New Financial Assurances for Hardrock Mining

On July 13, 2009, the Environmental Protection Agency (“EPA”) provided notice that the hardrock mining industry will be its top priority for developing financial responsibility requirements for facilities that use hazardous substances.  The EPA intends that these new requirements will assure that operators remain financially responsible for cleanup under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”).¹  The EPA expects to propose the new rules by the spring of 2011.  CERCLA does not currently have a financial assurance component, and hardrock mining facilities will be the first such facilities subject to these new regulations.  The EPA’s July 13, 2009, announcement only provides notice to the hardrock mining industry that financial responsibility requirements are forthcoming – it does not give guidance on what those rules are expected to entail.  Hardrock mining facilities will not be subject to financial guarantee requirements until the EPA promulgates the final financial assurance regulations sometime after completing the rulemaking process.

Sierra Club v. Johnson

In Sierra Club v. Johnson², several non-governmental organizations (“NGOs”) sued the EPA for the EPA’s failure to comply with CERCLA Section 108(b).  CERCLA Section 108(b) requires the EPA to identify by December 11, 1983, classes of facilities that use hazardous substances and therefore should be subject to financial assurance guarantees.  Additionally, the EPA must promulgate rules that require that “classes of [those identified] 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.”³  As of July 13, 2009, the EPA had neither (1) published notice of the classes of facilities that should be subject to financial guarantees, nor (2) promulgated rules implementing the financial responsibility requirements.  The court in Sierra Club v. Johnson gave the EPA until May 4, 2009, and then through an extension until July 10, 2009, to satisfy Section 108(b)’s first requirement and publish a notice of classes of facilities for which financial guarantees would be required under CERCLA.  The EPA intended to satisfy the first requirement with the notice published on July 13, 2009.

Regulatory Gap

The NGOs in Sierra Club v. Johnson sued the EPA because they believe there is a regulatory gap between the risk associated with environmental harm from facilities dealing with hazardous substances and the financial responsibility requirements applicable to those facilities.  In hardrock mining, however, operators are currently subject to financial assurance guarantees under state programs for operations on state or private lands, and under federal programs for conducting certain types of operations or mining on federal lands.  Despite a robust regime of financial assurances related to hardrock mining, the EPA notice now seeks to impose additional financial responsibility provisions under CERCLA.

Reasons Hardrock Mining is the Top Priority

In its July 13, 2009, notice, the EPA singled out the hardrock mining industry as the only target for its first round of rulemaking on financial assurance guarantees under CERCLA.  The EPA’s notice recognizes that other industries, such as hazardous waste generators, hazardous waste recyclers, metal finishers, wood treatment facilities, and chemical manufacturers, will be subject to financial assurance guarantees in the future.  The EPA’s notice cited Section 108(b) in determining what risk factors were appropriate in designating hardrock mining for particular attention, noting that the law requires us to identify “degree and duration of risk,” and that the highest priority be given to classes of facilities that “present the highest level of risk of injury.”  Relying on this background, the EPA evaluated the following factors:

1. annual amounts of hazardous substances released to the environment;
2. the number of facilities in active operation and production;
3. the physical size of the operation;
4. the extent of environmental contamination;
5. the number of sites on the CERCLA site inventory (including both National Priority List (NPL) sites and non-NPL sites);
6. government expenditures;
7. projected clean-up expenditures; and
8. corporate structure and bankruptcy potential.

After looking at these risk factors, the EPA determined that “[it is] readily apparent that hardrock mining facilities present the type of risk that, in light of the EPA’s current assessment, justifies designating such facilities as those for which the EPA will first develop financial responsibility requirements pursuant to CERCLA Section 108(b).”

Types of Mining Facilities Impacted

The EPA’s notice identifies three broad types of hardrock mining facilities that will be subject to financial assurance guarantees.  They are: (1) facilities which extract; (2) facilities which beneficiate; and (3) facilities which process metals and non-metallic, non-fuel minerals.  The EPA concluded that all three types of facilities share common characteristics and any facility that undertakes one of the three types of operations will be subject to the hardrock mining facility financial assurance guarantee.  The EPA defines “hardrock mining” in its notice as mining for metals (such as copper, gold, iron, lead, magnesium, molybdenum, silver, uranium, and zinc) and non-metallic, non-fuel minerals (such as asbestos, gypsum, phosphate rock, and sulfur).  The EPA, however, may expand that list when it goes through the formal financial assurance rulemaking.

Hardrock Mining Industry Should Prepare to Participate in the Rulemaking

The July 13, 2009, notice satisfied just that portion of Section 108(b) requiring the EPA to identify facilities subject to financial assurance guarantees.  Now that the EPA has identified hardrock mining facilities as the first facilities subject to financial responsibility regulation under CERCLA, the EPA will spend the next two years studying and drafting a proposed rule.  The EPA has set the spring of 2011 as its goal for proposing a draft rule implementing financial assurance guarantees on hardrock mining facilities.  The EPA’s notice did not indicate if the new financial assurance requirements will apply to existing mining facilities or only to future mining facilities.  Between now and the publication of the proposed rules, hardrock mining operators can begin to identify and budget for financial assurances related to their operations.  In the interim, the hardrock mining industry should consider identifying potential exceptions to the general categories of facilities set forth in the notice, recognizing the preferred methods for providing financial assurance, and documenting the existing financial assurance requirements under local, state, tribal, and federal programs. 

1. 42 U.S.C. § 9608(b)(1)
2. No. 08-cv-01409-WHA, 2009 Dist. LEXIS 14819 (N.D. Cal., Feb. 25, 2009)
3. 42 U.S.C. § 9608(b)(1) (2009)