Financial Responsibility Requirements Under CERCLA § 108(b) for Classes of Facilities in the Hardrock Mining Industry, 3388-3512 [2016-30047]
Download as PDF
<![CDATA[
3388
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 320
[EPA–HQ–SFUND–2015–0781; FRL–9953–
75–OLEM]
RIN 2050–AG61
Financial Responsibility Requirements
Under CERCLA § 108(b) for Classes of
Facilities in the Hardrock Mining
Industry
Environmental Protection
Agency (EPA).
ACTION: Proposed rule.
AGENCY:
The Environmental Protection
Agency (EPA) is proposing requirements
under section 108(b) of the
Comprehensive Environmental
Response, Compensation, and Liability
Act (CERCLA) for demonstrating
financial responsibility. This proposed
rule would create a new Part in the
CERCLA regulations to require financial
responsibility under CERCLA § 108(b),
define requirements for demonstration
of financial responsibility, define
requirements for maintenance of
financial responsibility instruments,
and establish criteria for owners and
operators to be released from financial
responsibility requirements. In addition,
this proposal would establish specific
financial responsibility requirements
applicable to certain classes of mines
and associated mineral processing
facilities within the hardrock mining
industry. EPA expects this proposed
rule will, when made final, increase the
likelihood that owners and operators
will provide funds necessary to address
the CERCLA liabilities at their facilities,
thus preventing owners or operators
from shifting the burden of cleanup to
other parties, including the taxpayer. In
addition, EPA expects that by adjusting
the amount of financial responsibility to
account for environmentally safer
practices, it would provide an incentive
for implementation of sound practices at
hardrock mining facilities and thereby
decrease the need for future CERCLA
actions.
DATES: Comments must be received on
or before March 13, 2017. Under the
Paperwork Reduction Act (PRA),
comments on the information collection
provisions are best assured of
consideration if the Office of
Management and Budget (OMB)
receives a copy of your comments on or
before February 10, 2017.
ADDRESSES: Submit your comments,
identified by Docket ID No. EPA–HQ–
SFUND–2015–0781, at https://
www.regulations.gov. Follow the online
sradovich on DSK3GMQ082PROD with PROPOSALS2
SUMMARY:
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
instructions for submitting comments.
Once submitted, comments cannot be
edited or removed from Regulations.gov.
EPA may publish any comment received
to its public docket. Do not submit
electronically any information you
consider to be Confidential Business
Information (CBI) or other information
whose disclosure is restricted by statute.
Multimedia submissions (audio, video,
etc.) must be accompanied by a written
comment. The written comment is
considered the official comment and
should include discussion of all points
you wish to make. EPA will generally
not consider comments or comment
contents located outside of the primary
submission (i.e. on the Web, cloud, or
other file sharing system). For
additional submission methods, the full
EPA public comment policy,
information about CBI or multimedia
submissions, and general guidance on
making effective comments, please visit
https://www2.epa.gov/dockets/
commenting-epa-dockets.
FOR FURTHER INFORMATION CONTACT: For
more information contact Barbara
Foster, Program Implementation and
Information Division, Office of Resource
Conservation and Recovery, Mail Code
5303P, Environmental Protection
Agency, 1200 Pennsylvania Avenue
NW., Washington, DC 20460; telephone
(703) 308–7057; (email) Foster.Barbara@
epa.gov; or Michael Pease, Program
Implementation and Information
Division, Office of Resource
Conservation and Recovery, Mail Code
5303P, Environmental Protection
Agency, 1200 Pennsylvania Avenue
NW., Washington, DC 20460; telephone
(703) 308–0008; or (email)
Pease.Michael@epa.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive Summary
A. Purpose of the Regulatory Action
B. Summary of the Major Provisions of the
Regulatory Action
C. Costs and Benefits of the Regulatory
Action
II. Authority
III. Background Information
A. Overview of CERCLA § 108(b) and Other
CERCLA Provisions
B. Recent Litigation Under CERCLA
§ 108(b)
C. Hardrock Mining 2009 Priority Notice
D. Additional Classes Advance Notice of
Proposed Rulemaking
E. Market Capacity Study
F. Approach to Developing This Proposed
Rule
IV. Major Issues in the Development of the
Proposed Rule
A. Relationship to Existing Superfund
Processes
B. Liabilities Covered
C. Universe Covered
PO 00000
Frm 00002
Fmt 4701
Sfmt 4702
D. Notification Requirement
E. Determining the Financial
Responsibility Amount for Hardrock
Mining Facilities
F. Available Instruments
V. Relationship of CERCLA § 108(b) to Other
Federal Laws, and to State and Tribal
Laws.
VI. Section-by-Section Analysis
A. Subpart A—General Facility
Requirements
1. Purpose and Scope (§ 320.1) and
Applicability (§ 320.2)
2. Definitions and Usage (§ 320.3)
3. Availability of Information: Confidential
Business Information (§ 320.4)
4. Initial Notification Requirement (§ 320.5)
5. Information Submission Requirements
(§ 320.6)
6. Requirement for Electronic Submission
of Information (§ 320.7)
7. Recordkeeping Requirements (§ 320.8)
8. Requirements for Public Notice (§ 320.9)
B. Subpart B—General Financial
Responsibility Requirements
1. Applicable Financial Responsibility
Amounts and Procedures for
Establishing Financial Responsibility
(§ 320.20 and § 320.21)
2. Maintenance of Instruments (§ 320.22)
3. Incapacity of Owners or Operators,
Guarantors, or Financial Institutions; or
Instrument Cancellation (§ 320.23)
4. Notification of Claims Brought Against
Owners, Operators, or Guarantors
(§ 320.24)
5. General Provisions for Instrument
Payment
6. Facility Transfer (§ 320.25)
7. Notification of Cessation of Operations
(§ 320.26)
8. Release From Financial Responsibility
Requirements (§ 320.27)
C. Subpart C—Available Financial
Responsibility Instruments
1. Letter of Credit (§ 320.40)
2. Surety Bond (§ 320.41)
3. Insurance (§ 320.42)
4. Financial Test (Options) (§ 320.43)
5. Corporate Guarantee (Options) (§ 320.44)
6. Trust Fund (§ 320.45)
7. Issuer Cancellation Provisions (§ 320.23)
8. Use of Multiple Financial Responsibility
Instruments (§ 320.46)
9. Use of a Financial Instrument for
Multiple Facilities (§ 320.47)
10. Consolidated Form and Multiple
Owners and/or Operators (§ 320.48)
D. Subpart H—Hardrock Mining Facilities
1. Universe of Hardrock Mining Facilities
Covered by the Rule (§ 320.60)
2. Timeframes for Compliance (§ 320. 61)
3. Definitions (§ 320.62)
4. Determining the Financial
Responsibility Amount (§ 320.63)
5. Information Submission and
Recordkeeping Requirements (§ 320.64)
6. Third-Party Certification (§ 320.65)
7. Continued Risk at Hardrock Mining
Facilities
VII. Statutory and Executive Orders Reviews
A. Executive Order 12866: Regulatory
Planning and Review and Executive
Order 13563: Improving Regulation and
Regulatory Review
B. Paperwork Reduction Act (PRA)
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
C. Regulatory Flexibility Act (RFA)
D. Unfunded Mandates Reform Act
(UMRA)
E. Executive Order 13132: Federalism
F. Executive Order 13175: Consultation
and Coordination With Indian Tribal
Governments
G. Executive Order 13045: Protection of
Children From Environmental Health
Risks and Safety Risks
H. Executive Order 13211: Actions
Concerning Regulations That
Significantly Affect Energy
I. National Technology Transfer and
Advancement Act (NTTAA)
J. Executive Order 12898: Federal Actions
To Address Environmental Justice in
Minority Populations and Low-Income
Populations
I. Executive Summary
sradovich on DSK3GMQ082PROD with PROPOSALS2
A. Purpose of the Regulatory Action
Section 108(b) of the Comprehensive
Environmental Response,
Compensation, and Liability Act
(CERCLA), also known as Superfund,
directs EPA to develop regulations that
require classes of facilities to 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. When releases of hazardous
substances occur, or when a threat of
release of hazardous substances must be
averted, a Superfund response action
may be necessary. Since the Superfund
tax has expired, EPA’s Superfund
appropriation is increasingly funded by
the general revenues. Therefore, the
costs of such response actions can fall
to the taxpayer if parties responsible for
the release or potential release of
hazardous substances are unable to
assume the costs. In addition, the
likelihood of a CERCLA response action
being needed, as well as the costs of
such a response action, are likely to be
higher where protective management
practices were not utilized during
facility operations. This proposed rule is
intended to address both concerns. By
assuring that owners and operators
establish financial responsibility
consistent with the risks associated with
the production, transportation,
treatment, storage, and disposal of
hazardous substances at their facilities,
this proposed rule would increase the
likelihood that owners and operators
will provide funds necessary to address
the CERCLA liabilities at their facilities,
thus preventing the burden from
shifting to the taxpayer or to other
parties. In addition, this proposed rule
would provide an incentive for
implementation of sound practices at
hardrock mining facilities that would
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
decrease the need for future CERCLA
actions.
B. Summary of the Major Provisions of
the Regulatory Action
EPA identified hardrock mining as the
classes for which it would first develop
financial responsibility requirements in
a Federal Register notice dated July 28,
2009 (2009 Priority Notice).1 In that
notice, EPA provided a general
definition of ‘‘hardrock mining’’ 2 and
has refined that general definition for
purposes of this proposal. This
proposed rule would apply to certain
classes of facilities that engage in the
extraction, beneficiation, and processing
of metals, (e.g., copper, gold, iron, lead,
magnesium, molybdenum, silver,
uranium, and zinc) and non-metallic,
non-fuel minerals (e.g., asbestos,
phosphate rock, and sulfur).3
The proposed rule would require
owners and operators subject to the rule
to demonstrate and to maintain
financial responsibility consistent with
the degree and duration of risk
associated with the treatment,
production, transportation, storage and
disposal of hazardous substances at
their facilities. The Agency is proposing
that current owners and operators of
facilities subject to the rule be required
to demonstrate financial responsibility
to cover the three types of costs
associated with releases and potential
releases of hazardous substances from
their facilities, including response costs,
health assessment costs, and natural
resource damages. These are the same
types of costs that CERCLA makes
specified parties, including current
owners or operators, liable for under
CERCLA § 107. Thus, by requiring
current owners or operators of facilities
that manage hazardous substances to set
aside funds for cleanup (or otherwise
demonstrate their ability to pay for it),
EPA expects this proposed rule would
increase the likelihood that owners or
operators subject to the rule will be able
to pay the costs associated with releases
or potential releases of hazardous
substances from their facilities for
which they are responsible, in the event
a CERCLA cleanup becomes necessary.
The proposal would establish a
process for owners and operators subject
to the proposed rule to identify a
financial responsibility amount for their
sites, to demonstrate evidence of
1 Identification of Priority Classes of Facilities for
Development of CERCLA Section 108(b) Financial
Responsibility Requirements, 74 FR 37213, July 27,
2009.
2 Id. at 37213.
3 The details on the facilities that would be
subject to this proposed rule are provided in
Subpart H of this preamble.
PO 00000
Frm 00003
Fmt 4701
Sfmt 4702
3389
financial responsibility, and to maintain
the required amount of financial
responsibility until the requirement for
financial responsibility for the site is
released by EPA. The proposed rule
would promote efficiency and accuracy
of information collected by requiring
electronic submission of information.
Further, the proposal would encourage
public participation in the effective
implementation of the rule by requiring
owners or operators to post information
related to their compliance with the
financial responsibility requirements of
this rule on their company Web sites.
The proposal includes a formula by
which EPA expects facilities to calculate
an amount of financial responsibility.
The formula is also structured to allow
facilities, upon certain showings, to
reduce that calculated amount to
account for the current conditions of
their sites. EPA expects that many, if not
most, facilities, will be able to adjust the
amount required based on the
calculation. By requiring an amount of
financial responsibility consistent with
the degree and duration of risk at the
site, while allowing for adjustments as
a result of environmentally-protective
practices, the proposed rule should
create economic incentives for owners
and operators to employ
environmentally sound practices. In
turn, EPA expects that the proposed rule
would ultimately have the effect of
decreasing Superfund liabilities because
it would create incentives for owners
and operators to minimize the risk
associated with their facilities thereby
lowering their financial responsibility
amounts. This is also consistent with
CERCLA’s overarching goal of
encouraging potentially responsible
parties to increase the level of care with
which they manage the hazardous
substances at their sites. Similarly, the
proposed rule would provide for the
release of the owner and operator’s
financial responsibility requirements
when EPA makes a determination that
the risks from the facility are minimal.
This provision would encourage
protective and responsible closure and
cleanup of their facilities.
The proposed rule also would
establish conditions for payment of
funds from the financial responsibility
instruments. Under the proposed rule,
financial responsibility instruments
could be used to pay a party that has
sought reimbursement through the
courts for costs; to pay as specified in
a settlement with the Federal
Government, or to pay into a trust fund
established by the owner or operator
pursuant to a Federal Government
administrative order under CERCLA
§ 106(a). EPA has thus sought to ensure
E:\FR\FM\11JAP2.SGM
11JAP2
3390
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
that its proposed CERCLA § 108(b)
instruments would complement the
current Superfund framework for
obtaining cleanup and reimbursement
from those parties responsible for
contamination.
C. Costs and Benefits of the Regulatory
Action
1. Introduction
EPA assessed the industrial and social
costs as well as benefits of the
regulatory options of the proposed rule.
The details of the analysis are presented
in the Regulatory Impact Analysis (RIA),
which can be accessed in the docket
supporting this rulemaking (Docket No.
EPA–HQ–SFUND–2015–0781). This
preamble provides an overview of the
methodology that EPA applied in the
RIA and the key results including the
identification and characterization of
the potentially regulated universe; the
projected economic impacts from
industry and society standpoints; and
potential social welfare benefits of the
proposed rule. Detailed discussions of
the uncertainties and limitations of the
analysis are provided in the RIA.
sradovich on DSK3GMQ082PROD with PROPOSALS2
2. Characterization of Baseline Affected
Entities
Hardrock mining is the extraction and
beneficiation of rock and other materials
from the earth that contain a target
metallic or non-fuel non-metallic
mineral. Mineral processing separates
and refines mineral concentrates to
extract the target material.4 In order to
establish the universe of facilities likely
to be subject to this proposed rule, EPA
primarily relied on July 2015 data from
the U.S. Mine Safety and Health
Administration (MSHA) Mine Data
Retrieval System (MDRS) accessed on
July 2015,5 U.S. Energy Information
Administration (EIA) (2015),6 and the
2015 U.S. Geological Survey (USGS)
Mineral Commodity Summaries
(MCSs).7
From a list of potentially regulated
facilities, EPA excluded 35,103 coal
mining operations. EPA also removed
44,845 mines associated with 59 nonfuel hardrock commodities to conform
4 Identification of Priority Classes of Facilities for
Development of CERCLA Section 108(b) Financial
Responsibility Requirements. 74 FR 37213, July 28,
2009.
5 MDRS data are available at: https://
www.msha.gov/drs/drshome.htm and Mines Data
Set, https://www.msha.gov/OpenGovernmentData/
OGIMSHA.asp.
6 U.S. Energy Information Administration. 2015.
2014 Domestic Uranium Production Report.
Washington, DC. April. Available at: https://
www.eia.gov/uranium/production/annual/pdf/
dupr.pdf.
7 MCS can be accessed at https://
minerals.usgs.gov/minerals/pubs/mcs.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
with the scope of those classes of
facilities identified in the 2009 Priority
Notice.8 Furthermore, EPA removed an
additional 4,548 mines classified as
abandoned (non-currently operating)
sites by MHSA. From the remaining 354
facilities, EPA identified and removed
classes of facilities that may present a
lower level of risk of injury than other
facilities within the 2009 Priority Notice
universe. These facilities are mines
engaged solely in exploration projects,
placer mines that do not use hazardous
substances to extract ore, and mining
operations of less than five acres that are
not located within a mile of other
mining activities. In addition, mineral
processors with less than five acres of
disturbed surface impoundment and
waste pile disturbed acres would not be
subject to the proposed rule. Overall,
EPA removed 133 facilities in these
classes, leaving 221 facilities in what is
referred to here as the ‘‘included
universe.’’
EPA believes that 221 facilities (208
active and thirteen intermittent or
temporarily idled) will currently be
subject to this rule. The Agency
acknowledges that the population of
mines and mineral processors that are
operating at any given point in time can
fluctuate significantly due to fluctuating
commodity prices, other businessrelated factors, mining and processing
technical operations issues, and weather
conditions. As such, EPA may not have
accurately identified all facilities that
would be subjected to the rule. Thus,
the Agency requests comments on the
included universe.
The most common activities at these
facilities are surface mining (88),
underground mining (56), and
processing (68).9 Geographically, the
potentially regulated universe spans
over 38 states, mostly concentrated in
the western states. The states with the
most potentially regulated facilities are
Nevada (45), Arizona (21), and
Minnesota (14). The potentially
regulated universe currently mines 33
commodities, although the scope of the
rule is not limited to the 33
commodities currently mined at the
potentially regulated facilities. The most
common commodities mined in the
potentially regulated universe are Gold
(70), Copper (25), and Iron Ore (17). A
8 U.S. EPA. 2009. Mining Classes Not Included in
Identified Hardrock Mining Classes of Facilities.
Available online at: https://www.regulations.gov/
contentStreamer?documentId=EPA-HQ-SFUND2009-0265-0033&disposition=attachment&content
Type=pdf.
9 Many of the 184 facilities conduct multiple
activities, causing the total number of facilities to
be less than the summation of all activities
practiced.
PO 00000
Frm 00004
Fmt 4701
Sfmt 4702
wide range of NAICS codes
(approximately 45 types) are
represented by the owners of the
facilities in the potentially regulated
universe, the most common of which
are 212221: Gold Ore Mining (18),
213114: Supporting Activities for Metal
Mining (10), and 212234: Copper Ore
and Nickel Ore Mining (8). However,
there were twelve owners for which no
NAICS code could be identified.
3. Cost of the Proposed Rule
This rule includes two proposed
Options for use of a financial test—the
no financial test option (Option 1), and
the financial test option (Option 2).
Option 1 requires all owners and
operators to acquire third-party
financial instruments to demonstrate
financial responsibilities. Alternatively,
under Option 2 the owner or operator
could qualify to self-insure (or use the
corporate guarantee) by passing the
proposed financial test. Owners or
operators unable to qualify for the
Option 2 financial test must acquire a
third-party instrument or a trust fund to
comply with the rule. EPA’s RIA
assessed the costs associated with
obtaining third-party instruments under
the two options, as well as costs
associated with the reporting and
recordkeeping requirements of the rule.
These costs represent the primary
economic impacts of the proposed rule
to the regulated industry.
To assess the cost, EPA developed
and implemented a multi-dimensional
analysis that involves: (1) An estimation
of the owner or operator’s financial
responsibility obligations under
baseline scenario; (2) estimation of the
price of third-party instruments; and (3)
assessment of the industrial (i.e., cost
imposed on the regulated industry), and
social costs (i.e., costs from the
standpoint of society) associated with
obtaining financial assurance. In
addition, EPA’s analysis also examined
the extent to which the rule shifts the
burden of financing potential Superfund
cleanups and related expenditures away
from the taxpayer and toward the
regulated owners or operators. This
section provides an overview of the
methodology EPA used to assess the
industrial and social costs, and intraindustry transfers (i.e., payment
between two industries). This section
also discusses the transfer of cost from
the government (taxpayer) to the
regulated industry.
a. Industry Compliance Costs
As described earlier in this preamble,
EPA identified 221 facilities owned by
121 ultimate parent companies that
would be subject to the rule. To estimate
E:\FR\FM\11JAP2.SGM
11JAP2
3391
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
the impact of acquiring financial
assurance, EPA collected facilityspecific data (e.g., mine site features,
acreage, and meteorological data) and
company-level financial information.
However, this effort rendered facilityspecific data for only 49 facilities, and
financial information for 21 publically
traded firms. Thus, EPA’s assessment of
compliance costs relied on this subset of
mining/mineral processing facilities and
related owner companies for which
detailed technical data was obtained
(herein referred to as the ‘‘modeled
universe’’). EPA extrapolated the results
of the analysis of this subset of facilities
to the full universe of facilities covered
by the rule. EPA requests comments on
using the modeled universe to estimate
the overall industrial compliance costs.
The compliance costs of acquiring
third-party financial instruments
depends on the financial responsibility
amounts the instrument covers. Thus,
EPA first estimated the baseline
financial responsibility amounts for
facilities in the modeled universe. EPA
used a financial responsibility formula
that the Agency developed for facilities
to calculate their financial responsibility
amount on a national basis. As
described in Section VI.D.4. of this
preamble, the proposed formula consists
of three key components that capture
the potential costs associated with
release of hazardous substances at
hardrock mining facilities. These
include the response component; health
assessment component; and natural
resources damages.
For the response component, EPA
estimated the financial responsibility
amounts for each facility for twelve
categories of response activities that
EPA has undertaken at hardrock mining
sites. These include categories for types
of engineering costs (e.g., capital cost to
construct source control for an open
pit); operation and maintenance (O&M)
costs (e.g., interim, short-term, and longterm O&M); and long-term water
treatment costs. EPA aggregated the
twelve response categories and adjusted
the amount to account for other costs
related to response activities that may
be experienced by the Agency including
mobilization/demobilization;
engineering design and redesign;
contingency; contractor profit and
overhead; contractor liability insurance;
payment and performance bonds; and
Agency direct and indirect costs. EPA
also applied locality adjustment factors
to account for regional variation in labor
and material costs. EPA then combined
the aggregated financial responsibility
estimates for the response component
with the health assessment and natural
resource damages components to arrive
at the maximum financial responsibility
amount for each facility. EPA applied a
proposed multiplier to obtain the
financial responsibility amount for
natural resource damages and a fixed
financial responsibility amount for
health assessment.10
The proposed rule is also structured
to provide reductions in the financial
responsibility amount required at a
facility for risk-reducing practices,
including controls established in
compliance with Federal and state
reclamation and closure programs. For
the purpose of the RIA, EPA adjusted
the maximum financial responsibility
amount for owners and operators, where
EPA identified risk-reducing practices
in enforceable documents backed by
financial bonding. In applying the
reductions, EPA assumed that identified
risk-reducing practices would fully meet
EPA’s proposed criteria. As such, for
qualified facilities, EPA applied full
reductions in the financial
responsibility amount for the relevant
response categories. EPA acknowledges
this assumption simplifies the construct
of the proposed rule’s requirements for
reductions.
Table X–1 presents the adjusted
baseline financial responsibility
estimates for future CERCLA liability of
owners and operators in the modeled
universe. The table also provides the
extrapolation of results from the
modeled universe to the full universe.
As shown in the table, Column C
presents the median financial
responsibility amount of the modeled
universe by facility types. EPA used
these median values to estimate the
financial responsibility amounts of the
full universe. Column D presents the
financial responsibility amount for the
full universe, which was calculated by
multiplying the total number of mines
in the full universe (Column A) by the
median financial responsibility amount
calculated for modeled universe.
TABLE X–1—EXTRAPOLATION FR FROM THE MODELED UNIVERSE TO THE POTENTIALLY REGULATED UNIVERSE
Modeled universe
(n=49)
Modeled universe
facility
FR—Median
($2015 millions)
Potentially
regulated universe
total FR amount
across facilities,
median-based
extrapolation
($2015 millions)
(B)
Potentially
regulated
universe
(n=221)
(C)
(D) = A * C
(A)
Facility type
6
8
33
62
27
2
Surface/Underground mine ....................................
sradovich on DSK3GMQ082PROD with PROPOSALS2
Brine Extraction/Processing ...................................
In-situ recovery .......................................................
Processor/Refiner ...................................................
Surface Mine ..........................................................
Surface Mine/Processing .......................................
Surface Mine/Processing/Primary Smelter ............
$1
1
76
48
28
28
$8
10
2,496
2,961
766
57
48
48
53
6
23
(none; assume equal to ISR) ......
3 ..................................................
1 ..................................................
25 ................................................
13 ................................................
(none; assume equal to surface
mine/processing).
(none; assume equal to surface
mine).
5 ..................................................
2 ..................................................
(none; approximated separately)
1
Underground Mine .................................................
Underground Mine/Processing ...............................
Primary Smelter .....................................................
5
29
11
284
172
263
All Facilities ............................................................
221
49 ................................................
37
7,064
Note: This exhibit presents extrapolation based on median values of financial responsibility amounts for the modeled universe.
10 13.4 percent of the response costs estimated for
each site. For health assessment costs, EPA
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
estimated a fixed financial responsibility amount of
$550,000 per facility based upon health assessment
PO 00000
Frm 00005
Fmt 4701
Sfmt 4702
cost information obtained from the Agency for
Toxic Substances and Disease Registry (ATSDR).
E:\FR\FM\11JAP2.SGM
11JAP2
3392
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
As shown in the table, the estimated
financial responsibility amount for the
regulated industry is $7.1 billion. EPA
assumed this amount represents the
baseline financial responsibility amount
of the regulated industry, for which
owners and operators must demonstrate
financial assurance under the proposed
rule by procuring third-party financial
instruments, or through self-insurance
(or corporate guarantee).
EPA estimated the compliance costs
to industry assuring payment of
financial responsibility amounts by
focusing on the 21 owners and operators
of 38 mining facilities 11 in the modeled
universe 12 for which detailed financial
data is publically available. EPA
conducted the cost analysis in two
primary steps: (1) EPA first subjected
the modeled universe to the two
regulatory options (with or without
financial test) to identify entities that
may be required to acquire third-party
instruments; and (2) for entities unable
to self-insure, EPA estimated the
compliance cost of obtaining third-party
financial responsibility instruments.
To determine whether owners and
operators pass the financial test, EPA
compared the relevant financial
characteristics of each company to the
financial test described in § 320.43 of
the preamble. Consistent with the
proposed test, EPA’s analysis allowed
owners and operators to self-insure their
entire obligation if they hold at least one
long-term corporate credit rating equal
to or higher than A¥ as issued by S&P
or another equivalent rating agency.
Furthermore, EPA also allowed selfinsurance of up to one-half of an owner
or operator’s obligation if it holds at
least one long-term credit rating of
BBB+ or BBB. EPA assumed owners and
operators that pass the test would elect
to self-insure either the full or one-half
of their obligations. For these facilities,
EPA assumed compliance costs
associated with acquiring third-party
instruments would be zero, and that the
owner or operator would only incur
compliance costs associated with the
reporting and recordkeeping
requirements of the proposed rule.
For owners or operators that did not
pass the financial test, and for the
regulatory option where the financial
test is precluded (Option 1), EPA
estimated the costs of obtaining thirdparty financial responsibility
instruments. For each facility, EPA
modeled separately the costs of three
representative financial instruments,
which included letter of credit, trust
fund, and insurance.13 EPA assumed
owners and operators would choose the
instrument option with the lowest cost.
Overall, the pricing of the instruments
is case-specific, and informed by several
parameters. Specifically, the factor
considered included the baseline
financial responsibility level
determined by the formula, the financial
health of the owner or operator (credit
rating and default probability), the
corresponding fee structure of the
specific financial instrument, and the
project’s risk profile (probability and
timing of costs associated with the
facility’s CERCLA liabilities). In
estimating the cost of the instruments,
EPA also assumed that no market
capacity constraints exist for the
issuance of third-party instruments
sufficient to cover the financial
responsibility amounts estimated earlier
in this discussion.
The actual compliance cost incurred
by industry in securing these
instruments comes from the
transactional costs (e.g., the fees and
commissions paid to financial
institutions) and the net cost of
acquiring capital to fund the purchase of
financial instruments. EPA did not
attempt to predict whether the funds
come from internal sources or from debt
or equity markets. Regardless of the
sources of funding, EPA assumed the
net cost to the owner or operator of
acquiring funds is the weighted average
cost of capital (WACC).14 EPA collected
firm specific WACCs from each
company’s Web site.
EPA assumed owners and operators
would need to acquire funding to
purchase financial instruments every
three years 15 (as required by the rule)
until released from their obligations.
Thus, EPA annualized the compliance
cost using a seven percent discount rate
over the life of the mine. To investigate
the sensitivity of results, EPA also
applied a three percent discount rate. In
addition, EPA assumed a period of
analysis from 2021 to end of mine life
(capped at 2055). The start date is based
on a year before the end of the four-year
implementation schedule of the rule,
which represents the year mines will
start to incur significant costs. The end
date is mainly based on the end of
mining operations. However, where
EPA could not identify the end date for
mining operations, EPA capped the
analysis at 2055, which represents the
ninetieth percentile of mine lives in the
modeled universe. Furthermore, EPA
also assumed that the owner and
operator would be released from their
financial responsibility obligations
when the facility ceases its operation.
However, under the proposed rule
owners and operators may not be
released of their obligations until EPA
makes a determination.
Table X–2 summarizes the average
annualized compliance costs for the two
regulatory options, as a percentage of
the financial responsibility amounts of
owners and operators in the modeled
universe. The annualized costs are
categorized based on the credit
worthiness of the firms in the modeled
universe. Entities with a stronger
financial profile (Category 1) were
simulated to experience an annual cost
as low as 1.1 percent of the financial
responsibility amount. Similarly, poorly
rated entities (Category 4) would
experience annual costs as high as four
percent. Overall, on a weighted average
basis, annualized compliance costs as a
percentage of the financial
responsibility amount equal
approximately 2.3 to 2.4 percent.
TABLE X–2—INSTRUMENT PRICING OUTCOMES
sradovich on DSK3GMQ082PROD with PROPOSALS2
Company category
Average annualized cost as percentage of financial
responsibility amounts
Percent of companies
in category
BBB ................................................................................
BB ..................................................................................
1.1 to 1.7 .......................................................................
2.5 .................................................................................
26.3
26.3
11 The identified owner/operator companies of
the 49 facilities in the modeled universe were
matched to S&P’s financial database. This crosswalk
identified the owner/operator companies of 40
facilities in S&P financial database. Two of these
facilities have entered bankruptcy and therefore did
not have the necessary recent financial data to be
included in the analysis.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
12 It is important to distinguish between the mine
facilities, to which the financial responsibility
amount applies, and the owner/operator company
that is obligated to fund, or secure, this financial
responsibility amount. One owner/operator may
have this obligation for more than one mine.
13 EPA limited the analysis to three instruments
because it believed that these reasonably represent
PO 00000
Frm 00006
Fmt 4701
Sfmt 4702
the ranges of costs for the other instruments
allowed by the rule.
14 WACC is defined as the average cost of
obtaining capital in the debt and equity markets.
15 The proposed rule would require facilities to
update financial responsibility amount calculations
every three years, and maintain financial assurance
consistent with the revised financial responsibility
amount.
E:\FR\FM\11JAP2.SGM
11JAP2
3393
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
TABLE X–2—INSTRUMENT PRICING OUTCOMES—Continued
Company category
Average annualized cost as percentage of financial
responsibility amounts
Percent of companies
in category
B .....................................................................................
CCC ...............................................................................
2.4 .................................................................................
4.0 .................................................................................
36.8
10.5
Note:
1. Pricing categories based on credit ratings and other financial metrics. Ranges of costs are presented for Option 2 (low) and Option 1 (high).
2. This exhibit presents costs discounted using a 7 percent social discount rate. Supplementary results discounted using a 3 percent social discount rate are presented in Appendix E of the RIA.
EPA applied these weighted average
percentages to extrapolate results to the
entire universe. Table X–3 presents the
calculation of annualized compliance
costs for the full universe under the two
regulatory options. As shown in the
table, Column A lists the aggregated
financial responsibility amount covered
by third-party instruments by mine type
under the proposed financial test
regulatory option, while Column B lists
universe of owners and operators would
have similar financial characteristics as
the modeled universe. Similarly, for the
financial test option, EPA assumed that
a similar proportion of owners and
operators would pass the financial test
in both the full universe and in the
modeled universe. EPA acknowledges
that there are uncertainties with this
supposition, and request comments
from the public.
the financial responsibility amounts
under the no-test option. Columns C
and D calculate the annualized
acquisition costs for each facility type
by multiplying the aggregate financial
responsibility amounts under each
regulatory option with the respective
weighted average annualized costs
generated for the model universe, as
shown in Table X–3. The extrapolation
calculation assumes that the full
TABLE X–3—CALCULATION OF ANNUALIZED COMPLIANCE COST
[$ million]
FR amount
covered by
third party
(Option 1)
($2015 millions)
Annualized cost
of third-party FR
instruments—
Option 1
($ millions)
Annualized cost
of third-party FR
instruments—
Option 2
($ millions)
(A)
Facility type
FR amount
covered by
third party
(Option 2)
($2015 millions)
(B)
(C) = 2.4 * (A)
(D) = 2.3 * (A)
Brine Extraction/Processing .............................................................
In-situ recovery ................................................................................
Processor/Refiner ............................................................................
Surface Mine ....................................................................................
Surface Mine/Processing .................................................................
Surface Mine/Processing/Primary Smelter ......................................
Surface/Underground Mine ..............................................................
Underground Mine ...........................................................................
Underground Mine/Processing ........................................................
Primary Smelter ...............................................................................
$8
10
2,496
2,961
766
57
48
284
172
263
$5
7
1,747
2,073
536
40
33
199
120
184
$0.2
0.2
60
72
18
1
1
7
4
6
$0.1
0.2
39
47
12
1
1
4
3
4
All Facilities ...............................................................................
7,064
4,944
171
111
sradovich on DSK3GMQ082PROD with PROPOSALS2
Note: This table presents costs discounted using a 7 percent social discount rate. Supplementary results discounted using a 3 percent social
discount rate are presented in Appendix E of the RIA.
As shown in the table, under the
baseline scenario, the total financial
obligation amount for the potentially
regulated universe is approximately
$7.1 billion. Under the financial test, the
amount of financial obligations covered
through third-party instruments is $4.9
billion, whereas for the no-financial test
option, the entire baseline financial
responsibility amounts would be
covered by third-party instruments. In
addition, the annualized industry
compliance costs to secure the thirdparty instruments under the nofinancial test option is $171 million,
whereas annualized costs are $111
million for the financial test option. The
difference between the two regulatory
options is approximately 35 percent.
These values represent the range of
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
potential incremental costs of the
proposed rule to industry.
In addition, EPA’s compliance cost
estimate also included the
administrative reporting and
recordkeeping costs to industry
associated with the proposed rule for
the potentially regulated universe.
These costs consist of labor, O&M, and
capital costs and include the costs of
reading the regulations; submitting
initial facility information to EPA and to
the public; calculating financial
responsibility amounts; choosing a
financial responsibility instrument;
acquiring and maintaining a financial
responsibility instrument, recalculating
financial responsibility amounts to
reflect any changes in facility
operations; and any requirements that
PO 00000
Frm 00007
Fmt 4701
Sfmt 4702
apply to the owners and operators upon
the transfer of a facility, owner or
operator default, a CERCLA claim
against any of the owners and operators,
or release of the owners and operators
from the regulations. The labor costs are
estimated on an annual basis, as of the
first year of compliance. Table X–4
presents the annualized administrative
cost of the rule under the two options
using a seven percent social discount
rate.
E:\FR\FM\11JAP2.SGM
11JAP2
3394
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
costs imposed on owners and operators.
However, much of the costs borne by
the owners and operators represent a
transfer 16 to financial firms that provide
Option 2
Option 1
(Financial
financial responsibility instruments. In
(No test)
test)
the context of this rule, the net
incremental costs of acquiring capital to
$225,302
$269,038
secure financial instruments (i.e.,
Note: This exhibit presents costs discounted insurance) are treated as a transfer.
using a 7 percent social discount rate. Supple- Table X–5 presents the intra-industry
mentary results discounted using a 3 percent transfers of the rule. The RIA estimated
social discount rate are presented in Appendix the intra-industry transfer amount by
E.
tabulating the net acquisition cost of
capital excluding transactional costs
b. Social Cost and Intra-Industry
that are considered social costs.
Transfers
Some portion of the industry cost is
The annualized compliance costs
also a social cost,17 that is, a cost on
calculated and presented in Table X–3
society as a whole, rather than just the
and X–4 represent industry costs, i.e.,
regulated entities. These costs reflect the
TABLE X–4—ANNUALIZED
ADMINISTRATIVE COSTS
value of the real resources (e.g., labor
and capital) needed to comply with the
rule. These costs include: (1) The fees
and commissions paid to financial
institutions to obtain financial
instruments; and (2) the administrative
costs incurred in complying with
reporting and recording keeping
requirements of the proposed rule.
Table X–5 presents the social cost of the
rule. EPA estimated the social costs
associated with acquiring instruments
by taking the difference between the
industrial costs less the intra-industry
transfers. The table summarizes the
annualized social costs and intraindustry transfers using seven percent
discount rates.
TABLE X–5—SUMMARY OF SOCIAL COSTS AND INTRA-INDUSTRY TRANSFERS
Option 1: No financial test
Annualized
cost of thirdparty FR
instruments
($ millions)
Outcome
Transfer from
mining
industry
to others
($ millions)
Option 2: Proposed financial test
Annualized
social cost
($ millions)
Annualized
cost of thirdparty FR
instruments
($ millions)
Transfer from
mining
industry
to others
($ millions)
Annualized
social cost
($ millions)
Annualized Amount ..................................
Administrative Cost to Industry ................
171
N/A
127
N/A
44
$0.2
111
N/A
81
N/A
30
$0.3
Total Social Costs and Transfers .....
N/A
$127
$44
N/A
$81
$30
Note: This exhibit presents costs discounted using a 7 percent social discount rate. Supplementary results discounted using a 3 percent social
discount rate are presented in Appendix E.
Under proposed Option 1, of the $174
million cost to industry, the annualized
intra-industry transfer is estimated to be
$127 million. Thus, the social cost
amounts to $44 million. Option 2
engenders slightly lower social costs at
$30 million. As shown in the table, the
administrative costs related to the
reporting and recordkeeping
requirements of the rule are
approximately $0.3 million under the
two regulatory options.
c. Government Costs and Risk Transfers
The primary effect of this proposed
rule is to transfer the risk associated
with CERCLA liabilities from the
taxpayer to the private sector. Table X–
6 presents the estimated magnitude of
this shift of potential CERCLA liabilities
across the baseline and regulatory
scenario. For the purposes of estimating
changes in government burden due to
the rule, EPA calculated the government
burden assuming that financial
responsibility amounts are
representative of costs associated with
future CERCLA cleanups. In the
baseline, the Government is burdened
with the CERCLA cost if an owner or
operator defaults, as no third-party
instruments will be in place. For the
baseline, EPA estimated, the
government burden rate using the firm
exit rate derived from the Census
Bureau’s Business Dynamics Statistics
(BDS).18 This represents a (high-end)
estimate that assumes exiting firms fail
to meet any of their CERCLA
obligations. Under proposed Option 2,
government costs were calculated based
on estimated probabilities of default for
firms in the modeled universe. Under
this option, if a company passes the
financial test but later files for
bankruptcy and defaults on its financial
responsibility obligations, EPA assumed
that taxpayers would assume these
obligations. Under proposed Option 1,
there are no government costs, as no
company may self-insure.
EXHIBIT X–6—SUMMARY OF POTENTIAL GOVERNMENT COSTS
sradovich on DSK3GMQ082PROD with PROPOSALS2
Cost category
Baseline
Option 1: No
financial test
Option 2:
Proposed
financial test
Industry Liabilities ($2015 Millions)
CERCLA FR Amount Insured through Third-Party Instruments .................................................
16 Transfer payments are monetary payments
from one group to another that do not affect total
resources available to society.
17 The value of real resources—land, labor, energy
and so forth—needed to comply with the
regulations.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
18 The BDS provides the number of firms
operating and number of firm exits each year in the
mining sector. Firm exits identify when all
establishments of a firm cease operations for
reasons other than reorganization, merger, or
acquisition. Because of the ‘‘corporate veil’’ enjoyed
PO 00000
Frm 00008
Fmt 4701
Sfmt 4702
N/A
$7,064
$4,944
by legal subsidiaries, this analysis uses a facilitybased failure rate to model government costs in the
baseline due to owner/operator failure. Compared
to other measures of failure or default, the BDS firm
exit rate also captures both private and public
companies.
E:\FR\FM\11JAP2.SGM
11JAP2
3395
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
EXHIBIT X–6—SUMMARY OF POTENTIAL GOVERNMENT COSTS—Continued
Cost category
Baseline
CERCLA FR Amount Self-Insured ..............................................................................................
Option 1: No
financial test
Option 2:
Proposed
financial test
7,064
0
2,120
7.5%
527
N/A
0
0.7%
16
527
511
Expected Government Costs ($2015 Millions)
Government Burden Rate ............................................................................................................
Government Cost .........................................................................................................................
Decrease in Expected Government Costs ($2015 Millions)
Expected Transfers from Government to Industry ......................................................................
As shown in Table X–6, under the
baseline scenario, the potential liability
transfer from private parties to
government is $527 million over the
period of analysis (i.e., 34 years). Under
the financial test option, the potential
burden to taxpayer is reduced to $16
million. For the no-financial test option,
the potential CERCLA liabilities are
fully internalized by the regulated
community.
4. Economic Impact Analysis
EPA assessed the economic impacts of
the proposed rule in two areas: (1) An
assessment of the impact of compliance
costs on the modeled universe, based on
the comparison of compliance costs
with relevant financial characteristics of
the owner and operator; and (2) an
assessment of the potential for
employment impacts at the national
level of the proposed rule. The
following sections summarize the
methods and findings for these analyses.
sradovich on DSK3GMQ082PROD with PROPOSALS2
a. Screening Analysis for Potentially
Significant Economic Impacts
EPA assessed the economic impacts of
the proposed regulatory options relying
on the modeled universe for which
detailed financial data are available.
EPA assessed the impacts using two
financial characteristics of the owner
and operator: (1) A screening-level
assessment which compares the
annualized industrial costs to the firms’
revenue; and (2) an alternative
assessment that utilizes the firms’
operating cash flow.
For the 21 firms in the modeled
universe, the annual revenues range
from approximately $300 million to
over $60 billion. Their annual cash flow
from operations (cash flow associated
with their primary business activity)
ranges from $800,000 to over $3 billion.
