Indemnification or Defense, or Providing Notice to the Department of Defense, Relating to a Third-Party Environmental Claim

AGENCY:

Department of Defense (DoD).

ACTION:

Proposed rule.

SUMMARY:

The DoD proposes to identify the proper address and notification method for an entity making a request for indemnification or defense, or providing notice to DoD, of a third-party claim under section 330 of the National Defense Authorization Act for Fiscal Year 1993, as amended (hereinafter “section 330”), or under section 1502(e) of the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001, (hereinafter “section 1502(e)”). This rule also identifies the documentation required to demonstrate proof of any claim, loss, or damage for indemnification or defense or for providing notice to DoD of a third-party claim. This rule also provides the mailing address for such requests for indemnification or defense or notice to DoD of a third-party claim to be filed with DoD, Office of General Counsel, Deputy General Counsel for Environment, Energy, and Installations (DoDGC(EE&I)). This will allow for timely review and greater efficiency in screening requests for indemnification or defense by providing clarity to requesters.

DATES:

Written comments on this proposed rule will be accepted on or before February 6, 2017.

ADDRESSES:

You may submit comments, identified by docket number and/or Regulatory Information Number (RIN) number and title, by any of the following methods:

• Federal Rulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
• Mail: Department of Defense, Office of the Deputy Chief Management Officer, Directorate of Oversight and Compliance, Regulatory and Advisory Committee Division, 4800 Mark Center Drive, Mailbox #24, Alexandria, VA 22350-1700.

Instructions: All submissions received must include the agency name and docket number or RIN for this Federal Register document. The general policy for comments and other submissions from members of the public is to make these submissions available for public viewing on the Internet at http://www.regulations.gov as they are received without change, including any personal identifiers or contact information.

FOR FURTHER INFORMATION CONTACT:

Mr. Philip Sheuerman, 703-692-2287.

SUPPLEMENTARY INFORMATION:

Preamble Outline

I. Legal Authority

II. Background

III. Summary of Proposed Rule

IV. Section-by-Section Analysis

A. Purpose and Objectives

B. Applicability

C. Responsibilities

V. Summary of Challenges

VI. Discussion of Other Major Alternatives

A. Status Quo

VII. Costs and Benefits

VIII. Administrative Requirements

A. Executive Order 12866, “Regulatory Planning and Review” and Executive Order 13563, “Improving Regulation and Regulatory Review”

B. Regulatory Flexibility Act

C. Paperwork Reduction Act

D. Environmental Justice

E. Unfunded Mandates

F. Federalism

IX. References/Docket

I. Legal Authority

This part is proposed under 10 U.S.C. 113, 5 U.S.C. 301, section 330 of the National Defense Authorization Act for Fiscal Year 1993, Public Law 102-484, October 23, 1992, 106 Stat. 2371, as amended, and section 1502(e) of the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001, Public Law 106-398, October 30, 2000, 1014 Stat. 1654A-350, as amended.

II. Background

Sections 330 and 1502(e) provide that, subject to certain exceptions set forth in the statutes, the Secretary of Defense shall hold harmless, defend, and indemnify in full certain persons and entities that acquire ownership or control of, in the case of section 330, any military installation closed pursuant to a base closure law or, in the case of section 1502(e), certain portions of the former Naval Ammunition Support Detachment on the island of Vieques, Puerto Rico (hereinafter “Detachment”), from and against any suit, claim, demand or action, liability, judgment, cost or other fee arising out of any claim for personal injury or property damage (including death, illness, or loss of or damage to property or economic loss) that results from, or is in any manner predicated upon, the release or threatened release of any hazardous substance, pollutant or contaminant, or petroleum or petroleum derivative as a result of DoD activities at any military installation (or portion thereof) that is closed pursuant to a base closure law or the Detachment. (Coverage of pollutants and contaminants was added to section 330 by an amendment contained in the National Defense Authorization Act for Fiscal Year 1994, Public Law 103-160, 1002.) It also provides that DoD has certain rights in defending third-party claims.

The authority to adjudicate requests for indemnification and process requests for defense under sections 330 or 1502(e) has been delegated from the Secretary of Defense to the DoD General Counsel and re-delegated by the General Counsel to DoDGC(EE&I). Requests for indemnification or defense or notice to DoD of a third-party claim must be sent to DoDGC(EE&I) to be considered.

The DoD recognizes that some real property transfer documents, such as deeds and agreements, entered into in past years provide for notification under sections 330 or 1502(e) being made to, e.g., the local BRAC program office. Until the promulgation of this rule in its final form, DoD has and will continue to honor such notifications made in conformance with those transfer documents. Effective 180 days after promulgation of this rule, while a requester may continue to provide notification in accordance with such transfer documents, a requester must also comply with the notice requirements of this rule in order to comply with the requirements of sections 330 or 1502(e), particularly with regard to when the statutes of limitation in sections 330(b)(1) and 1502(e)(2)(A) begin to run. Nothing in this rule should be construed as requiring amendment of any such transfer documents.

