Environmental Protection: Issues Facing the Energy and Defense
Environmental Management Programs (Testimony, 03/21/96,
GAO/T-RCED/NSIAD-96-127).

GAO discussed the Department of Energy's (DOE) and Department of
Defense's (DOD) efforts to control the cost of environmental cleanup of
their nuclear weapons facilities. GAO noted that: (1) if DOE
incorporated more realistic land use assumptions into the selection
process for cleanups, that could result in significant cost savings of
$200 million to $600 million annually; (2) deactivation of surplus
facilities, a shortened environmental restoration process, and
privatization of some cleanup processes could also result in DOE
savings; (3) DOE excess carryover balances of uncosted obligations and
unobligated balances could be used to fund cleanup efforts and reduce
its future budget requests; (4) DOD has evaluated about 70 percent of
its 10,000 cleanup sites, but it has not ranked over half of the sites
based on relative risk or ranked sites based on geographical or
organizational boundaries; and (5) DOD does not have sufficient data to
manage its environmental compliance programs.

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

 REPORTNUM:  T-RCED/NSIAD-96-127
     TITLE:  Environmental Protection: Issues Facing the Energy and 
             Defense Environmental Management Programs
      DATE:  03/21/96
   SUBJECT:  Environment evaluation
             Environmental law
             Nuclear weapons plants
             Privatization
             Tanks (containers)
             Defense cost control
             Pollution control
             Unobligated budget balances
             Nuclear waste management
             Atomic energy defense activities
IDENTIFIER:  DOD Environmental Restoration Program
             DOE Environmental Management Program
             Hanford (WA)
             California
             Air Force Environmental Compliance Assessment and 
             Management Program
             Defense Business Operations Fund
             Army Environmental Compliance Assessment System
             
******************************************************************
** 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


Before the Subcommittees on Military Procurement and
Military Readiness, Committee on National Security,
House of Representatives

For Release on Delivery
Expected at
2:00 p.m.  EST
Thursday
March 21, 1996

ENVIRONMENTAL PROTECTION - ISSUES
FACING THE ENERGY AND DEFENSE
ENVIRONMENTAL MANAGEMENT PROGRAMS

Statement of Victor S.  Rezendes,
Director, Energy, Resources, and Science Issues,
Resources, Community, and Economic
Development Division

GAO/T-RCED/NSIAD-96-127

GAO/RCED/NSIAD-96-127T


(302189)


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

  GAO -
  DOD -
  DOE -
  GAO -
  EPA -
  EM -
  RCRA -
  CERCLA -
  BRAC -
  DERP -
  DLA -
  OSD -
  NSIAD -
  DBOF -
  O&M -

============================================================ Chapter 0

Messrs.  Chairmen and Members of the Subcommittees: 

We are pleased to participate in this hearing on the major
environmental issues facing the Departments of Energy and Defense. 
At the Department of Energy (DOE), a major focus in the last few
years has been on improving the cost-effectiveness of the nuclear
weapons complex cleanup.  Similarly, at the Department of Defense
(DOD) cleanup costs have been an issue, but the cleanup effort is
part of a larger effort to control the cost of environmental
compliance now, while minimizing contamination and associated costs
in the future.  At DOD, environmental compliance-related activities
have overtaken cleanup as the major annual cost. 

As our work over the last several years has shown, both departments
face monumental tasks in addressing the legacy of environmental
problems created by many decades of nuclear weapons production and
military operations.  Although DOE and DOD have made some progress,
major obstacles remain, and the two departments estimate that the
total cost of cleaning up their facilities could run as much as $389
billion--about $39 billion for DOD and as much as $350 billion for
DOE. 

Over the last several years, we have reviewed many aspects of each
department's cleanup effort.  With regard to DOE's cleanup effort,
our testimony today will address (1) how administration of basic laws
governing cleanup of the weapons complex affect costs, (2) suggested
ways to reduce DOE's costs, (3) issues the Congress should consider
regarding DOE's initiative to privatize portions of its cleanup
effort, and (4) how excess carryover balances could be used to fund
DOE's cleanup effort.  With respect to DOD's cleanup program, we will
address (1) DOD's use of relative risk as a major factor in ranking
individual cleanup sites and (2) how DOD prioritizes, plans, and
budgets for its environmental compliance program. 

