, the Army reimbursed the
     Federal Cartridge Company $3.7 million for the company's share
     of a settlement in litigation. 

  -- Relative to the above case, the Army settled for a $1.3-million
     Army share, which was paid out of the Department of Justice
     Judgment Fund. 

  -- The Army reimbursed Federal Cartridge $1.9 million for
     disposal-related cleanup costs. 

  -- The U.S.  government paid $70,000 on behalf of all other federal
     potentially responsible parties for cleanup-related expenses at
     a disposal site in Oak Grove, Minnesota. 

  -- The Army paid an additional $234,292 for attorney time relating
     to cleanup. 


      COST-SHARING ARRANGEMENT
------------------------------------------------------- Appendix I:2.3

The Army does not plan to pursue Federal Cartridge, the former
operator, to share environmental cleanup costs at this facility. 
However, both Alliant and 3M, who also produced at the plant, are
being held liable for contamination associated with their activities
and have agreed to share the cleanup costs. 

Federal Cartridge was responsible for manufacturing and testing
ammunition, disposing of production waste, and maintaining the
facility.  Beginning in the early 1980s, the company was also
responsible for performing the preliminary environmental damage
assessments and engineering evaluations and analyses.  At peak
production in 1943, according to Army officials, almost all of the
26,000 employees who worked at the plant were contractor personnel. 
By 1995, the total decreased to about 1,000 employees, and all but
about 19 were contractor personnel. 

The Army is assuming costs not already covered by the other two
private companies and Federal Cartridge believes it has no liability
for cleanup costs.  Reasons given by the Army are the Secretary of
the Army granting indemnification status to the contractor under
Public Law 85-804, and contract clauses that address contractor
liability.  In addition, Federal Cartridge Company officials stated
that disposals were not due to any company wrongdoing, either willful
or knowing, and were at state-approved landfills under the review and
approval of the Army.  Also, they said that the Army did not
disapprove of company practices, which were considered
state-of-the-art. 

However, Army officials have participated in pursuing Federal
Cartridge's insurance company to recover cleanup costs associated
with the company's operations at the plant.  The Army asked the
Justice Department to help it recover about $10.2 million, plus
interest, that it reimbursed Federal Cartridge for cleanup-related
costs.  Negotiations are underway. 

Both of the companies that operated on plant property as tenant and
lessee are sharing in cleanup costs. 

  -- Alliant produced ammunition for the Army as a tenant using
     government facilities, but Alliant's facility contract did not
     contain indemnification provisions.  In 1995, an attorney for
     Alliant estimated that the company had paid over $10 million
     since the 1985 apportionment agreement, whereby Alliant is to
     pay the cleanup costs at the South plume, and the Army is
     responsible for costs at the North plume.  The cost of cleaning
     up groundwater where the origin of contamination is unclear will
     be split between the parties, with the Army paying 80 percent
     and Alliant 20 percent. 

  -- The 3M Company produced for the commercial market under a lease
     with the Army.  The company is solely responsible for cleanup of
     radioactive contamination of property on the site.  The company
     has cleaned up the contaminated buildings and soils, but the
     Army has not yet examined and approved 3M's cleanup actions. 


   LAKE CITY ARMY AMMUNITION PLANT
--------------------------------------------------------- Appendix I:3

The Lake City Army Ammunition Plant is the Army's only installation
that now manufactures small-caliber ammunition.  The plant, which
occupies about 4,000 acres in a rural area near Independence,
Missouri, began operating in 1941.  Remington Arms operated the
facility until 1985, when the current contractor, the Olin
Corporation, took over. 

Manufacturing operations at the Lake City plant generated hazardous
wastes.  Soil has been contaminated with explosives; volatile and
semivolatile organic compounds; oil and grease; low-level radioactive
materials; and such metals as arsenic, lead, mercury, and zinc. 
Groundwater was contaminated with dichloroethylene, lead, and vinyl
chloride.  Because these contaminants exceed levels set by EPA,
groundwater from wells on the installation must be treated before it
can be consumed.  For example, the EPA maximum contaminant level for
vinyl chloride is 2 parts per billion, but the drinking water aquifer
at the plant contained 8,000 parts per billion. 

According to test results and studies, contamination has not yet
migrated off the site but will do so eventually, unless preventive
action is taken.  Because the site is located in a rural, sparsely
populated area, no immediate threat exists to the groundwater of
surrounding communities.  The Lake City plant was placed on EPA's
National Priorities List in 1987. 


      CLEANUP EFFORTS
------------------------------------------------------- Appendix I:3.1

The contaminated areas at the plant are divided into four units. 
Preliminary assessments and site inspections were conducted in 1979. 
EPA and the Missouri Department of Natural Resources approved the
remedial investigation for one unit in March 1995.  Another was
completed in May 1995, but awaits EPA and Missouri approval.  The
Army is not proceeding with remedial investigations for the other two
units until it receives comments from EPA and the state of Missouri
on the May 1995 investigation report and a feasibility study
submitted in June 1995 for the first unit.  The proposed corrective
actions mainly involve groundwater treatment and soil excavation. 


      CLEANUP COST ESTIMATES
------------------------------------------------------- Appendix I:3.2

Both DOD and Army estimates increased from fiscal year 1993 to 1994. 
The DOD estimate increased from $52 million to $339.2 million, while
the Army estimate increased from $24.8 million to $168.1 million. 
Army officials attributed the increase to including long-term cleanup
costs beyond 2001.  Earlier estimates considered only a 7-year budget
cycle. 

DOD's estimate was more than double what Army officials at the plant
reported to us for the same time frame.  Lake City officials believed
their estimate was accurate, and they did not know why DOD's estimate
was so much higher.  According to a DOD official, it might have been
due to a data entry error.  The difference was generally resolved
with DOD's May 15, 1996, report for fiscal year 1995, which updated
the figure to $139.4 million. 