Relative to the companies’ revenues, the
per-company annualized costs of
financial responsibility range from zero
percent to 1.1 percent, with the majority
of companies (20 of 21) falling between
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
zero and 1 percent. Relative to operating
cash flow, the range of annualized
financial responsibility cost percentages
is wider: From zero to over 160 percent
(the latter is for the company whose
operating cash flow is under $1
million). Approximately eighty percent
of all companies experience impacts
that are under one percent of operating
cash flow and approximately 95 percent
of companies experience impacts under
ten percent.
Due to limitation in financial data,
EPA did not expand the screening
analysis to the full universe of regulated
facilities. EPA acknowledges that the
results generated based on the modeled
universe may not be reflective of the
impacts on the entire industry.
b. Employment Impact Analysis
EPA routinely assesses the
employment impacts of economically
significant regulations. Executive Order
13563, ‘‘Improving Regulation and
Regulatory Review,’’ states, ‘‘Our
regulatory system must protect public
health, welfare, safety, and our
environment while promoting economic
growth, innovation, competitiveness,
and job creation.’’ In general, the
national employment effects of
environmental regulation are complex
and multi-faceted and very likely
involve both negative and positive
effects. Neoclassical theory of
production and factor demand provides
a constructive framework for
understanding and conducting
employment impacts analysis of
environmental regulations. It describes
how firms adjust their demand for
inputs, such as labor, in response to
changes in economic conditions.19
Theory predicts that regulated firms will
respond to regulation by adjusting input
demands and output. The theory
19 For an overview of textbook discussions of the
neoclassical theory of production and factor
demand, see, for example, Layard and Walters,
Microeconomic Theory (1978), chapter 9 ‘‘The
Derived Demand for Factors’’.
PO 00000
Frm 00009
Fmt 4701
Sfmt 4702
suggests the direction of the total impact
of a regulation on the demand for labor
in the regulated sector is
indeterminate.20
EPA did not have sufficient data to
model and quantify the potential
changes in mines’ employment levels as
a result of the proposed regulation.
Analysis provided by the U.S.
Geological Survey (USGS) suggests that
‘‘the primary metals industry and the
nonmetallic minerals products industry
are fundamentally cyclical.’’ The
industries are affected both by the
domestic business cycle and the global
economic environment. Composite
indices constructed by USGS suggest
that the industry experienced
significantly decreased activity
surrounding the Great Recession. In
2014, the most recent year analyzed by
USGS, industry growth rates were
positive.21
5. Benefits of the Rule
This section provides an overview of
the methodology EPA used to assess or
identify benefits of the proposal. EPA
expects the CERCLA § 108(b) financial
responsibility provisions to yield social
welfare benefits because of reductions
in overall mining facility environmental
obligations and an increase in the
proportion of those obligations borne by
the private sector through financial
responsibility instruments.
Identified benefits of the proposed
rule include a reduction in costs the
government must bear to fulfill cleanup
obligations, improved environmental
practices at mining sites, avoided
impacts to impaired waters, and faster
cleanups. The reduction in the cost to
20 For theoretic frameworks that conceptualize
and incorporate the impacts of regulation, see
Berman and Bui, 2001 or Deschenes, 2012, 2014).
21 See: U.S. Geological Survey, Mineral
Commodity Summaries, 2015, pp. 4, 7. The USGS
generates composite indexes for primary metals and
separately for nonmetallic mineral products. Their
indices are intended to measure economic activity
in these industries using production, employment,
and shipments data.
E:\FR\FM\11JAP2.SGM
11JAP2
3396
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
government is the only benefit that can
be measured with sufficient accuracy to
allow for a quantitative assessment. A
qualitative benefit assessment of the
proposed rule was performed utilizing
literature on related topics, such as the
effect of environmental liabilities
disclosure on financial markets. The
benefits of the proposed rule are as
follows:
sradovich on DSK3GMQ082PROD with PROPOSALS2
a. Reduced Costs to Government
The establishment of financial
responsibility requirements for potential
CERCLA § 108(b) liabilities will reduce
the costs incurred by the Government to
finance remediation expenditures for
companies that are unable to meet
cleanup obligations. Section 7 of the
RIA considered government costs
associated with potentially responsible
parties’ (PRP) defaults on CERCLA
§ 108(b) liabilities at mining facilities,
including response costs, natural
resource damages, and health
assessment costs. Without the rule, EPA
estimated that the Government would
potentially incur a total cost of $527
million (over the 34-year period of
analysis) for the cost categories
described earlier. Under the proposed
financial test option, the Government
would incur an estimated $16 million in
costs, whereas for the no-test option, the
taxpayer’s burden would be reduced to
zero. Thus, the analysis concluded that
the public, through the Government,
would experience a cost savings from
$511 million to $527 million over 34
years because of the proposed rule.
b. Improvement in Environmental
Performance
Financial responsibility requirements
may provide an incentive for regulated
entities to minimize future
environmental obligations. When
regulated entities rely on a letter of
credit, insurance policy, or other thirdparty instrument to meet financial
responsibility requirements, the issuer
will have an incentive to require sound
environmental management as a
condition for providing access to these
instruments.
To the extent that the proposed rule
leads to improvements in facilities’
environmental performance, the rule
may reduce acid mine drainage and
other discharges into waterways caused
by mining activities. Waterways
identified as impaired waters by section
303(d) of the Clean Water Act (CWA)
and waters identified as wild and scenic
rivers under the 1968 Wild and Scenic
Rivers Act may benefit the most from
improved environmental performance.
Adverse impacts to waterbodies may be
reduced or avoided in accordance with
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
improvements in the environmental
performance of mines. To gauge the
potential magnitude of the benefits
associated with avoided environmental
impacts, EPA identified the number of
sites in the potentially regulated
universe that are located near CWA
impaired waters or wild and scenic
rivers. Of the 221 facilities in the
potentially regulated universe, EPA
identified the status of waterways
adjacent to 172 facilities. Overall, EPA
believes that the magnitude of these
benefits in the context of the proposed
rule is contingent upon changes in
behavior among regulated entities to
reduce the environmental risk.
c. Speed of Site Cleanups
Under the financial responsibility
requirements outlined in the proposed
rule, the cleanup of sites owned by
companies in default could begin more
rapidly than under the baseline.
Because funding for site remediation
would be secured prior to a firm’s
insolvency, the initiation of cleanup
would not be delayed by EPA budget
constraints. Expedited cleanups would
benefit human health and ecosystems as
exposure to harmful contaminants may
decline.
II. Authority
EPA is issuing these proposed
regulations under the authority of
sections 101, 104, 108 and 115 of the
Comprehensive Environmental
Response, Compensation, and Liability
Act of 1980, as amended, 42 U.S.C
§§ 9601, 9604, 9608 and 9615, and
Executive Order 12580. 52 FR 2923, 3
CFR, 1987 Comp., p. 193.
III. Background Information
A. Overview of CERCLA § 108(b) and
other CERCLA Provisions
CERCLA, as amended by the
Superfund Amendments and
Reauthorization Act of 1986 (SARA),
establishes a comprehensive
environmental response and cleanup
program. Generally, CERCLA authorizes
EPA 22 to undertake removal or remedial
actions in response to any release or
threatened release into the environment
of ‘‘hazardous substances’’ or, in some
circumstances, any other ‘‘pollutant or
contaminant.’’ As defined in CERCLA
§ 101, removal actions include actions
to ‘‘prevent, minimize, or mitigate
damage to the public health or welfare
or to the environment,’’ and remedial
actions are ‘‘actions consistent with [a]
22 Although Congress conferred the authority for
administering CERCLA on the President, most of
that authority has since been delegated to EPA. See
Exec. Order No. 12580, 52 FR 2923 (Jan. 23, 1987).
PO 00000
Frm 00010
Fmt 4701
Sfmt 4702
permanent remedy[.]’’ Remedial and
removal actions are jointly referred to as
‘‘response actions.’’ CERCLA § 111 also
established the Superfund Trust Fund
(the Fund) to finance response actions
undertaken by EPA. In addition,
CERCLA § 106 gives EPA 23 authority to
compel action by liable parties in
response to a release or threatened
release of a hazardous substance that
may pose an ‘‘imminent and substantial
endangerment’’ to public health or
welfare or the environment.
CERCLA § 107 imposes liability for
response costs on a variety of parties,
including certain past owners and
operators, current owners and operators,
and certain transporters of hazardous
substances. Such parties are liable for
any costs of removal or remedial action
incurred by the Federal Government, so
long as the costs incurred are ‘‘not
inconsistent with the national
contingency plan,’’ (NCP).24 CERCLA
§ 107 also imposes liability for natural
resource damages and health assessment
costs.25 In accordance with CERCLA, in
1990 EPA issued the current version of
the NCP.26 These regulations provide
the organizational structure and
procedures for preparing for, and
responding to, discharges of oil and
releases of hazardous substances,
pollutants, and contaminants. The NCP
is codified at 40 CFR part 300. Among
other provisions, the NCP provides
procedures for hazardous substance
response including site evaluation,
removal actions, remedial investigation/
feasibility studies (RI/FS), remedy
selection, remedial design/remedial
action (RD/RA), and operation and
maintenance.27 The NCP also designates
Federal, state, and tribal trustees for
natural resource damages, and identifies
their responsibilities under the NCP.28
CERCLA § 108(b) generally requires
that EPA develop regulations requiring
owners and operators of facilities to
establish evidence of financial
responsibility, and provides for
publication of a ‘‘Priority Notice’’
identifying the classes of facilities for
which EPA would first develop
requirements. Paragraph (b)(1) also
directs that priority in the development
of requirements shall be accorded to
those classes of facilities, owners, and
operators that present the highest level
of risk of injury. This proposed rule for
23 1 CERCLA §§ 106 and 122 authority is also
delegated to other Federal agencies in certain
circumstances. See Exec. Order No. 13016, 61 FR
45871 (Aug. 28, 1996).
24 See CERCLA § 107 (a)(4)(A).
25 See CERCLA § 107 (a)(4)(C)–(D).
26 See 55 FR 8666, March 8, 1990.
27 See 40 CFR 300, Subpart E.
28 See 40 CFR 300, Subpart G.
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
hardrock mining facilities prioritizes
among the classes of facilities in that
sector, and proposes financial
responsibility requirements for those
hardrock mining facilities that EPA has
identified as presenting the highest level
of risk of injury. More details on this
analysis are provided in section
VI.D.1.A of this preamble.
Under CERCLA § 108(b), classes of
facilities must 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.’’ 29 CERCLA § 108(b)(2)
directs that the level of financial
responsibility shall be initially
established, and, when necessary,
adjusted to protect against the level of
risk that EPA in its discretion believes
is appropriate based on the payment
experience of the Fund, commercial
insurers, courts settlements and
judgments, and voluntary claims
satisfaction. EPA discusses its
interpretation of these provisions in
section VI.D.4. of this preamble.
CERCLA § 108(b) also discusses
particular instruments for EPA to
consider in its regulations. Specifically,
paragraph (b)(2) states that financial
responsibility may be established by any
one, or any combination, of the
following: insurance, guarantee, surety
bond, letter of credit, or qualification as
a self-insurer. Paragraph (b)(2) further
authorizes the President to specify
policy or other contractual terms,
conditions, or defenses that are
necessary, or that are unacceptable in
establishing evidence of financial
responsibility. Paragraph (b)(2) also
requires EPA to cooperate with and seek
the advice of the commercial insurance
industry to the maximum extent
practicable when developing financial
responsibility requirements. Paragraph
(b)(4) provides direction on how the
CERCLA § 108(b) instruments are to
address multiple owners and operators
at a single facility. Section VI.C. of this
preamble discusses each of these
financial responsibility instruments in
detail.
CERCLA § 108(b)(3) requires that
regulations promulgated under CERCLA
§ 108(b) incrementally impose financial
responsibility requirements as quickly
as can reasonably be achieved, but in no
event more than four years after the date
of promulgation. Section VI.A.1. of this
preamble discusses how EPA intends to
29 Executive Order 12580 delegates the
responsibility to develop these requirements to the
Administrator of EPA for non-transportation related
facilities. 52 FR 2923, 3 CFR, 1987 Comp., p. 193.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
phase in the CERCLA § 108(b)
requirements in accordance with this
provision.
CERCLA § 108(c) also includes a
‘‘direct action’’ provision, under which
CERCLA claims can be brought directly
against an insurer or other entity issuing
an instrument pursuant to the CERCLA
§ 108(b) regulations. CERCLA § 108(c)(2)
provides that any claim authorized by
CERCLA § 107 or § 111 may be asserted
directly against any guarantor providing
evidence of financial responsibility
under CERCLA § 108(b) if the person
liable under CERCLA § 107 is: (1) In
bankruptcy, reorganization, or
arrangement pursuant to the Federal
Bankruptcy Code, or (2) likely to be
solvent at the time of judgment but over
whom jurisdiction in the Federal courts
cannot be reached with reasonable
diligence. EPA discusses the direct
action provision and other ways that it
envisions the instruments provided
pursuant to the CERCLA § 108(b)
program may pay out and otherwise
support cleanup efforts in section
VI.B.5. of this preamble.
CERCLA § 114(d) is an express
preemption provision addressing state,
tribal, and local financial responsibility
requirements. This provision states:
Except as provided in this subchapter, no
owner or operator of a . . . facility who
establishes and maintains evidence of
financial responsibility in accordance with
this subchapter shall be required under any
State or local law, rule or regulation to
establish or maintain any other evidence of
financial responsibility in connection with
liability for the release of a hazardous
substance from such . . . facility. Evidence
of compliance with the financial
responsibility requirements of this
subchapter shall be accepted by a State in
lieu of any other requirement of financial
responsibility imposed by such State in
connection with liability for the release of a
hazardous substance from such . . .
facility.30
Many states already have financial
responsibility requirements applicable
to some of the hardrock mining facilities
that would be subject to this proposed
rule. Thus, in developing this proposal,
EPA had to carefully consider the effects
of its CERCLA § 108(b) rules on other
programs to avoid any unanticipated
consequences. The Agency’s
conclusions regarding the relationship
of CERCLA § 108(b) requirements to
financial responsibility requirements
under other laws is discussed in Section
V. of this preamble.
30 42
PO 00000
Fmt 4701
B. Recent Litigation under CERCLA
§ 108(b)
On March 11, 2008, Sierra Club, Great
Basin Resource Watch, Amigos Bravos,
and Idaho Conservation League filed a
suit against former EPA Administrator
Stephen Johnson and former Secretary
of the U.S. Department of
Transportation Mary E. Peters, in the
U.S. District Court for the Northern
District of California. Sierra Club, et al.
v. Johnson, No. 08- 01409 (N. D. Cal.).
On February 25, 2009, that court
ordered EPA to publish the 2009
Priority Notice required by CERCLA
§ 108(b)(1) later that year. The 2009
Priority Notice is described in more
detail in section III.C. The court later
dismissed the remaining claims.
EPA issued the Advance Notice of
Proposed Rulemaking discussed in
section III.D. in early 2010, and
continued to work on this proposed rule
for the next several years. Dissatisfied
with the pace of EPA’s progress,
however, in August 2014, the groups
Idaho Conservation League, Earthworks,
Sierra Club, Amigos Bravos, Great Basin
Resource Watch, and Communities for a
Better Environment filed a new lawsuit
in the U.S. Court of Appeals for the
District of Columbia Circuit, for a writ
of mandamus requiring issuance of
CERCLA § 108(b) financial assurance
rules for the hardrock mining industry
and for three other industries—chemical
manufacturing; petroleum and coal
products manufacturing; and electric
power generation, transmission, and
distribution.31 Companies and
organizations representing business
interests in the hardrock mining and
other sectors also sought to intervene in
the case.
Following oral argument, the court
issued an Order in May 2015 requiring
the parties to submit, among other
things, supplemental submissions
addressing a schedule for further
administrative proceedings under
CERCLA § 108(b). The Court’s May 19,
2015 Order further encouraged the
parties to confer regarding a schedule
and, if possible, to submit a jointly
agreed upon proposal. Petitioners and
EPA were able to reach agreement on a
schedule. The parties requested an
Order from the court with a schedule
calling for the Agency to sign for
publication in the Federal Register a
proposed rule for the hardrock mining
industry by December 1, 2016, and a
final rule by December 1, 2017.
On January 29, 2016, the court
granted the joint motion and issued an
Order that mirrored the submitted
31 See In re: Idaho Conservation League, et al., No.
14–1149.
U.S.C. 9614(d).
Frm 00011
3397
Sfmt 4702
E:\FR\FM\11JAP2.SGM
11JAP2
3398
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
schedule in substance. The court Order
can be found in the docket for this
proposed rule (Docket No. EPA–HQ–
SFUND–2015–0781). The signing of this
proposed rule for publication by
December 1, 2016 will satisfy one
component of the court order.
C. Hardrock Mining 2009 Priority Notice
As described earlier in this preamble,
CERCLA § 108(b)(1) requires the
President to identify those classes of
facilities for which requirements will be
first developed and to publish notice of
such identification in the Federal
Register. That paragraph also directs
that priority in the development of such
requirements shall be accorded to those
classes of facilities, owners, and
operators that present the highest level
of risk of injury. As discussed in section
III.C., EPA published a Federal Register
notice entitled ‘‘Identification of Priority
Classes of Facilities for Development of
Section 108(b) Financial Responsibility
Requirements.’’ 32 EPA chose to evaluate
indicators of risk and its related effects
to inform its decision on the classes of
facilities for which it would first
develop requirements.33 EPA
specifically pointed to eight factors that
it considered,34 and stated that its
review of those factors and the
associated information in the docket led
the Agency to conclude that hardrock
mining facilities present the type of risk
that, in light of its then-current
evaluation, justified them being the first
for which EPA issued CERCLA § 108(b)
requirements.35 The 2009 Priority
Notice and supporting documentation
have been included in the docket for
this proposal (Docket No. EPA–HQ–
SFUND–2015–0781) .
The 2009 Priority Notice also
provided a working definition of
‘‘hardrock mining,’’ namely, ‘‘facilities
which extract, beneficiate, or process
metals . . . and non-metallic, non-fuel
minerals.’’ 36 EPA generally explained
the processes that constitute extraction,
beneficiation, and processing, and how
those processes relate to one another
and how they differ.37 EPA explained
32 See
74 FR 37213 (July 28, 2009)
Id. at 37214
34 These eight factors were: (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 NPL sites
and non-NPL sites); (6) government expenditures;
(7) projected clean-up expenditures; and (8)
corporate structure and bankruptcy potential (see
74 FR 37214, July 28, 2009).
35 Id.
36 Id.
37 Id. at 37214–15
sradovich on DSK3GMQ082PROD with PROPOSALS2
33 See
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
that because of their interrelationships,
EPA was identifying them as a group,
yet the distinctions between them made
it appropriate to consider such
operations as encompassing multiple
‘‘classes’’ of facilities.38
It is important to recognize the
necessary, but limited, role of the 2009
Priority Notice. The 2009 Priority Notice
directly satisfied the notice requirement
in CERCLA § 108(b)(1), by identifying
where EPA would start in its
development of requirements. The 2009
Priority Notice did not, however, serve
to comprehensively analyze the
universe of hardrock mining facilities
that would necessarily be covered by a
proposed or final CERCLA § 108(b) rule.
As EPA stated in the notice,
‘‘[a]dditional research, outreach to
stakeholders, proposed regulations,
review of public comments, and
finalization of those regulations are
needed before hardrock mining facilities
are subject to any financial assurance
requirements.’’ 39 Nor did that notice
purport to identify which ‘‘classes of
facilities, owners and operators . . .
present the highest level of risk of
injury’’ as required by CERCLA § 108(b)
(1). The initial identification of hardrock
mining facilities provided in the 2009
Priority Notice included classes of
facilities of varying degrees of risk of
injury, and EPA has identified in this
proposed rule what it believes are the
classes of facilities that present the
highest risk from among the classes of
facilities identified in the Priority
Notice.
D. Additional Classes Advance Notice of
Proposed Rulemaking
The 2009 Priority Notice described in
section III.C. stated EPA’s view that
classes of facilities outside of the
hardrock mining industry may warrant
the development of financial
responsibility requirements.40 The
Agency committed to gather and
analyze data on additional classes of
facilities and consider them for possible
regulation.
On January 6, 2010, EPA published an
Advanced Notice of Proposed
Rulemaking (2010 ANPR) 41, in which
the Agency identified three additional
industrial sectors for the development of
a proposed regulation—the Chemical
Manufacturing industry (NAICS 325),
the Petroleum and Coal Products
Manufacturing industry (NAICS 324),
and the Electric Power Generation,
Transmission, and Distribution industry
38 Id.
at 37214
at 37214, n. 5.
40 Id. at 37218.
41 See 75 FR 816.
39 Id.
PO 00000
Frm 00012
Fmt 4701
Sfmt 4702
(NAICS 2211). Th 2010 ANPR did not
set requirements for any of these three
sectors. However, for transparency and
completeness, this preamble includes
information on the development of the
2010 ANPR, the litigation related to
these sectors, and the companion notice
on these sectors.
In the 2010 ANPR, EPA requested
public comment on whether to propose
a regulation under CERCLA § 108(b) for
any class or classes, or the industry as
a whole, including information
demonstrating why such financial
responsibility requirements would not
be appropriate for those particular
classes. In addition, the Agency
requested information related to the
industry categories discussed in the
notice, including data on facility
operations, information on past and
expected future environmental
responses, use of financial instruments
by the industry categories, existing
financial responsibility requirements,
and other information the Agency might
consider in setting financial
responsibility amounts. Finally, EPA
requested information from the
insurance and the financial sectors
related to instrument implementation
and availability, and potential
instrument conditions.
As noted earlier, the In re: Idaho
Conservation League case also involved
EPA’s actions on these sectors as well.
The same order addressing the CERCLA
§ 108(b) hardrock mining rule also
required the Agency to sign for
publication in the Federal Register a
decision on whether to issue a notice of
proposed rulemaking for these
additional sectors by December 1, 2016.
EPA has developed that notice as
required by the court order. That notice
appears elsewhere in this Federal
Register.
EPA received comments on the 2010
ANPR, which can be found in the
docket for that notice (Docket ID No.
EPA–HQ–SFUND–2009–0834). EPA
considered those comments as part of its
decision whether to proceed with
issuing proposed rules for the additional
sectors, as described in the companion
noticed issued by the Agency. EPA
intends the future rulemaking processes
for these sectors to be the venue through
which the public can engage with EPA
on issues related to those sectors. In this
proposed rule for hardrock mining, EPA
is not seeking, nor will it respond to,
comments on issues relating only to
sectors outside of hardrock mining,
including its determinations on whether
to proceed with the rulemakings for
those other sectors.
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
E. Market Capacity Study
In accordance with an instruction
regarding the CERCLA § 108(b)
proposed rule in the Conference
Committee Report for the Consolidated
Appropriations Act (2016), EPA
conducted a study of the market
capacity regarding the necessary
instruments (surety bonds, letters of
credit, insurance and trusts) for meeting
any new CERCLA § 108(b) financial
responsibility requirements and post the
study on the Agency’s website ninety
days prior to this proposed rulemaking.
The Agency also provided an
explanation of how the CERCLA
§ 108(b) rule will avoid requiring
financial responsibility obligations that
are duplicative of those already required
by other Federal agencies as of the time
it was released to the public. EPA also
included the Market Capacity Study in
the docket for this proposal.
The Market Capacity Study assessed
the likely availability of financial
responsibility instruments and the
capacity of third-party markets to
underwrite financial responsibility
requirements for responsible parties
subject to CERCLA § 108(b). The study
relies on a substantial amount of
quantitative and qualitative data in the
public domain from readily referenced
industry sources, as well as information
gained in meetings held during 2015
and 2016 with instrument providers
regarding factors that may affect
instrument availability.
The Agency’s evaluation further
focuses on characterizing that portion of
the commercial insurance and surety
markets that specifically underwrite
environmental liability coverage as a
way to gauge future capacity. The
results of the research suggest that
sufficient capacity likely will be
available to cover the financial
responsibility obligations called for
under CERCLA § 108(b), but caution
that this capacity will be highly
dependent upon the overall amount of
financial responsibility that the market
will need to accommodate. Overall
capacity may also be influenced by: (1)
The diversity of instruments allowed,
(2) whether the rule allows insurance
and surety markets to form risk
retention groups (RRGs), and (3)
whether the proposed rule permits the
use of a financial test. All such features,
if included in the rule, could help to
relieve pressure on third-party surety
markets and ensure greater market
capacity.
In consideration of these market
issues, the rule as currently proposed
includes a number of specific features to
help ensure that the capacity of the
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
market for financial responsibility
instruments will be sufficient to meet
demand subsequent to promulgation.
First, preliminary results from draft
regulatory impact analyses reveal
estimates of total demand for
instruments to be below that of the
Agency’s estimate of overall capacity.
The proposal also offers further
flexibility by permitting owners and
operators to use a variety of alternative
instruments to meet the requirements of
the rule. Further, RRGs are not
prohibited under the proposed
provision for insurance, and the Agency
is taking comment on their potential
permissibility for the final rule. Lastly,
as discussed in detail in VI.C.9 of this
preamble, EPA has co-proposed options
regarding the availability of a financial
test and corporate guarantee
mechanism. Under Option 1 (EPA’s
preferred option), use of a financial test
and corporate guarantee would not be
allowed. However, under Option 2, use
of a financial test and corporate
guarantee would be allowed, thus those
instruments would be available as well
if Option 2 were to be adopted in the
final rule.
Given the number of unknown
factors, the ultimate availability of
CERCLA § 108(b) financial
responsibility instruments cannot be
predicted with certainty until the final
rule has been promulgated. At that time,
the available instruments will be
determined, and the market will have an
opportunity to respond.
F. Approach to Developing This
Proposed Rule
This is the first EPA proposed rule
under the authority of CERCLA § 108(b).
As a result, this proposed rule would
establish a financial responsibility
program under CERCLA § 108(b), in
addition to imposing requirements
specific to the hardrock mining
industry. EPA anticipates that core
financial responsibility program
requirements established under this
proposal, such as procedures for
establishing financial responsibility,
public involvement, recordkeeping and
reporting, establishing and maintaining
instruments, and the wording of some of
the instruments would apply to
hardrock mining facilities subject to this
rule and to classes of facilities subject to
further rules promulgated under
CERCLA § 108(b) authority. EPA
therefore solicits comments on these
provisions from all interested parties,
including representatives of industries
other than the hardrock mining
industry.
Other requirements of this proposed
rule would likely apply only to the
PO 00000
Frm 00013
Fmt 4701
Sfmt 4702
3399
hardrock mining facilities for which
they were designed. For example, the
financial responsibility formula
proposed in this rule was designed for
use by hardrock mining facilities. A
method for determining financial
responsibility amounts would be
identified for future industry sectors in
future proposed rulemakings. EPA
intends that the provisions of this rule
be severable. In the event that any
individual provision or part of this rule
is invalidated, EPA intends that this
would not render the entire rule invalid,
and that any individual provisions that
can continue to operate will be left in
place.
Development of these regulations has
proven to be a complex and unique task
for EPA, and the Agency has explored
a number of options for key components
of the proposed rule. Thus, while the
Agency is proposing an approach for
implementing CERCLA § 108(b), the
Agency also has attempted to present a
broad range of options and is seeking
comment on a variety of issues
throughout the preamble. Because this
proposed rule represents the initial
steps in development of a CERCLA
§ 108(b) program, EPA is particularly
interested in receiving information from
a broad range of parties with suggestions
for improving EPA’s proposed new
CERCLA § 108(b) program.
IV. Major Issues in the Development of
the Proposed Rule
This proposed rule is the first to be
issued by EPA under the authority of
CERCLA § 108(b).42 In developing this
proposal, EPA has given significant
consideration to a number of issues. In
this preamble section, EPA discusses
those issues and its proposed
approaches to them. EPA expended
considerable effort over several years
before deciding how to structure this
proposal, and the various options
included throughout reflect varying
ways that EPA is considering
reconciling the policy purposes of the
CERCLA § 108(b) rule in light of the
information before the Agency and the
general statutory direction. EPA
explains these considerations in the
more detailed discussions of the various
provisions in later sections of this
preamble. In general, however, this
proposed rule would establish
requirements for financial responsibility
applicable to certain facilities within the
hardrock mining industry. Owners and
operators of facilities subject to this rule
would be required to demonstrate
financial responsibility to cover costs
42 Regulations were promulgated by the Coast
Guard under § 108(a) (insert cite).
E:\FR\FM\11JAP2.SGM
11JAP2
3400
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
associated with liabilities identified in
CERCLA § 107, that is, for response
costs, health assessment costs, and
natural resource damage costs.
A. Relationship to Existing Superfund
Processes
The proposed rule would not
establish any regime regulating the
conduct of hardrock mining and mineral
processing activities. Instead, EPA
intends for CERCLA § 108(b)
requirements to apply alongside other
programs that directly regulate the
operation of hardrock mines. Nor does
the proposed rule modify the existing
Superfund enforcement authorities,
including those to gather information,
identify responsible parties, effect
cleanup (especially through EPA’s
enforcement first policy), assess
penalties, or provide for citizen suits.
Instead, the proposal is designed to
complement and support those existing
processes. The impact of this proposal
on existing processes would be to
increase the likelihood that parties have
funds to conduct cleanup; increase the
likelihood of successful recovery of
costs under CERCLA, including claims
brought under CERCLA §§ 107 or 113(f)
from the parties providing the financial
responsibility instruments, increase the
likelihood that funds will be available
for owners and operators to settle their
Superfund liabilities with the Federal
Government, and provide an instrument
that may be used by an owner or
operator, to assure work required under
a CERCLA § 106 unilateral
administrative order by EPA and other
Federal agencies.
Set within the context of CERCLA’s
response program, CERCLA § 108(b)
establishes a broad authority for EPA to
promulgate requirements that classes of
facilities establish and maintain
evidence of financial responsibility
consistent with the risk associated with
various hazardous substance
management activities. CERCLA as a
whole is generally designed to ensure
that, ultimately, risks to human health
and the environment are addressed by
those responsible for contamination in
the first instance (commonly called the
‘‘polluter pays’’ principle). The CERCLA
§ 108(b) requirements can complement
this goal in two particular ways. First,
the rules should help assure that
businesses make financial arrangements
to address risks from the hazardous
substances at their sites in the event that
a CERCLA cleanup ultimately becomes
necessary. The rules can thus promote
the polluter pays principle underlying
the CERCLA scheme. Second, CERCLA
§ 108(b) rules should serve to create
effective incentives for regulated entities
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
to manage the hazardous substances
present at their facilities more carefully
and thereby minimize the threats of
future releases. These sorts of measures
directly promote protection of human
health and the environment by
preventing the environmental harm
caused by releases, and by creating a
culture of responsible behavior among
the regulated community that will
minimize the need for future Superfund
actions.
B. Liabilities Covered
CERCLA § 108(b) does not provide
specific direction on the types of
liabilities that the regulations for
facilities are to cover. Paragraph (a)(1) of
§ 108 requires evidence of financial
responsibility for vessels explicitly ‘‘to
cover the liability prescribed under
paragraph (1) of section 107(a).’’ By
contrast, CERCLA § 108(b)(1) provides
only that classes of facilities establish
and maintain evidence of financial
responsibility ‘‘consistent with the
degree and duration of risk’’ associated
with various aspects of hazardous
substance management. Thus CERCLA
§ 108(b) does not include the same
direct cross-reference to the categories
of liabilities under CERCLA § 107 that it
does for vessels. Therefore, in
developing this proposal EPA
considered whether it was appropriate
to require evidence of financial
responsibility for all types of CERCLA
liabilities, only a subset of those
liabilities (for example, only for
potential response costs), or even extend
the instruments beyond the categories
included in CERCLA § 107 (for example,
for personal injury costs). EPA is today
proposing to make the instruments
available for all types of CERCLA
liabilities enumerated in CERCLA § 107.
EPA believes that this approach furthers
both policy objectives described earlier,
by helping to ensure adequate funding
for all types of potential CERCLA
liabilities at regulated facilities, and by
encouraging owners and operators to
take into account the full breadth of
potential CERCLA liability when
structuring their operations, thereby
minimizing those risks in the first
instance. Thus, the instruments
provided under this proposed rule
would be available to pay costs incurred
by a government or private party for
response costs, natural resource damage
costs, and health assessment costs.43
Finally, EPA has not identified a basis
for it to exclude any of these particular
types of costs based upon the data EPA
has gathered in preparing this proposal.
All three types of CERCLA § 107 costs
43 See
PO 00000
42 U.S.C. 9607(a)(4)(A)–(D).
Frm 00014
Fmt 4701
Sfmt 4702
have been incurred by hardrock mining
facilities as EPA has documented
elsewhere in this preamble. (see Section
VI.F.3.).
C. Universe Covered
Under this proposal, requirements
would apply to owners and operators of
mining facilities that fall within the
classes described in the 2009 Priority
Notice except for three classes that EPA
has identified as presenting a lower
level of risk of injury—mines
conducting only placer mining
activities, mines conducting only
exploration activities, and mines with
less than five disturbed acres that are
not located within one mile of another
area of mine disturbance that occurred
in the prior ten year period. In addition,
requirements under this proposal would
apply to owners or operators of mineral
processing facilities identified in the
2009 Priority Notice with less than five
disturbed acres of waste pile and surface
impoundment. Other mineral
processing facilities identified in the
2009 Priority Notice would not be
subject to the proposed rule. Further,
the proposed rule would apply only to
facilities that are authorized to operate,
or should be authorized to operate, on
the effective date of the rule. The
applicability of this rule is described
further in section VI.A.1. of this
preamble.
D. Notification Requirement
The proposal would require owners
and operators subject to the rule to
notify EPA that they are subject to the
rule and intend to comply, and to
provide basic facility information,
within thirty days of the effective date
of the final rule. Those owners and
operators would then be required to
identify a CERCLA § 108(b) financial
responsibility amount for their facility,
and to submit evidence of financial
responsibility to EPA.
E. Determining the Financial
Responsibility Amount for Hardrock
Mining Facilities
The rule proposes a hardrock mining
financial responsibility formula for
determining a financial responsibility
amount for response costs, health
assessment costs, and natural resource
damages. The formula, and EPA’s
approach and methodology for
developing the formula, are described in
detail in section VI.D.4. of this
preamble. In summary, the proposed
formula is designed to reflect the
relative risk to human health and the
environment, of facility practices for
managing hazardous substances,
including reductions in risk that may
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
result from compliance with other
regulatory requirements or other facility
practices. The formula assigns values for
a facility based on facility and unit
characteristics (e.g., open pits, waste
rock, tailings, heap leach, process
ponds, water management, and
operations, maintenance, and
monitoring). These values correspond to
calculated cost levels, and the formula
then aggregates these cost levels to
establish the facility-wide financial
responsibility amount. The formula is
not intended to establish any CERCLA
liability or define a particular remedy
for a unit or facility. Rather, the purpose
of the formula is simply to establish an
amount of financial responsibility that
reflects the costs that might be expected
to result, if a Superfund action should
ultimately be required at the site, based
on the information EPA has compiled
on a national basis in the record for this
proposal. Any remedy decisions will
continue to be developed on a sitespecific basis through standard CERCLA
processes, including the processes in
the NCP. Because the CERCLA § 108(b)
cost estimate is necessarily developed in
the absence of any site-specific remedy
selection, EPA cannot ensure that the
particular costs the formula assigns for
a particular feature will necessarily
ultimately be identical to the actual
costs for cleaning up that site feature.
Therefore, although the formula
employs an aggregation of individual
costs to obtain an overall amount for the
facility, the individual cost components
are not themselves intended to represent
any sub-limits within the actual
financial responsibility instrument. In
other words, the total amount of funds
would be available for any future
Superfund action anywhere across the
facility, and would not be tied to
particular site features. Moreover, to
impose sub-limits based on the
particular values for the formula
subcomponents has the potential to
result in partial over- and under-funding
of unit- and site-specific remedies in the
future, once a CERCLA remedy is
defined and claims are made against the
instrument. In addition, making those
claims would potentially require
protracted negotiations over which
response costs are ultimately payable
from the instrument. Such a situation
would hinder, instead of support,
CERCLA cleanups.
Once the amount is ascertained
through the formula, owners and
operators would then be required to
obtain an acceptable financial
responsibility instrument for that
amount, submit evidence of the
instrument to the Agency, and make
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
information about the instrument
available to the public. EPA is not
proposing to require a preliminary
review and approval of the application
of the formula to the facility’s features,
nor prior review and approval of the
financial responsibility instrument,
prior to it becoming effective. The
Agency may choose to review and verify
the adequacy of a financial
responsibility amount, or the terms of
the instrument provided to EPA under
CERCLA § 108(b), at a facility at any
time. If EPA determines the financial
responsibility amount submitted by the
owner or operator to be inadequate, EPA
may choose to initiate enforcement
proceedings.
The Agency considered an alternative
approach to establishing a CERCLA
§ 108(b) cost estimate that more closely
resembles more traditional financial
responsibility programs developed to
complement a permit-based regulatory
program. Financial responsibility
requirements under many other
programs 44 are typically components of
an overarching regulatory program, such
as a permit program, and are designed
to assure compliance with the
requirements of that program. CERCLA
§ 108(b) requirements in contrast, are
freestanding in that they are not directly
associated with regulatory program
requirements with which an owner and
operator must comply, or with a remedy
that has been selected that an owner and
operator must implement. Under the
‘‘closure plan’’ alternative EPA
considered, the Agency would first
identify a set of technical engineering
requirements for a facility subject to
CERCLA § 108(b) requirements that
could be consolidated into a complete
facility closure, and in turn could be
used as the basis for calculating an
amount that ultimately would need to
be assured for under CERCLA § 108(b).
In effect, the ‘‘closure plan’’ would have
had to include the engineering controls
necessary to compete a CERCLA-style
clean up at a facility where the owner
or operator had walked away and failed
to complete reclamation and closure
activities. The plan itself would not be
intended to be enforceable, but would
only have served as a method to
calculate the amount of financial
responsibility that would be required
under CERCLA § 108(b), using sitespecific information. Based on the
closure plan, EPA would then have
calculated the amount of financial
responsibility necessary under CERCLA
§ 108(b), after taking into account other
44 See summaries of state financial responsibility
programs in the docket for this rulemaking (EPA–
HQ–SFUND–2015–0781).
PO 00000
Frm 00015
Fmt 4701
Sfmt 4702
3401
Federal and/or state engineering
controls and associated financial
responsibility requirements. This could
integrate CERCLA § 108(b) requirements
into the existing Federal and state
financial responsibility requirements
applicable at hardrock mining facilities,
and allow for more consistency among
financial responsibility requirements
nationally, as the CERCLA § 108(b)
amount would in concept, fill in any
gaps EPA identified under other
programs.
However, EPA soon recognized that
there may be problems adopting such an
approach. First, selection of a particular
response under CERCLA is determined
in accordance with the NCP, but after a
release or threatened release is
identified, and on a case-by-case basis.
By contrast, a permit program has the
advantage of identifying the appropriate
engineering controls for closure before
they become necessary, through the
permit process. EPA was unable to
identify a basis to specify a site-specific
set of engineering controls for a sitespecific cost estimate, without going
through a process similar to applying
the NCP at each facility. Such an
approach would present a significant
regulatory burden on the Agency. First,
it would necessitate a case-by-case
evaluation of each facility to determine
the appropriate engineering controls
that CERCLA might require, and then
the Agency would need to compare that
set of controls to any applicable
regulatory requirements, such as state or
Federal reclamation requirements.
Second, it would be difficult for EPA to
create a CERCLA § 108(b) financial
responsibility instrument that would be
written to cover only the particular
‘‘gaps’’ the Agency sought to cover for
each engineering requirement at a
facility without having the instrument
overlap with other requirements given
that some closure programs conduct
activities that reduce CERCLA risks.
This would present problems those
presented by sub-limits on instruments
(discussed earlier). EPA has other
important concerns with such an
approach aside from these
implementation concerns. EPA has
policy concerns about overseeing other
Federal and state programs’ financial
responsibility requirements for
adequacy, given other authorities’
expertise with mining regulation. Based
on these considerations, EPA is
proposing the formula approach in this
rule. EPA solicits comment on the
proposed approach.
It should be noted that, as mentioned
in section III.F. of this preamble, the
financial responsibility formula
developed for this proposed rule is
E:\FR\FM\11JAP2.SGM
11JAP2
3402
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
specific to the hardrock mining
industry, and is not designed for use in
future rulemakings under CERCLA
§ 108(b). In future rulemakings under
CERCLA § 108(b), EPA will evaluate
how to determine financial
responsibility amounts for each
particular rule, and will propose an
appropriate methodology.
F. Available Instruments
The proposed rule considers the use
of all financial responsibility
instruments identified in CERCLA
§ 108(b)(2) of the statute, that is,
insurance, guarantee, surety bond, letter
of credit, or qualification as a selfinsurer. The proposal includes a trust
fund as an available form of qualifying
as a self-insurer. The proposed rule
would allow owners and operators to
demonstrate the financial responsibility
amount required at a facility using one
or a combination of these instruments.
In addition, the proposed rule would
allow the owner or operator to
demonstrate financial responsibility for
multiple facilities using a single
instrument.
The Agency is proposing two
approaches for qualifying as a selfinsurer through a financial test
instrument for self-insurance. Under
Option 1, EPA would not include a
financial test as a form of self-insurance.
EPA prefers this option because it
believes the weight of the evidence
supports more secure forms of financial
responsibility. With respect to Option 2,
EPA would include a stringent credit
rating-based financial test to cover all or
partial costs of a facility’s obligations,
depending on the owner or operator’s
credit rating. Under Option 2, the owner
or operator could use the financial test
itself, or the test may be used by a
corporate parent, a firm owned by the
same parent corporation as the owner or
operator, or a firm with a substantial
business relationship with the owner or
operator, to demonstrate financial
responsibility for the owner or operator
through a corporate guarantee. The
proposed approaches are discussed in
section VI.C.4. of this preamble.
The proposed rule includes wording
for the financial responsibility
instruments. The instruments would be
required to conform to this wording.