Concerning the DOE cleanup, in summary, we have found the following: 

  -- Changes in how the basic laws governing the cleanup of the
     weapons complex are administered can potentially reduce cleanup
     costs.  For example, DOE has usually assumed that all of its
     facilities will be cleaned up so that their use would be
     unrestricted; however, many facilities are so contaminated that
     unrestricted use is unlikely.  In our August 1994 report on the
     impact of incorporating land use planning decisions into cleanup
     decision-making, we found that incorporating more realistic land
     use assumptions into the selection process for a cleanup remedy
     under the Comprehensive Environmental Response, Compensation,
     and Liability Act of 1980, as amended (CERCLA), could result in
     significant cost savings--from $200 million to $600 million
     annually, according to DOE.\1

  -- In July 1995, we reported (1) that while removing radioactive
     and hazardous materials through a process known as deactivation
     can save money--almost $458 million for the projects we could
     evaluate--DOE did not have a consistent method for determining
     the relative savings among projects and (2) that without a more
     consistent method, DOE could select the wrong priority for
     projects it intends to deactivate.\2 More recently, we have been
     examining how DOE could speed the environmental restoration of
     its sites.  While our work is not complete, we have found that
     significant potential exists to use a less restrictive process
     to plan the remediation of sites, at a significant cost savings. 

  -- As part of its initiatives to reduce the cost of the cleanup,
     DOE is now proposing to privatize portions of the cleanup, most
     notably, the vitrification of high-level waste in the tanks at
     its Hanford facility.  While we have not evaluated DOE's
     privatization proposal, we have conducted numerous reviews of
     DOE's management of the cleanup and of the Hanford tank farms. 
     Key among the major issues that the Congress should consider in
     evaluating DOE's privatization proposal are (1) has DOE
     demonstrated that privatizing the cleanup of the tank farms will
     reduce the overall life cycle costs of the program to the
     taxpayer, (2) has DOE adequately defined what liability the
     government should assume and what liability should be borne by
     the private firm, and (3) has DOE determined who will oversee
     the private firm for compliance with environmental, nuclear, and
     health and safety regulations? 

  -- The Department's excess carryover balances could be used to help
     fund its cleanup efforts.\3 At the end of fiscal year 1995,
     DOE's environmental programs had almost $1.8 billion in these
     balances.  Through prior and ongoing work, we have found that in
     formulating a budget request, DOE officials do not use a
     standard, effective approach for identifying excess carryover
     balances that could be used to reduce DOE's budget request. 
     Instead, DOE makes broad estimates of the potentially excess
     balances in its programs.  As a result, DOE cannot be sure it
     has reduced its balances to the minimum needed to operate its
     programs. 

Turning to DOD, in summary, our work shows the following: 

  -- DOD has begun efforts to categorize cleanups within and among
     facilities based on their relative risk.  Our past and ongoing
     work for this Committee indicates that these efforts are a step
     in the right direction.  About 70 percent of the estimated
     10,000 DOD sites believed to need cleanup have been evaluated,
     but over half of all evaluated sites still are considered high
     priority without any further ranking within that group. 
     Consequently, some lesser priority sites may exist within the
     broader high relative risk category.  Finally, efforts to rank
     cleanup sites across geographic and organizational boundaries
     are still in their infancy. 

  -- DOD does not have sufficient data to manage its environmental
     compliance programs, with far less oversight data for compliance
     activities than for cleanup activities.  For example, even
     though the Congress receives annual reports with installation
     level data for planned and actual cleanup expenditures, DOD's
     process for compliance data cannot now provide a similar degree
     of detail.  In 1994, the Office of the Secretary of Defense
     (OSD) established a working group to develop procedures to
     ensure that necessary data, such as amounts budgeted and spent,
     can be obtained and reported in detail.  It is too soon to fully
     evaluate DOD's plans to improve oversight of the compliance
     program, but we are concerned some initial changes may make it
     harder to distinguish among DOD's highest priorities. 


--------------------
\1 Nuclear Cleanup:  Completion of Standards and Effectiveness of
Land Use Planning Are Uncertain (GAO/RCED-94-144, Aug.  26, 1994). 

\2 Department of Energy:  Savings From Deactivating Facilities Can Be
Better Estimated (GAO/RCED-95-183, July 7, 1995). 

\3 Carryover balances consist of uncosted obligations and unobligated
balances. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

Through its Environmental Management (EM) program, DOE is responsible
for environmental restoration, waste management, and facility
transition and management at 15 major contaminated facilities and
more than 100 small facilities in 34 states and territories.  These
facilities encompass a wide range of environmental problems,
including more than 7,000 locations where radioactive or hazardous
materials were released into the environment; almost 200 tanks that
contain high-level radioactive waste from nuclear weapons production,
some of which have leaked or could explode; and 7,000 production
facilities that are now idled and in need of deactivation,
decontamination, and decommissioning. 

For decades, DOD has operated industrial facilities that generated,
stored, or disposed of hazardous wastes.  The types of hazardous
wastes and contaminants that require cleanup at the majority of DOD's
installations are also found at most private industrial operations. 
The primary contaminants are petroleum-related products such as
fuels, solvents, corrosives, and paint strippers and thinners. 
Contamination has usually resulted from improper disposal, leaks, or
spills.  Some unique military substances, such as nerve agents and
unexploded ordnance, are also found at DOD's installations. 

