On December 30, 2009, the U.S. Environmental Protection Agency (“the Agency”) identified three industry sectors for which it will begin the regulatory development process for financial assurance requirements under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA): the chemical manufacturing industry; the petroleum and coal products manufacturing industry, which primarily includes refineries and not coal mines; and the electric power generation, transmission, and distribution industry. Such regulations, if finalized, could require affected entities to maintain financial assurance deemed adequate to cover the potential environmental risks associated with ongoing operations at their facilities.

CERCLA section 108(b) requires the Agency to promulgate requirements for classes of facilities to establish and maintain financial responsibility. Any requirements must be “consistent with the degree and duration of risk associated with the production, transportation, treatment, storage, or disposal of hazardous substances.” The level of financial assurance required falls within the Agency’s discretion based principally upon the degree of risk deemed to exist, but the statute also requires the Agency to consider “the payment experience of the Fund, commercial insurers, courts [sic] settlements and judgments, and voluntary claims satisfaction.” Any required financial assurance may be established through insurance, a guarantee, a surety bond, letter of credit, and/or qualification as a self-insurer; the statute grants the Agency the authority to require or prohibit specific contract terms of financial assurance instruments.

The notice marks the Agency’s second effort at identifying classes of facilities it views as priorities for implementation of financial assurance requirements. In July 2009, the Agency identified the hard-rock mining industry as its priority for initiating development of CERCLA financial assurance requirements. The Agency expects to release any “appropriate” financial responsibility rules for that industry by spring of 2011.

The Agency selected the three industries subject to the latest notice based on a variety of information sources, including the CERCLA National Priorities List (NPL), data on hazardous waste generation from the 2007 National Biennial Report under the Resource Conservation and Recovery Act (RCRA), and data from the TRI. Its analysis notes the prevalence of chemical manufacturing facilities on the NPL and their tendency toward changes in ownership and bankruptcy, even though many of the instances discussed occurred pre-regulation. It also notes the relatively large amounts of hazardous waste such facilities generate, based on Biennial Report data, and the relatively large number of on-site releases evidenced in the TRI data. The petroleum and coal products manufacturing industry is noted as producing particularly large amounts of hazardous waste and as being historically responsible for relatively high-value cleanups. And while the electric power industry did not score high in the Agency’s NPL or Biennial Report analysis, the notice points in particular to the high-profile coal ash spill at the Tennessee Valley Authority’s Kingston, Tennessee facility in December 2008.

The notice does not represent an Agency conclusion to require financial assurance under CERCLA for these three industry sectors; rather, it calls for comment on the specific activities, practices, and processes involving hazardous substances at such facilities, as well as Federal and State authorities, policies, and practices currently in place, to determine the risks posed by these classes of facilities and whether financial assurance requirements “will effectively reduce these risks.” It also seeks comment on what types of financial assurance may be appropriate; the benefits and shortcomings of existing financial assurance models; and what other state or federal financial assurance requirements may already be in place.

In addition, EPA has identified the waste management and remediation services, wood product manufacturing, fabricated metal product manufacturing, and electronics and electrical equipment manufacturing industries, as well as facilities engaged in the recycling of materials containing CERCLA hazardous substances, as requiring further study for the Agency to determine whether financial assurance requirements may be appropriate for those sectors.

EPA will be accepting public comment on this notice for 30 days after it is published in the Federal Register. A pre-publication version of the notice is available at http://www.epa.gov/superfund/policy/financialresponsibility/cercla108b_12-29-09.pdf.