Mr. Chairman, distinguished Members of the Committee, I am appearing today on behalf of the twenty-three companies and associations comprising the Coalition for NRD Reform. A list of Coalition members is attached as Appendix 1. Mr. Chairman, I would like to begin by thanking you for recognizing that the NRD program needs reform. As the Interior Department's 1994 Report on Reinventing Government stated: "The existing [NRD] process is complex for all parties involved and creates conflict instead of restoring resources."

When the NRD Coalition formed two years ago, we were told NRD was a small problem involving only a few sites. A scant two years later, federal trustees state that they want to use their NRD authority at half the NPL sites and at 80,000 surface lagoons, 14% of all U.S. lake acreage and 4% of all U.S. river miles. EPA's recently completed study of 2,100 watersheds ranked 824 as Priority 1-5 for sediment contamination, but, to date, trustees have asserted major NRD claims at only 10 of the 824 priority watersheds. To put the EPA survey into further perspective, one watershed which EPA placed in its lowest priority category is the subject of an NRD claim of over $1 billion. The rapidly escalating NRD program also presents a serious problem for the federal government, particularly at sites owned by the Departments of Energy and Defense where there is extensive contamination of resources subject to state and tribal authority.

The problem which brings us before you today is that the NRD program has lost its focus on reasonable restoration. Unless the NRD program is reformed, not only will the problems with this program dwarf the well recognized problems of the cleanup program, but any progress made on remedy reform in S.8 will be undone. Remedy reform without NRD reform will be like squeezing a balloon at the bottom, all the air will shift to the top --- government agencies will be able to bypass the new remedy requirements under the guise of resource restoration. For example, while S.8 establishes an environmental protection standard tied to population and community level effects on plants and animals, federal trustees assert that any measurable adverse change in the chemical, physical, or biological environment justifies an NRD claim. In other words, trustees claim that any change from the so-called baseline --- or pre-release --- condition supports an NRD claim --- even when there is no population or community level impact. If the trustees' definition of injury prevails, reforms to EPA's remedial program can be overridden or rendered moot. Small and large businesses which have engaged in cleanup under EPA standards, agreed to a remedy selection, or entered into a covenant not to sue with EPA can find themselves liable for additional cleanup under the NRD program.

Because trustees define a resource injury requiring NRD action as any measurable adverse change in the chemical, physical or biological environment, Superfund is no longer two programs, cleanup and restoration, but it is three programs: cleanup #1 administered by EPA designed to protect human health and the environment; cleanup #2 administered separately by resource trustees in which trustees can second guess EPA remedial decisions; and natural resource restoration administered by trustees to restore fisheries, wetlands, etc.

S.8 offers a unique opportunity to fix the problem of having two separate cleanup programs. Unfortunately, the language in the Chairman's mark does not clarify the differences between the remedial program and restoration, thereby allowing NRD to remain as a second cleanup program. In fact, we think the trustees will read the first part of proposed Section 703(a) as confirming that NRD is a second cleanup program. We strongly urge you to develop a clearer definition of the objective of restoration. We would like to work with you to address this issue which we believe must be fixed --- otherwise the Superfund program will become even slower and more litigious. Trustees for the public should focus on restoring injured public resources and providing the public with appropriate alternatives to use while restoration is taking place --- not on creating a second cleanup program.

Having said that, there are provisions in the Chairman's mark which we think are positive. The requirements for technically feasible and cost effective restoration are good, as is the requirement for proof of causation and the clarification of the right to seek contribution from other responsible parties. We are interested in the provisions allowing for an extended payment period and would like to better understand your intent.

We are particularly pleased by the intent of the Chairman's mark to limit the measure of damages to the cost of restoration, including permanent and temporary measures, and to exclude surplus and punitive damages. However, we are concerned that trustees will circumvent your intent. The Chairman's mark states non-use "values" are not allowed. But trustees have begun to change the words, asserting that they are not collecting values and damages but are collecting "compensatory restoration" or determining the proper level of restoration. Non-use claims need to be prohibited regardless of what they are called. We would be pleased to work with you in this regard. Similarly, the Chairman's mark does not clearly prohibit the use of the much criticized contingent valuation methodology ("CVM"). The mark only says trustees cannot collect the costs of a CVM study from liable parties. This implies that CVM can still be used. Again, we think a simple fix could be made to prohibit the use of CVM and we would like to work with you to accomplish that.