Lake City officials stated that it is difficult to accurately project
the cost of cleanup until options have been selected and approved by
EPA and the state regulatory agencies.  We found about $22.9 million
in costs that were not included in either DOD or Lake City estimates. 

  -- Remediation may take longer than the year 2024 estimated, thus
     increasing costs by $16.8 million.  The feasibility study for
     one operating unit stated that the contaminated water should be
     pumped, treated, and monitored for at least 50 years, or until
     2048.  The Army's estimated cost for such remedial action was
     about $700,000 a year, including $500,000 for pumping and
     treating the water and $200,000 for monitoring. 

  -- Costs excluded an estimated $6 million to clean up low-level
     radioactive contamination caused by ammunition made from
     depleted uranium.  The cost was excluded from DOD and Army
     estimates because the cleanup will be conducted under the
     direction of the Nuclear Regulatory Commission. 

  -- The state was paid $91,000 for oversight costs. 

Also, the use of a residential cleanup standard as opposed to an
industrial cleanup standard could increase the cost of cleaning one
area by about $23.6 million, from $5 million to $28.6 million.  The
cleanup standard for an industrial site assumes human exposure of 40
working hours per week, whereas a residential standard assumes
continuous human exposure of 168 hours per week.  The Army estimates
it will cost $5 million to remediate the contamination at its Area 18
Operable Unit to the industrial standard.  However, the EPA and the
state of Missouri believe that the residential cleanup standard
should be used. 


      COST-SHARING ARRANGEMENT
------------------------------------------------------- Appendix I:3.3

The Army does not plan to pursue cost sharing by current or former
operators of the Lake City plant.  Olin has been the operator since
1985, and Remington operated the plant for more than 40 years.  No
other private parties, such as lessees, operated at the facility. 

Army officials said they do not plan to pursue cost sharing with Olin
because of the Secretary of the Army's decision to indemnify plant
operators under Public Law 85-804.  Likewise, they applied this
decision to relieve Remington, Lake City's prior contractor. 


   NEWPORT ARMY AMMUNITION PLANT
--------------------------------------------------------- Appendix I:4

The Newport Chemical Facility, formerly Army Ammunition Plant,
occupies about 7,000 acres in a sparsely populated rural area near
Newport, Indiana.  The plant, which has been inactive since 1975,
currently serves as a storage facility for a nerve agent the Army
plans to incinerate as part of its chemical material program.  The
Newport plant was established in 1941; from then until 1974, several
contractors, including E.I.  duPont, FMC Corporation, Liberty Powder
Corporation, and Uniroyal, Inc., produced explosives such as
trinitrotoluene (TNT) and chemical agents.  The current operator for
the storage function is Mason & Hanger. 

Manufacturing operations at the Newport plant generated various
hazardous wastes.  Soil, groundwater, and surface water were
contaminated with explosives, solvents, heavy metals, oils, and
grease.  Groundwater contaminated with carbon tetrachloride and
trichloroethylene has not yet migrated off the site, but EPA and Army
officials are concerned that it may.  If contaminated groundwater
reaches the plant's boundaries, it could threaten the safety of the
surrounding area's drinking water. 


      CLEANUP EFFORTS
------------------------------------------------------- Appendix I:4.1

Preliminary investigations were completed in 1986.  The Army
identified
16 sites, 12 of which it believed required some remedial action or
additional study.  The Army classified four sites requiring no
further action, but EPA disagreed and is requiring additional testing
and monitoring activities for these four sites.  The Army removed
underground petroleum storage tanks and currently plans to remove
other contaminants.  Investigations and studies are continuing. 


      CLEANUP COST ESTIMATES
------------------------------------------------------- Appendix I:4.2

DOD's estimate of the cleanup costs for the Newport plant was higher
than the Army's.  DOD's report for fiscal year 1994 put the total
cost at about $55.5 million, as compared to an Army estimate of $41.5
million.  Officials could not reconcile the difference, but said part
could be explained by DOD's estimated completion in 2010, versus the
Army estimate of 2006.  DOD's report for fiscal year 1995 increased
the estimate to about $68 million, with completed cleanup still
estimated for 2010. 

A cost not reflected in either DOD or Army data was about $120
million for a chemical plant cleanup that was excluded because that
effort will be funded by the Chemical Munitions Destruction Defense
Account, not DERA. 

Army officials stated that costs cannot be accurately estimated until
more is known about the sites.  Until the contamination is known and
the remediation methods are selected, the costs of remediation
options can vary significantly.  For example, the Army's cost
estimate assumed that the service will incinerate contaminated soils,
but Army officials said that soils may be cleaned up biologically
through composting at about half the cost of incineration. 


      COST-SHARING ARRANGEMENT
------------------------------------------------------- Appendix I:4.3

Army officials do not plan to pursue cost sharing by the current or
any past operators of the Newport plant.  They said this is because
of the Secretary of the Army's decision to indemnify plant operators
under Public Law 85-804. 


NAVY CASE STUDIES
========================================================== Appendix II

We visited two active Navy GOCO manufacturing facilities:  the
Allegany Ballistics Laboratory, Mineral County, West Virginia, and
the Naval Industrial Reserve Ordnance Plant, Fridley, Minnesota. 
Both facilities have been in operation since the early 1940s.  The
Allegany facility was operated by Hercules, Inc., until Alliant
Techsystems purchased Hercules and took over operations in 1995.  The
Fridley facility also involved changes in ownership.  The Northern
Pump Company operated the facility from 1942, until FMC purchased a
subsidiary of Northern in 1964.\1


--------------------
\1 The operations by Northern Pump to 1964 were through a subsidiary,
Northern Ordnance, Incorporated.  FMC operations from 1994 were by a
subsidiary, United Defense Limited Partnership. 


