NOAA's
Accounting Policy for PP&E Cleanup Costs
October 1, 1998
NOAA Environmental Compliance Policy 98-03
1. Policy
1.1 The National Oceanic and Atmospheric Administration (NOAA) is committed
to operating facilities in full compliance with environmental law and
other governing authorities.
1.2 NOAA is committed to cleaning up the hazardous wastes resulting
from past, present, or future NOAA operations.
1.3 NOAA will determine the
cleanup costs associated with its Property, Plant, and Equipment (PP&E)
and report these costs as financial liabilities.
2.0 Definitions
2.1 An environmental cost is any expenditure necessary to bring NOAA
into compliance with Federal, state, or local environmental regulations.
2.2 An environmental liability is a subset of environmental costs which
includes response to those Federal laws requiring corrective action,
such as the Comprehensive Environmental Response, Compensation and Liability
Act; the Resource Conservation and Recovery Act; and the Toxic Substances
Control Act. These laws authorize the Environmental Protection Agency
to use government funds to perform any necessary clean up not performed
by the offending party, and then seek to recover the costs. Environmental
liabilities must be reported on NOAA's Annual Consolidating Financial
Statement.
2.3 Property, Plant, and Equipment
(PP&E) is defined as tangible
assets that have an estimated useful life of two or more years, are not
intended for sale in the ordinary course of business, and are intended
to be used or available for use by NOAA.
2.4 PP&E-related cleanup costs, as considered in this policy, are
the costs of removing, containing, and/or disposing of hazardous waste
or material and/or property that consists of hazardous waste or material
at permanent or temporary closure or shutdown of associated PP&E.
These costs are a subset of environmental liabilities.
2.5 PP&E-related cleanup costs, as considered in this policy, refer
to environmental cleanup that can not occur until the end of the useful
life of the PP&E or at regular intervals during that life. This is
characterized by the ability to anticipate the cleanup as a liability
as contrasted with environmental liability that occurs without prior
anticipation.
2.6 Hazardous waste, as used in this policy, is a solid, liquid, or
gaseous waste, or combination of these wastes, which because of its quantity,
concentration, or physical, chemical, or infectious characteristics may
cause or significantly contribute to an increase in mortality or an increase
in serious irreversible, or incapacitating reversible, illness or pose
a substantial present or potential hazard to human health or the environment
when improperly treated, stored, transported, disposed of, or otherwise
managed.
2.7 Cleanup may include, but is not limited to, decontamination, decommissioning,
soil removal, site restoration, site monitoring, closure, and postclosure
costs.
3.0 Procedures
3.1 Areas of Concern: Most hazardous materials of concern to NOAA are
regulated by TSCA, enacted in 1976. Of the substances regulated asbestos,
polychlorinated biphenyls (PCBs), radon, lead, and mercury present the
most likely candidates for required cleanup action within property, plant,
and equipment at NOAA facilities.
3.1.1 Asbestos : Asbestos is a naturally occurring material linked to
several diseases, including lung cancer, which was commonly used in building
construction until production of asbestos-containing materials was banned
in 1987. TSCA requires the performance of asbestos surveys, abatement,
or operation and maintenance activities. NOAA considers the conduct of
asbestos surveys an environmental cost, but not a liability. However,
if abatement is required for friable (may be crushed or crumbled by hand
pressure) asbestos, a financial liability will be recognized. Abatement
could be encapsulation, encasement, enclosure, or repair. Only when all
other approaches fail, or if the building were going to be demolished,
would complete removal be appropriate.
3.1.2 PCBs: PCBs are organic
chemicals which pose health concerns when not totally enclosed. Although
the manufacture of PCBs was banned in
1976, many older electrical transformers, capacitors, and light ballasts;
hydraulic systems; waste oil cans; and heat transfer systems still contain
measurable levels. TSCA requires the proper maintenance or disposal of
equipment containing PCBs. NOAA considers the assessment of facilities
for PCBs and the maintenance or disposal of PCB-containing equipment
to be an environmental cost, but not a liability. NOAA will recognize
as a financial liability any situations where PCBs are not totally enclosed.
Although TSCA probably intended its coverage of PCBs to be limited to
the chemical in its liquid form, solid PCBs are assumed to be regulated
as well. These were commonly used in insulation in older electrical wiring
such as found on many NOAA ships. The law specifically prohibits the
transfer of PCBs in commerce and the sale or transfer of a NOAA ship
would fall under this prohibition; thus, ship decontamination must be
considered a financial liability (see NOAA Environmental Compliance Policy
97-03, "NOAA Shipboard Environmental Compliance and Liability Policy").