The United States Federal Circuit has interpreted the definition of a “claim for personal injury or property damages” under section 330 to include, under certain circumstances, notice from an enforcement agency to conduct a cleanup. Indian Harbor Insurance Co. v. United States, 704 F.3d 949 (Fed. Cir. 2013). Because such notices may constitute a claim under section 330, a requester should carefully evaluate whether failing to provide notice to the Secretary would prevent the Secretary from settling or defending against a claim.

The timely and proper filing of a request for indemnification or defense enables DoDGC(EE&I) to perform its adjudication function for requests, maintain oversight of the implementation of sections 330 and 1502(e), and secure the rights of requesters under sections 330 and 1502(e). Proper notice to DoD of a claim from a third-party is also essential to allow DoD to exercise its right to defend against such a claim pursuant to sections 330(c) or 1502(e).

Under sections 330(c)(2) and 1502(e)(3)(B), the requester must allow DoD to defend the claim in order to be afforded indemnification for that claim. This regulation makes clear that failure to notify DoD immediately of receipt of any claim, or of a release that may lead to a claim, could prevent DoD from settling or defending that claim, and on that basis, DoD may deny indemnification. Failure to provide necessary documents and access will also prevent DoD from exercising its right to settle and defend the claim and, on that basis, DoD may deny indemnification.

In the context of a claim from an enforcement agency or third party seeking to require a cleanup or response action, failure to notify DoD may prevent DoD from exercising its right to defend against the claim. If the requester undertakes a cleanup or response action itself prior to providing immediate notice to DoD, the requestor's actions may interfere with DoD's ability to defend against a claim, which might result in denial of indemnification.

This proposed rule does not affect claims that are made pursuant to other authorities such as under a real property covenant contained in a deed in accordance with section 120(h) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA).

III. Summary of Proposed Rule

This proposal identifies the required process for submitting documentation necessary to support a request for indemnification or defense or to provide notice to DoD of a third-party claim under sections 330 or 1502(e). For a notice to DoD of a third-party claim, DoDGC(EE&I) must receive the specified paperwork at the specified address no less than 30 days after a requester receives a third-party claim or before any action is taken, or an agreement is entered into, related to a hazardous substance or a pollutant or contaminant, or petroleum or petroleum derivative covered by section 330 or a hazardous substance or a pollutant or contaminant covered by section 1502(e).

IV. Section-by-Section Analysis

A. Purpose

To ensure the proper implementation of sections 330 and 1502(e), requesters and DoD must communicate effectively and in a timely manner. This proposal will provide the necessary information for that interaction to take place.

B. Applicability

This proposal applies to the DoD General Counsel's Office, to the Military Departments, and to any person or entity making a request for indemnification or defense, or providing notice to DoD, of a third-party claim pursuant to sections 330 or 1502(e).

C. Definitions

This proposal defines the terms “commercial delivery service”, “Deputy General Counsel”, “received”, “request”, “requester”, “section 330”, “section 1502(e)”, and “third-party claim”.

D. Responsibilities

This proposal advises that the responsibilities of the Secretary of Defense under sections 330 and 1502(e) have been delegated to the General Counsel of the DoD who has, in turn, re-delegated certain of those responsibilities, particularly with regard to adjudication of requests for indemnification, to DoDGC(EE&I). DoDGC(EE&I) exercises this responsibility through close communication with the military department that has property disposal responsibility for the closed installation subject of the request for indemnification or defense. Such communication includes obtaining review by, and the recommendations of, the military department on the merits of the request for indemnification or defense. Likewise, DoDGC(EE&I) communicates any notice of a third-party claim to the military department and works closely with the military department in determining what action, if any, the DoD will take in response to the notice. The proposal also contains responsibilities of requesters, delineated in the body of the rule.

E. Requests for Indemnification or Defense

This proposal explains the process to be used, timelines that apply, and documentation that must be received by DoDGC(EE&I) for a request for indemnification or defense. The mailing address and required method of delivery are specified. The proposal also requires a requester to provide DoD with a right of entry at reasonable times for purposes of inspecting the property and obtaining samples. The proposal also provides for reconsideration of a DoD determination.

F. Third-Party Claims

This proposal explains the process to be used, timelines that apply, and documentation that must be received by DoDGC(EE&I) relating to a notice of a third-party claim. The mailing address and required method of delivery are specified. The proposal also requires a requester to provide DoD with a right of entry at reasonable times for purposes of inspecting the property and obtaining samples. The section specifies that a requester must notify DoD within 30 days of receiving the third-party claim or 30 days before taking an action in order to allow DoD to determine what action to take with regard to the claim.

V. Summary of Challenges

Informing all affected persons and entities about this rule will require communication with relevant non-governmental organizations.

VI. Discussion of Other Major Alternatives

A. Status Quo

The current process is unclear, inefficient, and time-consuming, causes delay, and may be ineffective. This lack of clarity contributes to concern that indemnification is not being addressed adequately and creates the potential for impairment of DoD's ability to present an effective defense of claims under sections 330 or 1502(e). The DoD is committed to sound environmental stewardship in all of its activities while meeting the goal of encouraging the development of land for productive use.