This simplifies administration of the
rule. The proposed financial
responsibility instruments are designed
to pay costs under CERCLA for which
the owner or operator is responsible at
the facility. Depending on the
requirements of the instrument
provider, both the owner and operator
may or may not be named on the
financial responsibility instrument, but
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
all instruments must be available to pay
for costs of either party.
The financial responsibility
instruments proposed are designed to
pay for CERCLA response costs, health
assessment costs, and natural resource
damages under three scenarios in
addition to, and independent of, the
direct action scenario provided in
CERCLA § 108(c). First, the instruments
are designed to pay the party obtaining
the judgment after a court finding of
CERCLA liability against any owner or
operator covered by the instrument. In
this case, the instrument would pay any
party obtaining a judgment.
Second, the instruments are designed
to pay upon settlement of CERCLA
liability with the United States, into an
account designated under the
settlement. This could include a
CERCLA special account under CERCLA
§ 122, in which those funds can be used
for carrying out the settlement at the
site, or into the Superfund. In situations
where a facility is in bankruptcy or
jurisdiction over the owner or operator
is not available and a direct action is
brought against the instrument provider
under CERCLA § 108(c), the instrument
would be available to pay in settlement
of the owner or operator’s CERCLA
liabilities upon settlement with the
instrument provider, standing in the
shoes of the owner or operator.
Finally, the instruments are designed
to pay in certain limited administrative
order situations under CERCLA § 106;
that is, where the financial
responsibility instrument is named in
an administrative order and a trust fund
is established pursuant to the order, the
funds would be available to be paid into
that trust fund if performance at the
facility as required by the order had not
occurred.
V. Relationship of CERCLA § 108(b) to
Other Federal Laws, and to State and
Tribal Laws
In considering options for this
proposed rule, EPA examined how
CERCLA § 108(b) may relate to other
financial responsibility authorities
currently implemented by EPA and
from closure and reclamation programs
implemented by other Federal agencies
and by states and tribes. EPA has
concluded that CERCLA § 108(b)
requirements apply in addition to
requirements under other Federal law.
EPA also believes that preemption of
state reclamation bonding programs is
not intended by CERCLA, nor necessary
or appropriate. Thus, EPA expects
CERCLA § 108(b) to effectively
complement, not duplicate or disrupt,
those programs.
PO 00000
Frm 00016
Fmt 4701
Sfmt 4702
CERCLA § 108(b) Applies To Address
CERCLA Liabilities at Facilities in
Addition to Other Federal Financial
Responsibility Requirements
CERCLA authorizes EPA to issue
financial assurance requirements to
cover CERCLA liabilities, whether or
not a facility is subject to financial
responsibility requirements under
another Federal law. Thus, CERCLA
§ 108(b) requirements apply even where
a hardrock mine or mineral processor
may be subject to, for example, Federal
reclamation bonding requirements. This
interpretation gives full effect to
CERCLA § 108(b) and carries out its
purpose in ensuring that facilities that
manage CERCLA hazardous substances
make arrangements to cover any
CERCLA liabilities that may arise.
This approach is fully consistent with
the plain language of the statute.
CERCLA § 108(b)(1) addresses other
Federal law only in a very limited way.
It states that the requirements under that
section are to be ‘‘for facilities in
addition to those under [RCRA] Subtitle
C . . . and other federal law.’’ The
section does not further elaborate on
what ‘‘in addition to’’ means. EPA reads
this provision in a most straightforward
way: Requirements in this proposed rule
are quite literally ‘‘in addition to’’
whatever financial responsibility
requirements may be imposed under
other Federal laws for other purposes.
EPA does not, for instance, see this
reference to other Federal law as any
limitation on the applicability of the
section. Indeed, the phrase ‘‘in addition
to’’ is inconsistent with the notion that
other Federal law is to be a limitation
on the scope of CERCLA § 108(b)’s
applicability. By contrast, when
Congress intended to insert limitations
based on other Federal law into
CERCLA, it clearly stated them as such.
See, e.g., CERCLA § 101(22)(C)
(definition of release ‘‘excludes . . . (C)
release of source, byproduct, or special
nuclear material from a nuclear
incident, as those terms are defined in
the Atomic Energy Act of 1954, if such
release is subject to requirements with
respect to financial protection
established by the Nuclear Regulatory
Commission under § 170 of such Act.
. . .); 101(39) (‘‘The term ‘brownfield
site’ does not include’’ facilities to
which permits have been issued under
RCRA, the Clean Water Act, the Toxic
Substances Control Act, or the Safe
Drinking Water Act; or facilities subject
to RCRA corrective action, RCRA
closure, or TSCA clean up obligations).
Nor would reading this reference as a
limitation on the scope of CERCLA
§ 108(b) make much practical sense, as
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
the need for a CERCLA response may
arise regardless of whether another
Federal law already applies.
EPA’s intent in this proposal,
consistent with its interpretation
described earlier, is to apply CERCLA
§ 108(b) to address potential CERCLA
risks at a facility, even when that facility
is subject to regulation and/or financial
responsibility requirements under other
Federal law, such as mine reclamation
bonding requirements required by
Bureau of Land Management (BLM) or
the U.S. Forest Service (USFS). As
explained elsewhere, these proposed
regulations are not designed to ensure
compliance with technical engineering
requirements imposed through a permit,
or to ensure proper closure or
reclamation of an operating mine.
Instead, EPA has structured these rules
to address the CERCLA liabilities at a
regulated facility, and to create
incentive for practices that will prevent
the need for future CERCLA responses.
sradovich on DSK3GMQ082PROD with PROPOSALS2
Provision of a Financial Responsibility
Instrument Under CERCLA § 108(b)
Does Not Preempt State Mine Bonding
Regulations Under CERCLA § 114(d)
EPA has also considered, in
developing the proposed CERCLA
§ 108(b) regulations for hardrock mining
classes, what effect, if any, compliance
with the Federal requirements would
have under CERCLA § 114(d), an
express preemption provision relating to
specific state financial responsibility
requirements. Many states have mine
financial responsibility requirements.
EPA compiled summaries of all 50
states’ mine bonding requirements to get
a general understanding of the types of
requirements applicable under other
programs. These summaries are also
available in the docket. EPA’s general
understanding of state mining programs
indicates that those programs vary, and
that states use mine permitting
authorities to enforce compliance with
state mining regulations. Some states
may address different risks, or address
risks in a different manner from those
for which EPA’s proposed Financial
Responsibility Formula is designed to
account. In developing the proposed
rule, the Agency sought the input of
several states with significant mining
regulatory programs on the state
preemption question. EPA received
responses from Alaska, Arizona,
Colorado, and New Mexico. The
comment letters also are included in the
docket for this proposal.
EPA does not intend its CERCLA
§ 108(b) regulations to result in
widespread displacement of those
programs, nor does EPA believe that
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
such preemption is intended by
CERCLA, necessary, or appropriate.
EPA does not believe that CERCLA
§ 114(d) 45 gives a broad preemptive
effect to EPA’s CERCLA § 108(b)
financial responsibility regulations, over
state reclamation bonding requirements
generally.46 This follows from
consideration of the structure and
language of the statute and case law.
First, both CERCLA §§ 108(b) and 114
are expressly focused on hazardous
substances, the risks they present, and
financial responsibility associated with
liability stemming from their release or
threatened release. Consistent with this,
as described in section V.B. of this
preamble, EPA has interpreted the scope
of CERCLA § 108(b)’s mandate for
evidence of financial responsibility to
reflect the types of costs for which
parties may be liable under CERCLA
§ 107 that result from releases or
threatened releases of hazardous
substances. As the state commenters
have made clear, many state reclamation
bonding regimes are not similarly
limited to CERCLA hazardous
substances or their release. For example,
the New Mexico Environment
Department stated that reclamation
under the state Mining Act is a goal in
itself, which may or may not be
connected with the release of hazardous
substances in a particular instance.
Second, CERCLA § 114 taken as a
whole makes clear that states are not
prohibited from requiring reclamation
bonding. The section begins with a
general disclaimer of preemptive effect
in paragraph (a), specifically directing
that ‘‘nothing in this chapter’’ ‘‘be
construed or interpreted as preempting
any State from imposing any additional
45 CERCLA
§ 114 states, in relevant part:
(a) Nothing in this chapter shall be construed or
interpreted as preempting any State from imposing
any additional liability or requirements with
respect to the release of hazardous substances
within such State.
. . .
(d) Except as provided in this subchapter, no
owner or operator of a . . . facility who establishes
and maintains evidence of financial responsibility
in accordance with this subchapter shall be
required under any State or local law, rule, or
regulation to establish or maintain any other
evidence of financial responsibility in connection
with liability for the release of a hazardous
substance from such . . . facility. Evidence of
compliance with the financial responsibility
requirements of this subchapter shall be accepted
by a State in lieu of any other requirement of
financial responsibility imposed by such State in
connection with liability for the release of a
hazardous substance from such . . . facility.
46 By this discussion, EPA is providing its general
views on the preemption issue for transparency and
to obtain public comment. It is the courts that
would make any final determinations about the
preemptive effect of CERCLA 108(b) regulations at
any particular facility. These determinations would
necessarily be based on case-by-case evaluations.
PO 00000
Frm 00017
Fmt 4701
Sfmt 4702
3403
liability or requirements with respect to
the release of hazardous substances
within such State.’’ This reflects
Congressional intent that preemption of
state law requirements should be
minimized. Moreover, CERCLA
§ 114(d)’s preemptive effect is
qualified—‘‘except as provided in this
subchapter’’—a reference that logically
encompasses the limitations on
preemption outlined in paragraph (a).
Taken together, these references quite
naturally preserve state mine bonding
requirements as ‘‘additional
requirements’’ to the extent that they
may also address the release of
hazardous substances.
Third, many state requirements serve
significantly different purposes from
any final CERCLA § 108(b) regulations,
and for this reason alone those state
requirements should not be considered
to be ‘‘in connection with liability for
the release of hazardous substances’’
within the meaning of CERCLA § 114(d).
As discussed, the CERCLA § 108(b)
regulations being proposed today are
intended to address facilities’ potential
for releases or threatened releases that
result in CERCLA liability. By contrast,
many mine bonding programs are
designed to ensure that a facility can
comply with otherwise-applicable
regulatory requirements, that may or
may not be connected with (or may be
only partially connected with)
hazardous substance releases or
threatened releases. See ALASKA
STATUTE § 27.19.040(a), Reclamation
Financial Assurance (requiring financial
responsibility to ensure performance of
a reclamation plan); ARIZ. REV. STAT.
§ 27–971(B)(11), Submission and
contents of reclamation plan (financial
responsibility is required to ensure
completion of all activities in the
approved reclamation plan for mining
units); CAL. PUB. RES. CODE
§ 2773.1(a), Reclamation of Mined
Lands and the Conduct of Surface
Mining Operations (financial
responsibility is required to ensure the
completion of the lead agency-approved
reclamation plan); 2 COLO CODE REGS.
§ 407–1 R. 4.2.1(1), Adequacy of
Financial Warranties (For mining
operations, financial responsibility is
required to ensure the fulfillment of the
requirements of the reclamation plan
that is attached to the reclamation
permit application); FLA. ADMIN.
CODE ANN. r. 62C–16.0075(5)(f),
Financial Responsibility (required to
demonstrate financial responsibility in
order to cover reclamation through the
initial revegetation of the reclaimed
area); IDAHO ADMIN. CODE
r.20.03.02.070(01), Reclamation Plan
E:\FR\FM\11JAP2.SGM
11JAP2
3404
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
Approval Required and IDAHO ADMIN.
CODE r.20.03.02.071(01), Permanent
Closure Plan Approval Required
(Financial responsibility is required to
ensure that all reclamation activities
included in an approved reclamation
plan and that all closure activities in an
approved permanent closure plan are
completed for surface mining operations
and cyanidation facilities, respectively);
MINN. R. 6130.6000 Subp. 1–Subp. 2,
Performance Bonds (Financial
responsibility also may be required to
cover the estimated cost of
‘‘satisfactorily accomplishing
reclamation of all lands disturbed and
unreclaimed up to the date of annual
[financial responsibility] review.’’);
NEV. ADMIN. CODE ch. 519A.350(1),
General requirements (Financial
responsibility is required to ensure that
reclamation activities in the approved
reclamation plan will be completed);
N.M. STAT § 69–36–11, Existing mining
operations; closeout plan required
(Financial responsibility under NMMA
is required to assure reclamation or
‘‘closeout.’’); UT CODE ANN. 40–8–
4(13)(a), Definitions (Financial
responsibility is required to assure
reclamation of affected lands); WASH.
REV. CODE § 78.44.087(1)(a),
Performance security required
(Financial responsibility is required for
reclamation of affected surface mining
lands).
Fourth, it makes sound policy sense
for CERCLA § 114(d) to be read to allow
these programs to apply in tandem. EPA
cannot write its national CERCLA
§ 108(b) requirements to simultaneously
correspond to 50 different states’
reclamation requirements. These
requirements can vary substantially, and
particular requirements may have only
a limited relationship to liability for the
release of hazardous substances.47
VI. Section-by-Section Analysis
A. Subpart A—General Facility
Requirements
sradovich on DSK3GMQ082PROD with PROPOSALS2
1. Purpose and Scope (§ 320.1) and
Applicability (§ 320.2)
This proposed rule would establish
financial responsibility requirements
under CERCLA applicable to current
owners and operators of hardrock
mining facilities that are authorized to
47 EPA also notes that concerns about duplication
are separately addressed in CERCLA’s prohibition
on double recovery in CERCLA § 114(b). That
section allows for harmonizing recoveries where
claims could also be brought under other state
causes of action. This helps provide assurance, for
example, that reclamation requirements that may
otherwise be similar to CERCLA response actions
and compensable through a CERCLA 108(b)
financial responsibility instrument would not be
unfairly paid twice.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
operate or should be authorized to
operate, that is, owners and operators
that are required to obtain authorization
to operate and have done so, as well as
those who are required to obtain
authorization to operate and have failed
to do so. The proposed rule would not
apply to owners or operators of past
hardrock mining facilities, such as
abandoned mines, nor would it apply to
former owners or operators of mines
that are covered by the rule. The
financial responsibility requirements for
those current owners or operators would
extend to all potential CERCLA
liabilities at the facility, based on
current conditions at the site. This
approach balances the dual goals of
providing funds to address CERCLA
liabilities at their sites, and of creating
incentives for sound practices that will
minimize the likelihood of a need for a
future CERCLA response.
In developing this proposed rule, EPA
considered whether to propose
conditions applicable to all owners and
operators, past and present, of facilities
covered by the rule, or whether to limit
the rule to current owners and
operators. EPA also considered whether
CERCLA § 108(b) requirements could be
applied to abandoned facilities.
Although CERCLA § 108(b) could
potentially be interpreted to cover such
owners, operators and facilities, EPA is
proposing requirements applicable only
to current owners and operators of
currently authorized to operate facilities
for a number of reasons.
The plain language of CERCLA
§ 108(b) is ambiguous on the owners,
operators and facilities to which it is
intended to apply. The section uses the
terms ‘‘owner’’ and ‘‘operator’’ and
‘‘facility’’ repeatedly, but says nothing
about whether these terms could
include past owners and operators, or
owners or operators of former facilities.
Looking at the statute more broadly,
however, indicates that it is appropriate
to adopt a narrower interpretation than
the bare terms in CERCLA § 108(b)
would suggest. First, reading CERCLA
§ 108(b) as applying to current owners
and operators of currently-active or
–idled facilities comports with CERCLA
§ 108 when read as a whole. CERCLA
§ 108 requires evidence of financial
responsibility for three different types of
facilities: vessels under CERCLA
§ 108(a), motor carriers under CERCLA
§ 108(b)(5), and other facilities under
CERCLA § 108(b). The provisions
applicable to vessels and motor carriers
logically apply to current owners and
operators of existing vessels and motor
carriers. For example, CERCLA § 108(a)
refers, as does CERCLA § 108(b), to
‘‘owners’’ and ‘‘operators’’ of ‘‘vessels’’
PO 00000
Frm 00018
Fmt 4701
Sfmt 4702
without qualification. However,
logically only current owners and
operators of existing vessels are able to
‘‘use[] any port or place within the
United States’’ as required by CERCLA
§ 108(a), and only those entities and
vessels would be subject to the remedies
available to the Secretaries of the
Treasury and Transportation in CERCLA
§§ 108(a)(2) and (3). Indeed, the U.S.
Coast Guard’s CERCLA § 108(a)
regulations apply only to current
owners and operators of vessels used or
capable of being used as a means of
transportation on the water. See 33 CFR
§§ 138.12 and 138.20. DOT’s motor
carrier financial responsibility
requirements also only apply
prospectively.
Current owners and operators are the
primary actors at facilities and as such
would be able to evaluate the
applicability of the rules and apply the
formula to the features present. EPA
anticipates that requiring entities that
may no longer have the legal rights to
access a facility to evaluate it for
purposes of determining whether they
are subject to the rule and if so, the
appropriate amount of financial
responsibility, would be difficult in
many cases. Thus EPA intends for this
proposal to be focused upon an easilyidentified, particular subset of parties
that has control over and are thus in the
best position to control and address
hazardous substance management
activities. Such incentives would not
exist in the case of owners and operators
that no longer have activities at the site.
Nor does EPA expect that applying the
rules to such former owners would
further a primary goal of financial
responsibility, that is, to develop
incentives for good practices.
Similar reasoning leads EPA to
propose applying the CERCLA § 108(b)
requirements only to currently-active or
currently-idled facilities. These facilities
are readily identifiable and because they
are ongoing concerns, are more likely to
be able to obtain the kind of financial
responsibility necessary under the
regulation, and to further the dual goals
of CERCLA § 108(b) regulations. By
contrast, EPA is concerned that a rule
applicable to facilities that are not
currently active or currently idled
would be very difficult to implement,
and has the potential to divert
significant resources from existing
Superfund priorities with minimal
benefit to the program. Therefore, EPA
believes that attempting to regulate and
oversee CERCLA § 108(b) requirements
for this vast universe of facilities would
impose a tremendous administrative
burden on the Superfund program, with
the likelihood of very little return. EPA
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
believes that the Superfund and existing
enforcement processes are significantly
better suited for use at sites that are not
currently active or currently idled to
effect cleanup directly. Thus, EPA
expects that the approach in this
proposed rule would maximize the
effectiveness of CERCLA § 108(b)
requirements.
EPA has sought to complement
CERCLA’s liability provisions by
requiring owners and operators subject
to the rule, to provide assurance against
all potential risks associated with
hazardous substance management at
their facility. In this way EPA’s
proposed approach thus also is intended
to support CERCLA’s broad remedial
purposes, while accounting for the
differences between CERCLA § 108(b)’s
regulatory program and CERCLA’s
liability and enforcement provisions.
As discussed in further detail in
following sections of this preamble,
requirements for financial responsibility
under CERCLA § 108(b) do not affect the
liability of any parties potentially
responsible for CERCLA costs. This
would include that of any former
owners and operators. The existing
CERCLA processes for enforcement,
contribution, cost recovery, and
assignment of liability are unaffected by
CERCLA § 108(b) financial
responsibility requirements, and are
available to ensure that responsible
parties pay the costs associated with
releases or threatened releases of
hazardous substances. In fact, while not
required by the proposed rule itself,
EPA believes that requiring current
owners and operators to demonstrate
CERCLA § 108(b) financial
responsibility may have the salutatory
effect of inducing those subject to the
rule to seek out any other parties who
may be liable for contamination at their
facility in order to obtain their
assistance with cleanup. The result
could be a potential reduction in threats
to human health and the environment at
the site which could in turn result in a
reduced CERCLA § 108(b) financial
responsibility amount. Given the
practical difficulties of imposing
CERCLA § 108(b) financial
responsibility requirements upon past
owners and operators, EPA expects that
those existing processes are the
appropriate means for parties to divide
liabilities amongst themselves.
Exemption for States and the Federal
Government
The proposed rule at § 320.1(c) would
exempt states and the Federal
Government from the requirements of
part 320. This provision is modeled on
a similar, long-standing exemption in
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
EPA’s regulations for RCRA Subtitle C
hazardous waste treatment, storage, and
disposal facilities.48 In EPA’s view, the
Federal and state governments have
adequate resources and taxing authority
to ensure that they will be able to pay
for any CERCLA § 107 costs that may
arise at facilities where they are owners
or operators. Local governments,
however, are not exempt. As EPA
explained in 1980, local governments
can and do become insolvent, and if
small enough, may not be able to cover
their liabilities. EPA requests comment
on this exemption.
Non-Transportation-Related Facilities
E.O. 12580 delegates the
responsibility for developing regulations
under CERCLA § 108(b) for nontransportation-related facilities to EPA.
Responsibility for developing
regulations for transportation-related
facilities is delegated to the Department
of Transportation. Thus, transportationrelated facilities at hardrock mining
sites would not be subject to
requirements under this proposed rule.
The Agency anticipates that
jurisdictional issues between EPA and
the Department of Transportation will
be worked out in implementation. EPA
solicits comment on this approach.
2. Definitions (§ 320.2)
The Agency is proposing the
following definitions for use in Part 320:
Hardrock Mining Facility means a
hardrock mine, as defined in subpart H
of part 320, and/or a mineral processor,
as defined in subpart H part 320.
Administrator means the EPA
Administrator, or designee thereof.
3. Availability of Information;
Confidential Business Information
(§ 320.4)
Section 2.203(b) of this chapter
provides procedures through which any
person submitting information to EPA
in accordance with this Part may assert
a claim of business confidentiality
covering part or all of that information.
Information covered by such a claim
will be disclosed by EPA only to the
extent, and by means of the procedures,
set forth in Part 2, Subpart B, of this
chapter. However, if no such claim
accompanies the information when it is
received by EPA, it may be made
available to the public without further
notice to the person submitting it.
This rule proposes an option to
require owners or operators to post on
their company website all information
submitted to EPA that is not identified
48 See 45 FR 33198–99 (May 19, 1980); 45 FR
33262 (May 19, 1980).
PO 00000
Frm 00019
Fmt 4701
Sfmt 4702
3405
as confidential business information
(CBI). EPA anticipates that owners or
operators will claim some of the
information submissions required under
this rule as CBI. However, the Agency
believes that there are categories of
information required that will not be
CBI including, but not limited to,
identification of the type of financial
responsibility instrument used, the
amount of financial responsibility
required at a facility, the facility contact
information, failure of instrument
providers, an owner or operator entering
bankruptcy, claims made against the
owner or operator, or an owner or
operator’s request for release from
financial responsibility requirements.
To facilitate implementation of this
proposed rule, the Agency is
considering making Class
Determinations for certain types of CBI
information. EPA solicits comment on
the types of information that owners or
operators anticipate would be CBI, and
on the value of CBI Class
Determinations.
4. Initial Notification Requirement
(§ 320.5)
EPA is proposing to require owners or
operators subject to the requirements of
this rule to submit a notification form to
EPA. Owners or operators authorized to
operate on the promulgation date of this
rule would be required to submit the
initial notification form within thirty
days of the effective date of the final
rule. Owners or operators that become
authorized to operate after the effective
date of the final rule would be required
to submit the notification form and
comply with the requirements of this
proposed rule prior to beginning
operations
The notification form is specified in
proposed § 320.5. Owners or operators
would be required to provide, at a
minimum, the following information:
(1) The name, mailing address, and
location of the facility, (2) the facility’s
EPA ID number, if one has been
previously issued, (3) the name and
contact information for a contact person
for financial responsibility issues, (4)
the land type on which the facility is
located, (5) owner and operator
information, (6) and information about
the activities conducted at the facility.
Within thirty days of receiving the
notification form, EPA would issue an
EPA identification number to the
facility, if the facility has not yet
received one.
The requirement for this notification
form would serve several purposes
important to the implementation of
financial responsibility requirements
under this proposed rule. First, it would
E:\FR\FM\11JAP2.SGM
11JAP2
3406
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
allow EPA to identify the universe of
facilities subject to the rule. In addition,
it would assure that all facilities subject
to the rule receive an EPA identification
number, which will allow EPA to track
financial responsibility implementation
information. Finally, it would provide
EPA information about the facility that
EPA anticipates will be important for
effective rule implementation. The
Agency solicits comment on this
proposed notification requirement, on
the proposed notification form, and on
the timeframe for notification.
5. Information Submission
Requirements (§ 320.6)
This proposed rule would require that
owners or operators of facilities subject
to the rule submit information to EPA.
The Agency believes that submission of
the information proposed in this rule
would be needed for effective
implementation of CERCLA § 108(b)
requirements. By requiring the owner or
operator to submit information about
the facility to EPA, these requirements
would better enable the Agency to
ensure full compliance with the
requirements for financial responsibility
throughout the time the facility is
subject to those requirements.
Under § 320.5, owners and operators
would be required to submit an initial
notification form. The form would
provide EPA basic information about
the facility. The form can be found in
Appendix A of Part 320. EPA solicits
comment on the information required in
the form.
Owners or operators would further be
required to submit evidence of financial
responsibility. The precise submittal
requirements for each financial
instrument are described in subpart C.
Generally, owners or operators
demonstrating financial responsibility
using a surety bond would be required
to submit the surety bond to EPA.
Owners or operators using a letter of
credit would be required to submit the
letter of credit to EPA unless it is held
by a trustee, as provided in § 320.40, in
which case they would be required to
submit a certified copy. Owners or
operators using insurance would be
required to submit the endorsement.
Owners or operators using a trust
agreement (either a stand-alone trust or
a stand-by trust established for use with
another instrument) would be required
to provide a duplicate original. If the
final rule allows for the use of a
financial test and corporate guarantee,
owners or operators using the corporate
guarantee would be required to submit
a signed corporate guarantee, as well as
a letter from the Chief Financial Officer
(CFO letter), audited financial
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
statements, and agreed upon procedures
report, as required in § 320.44. Finally,
owners or operators using the financial
test, if allowed in the final rule, would
be required to submit the CFO letter,
audited financial statements, and agreed
upon procedures report, as required in
§ 320.43. In the case of the corporate
guarantee and the financial test, the
CFO letter, auditors report, and agreed
upon procedures report would be
required to be updated annually.
This proposal also requires
information submission to assure proper
maintenance of financial responsibility.
The precise submittal requirements for
each of the following are described in
§ 320.65. These requirements include a
requirement to update financial
responsibility amount calculations
every three years, at a minimum, and to
notify EPA of changes in the
information on the facility’s initial
notification form, facility transfer,
claims filed against the instrument or
owner or operator, intent to close the
facility, failure of an instrument
provider, instrument provider intent to
cancel, and owner or operator
bankruptcy.
Owners or operators are also required
to submit information that may vary
according to facility class. These
requirements will be specified in the
relevant Subparts to 40 CFR part 320,
but for clarity, those submission
requirements are also incorporated into
the general information submission
requirement in proposed § 320.6. Thus,
for example, owners and operators of
hardrock mining facilities must
calculate a financial responsibility
amount for their facilities using the
formula in § 320.66, and § 320.67
requires submission of information to
support that calculation, including data
inputs to the proposed formula to
determine a financial responsibility
amount, and documentation supporting
all data inputs and assumptions. Under
proposed § 320.6, this information must
be submitted to EPA.
The Agency solicits comment on
these information submission
requirements including comments on
the need for these requirements and
suggestions for additional information
that should be required under this rule.
6. Requirement for Electronic
Submission of Information (§ 320.7)
This proposed rule includes
information submission requirements
throughout the financial responsibility
process. These information submission
requirements include: (1) Initial
notification, (2) demonstration of
financial responsibility, (3) notifications
pursuant to financial responsibility
PO 00000
Frm 00020
Fmt 4701
Sfmt 4702
maintenance, (4) submission of a
financial responsibility amount and
support for the amount, and (5) request
for release from financial responsibility.
The Agency is proposing to require that
the submissions under this rule be in
electronic format.
a. Benefits of Electronic Reporting
Adopting electronic information
submission across its programs will
benefit the Agency, owners and
operators, and the general public.
Electronic information submission will
save Agency resources and improve data
quality by reducing the need for manual
data entry, and will help the Agency
manage environmental programs more
efficiently and effectively. EPA also
expects electronic information
submission to promote public
participation by facilitating EPA’s
ability to make information submitted
more readily accessible to interested
parties. In this respect, electronic
reporting can work in concert with
another requirement in the proposed
rule—that owners and operators have a
publicly-accessible Web site (see
Section VI.A.8. of this preamble). In
addition, electronic information
submission will reduce the time needed
for owners and operators to submit
information by eliminating the need to
print or mail forms, eliminate mailing or
courier fees, and allow members of the
regulated community to obtain
information about the status of their
submissions without requesting such
information from EPA by phone or mail.
Use of electronic forms should also
facilitate the effective submission of
required information. Owners and
operators may benefit through
integration of data entry error
prevention and compliance assistance
into the reporting tool. Namely,
electronic systems can provide
automatic data quality checks, such as
for improperly formatted addresses,
math errors, or significant changes in
cost estimates, and flag these for
correction, if needed, before submission.
A system can also provide automated
reminders and prompts (e.g., when
annual updates are due) to owners and
operators, and pre-populate forms with
information from prior reports. EPA
does not expect that these or other tools
that could be built into such a system
would guarantee compliance or be a
substitute for an owner or operator’s
own compliance assessment, since they
cannot account for every site-specific
situation, but EPA expects that such
tools will make it easier for owners and
operators to comply with the rules. It
can also facilitate communication
between EPA, owners and operators,
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
and instrument providers to
immediately address data quality issues
and to provide compliance assistance or
take other action when potential
problems are identified. Finally, the
system may also provide a way for
entities to maintain records supporting
financial responsibility compliance,
such as cost estimate documents.
This approach is also consistent with
the Agency’s 2013 E-Reporting Policy
Statement for EPA Regulations, which
reflects that, in developing new
regulations, EPA will assume that
reporting will be electronic and not
paper-based.49 As described by this
policy, e-reporting is not simply a
regulated entity e-mailing an electronic
copy of a document (e.g., a PDF file) to
the government, but a system in which
an electronic tool guides the regulated
entity through the reporting process,
often with built-in compliance
assistance and data quality checks. This
policy embraces the Digital Government
Strategy issued by the White House on
May 23, 2012,50 which calls for EPA to
continue evolving its reporting systems
to take advantage of new technology and
improve transparency for all of its
stakeholders.
Electronic reporting also is a key
component of the Next Generation
Compliance Strategy.51 EPA’s Next
Generation Compliance Strategy is an
integrated strategy to improve
regulations with new monitoring and
information technology and expanded
transparency.52 It is designed to
motivate the regulated community to
increase compliance, inform the public
about performance, and help ensure the
public has access to information about
their communities that allows them to
more fully engage in environmental
protection efforts.
sradovich on DSK3GMQ082PROD with PROPOSALS2
b. Financial Responsibility Portal
To realize these benefits, EPA is
considering development of a Financial
Responsibility Portal to collect
information relevant to the rule and to
serve as an electronic tool that guides
owners and operators through the
reporting and submission processes
with built-in compliance assistance and
data quality checks. EPA envisions that
this system would be a component of
49 See E-Reporting Policy Statement for EPA
Regulations (September 30, 2013), https://
www.epa.gov/sites/production/files/2016-03/
documents/epa-ereporting-policy-statement-201309-30.pdf.
50 https://www.whitehouse.gov/sites/default/files/
omb/egov/digital-govemment/digital-govemmentstrategy.pdf.
51 See https://www.epa.gov/compliance/nextgeneration-compliance-strategic-plan-2014-2017.
52 See https://www2.epa.gov/compliance/nextgeneration-compliance.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
EPA’s Central Data Exchange,53 or an
equivalent technical architecture. If the
Financial Assurance Portal is created
using Central Data Exchange, owners
and operators will be required to
establish an account with Central Data
Exchange in order to use the system.
Any electronic reporting system will
comply with subpart D of EPA’s CrossMedia Electronic Reporting Regulation
(CROMERR).54 CROMERR sets
performance-based, technology-neutral
standards for receiving electronic
reports from facilities regulated under
EPA programs to protect users and their
data.
EPA envisions that users would
access the portal through a Web form
based on Extensible Mark-up Language
(XML). EPA expects that XML schemas
and stylesheets, when combined with
XML enabled browsers, data bases, and
other applications are currently the
method of choice for conducting data
exchange using the Internet to transfer
and manipulate data.55 The Agency is
seeking comment on using an XML
format, or if another type of electronic
format, such as an Electronic Data
Interchange (EDI) would be preferable.
EPA also requests comment on the
estimated burden reduction if EPA
developed an option to submit
information electronically using a
system-to-system based approach using
Extensible Mark-up Language (XML)
through EPA’s Central Data Exchange.
Once the Financial Assurance Portal
is developed, EPA is proposing to
require that regulated facilities
electronically submit the following
categories of information through the
portal: (1) Initial notification form
required under § 320.5, (2) submission
of URL where CERCLA § 108(b)
information will be available, (3)
financial responsibility formula data
(upload documentation), (4) financial
responsibility instrument evidence, (5)
notification of change in financial
responsibility amount, (6) notification of
change in instrument, (7) notification of
claim filed against the instrument or
owner or operator, (8) notification of
closure, (9) request for release from
financial responsibility; and (10) notice
53 CDX is EPA’s electronic system for
environmental data exchange to the Agency. CDX
also provides the capability for submitters to access
their data through the use of Web services. CDX
enables EPA to work with stakeholders, including
governments, regulated industries, and the public,
to enable streamlined, electronic submission of data
via the Internet. For more information about CDX,
go to https://epa.gov/cdx.
54 see 40 CFR part 3.
55 EPA states a similar expectation in the Final
Rule for Hazardous Waste Manifest Revisions—
Standards and Procedures for Electronic Manifests
(79 FR 7517, Aug. 6, 2004).
PO 00000
Frm 00021
Fmt 4701
Sfmt 4702
3407
of owner or operator bankruptcy. In
addition, EPA is proposing to provide
for both paper and electronic
submission of the following notices
from instrument providers: (1) Notice of
cancellation (by provider), and (2)
notice of provider incapacity. Within
these categories, EPA expects that
certain types of information will need to
be submitted using different types of
electronic means, which are discussed
in detail in later sections.
In order to gain the full benefits of
electronic reporting, obtaining as much
information as possible in an electronic
format is preferable. At the same time,
the Agency is considering whether some
of the information submission
requirements of this proposed rule may
not be appropriate for electronic
information submission. For example,
some of the information submission
requirements proposed in this rule will
result in more frequent submissions to
EPA than will others. An example of
submissions that EPA expects to occur
more frequently relate to facility
conditions—every facility will have to
notify the Agency, and the notification
form will have to be updated to reflect
changed facility conditions. On the
other hand, other requirements may be
less frequent. For example, EPA’s
analysis of instrument providers
(conducted for purposes of evaluating
provider qualifications) indicates that
failures are relatively uncommon. Thus,
it is possible that few owners or
operators will have to submit
notification of instrument provider
failure. Where infrequent submissions
are likely, EPA expects that developing
an electronic form for that submission
may not have significant benefits. In
addition, there may be specific types of
documents (e.g., cost estimate data,
certain types of financial responsibility
instruments that may require wet ink
signatures) that cannot be submitted
electronically. The Agency solicits
comment on types of information that
are inappropriate for electronic
submission, including the reason they
may not be appropriate, and the burden
to the regulated community if electronic
submission of such information were to
be required. EPA also asks for comment
on which types of information
commenters believe should be highest
priority for EPA development of
electronic submission tools.
As EPA develops its data system, it is
considering technical issues associated
with its development as described later
in this section. EPA solicits comment on
how an electronic submission system
can be constructed to appropriately
capture submission of the categories of
information that EPA proposes to
E:\FR\FM\11JAP2.SGM
11JAP2
3408
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
require. Specifically, EPA requests
comment on whether specific technical
requirements are called for to support
data submission of the following
categories of information: (1) The
development of a financial
responsibility amount, (2) evidence of
financial responsibility, (3) updates to
the facility’s financial responsibility
information, (4) notice of closure of the
facility, and (5) submission of
instruments and cancellations,
including how to account for the
acceptance of originally signed financial
responsibility documents. EPA is also
seeking comment on the feasibility and
utility of developing tools within the
system that would assist users in
complying with reporting requirements,
such as the use of decision-trees to
determine if an entity is regulated,
checklists to ensure the proper form/
documents are submitted, or reminders
when reports or updated documents are
due.
c. Anticipated Format of Submissions
The electronic system envisioned by
EPA would have both mandatory and
optional data entry fields. Submissions
will not be processed until each of the
mandatory fields have data entered,
ensuring complete data entry before
final submission. Data entry fields are
expected to be a variety of drop down
lists, number fields, calendars, and open
test fields depending on the information
that is required. For example, the type
of activities occurring at the facility
could be chosen from a drop down list,
and the date of a facility’s last financial
responsibility amount calculation or
financial test submission could be
chosen from a calendar.
EPA expects these types of controls
on data input can result in reduced
errors. In turn this should provide
efficiencies by substantially decreasing
the time needed for EPA to review and
process the submissions, and the time
needed for the submitter to correct
deficiencies. As discussed earlier, EPA
is considering the ability to duplicate
previous submissions when seeking to
update or renew information. This will
simplify future submissions to only
those fields that require updates. To
address the issue of CBI (described in
§ 320.4) the Agency envisions
establishing a database that tags
information as public or confidential
upon receipt. This would allow the
system to then auto-populate an EPA
webpage to provide information not
identified as CBI to the public. EPA
solicits comment on this approach.
As discussed earlier, EPA would like
to make it possible for users to enter
some types of information through
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
electronic forms available in the Portal.
For example, EPA intends that the
following information would be entered
into the Financial Assurance Portal
using smart forms with data-entry boxes
that specify the exact information
needed: (1) Initial notification; (2)
website URL; (3) amount of financial
responsibility required; (4) amount of
financial responsibility secured; (5) type
of instrument; and, if the financial test
is used, credit rating, tangible net worth,
and assets in the United States; and (6)
instrument provider information (e.g.,
name, address, etc.).
EPA intends other submissions to be
accomplished through forms with
electronic signatures and verification:
(1) Financial responsibility instruments,
(2) certain information demonstrating
passage of the financial test, (3) notice
of a change in financial status if using
the financial test, (4) notice of
cancellation of a financial assurance
instrument, (5) notice of a claim against
the instrument, (6) notice of bankruptcy;
(7) notice of a change in instrument, (8)
notification of change in the amount of
financial responsibility required, and (9)
notice of incapacity of the instrument
provider. Where an electronic signature
is required, the proposal requires that
the signature be a legally valid and
enforceable signature under applicable
EPA and other Federal requirements
pertaining to electronic signatures.
EPA also expects that the user will
need to upload other information from
outside the system. EPA expects that
this information will need to meet
certain document requirements (e.g.,
downloadable, not encrypted, printable,
searchable, etc.). For this category of
documents, owners and operators
would be required to produce duplicate
originals of certain electronic filings
upon request by EPA. EPA expects that
the following information, if applicable,
may fall into this category: (1)
Information supporting the financial
responsibility amount determination, (2)
information to support a financial test
showing, for example financial
statements; the CFO letter; a CPA audit
of financial information; and an agreedupon procedures document; (3) annual
updates on trust properties and (4)
evidence of financial responsibility; and
(5) PDF copies of instruments that
cannot be submitted electronically.
The Agency solicits comment on
these expectations for information
submission format.
d. Access to the System
EPA envisions that owners or
operators will receive a password and/
or user identification number to access
the portal when they notify EPA that
PO 00000
Frm 00022
Fmt 4701
Sfmt 4702
they are a regulated entity. The system
will then assist owners or operators in
obtaining a unique user identification
number, similar to the electronic
interface that EPA has recently made
available for states and the regulated
community to use to electronically
submit RCRA Site Identification (Site
ID) forms, which are used by facilities
to notify regulators that they are
involved in RCRA waste activities. EPA
intends to establish an electronic
notification form for owners or
operators to comply with proposed
§ 320.5. EPA solicits comment on
whether instrument providers should be
given access to the Financial Assurance
Portal in order to submit notices to EPA
and to owners and operators as required
under this rule (e.g., notice of
cancellation). EPA solicits comment
from instrument providers specifically,
on whether they would use the
electronic system described to file their
notices electronically.
e. Beginning Electronic Reporting Once
Portal Developed
Because the Agency anticipates that
the Financial Assurance Portal will not
be available to receive submissions
when this rule is made final, the Agency
is proposing that owners or operators be
required to initially submit information
in paper format until the electronic
capability is available. Thus, EPA is
proposing to identify an electronic filing
compliance date in § 320.7(a). Because
that date is not currently known, EPA is
proposing to announce that date in the
Federal Registerat least sixty days in
advance. The Agency is further
proposing that after that compliance
date, owners or operators would be
required to submit information
electronically unless they apply for and
receive a waiver from electronic
reporting requirements under § 320.7(d).
This waiver provision is discussed in
more detail later in this section. The
Agency solicits comment on this
approach.
EPA is considering an alternative
approach under which electronic
reporting would be phased in over the
four-year compliance timeframe. EPA
would require the initial notification to
be submitted electronically, but would
roll out other electronic forms as parts
of the rule become effective or required
(e.g., the full amount of financial
responsibility is not required until four
years after the rule is promulgated). This
will give EPA time to complete and
fully test a number of the electronic
documents prior to requiring their use.
The disadvantage of this option is the
increased burden to industry of having
to print and mail paper documents,
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
along with the Agency’s burden of
manually entering data into its data
system. EPA is considering whether
such phasing may help ensure the
system is working effectively and
efficiently. Under this option, EPA
would similarly identify an electronic
filing compliance date for each phase in
future Federal Register notices in a
similar manner as described in the
proposed option described earlier. Also
similarly to the proposed option, the
facility would be required to submit
information in paper format until
electronic submittals are possible for
submission of the facility’s information,
and electronic filing would be subject to
waiver.
f. Proposed Waivers
As part of the proposal for mandatory
electronic reporting, the proposed rule
would provide two options through
which the Administrator could waive
the requirement for electronic
submission. EPA recognizes that there
may be some circumstances where it
may be necessary to provide for paper
reporting of information otherwise
required electronically, e.g., in areas
that lack sufficient broadband access,
during large-scale national disasters
(e.g., hurricanes) or prolonged electronic
reporting system outages, or to
accommodate the religious practices of
individuals that choose not to use
certain technologies (e.g., computers,
electricity) in accordance with their
religion. The Agency solicits comment
on situations where flexibility might be
required, and on what types of waivers
should be provided under this rule.
