MARCH 5, 1997

My name is Rich Heig, and I am Senior Vice President for Engineering and Environment of Kennecott Corporation.

I appreciate having the opportunity to appear before this Committee on behalf of Kennecott, and express our views on S. 8, the "Superfund Cleanup Acceleration Act of 1997". There is a lot that we like about this bill. Kennecott supports a balanced reform of Superfund, designed to correct the program's many problems -- problems that have led to little cleanup, and a tremendous amount of litigation. Superfund reform should have as its goal, expedient cleanup based upon good science, and should include natural resource damages (NRD) provisions that clearly focus on restoration of services. S. 8 is a positive step toward this goal.

Kennecott Corporation is headquartered in Salt Lake City, Utah, and provides management services to various Kennecott affiliates. Kennecott companies include the third largest producer of copper metal, and the third largest producer of clean burning, low sulfur coal in the United States. The operations of Kennecott Utah Copper Corporation near Salt Lake City have produced more copper than any other mine in history, and are a significant supplier of gold, silver, and molybdenum, with employment for more than 2,300 Utah residents. Over the last ten years, Kennecott Utah Copper has invested more than $ 2 billion in modernizing its mining and processing facilities. Our new smelter, when operating to full design capacity, will be the world standard for reducing SO2 . In addition to Utah, Kennecott companies have base and precious metal operations in the states of Alaska, Nevada, South Carolina, and Wisconsin, and coal mines in Colorado, Montana, and Wyoming.

Kennecott is very familiar with the inefficiencies of the existing Superfund law, and since 1990 has undertaken proactive cleanup measures at Kennecott Utah Copper's Bingham Canyon Mine. Mining in the Bingham Canyon area can be traced to the 1860's when a number of lead and silver mines and mills became active. In the 1920's, Kennecott consolidated various holdings and began the mining of copper. Early miners, along with the rest of society, did not have the benefit of modern technology and understanding of environmental values in their practices of waste management.

We believe the results of Kennecott's proactive approach speak for themselves. Over the past five years, Kennecott has expended over $230 million for remediation. Twenty-five (25) million tons of historic mining wastes have been properly disposed. Over 5,500 acres have been reclaimed for wildlife habitat and recreational uses. Significant progress has been made in containing and controlling affected groundwaters. This has all been accomplished to EPA and State of Utah specifications.

These efforts have not been easy under the current Superfund law which lacks flexible mechanisms to accomplish proactive and voluntary cleanups. After years of attempting to negotiate a formal comprehensive consent decree to address the cleanup work, negotiations failed. In January 1994, Kennecott Utah Copper sites were proposed for Superfund listing, despite having spent over $85 million on cleanup at 14 source sites (with cleanup completed at seven of those sites). To avoid the negative ramifications of a Superfund listing, Kennecott mounted an extensive challenge to the proposed listing. All the while, Kennecott proceeded with cleanup activities and discussions with EPA to develop a non-traditional Superfund approach to address the numerous cleanup activities.

A site visit by Environmental Protection Agency (EPA) Administrator Carol Browner and her staff, combined with recognition of Kennecott's successful cleanup efforts and ongoing commitment, resulted in a Memorandum of Understanding (MOU) established in September 1995. In the MOU, Kennecott, EPA, and the State of Utah agreed that the Superfund listing of the Kennecott sites would be deferred if Kennecott completed certain specified cleanup programs and studies -- most of which were already underway.

Kennecott's goals for its environmental cleanup program include expeditiously reducing real risks by characterizing the problems fully and efficiently, considering both proven and innovative solutions, and utilizing those technologies that are readily implementable and cost-effective. This has been done on a parallel track with regulatory and legal discussions, and, at the same time, continuing full and open communications with the affected communities. This approach has minimized transaction costs, and continues to avoid the negative effects of a Superfund listing on a viable operating facility and the adjoining communities.

Kennecott continues to work with EPA and the State in completing these projects, including, a remedial investigation and a feasibility study for groundwater contamination, an ecological risk assessment, and completion of source control and elimination efforts. Kennecott appreciates the foresight, and we believe, good judgment exercised by Administrator Browner in adopting this approach to Kennecott's cleanup activities.

The results achieved by Kennecott Utah Copper, acting as an environmentally pro-active company, are in sharp contrast to Kennecott's experience at other Superfund sites, such as the Ekotek NPL site located in North Salt Lake. Over $19 million has been spent since 1989, approximately half of which went to EPA oversight costs and legal fees, and the final cleanup remedy is yet to be implemented, even though the potentially responsible parties (PRPs) are eager to proceed.