In 1984, the Congress established the Defense Environmental
Restoration Program (DERP) to evaluate and clean up contamination
resulting from DOD's past activities.  DERP's primary goal is to
protect human health and the environment from risks posed by
contaminated sites.  Since 1984, DOD has identified approximately
20,000 potentially contaminated sites (10,000 of which it believes
contaminated) at over 1,700 installations, and approximately 3,200
potentially contaminated sites at about 2,200 formerly used DOD
installations in the United States.\4

In cleaning up its sites, DOD and DOE must comply with two major
federal environmental laws--the Resource Conservation and Recovery
Act of 1976, as amended (RCRA), and CERCLA--as well as with state
environmental laws and regulations.  RCRA regulates the management of
facilities that treat, store, and dispose of hazardous wastes and the
cleanup of hazardous wastes released from such facilities.  CERCLA
governs the cleanup of inactive waste sites--that is, sites where
disposal is no longer occurring.  The Environmental Protection Agency
(EPA) is responsible for administering both acts, but EPA may
authorize state agencies to implement all or part of its RCRA
responsibility.  To implement its responsibilities under these acts,
DOE has entered into interagency compliance agreements with EPA and
the states.  These agreements identify activities--generally called
milestones--and schedules for achieving compliance, many of which are
legally binding and enforceable.  Both departments are also involved
in complying with other laws such as the Clean Air Act, the Clean
Water Act, the Safe Drinking Water Act, the National Environmental
Policy Act, and the Federal Facility Compliance Act. 

Cleaning up these department's sites is an enormous task, that, in
the case of DOE, is likely to span multiple generations.  Over the
last several years, the total estimated cost of the DOE cleanup has
risen from about $100 billion in 1988 to $230 billion, with a high
end estimate of $350 billion.  DOD currently estimates its total
costs, from its inception, at almost $39 billion. 


--------------------
\4 DOD had previously used a figure of 8,000 potential sites because
that was the number of formerly used defense sites.  That number was
not based on any indications of contamination, and DOD has revised it
based on preliminary assessments. 


   MANY ISSUES COULD AFFECT THE
   COST OF CLEANING UP THE WEAPONS
   COMPLEX
---------------------------------------------------------- Chapter 0:2

The huge cost of cleaning up the weapons complex has been a matter of
growing concern, especially to the Subcommittee on Military
Procurement.  We have reported repeatedly on many issues that have
and will affect the cost of the cleanup, including the need for a
national, risk-based strategy to set realistic priorities; the need
for DOE to more effectively address the complex technical problems
that it faces in cleaning up its most vexing problems, such as the
high-level tank wastes at Hanford; and the need for effective
contractor management.\5 At your request, we would like to address
several issues of specific interest to the Subcommittee.  These
issues include how legislation can affect cleanup costs, ways to
reduce cleanup costs, DOE's privatization initiative, and how excess
carryover balances could be used to fund DOE's cleanup efforts. 


--------------------
\5 Nuclear Weapons Complex:  Establishing a National Risk-Based
Strategy for Cleanup (GAO/T-RCED-95-120, Mar.  6, 1995), Nuclear
Waste:  Hanford Tank Waste Program Needs Cost, Schedule, and
Management Changes (GAO/RCED-93-99, Mar.  8, 1993), and Department of
Energy:  National Priorities Needed for Meeting Environmental
Agreements (GAO/RCED-95-1, Mar.  3, 1995). 


      HOW LEGISLATION IS
      ADMINISTERED CAN AFFECT
      CLEANUP COSTS
-------------------------------------------------------- Chapter 0:2.1

Our August 1994 report on the impact of incorporating land use
planning decisions into cleanup decision-making stated that
incorporating more realistic land use assumptions into the selection
process for a cleanup remedy under CERCLA could result in significant
cost savings--from $200 million to $600 million annually, according
to DOE's Assistant Secretary for EM.  Our report noted that DOE and
EPA had been assuming that all of DOE's facilities would be cleaned
up so that they could be used for unrestricted use.  Consequently,
the most stringent environmental requirements were imposed on every
cleanup project.  However, we found that because CERCLA does not
specifically address using alternative land uses, such as industrial
parks, EPA's policy had been to assume residential use in its
decisions--potentially the most costly cleanup requirement. 

Since our report was issued, DOE has begun to work with local
stakeholder groups and develop land use plans for its sites. 
Additionally, in May 1995, EPA issued a directive indicating that
cleanup decision-making should reflect "reasonably anticipated future
land use" and that this could lead to more expedited, cost-effective
cleanups.  The practical effect of this directive is not clear.  For
example, CERCLA states that cleanup alternatives that permanently
treat contaminants are preferred.  Since some land uses may rely on
institutional controls, such as deed restrictions and fencing, to
prevent access to the contaminated area, it is not clear whether EPA
will be able to consider these types of controls a permanent
solution.  As we noted in our report, if the Congress agrees that
land use planning should be used in cleanup decisions, it could amend
CERCLA to provide EPA with more specific direction. 