EPA has included both a general
waiver provision and an emergency
waiver provision in the proposed rule.
A general waiver could be granted to
owners or operators that cannot comply
with the requirement for electronic
submission. The owner or operator
would be required to submit a request
for a general waiver to the
Administrator at least thirty days in
advance of the date the information is
due to EPA. The Administrator could
grant a general waiver upon a finding
that: (1) The owner or operator is unable
to gain access to a system allowing
electronic reporting because it is located
in an area with insufficient broadband
access, or (2) religious practices of the
owner or operator prohibit the use of
necessary technologies. A general
waiver could be granted for one year,
and the owner or operator would be able
to reapply annually.
In addition, the Administrator could
grant a waiver of the requirements for
electronic submission in emergency
situations. To obtain an emergency
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
waiver, the owner or operator would be
required to submit a request within ten
days of the date the information is due
to EPA. The request for an emergency
waiver must describe the conditions
that prevent electronic submission of
information and must be accompanied
by a paper copy of the information due.
The Administrator may grant an
emergency waiver upon a finding that
the owner or operator was unable to
comply with the requirement for
electronic information submission due
to: (1) A large-scale national disaster
(e.g., hurricane), (2) a prolonged
electronic reporting system outage, or
(3) a prolonged outage of the owner’s
and operator’s computer system. The
Agency solicits comment on the
adequacy of these waiver provisions.
7. Recordkeeping Requirements
(§ 320.8)
EPA is proposing that owners or
operators be required to develop and
maintain a facility record that includes
information documenting compliance
with the financial responsibility
requirements of this proposed rule. The
facility record must include at least all
information required to be submitted to
EPA under this Part, comments received
from the public, and all notifications
received from EPA related to the
financial responsibility obligations of
the facility. The rule would require
owners or operators to maintain this
information until three years after the
Agency releases the owner or operator
from the requirement for financial
responsibility. EPA solicits comment on
these recordkeeping requirements.
8. Requirements for Public Notice
(§ 320.9)
EPA is proposing requirements for
public notice for owners and operators
subject to CERCLA § 108(b)
requirements. This approach will add
the benefit of transparency to
implementation of CERCLA § 108(b)
requirements. In addition, these
proposed requirements are consistent
with EPA’s commitment to assuring that
the public is aware of EPA’s Superfund
activities at sites, even when there may
not be an active Superfund action
underway.56 EPA believes that the
proposed requirements for public notice
would enhance the implementation of
the proposed rule in two respects.
First, such public notice would help
to ensure that the financial
responsibility formula is applied as
intended, so that the resulting financial
responsibility level reflects the degree
56 See Superfund Community Involvement
Handbook, 2005 page 5.
PO 00000
Frm 00023
Fmt 4701
Sfmt 4702
3409
and duration of risk at the facility. As
discussed in the financial responsibility
formula section of this preamble,
§ 320.63, the financial responsibility
formula is intended to be implemented
by owners or operators, rather than by
EPA. While EPA expects that in the vast
majority of cases the financial
responsibility formula will be applied
accurately, EPA believes that providing
information to the public can enhance
the incentives for owners and operators
to fully comply with regulatory
requirements. The reliance on public
notice as an incentive for compliance
under this proposal is consistent with
the 2010 guidance issued by the Office
of Management and Budget (OMB),
where that office recognized that the
public disclosure of information is an
increasingly common and important
regulatory tool.57
Second, the proposed rules are
structured to support CERCLA
responses undertaken by the Federal
Government, states, and private
parties—a structure that is consistent
with the CERCLA scheme. EPA is
proposing to require owners and
operators to make readily available to
the public information about the levels
of financial responsibility, information
on claims made, and information that
may relate to the continued validity of
the instruments—for example, any
notices of instrument cancellation by
providers. EPA believes that ready
access to this information will help
ensure that parties with CERCLA
claims, and parties potentially impacted
by the CERCLA claims of others, will
have the opportunity to monitor
changes in the facility’s financial
responsibility.
EPA is today proposing two
approaches for public notice
procedures. Under the first approach,
the owner or operator would be required
to maintain a web site to convey
information regarding its compliance
with the requirements of proposed part
320. Under the second, EPA would
provide information to the public on the
Agency’s Web site.
Under the first approach, owners and
operators would be required to post
information on a Web site created and
maintained by the owner and operator.
EPA is considering this approach
because, as those generating the
information, owners and operators are
in the best position to track information
about their facilities. In addition,
57 See United States Office of Management and
Budget. Sharing Data While Protecting Privacy.
Memorandum from Jeffrey D. Zeints and Cass R.
Sunstein. November 3, 2010. Available at: https://
www.whitehouse.gov/sites/default/files/omb/
memoranda/2011/m11-02.pdf
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3410
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
requiring owners and operators to
update information related to their
financial responsibility requirements
would eliminate lag times between
when the information is submitted to
EPA and when EPA can make that
information publicly available. Thus,
EPA expects that requiring owners and
operators to create and maintain their
own Web sites may be an efficient way
to ensure timely dissemination of
information related to CERCLA § 108(b)
financial responsibility.
The owner or operator would be
required to establish a Web site titled
‘‘CERCLA § 108(b) Financial
Responsibility Information’’ within
sixty days of the date it first becomes
subject to CERCLA § 108(b)
requirements to and provide EPA with
the URL of the location on its company
Web site where it will make information
available to the public about the
implementation of financial
responsibility requirements at the
facility.
EPA would be required, within thirty
days of receiving the URL, to post on its
Web site the facility name, company
EPA identification number, and the URL
where information will be made
available to the public by the owner or
operator.
The proposed rule would then require
the owner or operator to provide
information on its company Web site
beginning ninety days after the date it
becomes subject to requirements under
CERCLA § 108(b). The initial posting of
information must include the name and
contact information for a person that
can provide the public information
about the facility’s CERCLA § 108(b)
requirements. In addition to this
information, the rule would require the
owner or operator to make public at
least the following information: (1) Any
information that the owner or operator
is required to submit to EPA under this
proposed rule, and (2) notifications from
EPA to the owner or operator .
This approach would also establish
conditions for maintenance of the
information on the company Web site.
For example, § 320.9(e) would require
that the information be posted in a
location where a visitor to the Web site
would reasonably expect to see
announcement of issues related to
compliance with requirements of
CERCLA. In addition, that section
would require that the owner or
operator assure freely available access to
the information, and that the access not
be obstructed by complex access
processes or passwords. The Agency
believes these requirements are
necessary to assure meaningful access to
information.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
To assure that current information is
made available to the public, this
approach would require the owner or
operator to post all information
submitted to EPA within thirty days of
its submission. Thus, for example, the
rule would require the owner or
operator to submit to EPA the Initial
Notification Form required under
§ 320.5 within thirty days of the
promulgation date of this rule, and to
post that form on the company’s Web
site within thirty days of submitting it
to EPA. By requiring that the owner or
operator post information submitted to
EPA, the proposed rule will require that
the Web site information be updated at
key financial responsibility
implementation points including: (1)
When the level of financial
responsibility required at the facility is
initially determined and when it
changes, (2) upon application for release
from financial responsibility
requirements, (3) when a claim is made
on the instrument, (4) upon receiving
notification of cancellation of an
instrument, (5) upon transfer of
ownership of the facility, and (6) upon
submitting notice to a regulator of
closure of the facility. The Agency
believes that this approach will allow
the public or claimants the opportunity
to follow the implementation of
financial responsibility requirements
and the facility and be aware of changes
that occur.
Under the second approach proposed
in this rule, the owner or operator
would not be required to post
information on a Web site; rather, EPA
would make the required information
available to the public on the Agency’s
Web site.
EPA solicits comment on these
approaches to providing notice to the
public regarding the CERCLA § 108(b)
financial responsibility at a facility. EPA
particularly solicits comment on
whether the owner or operator should
be required to post information, what
information would be of most benefit to
the public in the implementation of
CERCLA § 108(b) financial
responsibility, and how the information
would be used for that purpose.
Class Determinations for Confidential
Business Information
As discussed in section VI.A.3. of this
preamble, some information that owners
and operators would be required to
submit under this proposed rule may be
claimed as CBI. This proposal would
not require or allow posting of CBI.
However, the Agency expects that much
of the information submitted to EPA
under the proposal would not be CBI,
and could be made available. EPA is
PO 00000
Frm 00024
Fmt 4701
Sfmt 4702
considering issuing a Class
Determination under 40 CFR 2.207
notifying parties how it intends to treat
information submitted under this rule.
The purpose of a Determination is to
state the Agency’s position regarding the
manner in which information within a
class will be treated when information
received by the Agency shares
characteristics and necessarily results in
identical treatment of the information.
EPA expects that a Class Determination
would clarify the Agency position on
what does and does not constitute CBI
under this rule. The Agency solicits
comment on this approach. In
particular, the Agency requests
information regarding what the
information that would be required
under this proposed rule might owners
or operators consider to be CBI.
Finally, EPA notes that it is planning
to develop a Financial Responsibility
Portal to receive and track financial
responsibility information. Ultimately,
when developed and populated, the
goal is for that system to auto-populate
an Agency public database and make
available to the public information
submitted under this rule. EPA solicits
comment on whether, when the EPA
public database becomes available, the
requirement for the owner or operator to
maintain a Web site should continue if
that requirement is adopted in the final
rule.
B. Subpart B—General Financial
Responsibility Requirements
This proposed rule is designed to set
up a regulatory program for multiple
classes of facilities. Thus, the proposed
rule includes several basic provisions
that are intended to be used in
conjunction with the class-specific
requirements in Subparts D–Z.
These requirements are intended to
guide the regulated community through
the general requirements to establish the
required evidence of financial
responsibility, and also provide
requirements that EPA anticipates will
be applicable to multiple facility
classes.
1. Applicable Financial Responsibility
Amounts and Procedures for
Establishing Financial Responsibility
(§ 320.20 and § 320.21)
EPA has included a general
requirement that owners and operators
calculate a current amount of financial
responsibility at their facilities in
accordance with this part. Because this
proposed rule also includes
requirements for hardrock mining
classes, proposed § 320.20 includes a
cross reference to Table A–1 in § 320.2,
which identifies the class-specific
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
requirements applicable to hardrock
mining facilities. Those class-specific
requirements are found in subpart H,
where the Financial Responsibility
Formula developed for those facilities is
proposed. Upon addition of future
classes to the CERCLA § 108(b) program,
EPA anticipates that additional cross
references will be added to Table A–1.
Each instrument included in the
proposed rule has its own particular
supporting information. The specific
instruments proposed in this rule are
further discussed in section VI.C.1. of
this preamble.
2. Maintenance of Instruments
(§ 320.22)
The proposed rule would require the
owner or operator to recalculate the
financial responsibility level three years
after the date the facility is required to
provide the full amount of financial
responsibility at its facility under
§ 320.61, every three years thereafter,
and within sixty days after every
successful claim against a CERCLA
§ 108(b) financial responsibility
instrument. The recalculation must use
the most current facility information
available. The owner or operator must
submit the revised financial
responsibility amount to EPA, along
with supporting documentation.
Whenever the required financial
responsibility amount changes, the
owner or operator would be required to
compare the new amount with the value
of the financial responsibility
instrument(s). If the resulting amount of
financial responsibility required is
greater than the amount of financial
responsibility provided by the current
CERCLA § 108(b) financial
responsibility instrument(s), the owner
or operator, within sixty days after the
change in the required financial
responsibility amount, would be
required to increase the value of the
instrument(s), or obtain a new
instrument(s), in accordance with
Subpart C, so that the value of the
instrument(s) is at least equal to the
newly required financial responsibility
amount. This proposed provision
ensures that adjustments to the required
level are made promptly.
Conversely, if the resulting amount of
financial responsibility required is less
than the amount of financial
responsibility provided by the current
CERCLA § 108(b) financial
responsibility instrument(s), the owner
or operator may send a written request
to the Regional Administrator to lower
the required financial responsibility
amount at the facility. The request must
include updated information to support
the revised financial responsibility
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
amount as required in § 320.22. The
amount of financial responsibility
required at the facility would be
reduced to the recalculated amount only
with written approval by the
Administrator.
This provision would ensure that the
owner or operator first receive approval
from EPA that the financial
responsibility may be lowered, which
provides a check against improper
implementation of the requirements.
Furthermore, under the proposed
wording of the trust agreement, EPA
would need to provide notification to
the trustee that funds may be released
(see § 320.50(a)).
This proposed requirement is
intended to ensure that the amount of
financial responsibility at the facility
continues to reflect the level of risk at
the facility. EPA recognizes that facility
conditions and operations may change
over time, or that new information may
be available that may affect the amount
of financial responsibility required. EPA
thus is proposing a three-year periodic
recalculation of the required financial
responsibility amount to ensure the
amount reflects the current risk at the
facility. EPA expects that three years
was a frequent enough requirement to
provide current information while not
overly burdening owners, operators and
EPA with a more frequent
implementation of the recalculation
requirements. EPA requests comment on
requiring recalculation of the amount of
financial responsibility every three
years.
Furthermore, EPA recognized that
claims against the instrument may be
successfully made that would
correspondingly reduce the amount of
financial responsibility at the facility. In
some cases, the claims may be the result
of responses that lower the risk at the
facility. However, this is not expected to
always be the case. Accordingly, EPA
believes it is necessary for owners and
operators to recalculate the required
amount of financial responsibility after
successful claims against the CERCLA
§ 108(b) financial responsibility
instruments in order to compare the
new required amount to the remaining
financial responsibility at the facility.
3. Incapacity of Owners or Operators,
Guarantors, or Financial Institutions; or
Instrument Cancellation (§ 320.23)
Under this proposed rule, an owner or
operator would be required to notify the
Administrator by certified mail of the
commencement of a voluntary or
involuntary proceeding under Title 11
U.S.C. (Bankruptcy), naming the owner
or operator as debtor, within ten days
after commencement of the proceeding.
PO 00000
Frm 00025
Fmt 4701
Sfmt 4702
3411
[Option 2 only: A guarantor of a
corporate guarantee would be required
to make such a notification if he is
named as debtor, as required under the
terms of the corporate guarantee. Those
requirements are discussed in section
VI.C.5. of this preamble.]
This provision is modeled after a
similar requirement in the requirements
for hazardous waste treatment, storage,
and disposal facilities at 40 CFR part
264 and 265. EPA believes it is
important for EPA to be made aware of
the owner or operator entering
bankruptcy, as that event may have
implications for the owner’s or
operator’s ability to meet financial
obligations under CERCLA. Likewise,
EPA believes it is important for the
Agency to be aware of situations where
a guarantor of a corporate guarantee is
entering bankruptcy as it may have
implications for the guarantor’s ability
to meet financial obligations under the
guarantee.
An owner or operator who
demonstrates CERCLA § 108(b) financial
responsibility for CERCLA liabilities by
obtaining a trust fund, surety bond,
letter of credit, or insurance policy
would be deemed to be without the
required financial responsibility in the
event of bankruptcy of the trustee or
issuing institution, or a suspension or
revocation of the authority of the trustee
institution to act as trustee or of the
institution issuing the surety bond,
letter of credit, or insurance policy to
issue such instruments. The owner or
operator would be required to provide
other evidence of financial
responsibility within sixty days after
such an event. This provision is also
modeled on existing RCRA Subtitle C
requirements. As with those regulations,
EPA expects that this requirement will
make clear what must be done by the
owner or operator when the institution
providing trustee services or issuing a
bond, letter of credit, or insurance
policy goes bankrupt or loses its
authority to act as a trustee or issue such
instruments.
4. Notification of Claims Brought
Against Owners, Operators, or
Guarantors (§ 320.24)
The owner or operator would be
required to notify the Regional
Administrator by certified mail, within
ten days of a CERCLA claim being filed
against the owner or operator or
financial responsibility guarantor. The
proposed rule also requires that this
notification include certain key
information: a copy of any papers filed
by the claimant with a court, or other
information allowing the Regional
Administrator to identify the court, case
E:\FR\FM\11JAP2.SGM
11JAP2
3412
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
name and number, and parties. This
notification requirement would apply to
owners or operators regardless of the
instrument they have elected to use.
This proposed notification requirement
is important because EPA will not, in
many cases, be involved in the claims
process against a financial responsibility
instrument. It is appropriate for EPA to
monitor potential claims because claims
made may affect the adequacy of the
instrument provided under the
regulations, because those claims may
reduce the amount available to below
that which is required for that facility
class. In addition, EPA is also proposing
these requirements to apprise the
Agency of potential issues at a site that
could ultimately lead to EPA or another
governmental agency having to take a
response at the facility. This provision
thus helps the CERCLA § 108(b)
requirements support the broader
CERCLA response program.
5. General Provisions on Instrument
Payment
In this section of the preamble EPA
discusses generally the key payment
methods that are associated with each
instrument. Proposed Subpart B does
not contain corresponding language.
Instead, this is contained in Subpart C
of the proposed regulations, in the
required wording of each instrument.
Instead of addressing these
considerations multiple times, however,
EPA is presenting its approach to these
common provisions once in this section
of this preamble.
Under this proposed rule, the funds
from all types of financial responsibility
instruments except the financial test
would be available under three
circumstances and also under direct
action scenarios. In essence, EPA has
sought to allow for maximum flexibility
in how the instruments pay out through
the payment terms. EPA believes this
approach will help integrate the
operation of the CERCLA § 108(b)
instruments into the various CERCLA
enforcement and cleanup processes and
therefore will efficiently support the
goal of ensuring that funds be made
available for the payment of CERCLA
response costs, health assessment costs,
and natural resource damages.
It is EPA’s intent that each payment
term as well as direct action be available
independently of one another, and
claimants may use any or any
combination of the terms as the
circumstances dictate. Similarly, use of
one payment term by a particular
claimant would not prevent its reuse or
use of another payment term by another
claimant. Again, this is to maximize
flexibility in the manner in which the
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
instruments can be payable, to promote
the goal of ensuring cleanup while
avoiding unnecessary litigation over
whether the instruments are in fact
payable. EPA seeks comment on these
proposed payment terms.
a. Payment of an Unsatisfied CERCLA
Judgment
Under this proposed rule, the
financial responsibility instruments
would be available to pay a final
judgment from a Federal court awarding
CERCLA response costs, health
assessment costs, and/or natural
resource damages associated with the
facility against any of the current owner
or operators for which payment as
required by the judgment has not
otherwise been made within thirty days.
This is intended to cover all types of
CERCLA actions, including those under
CERCLA §§ 107 or 113(f). This is also
intended to cover judgments in favor of
both governmental claimants (e.g., EPA
or another Federal agency, a state, or an
Indian tribe) as well as private
claimants. EPA solicits comments on
this approach.
EPA is requiring that the claim be
reduced to a final judgment under this
payment term for two reasons. First, this
provision provides court oversight to
ensure the validity of the claims. This
is important because EPA or another
regulatory agency may not be directly
involved in a particular cleanup.
Second, the requirement to present a
valid final court judgment may help
alleviate concerns of potential
instrument providers about instruments
that could pay to multiple potential
claimants. In discussions with
representatives of the financial industry,
certain representatives expressed
concern that the availability of the
instruments to multiple claimants
would either: (1) Raise the risk to the
instrument provider of fraudulent
claims, or (2) increase the potential
claims management and investigation
costs of determining which claims are
valid. While the preferred option of
several representatives of the financial
community was to have EPA specified
as the beneficiary of the instrument,
EPA had concerns with such an option
in the context of CERCLA § 108(b) (see,
for example, discussion in Section
VI.C.1. of this preamble in the section
titled ‘‘two letter of credit
constructions’’). Representatives did,
however, express greater comfort at a
court having first ordered payment as
that would limit the prospect for
fraudulent or specious claims against
the instruments. Further, having an
objective documentary payment trigger
limits the amount of due diligence
PO 00000
Frm 00026
Fmt 4701
Sfmt 4702
required on the part of the instrument
provider.
This payment provision also requires
that the party may only make a claim if
they have not recovered or been paid
the funds from any other source. This is
intended to provide further assurance to
providers and current owners and
operators that the claims are valid and
that the claimant is not being paid twice
for the same costs or damages.
It should be noted that EPA does not
intend for this provision to displace the
standard manner in which CERCLA
claims are brought and resolved outside
of the CERCLA § 108(b) instrument.
Claims can continue to be asserted
against the owner and/or operator in the
first instance, and EPA expects that in
most instances, the owner or operator
would pay the claim itself, without
resort to the instrument.58 Indeed, EPA
expects owners and operators to
continue to do so to the extent they are
able, in order to avoid the costs incurred
in drawing upon the instrument which
in many cases would result in the
provider seeking to recoup those costs
from the owner or operator. For
example, were a successful third-party
CERCLA claimant to make a draw on a
CERCLA § 108(b) letter of credit, the
owner or operator would be obligated to
pay the financial institution that issued
the letter of credit for the amount paid
under the instrument. Owners or
operators also have an obligation to
reimburse the issuer of a surety bond for
payment made in accordance with the
terms of the bond. The surety bond
issuer’s right to reimbursement helps to
ensure that it is the owner or operator
rather than the issuer of the surety bond
that ultimately bears the cost of
fulfilling the CERCLA obligations owed
to the claimant. However, should the
owner or operator fail to satisfy the final
judgment, the instruments are
structured to become available to the
claimant within thirty days. EPA
identified this time period based upon
current EPA settlement practice which
typically provides thirty days for
performance to occur. EPA believes it
provides adequate time for payment to
occur while not providing more time
than under a settlement scenario which
may create a disincentive to settle. In
this role, the financial responsibility
instruments serve as a backstop to help
assure that recovery will be successful.
58 Similarly, provision of financial responsibility
under CERCLA § 108(b) by an owner or operator
would not affect a party’s ability to make CERCLA
claims against other potentially responsible parties
at a site.
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
b. Payment for a CERCLA Settlement
With the Federal Government
Under this proposal, the financial
responsibility instruments also would
be available to pay for a CERCLA
settlement with agencies of the Federal
Government, including but not limited
to administrative settlements and
consent decrees. Specifically, the
instruments provide for payment to the
Administrator or another authorized
Federal agency if payment has not been
made as required by a CERCLA
settlement associated with the facility
with a current owner or operator. EPA’s
current CERCLA model settlements
often include a financial responsibility
component to ensure that funds are
available, should the respondent fail to
perform. EPA expects that future
settlements could rely on an owner or
operator’s CERCLA § 108(b) instrument
for this purpose if the settling parties
agreed to employ the instrument in this
manner. EPA expects to review and, if
necessary, modify its existing models to
account for the possibility that CERCLA
§ 108(b) instruments could be used to
assure the work required by future
settlements. Additionally, some
settlements are structured on a ‘‘cash
out’’ basis, where the respondent is not
doing work, but is instead resolving
liability as a lump-sum payment to the
United States. EPA’s intent is for this
payment term to function in any of
these settlement scenarios. Such
payments, in the case of settlements
with EPA, would be expected to be
made into the Superfund and/or a
CERCLA special account.59 For
settlements with other Federal
government agencies acting pursuant to
delegated CERCLA authority, such as
the Bureau of Land Management, the
payments would be made pursuant to
the terms of the settlement.
Again, EPA does not intend for this
provision to displace the standard
manner in which CERCLA claims are
brought and resolved outside of the
CERCLA § 108(b) instrument. Federal
agency claims may continue to be
asserted against the owner and/or
operator, where appropriate, and the
parties would remain free to settle those
claims as they determine appropriate
under the circumstances. EPA expects
that in most instances, the owner or
operator would make the payment
required in the settlement directly, in
order to avoid the costs incurred in
59 EPA retains money received through
settlements with potentially responsible parties in
site-specific ‘‘special accounts’’ to conduct planned
future cleanup work at a site based on the terms of
a settlement agreement. These special accounts are
sub-accounts within the Superfund.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
drawing upon the instrument which
may result in the owner or operator
incurring costs as discussed earlier.
However, should the owner or operator
fail to make payment as provided in a
settlement, the instruments are
structured to become available for
payment to (an) authorized Federal
government agency(ies).
EPA is proposing including this term
for several reasons. First, the Agency
intends to make express provision for
settlement accomplished under direct
Federal oversight to assure that any
necessary response actions are
completed in a manner that protects
human health and the environment.
Such a provision would provide the
flexibility for payment into special
accounts under CERCLA § 122(b)(3),
when appropriate as determined in the
particular settlement, in order to
provide an avenue for settlement funds
to be used at a particular site. This
provision also would allow for money
recovered by the Federal Government to
be deposited back into the Superfund
Trust Fund under 26 U.S.C. 9507(b).
EPA expects that this payment term
would therefore provide a further
incentive for owners and operators to
undertake necessary CERCLA response
actions at their sites or otherwise settle
their liabilities without protracted
litigation, even where their ability to
pay for such a settlement would
otherwise be limited. In this role, the
instruments would help promote the
goal of CERCLA § 108(b) to support
CERCLA’s ‘‘polluter pays’’ principle.
As noted earlier, this payment term is
independent of other payment terms.
Thus for example, in the absence of any
settlement, the instruments could be
made available upon obtaining a
CERCLA judgment. Similarly, this
would not affect settlements between
non-Federal parties and owners and
operators. Such settlements could also
proceed under the payment term
discussed in the previous subsection,
but would require court approval and
reduction to a CERCLA judgment for
costs. EPA solicits comment on this
approach.
c. Payment Into a Trust Fund
Established Under a Unilateral
Administrative Order
This proposal would also allow the
financial responsibility instruments to
pay into a trust fund established
pursuant to a unilateral administrative
order under CERCLA § 106(a) under
certain circumstances. Specifically,
under the proposal, the Administrator
or another Federal agency may make a
claim against the instrument requesting
payment into a trust fund established
PO 00000
Frm 00027
Fmt 4701
Sfmt 4702
3413
pursuant to a CERCLA unilateral
administrative order issued to a current
owner or operator if performance at the
facility as required by the order had not
occurred. The proposed rules also
provide that the Administrator or
another Federal agency may only make
the claim against the instrument if the
owner or operator has provided a
written statement that the instrument
may be used to assure the performance
of the work required in the order.
These provisions of the proposed rule
are intended to complement existing
EPA model orders. Under EPA’s existing
models, EPA requires recipients to
provide evidence of financial
responsibility to ensure that funds will
be available to complete the work,
should the recipient fail to perform as
required under the unilateral
administrative order. In essence, the
owner or operator chooses the
instrument to comply with the financial
responsibility provisions of the order.
EPA expects to review and, if necessary,
modify its existing model administrative
orders to account for the possibility that
CERCLA § 108(b) instruments could be
used to assure the work required by
future unilateral administrative orders.
EPA believes that this approach would
provide owners and operators the
maximum amount of flexibility to use
the CERCLA § 108(b) instrument, should
they become subject to a unilateral
administrative order.
d. Payment Through the Direct Action
Provision
Finally, CERCLA § 108(c)(2) contains
a ‘‘direct action’’ provision, under
which claims can be brought against the
guarantor, instead of against the owner
or operator, as in the case of the other
payment triggers discussed earlier.
CERCLA § 108(c)(2) generally provides
that any claim authorized by CERCLA
§§ 107 or 111 may be asserted directly
against the provider of the financial
responsibility instrument in situations
where the owner or operator is in
bankruptcy or is unavailable. In
addition, CERCLA § 108(d)(1) generally
provides that the total liability of any
guarantor in a direct action suit is
limited to the aggregate amount of the
monetary limits of the policy of
insurance, guarantee, surety bond, letter
of credit, or similar instrument obtained
from the guarantor by the person subject
to liability.
The proposed CERCLA § 108(b)
instruments are intended to account for
direct actions authorized by these
provisions. Where an owner or operator
is bankrupt or unavailable, there is
uncertainty around a claimant’s ability
to obtain a judgment. Thus, the ability
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3414
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
to take direct action against the financial
responsibility instrument may be
critical for assuring that funds will be
made available for necessary cleanup.
The direct action provisions of the
statute received attention during
meetings EPA held with representatives
of financial institutions that provide
financial instruments or services being
considered for use in the proposed rule.
Information on these meetings is
available in the docket for this proposed
rule (Docket No. EPA–HQ–SFUND–
2015–0781). Specifically, EPA asked
representatives how the direct action
provision may affect their willingness to
provide instruments for the CERCLA
§ 108(b) rule. Financial industry
representatives indicated that providers’
willingness to issue instruments was
impacted by the availability of direct
action and the potential scope of
claimants, although to varying degrees
across the instruments. With the
exception of insurance providers,
financial instrument providers
expressed some degree of aversion to
the direct action provision.
Representatives of the insurance
industry informed the Agency that the
industry is familiar with direct action
because it is required under some state
insurance laws. Insurance providers
indicated that direct action would not
generally have an effect on market
participation.
Representatives from the surety
industry had a mixed reception to the
direct action provision. Sureties
typically have some ability to step into
the shoes of the owner or operator to
perform or fulfill the obligation insured
by the bond. Sureties have experience
stepping into the shoes of an owner or
operator and thus had some level of
comfort in assuming the owner or
operator’s responsibilities in negotiating
a settlement for CERCLA response costs,
health assessment costs, and natural
resource damages on behalf of the
facility. However, surety representatives
were concerned about the risk of direct
action attracting class action suits and
suits from environmental groups who
did not have valid claims. The
representatives also communicated
concern over legal fees incurred in
responding to numerous invalid suits.
Members of the banking community
who issue or are expert in letters of
credit or serve as trustees expressed
great concern about the direct action
provision. Letter of credit specialists
asserted that direct action would be out
of the realm of the typical
responsibilities of a bank providing
letters of credit. In fact, EPA was told
that banks in their role as issuers of
letters of credit can only be subject to
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
suit if they do not complete the
obligation to pay according to the
specifications of the letter of credit.
Banking institutions that serve as
trustees expressed that trust institutions
would not participate in a program
where the institution can be subject to
any liability. Trustees also
communicated that there is a distinction
between a trust and the trustee—the
trust itself holds the financial assurance,
whereas the trustee executes the trust
agreement in order to manage the
instrument. Following this argument
trustees suggested that the trust itself
might qualify as a CERCLA ‘‘guarantor’’
and therefore direct action could be
applied against the trust itself. Trustees
stated that the possibility of liability on
the trust institution would greatly and
negatively impact their participation in
providing trustee services to facilities
subject to the proposed rule.
While the ability to bring a direct
action against a guarantor is created by
the statute itself, EPA has nonetheless
sought to address the major issues
raised by the financial community to the
extent possible, in development of the
proposed rules. EPA has included
language in the instruments that mirror
the terms of the direct action provision,
specifically referring to claims
authorized by CERCLA §§ 107 or 111.
EPA has also sought to lessen the
perceived barriers for participation of
banks issuing letters of credit and
trustee institutions acting as guarantors.
Specifically, EPA is proposing two
structures for use of a letter of credit—
first a letter of credit payable directly to
claimants, and second a letter of credit
held and managed by a trust fund. The
owner or operator could choose either
option. In the second arrangement the
trustee would have direct access to draw
on the letter of credit to satisfy the
claims. EPA intends for this
arrangement to address concerns about
direct action claims for letters of credit,
because claimants would bring those
claims to the trust fund holding the
letter of credit, instead of the letter of
credit provider. In addition, EPA has
structured the trust fund instrument
with the express intent that direct action
would be taken against the trust fund
itself, not the trustee. This is intended
to address concerns about potential
trustee liability from their role as trustee
under the trust agreement. Section 3 of
the proposed trust agreement states
explicitly that the trust Grantor and
Trustee do not intend for the Trustee to
qualify as a ‘‘guarantor’’ as that term is
used in CERCLA §§ 101(13) and
108(c)(2), and therefore intend that the
Trustee will not be subject to a direct
action by Trustee’s agreement to act as
PO 00000
Frm 00028
Fmt 4701
Sfmt 4702
Trustee for the trust fund. The proposed
trust agreement further states that the
Grantor and Trustee intend for the trust
fund to qualify as a ‘‘guarantor’’ as that
term is used in CERCLA §§ 101(13) and
108(c)(2), and therefore intend that only
the trust fund will be subject to any
direct action brought pursuant to
CERCLA § 108(c)(2). The trust
agreement provides further that any
claim authorized by §§ 107 or 111 of
CERCLA may be asserted directly
against the trust fund as provided by
CERCLA § 108(c)(2) subject to the
limitations in CERCLA § 108(d). Standalone, funded trusts are structured
similarly. The proposed structure of the
trust fund is discussed in more detail in
VI.C.6 of this preamble. EPA seeks
comment on the effectiveness of this
structure for the proposed trust and
letter of credit to increase the likelihood
that a bank or trustee institution will
issue letters of credit or agree to be a
trustee under the proposed regulations.
EPA recognizes that the direct action
provision is an important and
potentially unfamiliar feature to
potential instrument providers, and the
Agency requests comment on how its
function in practice may affect the
availability of instruments.
6. Facility Transfer (§ 320.25)
This proposed rule would require that
the owner or operator subject to the rule
maintain financial responsibility in
accordance with part 320 upon transfer
of ownership, in whole or in part, to a
new owner, or upon transfer of
operations to a new operator, until the
Administrator releases the previous
owner or operator. EPA would provide
a release to the former owner or operator
upon the new owner or operator’s
demonstration of financial
responsibility in accordance with this
proposed rule.
These requirements assure continuity
of financial responsibility coverage and
prevent circumvention of the
requirements by changes in facility
ownership or operation. The
Administrator’s release of the old owner
and operator would not affect the old
owner’s and operator’s liability under
CERCLA, only their responsibility to
maintain financial responsibility for the
facility under Part 320. EPA solicits
comment on these requirements.
7. Notification of Cessation of
Operations (§ 320.26)
Section 320.26 requires a facility
owner or operator to notify the
Administrator thirty days prior to either
the date the facility will no longer be
authorized to operate or the date the
owner or operator is required under
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
another applicable regulatory program
to notify the relevant regulatory
authority that the facility is ceasing
operations, whichever is earlier. This
requirement provides EPA notice of
upcoming changes at the facility that
will likely affect the level of required
financial responsibility under CERCLA
§ 108(b). EPA solicits comment on this
requirement.
The proposed rule provides that
CERCLA § 108(b) requirements continue
until EPA releases the owner or operator
from such obligations. Thus, closure of
a facility would not, in and of itself,
trigger release from requirements under
proposed part 320. Owners or operators
of closed facilities would be required to
maintain financial responsibility
instruments until CERCLA § 108(b)
obligations are released by EPA. In
developing this proposed rule, the
Agency has considered whether some
financial responsibility instruments
might be better suited than others where
the owner or operator no longer is
operating the facility. For example, EPA
has considered whether owners or
operators should be able to continue to
use a financial test to provide financial
responsibility where they are no longer
operating the facility, or whether
financial responsibility should be
converted to a trust instrument at
facilities where obligations continue
after the facility ceases operation. EPA
has not identified any reasons to restrict
the options for instruments, and is
therefore proposing that the same
instruments available to owners and
operators of operating facilities would
continue to be available to owners and
operators of facilities that cease
operation. However, EPA solicits
comment on the reliability of
instruments where an owner or operator
is no longer operating a site.
8. Release From Financial
Responsibility Requirements (§ 320.27)
Under this proposed rule, owners or
operators and operators subject to
CERCLA § 108(b) requirements under
part 320 would remain subject to those
requirements until released by EPA.
Thus, those obligations would continue
regardless of the operating status of the
facility.
Proposed § 320.25 discussed earlier
provides for release of the owner or
operator from its obligations under part
320 upon transfer of ownership of the
facility, or transfer of operations of the
facility, where the new owner or
operator provides evidence of financial
responsibility that satisfies the
requirements of this proposed rule.
Where release from the regulations is
not accompanied by a transfer of the
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
3415
regulatory obligation to maintain
CERCLA § 108(b) financial
responsibility, EPA is proposing a
different process that reflects the final
nature of the determination. EPA also
explains the importance of this
determination in its discussion of the
public involvement requirements in
proposed § 320.9.
Proposed § 320.27 provides that the
owner or operator may petition to be
released from its CERCLA § 108(b)
obligations by submitting a request to
the Administrator. The request must
include evidence demonstrating that the
degree and duration of risk associated
with the production, transportation,
treatment, storage and disposal of
hazardous substances is minimal. The
opportunity provided in § 320.27 is not
intended to provide for adjustments of
financial responsibility levels, but is
intended to be limited to decisions to
release the owner or operator from
CERCLA § 108(b) requirements. Thus,
owners or operators that cannot
demonstrate minimal levels of risk at
the facility would not be eligible to
petition the Agency under this
provision. A demonstration of minimal
levels of risk at the facility is important
because following the owner’s and
operator’s release from the CERCLA
§ 108(b) requirements financial
responsibility would not be available if
needed at a later date. Upon receiving
such request, proposed § 320.27
provides that the Administrator would
evaluate facility information, including
the information submitted by the owner
or operator, regarding the degree and
duration of risk associated with the
production, transportation, treatment,
storage, and disposal of hazardous
substances at the facility, and make a
determination regarding the owner or
operator’s request.60
If the Administrator determines that
the degree and duration of risk
associated with the production,
transportation, treatment, storage, and
disposal of hazardous substances at the
facility is minimal, and that the facility
should therefore be released from
CERCLA § 108(b) requirements, the
Administrator would follow the
procedures described in § 320.9 to
involve the public in the decision.
Under those procedures, EPA would
post the draft decision on the Agency’s
Web site, provide the public
opportunity to comment on the
decision, and post the Agency’s final
decision, and response to comments
received, on the EPA Web site.61
If, on the other hand, the
Administrator determines that the
degree and duration of risk associated
with the production, transportation,
treatment, storage, and disposal of
hazardous substances is not minimal,
the Administrator would not release the
owner or operator from the requirement
to maintain financial responsibility in
accordance with this part. Section 320.9
provides that upon a finding that the
owner or operator should not be
released from financial responsibility
requirements, the Administrator would
provide notice of the Agency’s final
decision, and response to comments
received, and will provide the owner or
operator with written notice of its
decision. EPA is considering whether to
make these available through EPA’s
Web site, or alternatively through
traditional Federal Register notices.
EPA solicits comment on this approach,
and method of public notice.
The Agency is proposing not to
initiate a public involvement process in
cases where the Agency decides to deny
the request of the owner or operator to
release its financial responsibility
obligation. In these cases, the obligation
to maintain financial responsibility
continues, and thus continues to be
available should CERCLA liabilities
arise. Thus, EPA does not see any
benefit for public comment in these
situations. EPA solicits comment on this
approach.
EPA is proposing a site-by-site
evaluation of facility risk for decisions
to release an owner or operator from
CERCLA § 108(b) requirements for a
number of reasons. First and foremost,
EPA has not identified a set of
circumstances that if followed, would
allow it to determine on a national basis
that every facility across the country
would demonstrate a minimal degree
and duration of risk. Moreover, EPA has
substantial experience making
individualized determinations of site
risk, as this practice is consistent with
EPA’s practice under the Superfund
program, for example, in selecting
remedies under the NCP. EPA solicits
comment on the proposed approach to
releasing owners or operators from
CERCLA § 108(b) financial
responsibility requirements.
The proposed rule also provides that
owners or operators may petition the
Administrator for a renewed
determination regarding its continued
60 Note that the proposed rule does not limit the
ability of the Administrator to take other measures
(for example, under the authority of CERCLA § 104)
if appropriate, to obtain relevant information.
61 It should be noted that any release from
CERCRA § 108(b) obligations does not affect the
ability of the Federal Government to make a
CERCLA claim.
PO 00000
Frm 00029
Fmt 4701
Sfmt 4702
E:\FR\FM\11JAP2.SGM
11JAP2
3416
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
requirement to maintain financial
responsibility. The Administrator will
consider a petition for a renewed
determination only when it presents
new and relevant information not
previously considered by the
Administrator.
While beyond the scope of this
rulemaking, EPA notes in the interest of
transparency that EPA and the owner or
operator might, in some cases, elect to
enter into a CERCLA settlement
regarding the facility. The work
provided for in such a settlement,
depending upon its scope, may provide
the basis for a renewed determination
by the agency that results in a release
from part 320.
Finally, EPA recognizes that in some
instances, facilities may be located in
locations under the jurisdiction, custody
or control of another Federal agency. In
that instance, EPA will work with the
other agencies to gather the necessary
information for it to make a
determination on whether to release an
owner or operator from the
requirements of part 320.
C. Subpart C—Available Financial
Responsibility Instruments
Under this proposed rule, an owner or
operator would have to establish
financial responsibility by obtaining one
or a combination of mechanisms as
specified in proposed subpart C.
CERCLA § 108(b)(2) states that
‘‘financial responsibility may be
established by any one, or any
combination, of the following:
Insurance, guarantee, surety bond, letter
of credit, or qualification as a selfinsurer. In promulgating requirements
[under CERCLA § 108(b)], EPA is
authorized to specify policy or other
contractual terms, conditions, or
defenses which are necessary, or which
are unacceptable, in establishing such
evidence of financial responsibility in
order to effectuate the purposes of
[CERCLA].’’
EPA is proposing to establish required
wording for all of the instruments
(including the financial test and
corporate guarantee) for several reasons.
By specifying the instrument terms, EPA
reduces the administrative burden to the
Agency of reviewing the wide range of
potential instrument wording that may
otherwise be employed. EPA does not
wish to create a situation where
resources that otherwise would have
been devoted to cleanups would be
expended reviewing the myriad possible
instrument constructions. EPA is also
specifying the terms of the instruments
so that they operate in a manner that
integrates the CERCLA § 108(b)
instruments into the overall CERCLA
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
scheme and are uniformly enforceable
by the Agency or other parties seeking
compensation for costs and damages.
Third, EPA’s RCRA Subtitle C, subpart
H financial assurance requirements (see
40 CFR 264.151) similarly specify the
required wording of the instruments and
EPA has found this to be a beneficial
feature. Fourth, EPA has received
comment as it developed this proposal
from stakeholders that the RCRA
Subtitle C instruments are wellunderstood by regulated entities and the
financial industry. Without nationallyconsistent provisions, EPA does not
expect that a similar familiarity with the
CERCLA § 108(b) regulations would be
as likely to develop.