   AGENCY COST-SHARING POLICY
-------------------------------------------------------- Appendix II:1

The Navy has had a policy since 1989, which states that the
government and current and former contractors share the liability and
responsibility for cleaning up GOCO facilities.  The current
contractor is to pay all cleanup costs associated with its operation
of the facility unless the operating contract contains provisions to
the contrary.  According to a Navy official, the Navy has the right
to seek reimbursement from prior contractors for the costs it
incurred for cleaning up contamination resulting from their
activities. 

Navy officials stated that GOCO operational decisions, including
those about disposal, were left to its contractors, and the Navy had
little presence at its GOCOs.  Contractors operated the facilities
under a facilities-use contract to provide goods and services for the
Navy without direct Navy management of operations. 

According to the Navy's cost-sharing policy, if further study and
remediation are recommended after initial cleanup research, the Navy
command is required to immediately begin discussions with the GOCO
contractor regarding responsibility for and participation in the
cleanup effort.  Participation is also to be discussed prior to
cleanup, including any removal or interim actions.  According to Navy
legal representatives, the policy provides contractors an opportunity
to participate in the cleanup process as a means of reducing
litigation risk--that is, a contractor that participates in the
cleanup process is less likely to argue that cleanup costs were
excessive or unnecessary. 

If the contractor declines to participate, all cleanup costs are to
be identified for possible future recovery from the contractor. 
Despite its 1989 policy, the Navy has not initiated timely requests
for contractor participation in the cleanup.  The Navy did not send a
letter requesting contractor participation until 1994 at one of the
two facilities we visited and has not begun the required negotiations
with the second facility. 

At both the facilities we visited, some of the contamination related
to production for the Navy at contractor-owned property adjacent to
the government-owned sites.  In one case, the contamination was on
the contractor property, and in the other, it had been transferred to
the Navy property. 

Navy officials said the Navy will likely clean up its facilities and
then decide whether to seek a share of the costs from the operators. 
They provided a number of explanations for not pursuing cost sharing
more actively:  (1) operators who help pay for the cleanup may later
get reimbursed for the expenditures; (2) a divisive liability issue
might drive a wedge into an otherwise productive relationship between
the Navy and its contractors; (3) cost-sharing negotiations could
slow the cleanup; and (4) cost recovery is easier after the cleanup
is done, because all costs, contamination, and responsible parties
will have been identified, and the costs can then be allocated to the
responsible parties based on their contributions. 


   ALLEGANY BALLISTICS LABORATORY
-------------------------------------------------------- Appendix II:2

Since 1945, the Allegany Ballistics Laboratory has researched,
developed, produced, and tested solid propellant rocket motors on
about 1,600 acres in Mineral County, West Virginia, about 10 miles
southwest of Cumberland, Maryland.  The laboratory has been operated
by Hercules, Inc., for all but 2 of its 54 years in operation. 
George Washington University, under contract with the Army, operated
the laboratory from 1943 until 1945, when Hercules, Inc., took over
operations under a Navy contract.  In 1995, the laboratory's current
operating contractor, Alliant Techsystems, purchased the division of
Hercules that had been operating the facility. 

Hercules also began operating commercial businesses on and adjacent
to the laboratory in 1967.  Hercules purchased 56 acres adjoining the
laboratory in 1967 and built a propellant production facility.  In
addition to rocket development, Hercules began operating a commercial
automobile testing business at the GOCO facility in 1973.  According
to a Navy study, no written agreement exists between the Navy and
Hercules regarding the use of laboratory property for the disposal of
waste generated by the adjacent Hercules-owned facility. 

Manufacturing operations at the laboratory, as well as disposal of
contaminated waste produced at the nearby commercial plant, have
generated hazardous waste.  This waste contaminated soil and
groundwater with trichloroethylene, explosives, and volatile and
semi-volatile organic chemicals, and the laboratory was placed on the
EPA National Priorities List in 1994.  Navy officials do not believe
the contractor's on-site automobile testing business contributed to
the contamination.  However, some of the contamination at the
laboratory stemmed from burning of propellant-contaminated waste from
the adjacent contractor-owned production facility. 


      CLEANUP EFFORTS
------------------------------------------------------ Appendix II:2.1

Multiple studies and investigations have been performed, starting
with environmental studies initiated in fiscal year 1983 that
identified 11 sites and a later study in fiscal year 1986 that
recommended further study at
8 sites.  A subsequent assessment in fiscal year 1993 identified an
additional 105 sites and only recommended further action at 30 of the
sites.  As of September 1994, the Navy reported that remedial actions
should be completed by fiscal year 1998.  DOD reported in March 1995
that cleanup-related operations were expected to continue to fiscal
year 2010.  Navy officials later stated they expect the study phase
to be completed in fiscal year 2003, remedial actions to be completed
by fiscal year 2010, and long-term operations to be completed in
2025.  According to the officials, limited DERA funding and the
unavailability of field data have delayed cleanup efforts. 


      CLEANUP COST ESTIMATES
------------------------------------------------------ Appendix II:2.2

The Navy's cleanup cost estimates for the laboratory increased from
about $18.7 million in fiscal year 1993, to $27.8 million in 1994,
and $43.5 million in 1995.  DOD's estimates were about $21.2 million,
$30.7 million, and $24.4 million for the respective years.  Navy
officials attributed the increases to an extension of the cleanup
time frames and a change in the estimating methodology used.  The
Navy began to use a projection model in July 1994 to project future
cleanup costs based on factors such as contamination type and degree
of contamination.  The Navy attributed the differences between the
Navy and DOD for fiscal year 1995 mainly to the different data used. 
For example, DOD's 1995 reports excluded unfunded Allegany Ballistics
Laboratory requirements included by the Navy for fiscal year 1998 and
beyond.  In addition, the Navy estimate increased because additional
investigations revealed more extensive contamination. 

