The Nickel Report

On January 11, 2017, the US Environmental Protection Agency (EPA) published a proposed rule pursuant to Section 108(b) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA or Superfund), mandating extensive and costly financial assurance requirements applicable to the hardrock mining and mineral processing industry. On the same day, EPA also announced plans to commence rulemaking to consider similar requirements for additional classes of facilities in the petroleum and coal, chemical manufacturing, and electric power generation, transmission and distribution sectors. Both proposals derive from a series of lawsuits culminating in a “sue and settle” order of the DC Circuit Court of Appeals affirming a schedule agreed to between EPA and various environmental groups to issue financial assurance regulations.

When Congress enacted CERCLA in 1980, it required EPA to identify classes of facilities for which financial assurance requirements would be first developed “[n]ot later than three years” after enactment, and required EPA not later than five years after enactment to promulgate requirements for such facilities “consistent with the degree and duration of risk….”

Congress also expressed desire to avoid redundancy and unnecessary economic burdens on industry, stating in Section 114(d) that owners and operators required to have financial assurance under CERCLA shall not be required to maintain financial assurance “under any State or local law, rule, or regulation.” Hence, Congress expressly preempted state law in order to avoid duplicative impacts, requiring that states must accept financial assurance established under CERCLA 108(b) “in lieu of any other requirement…imposed by such State in connection with liability for the release of a hazardous substance.”

The agency chose not to adopt or even propose such standards for nearly 40 years. Indeed, the first formal step EPA took came more than 28 years after enactment — only after the agency was sued by environmental groups — with the agency’s so-called “2009 Priority Notice” identifying hardrock mining and mineral processing as its first priority industry for CERCLA financial assurance standards. The industries were identified based on only cursory evaluation of the risks presented.

Since Section 108(b)’s enactment in 1980, EPA and the states have adopted myriad interrelated and overlapping regulatory programs governing the generation, transportation, management and disposal of hazardous substances and mitigating the impacts of industrial operations — including those of the hardrock mining and mineral processing, petroleum and coal production, chemical manufacturing, and electric generation, transmission and distribution industries. Moreover, many of these same federal and state regulatory programs not only minimize significantly the level of risk of hazardous substances’ release inherent in such operations, but many also include financial assurance requirements specifically targeted at hazardous waste generation and management, site reclamation and closure, and hazardous substance remediation or corrective action within these industry sectors.

Rather than acknowledge that the now extensive existing federal and state regulation adequately addresses the risks Congress intended to mitigate through CERCLA Section 108(b), EPA instead has proposed a regulation that would impose redundant requirements. Moreover, EPA has not acknowledged that its proposed regulations will preempt overlapping state law, per the direction of Congress in Section 114(d). EPA instead claims that those other federal and state regulations differ in their focus and hence are not preempted by EPA’s proposed rule. Nonetheless, EPA has included provisions it claims are intended to allow industry to reduce its CERCLA 108(b) financial assurance obligation by documenting the duplicative requirements of other federal or state law — provisions that on their face seem to acknowledge the lack of a need for another layer of federal regulation.

The result is a proposed regulation searching for a purpose.

The proposal also suffers from serious procedural problems. EPA has included some 75,000 pages of materials in the record on the proposed hardrock mining rule, much of it released well after the rule was published in the Federal Register on January 11, yet EPA has provided only 60 days for public review and comment.

The DC Circuit Court of Appeals has ordered that a final rule must be issued by December 1 of this year. Thus, while the new administration could substantially change the proposed rule and reduce its burdens, it does not appear that the administration can simply halt activity on the rulemaking to remove the burdens and duplication altogether. Congress would need to intervene.

Congress could take several useful steps. It could encourage EPA to grant a reasonable extension to the hardrock mining CERCLA 108(b) rule comment period, and encourage the agency to seek from the court an extension of the December 2017 final rule promulgation date to allow reasonable consideration of the complex technical and policy issues under evaluation. Congress could put in place a temporary restriction on EPA’s issuing a final rule to facilitate a more reasonable public notice and comment process on the proposal, and to allow Congress time to consider potential amendments to the statute if warranted. And, to the extent it were determined that such amendments might be justified, Congress could undertake review and adoption of appropriate legislative amendments to update CERCLA Section 108(b) to better reflect the current regulatory landscape and industry practice.