Since much of the debate on NRD reform has swirled around non-use and lost use damages, it is worth taking a moment to trace the history of these damage claims because the history demonstrates how the regulatory expansion of the NRD program has changed Congressional intent and mired the program in controversy and litigation. When Superfund passed in 1980, there was no hint that the NRD program included lost use and non-use damages. Not until 1986 did the federal regulations introduce the concept of lost use and then it was to require that liable parties pay the lesser of the cost of restoration or lost use. And non-use was only to be considered if it was impossible to restore the resource or to compute lost use damages. Today, trustees claim they can require parties to pay for the full cost of restoration plus past lost use and non-use. If the resource is fully restored, what are past lost use and non-use monies used for? The answer is that they are surplus to the actual cost of restoration and are punitive damages. A moment ago, I told you that because of regulatory interpretations adopted by federal trustees Superfund has become three programs, cleanup #1, cleanup #2, and restoration. Based on this regulatory history, I think it is fair to say trustees have added a fourth program not intended by Congress --- punitive non-use and past lost use damages. Such damages undermine your intent to limit the measure of damages to the cost of restoration.

In this regard, it is worth noting the most recent regulatory expansion of the NRD program. The trustee's latest view is that lost use also includes surplus resource to resource lost use. In simple English what that means is that trustees are going to attempt to compute the value to the squirrel of having to eat acorns instead of walnuts while restoration is occurring, or the value to a robin of eating bugs instead of worms --- and to file claims for the robin's pain and suffering. That type of lost use will lead to speculative claims, increased litigation, and conflict instead of restoring resources. We hope that your focus on actual restoration precludes this result and we would like to work with you to clarify this issue. The NRD program should focus on restoration.

We also understand your intent is to leave the status quo unchanged on the critically important issue of a defendant's right to a trial. However, we think you have inadvertently changed existing law and may have established record review by (1) referencing Section 113(k) which provides for record review, (2) providing for the creation of an administrative record, which implies that judicial review is based on that record, and (3) repealing the rebuttable presumption which has been relied on by courts as proof that the law requires trial de novo, not record review. The Coalition is unalterably opposed to record review and we believe this section of the Chairman's mark must be changed. We cannot understand why the trustees are afraid of a standard which requires that they prove their case in court. We urge you to delete those provisions in the Chairman's mark which will be used by trustees to argue for record review under which trustees do not have to prove that their case is supported by the preponderance of the evidence.

Mr. Chairman, as I said at the beginning of my statement, the Coalition for NRD Reform thanks you for recognizing that the NRD program needs reform. We believe important substantive adjustments need to be made to the Chairman's mark to better effectuate your policy of reforming the NRD program so that it focuses on real restoration and we look forward to working with you. We also think there are important technical issues which merit additional attention. For example, your double recovery provision only prohibits persons from acting first under Superfund and then proceeding under another statute. The double recovery prohibition should be expanded to run both ways as it does in Section 114(b)(1) so that persons also cannot collect for a natural resource injury under another statute and then proceed under CERCLA for the same injury. The double recovery provision should also prohibit more than one person from recovering for the same resource.

A second technical issue involves the statute of limitations issues. Since CERCLA's existing statute of limitations provides that the statute of limitations begins to run after the promulgation of regulations, and since the courts have ruled the regulations have been issued, one possible reading of the Chairman's mark which requires regulations to be issued within two years is that you are reviving claims now barred by the existing statute of limitations. We understand that is not your intent and we hope you will clarify this point. Efforts by the trustees to apply the statute retroactively for NRD are bad enough, double retroactivity by reviving stale claims is doubly bad.

A third technical issue is that there are a number of positive provisions in the Chairman's mark which are then undermined by saying the provisions are requirements only "to the extent practicable." We think the "to the extent practicable" language should be deleted. Why, for example, should trustees use the best available scientific information only "to the extent practicable." Or why should trustees use site specific analyses to determine the extent of injury at a site only "to the extent practicable."

Finally, the requirement for the designation of a lead federal trustee is positive but your language is subject to interpretation at sites involving federal, state and tribal trustees. One interpretation of your language is that the federal trustee will be the lead trustee at every site, even sites principally involving state or tribal resources. We believe that would not be the right result.

Mr. Chairman, I appreciate the opportunity you have given the Coalition for NRD Reform to testify before you today and I would pleased to answer any questions you might have.

Thank you for this opportunity to testify.