Although DOD and Navy sources agreed on expenditures to date, we
found other costs totaling 76 percent more than the $1.3 million
reported for 1994.  Expenditures not reported in the above sources
for Allegany Ballistics Laboratory were (1) $836,000 that was paid
through the Naval Sea Systems Command Operations and Maintenance
account, as directed by congressional appropriations language for a
remedial investigation; (2) $60,000 for an initial assessment study
funded by the Naval Facilities Engineering Command; (3) $45,460
provided by the U.S.  Army Corps of Engineers in DERA funds to the
state of West Virginia for regulatory oversight and technical
assistance; and (4) $45,285 paid to EPA through the Superfund for
oversight.  Also, costs beyond 1994 for EPA oversight are expected to
exceed $667,000. 


      COST-SHARING ARRANGEMENT
------------------------------------------------------ Appendix II:2.3

According to Navy officials, the contamination at the laboratory
resulted from the contractor's operation of both the laboratory and
the adjacent contractor-owned facility.  The Navy sent a letter on
February 22, 1994, asking that Hercules, the facility operator for
more than 50 years, participate in financing the laboratory cleanup. 
Hercules declined to participate, saying that the Navy had assumed
all responsibility for the cleanup.  Hercules stated that it would
also bill the Navy for cleanup-related costs incurred in managing the
restoration contractor, because it considers such costs to be above
and beyond its normal operating costs. 

Navy officials agreed that their 1994 letter to Hercules was not
timely, but said the Navy will continue to clean up the facility and
then determine whether to pursue a cost-sharing arrangement with
Hercules.  They said their decision to pursue Hercules will be based
on such factors as evidence, litigation risk, and the level of
independence of the contractor.  Further, Navy officials stated that
the Navy has never had a significant presence at the laboratory,
leaving the contractor free to make operational decisions, including
those involving disposal.  In the 1960s, about 40 government
employees worked on site with 3,200 contractor personnel.  In the
1990s, about 4 government staff worked with 500 contractor personnel. 


   NAVAL INDUSTRIAL RESERVE
   ORDNANCE PLANT, FRIDLEY
-------------------------------------------------------- Appendix II:3

The Naval Industrial Reserve Ordnance Plant, Fridley, occupies about
83 acres in the city of Fridley, Minnesota, within the
Minneapolis-St.  Paul metropolitan area.  Since 1941, the plant has
produced gun mounts, torpedo tubes, and missile-launching systems. 
With changes in ownership, the same company has operated the plant
for more than 54 years.  Northern Ordnance, Inc., formerly a
subsidiary of Northern Pump Company, operated the facility from 1942
to 1964.  At that time, FMC Corporation purchased the company and
continued operations until 1994, when United Defense Limited
Partnership, a subsidiary of FMC, took over the plant's operations. 

Manufacturing at Fridley generated hazardous waste that contaminated
soil and groundwater with petroleum, oil, and other lubricants, and
such volatile organic chemicals as trichloroethane.  Contamination
has resulted from a leaking sewer system under one of the plant's
production buildings.  The plant was placed on EPA's National
Priorities List in 1989.  Contamination was also discovered at
off-site locations, including the operating contractor's private
facility next to Fridley and three municipal landfills.  From the
1940s through 1969, the contractor disposed of chemicals and other
hazardous waste materials on 18 acres it owned south of the Fridley
facility.  In addition, FMC disposed of foundry sand at landfills in
Andover, East Bethel, and Oakgrove, Minnesota, and it was
subsequently named as a potentially responsible party under CERCLA. 
Chemicals now considered to be carcinogens were reportedly detected
in the foundry sand, but FMC stated that the chemicals were absorbed
by the sand after its disposal at the landfill. 


      CLEANUP EFFORTS
------------------------------------------------------ Appendix II:3.1

The Fridley site was divided into three units for investigation and
cleanup:  groundwater, soils around the building, and soils under the
building.  A 1990 record of decision for the first unit called for
initially pumping and treating contaminated groundwater and
discharging it into a sanitary sewer.  Later, a permanent groundwater
extraction system would treat groundwater for discharge to the
Mississippi River.  The final remedy for the second unit is being
developed.  It involves containing contaminated soils and buried
drums of waste, and later removing the contamination.  For the third
unit, the remedial investigation begun in September 1996 will serve
as the basis for further studies and actions. 


      CLEANUP COST ESTIMATES
------------------------------------------------------ Appendix II:3.2

Total cost estimates for Fridley increased from fiscal year 1993 to
1995.  DOD's estimate increased from $13 million in fiscal year 1993,
to about $37.9 million in 1994, and $49 million in 1995.  The Navy's
estimate increased from about $17 million in 1993 to $30.7 million in
1994, and $52 million in 1995.  Navy officials attributed the 1993
and 1994 increases to changes in estimates of future cleanup
activities, completion dates, and related costs.  Also, the Navy used
a projection model in July 1994 to estimate future cleanup costs,
based on such factors as the type and degree of contamination.  For
1995, Navy officials attributed the large increase to additional
investigations that revealed more extensive contamination needing
cleanup.  Navy officials indicated that the latest difference between
DOD and Navy estimates resulted from a reevaluation of the cleanup
program between the time the Navy and DOD estimates were prepared. 

We found additional costs of about $4 million not reported by either
DOD or the Navy.  Neither included the following: 

  -- Contractors were paid $3.1 million for off-site cleanup.  (The
     Navy reimbursed FMC $1.9 million that FMC had paid to clean up
     its private facility next to Fridley.  The Navy also reimbursed
     FMC about $1.3 million for costs incurred to clean up three
     municipal landfills where it had disposed of waste from the
     Navy-owned Fridley sites.  The reimbursements total $3.1
     million, with rounding.  According to a DOD official, the state
     of Minnesota may reimburse some of the money to FMC and thus to
     the Navy.)

