ES, IG-98-024, Cost Sharing for Santa Susana Field Laboratory Cleanup Activities

COST SHARING FOR
SANTA SUSANA FIELD LABORATORY
CLEANUP ACTIVITIES
IG-98-024

Executive Summary

Introduction
The Rocketdyne Division operates the Santa Susana Field Laboratory (SSFL) in Ventura County, California, to test rocket engines. Of the SSFL's 2,700 acres, NASA-owned facilities and land comprise 452 acres. The initial parent company, North American Aviation, of what is now Boeing North American, Inc., established the Rocketdyne Division in 1955 to operate the SSFL. North American Aviation owned much of the land at the SSFL since 1954 and operated most of the facilities since 1947.

Use of trichloroethylene (TCE) as a cleaning solvent for flushing engines and test stands after test firings resulted in significant environmental contamination from 1954 through 1961. Rocketdyne conducted test firings for the U.S. Air Force (USAF) when there were no restrictions on the release or disposal of TCE or any other hazardous chemicals. TCE is now considered a cancer-causing agent. Rocketdyne discovered TCE contamination during tests of water supply wells on laboratory grounds in March 1984 and reported the problem to Federal and State environmental authorities. Since then, environmental authorities have issued various orders and permits requiring that corrective actions be taken. The estimated time to clean up groundwater contamination at the SSFL is 40 years.

Objectives
Our objectives were to determine whether NASA was paying only its fair share of the costs to remediate the TCE contamination at the SSFL, and whether adequate actions are being taken to prevent future contamination.

Results of Audit
Environmental laws require past and present owners, operators, and generators of hazardous waste to clean up hazardous waste sites. As one of the owners, NASA has accepted responsibility for resolving SSFL contamination problems. However, NASA has in the past paid more than its fair share of remediation costs and will continue to do so in the future if it does not take appropriate steps. Specifically:

NASA has not been successful in negotiating a fair cost sharing agreement for remediation costs. As a result, NASA may have overpaid Rocketdyne at least $16.4 million for these costs during 1984 through 1997 that NASA should attempt to recover from the responsible parties. Additionally, NASA could pay an estimated average of $6.8 million a year in remediation costs, more than NASA's fair share, with little assurance that these costs will be recovered from other responsible parties, including the Department of Defense.

Rocketdyne's methodology for distributing environmental preventive costs resulted in a disproportionate share of the costs being distributed to NASA through Rocketdyne's General and Administrative cost pool. This practice is potentially not in compliance with Cost Accounting Standards, which prescribe that these costs be allocated directly to the contracts that either benefit from or cause the preventive expenditures. As a result, NASA may have overpaid Rocketdyne $4.7 million during FYs 1996 and 1997 which NASA should attempt to recover from other Rocketdyne customers, most notably the Department of Defense. Additionally, NASA may overpay an estimated average of $6.9 million a year in preventive costs, more than NASA's fair share, unless this methodology is changed.

We calculated the amounts in each of the above scenarios based on NASA's share of Rocketdyne's current business base.

Recommendations and Management's Response
This report contains recommendations aimed at negotiating a cost sharing arrangement for remediation costs and obtaining an equitable distribution of preventive costs. Management suggested changes to the language of the draft report recommendations. We made the changes in the final report, and management concurred with the recommendations. Management has already begun to implement some recommendations to stop Rocketdyne from charging environmental remediation and preventive costs to NASA.

Introduction	The Rocketdyne Division operates the Santa Susana Field Laboratory (SSFL) in Ventura County, California, to test rocket engines. Of the SSFL's 2,700 acres, NASA-owned facilities and land comprise 452 acres. The initial parent company, North American Aviation, of what is now Boeing North American, Inc., established the Rocketdyne Division in 1955 to operate the SSFL. North American Aviation owned much of the land at the SSFL since 1954 and operated most of the facilities since 1947. Use of trichloroethylene (TCE) as a cleaning solvent for flushing engines and test stands after test firings resulted in significant environmental contamination from 1954 through 1961. Rocketdyne conducted test firings for the U.S. Air Force (USAF) when there were no restrictions on the release or disposal of TCE or any other hazardous chemicals. TCE is now considered a cancer-causing agent. Rocketdyne discovered TCE contamination during tests of water supply wells on laboratory grounds in March 1984 and reported the problem to Federal and State environmental authorities. Since then, environmental authorities have issued various orders and permits requiring that corrective actions be taken. The estimated time to clean up groundwater contamination at the SSFL is 40 years.
Objectives	Our objectives were to determine whether NASA was paying only its fair share of the costs to remediate the TCE contamination at the SSFL, and whether adequate actions are being taken to prevent future contamination.
Results of Audit	Environmental laws require past and present owners, operators, and generators of hazardous waste to clean up hazardous waste sites. As one of the owners, NASA has accepted responsibility for resolving SSFL contamination problems. However, NASA has in the past paid more than its fair share of remediation costs and will continue to do so in the future if it does not take appropriate steps. Specifically: NASA has not been successful in negotiating a fair cost sharing agreement for remediation costs. As a result, NASA may have overpaid Rocketdyne at least $16.4 million for these costs during 1984 through 1997 that NASA should attempt to recover from the responsible parties. Additionally, NASA could pay an estimated average of $6.8 million a year in remediation costs, more than NASA's fair share, with little assurance that these costs will be recovered from other responsible parties, including the Department of Defense. Rocketdyne's methodology for distributing environmental preventive costs resulted in a disproportionate share of the costs being distributed to NASA through Rocketdyne's General and Administrative cost pool. This practice is potentially not in compliance with Cost Accounting Standards, which prescribe that these costs be allocated directly to the contracts that either benefit from or cause the preventive expenditures. As a result, NASA may have overpaid Rocketdyne $4.7 million during FYs 1996 and 1997 which NASA should attempt to recover from other Rocketdyne customers, most notably the Department of Defense. Additionally, NASA may overpay an estimated average of $6.9 million a year in preventive costs, more than NASA's fair share, unless this methodology is changed. We calculated the amounts in each of the above scenarios based on NASA's share of Rocketdyne's current business base.
Recommendations and Management's Response	This report contains recommendations aimed at negotiating a cost sharing arrangement for remediation costs and obtaining an equitable distribution of preventive costs. Management suggested changes to the language of the draft report recommendations. We made the changes in the final report, and management concurred with the recommendations. Management has already begun to implement some recommendations to stop Rocketdyne from charging environmental remediation and preventive costs to NASA.