3.1.3 Radon: Radon is a dense, inert radioactive gas. The isotope and
the decomposition products become collected on airborne dust. The EPA
requires the proper management of a location with potentially significant
radon levels. NOAA considers radon assessment and mitigation an environmental
cost, but not a financial liability.
3.1.4 Lead: Lead is an element which, upon inhalation, ingestion, or
absorption into a body, acts as a cumulative poison throughout the terrestrial
and aquatic food chain. In facilities it most commonly is found in paint
produced prior to 1978. Lead-based paint (LBP) is considered hazardous
to children under aged seven or where people are exposed to prolonged
or repeated exposure to airborne LBP dust. TSCA requires the oversight
of lead abatement activities. NOAA considers LBP abatement for non-residential
facilities an environmental cost, but not a financial liability. However,
the Residential Lead-Based Paint Hazard Reduction Act of 1992 imposes
greater requirements on Federally owned and assisted housing. This Act
requires LBP abatement for residential or child-care property constructed
prior to 1960, and disclosure for such property constructed between 1960
and 1978 prior to the transfer of the property. Abatement could include
encapsulation, encasement, enclosure, or removal. The LBP abatement costs
for residential or child-care facilities will be considered a financial
liability.
3.1.5 Mercury: Mercury is a poisonous metallic element not specifically
mentioned by TSCA, but used in scientific instruments in many parts of
NOAA. NOAA is in the process of developing a mercury handling plan and
has already implemented a program to convert certain of its instruments
from mercury to a digital alternative. NOAA considers mercury containment
and conversion to be an operational cost and not a financial liability.
3.2 Recognition:
3.2.1 For all PP&E in service as of October 1, 1997, NOAA will recognize
the estimated total (ultimate) cleanup costs associated with the PP&E
at the time the cleanup requirement is identified. NOAA will not prorate
a cleanup cost over the life of these PP&E. However, the estimate
may be subsequently adjusted for material changes due to inflation/deflation
or changes in regulations, plans, or technology. The applicable costs
of decommissioning NOAA's existing and future vessels will be considered
cleanup costs for purposes of this policy.
3.2.2 For any PP&E placed in service after October 1, 1997, NOAA
will estimate the total cleanup costs related to the PP&E and recognize
annually a prorata portion of the costs over the life of the PP&E.
Expense recognition shall begin on the date that the PP&E is placed
into service.
3.2.3 Cleanup costs are financial liabilities only for NOAA operations
known to result in hazardous waste which NOAA is required to remove,
contain, and or dispose of by Federal, state and/or local statutes and/or
regulations that have been approved as of the financial statement date.
3.2.4 Clean up requirements
and cost assessments will be conducted in conjunction with NOAA's environmental
audits (see NOAA Environmental
Compliance Policy 97-01, "Environmental Audit Policy") and
NOAA facility condition surveys.
3.3 Methodology: There are
two primary ways to estimate the cost of PP&E cleanup.
3.3.1 The direct method physically determines the quantity of hazardous
waste or material requiring cleanup and applying standard cleanup rates.
At times when the waste or material is contained in inaccessible areas
and is not apparent prior to opening the areas, physical assessment is
expensive and not always practicable.
3.3.2 The indirect method relies on prior experience with comparable
sites. When no comparable sites are available, the liability may be determined
by extrapolation of previously calculated data.
3.3.3 Whenever possible, the two estimation techniques should be used
together to refine the accuracy of the estimated liability.
3.4 Tracking cleanup costs
3.4.1 Cleanup projects will
be proposed, costs estimated, and progress tracked in accordance with
NOAA's Environmental Project Management Policy
(97-02). The "category" for these costs will be annotated with
a "C" to indicate the special financial liability status of
PP&E cleanup costs.
3.4.2 Cleanup projects generally
can occur only at the end of the useful life (for NOAA) of the PP&E,
or at regular intervals during that life.
3.4.3 As cleanup costs are paid, payments shall be recognized as a reduction
in the liability for cleanup costs.
3.5 Disclosing cleanup cost
3.5.1 The disclosure associated
with PP&E cleanup costs will be
coordinated by NOAA's Environmental Compliance Staff and provided for
inclusion within the annual NOAA Financial Statement in the manner described
in NOAA Environmental Compliance Policy 97-02, "NOAA Environmental
Project Management Policy." The disclosure will specify the laws
and regulations requiring the cleanup; the method used to assign estimated
cleanup costs; the unrecognized portion of estimated total cleanup costs
when applicable, material changes relating to portions allocated over
prior periods, and the nature of estimates and information regarding
possible changes due to inflation, deflation, technology, or applicable
laws and regulations. |