  -- EPA was paid $481,000 through the Superfund for oversight and
     technical assistance. 

  -- Approximately $106,000 was paid by Army Corps of Engineers to
     the state of Minnesota for regulatory oversight and technical
     assistance. 

  -- The Navy paid $269,000 for cleanup before DERA funds were
     available. 

  -- A study funded by the Naval Facilities Engineering Command cost
     $60,000. 

Costs beyond 1994 for EPA oversight are expected to exceed $1.78
million. 

DOD's report for fiscal year 1994 did not show any projected cleanup
costs for 1995 and 1996.  This was corrected in the 1995 report,
which showed total reported cost of about $8 million. 


      COST-SHARING ARRANGEMENT
------------------------------------------------------ Appendix II:3.3

Navy officials said the Navy will clean up the Fridley facility and
then determine whether to pursue cost sharing with FMC.  According to
Navy officials, the Navy has never sent a letter to FMC requesting
financial participation in the cleanup, but did request the
contractor to review and comment on the Navy's new cleanup policy in
September 1989.  In its October 1989 response, FMC disagreed with the
Navy's policy to "require current GOCO contractors to pay for any and
all cleanup costs associated with their operation of Navy
facilities." According to the FMC response, the nature of the
company's relationship with the Navy and related contractual
obligations does not justify it paying for cleaning up the hazardous
waste sites associated with its operations. 

FMC stated that under its contract, it is required to perform only
normal maintenance on the facility:  "Remediation of hazardous waste
sites at the facility would clearly fall in the category of
maintenance over and above normal maintenance that would either be
performed by the Navy or by FMC at Navy expense." However, according
to a Navy official, the contractor was free to make operational
decisions at the facility, including those involving disposal.  He
stated the Navy never had significant presence at Fridley.  For
example, in the 1970s, about 70 or 80 government employees worked
onsite with about 2,000 contractor personnel, and in the 1990s, about
60 government employees worked with 1,500 contractor personnel. 

As noted above, the Navy reimbursed FMC $1.9 million for costs to
clean up the contractor's facility adjacent to Fridley.  Following a
contracting officer's final decision to deny FMC its requested
reimbursement of $2.2 million, FMC appealed to the Armed Services
Board of Contract Appeals.  According to a Navy legal official, after
extensive discussion, the decision to pay FMC was based on
litigation-related risk and cost.  The reimbursement was reduced to
$1.9 million because FMC recovered $275,000 through an action against
Northern Pump Company, the former parent company of the subsidiary
that FMC purchased in 1964.  FMC filed a claim with its insurance
company to recover some of the private facility's cleanup costs. 

In addition to the previously noted $1.3 million Navy reimbursement
to FMC for the company's cleanup costs at the three municipal
landfills, FMC has requested another $1.3 million for these
facilities.  A DOD official indicated that part of these past costs
may be recovered because the state of Minnesota is reimbursing
companies involved in settlements to pay for cleaning up the
landfills.  If FMC receives such a payment, DOD is to be reimbursed
its share. 


AIR FORCE CASE STUDIES
========================================================= Appendix III

We visited two active Air Force manufacturing facilities:  Air Force
Plant 4 in Fort Worth, Texas, and Plant 44 near Tucson, Arizona.  The
2 plants are among 4 the Air Force plans to retain following
divestiture, thereby reducing Air Force GOCO plants from a post-World
War II high of over 100 to the current 9. 


   AGENCY COST-SHARING GUIDANCE
------------------------------------------------------- Appendix III:1

Cleanup at the nine remaining Air Force GOCOs is expected to exceed
$245 million.  The Air Force Deputy General Counsel issued guidance
in December 1995 that deals with cost-sharing arrangements with other
potentially responsible parties, including plant operators.  The
guidance states that there is substantial legal rationale for
negotiating shared responsibility for environmental remediation
costs, based on the facts of the situation, especially where the
contractor may have liability insurance.  The guidance recognizes
that CERCLA "contemplates that potentially responsible parties,
including both the owner and the operator, are responsible and will
share the costs of environmental remediation." It states that "there
should be neither an assumption that the government is responsible
for and will pay 100 percent of a company's environmental remediation
costs, nor an assumption that the government would not pay for any of
these costs under other contracts or continuing liability under the
GOCO contract."

According to an Air Force memorandum, the Air Force now begins
cost-sharing negotiations by proposing equal sharing of costs between
the Air Force and plant operators unless evidence shows that the
government or operator had a greater responsibility, or other
responsible parties were identified.  The memorandum noted that equal
sharing is an appropriate starting place for negotiations because the
Air Force has never exercised day-to-day control over the work of
GOCO plant operators and thus has had little or no ability to control
contractors' compliance with environmental laws and regulations. 

The Air Force recently completed cost-sharing negotiations with a
GOCO operator.  Thiokol, the former operator of Plant 78 in Utah, has
agreed to equally share with the Air Force the costs related to
cleaning up contamination at the plant.  According to Air Force
officials, the decision to pursue cost-sharing at other locations
will ultimately depend on whether the service identifies other
responsible parties at each plant.\1

Air Force officials stated that the Air Force's cost recovery efforts
have been hindered by indemnifications of other DOD contractors and
other factors.  Budget cuts have delayed searches for other
responsible parties, and the Air Force does not have the financial
management systems needed to track all environmental cleanup costs
for recovery purposes.  Contractor officials at the two plants we
visited believe they are not liable for environmental cleanup costs
and cited various contract provisions.  They also stated that
contractor reimbursements by the government for environmental cleanup
costs are not prohibited by law or regulation.  According to Air
Force officials at the two sites visited, the Air Force intends to
pay for cleanup and then recover costs from other responsible
parties. 