DOE's facilities are subject to the cleanup actions and procedures
specified by EPA under CERCLA as well as to RCRA-related requirements
for corrective action established by EPA or a state regulatory
agency.  The need to coordinate the requirements of RCRA and CERCLA
has created the potential for delays and increased costs.  For
example, our December 1994 report stated that officials at DOE's
Savannah River Site were preparing additional documents to meet
CERCLA's requirements, at a cost of about $33,000, for a facility
that had been cleaned up and closed in 1990 under RCRA.\6 DOE
officials acknowledged that DOE would not be conducting any
additional cleanup or disclosing any new information in preparing the
required documents.  Such problems could continue, since much cleanup
work remains to be done, and additional DOE facilities have come
under CERCLA regulation. 

DOE and EPA have recognized the potential impact of this duplication. 
DOE has developed an approach where it attempts to avoid duplication
by specifying a lead regulator (either EPA or the state) for each
cleanup project.  Similarly, EPA is developing guidance on
designating a lead regulator which it expects to issue in the summer
of 1996.  While this approach might solve the problem, it will depend
on the cooperation of DOE and the EPA regions and states that oversee
DOE's facilities.  Absent such cooperation, problems with duplication
between RCRA and CERCLA could continue to affect the cost of the
cleanup. 


--------------------
\6 Nuclear Cleanup:  Difficulties in Coordinating Activities Under
Two Environmental Laws (GAO/RCED-95-66, Dec.  22, 1994). 


      SPECIFIC OPPORTUNITIES EXIST
      TO REDUCE CLEANUP COSTS
-------------------------------------------------------- Chapter 0:2.2

In July 1995, we issued a report to the Subcommittee on Military
Procurement examining DOE's approach for estimating the savings it
could achieve through the deactivation of surplus facilities.\7 We
found that deactivation--removing radioactive and hazardous materials
from unused buildings--can save money.  In estimating the net savings
that DOE could realize for the 11 projects for which sufficient data
were available for analysis, we found that the projects could yield a
net savings of $458 million over their expected life.  Despite the
significant savings that some deactivation projects can generate, DOE
did not have a consistent method for determining the relative savings
among projects, and without a more consistent method, DOE could
select the wrong priority for projects it intends to deactivate.  We
recommended that DOE develop a more reliable method for estimating
savings and use this method to set priorities for deactivation
projects.  DOE agreed with our recommendations and said it would
develop guidance on estimating savings and use the guidance to
determine facility deactivation priorities. 

Currently, we are examining for you how DOE could use a process known
as "removal actions" to speed the environmental restoration of its
sites.  A removal action shortens or eliminates some of the planning
steps, such as the remedial investigation and feasibility study,
normally used for full-scale remedial actions under CERCLA.  Although
removal actions are sometimes used to respond to emergencies or other
urgent circumstances, they can also be used in more routine
situations at federal facilities.  Removal actions have been used for
a variety of cleanups, including treating ground and surface water
and excavating contaminated soil.  While our work is not complete,
significant potential exists to use this less-restrictive process at
many DOE sites at a significant cost savings. 


--------------------
\7 Department of Energy:  Savings From Deactivating Facilities Can Be
Better Estimated (GAO/RCED-95-183, July 7, 1995). 


      MANY CHALLENGES FACE DOE
      WITH RESPECT TO
      PRIVATIZATION
-------------------------------------------------------- Chapter 0:2.3

As part of its initiatives to reduce the cost of the cleanup, DOE is
now proposing to privatize portions of the cleanup, most notably, the
vitrification of the high-level waste in the tanks at its Hanford
facility.  Rather than constructing and operating its own facilities
to treat the tank waste, DOE is considering having a company or a
consortium of companies finance, design, build, and operate
pretreatment and treatment facilities and deliver the finished
product--in this case, vitrified waste encased in stainless steel
containers--to DOE for a fee.  DOE expects this approach to save
billions of dollars because the potential for innovation in the
marketplace could lead to greater efficiencies and improved
performance.  A request for proposals to design the first phase of
this effort was issued in February 1996, and DOE expects to award
competing contracts in August 1996. 

It is important to recognize that for all practical purposes, DOE's
activities are already privatized.  Specifically, DOE primarily
relies on management and operating contractors to conduct its
programs at its major sites.  Under this concept, the government
assumes most of the risk for the operations, while the contractor is
paid on a cost-plus-award-fee basis.  What sets DOE's privatization
initiative apart from its traditional approach is DOE's attempt to
shift responsibility for financing and much of the risk onto the
private contractor. 