VII. Costs and Benefits

Cost Analysis

Based on the relatively small number of claims per year, compliance costs under this regulation are expected to be minimal. In fact, this regulation will reduce compliance costs because it will streamline and clarify the process for the submission of information which would have to be submitted in any case in order to obtain a determination regarding indemnification or defense or provide notice to DoD of a third-party claim under sections 330 or 1502(e).

Benefits Analysis

This proposal will clarify the process for requesters of indemnification or defense and promote efficient protection of the environment by enhancing communication between requesters and DoD. This enhanced and simplified communication process will result in fewer burdens for both requesters and DoD in the form of avoiding unnecessary, inappropriate, or duplicative paperwork. This proposal does not require any greater disclosure of information from a requester than sections 330 or 1502(e) already require. Enhancing DoDGC(EE&I)'s ability to adjudicate requests for indemnification or respond to requests for defense under sections 330 or 1502(e) will reduce the burden of information requests upon those entities requesting indemnification or defense, or providing notice to DoD, of a third-party claim under sections 330 or 1502(e). This proposal will promote protection of requesters' rights by reducing the possibility of a request for indemnification or defense being acted upon by the wrong agency or a statute of limitations running due to failure to provide timely notification to the proper agency.

VIII. Administrative Requirements

A. Executive Order 12866, “Regulatory Planning and Review” and Executive Order 13563, “Improving Regulation and Regulatory Review”

Under E.O. 12866 and E.O. 13563, DoD must determine whether this regulatory action is “significant” and therefore subject to review by the Office of Management and Budget (OMB) and to the requirements of this E.O., which include assessing the costs and benefits anticipated as a result of the proposed regulatory action. E.O. 12866 defines “significant regulatory action” as one that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or may adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) create serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in E.O. 12866.

This proposed rule will not have an adverse effect on the economy or cost the economy $100 million or more per year. Requests for indemnification are small in number and do not approach anywhere near $100 million per year, individually or collectively. c Although not economically significant, this rule has been designated a “significant regulatory action” under section 3(f) of Executive Order 12866. Accordingly, the rule has been reviewed by OMB under the requirements of these Executive Orders.

B. Regulatory Flexibility Act

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601, et seq., requires Federal agencies to consider “small entities” throughout the regulatory process. Section 603 of the Regulatory Flexibility Act requires an initial screening analysis performance to determine whether small entities will be adversely affected by the regulation. If affected small entities are identified, regulatory alternatives must be considered to mitigate the potential impacts. Small entities as described in the Regulatory Flexibility Act are only those “business, organizations and governmental jurisdictions subject to regulation.” It has been certified that this proposed rule will not add to the current burden for small entities to report their activities based on a request for indemnification or defense under sections 330 or 1502(e). This proposal will benefit small entities by streamlining communication to reduce the cost of making a request for indemnification or defense, or providing notice to DoD, of a third-party claim.

C. Paperwork Reduction Act

The Paperwork Reduction Act of 1995, 44 U.S.C. 3501, authorizes the Director of OMB to review certain information collection requests by Federal agencies. The recordkeeping and reporting requirements of this proposed rule do not constitute a “collection of information” as defined in 44 U.S.C. 3502(3), the Paperwork Reduction Act of 1995.

D. Environmental Justice

Under E.O. 12898 (59 FR 7629 (February 11, 1994)), Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations, Federal agencies are required to identify and address disproportionately high and adverse human health and environmental effects of Federal programs, policies, and activities on minority and low-income populations. Given the application of this proposed rule throughout the entire United States, DoD is soliciting comment and input from all public entities and government agencies, including members of the environmental justice community and members of the regulated community.

Sections 330 and 1502(e) are intended to reduce specified risks from development of former military land by aiding and legally protecting the entities that take title to land on closed military installations for development purposes. Because this rule will equally affect reporting associated with the development of land on a national basis, a disparate impact on minority and low-income population areas is not expected.

E. Unfunded Mandates

Title II of the Unfunded Mandates Report Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and Indian tribal governments and the private sector. Under Section 202 of the UMRA, DoD generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, and Indian tribal governments, in the aggregate, or to the private sector, of $100 million or more in any one year.

The DoD has determined that this rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and Indian tribal governments, in the aggregate, or the private sector in any one year. Thus, this proposed rule is not subject to the requirements of Section 202 of the UMRA.

F. Executive Order 13132, “Federalism”

It has been determined that this rule does not have federalism implications. This rule does not have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government.

List of Subjects in 32 CFR Part 175

• Indemnification
• Claim

Accordingly, 32 CFR part 175 is proposed to be added to read as follows:

PART 175—INDEMNIFICATION OR DEFENSE, OR PROVIDING NOTICE TO THE DEPARTMENT OF DEFENSE, RELATING TO A THIRD-PARTY ENVIRONMENTAL CLAIM

Authority: 10 U.S.C. 113, 5 U.S.C. 301, section 330 of the National Defense Authorization Act for Fiscal Year 1993, Public Law 102-484, October 23, 1992, 106 Stat. 2371, as amended, and section 1502(e) of the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001, Public Law 106-398, October 30, 2000, 1014 Stat. 1654A-350, as amended.