Kennecott Utah Copper also has experience with the natural resource damages provisions of Superfund. In the midst of all the Superfund cleanup activity, the NRD Trustee for the State of Utah maintained a $129 million action for natural resource damages for contaminated groundwater. An initial settlement was rejected by the federal court, and the parties entered a second round of negotiations. It was difficult to develop a settlement of the NRD Trustee's lawsuit prior to any remedial determination on the groundwater. Kennecott needed a resolution that would not require it to pay for a cleanup twice -- once for NRD damages, and once for a Superfund cleanup remedy.

Ultimately such a settlement was reached. The settlement required Kennecott to complete source control measures already begun as part of Kennecott's proactive cleanup and to pay $9 million in damages, primarily for increased costs of municipal water delivery and future lost use resulting from restoration activities. Additionally, Kennecott established a letter of credit currently valued at $ 35 million to be held in trust to restore municipal water services that would have been provided by the groundwater. If Kennecott develops a qualified program to provide municipal quality water, either as part of the Superfund remedy or as part of the NRD settlement, it can utilize the letter of credit to help fund that effort. How the final remedial action and NRD settlement will be coordinated has not yet been determined.

Kennecott's Superfund experiences have led to the following conclusions:

Kennecott is, therefore, pleased to see the efforts being made by the sponsors of S. 8 to amend and bring about the much-needed reform of Superfund. Towards that goal, we would respectfully ask the Committee to consider the following comments in their deliberations on this bill.

Title I-Brownfields Revitalization

This Title includes a provision to assist States to establish and expand voluntary response programs. Kennecott believes that provision should be made for voluntary cleanups as part of the federal program. PRPs should be encouraged to undertake voluntary cleanups, whether or not a site is listed or proposed for listing as a Superfund site. Voluntary cleanups can significantly reduce the costs and delays of Superfund, and be completed in a manner acceptable to EPA or the States.

Title IV Selection of Remedial Actions

Kennecott supports the remedial action provisions of Title IV that require the selection of remedies that are cost-effective, that are based on site-specific conditions and risk assessments, and that consider reasonably anticipated future uses of land and water. Kennecott also supports those provisions that allow for the consideration of natural attenuation and biodegradation in groundwater remediation, that recognize institutional and engineering controls, and that eliminate the preference for permanence and treatment.

Title V - Liability

Kennecott supports the provisions in Title V to fairly allocate response costs at non-federal sites, including the mixed funding for orphan shares.

We recommend a provision be added that would allow remining of historic mining sites for the economic recovery of metals or minerals without the imposition of Superfund liability for past releases. Because of the size and nature of these sites, remining may be the only practicable approach to a cost-effective cleanup

Title VII - Natural Resource Damages

S. 8 recognizes the need to reform the cleanup and remedy provisions of Superfund. This includes the need to have a rational approach to determine how clean is clean. This approach should be based on reasonable risk assumptions in light of current and reasonably anticipated land and water use scenarios. In order for the remedy and liability reforms of Superfund to succeed, the objectives of the NRD program must work harmoniously with those provisions. The improvements to be gained in the cleanup provisions will be lost if NRD Trustees, under the guise of restoration, can still require payment for additional cleanup beyond that necessary to achieve protection of human health and the environment. While Kennecott and the State of Utah NRD Trustee were able to reach a compromise that so far allows Kennecott to avoid a double cleanup, this type of result could be formalized for all NRD claims, rather than left to an NRD Trustee's discretion.

NRD should not be a secondary or substitute cleanup program. Superfund reform legislation should clarify the role of the NRD program by clearly limiting NRD damages to restoring the public uses provided by the natural resource that were lost or impaired by the release of hazardous substances. It also includes defining injury in terms of actual injury to measurable and ecologically significant functions provided by the resource that were committed or allocated to public use just prior to the time an injury occurred. Restoration programs should be cost effective and reasonable, based upon actual restoration needs, and damages should be spent on restoration. To be cost effective, the cost of restoration should not exceed the benefits of the restoration activity. Surplus or punitive recoveries of past lost use or non-use damages should be eliminated.

The NRD Title of S.8 is a good beginning from which to address these concerns. In particular, we concur in the elimination of non-use damages, and the elimination of assessment costs for studies using the contingent valuation method (CVM). However, we believe CVM should be eliminated altogether as a damage calculation methodology. We agree that regulations should be required to take into consideration the ability of a natural resource to recover naturally, as well as the availability of replacement or alternative resources. We also believe it would be appropriate to clarify that natural recovery should also be applied to reduce the amount of the overall recoverable damages.

Kennecott offers the following suggestions to clarify the provisions of Title VII:

In conclusion, Kennecott believes that S. 8 offers several positive improvements to the Superfund program. We appreciate this opportunity to testify and offer our suggestions for additional improvements to Superfund.