On Dec. 1, the Environmental Protection Agency (EPA) administrator signed a proposed rule, “Financial Responsibility Requirements under CERCLA § 108(b) for Classes of Facilities in the Hardrock Mining Industry,” which would impose new financial responsibility requirements for current owners and operators of hardrock mines, including numerous metal mines in the western United States. Federal Register publication of the proposed rule is expected within the month.

According to the agency, this rule is designed to ensure that mining companies have the resources to pay for liabilities arising under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Under CERCLA’s strict joint and several liability scheme, the government may incur up-front costs for responding to pollution at a particular site, and is able to recover those cleanup costs from “potentially responsible parties,” defined in the CERCLA to include current and past owners and operators.

Problems can arise when a potentially responsible party is unable to pay (e.g., because it has filed for bankruptcy), which under CERCLA’s joint liability regime causes that party’s share of liability to pass to any financially secure co-defendants, or if there are none, to the government. To avoid this problem in the mining sector, the EPA seeks to impose financial responsibility requirements on all hardrock mine owners and operators, even those who may never be involved in a CERCLA matter.

Legal Background: Under section 108(b) of CERCLA, 42 U.S.C. § 9608(b), the EPA is required to “promulgate requirements . . . that classes of facilities establish and maintain evidence of financial responsibility consistent with the degree and duration of risk associated with the production, transportation, treatment, storage, or disposal of hazardous substances.” Although this provision was enacted in 1980, the EPA did not take action for decades. In fact, the hardrock mining rule has been promulgated under the terms of a settlement between the EPA and environmental groups who, in In re: Idaho Conservation League, petitioned the United States Court of Appeals for the D.C. Circuit for a writ of mandamus compelling the EPA to issue the requirements under CERCLA. The parties negotiated a schedule for EPA’s rulemaking activities, and in January 2016, the D.C. Circuit issued an opinion approving the parties’ settlement as well as an order establishing agreed-upon deadlines for the EPA.

The New Regulations: The proposed regulations at 40 C.F.R. Part 320 would establish the amount of financial assurance owners and operators of hardrock mines are required to hold. Notably, the amount of financial assurance needed per the proposed formula in 40 C.F.R. § 320.63 will be lower for facilities that have certain environmental protection practices in place, giving regulated entities an opportunity to reduce insurance needs.

Regulated entities are also given options for meeting the financial responsibility requirements: the regulation identifies several acceptable financial instruments and includes an option for corporations to self-insure if qualified to do so.

As detailed in the EPA’s July 28, 2009 Federal Register Notice, the EPA considers “facilities which extract, beneficiate or process metals (e.g. copper, gold, iron, lead, magnesium, molybdenum, silver, uranium, and zinc) and non-metallic, non-fuel minerals (e.g. asbestos, gypsum, phosphate rock, and sulfur)” to be generally subject to the rule. Notably, the agency did not include several non-fuel mineral (including sand, gravel, and limestone) mines within its group of priority classes of facilities. (See “Mining Classes Not Included in Identified Hardrock Mining Classes of Facilities,” available here). The proposed rule at 40 C.F.R. § 320.60(a)(2) further exempts the following facilities from the financial responsibility requirements: “(i) Mines conducting only placer mining activities; (ii) Mines conducting only exploration activities; (iii) Mines with less than five disturbed acres that are not located within one mile of another area of mine disturbance that occurred in the prior ten-year period, and that do not employ hazardous substances in their processes; and (iv) Processors with less than five disturbed acres of waste pile and surface impoundment.” The EPA expects approximately 221 facilities to be affected, but that number is subject to fluctuation.

The plaintiffs in In Re: Idaho requested that the EPA promulgate financial responsibility regulations for four industry sectors: hardrock mining; chemical manufacturing; petroleum and coal products manufacturing; and electric power generation, transmission, and distribution. Accordingly, the D.C. Circuit also ordered the EPA to determine by Dec. 1 whether it would initiate rulemaking for the other three industries. Per the agency’s “Notice of Regulatory Determination for Financial Responsibility Requirements for Facilities in the Chemical, Petroleum and Electric Power Industries,” it will continue the regulatory process and determine whether financial responsibility requirements are necessary for the remaining three sectors. The EPA must issue the final rules by December 2020, 2021, and 2024. However, the order does not specify the sequence in which the three industries should be addressed, nor does it require the EPA to actually promulgate final rules. Thus, the EPA still retains discretion in determining requirements for these three industries.

Future of the Financial Responsibility Regulations: Critics of the rule argue that additional financial assurances are unnecessary and duplicative – mining is already a heavily regulated industry subjected to state financial responsibility obligations and a host of state and federal environmental regulations – and the new rules will only increase compliance costs without improving environmental conditions. In addition, President-elect Trump has been critical of existing environmental regulations for their impact on U.S. jobs, especially in industries that will be targeted for financial responsibility requirements. Since the incoming administration and Congress appear receptive to the concerns of industry, advocacy during the upcoming comment period may be particularly effective in changing the rule before finalization.

However, the background of this particular financial responsibility rule – promulgated pursuant to a court order and 40-year old congressional mandate – makes it hard to revoke. Although executive branch agencies typically enjoy significant discretion in rulemaking, the EPA’s actions here are required by court order, and the In re: Idaho plaintiffs could take additional legal action if the agency fails to comply. The case also serves as a reminder of how environmental organizations can use legal action to advance policy goals. Given the new administration’s stated opposition to many environmental regulations, we may see an increase in court involvement, through citizens suits filed both to compel agency action as well as to compel regulated entities to comply with environmental statutes.