Although we have not evaluated DOE's privatization initiative, we
have conducted numerous reviews of DOE's management of the cleanup
and of the Hanford tank farms.  You asked us to identify issues that
the Congress should consider in evaluating DOE's privatization
proposal.  While there are many issues to consider, we believe three
are the most critical: 

  -- Has DOE demonstrated that privatizing the cleanup of the tank
     farms will reduce the overall life cycle costs to the taxpayer? 
     As our work has demonstrated, considerable uncertainty exists
     about the contents of the tanks and the effectiveness of many of
     the technologies needed to be successful.\8 It is possible that
     the "risk premium" demanded by a private entity to cover these
     uncertainties could exceed the efficiency gains that might be
     realized by privatization. 

  -- Has DOE adequately defined what liability the government should
     assume and what liability should be borne by the private firms? 
     According to our past work, DOE has not used a consistent
     approach to indemnify its cleanup contractors, and some
     contractors have received more favorable treatment than
     others.\9 Again, given the substantial risk involved, the issue
     of indemnification bears close scrutiny to ensure that the
     government does not assume so much of the risk that the effort
     becomes privatized in name only. 

  -- Has DOE determined who will oversee the private firm for
     compliance with environmental, nuclear, and health and safety
     regulations?  The facilities to treat Hanford's high level waste
     will involve hazardous, radioactive materials potentially
     dangerous to workers and the public.  This will require the
     coordination and cooperation of many agencies, including EPA,
     the Nuclear Regulatory Commission, the state of Washington, and
     the Defense Nuclear Facilities Safety Board. 


--------------------
\8 Nuclear Waste:  Management and Technical Problems Continue to
Delay Characterizing Hanford's Tank Waste (GAO/RCED-96-56, Jan.  26,
1996). 

\9 DOE Management:  Consistent Cleanup Indemnification Policy Is
Needed (GAO/RCED-93-167, July 12, 1993). 


      DOE'S LARGE CARRYOVER
      BALANCES CONTINUE TO BE AN
      ISSUE
-------------------------------------------------------- Chapter 0:2.4

In addition to making the cleanup more cost effective, an additional
way to provide funds for DOE's cleanup is through the use of excess
carryover balances of uncosted obligations and unobligated balances. 
Over the last several years, the Congress has reduced DOE's request
for new obligational authority and recommended that DOE use balances
remaining from prior years' obligational authority that are carried
over into the new fiscal year.  DOE's EM program had about $1.8
billion in such carryover balances at the end of fiscal year 1996. 
While DOE needs some carryover balances to pay for program
commitments made in prior years that have not been completed, the
Department's large and persistent carryover balances have raised
concern in the Congress, and especially in the Subcommittee on
Military Procurement, about whether DOE's carryover balances exceed
the minimum needed to support its programs. 

Over the last several years, we have consistently found that DOE had
hundreds of millions of dollars in carryover balances that were not
needed for their identified purpose, were not tied to specific needs,
or were in excess of expected needs.\10 For example, last year, we
identified $46.2 million reserved for 15 environmental management
projects at the Savannah River Site that were no longer needed
because of cost underruns, reductions in the projects' scope, or
cancellation of projects.  These persistent findings led us to review
whether DOE had an effective approach for identifying carryover
balances that exceed its program requirements and may be available to
reduce its budget request and whether DOE's process could be
improved. 

We found that in formulating a budget request, DOE officials do not
use a standard, effective approach for identifying excess carryover
balances that could be used to reduce DOE's budget request.  Instead,
DOE makes broad estimates of the potentially excess balances in its
programs.  For example, EM proposed the use of $300 million in
carryover balances for its fiscal year 1996 budget.  According to EM
officials, that amount was not based on any detailed analysis, and
only after it was proposed did the program identify where the
available balances might be found.  As a result, DOE cannot be sure
it has reduced its balances to the minimum needed to operate its
programs.  Our forthcoming report will make recommendations on how
DOE can better estimate the carryover balances it needs to operate
its programs and make available additional resources to pay for its
efforts. 


--------------------
\10 DOE's Fiscal Year 1994 Uncosted Balances (GAO/RCED-95-263R, Aug. 
7, 1995), Energy Management:  Use of Uncosted Balances to Meet Budget
Needs (GAO/RCED-94-232FS, June 6, 1994), and Energy Management: 
Additional Uncosted Balances Could Be Used to Meet Future Budget
Needs (GAO/RCED-94-26, Oct.  26, 1993). 


   OPPORTUNITIES EXIST TO IMPROVE
   MANAGEMENT OF DOD'S CLEANUP AND
   COMPLIANCE PROGRAMS
---------------------------------------------------------- Chapter 0:3

Addressing DOD's environmental problems also represents a significant
undertaking.  Cleanup and compliance program costs make up 86 percent
(including Base Realignment and Closure [BRAC] costs) of DOD's total
$5 billion fiscal year 1996 budget estimate for its overall
environmental security program.  Cleanup costs, excluding BRAC, total
$1.6 billion for fiscal year 1996, and compliance costs, excluding
BRAC, total $2.2 billion.\11 Consequently, ensuring that these
programs are well managed has been an ongoing concern of the National
Security Committee and its subcommittees. 


