NATURE OF THE CASE: THIS PROPOSED COST RECOVERY CASE CONCERNS THE ARROWHEAD RE FINING COMPANY SITE (SITE) LOCATED OUTSIDE OF THE CITY OF DU LUTH., MN. THE SITE WAS HOME TO THIS WASTE OIL RECYCLING COMPANY BETWEEN 1961 AND 1977. DURING THIS PERIOD, THE OPER ATOR DISPOSED OF THE RESIDUAL WASTE FROM ITS WASTE OIL RECYC LING PROCESS INTO A WASTEWATER POND AND SLUGDE LAGOON LOCA- TED ON THE SITE. THE OPERATION CEASE IN 1976, UNDER DIREC- TIONS FROM THE MN POLLUTION CONTROL AGENCY (MPCA). IN 1979, THE USEPA INSPECTED THE SITE AND OBSERVED THAT CONTAMINATED SURFACE WATER WAS FLOWING INTO NAVIGABLE WA- TERS. THIS OBSERVATION, PROMPTED REMEDIAL ACTION UNDER THE CWA. IN 1983, ARROWHEAD WAS PLACED ON THE NAT'L PRIORITIES LIST (NPL) 42 USC SECT 9605. THE EPA PERFORMED A REMEDIAL INVESTIGATION (RI) IN 1984, WHICH REVEALED THE PRESENCE OF HEAVILY CONTAMINATED SOIL/SEDIMENT, GROUNDWATER, AND SURFACE WATER. FOLLOWING THE CONCLUSION OF A FEASIBILITY STUDY (FS) EPA SIGNED A RECORD OF DECISION (ROD) IN SEPTEMBER 1986. STATE RESISTANCE TO THE CHOSEN REMEDY, STEMMING FROM THEIR CONCERNS AS TO THE THOROUGHNESS OF THE RI AND SOIL INCINERA- TION, PROMPTED THE EPA TO DO FURTHER INVESTIGATION AND EX- PLORE NEW SOURCE CONTROL ALTERNATIVES. CAUSE OF ACTION: EPA SEEKS THE RECOVERY OF APPROXIMATELY $1.9 MIL EXPENDED IN RESPONSE TO CONDITIONS AT THE SITE P