--------------------
\1 In another instance, the Air Force has negotiated a cost-sharing
settlement with Aerojet, the operating contractor at Air Force Plant
70 in Sacramento, California.  Aerojet has agreed to pay 35 percent
of cleanup costs associated with its products.  The Air Force is to
pay the other 65 percent of what DOD and EPA officials estimate will
be hundreds of millions of dollars in cost. 


   AIR FORCE PLANT 4
------------------------------------------------------- Appendix III:2

Air Force Plant 4, Fort Worth, Texas, began operations in 1942, when
Consolidated Aircraft manufactured B-24 bombers.  General Dynamics
operated the plant from 1953 until 1993, when Lockheed acquired
General Dynamics' Fort Worth operations.  These Lockheed operations
now produce F-16 fighter jets, spare parts, radar units, and missile
components. 

Manufacturing at Plant 4 generated hazardous waste, including waste
oils, fuels, paint residues, solvents, heavy metals, and process
chemicals.  Groundwater and soil were contaminated, primarily with
trichloroethylene, chromium, and petroleum byproducts.  Four major
plumes of groundwater contamination originate at the plant and extend
offsite, including two plumes that are contaminating the drinking
water aquifer that serves as a municipal water source for the City of
White Settlement.  In addition, the contaminated drinking water
aquifer is near a creek that borders the plant.  This creek
discharges into the Lake Worth Reservoir, which is the primary
drinking water source for Fort Worth.  Plant 4 was placed on EPA's
National Priorities List in August 1990. 


      CLEANUP EFFORTS
----------------------------------------------------- Appendix III:2.1

Site investigations began in 1984, and the Air Force has begun six
ongoing remedial actions since 1992.  These actions consist primarily
of groundwater pump-and-treat, extraction of vapors from soil, and
excavation and disposal of contaminated soil.  Based on a November
1994 Air Force Material Command review of the cleanup program at
Plant 4, the Air Force canceled its plans to build a $25-million
groundwater treatment system because monitoring indicated that the
contaminants in the groundwater are slowly biodegrading.  According
to the Air Force remedial project manager for Plant 4, remedial
actions will be taken only for sites that present an immediate risk,
such as contaminated soils or areas where contaminated groundwater is
affecting drinking water.  The remedial project manager expects
regulatory approval of a record of decision, documenting the final
plan for cleaning up the site, in 1997. 


      ESTIMATED CLEANUP COSTS
----------------------------------------------------- Appendix III:2.2

According to Air Force field estimates, cleanup at Air Force Plant 4
will cost $79.6 million, which is over $16 million more than the
nearly $63 million reported in DOD's fiscal year 1994 and 1995
reports to Congress.  Most of the difference between the two
estimates related to future costs. 

The field estimates were prepared by the Aeronautical Systems Center
in Dayton, Ohio, which is responsible for managing Air Force GOCO
plants and the associated environmental cleanup activities.  DOD's
estimate was based on Air Force headquarters information from an
automated cost-estimating program that considers, among other things,
historical information from similar sites where cleanup has been
completed. 

Regardless of which estimate is more accurate, both excluded some
cleanup costs, although the total excluded is unknown.  According to
Air Force officials, these included such expenses as those incurred
prior to 1984, costs claimed through overhead, projects paid for with
compliance funds, and reimbursements to state regulatory agencies for
oversight.  For example, the field estimate included nearly $4
million that was used for preliminary assessments, site
investigations, and interim remedial actions in 1983 and 1984.  DERA
funds were not available prior to 1984. 

A Center official said that costs can be estimated only roughly until
a record of decision has been signed, confirming the cleanup remedy
decision.  For example, DOD's fiscal year 1993 estimate of $113
million was reduced in 1994 to $63 million partly because of the
previously cited decision to cancel a major groundwater treatment
facility.  The facility became unneeded when the Air Force found that
the hydrogeologic conditions at the affected site were conducive to
natural biodegradation. 


      COST-SHARING ARRANGEMENT
----------------------------------------------------- Appendix III:2.3

The Air Force has paid all the costs of the plant's cleanup to date. 
A decision about whether to pursue recovery of any of those costs
depends on the Air Force's search for responsible parties, which will
be conducted in fiscal year 1997.  General Dynamics and Lockheed
officials believe that existing and former contracts obligate the Air
Force to pay for all environmental cleanup costs.  Lockheed officials
believe that cleanup costs incurred by contractors are normal costs
of doing business and thus generally allowable, as long as they are
reasonable, allocable, and meet other provisions of contracts. 
According to General Dynamics, the agreement between General Dynamics
and Lockheed for the sale of the Fort Worth Division set forth how
the parties would allocate the environmental liability if costs were
not reimbursed by the Air Force.  Contractor officials noted that
this agreement did not constitute an admission of liability. 


   AIR FORCE PLANT 44
------------------------------------------------------- Appendix III:3

Air Force Plant 44, in Tucson, Arizona, has been operated by Hughes
Missile Systems Company since its 1951 construction.  Hughes
currently produces electronic and tactical missile systems at the
plant. 

Manufacturing at Plant 44 generated hazardous waste that contaminated
soil and groundwater.  Contaminants included trichloroethylene as
well as chromium and other metals.  The Tucson International Airport
area, contiguous to Plant 44, was placed on the National Priorities
List in 1983, and Plant 44 is a unit within that site because it is
one of four source areas that contributed to a large groundwater
contamination plume. 


