- EPA’s proposed CERCLA financial responsibility rule for the hardrock mining industry may be illustrative of what to expect for the chemical, petroleum, and utility industries.
On January 11, 2017, the U.S. Environmental Protection Agency (EPA) published a Proposed Rule (Rule) regarding financial responsibility requirements under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) §108(b) for the hardrock mining industry. On the same day, EPA also published a Notice of intent to proceed with rulemakings (Notice) in connection with its January 2010 Advance Notice of Proposed Rulemaking (ANPRM) that identified additional classes of facilities within three industry sectors that may warrant the development of financial responsibility requirements under CERCLA:
- the Chemical Manufacturing industry (NAICS 325);
- the Petroleum and Coal Products Manufacturing industry (NAICS 324); and
- the Electric Power Generation, Transmission, and Distribution industry (NAICS 2211).
EPA’s Rule and Notice are in response to a consent order signed in In re Idaho Conservation League, No. 14-1149 (D.C. Cir. Jan. 29, 2016). In August 2014, environmental groups filed a writ of mandamus requiring issuance of CERCLA financial responsibility rules for the hardrock mining industry and the three industries referenced above. Under section 108 of CERCLA, EPA must establish financial assurance and responsibility rules for classes of facilities that are associated with the production, transportation, treatment, storage or disposal of hazardous substances. Section 108 is intended to ensure that the facilities maintain funding sufficient to address risks posed by such hazardous substances. However, more than 30 years has passed without EPA publishing any rules or proposed rules. EPA and the petitioners submitted, and the court approved, a consent order that included a schedule for further administrative proceedings under CERCLA section 108(b). Critically, in granting the motion to enter the order, the D.C. Circuit recognized that “the content of [the rulemaking required under the Order] is not in any way dictated by the [Order].” Therefore, while the new administration may be bound to entertain the process of rulemaking, ultimately, EPA may refrain from producing any rule.
The court ordered EPA to expedite its rulemaking schedule for the first class of industries, so EPA chose to examine and propose the Rule for the hardrock mining industry. The Rule proposes a combination approach to determine financial responsibility; specifically, a formulaic approach for response costs and natural resource damages (NRDs) and a fixed cost approach for the health assessment cost. EPA noted that the formula is not intended to establish any CERCLA liability or define a particular remedy; rather, it establishes an amount that reflects likely environmental response costs.
When determining the response cost formula, EPA collected information about CERCLA response activities, various site features, and causes of releases or threatened releases. EPA then identified eight types of remedial measures: (1) on-site disposal; (2) off-site disposal; (3) engineering and/or containment; (4) surface water diversion; (5) water treatment (lime addition); (6) water treatment (other); (7) monitoring; and (8) deconstruction/ decontamination of buildings. To monetize the expected costs for the eight remedies, EPA linked the remedy types to similar tasks identified in current engineering cost data. EPA also added region-specific and state-specific cost adjustments to the formula.
EPA collected data on natural resource damages (NRDs) and NRD assessment costs at hardrock mining sites and created a hardrock mining-specific NRD multiplier. NRDs drive approximately 13.4 percent of response costs. Thus, to determine financial responsibility for NRDs, hardrock mining facilities would multiply their potential future response costs by 0.134. Despite 13.4 percent being the average, EPA is considering an alternative that would use the median NRD of 3.8 percent of the response costs.
Regarding the health assessment component, EPA adopted a fixed amount of $550,000. The Agency for Toxic Substances and Disease Registry (ATSDR) must maintain documents pertaining to the costs associated with all phases of a Public Health Assessment or a Health Consultation used as the basis for EPA cost recovery. EPA used ATSDR’s data, which provided the minimum, maximum, and average costs of health assessments conducted since March 2016. $550,000 represents the average health assessment cost reported by ATSDR. The particulars on how EPA determined the hardrock mining financial responsibility formula may be a precursor for methods that may be used in the upcoming industry regulations.
Although the Notice is “not a determination that requirements are necessary for any or all of the classes of facilities within the three industries, or that EPA will propose such requirements,” EPA did discuss and dismiss the arguments that the potentially regulated industries raised in opposition to the regulatory initiative. For example:
- EPA rejected the argument that the Resource Conservation and Recovery Act’s (RCRA’s) financial responsibility requirements were sufficient because those requirements are “more narrowly designed to assure compliance with those closure requirements.”
- In EPA’s original selection of these industries in its 2010 ANPRM, it relied on the Toxics Release Inventory and RCRA’s national Biennial Report, and, according to EPA, “[n]one of the commenters submitted data to dissuade the Agency from the path of acquiring additional and more comprehensive information for these industries.”
- EPA’s 2010 ANPRM also used data from the Superfund National Priorities List (NPL) to select these industries. Commenters asserted that EPA was not giving credit to the fact that many of those sites either did not remain in production, or had practices that were improved based on environmental regulations issued after the initial contamination. EPA countered that the NPL analysis was informative and there was no evidence that the risks were eliminated at these sites.
- Finally, EPA rejected the industries’ argument that they generally are healthy and not at risk for bankruptcy, stating that “[e]conomic solvency at an industry-wide level is not a substitute for insurance against the possibility of CERCLA liabilities remaining unsatisfied on a facility-specific basis.”
Regarding the future rulemaking for the chemical, petroleum and coal, and electric power industries, the Notice provided no specific financial assurance numbers, but EPA’s hardrock mining determinations provide insights into the methodology EPA may use in the future. Under the consent order:
- the notice of proposed rulemaking in the first additional industry must be signed by July 2, 2019 with final action by December 2, 2020;
- the second additional industry proposed rulemaking must be published by December 4, 2019 with final action by December 1, 2021; and
- the third additional industry proposed rulemaking must be published by December 1, 2022 with final action by December 4, 2024.
EPA will subsequently decide the sequence of industry rulemaking. There have been no EPA fact sheets released regarding this future rulemaking; however, EPA has noted that the Chemical Manufacturing and the Petroleum and Coal Products Manufacturing industries generate the highest volume of hazardous waste, so it seems that its focus may turn to those industries first.