Those same commenters suggested
that EPA use the RCRA Subtitle C
regulations as the basis for its proposed
CERCLA § 108(b) instruments because
those instruments are well-developed
and understood by regulators, the
regulated community, and the financialservices industry. This proposal does in
fact use the instruments specified in the
RCRA Subtitle C, subpart H regulations
as the model from which EPA
developed its proposed CERCLA
§ 108(b) instruments, in part, for that
reason.62 EPA discusses particular
provisions adapted from these RCRA
regulations in its discussions of
individual instruments later in this
preamble, as well as new aspects
necessitated by the CERCLA 108(b) rule
structure. In addition, this proposal
reflects some of the lessons EPA has
learned in administering the RCRA
Subtitle C financial assurance program.
For example, to ease administration
EPA is proposing that contact
information for key parties (e.g., the
EPA, the representative of the financial
institution) be identified in the
instruments to facilitate the notification
requirements and other necessary
communication. More information on
the required wording of the instruments
and the rationale for such wording is in
the background document entitled
‘‘Potential Requirements for Insurance,
Surety Bonds, Letters of Credit, and
Trust Agreements and Standby Trust
Agreements under CERCLA Section
108(b),’’ which is in the docket for this
proposal (Docket No. EPA–HQ–SFUND–
2015–0781). EPA requests comment on
the proposed wording of the financial
responsibility instruments including the
proposed required documentary
62 EPA is not, however, reopening the RCRA
Subtitle C, Subpart H regulations by this proposal,
nor will EPA respond to comments related only to
those regulations.
PO 00000
Frm 00030
Fmt 4701
Sfmt 4702
conditions required to make a claim
under several of the instruments.
1. Letter of Credit (§ 320.40)
An owner or operator would be able
to satisfy the requirements of this
section by obtaining an irrevocable
standby letter of credit in accordance
with the proposed requirements of
§ 320.40 and the proposed wording of
§ 320.50(b). A letter of credit is an
independent agreement by the issuer
(e.g., a bank) to pay up to a specified
amount to parties upon the presentation
of certain documents on behalf of its
customer. Through a letter of credit, the
bank provides assurance that the
CERCLA response costs, health
assessment costs, and natural resource
damages for which the owners and
operators are responsible would be paid.
The financial strength of the bank
would backstop that of the owner and
operator, reducing the credit risk to
potential claimants. EPA requests
comment on the required wording and
specification of the letter of credit in
this proposed rule.
Issuer Eligibility (§ 320.40(a))
The issuing institution would be
required to be an entity that has the
authority to issue letters of credit and
whose letter of credit operations are
regulated and examined by a Federal or
state agency. These proposed
requirements ensure that the letter of
credit operations are overseen by a
regulator, a requirement that EPA
intends to help protect against failure of
the issuing institution by ensuring that
the operations are regularly examined
(e.g., lending limits are being observed).
This requirement is the same as that in
the RCRA Subtitle C financial assurance
requirements for closure and postclosure care,63 which EPA believes has
worked well, and would be familiar to
the regulated community and to the
Agency. EPA considered additional
qualifications for banks providing letters
of credit but is today proposing the
same qualifications as are required in
the Subtitle C regulations. Some of the
alternative criteria considered were
minimum ratings from a rating agency
or differentiating between state or
nationally chartered institutions.
Additional information on the
consideration of alternative provider
qualifications is in the background
document titled ‘‘Potential Issuer
Eligibility Requirements for Insurance,
Surety Bonds, Letters of Credit, and
Trust Agreements and Standby Trust
Agreements under CERCLA § 108(b).’’
EPA is proposing a standard similar to
63 See
E:\FR\FM\11JAP2.SGM
46 FR 2826, January 12, 1981
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
the Subtitle C standard so as to not
unduly constrain supply because
additional requirements beyond the
existing framework of Federal and state
examination and regulation would limit
the pool of available providers and also
to avoid the administrative burden on
EPA of verifying additional
qualifications.
The Institute of International Banking
Law and Practice (IIBLP) suggested to
EPA that the minimum issuer
qualifications may be improved by
specifying that the institution must be
one that ‘‘regularly issues standby
letters of credit.’’ IIBLP’s stated intent of
the recommended specification was to
align the EPA requirement with the
Uniform Commercial Code 64 (UCC) § 5–
108(e) that obligates issuers to observe
the standard practice of ‘‘financial
institutions that regularly issue letters of
credit’’. However, such a provision
would require EPA to determine what
constitutes regularly issuing letters of
credit and would increase the
administrative burden of
implementation. Because the UCC
would apply in the background as state
law the Agency does not expect it is
necessary to include such a requirement
in the proposed regulations, and so is
not proposing such a requirement.
Required Standardized Wording
(§ 320.40(b))
EPA is proposing required wording of
the letter of credit. The proposal would
require that instruments be worded
identically to the language proposed in
§ 320.50(b) of this proposed rule, except
that the instructions in brackets would
be replaced with the relevant
information and the brackets deleted.
The IIBLP also suggested that EPA
should allow for greater flexibility to
accommodate confirmations, other
parties obtaining the letter of credit or
state variations. Specifically, IIBLP
recommended that the letter of credit
wording be ‘‘substantially in accordance
with’’ the specified instrument
language. While flexibility may help
accommodate a wider range of
circumstances, EPA has found in its
financial assurance programs that
standardized wording is generally
acceptable to providers, and provides
significant benefits. Most significantly,
standardized wording saves EPA staff
from having to review and assess the
myriad variations in instrument
wording that may arise, which the
64 The Uniform Commercial Code (UCC) is a
comprehensive code of law addressing commercial
transactions in the United States created to serve as
a model for state adoption. Use of standby letters
of credit is governed by state laws that track Article
5 of the UCC.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
Agency may not have the technical
expertise to readily undertake. However,
EPA requests comment on whether
specific additional aspects of the
proposed wording could benefit from
additional flexibility. Specifically, EPA
requests comments on additional
variations that should explicitly be
provided for in brackets that may
improve the effectiveness of the
proposed letter of credit specifications.
Two Letter of Credit Constructions
(§ 320.40(b)–(d))
The proposed required wording
provides for two separate letter of credit
constructs—one in which the letter
would be issued in favor of any and all
third-party CERCLA claimants and one
in which the letter of credit would be
issued in favor of the trustee of a trust
fund established by an agreement
worded identically to the language for
the proposed trust fund. EPA is
proposing to allow for two possible
letter of credit constructions based on
feedback the Agency received during
discussions with the banking
community. Providing both options
enhances flexibility and is consistent
with the RCRA third-party liability
program where a similar letter of credit
arrangement is employed.65
The first option for a letter of credit
is for it to be issued in favor of any and
all third-party CERCLA claimants.
Under this arrangement, parties seeking
payment from the letter of credit for
CERCLA claims against the current
owners or operators of the facility
would be able to make claims by
presenting the necessary documents
directly to the issuing institution. This
would provide a streamlined approach
for paying claims and may entail lower
fees and expenses than the second
option. EPA intends for the CERCLA
108(b) instruments to be available to any
potential CERCLA claimant. Given that
the identity of potential claimants is
both difficult to ascertain at a given
point and because they may change over
time, EPA is concerned that attempting
to name particular beneficiaries would
be unworkable. For example, EPA
would be unable to determine in many
cases what claims made by what parties
would arise. In addition, EPA wishes to
avoid a claims administration role that
could result if EPA were the named
beneficiary. EPA is concerned about the
resources that would be necessary to
assess the merits of and make all
CERCLA claims that may be made
against the instruments nationwide.
Such a role would have the potential to
redirect Superfund programmatic
65 See
PO 00000
40 CFR 264.151(k)
Frm 00031
Fmt 4701
Sfmt 4702
3417
resources away from cleanups and other
high priority activities to assessing
claims at facilities where EPA may not
otherwise have been involved or
considered a priority. Further, in
instances where EPA is involved, EPA
may be a claimant. EPA was concerned
that the Agency may be placed in the
awkward position of administering and
prioritizing claims in that situation.
Finally, EPA is concerned that
specifying EPA as the beneficiary of the
instruments may be inconsistent with
the direct action provision and preclude
other claimants from taking direct
actions against the instruments as
provided by 108(c)(2).
At the same time, several industry
representatives expressed their concerns
about the possibility of such a wide
range of potential claimants who could
not possibly be ascertained at the time
the letter of credit is established.
Instead, these representatives indicated
a strong preference for a named
beneficiary.
In light of this feedback, and because
EPA does not intend to restrict options
such that institutions may be unwilling
to issue letters of credit, EPA is also
proposing letter of credit language that
would provide the option for the letter
of credit to be issued in favor of a single
named beneficiary, specifically the
trustee of a trust fund that would be
established pursuant to the proposed
trust fund regulations. In this case, the
letter of credit would authorize the
trustee to make draws on the letter of
credit to administer the claims process
for CERCLA response costs, health
assessment costs, and natural resource
damages in accordance with the terms
of the trust agreement. Parties seeking
payment from the letter of credit for
CERCLA claims against the current
owners or operators of the facility
would be able to present claims against
the trust fund in accordance with the
proposed trust agreement language. The
trustee would, upon receipt and review
of the required documents, accordingly
make a draw on the letter of credit and
provide the claimant with payment.
This latter option also appears to
provide other advantages. First, letter of
credit issuers indicated to EPA that this
option is more consistent with
commercial practice. Second,
representatives of trustee institutions
expressed a high level of comfort and
willingness to provide such
administrative services over a letter of
credit. Third, the trust fund itself could
be the subject of any direct actions
authorized by CERCLA § 108(c).
Accordingly, in this proposal, the
language acknowledging that direct
action claims may be brought against
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3418
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
the issuing institution is required only
for letters of credit issued in favor of any
and all third-party CERCLA claimants,
and is not required for those letters of
credit issued in favor of a trustee.
Considerations regarding the direct
action provisions are discussed in more
detail in section IV.B.5. of this
preamble.
Even with these advantages, EPA
expects that the principal disadvantage
in having the trustee hold the letter of
credit and channel claims through the
trust fund is that it will result in higher
trustee expenses and fees in comparison
with the letter of credit issued in favor
of any and all third-party CERCLA
claimants. This is because the trustee
would need to hold the letter of credit
and review the documents presented as
part of the claims process to determine
whether payment was merited under the
terms of the trust. EPA is proposing
nevertheless to offer such an
arrangement in order to provide
additional flexibility in compliance
options for the owners and operators
subject to the rule as well as offer an
option that the Agency has been told is
more consistent with commercial
practice.
EPA considered a third possible letter
of credit option. Under this option, EPA
would be the named beneficiary of the
letter of credit and would administer the
claims process but would require that
the letter of credit provide for
assignment of proceeds to other parties
as identified by EPA. EPA recognized
that this approach may provide the
familiarity of a named beneficiary for
issuers of letters of credit and may
reduce trustee expenses because they
would not need to provide a custodial
service over the standby letter of credit.
However, as discussed earlier in this
preamble section, EPA’s concerns about
administering the claims process has led
EPA not to include provisions for this
option in this proposal. However, EPA
solicits comment on this option.
Finally, the proposed rule also
includes specific information
submission requirements in proposed
§ 320.40(c) and (d). Where the
beneficiary is a trustee, the original
letter of credit would be held by the
trustee as part of the trust fund property.
A certified copy of the letter of credit
would be required to be submitted to
the Administrator. In addition, the
owner or operator would be required to
submit the original letter to the trustee
authorized to make draws on the letter
of credit, and then submit to the
Administrator an acknowledgment of
receipt of the letter of credit by the
trustee. Submission of this information
to EPA is intended to assist the Agency
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
in monitoring compliance as part of its
program oversight role.
If the letter of credit is issued in the
favor of any and all third-party CERCLA
claimants, under proposed § 320.40(d)
the original letter of credit would be
submitted to EPA, also to assist the
Agency to monitor compliance.
Requirement To Establish a Trust Fund,
Automatic Extension and Irrevocability
Provisions of the Letter of Credit
(§§ 320.40(e) Through (f) and (k)
Through (l))
Standby letters of credit are typically
issued for specific, finite periods of time
although they may automatically extend
provided the issuer has the right to
allow the credit to expire. In developing
this proposal, one consideration for EPA
was how to assure funds would be
available when necessary. One
consideration with the letter of credit
was that the issuer may wish not to
extend the letter of credit at some point
potentially leaving the owner or
operator without the required evidence
of financial responsibility. EPA was
concerned that the decision not to
extend a letter of credit may occur at a
time when the owner’s or operator’s
finances were in decline at which point
the ability of the owner or operator to
obtain alternate financial responsibility
may be constrained. To ensure
continuity of financial responsibility
coverage EPA is proposing a suite of
regulatory provisions intended to
provide strong assurance that funds
would be available when necessary.
First, an owner or operator who uses
a letter of credit to satisfy the
requirements of this regulation would
also be required to establish a trust fund
and update Schedule A of the trust
agreement within sixty days after a
change in the amount of CERCLA
§ 108(b) financial responsibility. The
requirement to establish a trust fund is
included regardless of whether the letter
of credit is issued in favor of all thirdparty CERCLA claimants, or in favor of
the trustee of a trust fund. EPA is
proposing to require that a trust fund
either hold the letter of credit or be
established alongside the letter of credit
to provide a repository for funds drawn
from the letter of credit in instances
where the issuing institution declines to
extend the letter of credit and the owner
or operator fails to obtain replacement
financial responsibility.
This standby trust fund would be
worded identically to the proposed trust
fund language (see § 320.50(a) for the
proposed wording of the trust
agreement) and would meet the same
requirements specified for the trust
funds (see § 320.45 for proposed trust
PO 00000
Frm 00032
Fmt 4701
Sfmt 4702
fund regulations) with two exceptions.
The first is that an originally signed
duplicate of the trust agreement would
be submitted to the Administrator with
the original or the certified copy of the
letter of credit. The second is that,
unless the standby trust fund was
funded pursuant to the requirements of
this part including holding a letter of
credit as specified in § 320.40 and
described earlier, the following would
not be required: (1) Payments into the
trust fund as specified in § 320.45; (2)
annual valuations as required by the
trust agreement; and (3) notices of
payment as required by the trust
agreement.
Second, EPA is proposing that the
letter of credit must be irrevocable and
issued for a period of at least one year.
Without this provision the letter of
credit could potentially be withdrawn
or modified for any reason and at any
time by the issuer unilaterally, without
notification to the current owner or
operator. With this provision, the owner
or operator, third-party CERCLA
claimants, and EPA are assured of at
least one year of coverage.
Further, EPA is proposing that the
letter of credit must provide that the
expiration date would automatically be
extended for a period of at least one year
unless, at least 120 days before the
current expiration date, the issuing
institution notifies the owner or
operator, the trust fund trustee (if the
letter of credit is held by the trustee)
and the Administrator by certified mail
of a decision not to extend the
expiration date. Under the terms of the
letter of credit, the 120 days would
begin on the date when the owner or
operator, the trust fund trustee (if the
letter is issued in favor of the trustee),
and the Administrator have received the
notice, as evidenced by the return
receipts. This proposed automatic
extension provision would help to
ensure that coverage continues.
Combined with the irrevocability
provision, the owner and operator, EPA
and other third-party CERCLA claimants
can be assured of continuous coverage
unless notified by the issuing
institution.
As a final proposed provision to
ensure continuity of coverage, the
proposed rule would provide for the
possibility for the letter of credit to fund
the trust fund in one of two ways if the
letter of credit were not extended. The
first way would apply when the letter of
credit is issued in favor of any and all
third-party CERCLA claimants. In that
scenario, if the owner or operator did
not establish alternate financial
responsibility as specified in this
proposed rule and obtain written
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
approval of such alternate financial
responsibility from the Administrator
within ninety days after receipt of a
non-extension notice by the owner or
operator and the Administrator, the
Administrator would draw on the letter
of credit if the letter of credit is issued
in favor of any and all third party
CERCLA claimants. The issuing
institution would then deposit the
unused portion of the credit into the
standby trust. The second way would
apply when the letter of credit is issued
in favor of the trust fund trustee. In such
scenarios, if the owner or operator did
not obtain alternate financial
responsibility and obtain written
approval of such alternate financial
responsibility from the Administrator
within ninety days after receipt of a
non-extension notice by the owner or
operator, the Administrator and the
trustee, the Administrator would inform
the trustee that the owner or operator
had not established alternate financial
responsibility. This would prompt the
trustee to draw on the letter of credit
and deposit any unused portion of the
credit into the trust fund.
The Administrator would be able to
delay the drawing of funds or the
notification to the trustee of the trust
fund that the owner or operator had not
established alternate financial
responsibility, if the issuing institution
grants an extension of the term of the
credit. During the last thirty days of any
such extension, if the owner or operator
has failed to provide alternate financial
responsibility as specified in this
section and obtain written approval of
such financial responsibility from the
Administrator, the Administrator would
draw on the letter of credit or notify the
trustee of the trust fund that the owner
or operator had not established alternate
financial responsibility and obtained
written approval of such alternate
financial responsibility. Under the terms
of the letter of credit, all amounts paid
pursuant to a draft by the Administrator
or the trust fund trustee in the
circumstances described in this
paragraph would be deposited by the
issuing institution directly into the trust
fund.
A similar arrangement is required
under the RCRA Subtitle C closure post
closure financial assurance regulations
and the Agency has found it to be a
valuable feature. The accompanying
trust fund and the automatic extension
provisions for letters of credit are an
important feature of this proposal
because letters of credit might otherwise
not be extended after a release of
hazardous substances or after marked
financial decline of the owner or
operator. Absent the ability for the
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
trustee or the Administrator to make a
draw on the letter of credit in instances
of issuer notice of non-extension and
the owner’s or operator’s failure to
obtain replacement financial
responsibility, financial responsibility
may not be available when necessary.
After notice of non-extension, a
CERCLA claim may not necessarily be
possible for some time because the
CERCLA processes leading to a claim
may be lengthy. In such an instance, the
letter of credit may expire, leaving no
financial responsibility instrument
available. The proposed arrangement
would ensure that funds are still
available to pay the valid CERCLA
claims. This provision, and the similar
provisions for other proposed
instruments, as well as alternatives are
discussed in more depth in section
VI.C.7 of this preamble.
IIPLP also provided comments to EPA
on these proposed automatic extension
and non-extension notification
requirements. With respect to the nonextension notification, the IIBLP
suggested that the wording of the letter
of credit should not explicitly require
notification to the owner or operator of
the decision not to extend the credit as
discussed earlier. Rather, IIBLP noted
that the means of how issuers and their
applicants communicate is typically left
to a separate agreement from the letter
of credit itself. However, EPA believes
that specifying such a notification term
in the letter of credit itself, including
notice to the owner or operator, is
preferable because timely receipt of
such notice by both EPA and the owner
or operator is important as it would
establish the timeframe in which the
owner or operator must obtain alternate
financial responsibility. Further, the
provision helps prevent expiration from
taking place without the knowledge of
EPA and the owner or operator, or a
draw being necessitated due to pending
expiration without the knowledge of the
owner or operator. Finally, while it may
be unusual as a general matter of
commercial practice, such a provision is
a common feature of government
financial responsibility programs. For
example, similar notification
requirements are required in the RCRA
Subtitle C closure and post closure letter
of credit which has been broadly used
as a financial assurance instrument by
regulated entities in that program.
With respect to the automatic
extension provisions, the IIBLP stated
that a date should be identified beyond
which extension should not be able to
occur. However, such a provision would
be inconsistent with other EPA financial
assurance programs and necessitate
more frequent re-establishment of
PO 00000
Frm 00033
Fmt 4701
Sfmt 4702
3419
financial responsibility on the part of
the owner or operator or draws on the
letter of credit prompted by pending
expiration. Further, given that the time
horizon over which an owner and
operator must maintain financial
responsibility under CERCLA § 108(b)
may vary on a case-by-case basis, EPA
could not identify a nationally-uniform
date beyond which the letter of credit
should be allowed to expire.
Claims Against a Letter of Credit Issued
in Favor of Any and All Third-Party
CERCLA Claimants (§§ 320.40(j) and
320.50(b))
Under the proposed letter of credit
language (§ 320.50(b)) and regulations
(§ 320.40(j)), when the letter of credit is
issued in favor of any and all third-party
CERCLA claimants, it would provide
payment to third-party CERCLA
claimants under three scenarios
provided that the claimant provides the
necessary documentation, in addition to
authorizing direct action claims against
the issuing institution itself. Under the
proposed regulations the following
claims would be authorized against the
letter of credit when issued in favor of
any and all third-party CERCLA
claimants:
(1) Any party that obtained a final
court judgment from a Federal court
awarding CERCLA response costs,
health assessment costs, and/or natural
resource damages associated with the
facility against any of the current
owners or operators to whom payment
as required by the judgment had not
been made within thirty days would be
able to make a claim against the letter
of credit. However, the party would
only be able to make a claim if it had
not recovered or been paid the funds
from any other source.
(2) The Administrator or another
authorized Federal agency would be
able to make a claim against the letter
of credit requesting payment if payment
had not been made as required by a
CERCLA settlement associated with the
facility between a current owner or
operator and EPA or another Federal
agency.
(3) The Administrator or another
authorized Federal agency would be
able to make a claim against the letter
of credit requesting payment into a trust
fund established pursuant to a CERCLA
unilateral administrative order issued to
a current owner or operator if
performance at the facility as required
by the order had not occurred. The
Administrator or other Federal agency
would be able to make the claim against
the letter of credit only if the owner or
operator had provided a written
statement that the letter of credit may be
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3420
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
used to assure the performance of the
work required in the order.
In order to make a draw on the letter
of credit under these three scenarios,
claimants would need to present one of
two sets of documents. The first set of
documents would consist of a demand
for payment bearing reference to the
letter of credit by number, a final court
judgment dated at least thirty days
earlier from a Federal court, in favor of
the claimant, awarding CERCLA
response costs, health assessment costs,
and/or natural resource damages
associated with the facility against any
of the current owners or operators, and
a certification from the claimant that
reads as follows: ‘‘I hereby certify that
the amount of the demand is payable
pursuant to regulations issued under the
Comprehensive Environmental
Response, Compensation and Liability
Act of 1980 as amended.’’
Because a claimant seeking
satisfaction of a final court judgment
awarding CERCLA response costs,
health assessment costs, and/or natural
resource damages may be any of a wide
range of potential parties including
Federal and state government officials,
natural resource trustees, or private
parties, EPA was told by several
representatives of the financial industry
that the potential for inappropriate
claims in this scenario may be higher
than in typical financial assurance
programs where a particular regulator is
the only named beneficiary. (The RCRA
Subtitle C closure and post-closure
letter of credit at 40 CFR 264.151(d) is
an example of a single-beneficiary letter
of credit). EPA was informed by one
bank representative that documentary
payment conditions requiring
presentation of a court judgment would
help ease concerns in this regard.
Specifically, the representative
suggested that the risk of fraud would be
reduced if the rules required production
of a court judgment in addition to a
demand and certification. EPA does not
expect that such a requirement would
present a significant burden to
legitimate claimants, and wishes to
lower any perceived barriers to issuing
the necessary instruments under this
proposed rule. Thus, EPA is proposing
that the language of the letter of credit
issued in favor of any and all third-party
CERCLA claimants require not just a
demand for payment and a certification
from the claimant but the presentation
of the final court judgment as well.
As discussed in the general payment
provisions section of the preamble, the
proposed regulatory text in § 320.40(j)
regarding letters of credit includes other
requirements for making draws on the
letter of credit. EPA’s proposed letter of
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
credit certification requirement is
intended to encompass these
requirements and thereby to help ensure
that those supplemental criteria have
been met. These requirements are
designed to foster fairness for both
potential claimants as well as to the
owners or operators who provide the
CERCLA § 108(b) financial
responsibility. These requirements are
(1) that a claim for satisfaction of a final
court judgment may only be made
against a CERCLA § 108(b) financial
responsibility instrument if the
judgment has been obtained against a
current owner or operator at the facility
and if the owner or operator has failed
to make payment on the judgment
within thirty days; and (2) that the
claimant may only make such a claim if
they have not recovered or been paid
the funds from any other source. EPA is
aware that letters of credit are designed
to be an independent undertaking that
would preclude the issuing institution
from considering non-documentary
conditions such as whether the
previously-mentioned supplemental
criteria had been met. EPA is thus
requiring that claimants certify that the
funds are payable pursuant to
regulations issued under the
Comprehensive Environmental
Response, Compensation and Liability
Act of 1980 as amended. EPA believes
this additional documentary condition
helps curb the potential for
inappropriate draws when the letter of
credit is issued in favor of any and all
third party claimants.
The second set of documents that
could be presented in order for EPA or
another authorized Federal agency to
make a draw when the letter of credit is
issued in favor of any and all third-party
CERCLA claimants is a demand for
payment bearing reference to the letter
of credit by number and a certification
from the Administrator or another
Federal agency that reads as follows: ‘‘I
hereby certify that the amount of the
demand is payable pursuant to
regulations issued under the
Comprehensive Environmental
Response, Compensation and Liability
Act of 1980 as amended.’’ EPA intends
for this second set of documents to be
presented by EPA or another authorized
Federal agency in order to obtain
payment for a CERCLA settlement or
into a trust fund established pursuant to
a CERCLA § 106 unilateral
administrative order in instances where
either (1) payment was not made as
required by a CERCLA settlement
associated with the facility with a
current owner or operator, or (2)
performance at the facility had not
PO 00000
Frm 00034
Fmt 4701
Sfmt 4702
occurred as required by a CERCLA § 106
unilateral administrative order issued to
a current owner or operator.
Because these payment scenarios are
explicitly provided for in the proposed
rules at 320.40(j)(2) and (3), and because
those scenarios are limited to Federal
agencies acting pursuant to CERCLA,
EPA sees no reason to require any
additional documentation beyond the
demand for payment and the
certification. A similar documentary
payment condition is employed in the
RCRA Subtitle C closure and postclosure letter of credit. See 40 CFR
264.143(d)(8); 264.151(d). Requiring
only a certification and a demand for
payment also streamlines the claims
process in these scenarios and imposes
a lower administrative burden on the
claimants and on the issuing
institutions because fewer documents
would require review.
Other supplementary documentary
requirements EPA considered were the
presentation of the CERCLA settlement
agreement or CERCLA unilateral
administrative order themselves.
However, EPA did not believe these
additional requirements provided
significant value beyond the
certification from the Administrator or
other authorized Federal agency. In
discussions with representatives of the
banking community, participants
suggested a high degree of comfort with
a certification from a Federal
government agency as a documentary
payment requirement, provided it was
specified in the letter of credit. Thus, to
avoid unnecessary documentary
provisions, EPA is proposing that the
required wording of the letter of credit
issued in favor of any and all third-party
CERCLA claimants not include a
requirement to produce the underlying
settlement or unilateral administrative
order, in the scenarios limited to
Federal government claimants.
Further, EPA is today also proposing
letter of credit wording that does not
require that the original letter of credit
itself be presented by claimants
requesting a draw. EPA’s financial
assurance programs under RCRA
Subtitle C (closure/post-closure letters
of credit and liability coverage letters of
credit) similarly do not require
presentation of the original letter of
credit itself. Such a requirement would
entail a greater level of administrative
burden on both EPA and claimants, in
particular due to the wide range of
potential claimants and the need to
coordinate between EPA and potential
claimants. In discussions with
representatives of the banking
community, EPA was told that banks are
likely to prefer that the presentation of
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
the original letter of credit not be a
requirement and that such a
requirement is a relic of the past.
However, this does not mean there
could be no value in such a
requirement. The issuing institution
may have noted on the letter of credit
any prior payments that may help keep
EPA informed of the remaining balance;
however, EPA should be able to remain
apprised of the value of the letter of
credit based on claims and payment
notification requirements included
elsewhere in the proposal (see for
example § 320.24). On balance, EPA is
proposing to forgo such a requirement to
be more consistent with current
commercial practice and reduce the
administrative burden entailed in the
claims process. However, EPA solicits
comment on whether such a
requirement would be useful.
Draws on the Letter of Credit When
Held by a Trust Fund Trustee
(§§ 320.40(i) and 320.50(b))
If the letter of credit is issued in favor
of the trust fund trustee, parties would
be able to make claims against the trust
fund in accordance with the terms of the
trust agreement in order to receive
payment from the letter of credit.
Accordingly, the proposed language of
the letter of credit (§ 320.50(b)) would
require only a demand for payment from
the trust fund trustee bearing reference
to the letter of credit by number. This
is similar to the required documentary
provisions in the RCRA Subtitle C thirdparty liability letter of credit when it is
issued in favor of a trustee. Other
documentary requirements appear
unnecessary under this construction
because the third-party CERCLA
claimants would be making claims
against the trust fund instead of the
letter of credit and would therefore need
to meet the documentary conditions laid
out in the trust agreement or
successfully make a direct action claim
against the trust fund itself. (Payments
from the trust fund are discussed further
in the trust fund section of the
preamble.) This arrangement provides
for a very streamlined process for the
trustee to draw on the letter of credit
when necessary to make payments to
the successful claimants. EPA did not
intend to burden this process with extra
documentary conditions as that would
only occasion greater fees and expenses
on the part of the trustee and provide no
clear benefit beyond the documentary
review already performed by the trustee.
Such a documentary requirement
would also provide the trustee of the
trust fund the ability to make draws on
the letter of credit when necessary to
cover trustee expenses. While the
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
proposed required wording of the trust
agreement specifies that fees and
expenses would be first paid by the
grantor of the trust agreement, the
proposed language also provides that all
expenses not paid directly by the
grantor shall be paid from the corpus of
the trust fund which may require a draw
on a letter of credit held by the trust
fund. This allowance is important to
allow trust expenses to be covered in
instances where the grantor may cease
to exist or is otherwise unavailable.
EPA recognizes that, when a letter of
credit is issued in favor of a trustee of
a trust fund, the trustee may incur
significant fees and expenses in
determining whether or not payment
should be made from the trust fund,
particularly in instances of a direct
action against the trust fund. These
expenses would likely reduce the value
of the trust fund (and by extension
potentially the value of the letter of
credit held by the trust fund). However,
given the apparent reluctance of
institutions that issue letters of credit to
provide letters of credit that could pay
to a wide range of unnamed
beneficiaries and institutions’ expressed
concerns regarding the institution itself
being potentially subject to direct action
suit from CERCLA claimants, EPA is
proposing this compliance option. EPA
requests comment on both options: (1)
Where the letter of credit may pay to
CERCLA claimants directly (i.e. be
issued in favor of any and all third-party
CERCLA claimants) or (2) where the
letter of credit may pay to the trustee of
a trust fund issued in accordance with
the proposed trust fund regulations who
would then pay valid claims (i.e. be
issued in favor of the trustee). EPA is
also interested in provisions or
specifications that may allow for lower
expenses or fees or that would protect
the value of the trust fund (and thus the
letter of credit) from expenses and fees
when the letter of credit is issued in
favor of the trust fund trustee.
Direct Action Language in the Letter of
Credit (§ 320.50(b))
Under the proposed regulations, the
issuing institution would be subject to
direct action claims only when the letter
of credit is issued in favor of any and
all third-party CERCLA claimants.
Because direct action is authorized by
the statute, the possibility of a direct
action suit should be clearly
acknowledged by issuing institutions.
Thus EPA has included required
language acknowledging that direct
action suits may be brought against the
issuing institution for letters of credit
issued in favor of any and all third-party
CERCLA claimants and that the issuing
PO 00000
Frm 00035
Fmt 4701
Sfmt 4702
3421
institution consents to suit in those
circumstances. The language further
acknowledges that the liability of the
issuing institution is limited by
CERCLA § 108(d) and that the
institution is entitled to the rights and
defenses provided to guarantors in
CERCLA § 108(c). The reader should
note that this language is not required
for those letters of credit issued in favor
of a trustee. In the latter case, EPA
intends the trust fund itself would be
the subject of direct action suits.
However, under the proposed
regulations, the issuing institution
would be subject to direct action claims
when the letter of credit is issued in
favor of any and all third-party CERCLA
claimants.
Also included in the direct action
language in the letter of credit is a
provision that the issuing institution
will provide notice of any such claims
and payments resulting from a direct
action to the Administrator. EPA has
included a similar provision applicable
to the owner and operator in proposed
§ 320.24, under which they are obligated
to provide notice to EPA of claims
made. However, EPA is including this
proposed term as part of the letter of
credit, because it expects that the owner
or operator may not be able to provide
such a notice of payment in a direct
action scenario. Providing a mechanism
for EPA to remain informed of claims
against the instrument and of the value
of the letter of credit in case of a direct
action, is appropriate for similar reasons
as described in proposed § 320.24.
Identification of Facility Information in
Letter of Credit (§ 320.50(b))
The proposed language of the letter of
credit would require the identification
of the facilities covered, and the amount
of financial responsibility provided by
the letter of credit. EPA is today
proposing language that allows (but
does not require) a single letter of credit
to cover multiple facilities if that is
determined to be optimal by the owner
and operator and their letter of credit
provider. EPA anticipates that allowing
coverage of multiple facilities
simultaneously may have administrative
efficiency benefits. As discussed in
section VI.3.9. of this preamble,
providing for one instrument to cover
multiple facilities may provide for some
administrative ease in the compliance
and implementation process and is a
common feature of EPA financial
assurance programs.66
Thus, EPA has made provision in the
letter of credit language for facilityspecific sub-limits (i.e. the identification
66 See
E:\FR\FM\11JAP2.SGM
for example, 40 CFR 264.143(h).
11JAP2
3422
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
of an amount available for claims
associated with each facility covered by
the letter of credit beyond which the
issuer would have no obligation to pay
claims associated with that facility)
when a letter of credit is covering
multiple facilities. The proposed letter
of credit would require the EPA
identification number(s), name(s),
address(es) and CERCLA § 108(b)
financial responsibility amount(s)
covered by the letter of credit for
facility(ies) that would be covered by
the instrument.
EPA recognizes that such information
may not typically be included in letters
of credit, where the preference is
typically for the simplest and briefest
language possible. However, this
approach allows the letter of credit to
reflect the site-by-site amounts of
financial responsibility required, and at
the same time, it will assist all parties
(e.g. the issuing institution, third-party
CERCLA claimants) in knowing the
amount of financial responsibility
available for claims associated with any
of the facilities.
EPA is also considering whether to
limit each letter of credit to coverage of
a single facility. The additional
information about other facilities and
facility-specific sub-limits would not
need to be included. In this way the
letter of credit could be drafted in a
simpler manner. However, as the EPA is
not proposing to require that multiple
facilities must be covered by one letter
of credit, EPA believes the proposed
language provides the flexibility to draft
a relatively simple letter of credit. As
such, EPA is today proposing language
that allows the letter of credit to cover
multiple facilities if that is determined
to be optimal. EPA requests comment on
this proposed provision and the
alternative option of requiring only one
facility per letter of credit.
2. Surety Bond (§ 320.41)
An owner or operator would be able
to satisfy the proposed CERCLA § 108(b)
financial responsibility requirements by
obtaining a surety bond in accordance
with the proposed requirements
including the proposed required
wording and submitting the originally
signed bond to the Administrator.
Through a surety bond, the Surety
would guarantee that it will pay thirdparty CERCLA claims for response costs,
health assessment costs, and natural
resource damages associated with the
facility against any of the current
owners and operators, even if not listed
as the principal on the bond, under
certain circumstances in the event the
claims are not satisfied by the owners or
operators, up to the bond limits.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
Issuer Eligibility (§ 320.41(b))
The surety company issuing the bond
would be required to, at a minimum, be
among those listed as acceptable
sureties on Federal bonds in Circular
570 of the U.S. Department of the
Treasury. This requirement for
providers of surety bonds is the same as
that in the RCRA Subtitle C financial
assurance regulations which EPA
believes has worked well and will
provide familiarity for implementing
staff and the regulated community. In
selecting this eligibility criteria EPA is
also taking advantage of a pre-existing
Federal examination and authorization
process designed specifically for
sureties. EPA recognizes that a Federal
government agency will not be listed as
the obligee of CERCLA § 108(b) surety
bonds under the proposed language and
thus Circular 570 listing may not be
strictly necessary to comply with
Treasury regulations. However, EPA and
other Federal government agencies are
likely to be claimants under the
proposed CERCLA § 108(b) construct
and thus EPA believes a similar level of
oversight of the solvency of a surety
providing a bond is merited. Further,
upon examination of eleven years of
data EPA did not identify any instances
of default of a surety listed on Circular
570 suggesting the criterion is robust.
EPA considered additional
qualifications for surety companies but
is today proposing the same
qualifications as are required in the
RCRA Subtitle C regulations. This
decision was based largely on the desire
to not unduly constrain supply, a desire
to leverage the pre-existing robust
criterion for sureties already well
established, and to avoid the
administrative burden on EPA of
verifying additional qualifications. For
more information on the consideration
of alternative provider qualifications,
please see the background document on
instrument provider qualifications titled
‘‘Potential Issuer Eligibility
Requirements for Insurance, Surety
Bonds, Letters of Credit, and Trust
Agreements and Standby Trust
Agreements under CERCLA § 108(b).’’
Requirements To Ensure Continuity of
Financial Responsibility Coverage
(§§ 320.41(f), (g)(4) and (k))
EPA is proposing a suite of regulatory
provisions in order to ensure continuity
of CERCLA 108(b) financial
responsibility coverage. First, an owner
or operator that elected to use a surety
bond to satisfy the requirements of this
section would also be required to
establish a standby trust fund and
update Schedule A of the trust
PO 00000
Frm 00036
Fmt 4701
Sfmt 4702
agreement within sixty days after a
change in the amount of CERCLA
§ 108(b) financial responsibility. This
standby trust fund would have to be
worded identically to the proposed trust
fund language in § 320.50(a) and meet
the same requirements specified for the
trust funds, except that: (1) an originally
signed duplicate of the trust agreement
would be submitted to the
Administrator with the surety bond; and
(2) until the standby trust fund is
funded pursuant to the requirements of
this section, the following would not be
required by the proposed regulations:
(1) payments into the trust fund as
specified in § 320.45, (2) annual
valuations as required by the trust
agreement; and (3) notices of payment
as required by the trust agreement.
The second proposed provision
designed to ensure continuity of the
CERCLA § 108(b) financial
responsibility is the cancellation
provision in the bond. EPA is proposing
that, under the terms of the bond, the
surety would be able to cancel the bond
by sending notice of cancellation by
certified mail to the owner or operator
and to the Administrator. Cancellation
would not occur, however, during the
120 days beginning on the date of
receipt of the notice of cancellation by
both the owner or operator and the
Administrator, as evidenced by the
return receipts.
Finally, EPA is proposing that, under
the terms of the bond, the surety would
become liable up to the penal sum 67 of
the bond in the event the owners or
operators failed to provide alternate
financial responsibility and obtain the
Administrator’s written approval of the
financial responsibility provided,
within ninety days after receipt by both
the owner or operator and the
Administrator of a notice of cancellation
of the bond from the surety. Under the
proposal, payment from the bond into
the standby trust would then occur.
A similar arrangement is required
under the RCRA Subtitle C hazardous
waste financial assurance regulations for
closure and post closure care and the
Agency believes it has been a valuable
feature. EPA believes the standby trust
and cancellation provisions are an
important feature of this proposal as
bonds could otherwise be cancelled
after a release of hazardous substances
from the facility or after marked
financial decline of the owner operator.
A CERCLA claim for payment from the
bond would not necessarily be mature
67 The penal sum represents the maximum
amount the surety will pay for CERCLA response
costs health assessment costs and/or natural
resource damages under the bond.
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
for some time and thus financial
responsibility may not be available
when necessary. EPA believes the
proposed arrangement however will
ensure that funds are still available to
pay the CERCLA response costs, health
assessment costs, and natural resource
damage claims of third parties. This
provision, and the similar provisions for
other proposed instruments, as well as
alternatives are discussed in more depth
in the preamble section headed ‘issuer
cancellation provisions.’
Claims Against the Surety Bond
(§§ 320.41(g) and 320.50(c))
In addition to guaranteeing that
replacement financial responsibility
will be obtained in the event the surety
provides notice of cancellation of the
bond, the bond would also guarantee
payment of CERCLA response costs,
health assessment costs, and natural
resource damages to third-parties.
Under the proposed terms of the bond,
the bond would guarantee that the
owner or operator would make
payments for or ensure payments are
made for CERCLA response costs, health
assessment costs, and/or natural
resource damages associated with a
facility covered by the bond as required
in a final court judgment from a Federal
court awarding such costs against any of
the owners or operators within thirty
days to the parties obtaining the
judgment. In these circumstances a
claimant would present the unsatisfied
final court judgment dated at least thirty
days earlier from a Federal court, in
favor of the claimant, awarding CERCLA
response costs, health assessment costs,
and/or natural resource damages
associated with the facility against any
of the current owners or operators at the
facility to the surety directly.
Additionally, the claimant would be
required to provide a signed statement
from the claimant certifying that the
amounts sought had not been recovered
or paid from any other source,
including, but not limited to, the owner
or operator, insurance, judgments,
agreements, and other financial
responsibility instruments.
Upon receipt of these documents the
surety would then make payment in
accordance with the instructions of the
successful claimant. These documentary
payment requirements were selected as
it removes EPA from the claims
administration process but ensures that
a court has determined that payment is
due to the party making the claim under
CERCLA and that the party has not
already recovered or been paid the
funds from another source. Further, by
relying on objective documentary
submissions the Surety should be able
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
to determine whether payment should
occur under the terms of the bond with
only minimal due diligence.
Additionally, the bond would
guarantee the owner or operator would
make payments or ensure payments
were made as required in a CERCLA
settlement associated with the facility
between any of the current owners and
operators at the facility and EPA or
another authorized Federal agency. The
Administrator or the other Federal
agency, in these situations, would
present a written signed statement to the
surety requesting payment from the
surety on the grounds that payment had
not been made as required by a CERCLA
settlement associated with the facility
and with any of the current owners or
operators. Additionally, the
Administrator or the Federal agency
would need to present a signed
statement certifying that the funds
sought had not been recovered or paid
from any other source, including, but
not limited to, the owner or operator,
insurance, judgments, agreements, and
other financial responsibility
instruments.
