On April 6, 2015, the Environmental Protection Agency (“EPA”) Office of Enforcement and Compliance Assurance’s Office of Site Remediation Enforcement (“OSRE”) issued new internal guidance on financial assurance requirements at sites subject to enforcement actions under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA” or “Superfund”), “Guidance on Financial Assurance in Superfund Settlement Agreements and Unilateral Administrative Orders” (“FA Guidance”). The FA Guidance includes model language for use by EPA Regions when drafting Superfund settlements and unilateral administrative orders and reflects the first effort at implementation of financial assurance requirements under CERCLA since its enactment. Environmental groups have sought implementation of CERCLA financial assurance in litigation pending in the DC Circuit. While EPA states that use of FA provisions is left to the discretion of the EPA regional enforcement offices, potentially responsible parties (“PRPs”) should be prepared to see FA language in settlement and consent order documents. 

Under its “enforcement first” policy, EPA seeks to have PRPs conduct cleanups of hazardous waste sites rather than performing remedies itself and seeking recovery of costs. The FA Guidance seeks to ensure that there are sufficient financial resources available to guarantee performance of should PRPs be unwilling or unable to fulfill their investigation and remediation obligations. The FA Guidance encourages case teams to include financial assurance requirements in settlement agreements and administrative orders based on EPA’s “Cleanup Enforcement Model Language and Sample Documents,” which includes samples of financial assurance mechanisms, including financial test documents, a corporate guarantee, a letter of credit, a payment bond, a performance bond, and a trust agreement. The mechanisms are comparable to those permitted under the Resource Conservation and Recovery Act. 

The FA Guidance directs EPA case teams to consider site-specific factors when making determinations as to financial assurance requirements, including (i) potential risks to human health and the environment if a PRP ceases work prior to completion of required response actions; (ii) the estimated cost of performing the response actions; (iii) the estimated time to complete the response action (noting that financial assurance is “extremely important” when required work, including operations and maintenance costs, will exceed one year); (iv) the nature and extent of contamination at the site or facility; and (v) details concerning the PRP, such as its industry sector and long-term financial viability. In general, the financial assurance amount should mirror the cost estimate for work to be completed, but also should reflect applicable discount rates “using publicly-available return rates” factoring in both the estimated time to complete the cleanup work and any potential reductions over time, such as taxes and fees on trusts. The FA Guidance notes that such calculations can be very complicated and that case teams are expected to contact OSRE for assistance. 

The FA Guidance follows EPA’s issuance of a revised “Model Remedial Design/Remedial Action Consent Decree and Statement of Work” in September 2014 for PRPs performing remedies under CERCLA, including a section on posting of financial assurance against the estimated remedy cost. EPA also issued an advance notice of proposed rulemaking in January 2010 to issue financial assurance regulations generally applicable to the chemical manufacturing, hardrock mining, petroleum and coal tar manufacturing, and electricity generation/transmission sectors, but took no action after the close of the comment period in Februar of 2010 As noted, several environmental groups filed a writ of mandamus on August 8, 2014, asking that the U.S. Court of Appeals for the D.C. Circuit require EPA to issue such financial assurance regulations (asserting that CERCLA requires the same). Oral arguments are scheduled for May 12, 2015.