Last week the EPA officially published its proposal to impose over $7 billion of financial assurance requirements on the owners and operators of currently active or idle hardrock mines and mineral processing facilities. 82 Fed. Reg. 3388 (Jan. 11, 2017).  These proposed requirements are intended to cover estimated response costs, natural resource damages, and health assessment costs for which an owner or operator could be liable under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) should a hazardous substance release occur.  The EPA estimates that 221 hardrock mining facilities would be subject to these proposed requirements, which would be in addition to financial assurance already required by other federal or state agencies for things such as closure and reclamation.  The deadline for submitting comments on the EPA’s proposal is March 13, 2017.Capture

Above is the EPA’s proposed formula for calculating the amount of financial assurance that would be required under CERCLA for each subject hardrock mining facility. At a very summary level, to calculate a particular facility’s amount:

  1. Apply the facility’s characteristics to 13 response cost categories (e.g., open pit, underground mine, waste rock, heap and dump leach, tailings) to calculate the response cost component. The costs in each category can be reduced if the facility is subject to and in compliance with specified risk minimization requirements. For example, a surface mine could reduce its “open pit” component if it is obligated to implement a plan to address safety by preventing public access and that obligation is backed by financial bonding.
  2. Apply the specified overhead/oversight and state adjustment factors based on the facility’s location.
  3. Multiply the result by 1.134, which reflects the EPA’s calculation that average natural resource damages are 13.4% of response costs.
  4. Add $550,000, which reflects the EPA’s determination of the average health assessment costs.
  5. Adjust the entire amount by inflation.

Letters of credit, surety bonds, insurance, trust funds, and (perhaps) self-insurance would be acceptable forms of financial assurance, although the EPA’s preference is to not allow self-insurance. Owners and operators would be required to maintain the financial assurance until some uncertain date in the future when the EPA concurs that the risk posed by the then-closed facility is minimal.

Facilities that would be subject to these proposed requirements consist of facilities that extract, beneficiate, or process metals (e.g., copper, gold, iron, lead, magnesium, molybdenum, silver, uranium, and zinc) or non-metallic, non-fuel minerals (e.g., asbestos, gypsum, phosphate rock, and sulfur).  Exempt facilities include mines conducting only exploration or placer mining activities and small, isolated mines that do not use hazardous substances in their processes.

The legal basis for this effort is Section 108(b) of CERCLA, which calls for the President to establish financial assurance requirements for classes of facilities “consistent with the degree and duration of risk associated with” hazardous substances at the facilities. 42 U.S.C. § 9608(b).  Before the end of 1983, the President was to identify and publish notice of the first classes of facilities to which CERCLA Section 108(b) would be applied.

No action was taken in the next 25+ years, other than President Reagan’s delegation of these responsibilities in 1987 to the EPA Administrator. As a result of a citizen suit brought by conservation organizations, in 2009 the EPA identified hardrock mining facilities as the first class of facilities to which CERCLA Section 108(b) would be applied. 74 Fed. Reg. 37213 (July 28, 2009).  In response to another lawsuit by conservation organizations in 2014, the EPA agreed to commence rulemaking for hardrock mining facilities by December 1, 2016 and to take final action by December 1, 2017.  However, the court opinion approving that EPA agreement expressly recognized that the agreement did not obligate EPA, after going through the rulemaking process, to actually impose financial assurance requirements on hardrock mining facilities. In re Idaho Conservation League, 811 F.3d 502, 514 (D.C. Cir. 2016).

Accordingly, the incoming Trump administration has real flexibility when it comes to this rulemaking, and it seems unlikely that the new administration would adopt the current proposal. However, the mining industry should nonetheless be proactive in submitting comments before March 13 to provide a record that can withstand the likely next round of litigation.