EPA believes that, similar to EPA’s
thinking on the documentary payment
conditions for the letter of credit issued
in favor of any and all third-party
CERCLA claimants (discussed in section
VI.C.1. of this preamble), in the
instances when the potential claimants
are limited to Federal government
agencies a more streamlined payment
condition is optimal. EPA believes that
the requirement of a signed statement
from the Administrator or another
Federal agency is a clear documentary
condition and will require minimal due
diligence on the part of sureties.
Finally, the bond would guarantee
that the owner or operator performs or
ensures the performance of the work at
the facility as required by a CERCLA
unilateral administrative order issued to
any of the current owners or operators
by EPA or another Federal agency for
which the owner or operator has
provided a written statement allowing
for the bond to assure performance of
the work. Payments would be made at
the request of EPA or another Federal
agency into a standby trust established
pursuant to the administrative order if
the work was not performed in
accordance with the order.
In this scenario, to make a claim
against the surety bond the
Administrator or the other Federal
agency would present a written signed
statement requesting payment from the
surety into a trust fund established
pursuant to a CERCLA unilateral
administrative order on the grounds that
performance at the facility had not
PO 00000
Frm 00037
Fmt 4701
Sfmt 4702
3423
occurred as required by a CERCLA
administrative order issued to a current
owner or operator. Additionally, the
EPA Regional Administrator or the
Federal agency would need to present a
signed statement certifying that the
funds sought had not been recovered or
paid from any other source, including,
but not limited to, the owners or
operators, insurance, judgments,
agreements, or other financial
responsibility instruments.
As discussed earlier, in the two
payment scenarios limited to Federal
government claimants EPA is
attempting to limit the complexity of the
documentary requirements. EPA
believes the relatively simple
requirements of signed statements from
EPA or another Federal agency will
streamline the claims process and
reduce uncertainty on the part of the
surety as to whether or not payment
should be made.
EPA requests comment on the
proposed documentary requirements for
payment from the surety bond. In
particular, EPA is interested in hearing
if there are other documentary payment
requirements that could further limit the
discretion required on the part of the
surety and yet still provide assurance
against inappropriate claims being paid.
EPA recognizes that the payment
mechanics of the surety bond involve
multiple parties that will not be listed
explicitly on the surety bond. In
discussions with representatives of the
surety bond industry, EPA learned that
such a construction may likely be less
palatable to potential providers of surety
bonds than a construction with one
designated claimant. Similarly, the
Surety and Fidelity Association of
America (SFAA) recommended that
EPA be the only claimant on the bond.
SFAA stated that multiple claimants
enlarges the surety’s exposure to claims
and possibly dilutes the protection to
EPA as the Agency may have less
assurance of the proper use of the funds
by third-parties other than EPA.
However, EPA is not proposing to list
EPA as the sole obligee on the bond for
several reasons. First, non U.S.
Government claimants would need a
final court judgment from a Federal
court awarding payment for CERCLA
response costs, health assessment costs,
and/or natural resource damages
ensuring that a court had reviewed the
merits of the claim (e.g. the consistency
of the action with the national
contingency plan) and found the claim
to be valid. As a result, EPA does not
share the concern that payment of funds
to parties other than EPA will
compromise the protection of human
health and the environment. EPA
E:\FR\FM\11JAP2.SGM
11JAP2
3424
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
believes that, given the nature of
CERCLA where any number of parties
may have claims under CERCLA § 107,
it is necessary to provide payment from
the bond to a range of third-party
CERCLA claimants.
EPA considered an option whereby
EPA would be listed as the obligee and
administer the claims process however,
as discussed in the letter of credit
§ 320.40 of the preamble. EPA is not
proposing this option for several
reasons. First, EPA would not
necessarily be involved in all CERCLA
actions at facilities and did not wish to
redirect its programmatic resources
away from high priority sites to
administer the claims process for
CERCLA § 108(b). Moreover, EPA may
not be able to assess the merits of all
CERCLA claims which include natural
resource damages and health
assessments that are primarily the
responsibility of other entities. Finally,
it may create a perception of partiality
were EPA to administer the claims
process in scenarios where the Agency
was one of the claimants. EPA believes
that the proposed construction best
achieves the need of providing payment
to the full range of potential CERCLA
claimants while simultaneously
protecting against improper claims and
preventing the sub-optimal redirection
of Superfund resources away from highpriority sites.
sradovich on DSK3GMQ082PROD with PROPOSALS2
Surety Liability (§ 320.41(h))
Under the terms of the bond, the
surety would become liable on the bond
obligation when the owner or operator
fails to perform as guaranteed by the
bond. EPA believes that this is an
additional advantage of the proposed
instrument payment terms. In
discussions with representatives of the
surety industry, representatives stressed
to EPA that the surety company should
be secondary to the owners and
operators and claimants should first
look to the owner or operators for
satisfaction. EPA hopes that this feature
of the proposed CERCLA § 108(b) surety
bond’s consistency with that aspect of
surety practice will encourage
participation on the part of surety
companies in the CERCLA § 108(b)
program.
The liability of the surety would be
limited to the penal sum 68 of the bond
plus the amount of any investigation or
legal defense fees incurred by the
surety. EPA, to the greatest extent
possible, wishes to preserve the value of
68 The penal sum of a bond is the specified
maximum amount that the surety will be required
to pay and is a required input in the proposed
surety bond language.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
the financial responsibility to pay
CERCLA claimants. EPA is thus
proposing that any legal or investigation
fees incurred by the surety remain
outside the penal sum of the bond and
not erode the value of the financial
responsibility. A similar provision is
also being proposed for insurance and
the corporate guarantee. EPA requests
comment on these proposed provisions.
Direct Action Language in the Surety
Bond (§ 320.50(c))
In addition to the payment triggers
described earlier, the proposed language
of the CERCLA § 108(b) surety bond
would also include language that the
surety acknowledges that direct action
suits may be brought against the surety.
The direct action provision would allow
for parties with CERCLA § 107 or § 111
claims, in certain instances identified in
CERCLA § 108(c)(2), to take actions
directly against the surety. It is a cause
of action authorized by the statute and
EPA expects it would operate
independently of the three previouslydescribed payment scenarios. In these
instances, as described in the proposed
bond language, the surety would have
the rights and defenses identified in
CERCLA § 108(c) and the liability
protections in CERCLA § 108(d).
Similar to the corporate guarantee,
insurance and letter of credit issued in
favor of any and all third-party CERCLA
claimants, EPA is proposing that the
required wording of the bond include a
provision that the surety notify EPA of
any claims and payments made as a
result of a direct action. EPA believes
this notification requirement is valuable
as the owner or operator may not be
available to provide such a notice of
claims and payments in a direct action
scenario yet EPA wishes to remain
informed of claims against the
instrument and the value of the
financial responsibility.
The SFAA also expressed concern
that the direct action provision in a
CERCLA § 108(b) surety bond may
expose the sureties to too many claims.
Specifically, SFAA stated that a surety
bond is a conditional obligation under
which the surety’s obligation is
triggered when the principal defaults.
SFAA stated that bankruptcy (one of the
preconditions for a direct action
identified in CERCLA § 108(c)) is too
broad as, in many cases, an owner or
operator may still be able to fulfill its
responsibilities even though bankrupt.
EPA agrees that the owner or operator
could still potentially fulfill its
obligations even though bankrupt.
Claimants could still pursue the
potentially responsible party directly
without implicating CERCLA § 108(b)
PO 00000
Frm 00038
Fmt 4701
Sfmt 4702
instruments. EPA believes including the
direct action provision is important as
in some cases it may not be possible for
EPA, or another third-party CERCLA
claimant to obtain satisfaction from or
obtain a court judgment against the
party liable under CERCLA § 107 (or
other necessary documents to make a
claim against the bond) and thus
recognizes the need for the surety, as
guarantor, to stand in the owner’s or
operator’s shoes
Multiple Sureties (§§ 320.41(e) and
320.50(c))
The surety bond would be able to be
issued by multiple sureties provided
that each is liable for its individual
vertical percentage share of the total
penal sum of the bond. (§ 320.41(e))
EPA is proposing surety bond language
that would provide the option for
owners and operators to obtain surety
bonds from multiple issuers in the
required amount of financial
responsibility. EPA expects the required
amounts of CERCLA § 108(b) financial
responsibility may be relatively large at
some facilities and wishes to provide
this flexibility. The proposed
arrangement for allowing multiple
sureties to cover a single facility is
consistent with the approaches
employed by all of the financial
responsibility programs EPA reviewed.
All financial responsibility programs
reviewed, including the Coast Guard
CERCLA § 108(a), RCRA Subtitle C
liability coverage, RCRA Subtitle C
closure/post-closure, and RCRA Subtitle
I Underground Storage Tanks, require
sureties to bind themselves jointly and
severally for purposes of allowing a
joint action(s) against the issuers of the
surety bond, but allow for payment
based on pre-determined proportions of
the penal sum (several liability).
In the proposed CERCLA § 108(b)
surety bond language, individual
sureties would identify percentage
limits of their liability in the surety
bond for which they would each be
liable while these individual surety
limits would sum to the total penal sum
of the bond. EPA believes that such an
arrangement may increase surety bond
issuers’ capacity to collectively cover
greater amounts of financial
responsibility because the surety’s level
of coverage would not be impacted by
the potential risk for non-payment by
other sureties.
When multiple sureties issue a single
bond, the proposed regulations would
require that each surety be liable for
their individual vertical percentage
share of the total penal sum of the bond.
EPA is proposing that the sureties’
individual amounts of liability be
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
specified in the bond as a percentage of
the penal sum of the bond. The
proposed specification would create a
vertical relationship whereby a surety’s
liability is not affected by other cosureties’ abilities to pay their shares.
EPA believes this provides greater
protection against the insolvency of one
of the participating sureties. This
approach also simplifies the claims
process as the exhaustion of one surety’s
liability does not need to be determined
before payment can be received from
another surety. An additional advantage
of this proposed structure is that
sureties would be binding themselves
jointly and severally for purposes of
allowing a joint action(s) against the
issuers of the surety bond. This would
allow for a simpler claims process for
claimants.
An alternative EPA considered was
proposing that multiple sureties could
form a tower of coverage comprised of
horizontal layers. In such an
arrangement each surety in the
horizontal tower would be agreeing to
cover its layer of the tower, not a
percentage of the total. Those sureties
higher up the horizontal tower become
responsible on a layer-by-layer basis as
the limits of each underlying surety’s
obligation become exhausted. However,
EPA is not proposing such an
arrangement due to several concerns
with such an arrangement. First, a
horizontal arrangement presents the
opportunity for sureties covering higher
coverage layers to avoid liability if a
surety on a lower level becomes
insolvent and cannot cover the liability
within its layer. This was a concern also
identified by the U.S. Coast Guard in
development of its CERCLA § 108(a)
regulations (see 59 FR 34220 (July 1,
1994)). Secondly, such an option would
raise the administrative burden on EPA
because EPA would need to ensure that
each layer of coverage fits with the
layers above and below and EPA would
also need to ensure that the layers
contained exhaustion provisions.
EPA requests comment on the
proposed arrangement for allowing
multiple sureties to execute one bond by
identifying their vertical percentage
share of the penal sum. Specifically,
EPA is interested in other potential
arrangements that may encourage surety
participation in the program and
provide for relatively high amounts of
financial responsibility coverage yet not
overly complicate implementation of
the claims process.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
Written Statements From Attorneys
General and Insurance Commissioners
(§ 320.41(d))
EPA believes a bond written as
required under this proposal may
implicate state insurance law and thus
the validity of any such bond may
depend on state law. This issue has
come up in other EPA rulemakings
including the financial responsibility
requirements for underground storage
tanks containing petroleum (see, for
example, 52 FR 12786, April 17, 1987)
and the RCRA Subtitle C third party
liability requirements (see, for example,
53 FR 33941, September 1, 1988). State
insurance regulation and law is by and
large the purview of the states and thus
the Agency does not believe it can state
with certainty whether any particular
bond would subject the issuer to state
insurance law, and whether it would be
valid with respect to such law. Similar
to the way the issue was handled in
those programs, EPA is proposing that a
surety bond may be used to satisfy the
requirements of this section only if the
Attorneys General or Insurance
Commissioners of (i) the state in which
the surety is incorporated, and (ii) each
state in which a facility covered by the
surety bond is located have submitted a
written statement to EPA that a surety
bond executed as described in the
regulations is a legally valid and
enforceable obligation in that state. EPA
believes that the surety bond would be
an important compliance option and
welcomes comments from state
Attorneys Generals and Insurance
Commissioners on this issue.
Termination of the Bond by the Owner
or Operator (§§ 320.41(l) and 320.50(c))
The owner or operator would be able
to terminate the bond if the
Administrator has given prior written
consent based on his receipt of evidence
of alternate financial responsibility as
specified in Part 320 or if the
Administrator releases the owner and
operator from the financial
responsibility requirements of that part.
To assist in implementing this
requirement the proposed wording of
the surety bond includes a provision
governing the principal’s (i.e. the
owner’s or operator’s) termination of the
bond. The proposed bond language
states that the principal may terminate
the bond by sending written notice to
the surety(ies), provided however, that
no such notice shall become effective
until the surety(ies) receive(s) written
authorization for termination of the
bond by the Administrator. In this way,
the owner or operator would not be able
PO 00000
Frm 00039
Fmt 4701
Sfmt 4702
3425
to unilaterally terminate the bond
without the authorization of EPA.
Performance Bond
In meetings with potential providers
EPA was told that sureties typically
prefer having an option of either
performing or paying under a bond. EPA
considered providing such an option as
the Agency believed it may encourage
greater participation from sureties in the
CERCLA § 108(b) program as well as
potentially allow sureties to conduct
work in certain cases, which may be
more economical than EPA or another
Federal agency conducting the work
itself. Specifically, EPA thought that the
option of performance could be
advantageous in some situations, for
example, when the surety became liable
because an owner or operator either did
not perform as required by a CERCLA
unilateral administrative order or failed
to perform work as required by a
CERCLA settlement.
However, EPA could not determine
how to specify a workable performance
option into the CERCLA § 108(b) surety
bond in light of some of the features of
the rule’s framework. Unlike typical
reclamation and closure programs,
CERCLA § 108(b) does not include a
series of defined and costed-out
activities (e.g. closure) which the surety
guarantees will be completed. In such
programs, if the principal defaults and
the surety elects to perform, the surety
is typically liable until the defined tasks
are all completed. CERCLA § 108(b)
does not include any pre-defined
obligations. Rather, a CERCLA § 108(b)
financial responsibility instrument
could be subject to multiple claims by
a variety of claimants under the various
payment scenarios over the life of the
instrument. Therefore, a very accurate
accounting of the liability of the surety
is necessary with respect to the claims
paid and the penal sum of the bond.
Such accounting would be difficult if
claims were satisfied by performance as
it is not clear how the performance
should be valued absent a pre-existing
accounting of the activities to be
conducted. Therefore, surety
performance would leave questions
about the remaining value of the bond
which would create uncertainty around
future claims and the availability of
financial responsibility. Further, as
CERCLA § 108(b) financial
responsibility amounts may be
relatively large, EPA anticipates that
multiple sureties may issue single
bonds. This would create even greater
complexity around coordinating
performance and determining the
remaining value of the bond. In light of
these considerations, EPA is today
E:\FR\FM\11JAP2.SGM
11JAP2
3426
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
proposing surety bond language that
provides only for payment, not
performance. EPA requests comment on
how EPA could specify a performance
option in the CERCLA § 108(b) surety
bond in light of the considerations
discussed.
sradovich on DSK3GMQ082PROD with PROPOSALS2
3. Insurance (§ 320.42)
An owner or operator would be able
to satisfy the CERCLA § 108(b) financial
responsibility requirements by obtaining
insurance for CERCLA response costs,
health assessment costs, and natural
resource damages which conforms to
the requirements of the regulations.
Through the policy the insurer agrees to
pay for the CERCLA response costs,
health assessment costs, and natural
resource damages associated with the
facility of the current owners and
operators under certain circumstances
should the current owners or operators
fail to do so. Each insurance policy
would be required to be amended by the
attachment of a CERCLA § 108(b)
insurance endorsement as worded in
§ 320.50(d).
Issuer Eligibility (§ 320.42(b))
At a minimum, the insurer would be
required to be licensed to transact the
business of insurance, or eligible to
provide insurance as an excess or
surplus lines insurer, in one or more
states. These proposed minimum
criteria for an insurer providing
insurance under the regulations are the
same as those used under the RCRA
Subtitle C financial assurance program,
which EPA believes have worked well.
Additionally, these requirements would
be familiar to the regulated community
and implementing EPA staff. EPA
believes that such standards help assure
the integrity of the insurers whose
policies are being used by owners or
operators to meet the financial
responsibility requirements. EPA
believes these qualifications will assure
that insurers are subject to some
regulatory oversight by state insurance
departments but will still permit broad
participation in providing the
insurance. EPA considered alternative
qualifications for providers of insurance
but is proposing that providers of
insurance policies meet the
requirements described in this section.
In making this decision EPA attempted
to balance the benefit of potentially
lower default rates by insurers
providing insurance under the proposed
regulations on the one hand, and the
potential impact on the supply of
instruments and the administrative
burden on the Agency entailed in
verifying providers met additional
qualifications of these alternatives on
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
the other. For more information on
alternatives considered, please see the
background document that addresses
instrument provider qualifications.
EPA also requests comment on
allowing owners and operators to obtain
insurance policies from captive insurers
and/or risk retention groups. A captive
insurer is an insurance company that
provides insurance primarily or
exclusively to its owner(s). A pure
captive is defined as having only one
owner and providing insurance
coverage to only one corporate entity,
whereas a group captive is defined as
having more than one owner and
providing insurance coverage only to
members of the group. A risk retention
group (RRG) is a liability insurance
company owned by its members (policy
holders) and organized under the
Federal Liability Risk Retention Act.
EPA is aware that some observers
have noted concerns with such forms of
insurance suggesting that captive
insurance and risk retention groups may
present a higher level of risk than
commercial insurance. EPA is
particularly concerned about the risk
that captive insurers may present.
Specifically, the EPA Inspector General
in its 2001 and 2005 reports on the
RCRA financial assurance program has
pointed to the limited financial
independence between the insurer and
the owner or operator as one source of
risk. The OIG, in the 2005 report,
explained that the financial health of
the captive insurer is tied to the parent
company. Most captive insurance
companies are wholly owned
subsidiaries, so there is a lack of
independence between the captive and
the parent company. If the parent
company has financial difficulties, then
the captive insurer may not have the
funds to cover the assured costs. (see
Office of Inspector General, Audit
Report: RCRA Financial Assurance for
Closure and Post-Closure, Report No.
2001–P–007 March 30, 2001; and Office
of the Inspector General, Continued EPA
Leadership Will Support State Needs for
Information and Guidance on RCRA
Financial Assurance, Report No. 2005–
P–00026, September 26, 2005). EPA has
concerns that pure captive insurers in
particular may offer insufficient
assurance in the context of CERCLA
§ 108(b) financial responsibility. Pure
captive insurance has a limited ability
to fulfill a basic purpose of insurance:
To spread the risks of potential losses
among multiple parties. In their 2007
report on captive insurance the
Environmental Financial Advisory
Board (EFAB) noted that the greatest
risk to the solvency of a captive insurer
is an infrequent, large insurance claim.
PO 00000
Frm 00040
Fmt 4701
Sfmt 4702
(See Environmental Financial Advisory
Board. The Use of Captive Insurance as
a Financial Assurance Tool in Office of
Solid Waste and Emergency Response
Programs. March 2007.) This may be the
very nature of claims for CERCLA
response costs, health assessment costs,
and natural resource damages associated
with hardrock mining facilities, which
can be quite large and difficult to
predict with certainty, for which the
108(b) financial responsibility
instruments would be intended to pay.
EPA believes that risk retention
groups may also carry potentially higher
risk than commercial insurance but may
be better suited to provide insurance
under CERCLA 108(b) than pure captive
insurers due to their greater ability to
spread risk across multiple insureds.
Risk retention groups were the subject
of a 2005 GAO report that identified
some concerns with risk retention
groups. One of the primary concerns
identified by the GAO was the
‘patchwork’ nature of state regulation
and oversight of risk retention groups.
(See Government Accountability Office,
Risk Retention Groups: Common
Regulatory Standards and Greater
Member Protections Are Needed, GAO–
05–536. August 2005.) Such a
patchwork regime of state regulation
and oversight may allow some risk
retention groups to operate with limited
oversight, including solvency
regulation.
EPA also recognizes that allowing
insurance policies written by captive
insurers and risks retention groups may
add potential insurance capacity. EPA
believes insurance is an important
financial responsibility instrument
under CERCLA § 108(b). EPA also
understands from its discussions with
representatives of the commercial
insurance industry as it developed this
proposal that environmental insurance
policies commonly issued may be
narrower in scope than the proposed
CERCLA § 108(b) requirements. The
Agency was also told that the scope of
the insurance coverage the Agency is
proposing to require today would likely
be viewed as a hybrid between a closure
and risk transfer policy.69 EPA
recognizes that a market for this type of
hybrid coverage thus may not currently
exist and may need some time to fully
develop. EPA believes one benefit of
allowing owners and operators to
purchase policies written by captive
insurers and risk retention groups may
be, at least initially, a deeper market for
69 A closure policy would assure the performance
or satisfaction of certain known or foreseeable
obligations. A risk transfer policy, on the other
hand, addresses losses arising from fortuitous
events (e.g. releases) that may or may not occur.
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
insurance policies to meet the CERCLA
§ 108(b) regulations. EPA’s expectations
in this respect are strongest for risk
retention groups, and are informed by
the 2005 GAO report, which noted that
many insurance regulators have
commented that risk retention groups
have filled voids where commercial
insurers may not have had a strong
interest. The report identified medical
malpractice insurance as an area where
risk retention groups were able to
provide coverage where the availability
of affordable commercial insurance was
limited. Furthermore, EPA’s evaluation
of markets for financial responsibility
instruments suggested that risk
retention groups may present an
opportunity for creation of additional
capacity to serve the financial service
needs of the hardrock mining industry.
Specifically, the report stated RRGs
have been able to offer additional
capacity to the insurance markets to
cover volatile, capital-intensive risks
like those associated with hardrock
mining.
In light of these tradeoffs between
potentially higher risk to third-party
claimants and taxpayers presented by
captive insurers and risk retention
groups and the possible additional
capacity they may provide, EPA
requests comment on allowing policies
written by these types of insurers.
Specifically, EPA requests comments on
allowing policies issued by captives or
risk retention groups provided the
issuer had a minimum financial strength
rating from A.M. Best or a comparable
rating from another Nationally
Recognized Statistical Ratings
Organization (NRSRO). EPA believes
requiring, at a minimum, that captives
and risk retention groups have a
minimum financial strength rating may
address some of the concerns associated
with these types of policies. First,
recognizing the limited financial
independence between the owner or
operator and the insurer and that
captive insurance in particular has some
similarities to self-insurance, a financial
strength rating would help to
demonstrate that the insurer has the
financial wherewithal to pay claims on
behalf of the owner or operator.
Secondly, the financial strength rating
provides an independent and common
assessment of the financial strength of
the insurer and thus may alleviate the
concerns of the state-by-state variation
in oversight and solvency examination
the GAO noted with respect to risk
retention groups. Such a provision
would also be consistent with one of the
findings in the 2007 EFAB report that
the use of independent credit analysis
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
3427
(i.e., credit ratings) is a cost-effective
mechanism for demonstrating the
financial strength of a captive insurer
and that these ratings help address the
limited capacity of state regulatory
bodies to undertake extensive credit
analysis.
The value of a potential rating
requirement for a captive insurer or risk
retention group can also be illustrated
by lower historical default rates for
higher rated insurers. In 2015 AM Best
reported 70 that US life/health and
property/casualty insurers rated by AM
Best over the period 1977–2014 with
secure ratings had a cumulative threeyear impairment rate of 1.05 percent.
The same impairment rate for life/health
and property/casualty insurers rated by
AM Best with vulnerable ratings over
that time period was 10.45 percent
suggesting that ratings requirement
could meaningfully reduce the
impairment risk of a risk retention
group or captive insurer.
EFAB also recommended to EPA in its
2007 report on captive insurance that in
addition to the captive insurer having a
minimum rating, the financially
responsible affiliate (e.g. the owner or
operator demonstrating financial
responsibility with insurance from a
captive) should also hold a minimum
credit rating. EPA requests comments on
this additional potential requirement for
captive insurance should captive
insurance be allowed in the final rule.
EPA believes that such a requirement
would address some of the concern
associated with the similarities between
pure captive insurance and a financial
test but would increase the
administrative burden on the Agency.
EPA recognizes, however, that a
requirement for a financial strength
rating would not address all concerns
with these instruments. These
remaining concerns would include: (1)
A concern that state insurance
regulation of captives and risk retention
groups may not be as uniform as that for
commercial insurance and may be
limited to only the state in which the
insurer is chartered; 71 (2) a concern that
captives and risk retention groups may
not be able to spread risk across many
insureds given the limitations inherent
in for whom they can write policies.
EPA is therefore seeking comment on
these issues, and on suggested
approaches to address these remaining
concerns.
For example, EPA requests comment
on the concept of allowing policies
issued by risk retention groups or group
captives that met a certain minimum
rating, but not allowing pure captive
insurers to meet the CERCLA § 108(b)
financial responsibility requirements.
The rationale for such a distinction
would be that risk retention groups and
group captives may be able to spread
risk across a larger pool of financially
and legally independent policy holders
than a pure captive insurer that may be
restricted to spreading risk amongst its
own financially-related affiliates. As
such, accepting insurance policies from
risk retention groups or group captives,
but not pure captives, may address the
second concern identified. EPA also
requests comment on whether insurance
policies provided by risk retention
groups and group captive insurers more
generally should be treated
equivalently.
EPA recognizes that a financial
strength rating would not necessarily be
available in the near term as some
captive insurers or risk retention groups,
were they to ultimately be considered
acceptable issuers, may be newly
created in response to these regulations.
EPA is thus accepting comment on
whether, if EPA ultimately allows
policies written by captives and/or risk
retention groups, to phase in the ratings
requirement. A phased ratings
requirement could operate by requiring
that owners and operators provide
evidence of the requisite financial
strength of a captive insurer or risk
retention group beginning five years
after the effective date of the rule. In this
way, a rating agency would be able to
review a multi-year track record of the
insurer’s performance which may be
necessary in order to accurately rate the
insurer.
70 A.M. Best. Best’s Impairment Rate and Rating
Transition Study–1977–2014. U.S. Property/
Casualty & Life/Health. Exhibit 2. Pg 5. (August 21,
2015)
71 This concern is one of the concerns identified
in the 2005 GAO report but may not be unique to
captive or risk retention groups in the context of
environmental insurance. Similar to captive
insurers and risk retention groups, an excess or
surplus lines insurer must be licensed in the state
that serves as its domicile and must meet the
solvency requirements of that state alone. Excess or
surplus lines insurers cover difficult to standardize
risks which often includes environmental insurance
and, the Agency anticipates, may include CERCLA
108(b) coverage initially due to the relatively high
Submission of Endorsement
(§ 320.42(c))
Typically, financial responsibility
regulations require submission of either
a certificate of insurance or an
endorsement as evidence of the required
insurance coverage. A certificate of
insurance is a form that typically is
completed by an insurance broker or
agent at the request of an insurance
PO 00000
Frm 00041
Fmt 4701
Sfmt 4702
dollar limits of liability and high risk facility
classes.
E:\FR\FM\11JAP2.SGM
11JAP2
3428
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
policyholder, which evidences the fact
that an insurance policy has been
written. An endorsement to an
insurance policy is a valid and binding
part of the contract considered to be part
of the insurance contract. EPA is today
proposing that an endorsement be
submitted as evidence of financial
responsibility by owners and operator
that choose to obtain insurance coverage
as the means of complying with the
CERCLA § 108(b) insurance
requirements. Specifically, the owner or
operator would be required to submit a
signed duplicate original of the CERCLA
§ 108(b) financial responsibility
endorsement to the Administrator, or to
regional delegees of the Administrator,
if applicable, if the endorsement covers
facilities located in multiple regions.
For more information on the required
wording of the endorsement and
alternatives considered please see the
discussions later in this preamble, and
the background document ‘‘Potential
Requirements for Insurance, Surety
Bonds, Letters of Credit and Trust
Agreements and Standby Trust
Agreements under CERCLA § 108(b)’’
regarding instrument specifications.
In discussions with representatives of
the insurance industry, EPA was told by
the participating representatives that
they were indifferent between a
certificate of insurance and an
endorsement as the form of the evidence
of financial responsibility. EPA did not
want to require the whole policy be
submitted in all cases and is thus today
proposing that an endorsement be
submitted as evidence of financial
responsibility. Other financial
responsibility programs specify either
certificates, endorsement or both. In
order to reduce the complexity of the
proposed regulations and provide a
narrower range of documents EPA
would need to review during
implementation, the Agency is
proposing an endorsement be
submitted. Further, because an
endorsement is part of the insurance
contract itself, it may provide greater
certainty with respect to the insurance
coverage provided by the policy than a
certificate of insurance.
Requirements To Ensure Continuity of
Financial Responsibility Coverage
(§§ 320.42(f)(k) and (l))
An owner or operator using insurance
to satisfy the requirements of this
section would also be required to
establish a standby trust and update
Schedule A of the trust agreement
within sixty days of a change in the
amount of CERCLA § 108(b) financial
responsibility. Similar to the
requirements for the letter of credit and
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
surety bond, the standby trust is being
required alongside the insurance
instrument to ensure continued
coverage, in conjunction with the
automatic renewal provision of the
policy and the potential liability of the
insurer if the owner or operator does not
obtain replacement financial
responsibility. EPA’s concern is that an
insurance policy might be cancelled, not
renewed or otherwise terminated
leaving no financial responsibility in
place for the payment of valid thirdparty CERCLA claims. EPA is especially
concerned that policies may be
cancelled, terminated or otherwise not
renewed following the issuance of a
notice letter of potential liability for the
release of hazardous substances or
marked financial decline of the owner
or operator, and financial responsibility
may not be in place when a claim is
made. Amplifying these concerns is the
recognition that the CERCLA processes
leading to a claim (e.g. cost recovery)
may be lengthy, which may make it
particularly difficult to ensure
continuity of CERCLA § 108(b)
insurance coverage without these
requirements.
As a result, in addition to the
requirement to establish a standby trust,
EPA is proposing an automatic renewal
provision. Specifically, EPA is
proposing that the endorsement provide
that cancellation, failure to renew, or
any other termination of the insurance
by the insurer will be effective only
upon written notice to the owner and
operator and the Administrator by
certified mail and only after the
expiration of 120 days beginning with
the date of receipt of the notice by both
the Administrator and the owner or
operator, as evidenced by the return
receipts. Such an automatic renewal
provision in the policy would be
required to provide the insured with the
option of renewal at the face amount of
the expiring policy. In this way,
insurance coverage could only lapse
after 120 days’ notice providing the
owner and operator an opportunity to
obtain replacement financial
responsibility.
The cancellation and termination
language in the endorsement proposed
today was intended to closely follow the
language used in the RCRA Subtitle I
insurance endorsement for underground
storage tank financial responsibility. A
2004 court decision held that those
regulations preclude rescission as a
remedy for misrepresentation and
provide only for prospective
cancellation of the insurance.72 EPA is
72 See: Zurich Am. Ins. Co. v. Whittier Props.,
Inc., 356 F.3d 1132 (9th Cir. 2004).
PO 00000
Frm 00042
Fmt 4701
Sfmt 4702
concerned that at the time a claim was
made against a CERCLA § 108(b)
insurance policy, rescission
(retrospective cancellation) of the policy
due to misrepresentation of the insured,
would result in the financial
responsibility being unavailable and
leave valid claims unsatisfied. EPA
recognizes the public policy merits of
protections to insurers in the event of
misrepresentation. However, in the
CERCLA § 108(b) context, EPA would
not have access to the owner or
operator’s application for insurance and
any investigations into
misrepresentations or omissions would
potentially be burdensome to the
Agency and redirect resources away
from cleanups and other programmatic
priorities. EPA believes that the insurer
is in the best position to conduct
investigations as to the accuracy of the
information provided in the application
for insurance and thus should retain the
risk from misrepresentation rather than
any CERCLA claimants. EPA’s intent
today is to preclude rescission of the
insurance coverage as a remedy for
misrepresentation and instead provide
that prospective cancellation, nonrenewal or other termination of the
insurance are the sole remedies. EPA
requests comment on this proposed
provision and endorsement language.
Finally, the endorsement would be
required to specify that in instances
where the owner or operator fails to
obtain alternate financial responsibility
and obtain written approval of such
alternate financial responsibility from
the Administrator within ninety days
after receipt by both the owner or
operator and the Administrator of a
notice from the insurer that it has
decided to cancel, not renew or
otherwise terminate the insurance
policy, the insurer would be liable up to
the face value of the policy for payment
into the standby trust in accordance
with the terms of the endorsement. EPA
believes the combination of the
requirements for a standby trust, a
notice of cancellation, failure to renew
or other termination of the policy and
the insurers potential liability if the
owner or operator did not obtain
alternate financial responsibility would
provide assurance to EPA and other
claimants that funds will be available to
make payment for CERCLA response
costs, health assessment costs, and
natural resource damages as required
under the proposal. This requirement
would be similar to those for owners
and operators using letters of credit or
surety bonds. This arrangement, and the
similar provisions for other proposed
instruments, as well as alternatives are
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
discussed in more depth in the
preamble section headed ‘issuer
cancellation provisions.’
A notable feature of the issuer
cancellation provision proposed today
for insurance is how failure to pay the
premium would be treated. Under this
proposed rule, if failure to pay the
premium was the rationale for the
insurer’s decision to cancel, not renew,
or otherwise terminate the policy, the
insurer would be liable on the policy to
fund a standby trust if the owner or
operator failed to obtain alternate
financial responsibility and obtain
written approval of such alternate
financial responsibility from the
Administrator within ninety days after
receipt by both the owner or operator
and the Administrator of the notice of
the insurers intent to cancel, not renew,
or otherwise terminate the policy. EPA
believes that this is the appropriate
treatment of the insured’s failure to pay
the premium. EPA believes that the
instances in which the owner or
operator is unable to pay the premium
are likely instances where financial
responsibility coverage is most needed
as the owner’s or operator’s ability to
satisfy valid third-party CERCLA claims
is likely limited. EPA believes one of the
benefits of CERCLA § 108(b) is that the
credit risk of the owners and operators
of facilities managing hazardous
substances can be transferred from the
taxpayer and other third-party CERCLA
claimants to the insurance and financial
responsibility providers better able to
manage, assess and make arrangements
for such credit risks.
One alternative option would be to
allow cancellation in the event of the
insured’s failure to pay the premium,
without potential insurer liability.
While, for the reasons discussed earlier,
EPA is not proposing such an
arrangement, the Agency requests
comments on this alternative and the
proposed treatment of failure to pay the
premium on the part of the insured.
Payment for Third-Party CERCLA
Claims From the Insurance (§§ 320.42(h)
Through (j) and (l) and § 320.50(d))
Under the proposed regulations the
insurance would provide for payment to
third-party CERCLA claims with three
payment triggers in addition to
providing for direct action as provided
by CERCLA. EPA anticipates these four
payment scenarios would operate
independently of each other. These
payment scenarios are the same as for
the other instruments and are discussed
more fully in section VI.B.5. of this
preamble.
The policy would be required to
provide for the payment awarded in
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
final court judgments from a Federal
court against any of the current owners
and operators awarding CERCLA
response costs, health assessment costs,
and/or natural resource damages
associated with the facility to the party
obtaining the judgment should such
payment not be made within thirty
days.
The policy would be required to
provide for payment as required by a
CERCLA settlement associated with the
facility between any of the current
owners or operators at the facility and
EPA or another Federal government
agency should the payment as required
by the settlement not be made.
The policy would also be required to
provide for payment into a trust fund
established pursuant to a CERCLA
unilateral administrative order issued to
any of the current owners or operators
at the facility by EPA or another Federal
agency in instances where performance
at the facility as required by the order
does not occur. The owner or operator
must have provided a written statement
allowing the insurance policy be used to
assure performance of the work required
in the order.
In addition to the three proposed
payment scenarios identified for which
EPA intends to provide insurance
coverage, the proposed CERCLA
§ 108(b) insurance would also be
required to provide for direct action
against the insurer in instances
identified in CERCLA § 108(c)(2).
Specifically, the proposed required
wording of the CERCLA § 108(b)
insurance endorsement includes
language stating that in the case of a
release or threatened release of (a)
hazardous substance(s) from a facility
covered by the policy, the insurer
acknowledges that any claim authorized
by CERCLA §§ 107 or 111 may be
asserted directly against the insurer as
provided by CERCLA § 108(c)(2). The
endorsement would also state that the
insurer consents to suit with respect to
these claims subject to the limitations in
CERCLA § 108(d), and that the insurer
will be entitled to all rights and
defenses provided to guarantors by
CERCLA § 108(c). Further, under the
proposed terms of the endorsement the
insurer would provide notice of any
such resulting claims and payments to
the Administrator. EPA believes this
notification requirement is valuable as
the owner and operator may not be
available to provide such a notice of
payments or claims in a direct action
scenario yet EPA wishes to remain
informed of claims against the
instrument and the value of the
financial responsibility.
PO 00000
Frm 00043
Fmt 4701
Sfmt 4702
3429
General Performance Clause
(§ 320.50(d))
The proposed insurance endorsement
language includes a general or blanket
performance clause as a means to
address the myriad number of ways the
scope of insurance coverage provided by
an insurance policy may be limited.
EPA recognizes that the ability to tailor
insurance coverage to the specific needs
of the insured is one of the virtues of
insurance contracts; however, the
Agency believes that in the context of
statutorily required financial
responsibility such limiting provisions
of the policy may conflict with the
intended scope of the financial
responsibility coverage and may
frustrate the realization of the public
policy goals. Environmental insurance
policies can be long, complex contracts
that operate as a whole to define and
restrict the coverage provided.
EPA believes it is necessary to
propose a performance clause in the
language of the endorsement that would
amend any terms of the policy
inconsistent with the regulatory
requirements for CERCLA § 108(b)
insurance or the terms specified in the
endorsement. Similar performance
clauses are employed in the certificate
of insurance required as evidence of
financial assurance for closure and postclosure care of hazardous waste
facilities in the RCRA Subtitle C
program (see 40 CFR 264.151(e)) and in
the required wording of the
endorsement used in the RCRA Subtitle
C third-party liability program (see 40
CFR 264.151(i)). EPA believes that the
proposed performance clause in the
endorsement will provide EPA evidence
of financial responsibility submitted by
owners and operators electing to use
insurance without necessitating EPA
review of the entire insurance policy.
Without such a provision, the
administrative burden involved with
reviewing insurance submissions would
be significantly higher and may require
expertise not readily available within
EPA.
The proposed performance clause
states that the insurance afforded with
respect to the covered facilities is
subject to all of the terms and
conditions of the policy; provided,
however, that any provision, exclusion,
definition, condition, retroactive date,
clause, defense, or other term of the
policy inconsistent with 40 CFR 320.42
or certain identified required
specifications in the endorsement are
hereby amended to conform with 40
CFR 320.42 and the required
specifications in the endorsement. EPA
intends for the performance clause to
E:\FR\FM\11JAP2.SGM
11JAP2
3430
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
help ensure that financial responsibility
coverage will continue and that the
insurer will satisfy valid third-party
CERCLA claims as intended by the
proposed regulations. In light of the fact
that insurance policies are often long,
complex documents that may include
numerous exclusions, definitions,
conditions, or other terms that may
undercut the intended coverage, EPA
requests comment on the proposed
performance clause in the CERCLA
§ 108(b) insurance endorsement.
Furthermore, EPA is interested in
comments as to whether or not the
proposed insurance specifications,
including the performance clause, will
reliably provide for the intended
coverage (e.g. payment under the
scenarios described in IV B 5 ‘‘General
Provisions for Instrument Payment’’ of
the preamble).
Retroactive Dates (§ 320.50(d))
The most notable aspect of the
proposed performance clause may be
the specification that any retroactive
date 73 contained in the policy
inconsistent with the intended scope of
CERCLA § 108(b) financial
responsibility coverage is amended to
conform with the regulatory
specifications and the terms of the
endorsement. EPA believes that such a
specification is necessary to effectuate
the purpose of CERCLA § 108(b) and has
public policy merits. CERCLA
§ 108(c)(2) provides a cause of action
against insurers providing CERCLA
§ 108(b) coverage in certain instances for
any claim authorized by CERCLA §§ 107
or 111. CERCLA’s liability scheme is
established in CERCLA § 107 and is
retroactive and includes costs incurred
addressing the threat of a release. EPA
believes a retroactive date would be
inconsistent with the intended scope of
CERCLA § 108(b) financial
responsibility which is intended to
cover the full suite of potential CERCLA
liabilities including threatened releases,
which could be a significant driver of
costs and risk and may exist at many
facilities subject to CERCLA § 108(b)
financial responsibility requirements.
This issue relates to the concept of
CERCLA § 108(b) presenting a hybrid
risk from the viewpoint of insurers
mentioned earlier. In discussions with
representatives of the insurance
community, EPA was informed that the
scope of a CERCLA response cost is
73 The ‘‘retroactive date’’ or ‘‘continuity date’’
(terminology varies) establishes the foregoing
temporal limits of insurance policies: Pollution
conditions commencing before the specified date
are not covered, even if a claim about such a
pollution condition is first made during the policy
term.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
broad and has elements suited to risk
transfer policies that commonly have
retroactive dates (e.g. costs incurred
responding to fortuitous releases) and
closure insurance that typically would
not have a retroactive date (e.g. costs
incurred responding to the threat of
release). EPA recognizes that for this
reason, the CERCLA § 108(b) financial
responsibility scope of coverage may, at
least initially, be perceived as an
unfamiliar or hybrid risk by insurers yet
believes that allowing retroactive dates
inconsistent with intended scope of
coverage could result in many valid
third-party CERCLA claims being
unsatisfied on the basis that the
pollution condition pre-dated the
retroactive date of the policy. EPA
requests comment on the performance
clause and in particular the proposed
language amending any retroactive dates
inconsistent with the scope of coverage
prescribed by the regulations.
