Orphan Share in the United States

Orphan Share in Environmental Law

A term used in cases involving the clean i up of a hazardous waste site to describe the proportion of potentially responsible parties who are insolvent, no longer in existence, or unavailable and therefore unable to contribute to the costs of remediation. It also may be used to describe the portion represented by defendants who have refused to settle.

Although the Comprehensive Environmental Response, Compensation, and Liability Act holds each potentially responsible party liable for the entire cleanup, in practice the Environmental Protection Agency (EPA) seeks out as many parties as it can find to finance the response action. The goal for the government is to find enough solvent and willing parties to pay 100 percent of the cost of remediation. Potentially responsible parties have an interest in locating as many people with a connection to the waste site as possible. The incentive is clear: generally, the more parties involved, the more money will be available. But that is not always the case.

Abandoned hazardous waste sites are often very old. The company that ran the operation may no longer exist, or the facility may have been rim by an individual who has no money. The same situations may apply to many of the businesses that disposed of the wastes. The nonsettlor is as much a concern to the other parties as those who cannot contribute to paying for the work. If a solvent owner, operator, or executive of a hazardous waste site or generator exists, the government can pursue those individuals. Frequently, that ability is exercised; however, many times those people are also insolvent, or they have so little money they cannot finance the cleanup.

When the potentially responsible parties who are solvent are assigned all of the costs for investigation and cleanup, they try to avoid paying the orphan’s share. Generally, the parties will argue that the EPA should pick up the orphan’s share by using the fund established for cleaning up abandoned hazardous waste sites [see Superfund].

Until 1986, the argument fell on deaf ears. The Superfund was established, the EPA contended, to pay for emergency responses and take care of sites where no potentially responsible parties can be found. However, the Superfund Amendments and Reauthorization Act made it clear that Congress favors settlements. Use of the Superfund to pay for the orphan’s share is permissible in situations where the agency believes settlement may result. This type of cleanup financing is called mixed funding.

The EPA recognizes three different types of mixed funding. In the first, the potentially responsible parties perform the work and are reimbursed for a portion of the costs. Such an arrangement must be worked out in advance of the work, but the EPA prefers this preauthorized method to other alternatives. The second type is a cash out, in which the agency does the work and the potentially responsible parties contribute toward the costs but do not pay for the entire cleanup. In the third type of mixed funding, the agency and parties agree to do discrete parts of the cleanup. The agency then pursues the potentially responsible parties who are not willing to settle.

The agency sanctions saving the Superfund for sites where no viable parties exist, but it also has an interest in completing a cleanup. The EPA’s guidance emphasizes the importance of obtaining substantial settlements from potentially responsible parties who are bargaining in good faith. The agency will not allow mixed funding to be used routinely to cover the orphan’s share.
Based on “Environment and the Law. A Dictionary”.