      CLEANUP EFFORTS
----------------------------------------------------- Appendix III:3.1

Site investigations began in 1981, when the Air Force initiated a
groundwater monitoring program.  Based on a 1986 record of decision,
a groundwater remediation program began with a pump-and-treat system
and numerous extraction and recharge wells.  The contaminated plume
has since been reduced by nearly 70 percent and has broken into
several smaller plumes, according to Air Force and contractor
officials, but contamination still exceeds that allowed by EPA for
drinking water.  The Air Force submitted a separate Plant 44
feasibility study to EPA in January 1995 and is developing several
cleanup strategies, including a cleanup remedy to accelerate the soil
cleanup. 


      CLEANUP COST ESTIMATES
----------------------------------------------------- Appendix III:3.2

At the time of our review, Air Force field estimates indicated total
cleanup at Plant 44 would cost about $90.9 million by 2002, which is
higher than either the $61.3 million reported in DOD's fiscal year
1994 report to Congress, or the $73.6 million in DOD's subsequent
1995 report.  According to Air Force officials, the database used to
prepare the DOD estimate in both years was missing nearly $19 million
in historical DERA costs.  Air Force headquarters officials believed
that field data are more accurate for historical costs because the
records of actual obligations reside in the field. 

Air Force headquarters officials told us that projected costs differ
because headquarters used an automated cost-estimating system. 
Headquarters officials believe their projections, which were lower
than the field's in both the 1994 and 1995 reports, will prove to be
more realistic.  According to the Plant 44 remedial project manager,
his estimates are more accurate because they are based on contracted
studies and historical cost figures for operating a groundwater
treatment plant. 

Historical cost estimates from DOD and the field excluded costs
funded by sources other than DERA, such as costs incurred prior to
the account's establishment in 1984, costs claimed by contractors
through overhead charges, more than $50,000 paid to state regulators
for oversight, and cleanup costs paid out of compliance funds.  For
example, the plant has spent over $3 million in compliance funds on
cleanup projects and may similarly use another $3 million that is
currently obligated to compliance projects. 


      COST-SHARING ARRANGEMENT
----------------------------------------------------- Appendix III:3.3

In accordance with the December 1995 Air Force guidance for cost
sharing at its GOCO plants, Air Force officials plan to search for
responsible parties in the future at Plant 44, depending on the
availability of DERA funds.  Hughes officials disclaim responsibility
for sharing the cleanup costs, saying the Air Force is contractually
obligated to pay for all historical environmental cleanup costs.  We
reported in July 1994\2

that a 1987 memorandum from the former Air Force Systems Command said
that Hughes was indemnified from responsibility for past groundwater
contamination.  Our November 1994 report noted that Air Force
officials did not believe that the memorandum indemnified Hughes. 
According to an Air Force attorney, Air Force officials will not make
a formal decision about Hughes' potential liability until cost
recovery becomes an issue. 

Hughes entered into a new lease agreement with the Air Force that
makes Hughes liable for all environmental claims resulting from
releases that arise from acts or omissions occurring on or after the
effective date of the lease.  Hughes and the Air Force are to be each
equally liable for claims resulting from unknown conditions after the
lease's effective date, up to a dollar ceiling for Hughes.  According
to an Air Force attorney, the dollar total is proprietary
information. 


--------------------
\2 Environmental Cleanup:  Defense Indemnification for Contractor
Operations (GAO/NSIAD-95-27,
Nov.  25, 1994). 


DEFENSE LOGISTICS AGENCY CASE
STUDIES
========================================================== Appendix IV

We visited two Defense Fuel Support Points managed by DLA at Norwalk,
near Los Angeles, California, and Ozol, near Oakland, California. 
These fuel support points, among 25 worldwide, are operated by
contractors for DLA's Defense Fuel Supply Center.  The center
purchases bulk refined petroleum products, coal, natural gas, and
synthetic fuels for the military services and federal civilian
agencies around the world. 


   AGENCY COST-SHARING POLICY
-------------------------------------------------------- Appendix IV:1

The Defense Fuel Supply Center policy and practice have been to
recover most cleanup costs for past contamination through a fuel
surcharge assessed to its customers, rather than with DERA funds. 
This surcharge, according to a Center official, is about 1 cent per
barrel.  We found no evidence that the Center has recovered
environmental cleanup costs from its former operators.  Current
operators are to be held responsible for a fuel spill if they are
negligent in attending to a leak on the facility. 

The center does not have a written policy that directs the
investigation of cost-sharing opportunities with potentially
responsible parties such as former owners, lessees, or neighboring
properties.  A complicating factor for DLA's cost sharing in
fuel-related cleanups is that CERCLA excludes certain petroleum
products from the definition of hazardous substances.  In such cases,
joint and several liability under CERCLA may not apply, and DLA may
need to either negotiate with other responsible parties or bring
legal action against them to recover contamination-related damages at
its facilities. 

In discussing this issue, a center official stated that the center
has considered developing a cost-sharing policy to encourage cost
recovery and consistency in cost-sharing approaches.  According to
center officials, the center has an unwritten policy to pursue cost
recovery.  In addition, they believe that the existing general
guidance on property damage should have the same effect, if followed. 


   DEFENSE FUEL SUPPORT POINT,
   NORWALK
-------------------------------------------------------- Appendix IV:2

DLA's Norwalk facility is a 50-acre fuel storage depot in Los Angeles
County, about 20 miles southeast of the city of Los Angeles.  From
1923 until 1951, the Norwalk site was owned by a number of private
oil companies.  In 1951, the site was purchased by the Air Force. 
DLA has operated the facility since 1968.  Tenco Services, Inc., has
been the operating contractor of the facility since 1992.  Santa Fe
Pacific Pipeline leases about 2 acres of land at the facility and has
operated a fuel pump station there for over 25 years. 