One possible arrangement that
representatives from the insurance
community offered was to separate the
financial responsibility requirements
into two separate obligations. Such an
arrangement for CERCLA § 108(b) would
allow EPA to specify an appropriate
retroactive date for the fortuitous risks
and not have one for the more ‘‘known’’
CERCLA response and health
assessment costs. In the RCRA Subtitle
C financial assurance program EPA was
able to specify separate instruments for
known costs (e.g. closure) and thirdparty liability financial assurance which
is more fortuitous in nature. However,
such a construct is not possible in the
case of CERCLA § 108(b) financial
responsibility. Because CERCLA
§ 108(b) financial responsibility does
not support a permitting program EPA
cannot establish, by regulation,
performance requirements for owners
and operators subject to the rule (e.g.
closure requirements that might address
a threat of release) which would be the
basis for a separate amount of financial
responsibility. Further it is important to
recognize that the determination of a
CERCLA § 108(b) financial
responsibility amount does not
constitute a determination of CERCLA
liability for regulated entities or
establish any presumptive remedy
which could be the basis of an amount
for costs amenable to a closure policy.
This is one of the reasons why CERCLA
§ 108(b) financial responsibility is
inherently different from financial
responsibility that complements
reclamation and closure programs.
Given the uncertainty around what
Superfund actions may ultimately be
required at a facility, EPA believes it
PO 00000
Frm 00044
Fmt 4701
Sfmt 4702
unwise to establish different pots of
money. Such an approach would only
be optimal in instances where there is
established certainty that particular
actions will need to take place at a
facility (e.g. in a program with
regulatory requirements for closure or
post-closure).
Multiple Insurers (320.42(d))
EPA is proposing that up to four
insurers would be able to provide the
required amount of CERCLA § 108(b)
financial responsibility at a single
facility. EPA expects the required
amounts of CERCLA § 108(b) financial
responsibility may be relatively large
and wishes to provide this flexibility.
The proposed endorsement language
would require that the participating
insurers identify their percentage share
of the coverage at facilities covered by
the policy and the corresponding dollar
value of that percentage share.
The proposed arrangement for
allowing multiple insurers to cover a
single facility is consistent with the
proposed arrangement for multiple
sureties with a few exceptions. As
described in the surety bond section of
the preamble, the proposed language of
the surety bond requires sureties to bind
themselves jointly and severally for
purposes of allowing a joint action(s)
against the issuers of the surety bond,
but allow for payment based on predetermined proportions of the penal
sum (several liability). Unlike in the
case of surety bonds where such a
provision has a great deal of precedent,
such a provision for insurers
participating in vertical towers of
coverage is less common in the financial
assurance programs EPA reviewed. As a
result, EPA is proposing that
participation by multiple insurers be
limited to four insurers to ensure a
manageable claims process. The U.S.
Coast Guard included the same cap on
the number of participating insurers (59
FR 34220 (July 1, 1994)). EPA does not
want to create a scenario whereby
claimants need to take action against
many insurers which would complicate
the claims process and create a
protracted process for the satisfaction of
valid claims. EPA requests comment on
this limitation. Specifically, EPA is
interested in comments as to whether,
in instances where multiple insurers
provide coverage at a single facility,
requiring participating insurers to bind
themselves jointly and severally for the
purposes of allowing a joint action(s)
against the group of insurers would be
possible and how such a provision
might best be specified.
When multiple insurers do provide
coverage at a single facility, the
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
proposed regulations would require that
each insurer be liable for their
individual vertical percentage share of
the total CERCLA § 108(b) financial
responsibility amount. The proposed
specification would create a vertical
relationship whereby an insurer’s
liability is not affected by the other
insurers’ abilities to pay their shares.
EPA believes this provides greater
protection against the insolvency of one
of the participating insurers. The U.S.
Coast Guard also restricted multiple
insurers to only providing vertical
towers of coverage.74 This approach also
simplifies the claims process as the
exhaustion of one insurer’s liability
does not need to be determined before
payment can be received from another
insurer.
An alternative EPA considered was
proposing that multiple insurers could
form a tower of coverage comprised of
horizontal layers. In such an
arrangement each insurer in the
horizontal tower would be agreeing to
cover its layer of the tower, not a
percentage of the total. Those insurers
higher up the horizontal tower become
responsible on a layer-by-layer basis as
the limits of each underlying policy
become exhausted. However, EPA is not
proposing such an arrangement due to
several concerns. First, a horizontal
arrangement presents the opportunity
for insurers covering higher coverage
layers to avoid liability if an insurer on
a lower level becomes insolvent and
cannot cover the liability within its
layer. This is a concern also identified
by the U.S. Coast Guard when it
developed its CERCLA § 108(a)
regulations.75 Secondly, such an option
would raise the administrative burden
on EPA because the Agency would need
to ensure that each layer of coverage fits
with the layers above and below by
ensuring the insurance included the
necessary ‘‘follow form’’ provisions.76
Further, EPA would also need to ensure
that the layers contained ‘‘drop down’’
provisions to address exhaustion issues
that might arise as a result of insolvency
of an underlying insurer.77
74 See
33 CFR 138.80(c)(1)(i).
59 FR 34220 (July 1, 1994).
76 A ‘‘follow form’’ provision means that the
excess insurer agrees to abide by the terms of the
primary or underlying policy(ies) to the extent that
the excess policy does not contain a conflicting
parallel term. The intent of an EPA requirement for
such a provision would be to eliminate coverage
gaps that may arise when excess policies do not
‘‘follow form’’ of underlying policies. For example,
a gap may arise when the primary policy covers
gradual pollution but the excess policy does not.
77 An exhaustion provision states that an excess
layer of coverage cannot be triggered until all
primary and underlying layers have been
exhausted. Problems in accessing excess layers can
sradovich on DSK3GMQ082PROD with PROPOSALS2
75 See
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
EPA requests comment on the
proposed regulatory provision allowing
up to four insurers to provide coverage
at one facility by identifying their
vertical percentage share of the total
CERCLA § 108(b) financial
responsibility amount in the submitted
endorsement. Specifically, EPA is
interested in other potential
arrangements that may encourage
insurer participation in the program and
provide for relatively high amounts of
financial responsibility coverage yet not
overly complicate implementation or
the claims process.
Termination of Insurance Coverage by
the Owner or Operator (§ 320.42(n) and
(p))
The owner or operator would be
required to maintain the insurance in
full force and effect until the
Administrator consents to termination
of the insurance by the owner or
operator. The Administrator would give
written consent to the owner or operator
that he or she may terminate the
endorsement when: (1) An owner or
operator substitutes alternate financial
responsibility as specified in this
section; or (2) the Administrator releases
the owner or operator from the
requirements of this section in
accordance with § 320. 26. This
provision is intended to ensure that the
coverage of the financial responsibility
does not cease, and that funds remain
available when needed, until the release
provisions are met or alternate financial
responsibility is provided.
4. Financial Test (§ 320.43)
a. Overview and Introduction
CERCLA § 108(b) (2) provides that
financial responsibility may be
established by any one, or any
combination of, the instruments listed
in that paragraph, including
‘‘qualification for self-insurance.’’ A
financial test is a financial
responsibility instrument that allows an
owner or operator to qualify for selfinsurance by demonstrating that it has
sufficient financial strength to meet its
environmental obligations. When
allowing the use of a financial test, the
Government accepts the facility’s
demonstration of financial strength as
the only assurance that the owner or
operator will meet its environmental
obligations, and does not require that it
establish a trust fund or obtain
arise when either the insured or an underlying
insurer cannot pay due to insolvency. A ‘‘drop
down’’ specification can address the situation of
insolvency on the part of an underlying insurer,
although other terms and conditions in the excess
policy will affect whether the coverage will drop
down.
PO 00000
Frm 00045
Fmt 4701
Sfmt 4702
3431
additional security in the form of a
third-party financial instrument, such as
insurance, a surety bond, or letter of
credit.
The Agency is co-proposing two
separate regulatory approaches in the
form of options regarding the use of a
financial test to assure that this
important issue is thoroughly
considered before the Agency makes a
decision in the final rule. The Agency
is proposing, under Option 1, not to
allow the use of a financial test or
corporate guarantee, and is proposing
under Option 2 allowing the use of a
credit rating-based financial test and
corporate guarantee. At this time, EPA
prefers Option 1. However, the Agency
is proposing both options to fully
evaluate this issue, and to gather as
much information as possible to inform
its ultimate decision on whether the
financial test and corporate guarantee
mechanisms are appropriate for use by
hardrock mining facilities under
CERCLA § 108(b). EPA has identified,
and presented in this preamble
discussion, a number of factors that the
Agency will consider in making its final
decision, and seeks public comment on
these factors, as well as additional
information from the public that could
inform the Agency’s final decision.
By replacing the requirement to
obtain a third-party instrument with a
demonstration of financial strength, the
financial test results in significant cost
savings to eligible owners or operators,
from not having to purchase a thirdparty financial responsibility
instrument. However, by allowing a
financial test, EPA would accept the risk
that, if the company’s financial situation
deteriorates and it cannot obtain a thirdparty instrument or fund a trust fund to
meet its environmental obligations, the
costs of addressing the environmental
risk at the facility could fall to the
public. With the added layer of a thirdparty financial responsibility
instrument, however, the risk of default
to the public would be lessened by the
financial strength of the instrument
provider. Nonetheless, EPA recognizes
that the risk of default exists regardless
of the type of financial responsibility
instrument. For example, even in the
case of secured financial responsibility
instruments, the possibility remains that
the banks and insurance companies
underwriting these instruments could
also fail. Regardless of the scenario,
with or without a financial test, EPA
and the public are not without some risk
of having to cover such obligations.
EPA also is carefully considering the
elements of the financial test. Financial
tests can vary in approach and in
sensitivity. The combination of terms
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3432
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
and conditions impacts the balance of
cost savings to the regulated community
and the risk to the public, as well as a
test’s efficacy. Thus for example, bond
ratings and financial ratios are
commonly used measures of financial
strength in financial tests. For bondrating-based tests, establishing a lower
minimum rating(s) requirement for selfinsurance, can expand the availability of
the test to the regulated community. At
the same time, such entities with lower
credit ratings also possess a higher
likelihood of defaulting on their
obligations. Thereby, permitting less
credit worthy companies the ability to
use the financial test increases the
chance that an obligation may go unpaid
and be borne by the public.
Further, the financial strength of an
owner or operator as measured by a
financial test represents a snapshot in
time. Thus, for a financial test to be
effective, the owner or operator must
provide periodic evidence that it
continues to pass the financial test and
that it can meet the costs associated
with its facility over time. For a
financial test to be effective: (1) The
financial test must accurately reflect the
financial strength of the owner or
operator; (2) the Agency and/or owners
and operators must identify when the
owner or operator no longer qualifies for
self-insurance under the financial test;
(3) the owners or operators that no
longer qualify for the financial test must
be able to quickly obtain an alternate
instrument(s) to cover their obligations
instead of self-insuring; and (4) the
requisite instruments must in turn be
available to such owners and operators
who no longer are able to self-insure.
The Agency is concerned, however, that
third-party financial instruments may
not be available to a company that is
experiencing a period of financial
hardship. While, in general, such an
issue has not been a widespread
problem in other EPA financial
responsibility programs, the Agency is
concerned that the highly cyclical,
capital-intensive nature of the mining
industry may present unique challenges
under a CERCLA § 108(b) rule for
hardrock mines.
There are several other broader
considerations with respect to the
adoption of a financial test. First, EPA
has concerns regarding the extent to
which sufficient resources and expertise
will be available to implement a
financial test under CERCLA § 108(b).
Second, EPA has policy concerns about:
(1) Whether offering a financial test
would adversely affect the incentives
created by the rule for better practices;
(2) the potential inequity of offering a
test due to the advantage that the test
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
may create for larger versus smaller
owners and operators; and (3) whether,
given the potentially significant costs
associated with Superfund liabilities,
should the financial test fail as an
instrument, these costs may not be paid
or may fall to the taxpayer to pay. All
of these considerations are discussed
elsewhere in the preamble. The Agency
remains extremely concerned regarding
the boom and bust nature inherent to
the hardrock mining industry and recent
volatility in commodity prices and
global markets. History suggests that the
increased risk of default for these
companies makes this sector
particularly problematic from the
perspective of allowing them to selfinsure through a financial test. Finally,
many hardrock mining facilities require
long-term care, such as long-term water
treatment of acid mine drainage.
Allowing owners or operators to selfinsure where such long-term liabilities
are anticipated may be ill-advised given
that some sites require treatment into
perpetuity. It should be noted that,
although EPA currently allows the use
of a financial test under various agency
programs,78 other agencies have chosen
not to allow the use of a financial test
for owners and operators in the mining
sector.79 80 81 EPA discusses all of these
factors in the following sections of this
preamble.
b. Option 1—No Financial Test
(Preferred Option)
Under this option, which EPA prefers,
the Agency is proposing an approach
under which a financial test would not
be available for use by hardrock mining
facilities subject to this rule. Under this
approach, owners or operators could
demonstrate financial responsibility
only by using a trust fund, insurance, a
letter of credit, or a surety bond, or a
combination of those instruments. A
corporate guarantee, which is based on
the financial test, would not be
available. EPA is proposing this option
as a preferred option based on a number
of factors. Covered initially are four
broader factors of concern regarding the
78 The financial test is an allowable instrument
under RCRA Subtitle C, Subtitle D, and Subtitle I
regulations, as well as under the Underground
Injection Control (UIC) program.
79 See 43 CFR § 3809.570(a) through (c) related to
self-insurance and pre-existing self-bonds under
BLM regulation.
80 See U.S. Forest Service, Forest Service Manual
§§ 2817.24; 6562 (2008).
81 For example, the Federal agency that regulates
surface mining of coal recently advised states to not
allow self-insurance by mining companies and also
announced that it was changing the federal rules
regarding self-insurance under the Surface Mining
Control and Reclamation Act (SMCRA).
See: https://www.eenews.net/eenewspm/stories/
1060041689
PO 00000
Frm 00046
Fmt 4701
Sfmt 4702
appropriateness of financial tests under
CERCLA § 108(b). Further discussion
follows that also outlines factors for
why the use of any financial test would
be particularly problematic for the
hardrock mining industry. (1) Concerns
regarding the use of a financial test
under CERCLA § 108(b).
The Agency considered several
concerns regarding the use of a financial
test under this proposed rule. The
Agency first considered the work
involved in overseeing a financial test in
the context of CERCLA § 108(b). EPA is
particularly concerned about the
administrative burden of a test under
CERCLA § 108(b) given the freestanding
nature of the CERCLA § 108(b)
obligation that would not be buttressed
by a permitting program. Observers,
more generally, have commented that
the financial test poses additional
administrative burden. For example, in
a 2001 audit of the RCRA Subtitle C
financial assurance program, the
Agency’s OIG reported that financial
tests pose unique administrative
complexities that raise their
implementation burden.82 In 2005,
when GAO was tasked with identifying
obstacles to full realization of the
‘‘polluter pays’’ principle, GAO
observed that financial tests and
corporate guarantees are among the
instruments that pose the greatest
financial risk to the Government and are
an administrative burden since they
require specialized expertise to
oversee.83 The Agency is considering
whether the unique characteristics of
the CERCLA § 108(b) financial
responsibility program and of the
hardrock mining industry may increase
the administrative burden of
implementing a financial test, and make
the use of a financial test less
appropriate under this proposed rule
than under other Agency programs. EPA
solicits comment on this issue.
As discussed earlier, successful use of
a financial test requires adequate
oversight by the regulatory agency to
assure that financial submissions are
accurate and adequate, and that when
owners or operators no longer meet the
requirements of the financial test they
secure an alternative financial
responsibility instrument in a timely
manner. Generally, where a financial
responsibility requirement is tied to a
permit, EPA has ongoing oversight of
the owners or operators of the facility,
82 See EPA Office of Inspector General. RCRA
Financial Assurance for Closure and Post-Closure.
March 30, 2001. 2001–P–007.
83 See Government Accountability Office.
Environmental Liabilities: EPA Should Do More to
Ensure That Liable Parties Meet Their Cleanup
Obligations. August 2005. GAO–05–658.
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
which supports implementation of a
financial test at that facility. For
example, under EPA’s RCRA Subtitle C
regulations for permitted hazardous
waste treatment, storage, or disposal
facilities, EPA receives extensive
information about the facility in its
permit application under 40 CFR part
270, and conducts regular and detailed
inspections of the facility, including
both the physical operations and
financial assurance information
required under the permit. As described
earlier, however, CERCLA § 108(b) is an
independent financial responsibility
requirement that is not associated with
a permit program, so the Agency may
have less immediate access to
information regarding the current status
of the facility.
The Agency has attempted to address
some of these concerns by structuring
the proposed financial test to reduce
implementation concerns, for example,
by including reliance on credit rating.
(This issue is discussed in section
VI.C.4. of this preamble). However, even
with the proposed financial test, the
Agency would still be required to, at a
minimum, verify the credit ratings, and
to annually review financial
submissions to assess whether the
company meets other test requirements,
such as coverage multiple
requirements 84 related to a company’s
tangible net-worth and the value of their
U.S. Assets. This review is potentially
complex and may require a level of
financial expertise not readily available
in all ten EPA Regional Offices. For
example, the data in the Chief Financial
Officer (CFO) letter 85 may vary from the
latest annual financial statements.
Professional judgment may be needed to
evaluate deviations between the CFO
letter and audited statements, which
increases the administrative burden and
the demand for technical expertise to
implement the financial test.
In addition, the efficacy of the
financial test proposed under Option 2
depends on the accurate and accessible
accounting of covered environmental
obligations company-wide to meet the
U.S. assets and tangible net worth
coverage multiple requirements. These
84 In this proposal, an owner or operator eligible
to use this financial test for any portion of its
CERCLA § 108(b) obligations also would be subject
to a coverage multiple requiring them to have both
a tangible net worth and U.S. Assets each
equivalent to at least six times the amount of
environmental obligations covered by a financial
test. The U.S. Asset requirements could also be met
by demonstrating that at least ninety percent of total
assets are located in the United States.
85 To demonstrate passage of the financial test,
owners or operators would be required to annually
submit a standardized letter to the Administrator
signed by its CFO.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
requirements will be implemented by
EPA Regional offices, but the coproposed financial test includes
nationwide obligations as part of the
calculation, to ensure effectiveness of
the test. This may necessitate
verification of information located in
another region or held by another
agency or state entity, which could be
a very timely and costly process.
The Agency has found
implementation of a financial test under
other Agency financial responsibility
programs to present challenges. EPA is
concerned that under CERCLA § 108(b),
without the structure of a permit
program and the level of interaction and
knowledge of site conditions that it
provides, it may be even more
challenging to successfully oversee and
implement.
Second, EPA is concerned that the use
of a financial test may limit the
realization of one of the potential
benefits of this rule—the development
of better mining practices. EPA believes
that this is an important impact of this
proposed rule. As explained in the
discussion of the financial
responsibility formula, EPA has built
such incentives into that aspect of the
rule. Those incentives are reinforced by
the effect that an owner or operator
adopting sound practices can be
expected to be able to purchase an
instrument from a third party, for a
reduced amount of coverage and at a
reduced cost. Similarly, some thirdparty providers may encourage owners
and operators to adopt safer practices as
well. However, with a financial test, so
long as the owner or operator can meet
the test requirements and avoid the
need to obtain third party coverage, the
cost savings incentive to implement
improved practices may be lost, along
with the associated risk reductions they
would afford. Therefore, the Agency
believes that providing a financial test
under this proposed rule could reduce
salutary effects of the rule. Further,
because financial tests are available to
the owners or operators that are best
able to bear the costs, this reduced
incentive affects the owners or operators
in the best position to invest in
improved practices.
Third, the Agency is further
concerned that because of the
potentially high costs associated with
Superfund liabilities, particularly from
hardrock mining facilities, and the
potential for such costs falling to the
taxpayer should the financial test fail, it
might not be an appropriate instrument
for use under CERCLA § 108(b). Under
the proposed rule, owners or operators
would be required to establish and
maintain financial responsibility to
PO 00000
Frm 00047
Fmt 4701
Sfmt 4702
3433
cover all CERCLA § 107 liabilities at
their facilities—response costs, natural
resource damages, and health
assessment costs.86 In many Superfund
cases, and particularly in the case of
hardrock mining facilities, these costs
can be quite high. Thus as noted in the
introductory discussion, use of a
financial test for such large amounts
presents a larger risk to the public
should cases arise where the financial
test fails to be effective.
Finally, because the financial test coproposed in this rule is by design only
available to the owners or operators best
able to bear the costs, the Agency
recognizes that allowing the use of a
financial test in this rule would provide
an economic advantage (in the form of
a cost savings) to the economically
strongest owners or operators, and
potentially create an economic and
competitive disadvantage for others.
The Agency solicits comment on the
concerns identified by EPA regarding
the use of a financial test under
CERCLA § 108(b).
(2) Concerns Regarding Use of a
Financial Test by the Hardrock Mining
Industry
Beyond concerns related to the use of
a financial test under CERCLA § 108(b),
EPA considered issues specific to the
use of a financial test for the hardrock
mining industry under 108(b). First,
there are significant concerns that
owners or operators that are no longer
able to meet the requirements of a
financial test may become less able than
owners or operators in other industries
to secure an alternative financial
responsibility instrument. One reason is
because frequent fluctuations in
commodity prices within the hardrock
mining industry may result in sharp
declines in production and accelerated
mine closures. This scenario is currently
playing out in the case of the coal
mining industry.87
86 Facilities with obligations under other statutes
will be separately responsible for meeting the
financial assurance requirements, such as those
under RCRA Subtitle C and Underground Injection
Controls (UIC) programs.
87 In recent years, the banking industry has been
stepping back from providing loans to the coal
industry:
• In 2015, Bank of America cut off its financing
for coal extraction projects to reduce its exposure.
(Kate Sheppard, Bank of America Backs Away from
Funding Coal Mining, Huffington Post. May 6,
2015.)
• In 2015, Citi Group and Goldman Sachs Group
sold its investments in mining and reduced its
financing of coal mining operations faced with large
environmental obligations. (Jeanne Dugan, Timothy
Puko, Goldman Sachs Sells Colombian Coal Mines
to Murray Energy, The Wall Street Journal. April 13,
2015; Kadhim Shubber, Citi Promises to Cut
E:\FR\FM\11JAP2.SGM
Continued
11JAP2
3434
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
Many mineral resource extraction
firms are not able to absorb market
fluctuations because they lack
diversified lines of business. This may
make it harder to ensure that owners or
operators who do fail the test obtain a
replacement instrument.88 Furthermore,
requiring a company to purchase a more
expensive means of financial assurance
once it begins to experience liquidity
problems may only serve to aggravate its
financial difficulties. This effect also
makes it harder for EPA to oversee the
use of the financial test. For example,
rapid fluctuations in financial status
may necessitate more frequent reporting
to the Agency, resulting in increased
oversight burden, as discussed earlier.
Thus, it may be more important in the
case of mining than in other industries
to require an owner or operator to
secure a third-party financial
responsibility instrument or fund a trust
fund when it is financially able to do so.
Second, numerous troublesome cases
have occurred involving hardrock
mining facilities that have gone through
bankruptcy, while leaving extremely
significant environmental impacts in
their wake. Remedial work can be
stopped or slowed in situations where
the owner or operator’s cash flow and
revenue is reduced or they go bankrupt.
Such impacts have occurred in the past
when owners or operators of mines
engaged in CERCLA cleanups have had
to negotiate changes to the scope of
work due to drops in metal prices. EPA
experienced this problem when a major
mining company slowed work at sites
and then filed for bankruptcy in 2005.
The company was using a financial test
(which was a less sensitive financial test
than the test proposed under Option 2)
under a CERCLA Consent Decree with
EPA at a smelter site in the northwest
part of the U.S. EPA discovered that the
company was having financial struggles,
despite having recently submitted
information that it met the necessary
financial test requirements. In response,
EPA requested that the company obtain
a liquid financial responsibility
instrument under the provisions of a
consent decree, but the company was
unable to do so, given its declining
financial condition.
Lending to Coal Miners, Financial Times. October
5, 2015.)
• In 2016, JPMorgan announced it would be no
longer finance new coal-fired plants in the U.S.
(Michael Corkery, As Coal’s Future Grows Murkier,
Banks Pull Financing, New York Times. March 20,
2016.)
88 These concerns were noted in the 2005 report
from the Government Accountability Office, EPA
Should Do More to Ensure that Liable Parties Meet
Their Cleanup Obligations, at p. 42. Available at
https://www.gao.gov/products/GAO-05-658.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
Third, given the relative market
volatility observed within the hardrock
mining industry, some have argued that
there are no circumstances under which
owners or operators of hardrock mining
companies should be allowed to selfinsure through a financial test. Analysis
has shown that mining companies can
be more likely to default on their
financial obligations than other types of
companies.89 For example, the recent
downturn in metals prices has led to a
default rate in the metals and mining
sector which is nearly three times the
economy-wide corporate default rate.90
Moreover, financial analysts have
predicted that mining sector default
rates are likely to rise.91 Mining
companies also tend to default more
quickly than other types of
companies,92 and may have multiple
mining operations, meaning that a
single failure could have broader
impacts.
EPA is concerned that close linkage
between the hardrock mining industry
and global commodity prices means that
companies that are invested in the same
minerals are likely to fail or experience
financial hardship at the same time,
when the prices of these minerals
decline.93 If so, additional strain would
89 See Standard & Poor’s 2014 Global Corporate
Default Study at p. 11. Available at: https://
www.nact.org/resources/2014_SP_Global_
Corporate_Default_Study.pdf. (While the total
number of defaults in 2014 declined from previous
years, the default rate in the energy and natural
resources industry rose to 25 percent. Eight of the
15 companies that defaulted were metals, mining,
and steel companies.)
90 See Energy, Mining Companies Lead Debt
Default Rates Higher,’’ 24/7 Wall St. (Aug. 14,
2015). Available at: https://247wallst.com/bankingfinance/2015/08/14/energy-mining-companies-leaddebt-default-rates-higher/ (Overall corporate default
rate for the twelve months trailing July 2015 was
2.5 percent, while the trailing rate for exploration
and production companies was 5 percent, and the
rate for metals and mining companies was 7.1
percent).
91 See Why Bankruptcy Might be the Mining
Industry’s Last Best Hope, Bloomberg Business
(Dec. 2, 2015), https://www.bloomberg.com/news/
articles/2015-12-03/why-bankruptcy-might-be-themining-industry-s-last-best-hope (warning that
falling commodities prices and an oversupplied
market will trigger more bankruptcies in the mining
sector); Warning of another string of mining
bankruptcies in 2016, (Mar. 1, 2016), https://
www.mining.com/warning-of-another-string-ofmining-bankruptcies-in-2016/ (noting dramatic
credit deterioration in the oil & gas, and metals and
mining sectors, ‘‘with no other sectors even in the
same ballpark,’’ and with credit conditions
expected to worsen in 2016).
92 See Standard & Poor’s 2014 Global Corporate
Default Study at p. 44. The time to default from
original credit rating for energy and mining
companies is 3.9 years versus 5.7 years for the
economy overall. The time to default from ‘‘postoriginal rating’’ for the energy & resources sector is
even shorter, at an average of just 2.1 years.
93 See Moody’s Investors Service, ‘‘Moody’s
places energy and metals & mining issuers on
review for downgrade,’’ (Jan. 22, 2016), https://
PO 00000
Frm 00048
Fmt 4701
Sfmt 4702
be placed on EPA’s ability to administer
the test and ensure compliance across
multiple companies at multiple sites
simultaneously.
Congress and the states have
expressed concern over the volatility in
the mining industry and the potential
inability of a financial test to account for
rapidly changing market conditions,
asking the Comptroller General for a
review of self-insurance practices.94 95
EPA has information that decisions in
the mining industry to expand or open
new facilities are generally made over a
longer period of time than some other
industries (on for example, a ten-year,
twenty-year, or longer amortization and
investment basis).96 Such investment
decisions often don’t always correspond
to the demand cycle for the
commodity.97 Moreover, mining assets
generally are immobile, making it
difficult to transfer equipment and
facilities to other productive uses during
periods of low demand.
Mining companies generally attempt
to manage cyclical patterns by balancing
new investment with projected sales of
minerals.98 Metal prices, however, can
www.moodys.com/research/Moodys-places-energyand-metals-mining-issuers-on-review-for-PR_
342773 (announcing placement of 55 metals and
mining companies on review for downgrade);
Moody’s Investors Service, Moody’s places 11
mining companies in the U.S. on review for
downgrade (Jan. 21, 2016), https://
www.moodys.com/research/Moodys-places-11mining-companies-rated-in-the-US-on-PR_342543
(warning of an ‘‘unprecedented shift’’ in the mining
industry and advising that ‘‘deteriorating industry
fundamentals require a recalibration of the global
mining portfolio rated by Moody’s’’).
94 Self-bonding may be otherwise understood to
mean self-insurance.
95 A recent letter from Senators Maria Cantwell of
Washington and Richard Durbin of Illinois to the
Comptroller General requested an investigation by
GAO into the use of self-bonding across federal
programs governing resource extraction, and a
performance audit of self-bonding under the
Surface Mining Control and Reclamation Act. The
letter, dated Mar. 8, 2016, is available at https://
www.energy.senate.gov/public/index.cfm/files/
serve?File_id=47C14E0B-8A9D-457F-A1DE0B7135144E1B.
96 Investments within the hardrock mining sector
tend to be longer term given the lifetime of typical
mines and the extreme amount of capital that must
be invested up-front. Such investments and assets
must therefore be amortized or written-off over a
longer period of use. Firms will utilize amortization
for spreading out of capital expenses for intangible
assets over a specific period of time (usually over
the asset’s useful life) for accounting and tax
purposes. Amortization is similar to depreciation,
which is used for tangible assets, and to depletion,
which is used with natural resources.
97 See J.T. Bradbury, International Movements
and Crises in Resource Oriented Companies: The
Case of Inco in the Nickel Sector, Economic
Geography, Vol. 61, No. 2, 1985.
98 See Philip Maxwell, Was there a Nickel
Shakeout?, Minerals and Energy, Vol 21, No. 3–4,
2006. J.T. Bradbury, International Movements and
Crises in Resource Oriented Companies: The Case
of Inco in the Nickel Sector, Economic Geography,
Vol. 61, No. 2, 1985.
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
unfortunately experience substantial
increases or decreases over a relatively
short time period. The speed of these
price changes results in swings in
market volatility rendering it difficult
for a capital-intensive industry like
mining to adjust quickly. Analysis of
price cycles from composite metals
indices for certain metals, over the past
thirty years, reveal that there have been
between three and five price cycles
lasting between five and eight years,
depending on the metal. Typically, the
peak price occurs during the first half of
the cycle, often exactly halfway between
the two trough prices. Price fluctuations
tend to happen rapidly with prices
increasing by more than 75 percent in
one month, or decreasing by more than
thirty percent over the course of a
month.99
‘‘Mining companies have volatile
earnings, coming from macroeconomic
factors that are not in their control. As
the economy weakens and strengthens,
mining companies see their earnings
and cash flows track with the
commodity price.’’ 100 And the stability
of earnings and cash flow of mining
companies is significantly less than the
average of other industries.101
Significant income fluctuations are also
compounded by the fact that many
mines use debt financing to support the
large infrastructure investments needed
to get a mine started and to expand
operations.102 This leads to high
volatility in equity values and debt
ratios for mining companies.103
Mining profits are also generally tied
to revenue rather than operating costs
because operating costs tend to be
highly fixed in the industry.104
‘‘Commodity price is a principal
determinant of revenue, but it is also the
factor with which the greatest level of
financial risk is associated.’’ 105 Today,
many mines cannot survive these price
fluctuations.106 During low price
99 See Background Document for Financial Test
Analyses, Industrial Economics, Inc. (IEc). 2016.
100 See Valuation of Metals and Mining
Companies, Svetlana Baurens, p. 56 (July 11, 2010).
Available at: https://www.basinvest.ch/upload/pdf/
Valuation_of_Metals_and_Mining_Companies.pdf.
101 See Rating Companies in the Mining Industry,
p.7 (June 2011). Available at: https://www.dbrs.com/
research/240365/rating-companies-in-the-miningindustry.pdf.
102 See Valuation of Metals and Mining
Companies, Svetlana Baurens, p. 13 (July 11, 2010).
Available at: https://www.basinvest.ch/upload/pdf/
Valuation_of_Metals_and_Mining_Companies.pdf.
103 Ibid.
104 Ibid.
105 See Valuation of Metals and Mining
Companies, Svetlana Baurens, p. 36, July 11, 2010.
Available at: https://www.basinvest.ch/upload/pdf/
Valuation_of_Metals_and_Mining_Companies.pdf.
106 See Background Document for Financial Test
Analyses, Industrial Economics, Inc. (IEc). 2016.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
periods, the mining industry tends to
contract since they are losing revenue
with increased periods of bankruptcy
and company consolidation. Over the
past 25 years, the rate of mining
bankruptcies has spiked during sharp
price declines and sustained periods of
low prices. Between 1981 and 2010,
there were approximately 43 mining
company bankruptcies, not counting
smaller mining operations that may
undergo personal, rather than corporate,
bankruptcy.
During the recent economic recession
(characterized by the stock market drop
in September 2008) for example, copper,
nickel, tin, and zinc prices fell more
than twenty percent between September
and October 2008.107 Notwithstanding
periods of market volatility, on average,
metal prices also generally experience a
three to seven percent increase or
decrease on a monthly basis. This
further substantiates that the mining
industry must operate under a great deal
of uncertainty, often facing greater and
more frequent changes in expected
market return than other sectors.
Such volatility impacts the effective
use of a financial test by hardrock
mining facilities. The cyclical nature of
the industry and the rapid fluctuations
in commodity prices may result in
corresponding fluctuations in the
financial health of hardrock mining
companies. Whereas a mining company
may accumulate substantial amounts of
cash flow from operating activities
during a period of peak prices, a price
trough likely would result in decreased
revenues, and corresponding decreased
cash flow.
However, because of falling revenues
and potentially compromised cash flow
stemming from commodity price
swings, EPA is concerned that
companies may have insufficient
tangible assets (financial reserves) to
establish alternate financial instruments
in years where they are unable to pass
the financial test.108
107 Gold responded differently. For ten years the
price of gold rose quickly, aided especially by the
stock market meltdown of 2009. After hitting its
high in August 2011, gold saw a gradual decline,
even as the stock market rose into record territory.
Then gold plummeted 25 percent in mid-April
2013, seeing its biggest one-day decline in more
than thirty years on April 15, 2013.
108 As stated by the U.S. General Accountability
Office, ‘‘If a company that passed the test later files
for bankruptcy or becomes insolvent, the company
in essence is no longer providing financial
assurance because it may no longer have the
financial capacity to meet its obligations. Such
financial deterioration can occur quickly. While
companies no longer meeting the financial test are
to obtain other financial assurance, they may not be
able to obtain or afford to purchase it.’’ GAO. EPA
Should Do More to Ensure That Liable Parties Meet
their Cleanup Obligations (2005). Available at:
https://www.gao.gov/products/GAO-05-658.
PO 00000
Frm 00049
Fmt 4701
Sfmt 4702
3435
In 2000, the BLM identified similar
concerns when it decided to prohibit
new corporate guarantees for future
reclamation work to restore lands when
hardrock mining operations cease.109
Commenters at the time noted that
because the value of the ore fluctuates
over time and may lose value as it is
mined, that the soundness of the
guarantee might be most questionable at
the time it is most needed.110 In making
the decision to eliminate self-insurance
from its hardrock mining regulations,
BLM cited both the Bureau’s lack of
expertise to perform the periodic
reviews of companies’ assets, liabilities,
and net worth that would be necessary
to oversee guarantees, as well as the fact
that even with annual reviews by skilled
staff, a default risk would remain. BLM
therefore decided to shift the financial
risk to the businesses they regulate who
have to purchase financial assurances
from independent third parties, such as
banks. In a 2005 report, GAO identified
examples of BLM’s inability to collect
funds for reclamation when operators of
hardrock mines using corporate
guarantees filed for bankruptcy.111 The
inability of companies to be able to
afford alternate financial assurance
when failing the financial test could be
exacerbated in the CERCLA § 108(b)
context by the potentially high costs
associated with Superfund liabilities,
particularly from hardrock mining
facilities. Owners or operators would
need to secure a third-party financial
responsibility instrument or fund a trust
fund for a high dollar amount in a time
when their financial health may be
compromised, which may be difficult or
impossible. The Agency solicits
comment on these concerns.
As a fourth and distinct concern,
when a mine is reaching the end of its
life and is bringing in less revenue, the
owner or operator may not be able to
secure a financial responsibility
instrument for CERCLA liabilities that
may continue to be required after the
109 See 65 FR 69998, at 70074, November. 21,
2000, stating: ‘‘We agree that a corporate guarantee
is less secure than other forms of financial
guarantees, especially in light of fluctuating
commodity prices. Recent bankruptcies added to
the concern that corporate guarantees don’t provide
adequate protection. We believe the number of new
mines that might have wanted to rely on corporate
guarantees is relatively small, and we also believe,
given the economics of the industry, that companies
that would have been eligible to hold a corporate
guarantee should not have a significant problem
finding a third-party surety, or posting the requisite
assets.’’
110 Id., at 70073.
111 See GAO. Hardrock Mining: BLM Needs to
Better Manage Financial Assurances to Guarantee
Coverage of Reclamation Costs, GAO–05–377
(Washington, D.C.: June 20, 2005). Available at:
https://www.gao.gov/products/GAO-05-377.
E:\FR\FM\11JAP2.SGM
11JAP2
3436
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
mine closes. If a company fails the
financial test after its mining facility
closes, it may thus not be able to obtain
alternate financial responsibility that
may be required after the facility closes.
EPA solicits comment on the likelihood
of this scenario.
As a fifth concern, allowing a
financial test under this proposed rule
for hardrock mining would be
inconsistent with the approach taken by
some other Federal regulators that have
experience and expertise in the
regulation of the hardrock mining
facilities. After having formerly allowed
a financial test, BLM modified its
regulations at 43 CFR part 3809 and
removed the financial test as an
available financial responsibility
instrument; 112 the U.S. Forest Service
regulations governing financial
responsibility requirements applicable
to locatable minerals operations also do
not allow the use of a financial test; 113
and the Nuclear Regulatory
Commission, explicitly prohibits the use
of self-insurance for uranium mills.114
EPA is concerned that allowing the use
of a financial test under this proposed
rule would be inconsistent with the
approach to hardrock mining financial
responsibility that has developed
through these other Federal programs.
Further, not allowing a financial test
would reflect the experience and
expertise of these regulators, all of
which have determined that a financial
test is not appropriate for hardrock
mining facilities. The Agency solicits
comment on these concerns.
Finally, as noted earlier, the Agency
is concerned that a financial test for the
hardrock mining industry may not fully
reflect the financial health of the owner
or operator. Based on experience from
requiring financial responsibility for
CERCLA consent decrees, EPA has
learned that mining companies often do
not list ‘‘contingent’’ liabilities, such as
the potential need for long-term
operation and maintenance (‘‘O&M’’) on
their corporate balance sheets, at least
not during the early exploration and
start-up phases of a mine. As such, a
balance sheet can show that a given
company has sufficient assets to meet
the requirements of the financial test,
112 See Mining Claims under the General Mining
Laws; Surface Management 65 FR 69998 @70073–
70074, November 21, 2000. BLM cited the necessity
to review submissions annually as well as its
limited capacity to do so, as contributing factors in
its decision not to allow additional use of a
financial test. Further justifying its decision, BLM
stated that even if it had the expertise to perform
reviews on a periodic basis, the risk of default
remains.
113 See 36 CFR 228.13 (allowing a bond, blanket
bond, or cash).
114 See 10 CFR 40 Appendix A criteria 9,
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
despite the fact that all or a portion the
recorded assets may be zeroed out by
unrecorded ‘‘contingent’’ liabilities. The
Agency solicits comment on this
concern. Specifically, EPA is concerned
that the six times multiples for tangible
net worth and U.S. assets that have
worked well in the RCRA Subtitle C
program would not be effective for a
mining industry with the potential for
large contingent liabilities.
For these reasons, the Agency is
proposing, as its preferred option, not to
allow the use of a financial test under
this proposed rule. The Agency solicits
comment on this proposal.
c. Option 2—Financial Test
Although the Agency’s preferred
option is to not allow a financial test
under the proposed rule (see Option 1),
EPA is proposing a second option—that
is, to make a financial test available for
use by hardrock mining facilities subject
to this proposed rule. The Agency is
proposing this option because it
recognizes that allowance of a financial
test under this proposed rule could
result in significant savings to those
members of the regulated community
that could use it and qualify to selfinsure.
Under the option that would allow a
financial test, EPA is proposing the use
of a credit rating—based financial test,
developed specifically for this proposed
rule. In developing the proposed
financial test, the Agency attempted to
address as many of the concerns
discussed in Option 1 as possible,
though the Agency recognizes that it
cannot eliminate all of the concerns
identified. EPA analyzed several
financial test options and selected one
for proposal that carries with it a
relatively low risk to the Government
that firms will pass the financial test
and still default on their obligations.
EPA requests comments on the extent to
which its proposed financial test
addresses the concerns outlined in
Option 1.
(1) Financial Test Overview
EPA is proposing the use of a
financial test based on the long-term
corporate credit rating of the owner or
operator. Under the terms of the
proposed financial test, an owner or
operator could assure its entire financial
responsibility obligation by submitting
annual verification that it holds at least
one long-term corporate credit rating
equal to or higher than A- as issued by
Standard & Poor’s (S&P) or its
equivalent by another NRSRO. In
addition, for some owners and operators
with lower credit ratings, the proposed
test would further allow an owner or
PO 00000
Frm 00050
Fmt 4701
Sfmt 4702
operator to alternatively assure one half
of its obligation by submitting annual
verification that it holds at least one
long-term corporate credit rating of
BBB+ or BBB from S&P or the
equivalent from another NRSRO.
