Locke Lord QuickStudy: Hardrock Miners May Soon be Subject to CERCLA Financial Assurance Requirements

Hardrock mining facilities may soon be compelled to demonstrate that they have the financial wherewithal to address potential hazardous substance risks and response costs under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). After nearly a decade of litigation, during which the Environmental Protection Agency (“EPA”) ultimately committed to promulgating CERCLA financial assurance requirements for hardrock mining facilities by December 1, 2017, the EPA has walked back its commitment. The Agency published a final action in the Federal Register announcing its decision that such regulation is not necessary, reasoning that state regulatory schemes appropriately address such requirements. While certainly a boon for industry, and the EPA’s reasoning does have merit, the Agency has nonetheless reneged on the terms of a court-approved consent order. Environmental groups have now filed suit against the EPA in the D.C. Circuit, seeking to compel the Agency to carry through with its prior commitment and comply with the consent order.

Background

Promulgation of CERCLA financial assurance rules is more than 30 years beyond its statutory deadline. The statute directs EPA to compel certain classes of facilities to demonstrate financial ability consistent with the degree and duration of risk associated with “the production, treatment, storage or disposal of hazardous substances.” 42 U.S.C. § 9608(b)(1). EPA was required by the end of 1983 to “identify those classes for which requirements will be first developed.” Id. § 9608(b)(2). This deadline was never met. 
After decades of little movement, in 2008, a citizen suit was filed against EPA for failure to develop CERCLA financial assurance rules. The court ordered EPA to identify classes of facilities that may require financial assurance. In July 2009, EPA published a priority notice that it would first develop CERCLA financial assurance rules for the hardrock mining industry. In January 2010, EPA issued an advanced notice of proposed rulemaking of its plan to develop “as necessary” financial assurance requirements for three additional industries: chemical manufacturing; petroleum and coal products manufacturing; and electric power generation, transmission, and distribution. The Agency subsequently postponed finalization of hardrock mining regulations, and did not further indicate whether a rulemaking would occur for the three other industries.

In 2014, environmental groups petitioned the D.C. Circuit for a writ of mandamus directing EPA to finalize CERCLA financial assurance rules. The parties then filed a joint motion for an order on consent establishing an agreed upon schedule for a rulemaking for the hardrock mining industry. Pursuant to the agreed order, EPA would propose a rule for the hardrock mining industry by December 1, 2016, and would issue a final rule or determination by December 1, 2017. The consent order also set timelines—beginning in 2020—for a determination regarding the other three industries.  

The EPA proposed hardrock mining financial assurance requirements in January 2017. However, instead of promulgating final hardrock mining financial assurance rules by December 1, 2017, the Agency published a final action announcing its conclusion that financial assurance rules were not appropriate for the hardrock mining industry. The Agency reasoned, based on the rulemaking record, that financial responsibility requirements were not needed for the industry and “the degree and duration of risk associated with the modern production, transportation, treatment, storage or disposal of hazardous substances by the hardrock mining industry does not present a level of risk of taxpayer funded response actions that warrant imposition of financial responsibility requirements.” 83 Fed. Reg. 7556, 7557 (Feb. 21, 2018).

While the EPA’s approach is certainly reasonable and does have merit, it nonetheless violates the terms of its 2015 consent order and is inconsistent with the EPA’s conclusion in the 2009 Priority Notice that hardrock mining facilities present the type of risk requiring regulation under CERCLA Section 108(b)(1). In response to EPA’s final action, Earthjustice, Earthworks, the Sierra Club and other environmental groups returned to the D.C. Circuit and filed suit against the Agency in May 2018 seeking to have the terms of the consent order enforced.

Takeaways

The hardrock mining industry should continue to monitor ongoing litigation and its outcome. CERCLA requires implementation of financial assurance rules within no more than four years after promulgation. It would benefit industry participants to remain active in the litigation and, if necessary, in crafting of the ultimate rulemaking.