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EPA Announces Plans to Require Financial Assurance Under CERCLA for Chemical, Refining and Electrical Industries

January 20, 2010

EPA has identified[1] three new industries that could eventually become subject to financial assurance requirements; regulations that would require facility owners and operators to maintain evidence that they are, and will remain, capable of paying the cost of any future environmental cleanup for which they are potentially responsible. EPA’s Advanced Notice of Proposed Rulemaking (“ANPR”) on the subject does not prescribe any new regulations, but signals the agency’s plans to develop them, possibly by next year. EPA has previously announced plans to impose financial assurance requirements on the hardrock mining industry.

The newly identified industries are chemical manufacturing, electricity generation and petroleum and coal products manufacturing (refining). EPA is still considering whether to target other industries for financial assurance, including waste management and remediation, recycling, wood product, fabricated metal product, electronics and electrical equipment manufacturing. The agency is taking comments on the proposal until February 5, 2010.


CERCLA § 108(b) and Sierra Club v. Johnson

The financial assurance program was mandated by Congress in 1980 under the Superfund law, CERCLA §108(b)(1). EPA was directed to “identify those classes [of facilities] for which requirements will first be developed” by December, 1983, and regulations were to be phased fully into effect by late 1989.[2]

EPA has cited “competing priorities and lack of funds” as the primary reasons for the delay.[3] Environmental groups sued EPA for its failure to begin developing regulations in early 2008.[4] On February 25, 2009, the Northern District of California ordered EPA to begin identifying regulated classes in accordance with Section 108(b).[5]

Hardrock Mining

Congress left it to EPA to decide which industries to regulate, with priority to be “accorded to those classes of facilities, owners and operators which [EPA] determines present the highest level of risk of injury,” and the new requirements to be “consistent with the degree and duration of risk associated with the production, transportation, treatment, storage, or disposal of hazardous substances.”[6]

EPA identified hardrock mining[7] facilities as the first industry class to be regulated.[8] In doing so, the agency examined the probability of a release from facilities in the mining sector, the potential risk from a release, and the “severity of consequences that result when those risks are realized,” including economic factors such as projected clean-up costs and the likelihood of bankruptcy within the industry.[9]

Chemical Manufacturing, Electric Power Generation and Distribution, and Petroleum and Coal Products Manufacturing

In its new ANPR, EPA refined its industry selection methodology to incorporate several major sources of industry and environmental data. EPA examined several large environmental datasets – lists of contaminated sites, the RCRA Biennial Report (identifying annual U.S. tons of hazardous waste generated) and the Toxics Release Inventory (“TRI,” identifying annual U.S. tons chemicals released on-site), and applied NAICS industry codes to arrive at conclusions about the relative prevalence of various industry sectors in each set.

For example, EPA assigned a NAICS code to each facility listed on the National Priorities List (“NPL”), and concluded that the waste management and remediation services, chemical manufacturing, wood product manufacturing, fabricated metal product manufacturing, electronics and electrical equipment manufacturing and petroleum and coal products manufacturing industries[10] accounted for 61 percent of NPL sites. Non-NAICS classifiable “facilities engaged in the recycling of materials containing CERCLA hazardous substances” accounted for another 10 percent.[11] Similarly, using the 2007 RCRA Biennial Report, EPA concluded that the chemical manufacturing and petroleum and coal products manufacturing industries generated approximately 74 percent of the total hazardous waste in the United States annually, while the waste management and electric equipment and fabricated metals product manufacturing industries comprised an additional 14 percent. Examining TRI data for 2007, EPA concluded that the chemical manufacturing and electric power generation, transmission and distribution industries accounted for 24 percent of the on-site release of hazardous substances.

Upon review of the above data, EPA concluded that two industries – chemical manufacturing and petroleum and coal products manufacturing – “emerged as clearly appropriate for consideration”[12] because they accounted for a large portion of the hazardous waste generated and had a number of sites on the NPL. With respect to its decision to include the electricity industry (which had not “scored” highly in any of EPA’s tests) EPA turned specifically to current events, citing the recent “catastrophic release … of about one billion gallons of coal ash” from the TVA Kingston Plant as a primary motivating factor for inclusion.[13] With the above conclusions made, EPA also discussed the “risk factors” that it had identified in the hardrock mining decision, marshalling its evidence under the previously-establish criteria.[14]

What Lies Ahead

In its new listing, EPA declined to decide whether the waste management and remediation, fabricated metal product manufacturing, electronics and electric equipment manufacturing, or hazardous substance recycling industries would be subject to financial assurance regulation. EPA plans to further characterize the many subclasses of facilities in the waste management and recycling sectors, and to further evaluate new developments in the named manufacturing industries, before making any further decisions.[15]

In addition, EPA has requested input to assist it in the next step: structuring the new financial assurance regulatory regime. Among the information that the agency has requested, EPA has solicited comments on the risks faced by subject industries, existing financial responsibility mechanisms and instruments, and information EPA may consider in setting levels of financial responsibility.[16] Affected industries may also expect that EPA will further break down the many types of facilities that comprise the sectors EPA plans to regulate, and may provide comments on that breakdown. Unless EPA extends the comment period, comments are due by February 5, 2010.

While the timing of new financial assurance regulations has not been established by the agency, a note on EPA’s website indicates that EPA “plans to propose a financial responsibility rule in the spring of 2011 for classes of facilities within the hard-rock mining industry, with a proposal for additional classes following within a few months.”

For more information on EPA’s proposed financial assurance program, please contact any member of Marten Law Group’s Waste Cleanup practice group.

[1] Identification of Additional Classes of Facilities for Development of Financial Responsibility Requirements Under CERCLA Section 108(b), 75 Fed. Reg. 816 (Jan. 8, 2010) (hereinafter, the “ANPR”).

[2] 42 U.S.C. § 9608(b)(1), (b)(3).

[3] Government Accountability Office, Environmental Liabilities: Hardrock Mining Cleanup Obligations, 1 (June 14, 2006).

[4] Sierra Club v. Johnson, No. 08-01409 (N.D.Cal. Mar. 12, 2008). Complaint available here. See also Environmental Groups Call for Courts to Impose New Financial Assurance Requirements on Mines, Utilities, Metal Refinishers, Wood Treaters, Marten Law Environmental News (April 23, 2008).

[5] Sierra Club v. Johnson, Not Reported in F.Supp.2d, 2009 WL 482248 (N.D.Cal. Feb. 25, 2009).

[6] 74 Fed. Reg. 37213 (July 28, 2008)

[7] Defined as the “extraction, beneficiation or processing of 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).” Id. at 37214.

[8] Id. at 37215-18.

[9] Id. at 37214. The factors EPA considered were: (1) [a]nnual 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.”

[10] NAICS 562, 325, 321, 332, 334-35 and 324, respectively.

[11] ANPR, 75 Fed. Reg. at 820..

[12] Id., 822.

[13] Id.

[14] Id., 823-30.

[15] Id., 830.

[16] Id., 830-31. While EPA has not requested comment on its industry selection methodology, it has stated that it will consider such comments in its final rule. Id., 819 n.5.

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