D.C. Circuit Upholds USEPA Decision to Not Require Financial Assurance Under CERCLA for Hardrock Mining

We have previously blogged (in June 2019 and 2017) on a proposed rule released during the final days of the Obama Administration which required hardrock mines to provide financial assurance demonstrating they are able to fund the costs associated with the future cleanup of the mines under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the federal statute designed to address releases of hazardous substances and the cleanup of hazardous waste sites nationwide. In December 2017, the USEPA stated its intention not to issue the final rule, finding that there was no need for any CERCLA financial assurance mechanism for operating hardrock mines based on existing federal and state programs as well as modern mining practices. Several environmental organizations filed suit in the U.S. Court of Appeals for the D.C. Circuit, challenging the USEPA’s decision not to issue the rule.

On July 19, 2019, the D.C. Circuit upheld the USEPA’s decision to not finalize the proposed hardrock mining financial assurance rule, stating that the EPA’s decision was a reasonable interpretation of its CERCLA authority and ambiguous CERCLA financial assurance provisions. USEPA had limited its evaluation to financial risk. The petitioners argued that USEPA needed to consider risk to the environment and health as well. The court noted that Congress only used financial terms to describe the relevant “risk” in the provision that directs the EPA to set requirements in sufficient amounts and found USEPA’s interpretation to be reasonable. The court also held that nothing in CERCLA mandated the USEPA to promulgate financial responsibility requirements for the hardrock mining industry and that the USEPA’s evaluation of financial risks and its economic impact analysis were not arbitrary and capricious.

Financial Assurance Rules for Other Industry Sectors

The environmental groups that had pushed EPA to issue financial assurance requirements for the hardrock mining industry had also filed a lawsuit seeking to require USEPA to issue financial responsibility rules under CERCLA for three other industries: Electric Power Generation, Transmission, and Distribution; Chemical Manufacturing; and Petroleum and Coal Products Manufacturing. USEPA and the petitioners agreed on a schedule for making determinations on whether financial assurance should be required for facilities in these additional three industry sectors, and USEPA has been proceeding with rulemaking for each.

In July 2019, USEPA released the proposal for the Electric Power Generation, Transmission, and Distribution industry. USEPA concludes in the proposed rule that financial responsibility regulations are not required for facilities in the Electric power Generation, Transmission, and Distribution industry under Section 108(b) of CERCLA. USEPA noted that any financial responsibility requirements would apply to currently operating facilities only, and it determined that these facilities present minimal current risk. In making this determination, USEPA noted that the industry is currently subject to a number of environmental regulatory programs and that, based on a review of the cost of cleanups, existing financial responsibility requirements, and enforcement actions, costs have already been reduced to the taxpayer. USEPA also determined, after a review of the financial health of the industry, that the industry as a whole should retain the capacity and fiduciary responsibility to pay the costs of addressing their environmental obligations without additional financial responsibility requirements under CERCLA.

USEPA is scheduled to issue the proposal for the Chemical Manufacturing section by December 2019, followed by the proposal for the Petroleum and Coal Products Manufacturing sector which we anticipate to be issued in 2020.