--------------------
\11 Pollution prevention, conservation, and environmental technology
make up the remaining 14 percent of DOD's environmental funding for
fiscal year 1996. 


      SETTING PRIORITIES FOR DOD'S
      ENVIRONMENTAL CLEANUP
-------------------------------------------------------- Chapter 0:3.1

In its 1994 annual report to the Congress, dated March 1995, DOD
estimated that the cost of cleaning up all of its currently
identified contaminated sites will total $38.9 billion.  Such an
immense undertaking and limited annual funding require that DOD
address the most severely contaminated sites first. 

In April 1994, we reported that DOD had not effectively prioritized
the cleanup of its contaminated sites and that some sites that were
identified as high priority posed less of a risk to human health and
the environment than sites that were not on the high-priority
list.\12 We reported also that DOD's cleanup had proceeded slowly and
that relatively few hazardous waste sites had been cleaned up. 
Citing congressional concerns and our report, DOD began to implement
a risk-based prioritization system. 

In May 1994, an inter-military service working group developed
procedures to prioritize cleanups on the basis of relative risk. 
Historically, priorities for cleanup were established at the field
level using a variety of methods and factors--often by DOD and
regulatory personnel--as part of negotiated legal agreements that
included study and cleanup milestones.  However, the legal agreements
did not always ensure that sites posing the greatest risk to human
health and the environment were cleaned up first. 

In the summer of 1994, DOD issued guidance to implement the relative
risk model to place sites in the DERP into high, medium, and low
groups.  Assignment to a relative risk group considered (1) site
contamination (What chemical concentrations are there?), (2) paths
that the materials could travel (Is the contamination moving or will
it move?), and (3) potential contacts that the contaminants could
have with people, animals, or plants (Are there humans or sensitive
environments nearby that could be adversely affected?). 

DOD expected to complete relative risk evaluations by July 1995 for
the estimated 10,000 sites requiring cleanup.  However, as of
February 1996, evaluations had been done for 7,450 of the sites. 
These evaluations were to be used as a primary tool for prioritizing
cleanup efforts for the fiscal year 1996 budget cycle and making
funding decisions.  However, the lack of relative risk evaluations
for the remaining sites impedes DOD's ability to prioritize and
sequence its cleanup work. 

In addition, more than one-half, or about 4,000 of the 7,450 sites
have been categorized as high risk.  DOD and the military services
plan to spend 83 percent of their fiscal year 1996 cleanup funds on
sites in the high relative risk category.  As shown in figure 1, the
remaining 17 percent of expenditures is for sites ranked medium, low,
or not evaluated.  Generally, no further risk distinctions are made
among the high risk sites, except for a Navy and Marine Corps effort
to prioritize sites in EPA Regions 9 and 10.  Not identifying the
worst sites among this large number of high risk sites could impede
directing scarce environmental resources to those sites posing the
greatest risk to human health and the environment. 

   Figure 1:  Fiscal Year 1996 DOD
   Cleanup Expenditures by
   Relative Risk Ranking (Dollars
   in millions)

   (See figure in printed
   edition.)

Note:  Total fiscal year funding of about $1.2 billion was based on a
one-time data request from the Army, Navy, Air Force, and the Defense
Logistics Agency in February 1996.  The total varies somewhat from
actual budget data. 


--------------------
\12 Environmental Cleanup:  Too Many High Priority Sites Impede DOD's
Program (GAO/NSIAD-94-133, Apr.  21, 1994). 


      IMPROVING DOD'S PRIORITY
      SETTING, PLANNING, AND
      BUDGETING FOR ITS COMPLIANCE
      PROGRAM
-------------------------------------------------------- Chapter 0:3.2

This portion of our testimony addresses our concerns about the
current process that DOD uses to set environmental compliance
priorities and to provide the funding necessary to meet these
priorities.  We will also discuss proposed changes in DOD's
compliance program that are designed to give DOD management and the
Congress more useful information to help them manage and oversee the
overall program. 


         COMPLIANCE PRIORITY
         SETTING
------------------------------------------------------ Chapter 0:3.2.1

We and OSD have noted that DOD's budgeting process does not provide
DOD management or the Congress with the information needed to provide
for proper oversight.  A DOD initiative to provide the data needed to
better manage the program has developed new definitions for EPA
classes that DOD used to set priorities for compliance projects. 
However, the initiative could dilute the highest-priority category by
increasing the number of highest-priority projects, and thus
significantly reduce management oversight. 

DOD's process for compliance requires the services and the Defense
Logistics Agency (DLA) to determine environmental requirements and
obtain funding for priority needs.  DOD's current policy uses an EPA
five-category classification system that places the highest priority
on those projects at facilities currently out of compliance (Class I)
and lesser priority on those not compliance-driven or time sensitive. 