Contamination exists both on and off the site in the form of
oil-contaminated soils and underground fuel plumes resulting from
fuel leaks.  Three contamination plumes have been identified on site;
one stemmed largely from the lessee's activities.  A fourth plume is
off site and resulted from a 200,000-gallon leak from a center
pipeline under an intersection in the nearby town of Tustin. 


      CLEANUP EFFORTS
------------------------------------------------------ Appendix IV:2.1

From 1991 through 1994, several assessments were performed at the
facility, and monitoring wells and soil borings were installed and
drilled.  In 1992 and 1993, a total of about 3,300 gallons of liquid
hydrocarbons were removed by a recovery system that was installed for
the Santa Fe plume within the southern portion of the facility. 
Another project removed
4,713 gallons of liquid hydrocarbons from seven off-site wells
adjacent to the site during 1992 and 1993. 

Delays have slowed investigations at the off-site location, and
damage has not yet been fully characterized.  According to Norwalk
officials, gaining access to the surrounding properties to install
test wells has been the major obstacle. 


      CLEANUP COST ESTIMATES
------------------------------------------------------ Appendix IV:2.2

According to Center officials, the Norwalk facility's on- and
off-site cleanup will cost about $16.5 million, about half for each
portion, and will be completed in 2010.  The estimate was submitted
to DOD and was accurately reflected in DOD's annual reports to
Congress for fiscal
year 1994, but was excluded from its 1995 report. 

A factor that could affect DLA costs includes private party leasing
of part of the facility.  The lessee was expected to contribute $7.5
million toward the facility's cleanup cost.  Additional costs that
could arise include four claims totaling about $1.6 million that
nearby property owners have filed against the center.  The claims
allege that contamination from the site has reduced the owners'
property values or prevented them from developing or selling their
properties.  Center officials have not included any amount for claims
in their estimate because the claims have not been decided. 

The center also prepared a worst-case estimate for Norwalk, with
total costs of about $34.7 million.  According to officials, the
higher estimate reflects not a more expensive cleanup remedy, but
potential increases in the cost of testing, monitoring, operations
and maintenance, system installation, pump replacement, and other
such activities.  Completion would still be expected in 2010. 


      COST-SHARING ARRANGEMENT
------------------------------------------------------ Appendix IV:2.3

The center is not attempting to recover any cleanup costs from
present or former contractors at the site.  An investigation
performed at this site identified Santa Fe Pipeline, the lessee, as a
potentially responsible party for this site.  The center and Santa Fe
are currently negotiating cost sharing for cleanup, and center
officials believe that the company will fund about $7.5 million in
cleanup costs. 

Center officials have not identified any possible cost recovery
options for Norwalk's off-site cleanup at the Tustin intersection, a
cleanup that is expected to cost between $8 million and $13 million. 
Officials of the operating contractor believe that a third party may
have damaged the center's pipeline by digging in the intersection to
install a separate pipeline.  A Defense Fuel Region West official
believes that DLA center officials could have been more aggressive in
attempting to identify the responsible party when the leak was first
discovered.  Center officials stated that little, if any, evidence
was gathered to prove that another party damaged the pipeline. 


   DEFENSE FUEL SUPPORT POINT,
   OZOL
-------------------------------------------------------- Appendix IV:3

The Ozol facility is a fuel storage depot near the town of Martinez,
California, about 25 miles northeast of Oakland.  The facility was
constructed in 1959 by the Holley Corporation and leased to the
federal government until the Air Force purchased the facility in
1980.  DLA has managed the facility since 1980, and Tenco Services,
Inc., operated it from 1990 until now. 

Aviation gasoline and jet fuel are present in soil and groundwater
around and beneath the storage tanks, apparently from leaks in the
tanks and pipes.  Four distinct groundwater fuel plumes have been
identified. 


      CLEANUP EFFORTS
------------------------------------------------------ Appendix IV:3.1

In 1985, a pilot recovery system was installed to remove fuel and its
byproducts southwest of the lower tank area.  This recovery system
consisted of a collection trench/recovery well, air stripper, and
recovered fuel holding tank.  In addition, a small, low-volume,
passive oil/water separator was installed to remove fuel north of the
upper tank field.  However, both of these systems have been taken out
of use pending establishment of the selected final remedy. 


      CLEANUP COST ESTIMATES
------------------------------------------------------ Appendix IV:3.2

According to center officials, cleanup at the Ozol facility will cost
about $6.4 million.  This estimate was accurately reflected in DOD's
annual report to Congress for fiscal year 1994, but was excluded from
the 1995 report.  Officials expected that the cleanup will be
completed in 2002. 

The center's worst case estimate totals about $37 million, with
cleanup completed in 2017.  The differences in treatment costs would
arise if active pump-and-treat and vapor-removal systems were
required, rather than the current plan to allow contaminated soils
and groundwater to naturally biodegrade. 


      COST-SHARING ARRANGEMENT
------------------------------------------------------ Appendix IV:3.3

The center is not attempting to recover any cleanup costs from
present or former contractors at the site because center officials do
not believe that contractor action caused the contamination. 
According to a DLA legal official, DLA is not pursuing cost recovery
from the former owner of the site because it believed the
contamination involved occurred after transfer of the property in
1980. 




(See figure in printed edition.)APPENDIX V
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================== Appendix IV



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

Charles I.  Patton, Jr
Uldis Adamsons
R.  Bruce Brown
Leticia V.  Bates
Jerome P.  Pederson

DENVER FIELD OFFICE

Patricia Foley Hinnen
Pamela K.  Tumler

DALLAS FIELD OFFICE

David P.  Marks
Eric R.  Erdman

KANSAS CITY FIELD OFFICE

Robert G.  Hammons
Gary L.  Nelson

LOS ANGELES FIELD OFFICE

Gary W.  Kunkle
Nancy Merlino

*** End of document. ***