In November 1993, we reported that overall environmental compliance
funding procedures varied widely among the services.\13 We noted that
many military services' compliance-related appropriations requests
did not provide detailed project information, impeding DOD's and the
Congress' ability to measure costs and progress.  Similarly, OSD's
Comptroller office stated in July 1994 that DOD's budget reports
provide only appropriation-level data that are not sufficient to
manage its overall environmental program.  The OSD established a
working group to develop procedures to ensure that necessary data
such as amounts budgeted and spent can be obtained and reported in
detail.  The military services' internal audit groups have also
identified problems with controls over compliance project
justifications, fund allocations, and expenditures. 

DOD began an environmental quality initiative in 1995 to promote
consistency in compliance definitions, categories, and requirements. 
DOD has identified goals, strategies, budget items, and measures of
merit for three of its environmental quality pillars:  pollution
prevention, conservation, and compliance.  DOD developed new
definitions for four of the five EPA classes, but it has not provided
specific guidance to the military services. 

We agree with DOD's general approach, but have concerns that the
class definitions in DOD's plan (1) are a significant departure from
DOD's past definitions, (2) do not conform to EPA's definitions, and
(3) may expand the number of projects that qualify for funding under
compliance Class I, without being able to distinguish among different
types, as shown in the following examples: 

  -- While EPA explicitly limits Class I to facilities currently out
     of compliance as documented by notices of violation or consent
     agreements, DOD's new definition adds projects to address
     requirements where the facility may not be out of compliance for
     2 or more years. 

  -- Although specific procedures have not yet been finalized, DOD's
     descriptions also indicate that items that EPA includes in Class
     III (such as inventories, surveys, studies, and assessments)
     could also be routinely funded as Class I projects. 

EPA states that designating a project as, for example, Class III,
does not mean the project is necessarily less important than one in
Classes I or II.  Nonetheless, the inclusion of greater numbers of
indistinguishable projects under a redefined Class I could reduce
management oversight.  In discussing this issue OSD officials said it
was not their intent to dilute the compliance priority setting
process.  Rather, they stated that they wished to permit better
recognition of must-fund items within each class.  They said it may
be too late to define the classes again this year, but that they will
act to ensure that the priorities are not diluted in the process. 


--------------------
\13 Environmental Compliance:  Guidance Needed in Programming Defense
Construction Projects (GAO/NSIAD-94-22, Nov.  26, 1993). 


      DOD'S COMPLIANCE PLANNING,
      REVIEW, AND BUDGETING
      PROCESSES
-------------------------------------------------------- Chapter 0:3.3

Each military service performs environmental self-assessments as a
means of helping it determine its environmental needs.  For example,
the Air Force has its Environmental Compliance and Assessment
Management Program, and the Army has its Environmental Compliance
Assessment System.  The services have set up standards for these
self-assessments, which generally require an internal assessment
performed by the installation each year together with an external
assessment, usually performed by the major command every 3 years. 
The findings from these assessments may identify regulatory
requirements and currently or soon-to-be-out-of compliance conditions
and are thus used to help classify projects selected to correct the
situation.  This helps installations to rank project lists. 

Other means that installations use to develop requirements include
inspections by EPA and state or local regulators.  For example,
regulators in California now have what they consider to be a
cooperative working relationship with many military installations. 
An effort commended by regulators in California was a partnership
with DOD called the California Military Environmental Coordinating
Committee.  The Committee brings together California regulatory
agencies, EPA, and the military to help solve mutual problems.  The
regulators believe that the Committee fosters cooperation,
coordination, and communication between DOD and the regulator
community. 

As requirements are developed at the installation level, they are
also ranked.  As noted previously, while installations prioritize
projects according to EPA's classification system, they also add
additional rankings to differentiate projects within each
classification.  Some installations rank projects as high, medium, or
low within each class, according to how critical they are to the
installations' environmental programs.  As an example, all Army Class
I-designated projects are, by definition, of high importance. 
However, Class II and III projects are further subdivided into high,
medium, and low, and this distinction is used to further rank the
projects for funding. 

Our initial discussions with the military services' headquarters
officials indicate that only the Marine Corps prioritizes individual
compliance projects among installations so that a service-wide
prioritized list of environmental projects is developed.  According
to a headquarters program manager, the Corps has been prioritizing at
its 25 installations for about 5 years.  The Marine Corps
headquarters officials revise this list as needs change. 

Installations develop a ranked unconstrained list of environmental
compliance projects and forward these detailed lists to their major
command.  Major commands review projects, scrub their funding
requests, and decide which projects they will support.  Major
commands forward their approved list to headquarters for further
review and approval.  The review process varies by service, but
generally the review is directed at the major command program level
and, except for the Marine Corps and DLA, does not normally include a
review of specific projects and priorities.  However, the military
services' headquarters officials review some projects, like military
construction, or they may sample individual projects as shown in the
following examples: 

  -- The Army Environmental Center reviews a sample of projects
     forwarded by the major commands to the service's headquarters. 
     The Center's goal is to improve future project submittals. 

  -- DLA reviews all project submittals. 

  -- The Marine Corps is the only service that takes this process to
     completion by setting priorities at the major command and
     headquarters levels. 

DOD's policy has placed the highest priority on projects for
facilities currently out of compliance and subject to an enforcement
action.  The next highest priority facilities are those facilities
that will be out of compliance soon.  The services' environmental
headquarters officials told us that they fund, within budget
limitations, all EPA Class I and EPA Class II projects that will be
out of compliance soon.  (As noted previously, such projects and
others would be considered Class I under DOD's plans for fiscal year
1998.) In addition, the services also fund recurring "must-fund"
activities.  These activities may include but not be limited to
manpower, fees and permits, sampling and analysis, and hazardous
waste disposal. 

Most environmental compliance funding is provided to the services
through the Operation and Maintenance (O&M) appropriation.  However,
significant funds are also provided by the Military Construction
appropriation, especially for the Navy and Air Force.  The Defense
Business Operations Fund (DBOF), a nonappropriated account, also
provides significant funds for environmental compliance within the
Navy and DLA.  DLA funds over 98 percent of its compliance activity
from DBOF. 

OSD and military service headquarters do not currently monitor
expenditures for environmental compliance projects.  As noted
earlier, the services' major commands review proposed installation
projects.  Our visits to each headquarters office and selected
commands and facilities showed little monitoring of specific
expenditures except at the installation level.  Funds from DOD and
the services' O&M accounts, which provide the majority of compliance
funding, can be authorized by major commands or installation
officials to be used for other purposes-- environmental or
nonenvironmental. 

DOD and the services currently cannot provide overall environmental
compliance budget execution data to show that the projects they
funded were actually executed.  DOD has established a joint working
group to develop operating procedures to implement a new budget
execution reporting procedure.  The extent to which actual
expenditures will be monitored under the new reporting procedures is
not clear at this time. 

Some headquarters officials believe that installation commanders have
adequate incentives to comply with environmental regulation, as they
risk being fined and/or jailed for environmental violations
discovered on their installations.  The services' officials believe
that indirect measures, such as the decreasing numbers of notices of
violation and enforcement actions, can indicate that installation
commanders are using their environmental funding for environmental
projects. 


      ISSUES RAISED BY INTERNAL
      AUDIT AGENCIES REGARDING
      COMPLIANCE MANAGEMENT
      ACTIVITIES
-------------------------------------------------------- Chapter 0:3.4

In a May 1995 report,\14 the Army Audit Agency found that
environmental managers (1) overestimated the number of must-fund
environmental projects; (2) overestimated project costs; and (3) did
not keep adequate documentation to support requirements.  The Agency
reviewed 196 projects classified as must-fund for fiscal year 1993
and found that 51 (27 percent) costing $22 million should not have
been classified as must-fund. 

In a May 1995 report,\15 the Air Force Audit Agency found that for
the nine installations visited 95 percent of projects funded with
fiscal year 1993 environmental compliance moneys were qualified
projects.  However, major commands and installations authorized some
projects that did not qualify for environmental compliance funding. 
The Agency found 17 projects valued at $3.2 million that did not
qualify for environmental compliance funding. 

In a January 1996 report,\16 the Naval Audit Service found that Navy
and Marine Corps activities based justification for one of six
environmental projects proposed for its 1997 Military Construction
Program on outdated data.  The project was nonetheless considered
partially valid.  The Service examined another 43 projects that were
not justified as environmental.  The Navy Audit Service had similar
overall findings in previous reviews of the 1996 and 1995 Military
Construction programs.\17


--------------------
\14 U.S.  Army Audit Agency, Program Execution for Environmental
Projects, Audit Report:  NR 95-708 (May 17, 1995). 

\15 U.S.  Air Force Audit Agency, Report of Audit:  Management of
Environmental Compliance Funds, Project:  94052022 (May 10, 1995). 

\16 U.S.  Naval Audit Service, Military Construction, Navy Projects
Proposed for Fiscal Year 1997, Audit Report:  024-96 (Jan.  8, 1996). 

\17 U.S.  Naval Audit Service, Military Construction, Navy Projects
Proposed for Fiscal Year 1996, Audit Report:  94-0013 (Nov.  29,
1994) and U.S.  Naval Audit Service, Military Construction, Navy
Projects Proposed for Fiscal Year 1995, Audit Report:  93-0017 (Dec. 
22, 1993). 


-------------------------------------------------------- Chapter 0:3.5

Messrs.  Chairmen, this concludes our prepared statement.  We will be
glad to respond to any questions you may have. 


*** End of document. ***