In addition, an owner or operator
electing to use the financial test would
be required to have: (1) a tangible net
worth of at least six times the amount
of environmental obligations, including
guarantees, covered by a financial test or
guarantee, including this financial test
and the corporate guarantee proposed in
this rule; and (2) U.S. assets equal to or
greater than ninety percent of its total
assets, or six times the amount of
environmental obligations covered by a
financial test or guarantee, including
this financial test and the corporate
guarantee proposed in this rule.115 EPA
discusses each of these components in
the sections that follow.
(2) Financial Test Components
(a) Credit Rating Thresholds
The proposed test would allow the
owner or operator to self-insure its
entire obligation by submitting annual
verification that the owner or operator
holds at least one long-term corporate
credit rating equal to or higher than Aas issued by S&P or its equivalent by
another NRSRO. Credit rating-based
thresholds are widely relied upon as a
central feature of many financial tests.
For example, this proposed rating
threshold is the same as that used in the
NRC’s financial test for self-insurance of
the decommissioning costs associated
with byproduct materials licensees (per
10 CFR 30 Appendix C). The Agency
chose this long-term corporate credit
rating threshold based on expected
default rates over a three year
horizon.116 Based on the NRSROs’
115 Tangible Net Worth and U.S. Asset thresholds
have been developed and historically utilized in
financial responsibility regulations for the purpose
of controlling for the possibility of a company that
may have multiple obligations (both within the
U.S., and/or abroad). Such scenarios could further
limit the company’s ability to self-insure the totality
of its obligations. Cases where multiple obligations
exist become very difficult for regulators to readily
identify, and having tangible net worth and U.S.
Asset thresholds already embedded within the
financial test requirements helps to temper this
concern.
116 Bankruptcy data from S&P are available for
one, three, and five-year periods, and it is the threeyear horizon that is most widely accepted for use
in the projection of default rates for purposes of
financial assurance analyses. The three-year time
horizon was for example used in the analyses that
were conducted when the Agency’s RCRA C
financial test were originally promulgated. The
reason for this is that the one-year data would be
unrepresentative since this wouldn’t allow
sufficient time for the government to respond to
such bankruptcies. Conversely, the five-year data
results reflect an excessive period of time needed
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
extensive default data, EPA can expect
three-year default rates below 0.4
percent for owners or operators meeting
this ratings criteria.117 Because the
probability of default is projected to be
well below one percent for hardrock
mining companies thought to be capable
of meeting the requirements of the
proposed financial test, the probability
that companies who pass the test will
enter into bankruptcy is substantially
reduced. This in turn reduces the risk of
defaults and lowers potential costs for
the public, when compared to less
stringent tests.
The proposed test would further
allow for coverage of up to one half of
an owner’s or operator’s obligation by
submitting annual verification that the
owner or operator holds at least one
long-term corporate credit rating of
BBB+ or BBB from S&P or the
equivalents from another NRSRO. This
long-term corporate credit rating
threshold was also chosen based on
expected default rates over a three-year
horizon. The Agency’s analysis
indicates that the risk of default roughly
doubles for these rating tiers compared
to A-rated long-term issuer credit
ratings118 and thus EPA proposes to
proportionately scale back the coverage
of the test for companies in these ratings
tranches.
Finally, under the proposed test EPA
would not allow those companies at the
lowest tier of investment grade ratings
(BBB- in S&P’s notation and the
equivalent rating from other NRSROs)
from using a financial test. EPA
determined that, based on the three-year
horizon default history for firms with
the lowest tier investment grade ratings,
the risk of default was significantly
higher than for firms with investment
grade ratings one tier higher. For
example, the risk of default for firms
rated BBB- by S&P is roughly twice that
by the government to identify and respond to a
bankruptcy, while also reflecting projected
probabilities of default that are unnecessarily high.
117 See: Default, Transition, and Recovery: 2013
Annual Global Corporate Default Study and Rating
Transitions. Standard and Poor’s. March 19, 2014
Table 26 p. 58; Corporate Default and Recovery
Rates, 1920–2013. Moody’s Investors Service.
Special Comment. February 2014. Exhibit 35, p. 35;
Fitch Ratings Global Corporate Finance 2013
Transition and Default Study. Fitch Ratings, March
17, 2014. Appendix 1, p. 13.
118 See: Default, Transition, and Recovery: 2013
Annual Global Corporate Default Study and Rating
Transitions. Standard and Poor’s. March 19, 2014
Table 26 p. 58; Corporate Default and Recovery
Rates, 1920–2013. Moody’s Investors Service.
Special Comment. February 2014. Exhibit 35, p. 35;
Fitch Ratings Global Corporate Finance 2013
Transition and Default Study. Fitch Ratings, March
17, 2014. Appendix 1, p. 13.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
of firms rated BBB by the same rating
agency.119
EPA is aware that this demarcation
differs from the normal split between
investment grade and speculative grade
ratings, and that often investors
distinguish on the basis of whether a
particular issuer carries an investment
versus speculative grade rating.
However, because of the significantly
higher default rates for the very bottom
of investment grade found in its
analysis, the Agency proposes to
eliminate the very bottom notch of
investment grade from being allowed to
self-insure under the proposed financial
test.
EPA solicits comment on the creditrating thresholds the Agency is
proposing for use in the proposed
financial test under Option 2.
(b) Tangible Net Worth Requirement
In this proposal, an owner or operator
eligible to use this financial test for any
portion of its CERCLA § 108(b)
liabilities would also be subject to a
coverage multiple requiring them to
have a tangible net worth of at least six
times the amount of environmental
obligations, including guarantees,
covered by a financial test or guarantee,
including this financial test and the
corporate guarantee proposed in this
rule. This is an important additional
component of the proposed financial
test as it would provide for a common
check across EPA financial
responsibility programs that a firm is
not assuming too great a level of future
costs that they might unduly strain the
firm’s ability to pay for them.
EPA financial tests typically account
for only cost estimates and obligations
covered by an EPA financial test.
However, because of the numerous
regulatory agencies that regulate
hardrock mines, EPA expects that an
owner or operator subject to this rule
may have many of its financial test
demonstrations under other Federal or
state programs. To assure that a
company is not using the same assets to
self-insure multiple obligations, EPA
believes it is necessary to account for all
environmental obligations covered by a
financial test or guarantee, and not just
EPA financial assurance obligations
covered by a financial test or guarantee.
(c) U.S. Asset Requirement
Owners or operators would also be
subject to an additional coverage
multiple, requiring them to submit proof
that the company either has assets
119 See Default, Transition, and Recovery: 2013
Annual Global Corporate Default Study and Rating
Transitions. Standard and Poor’s. March 19, 2014
Table 26 p. 58.
PO 00000
Frm 00051
Fmt 4701
Sfmt 4702
3437
located in the United States amounting
to at least ninety percent of total assets
or has U.S. assets totaling at least six
times the amount of environmental
obligations covered by a financial test or
guarantee, including this financial test
and the corporate guarantee proposed in
this rule. This would serve as an
additional precautionary measure to
help ensure that U.S. assets would be
available for claimants to proceed
against, in the event of a bankruptcy or
other default.
This proposed requirement would be
very similar to that used for U.S. assets
in past financial tests the Agency has
created. For example, the RCRA Subtitle
C closure and post-closure financial test
requires assets located in the U.S.
amounting to at least ninety percent of
total assets or at least six times the sum
of current closure and post-closure cost
estimates and the current plugging and
abandonment cost estimates.120 Similar
financial test components are also used
in the Underground Injection Controls
(UIC) financial responsibility programs
and in the CERCLA model financial test
instrument used to support financial
responsibility under CERCLA orders
and settlements. Using a similar ninety
percent or six times multiplier allows
for more effective financial
responsibility across EPA programs.
For those firms without assets in the
United States amounting to ninety
percent or more of total assets, the firms
would be required to demonstrate that
they have U.S. assets greater than six
times the sum of all financial
responsibility obligations covered by a
financial test. This six-times ratio is
consistent with Alternative I of a recent
RCRA consent decree that EPA entered
into with several phosphoric acid
mining companies, and is similar to
other requirements in EPA’s UIC Class
VI well regulations and the RCRA
Subtitle C regulations. The six times
multiplier is intended to address the
possibility that, in the event of a
bankruptcy, funds required to meet
other environmental obligations assured
through other financial tests would
reduce an owner or operator’s ability to
satisfy any CERCLA claims.
(d) Reporting Requirements for Passage
of the Financial Test
The proposed option that would
allow a financial test would also require
reporting of information necessary to
implement the financial test. To
demonstrate passage of the financial
test, owners or operators would be
required to submit the following
information annually:
120 See
E:\FR\FM\11JAP2.SGM
40 CFR 264.143(f)(1)(i)(D) and (ii)(D).
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3438
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
Chief Financial Officer Letter (CFO
Letter): A letter to the Administrator
signed by its chief financial officer
(CFO) as worded in § 320.50. The CFO
Letter confirms that the entity satisfies
the financial criteria required under the
financial test that makes the entity
eligible to utilize the financial test as
financial responsibility under this
regulation.
The Agency is proposing to require
standardized the language in the CFO
Letter from the owner or operator. Such
an approach is consistent with other
Agency rules such as the RCRA Subtitle
C or the Standardized Permit Rule and
carries with it several benefits to the
Agency. First, a standard CFO Letter
will provide for relatively quick Agency
review of financial test submissions and
lowers the chances of administrative
error in the review of submissions.
Administrative burden, once again, is a
key concern to the Agency as it wishes
to preserve the resources for conducting
cleanups. The Agency believes a
standardized CFO Letter offers the
additional potential advantage of
improving the consistency and
completeness of submissions, thereby
limiting delays caused by human error
and omissions.
(2) Annual Financial Statements: A
copy of the owner’s or operator’s most
recent independently audited annual
financial statements prepared in
accordance with U.S. Generally
Accepted Accounting Principles (U.S.
GAAP). At present, EPA expects that
firms seeking to self-insure through the
use of a financial test will do so based
on financial statements that are audited
in accordance with U.S. GAAP. The
Agency recognizes that foreign firms
might prepare audited financial
statements in accordance with either
GAAP or International Financial
Reporting Standards (IFRS), and that
IFRS and U.S. GAAP may converge into
a global set of accounting standards at
some point in the future. Until such
time as a unified set of accounting
standards is established, the Agency is
proposing to accept only audited
financial statements in accordance with
U.S. GAAP for purposes of compliance
with the financial test criteria. However,
EPA accepts comment on an alternative
whereby the acceptable accounting
standards are linked to those accepted
by the Securities Exchange Commission
(SEC) in order to potentially lower the
reporting burden for certain firms
seeking to use the financial test.
Presently, such an option would allow
foreign firms that file with the SEC to be
able to submit annual financial
statements prepared in accordance with
IFRS or GAAP while domestic firms
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
would submit statements prepared in
accordance with GAAP. However, the
underlying fundamentals of IFRS and
GAAP differ with respect to the
accounting of liabilities and assets. As
such, to accept both IFRS and GAAP
financial statements in support of the
financial test would yield a potentially
disproportionate playing field wherein
some companies using IFRS may pass
the test where they might otherwise fail
under GAAP, and vice versa. EPA
would thus be accepting potentially
divergent levels of assurance.
(3) Special Audit Report: A special
report of procedures and findings of an
audit conducted by a licensed, thirdparty, independent certified public
accountant (CPA) resulting from an
agreed-upon procedures (AUP)
engagement in accordance with
applicable Federal laws governing
independence and AUP engagements, or
standards set by the American Institute
of Certified Public Accountants, Inc.
(AICPA), to supplement Federal laws or
when Federal laws are not applicable.
The report would be required to
describe the procedures performed and
related findings as to whether or not
there were differences or discrepancies
identified between the financial
information in the owner’s or operator’s
CFO Letter and the owner’s or operator’s
most recent audited annual financial
statements. Where differences or
discrepancies were found in the
comparison of the owner’s or operator’s
CFO Letter and the owner’s or operator’s
most recent audited annual financial
statements, the report of procedures and
findings would reconcile any
differences or discrepancies.
There are advantages to third-party
auditing requirements, particularly with
strong auditor competence and
independence criteria. According to the
Center for Chemical Process Safety
(CCPS), ‘‘Third-party auditors . . .
potentially provide the highest degree of
objectivity,’’ 121 A leading scholar on
regulatory third-party programs also
found that a well-designed and
implemented ‘‘third-party verification
[program] could furnish more and better
data about regulatory compliance’’
while providing additional compliance
and resources savings benefits.122
Studies show that auditors are more
likely to provide lenient or biased audit
reports that can fail to accurately
121 See CCPS. March 2007 Guidelines for Risk
Based Process Safety. Available at: https://
www.aiche.org/ccps/resources/publications/books/
guidelines-risk-based-process-safety.
122 See Regulation by Third-Party Verification,
Lesley K. McAllister. January 2012. 53 B.C. L. Rev.
1, 21–26. Available at: https://
lawdigitalcommons.bc.edu/bclr/vol53/iss1/1/.
PO 00000
Frm 00052
Fmt 4701
Sfmt 4702
identify problems or violations when
there are insufficient safeguards to
ensure auditor independence.123
In audit engagements, CPAs are
required by professional standards and
Federal and State laws to maintain
independence (both in fact and in
appearance) from the entity for which
they are conducting an attestation (audit
and review) engagement. However, the
Public Certified Accounting Oversight
Board (PCAOB) found evidence that
many, if not most, of some types of
financial audits are flawed due to
insufficient auditor competence,
independence and/or lack of public
transparency. Third-party auditing is a
cornerstone of financial reporting, but
the PCAOB found audit deficiencies in
portions of seventy of the ninety audits
they reviewed in its third annual report
on audits of broker-dealers registered
with the SEC. Independence problems
were found in 21 of the ninety audits
where, contrary to SEC rules, firms
helped with the bookkeeping or
preparation of the financial statements
they audited.124
Therefore, EPA is proposing to require
that a CPA performing the audit
required under this proposal be
licensed. This requirement is designed
to ensure the auditor has the requisite
education and experience to perform the
audit. Each state has its own licensing
board. The proposal would also require
that auditors be independent, follow the
independence rules and standards
established by the AICPA’s Audit
Standards Board (ASB), have passed the
Uniform Certified Public Accountant
Examination, be licensed as a CPA, and
be current with all continuing
professional education requirements.
The Agency also is proposing to
require that the AUP engagement be
conducted in accordance with the
AICPA Statement on Standards for
Attestation Engagement (SSAE) and
related attestation interpretations, AT
Section 201—Agreed Upon Procedures
Engagements, or any future superseding
standards set by AICPA or any
superseding body. This provides further
assurance that the CPA’s review was
done in accordance with accepted
accounting industry standards. The
Agency recognizes that the AICPA may
update its standards, and thus the
123 See, e.g., Truth-Telling By Third-Party
Auditors and the Response of Polluting Firms:
Experimental Evidence From India, Esther Duflo et
al., 128 Q. J. of Econ. 4 at pp. 1499–1545, 2013.
124 See Third Progress Report on PCAOB
Inspections of Broker and Dealer Auditors Shows
Continued High Number of Findings. PCAOB. Aug.
18, 2014. Available at: https://pcaobus.org/
Inspections/Documents/BD_Interim_Inspection_
Program_2014.pdf.
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
Agency is proposing a flexible standard
for the CERCLA § 108(b) regulations that
relies upon the method(s) currently
accepted, instead of specifying a
particular standard that may need to be
updated in the future. EPA solicits
comment on whether, in addition to
those set by the AICPA, applying SEC
and/or PCAOB rules and standards
would provide appreciable additional
assurances of independence. In this
regard, EPA further believes that some
owners and operators who seek to use
the financial test, if available, may
already be SEC registrants and issuers.
As such cases, the application of more
stringent SEC/PCAOB independency
standards should result in little added
burden for owners and operators already
subject to such standards.
The audited annual financial
statements, the CFO Letter, and an AUP
engagement report signed and certified
by an independent, licensed CPA would
be submitted annually, within ninety
days of the close of the owner’s or
operator’s fiscal year. In so doing, the
Agency receives up-to-date financial
information to ensure the company still
meets the standards of the test. In
general, financial reports made directly
to the SEC are completed within ninety
days of the company’s fiscal year end.
Most small and medium-sized
businesses, who are not filing with the
SEC, track their fiscal year end to a
calendar-year end. These companies
tend to complete their annual financial
reports in support of tax filings to the
Internal Revenue Service, and generally
do so within ninety days of the calendar
year end. In either instance, most
companies already prepare annual
financial statements, and therefore the
financial reporting requirements of the
financial test should not present too
significant of a reporting challenge. The
annual reporting requirement is
essential to ensure firms using the
financial test maintain the requisite
financial strength and do not pose an
undue risk.
EPA believes, together, these
reporting requirements will foster
accountability, improve compliance,
and ensure EPA is receiving an accurate
portrayal of a company’s financial
ability to meet its environmental
obligations. Thus, if the use of a
financial test were to be allowed in the
final rule, this would reduce the risk
that the taxpayer would have to finance
cleanup in the future. EPA believes that
third-party reviews will help assist in
rule compliance and oversight.
Independence is important to preserve
the integrity and objectivity of these
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
audits, thereby providing reliable
compliance information to EPA.125
The Agency believes that requiring an
AUP engagement would also further
ease the implementation burden
associated with reviewing financial test
submissions, and reduce the prospect
for errors. Third-party, independent
audits will also promote cost-effective
EPA prioritization of Superfund
resources, and provide benefits to
communities near facilities by assuring
that secure financial responsibility is in
place. The AUP would give EPA an
independent third-party expert’s
opinion and attestation as to whether or
not the financial information provided
in the CFO Letter is consistent with that
in the most recent audited financial
statements and thus with U.S. generally
accepted accounting practices. EPA
believes independent, licensed CPAs are
better suited to review such data and
make such determinations, as EPA is
not primarily a financial regulator.
EPA is asking for comment on these
reporting requirements. Specifically, the
public should comment on what other
requirements, if any, should be required
to ensure the completeness, reliability,
and accuracy of the information
submitted to determine that facilities
have the funds necessary to meet their
environmental obligations, thereby
preserving taxpayer money. EPA is also
accepting comments on the application
of these laws and standards, whether or
not these requirements are sufficient to
ensure compliance with the financial
test, provide EPA with the necessary
information to implement the financial
test, or preserve independence in
performing under an AUP engagement,
and the ability of the requirements to
help EPA respond to deficiencies in
financial test submissions or changes in
financial situations.
(e) Self-Reporting Requirements for
Owners or Operators No Longer Able To
Pass the Financial Test
Additionally, owners or operators
would be required to notify the
Administrator in the event of a change
in their long-term issuer credit rating or
financial position that would disqualify
them from using the financial test. This
requirement also exists in other EPA
financial tests including the RCRA
Subtitle C test for hazardous waste
facilities. Such notification is designed
to be independent from the annual
reporting requirements associated with
the financial test. Owners or operators
125 See The Integrity of Private Third-party
Compliance Monitoring. Short, Jodi L., and Michael
W. Toffel. Harvard Kennedy School Regulatory
Policy Program Working Paper, No. RPP–2015–20,
November 2015. (Revised December 2015.)
PO 00000
Frm 00053
Fmt 4701
Sfmt 4702
3439
would be required to notify the
Administrator upon verifying that a
change in their financial status has
resulted in their becoming disqualified
from using the financial test. In such
circumstances, owners or operators will
be required to send notice to the
Administrator within thirty days,
documenting their intent to establish an
alternate financial responsibility
instrument to cover the portion of their
obligations for which they can no longer
use the financial test. As such, owners
and operators that currently qualify for
self-insurance under the financial test
will be responsible for continually selfmonitoring their qualification status
whenever they experience a change in
their long-term issuer credit rating,
tangible net worth, or value of U.S.
assets. The Agency is proposing this
reporting requirement to allow EPA to
respond as quickly as possible to
negative changes in a company’s
financial position. In the event the
owner or operator no longer passes the
financial test, the owner or operator
would have 120 days from the date the
owner or operator no longer qualifies to
obtain a replacement instrument for that
portion of its CERCLA § 108(b) financial
responsibility requirement previously
covered by the test.
(f) Provisions for Administrator’s
Discretion
The proposed regulations would
allow the Administrator to request
reports of financial condition at any
time from the owner or operator in
addition to those specified in
§ 320.43(b) in the event that the
Administrator has reason to believe the
owner or operator may no longer meet
the financial test requirements. This is
similar to a provision in the RCRA
Subtitle C financial test found at 40 CFR
264.143(f)(7), for example. The Agency
has found this provision very helpful in
evaluating compliance with the
regulations and proposes to include a
similar provision in these regulations.
The Administrator would also have
the discretion to disallow use of this test
on the basis of qualifications of opinion
given in the independent certified
public accountant’s report in the AUP
engagement or the audited financial
statements. An adverse opinion or
disclaimer of opinion in either report
will result in disallowance of the test.
The Administrator will evaluate other
qualifications on an individual basis.
An adverse opinion suggests that the
financial statements do not present
fairly the financial condition of the firm.
A disclaimer of opinion states that the
auditor does not express an opinion on
the financial statements. In both cases,
E:\FR\FM\11JAP2.SGM
11JAP2
3440
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
the Agency believes there is inadequate
assurance that the information
presented in the financial statements
can be relied upon to evaluate the credit
risk of the firm.
The owner or operator would be
released from the proposed
requirements of demonstrating financial
responsibility with the financial test
when: (1) An owner or operator
substitutes alternate financial
responsibility as specified in this
section; or (2) The Administrator
releases the owner or operator from the
requirements of this section in
accordance with § 320 27.
(3) Discussion
The Option 2 proposed financial test
was developed by EPA for use by
hardrock mining facilities under
CERCLA § 108(b). The Agency believes
that it is more suited for use by hardrock
mining facilities to demonstrate
financial responsibility under CERCLA
§ 108(b) than are other financial tests
currently implemented by EPA. As
discussed earlier, EPA has also
attempted to address to the extent
possible, many of the concerns raised
about the use of a financial test for
hardrock mining facilities under
proposed Option 1.
The proposed financial test utilizes
long-term corporate credit ratings, rather
than a series of ratios derived from a
company’s financial statements, as other
tests do. The Agency took this approach,
in part, to ease potential
implementation challenges. A test based
on long-term corporate credit ratings is
relatively easy to verify and carries with
it the lowest administrative burden of
the financial test options considered.
Moreover, the use of long-term
corporate credit ratings is further
substantiated by the robust data
underpinning the measures of risk
associated with each rating level. For
example, default rate studies are often
backed by large samples spanning many
years. The ratings agencies themselves
have done extensive studies
demonstrating the efficacy of credit
ratings as an indicator of credit risk.126
The Agency’s decision to propose a
credit rating-based test also reflects the
EFAB’s statements, made in its
reporting on the financial test and
corporate guarantee under the RCRA
programs, that independent credit
126 See for example: Default, Transition, and
Recovery: 2013 Annual Global Corporate Default
Study and Rating Transitions. Standard and Poor’s.
March 19, 2014; Corporate Default and Recovery
Rates, 1920–2013. Moody’s Investors Service.
Special Comment. February 2014; Fitch Ratings
Global Corporate Finance 2013 Transition and
Default Study. Fitch Ratings, March 17, 2014.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
analysis, i.e. credit ratings, can be a cost
effective mechanism for demonstrating
financial responsibility.127 The use of
long-term corporate credit ratings
leverages the expertise of a third party,
relieving the Agency of the primary
burden of performing credit analysis.
EPA has used different systems of
ratings in other financial tests. This
includes using the rating on the most
recent bond issuance in the RCRA
Subtitle C financial test, for example,
found in 40 CFR 264.143(f). The use of
long-term issuer credit ratings is
included in this proposal as the Agency
believes they most accurately reflect a
firm’s ability to meet the entirety of its
financial obligations over the long term
as opposed to the obligations related to
a single debt issuance (e.g. a bond
rating), which is narrower in scope. This
view is based on EPA’s review of the
credit rating agencies’ literature
performed for this proposal.128 An
additional benefit of using a credit
rating is that a firm does not need to
issue bonds or any other debt
instrument to be issued a credit rating,
which may increase the availability on
instruments. While this approach allows
the Agency to rely on the evaluation of
an outside party, rather than on inhouse financial expertise, this approach
is not without concerns. For example,
there is continued criticism that the
credit-rating agencies themselves may
not truly be independent from the
entities they rate.129 The Agency solicits
comment on the use of a credit-ratingbased financial test.
The proposed financial test includes a
high credit rating threshold so an owner
or operator with declining financial
health will still have a relatively high
credit status when it initially becomes
ineligible to use the financial test. EPA
expects that this will help to assure that
owners or operators that no longer
qualify for the test will still be
sufficiently viable to obtain an alternate
instrument. This is so, because evidence
from agency analyses of past
bankruptcies in this sector suggest that
it usually takes many years for a
127 See EFAB Initial Findings Concerning use of
the Financial Test and Corporate Guarantees to
Meet Financial Assurance Requirements under the
RCRA programs. Environmental Financial Advisory
Board. January 11, 2006, p. 5.
128 See Guide to Credit Rating Essentials: What
are Credit Ratings and How Do They Work?
Standard and Poor’s (2010), pp. 11–12; Moody’s
Rating Symbols & Definitions. Moody’s Investors
Service. New York, NY (2009), p. 11; and
Definitions of Ratings and Other Forms of Opinion.
Fitch Ratings (2011) pg 9.
129 See for example, CFR.org Staff, The Credit
Rating Controversy, Council on Foreign Relations,
updated February 19, 2015. Available at: https://
www.cfr.org/financial-crises/credit-ratingcontroversy/p22328.
PO 00000
Frm 00054
Fmt 4701
Sfmt 4702
company to enter bankruptcy after its
credit rating drops below BBB.130 In
addition, this is also the case given that
the proposed financial test has two tiers
of credit rating thresholds. As such,
should an owner’s or operator’s credit
rating drop below A-, the amount that
they may self-insurance for drops from
100 percent to 50 percent of the
obligations, provided that they still
retain an investment grade credit rating.
The impact on a company may be more
gradual when the owner or operator
experiences a decline in their credit
rating. The Agency solicits comment on
the validity of this approach.
The financial responsibility
instruments proposed in this rule are
new and unique and the market’s
appetite for providing these instruments
is yet to be determined. The Agency
expects that allowing a financial test
could potentially help to address market
capacity issues, should they arise.131 If
there is limited capacity when this rule
becomes final, the availability of a
financial test could help to address that
issue. The Agency solicits comment on
whether the financial test could help to
address market capacity issues.
Making a financial test available to
owners or operators of hardrock mining
facilities under this proposed rule
would be consistent with EPA’s
approach in other programs. It would
not, however, be consistent with
approaches taken by some other Federal
agencies.
According to the CERCLA § 108(b)
Regulatory Impact Analysis (RIA), the
estimated annualized compliance cost
to industry without a financial test is
$171 million. However, by allowing
financial test, the cost to industry goes
down to $111 million, which represents
a 35 percent in cost saving to industry.
With respect to the impacts on
government, without the financial test,
the industry would internalize in
approximately $527 million in potential
CERCLA liabilities that would otherwise
assumed by the Government (in
instances of owner or operator failure)
in the baseline (without the rule).
However, by allowing the financial test,
the cost internalized by the industry
goes down to approximately $511
million. Therefore, the increased risks to
the Government from unforeseen
130 See Draft Background Document for Financial
Test Analyses, Industrial Economics, Inc. (IEc),
November 2016.
131 Under a no financial test option, limited
market capacity may be burdened by a need for all
hardrock mining companies to obtain third-party
financial responsibility instruments. However,
under a financial test option, some companies
would be able to self-insure, possibly freeing up
market capacity for companies unable to do so.
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
defaults of owners and operator allowed
to self-insure is $16 million, which is
about three percent of the total potential
liability, relative to the baseline.
Finally, EPA solicits comment on the
potential impacts on small businesses of
allowing a financial test under the
proposed CERCLA § 108(b) rule. As
noted earlier, concerns exist regarding
the potential inequity of offering a test
due to the advantages that it may create
for larger versus smaller owners and
operators. This is in part because the
proposed financial test was designed to
be highly stringent. As proposed, only
those owners and operators with strong
long-term credit ratings, plus substantial
tangible net worth and U.S. assets
would pass the test. Designing the test
in this manner greatly lowers the risk of
default by owners and operators that
pass the test. Analyses conducted by
EPA of the financial test options
considered offers evidence, however,
that fewer small businesses are likely to
possess the credit ratings and net worth
necessary to qualify for self-insurance.
EPA, therefore, solicits comment on
whether the availability of a financial
test would thus create a competitive
disadvantage for small businesses.
EPA also solicits comment on how
allowance of a financial test under the
CERCLA § 108(b) rule could affect the
potential availability of third-party
instruments to small businesses. EPA
anticipates that the impact would
depend in part on the willingness of
instrument providers to provide
instruments to small businesses. If
instrument providers are willing to
provide instruments to small
businesses, allowing a financial test
could make instruments more available
to small businesses by freeing up overall
capacity of such instruments in the
open market. On the other hand, if
instrument providers prove less willing
to provide instruments to small
businesses, the capacity freed by
allowing the financial test may not
increase the availability of the
instruments to those entities. EPA
therefore solicits comment on the likely
impact on small businesses of making a
financial test available in the rule, both
in terms of potential disadvantages, and
in terms of the availability of the
instruments themselves.
(4) EPA’s Data Analysis: In this
section, EPA discusses the data analysis
it performed in connection with
developing financial test options
generally for the CERCLA § 108(b)
proposed rule, and in connection with
the particular test selected for proposal.
Specifically, EPA conducted several
basic analyses to understand the
impacts of the rule and tradeoffs
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
associated both with and without a
financial test. This is discussed in the
following section (a). In section (b), EPA
discusses its data analysis of the
expected cost savings and potential
costs to the public of alternative
financial tests considered for proposal
under Option 2. In section (c), EPA
discusses its analysis of the ability of
the alternative tests to screen out
bankruptcies.
(a) Analysis of Rule With and Without
a Financial Test Option
For this proposal, EPA sought to
estimate the overall cost to the public
from potential industry defaults that
could occur absent the rule, versus the
potential cost to industry under a rule
without any financial test provisions
(Option 1). All quantitative analyses
conducted in relation to financial tests
are more thoroughly described within
the ‘‘Background Information Document
for Financial Test Options Analysis for
Hardrock Mining Industry under
CERCLA § 108(b).’’
For purposes of analysis EPA adopted
several assumptions. At the time of
these analyses, estimates were not yet
available regarding the amounts of the
financial responsibility that individual
companies would be obligated to cover
under this rule. Therefore, in order to
facilitate necessary analyses of options
for a financial test, EPA assumed an
across-the-board obligation amount for
all companies (both at $50 million, as
well as $200 million respectively).132
EPA also assumed there would
essentially be full recovery of
instruments under the rule, plus
negligible recovery from bankruptcy
proceedings.
The Agency’s analyses puts the
annualized response costs for public
taxpayers from bankruptcies and
defaults at $1.22 billion in the absence
of any CERCLA § 108(b) rule for the
hardrock mining industry. EPA also
calculated that in order to eliminate
such costs borne by the public to the
maximum extent possible, requiring
financial responsibility (absent a
financial test) would result in additional
annualized costs to industry of
approximately $488 million.
132 While this assumption allows for comparison
of a company’s cost accrual relative to other
financial tests, it does not correctly scale the
obligation amount to the size of the company’s
operations. To the extent that this amount
overstates actual obligations, specifically for smaller
companies, the $50 million coverage requirement
may affect cost effectiveness determinations if there
is a systematic relationship between company size
and financial test passing rates.
PO 00000
Frm 00055
Fmt 4701
Sfmt 4702
3441
(b) Analytical Basis for the Proposed
Financial Test
EPA evaluated the No Test and a
range of alternative Financial Test
options, incorporating a variety of
financial metrics, to assess the ability of
these tests and metrics to predict the
likelihood of bankruptcy and ensure
that sufficient funds are available to
meet a company’s ongoing
environmental commitments. The
Agency evaluated all candidate
hardrock mining firms for which
financial information was available
against a variety of financial test
options, including tests promulgated
under other Federal statutes such as
RCRA, and two ratings-based options
designed by EPA (referred to as the
Investment Grade and Higher-thanInvestment-Grade Rating Tests).
The least sensitive of the options
considered looked at using a test based
solely on Investment Grade credit
ratings. Under this test option, all
companies with a rating of BBB- or
better qualify to self-insure 100 percent
of their financial responsibility
obligations under the rule.133 Similar,
but somewhat more sensitive, is the
option of using the same test as that
which is used under RCRA Subtitle C.
The RCRA Subtitle C Financial Test
contains two alternative avenues by
which a company may successfully
qualify for self-insurance (one with, and
one without a ratings-based threshold).
To pass the test under RCRA Subtitle C
a company must either possess an
investment grade rating on its most
recent bond issuance from Standard and
Poor’s or Moody’s, or must otherwise
demonstrate that their financial status
(including that of total liabilities, net
worth, net income, total assets, current
assets, and current liabilities) all meet
certain minimum standards. In order for
companies to self-insure under either of
these alternatives, their tangible net
worth must exceed their financial
responsibility obligations by a factor of
six at a minimum (and not be less than
$10 million), while their U.S. Assets
must equal at least ninety percent of
their total assets (or be at least six times
that of the financial responsibility
obligations).
EPA also developed a more sensitive
ratings-based financial test (the Higherthan-Investment-Grade Rating Test),
which further limits qualification for
self-insurance to only those companies
with a BBB or better rating. Unlike the
133 While this section refers to ratings according
to the notation used by S&P, the financial test
option considers ratings from S&P or an equivalent
NRSRO for the purposes of assessing a company’s
ability to meet the financial test requirements.
E:\FR\FM\11JAP2.SGM
11JAP2
3442
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
other tests considered, companies with
ratings of BBB- would not qualify for
any self-insurance under this test.
Furthermore, this test establishes a
hybrid hierarchy whereby only
companies with ratings of A- or higher
qualify at 100 percent, while those with
ratings of BBB or BBB+ qualify to selfinsure no more than fifty percent of
their financial responsibility obligation.
Lastly, because tangible net worth and
U.S. Asset requirements are frequently
included as an important feature of
financial responsibility regulations,
tangible net worth and U.S. Asset
limitations (similar to those stipulated
under RCRA Subtitle C) were added as
a further component of the Higher-thanInvestment-Grade Rating Test.
(c) Analysis of Financial Test Options
Considered
EPA first assessed the relative costs
borne by industry to maintain a
financial test, or in lieu of doing so, to
obtain a third-party instrument
(industry’s expected cost). EPA also
assessed the costs that may be borne by
the public in the event a company
defaults on its obligations (public’s
expected default cost).
Results of these analyses indicated
that the estimated costs to industry
consistently increase, as the conditions
of the alternative financial tests become
more sensitive and fewer companies
qualify to self-insure. As fewer
companies are able to pass the test, they
are required to pay for third party
financial responsibility instruments on
the open market, which comes at a cost.
Conversely, as alternative financial tests
become more sensitive and fewer
companies qualify to self-insure, the
potential for defaults decreases along
with the potential costs to the public
associated with such potential defaults.
Under the Investment Grade Ratings
Test, EPA’s analysis estimates the
annualized cost savings to industry at
approximately $112.5 million. As a
result of allowing the test, the public
would in turn experience potential costs
in annualized dollars of approximately
$19.6 million due to the possibility of a
company defaulting in spite of having
passed the test. Similarly, estimates for
the RCRA Subtitle C Test, reveal
marginally lower annualized cost
savings to industry of roughly $110.2
million, with the public bearing
potential costs from defaults valued at
an annualized cost of $16.4 million.
Under a Higher-than-InvestmentGrade Rating Test (with and without
tangible net worth and U.S. Asset
requirements), annualized cost savings
to industry range from $75.2 to $90.8
million, respectively. Annualized costs
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
to the public from potential defaults is
further diminished to between $10.4
and $12.0 million respectively. By
creating a stricter set of requirements,
the Higher-than-Investment-Grade
Rating Test (with tangible net worth and
U.S. Asset provisions) makes it more
difficult for companies with border-line
investment grade ratings or insufficient
assets to qualify for self-insurance. In so
doing, this test further reduces the
chance of defaults and potential costs to
the public precipitated by such defaults,
as compared to the other financial tests
considered.
The Higher-than-Investment-Grade
Rating Test is also the only option
designed to carry with it a provision
allowing a company to cover only a
portion of its obligations depending on
its current rating. Companies with lower
relative ratings (BBB and BBB+) may
only self-insure for up to 50 percent of
their financial responsibility obligation.
Such lower rated companies are not
only at greater risk of default, but may
also enter into default at a faster pace
than companies rated at A or better,
based on probability of default estimates
for companies in different ratings
tranches as seen in historical default
studies done by NRSROs. Consequently,
this tailored feature of the Higher-thanInvestment-Grade Rating Test helps to
further diminish the potential costs to
the public relative to other financial
tests, while still allowing some level of
self-insurance in recognition of the
creditworthiness of companies with
investment grade ratings of BBB or
higher.
(d) Analysis of Bankruptcy and
Predictiveness of Alternative Tests
The Agency endeavored to craft a test
that would be able to predict
bankruptcy in the hardrock mining
industry. To assess both the no test
proposal and that of the financial test
options in this respect, the Agency
collected as much financial information
as possible for each of 3 years
proceeding identified bankruptcies that
had historically occurred among
hardrock mining companies. This data
was matched with bankruptcies in the
industry identified over a 35-year period
spanning 1980 to 2015, resulting in a
sample of 25 unique occurrences of
bankruptcies in this industry for which
data is available. The financial data for
each of these bankruptcies were then
used to assess whether any of these
companies would have been capable of
passing any of the alternative tests, in
each of the 3 years before entering
bankruptcy. Of the tests considered, it
was the Higher-than-Investment-Grade
Rating Test (with Tangible Net Worth
PO 00000
Frm 00056
Fmt 4701
Sfmt 4702
and U.S. Asset thresholds) that
performed best in disqualifying
companies from passing the test during
the three-year period before they
ultimately went bankrupt.
Indeed, the Agency’s analysis shows
that of the 25 hardrock mining
bankruptcies for which data were
available, the proposed test would have
completely screened out 24 of the 25
companies at least three years in
advance of bankruptcy. However, even
in the case of the one company that the
test did not screen out, the Higher-thanInvestment-Grade Rating Test succeeded
in restricting the level of self-insurance
for which they qualified to just fifty
percent of its financial responsibility
obligations (instead of 100 percent).
This resulted from the hybrid feature of
the proposed Higher-than-InvestmentGrade Rating Test. This offers evidence
of the effectiveness of the hybrid
approach included in the proposed test
in meeting its objective of reducing the
exposure to unfunded costs (by fifty
percent) for the subset of companies
with higher expected bankruptcy rates
and ratings below that of an A rating.
Further, since a BBB rating forms the
minimum basis for whether a company
can qualify for any self-insurance of
their financial responsibility obligation,
EPA conducted further analyses to
evaluate this ratings threshold more
specifically. In particular, the Agency
sought to assess fluctuations in BBB
ratings in relation to previous
bankruptcies in the hardrock mining
industry. By looking at the historical
record of rating shifts below the BBB
threshold, the Agency sought to obtain
perspective on how often BBB-rated
companies experienced ratings
downgrades, how susceptible
companies were to receiving
speculative-grade ratings after
previously having been rated BBB, and
how quickly they may have entered
bankruptcy subsequent to their ratings
having dropped to below BBB.
To assess these questions, EPA
collected data on 102 hardrock mining
companies that were rated by S&P at
least once between 1984 and 2010.
These companies reflected both
hardrock mining companies (targets),
and parents of hardrock mining
companies (parents) who might
ultimately be in a position to provide a
corporate guarantee for their
subsidiaries’ obligations. The inclusion
of parent companies within the scope of
these analyses furthermore
supplemented the Agency’s analysis
where hardrock mining target company
data were unavailable.
Based on the data available from the
26-year sample period, the Agency’s
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
analyses identified only four
bankruptcies of companies (out of 36)
that had ever historically been rated at
the BBB level.134 In the case of these
bankruptcies, only one of these mining
companies entered bankruptcy within
one year following a drop in its BBB
rating. While the company had retained
BBB or better ratings presumably due to
their strength and longevity, they
ultimately succumbed to multimilliondollar asbestos claims over a very short
period. Of the other three companies
entering bankruptcy within the sample
period, two did so within three years of
a downgrade, and the other entered
bankruptcy 17 years later.
What these results suggest are that
relatively few bankruptcies were shown
to have occurred for companies rated at
BBB. The results also suggest that while
ratings fluctuations do occur, such
fluctuations generally do not signal an
unfailing decline towards bankruptcy.
Thirdly, they suggest that when a
company that has been rated at
investment grade does experience a
ratings decline and ultimately defaults,
this process is likely to take one or more
years for such relatively solid
enterprises to enter into bankruptcy. In
such instances, the proposed annual
Higher-than-Investment Grade Rating
Test (combined with RA notification
requirements when a company’s
qualification for the financial test
ceases) will alert regulators as to the
company’s inability to pass the Higherthan-Investment-Grade Rating Test.
Therefore, it appears that establishing
the cutoff for passing the proposed test
at a rating of BBB or above is well
justified. Setting the ratings threshold at
BBB, prevents companies with ratings of
BBB- or below from passing the Higherthan-Investment-Grade Rating Test. This
is designed to help ensure that there is
sufficient time for the Agency to
intercede and enforce the test
requirements should a company’s rating
begin to decline.
Summary
EPA is proposing two options—to not
allow a financial test (Option 1—
preferred option), and to allow a
‘‘Higher-than-Investment-Grade Rating
Test’’ (Option 2). EPA believes that not
allowing a financial test would best
avoid undue costs to the Government
and to the public from unsecured
environmental obligations that
companies may be unable to cover when
they go into default or bankruptcy, and
that it would eliminate administrative
134 One additional bankruptcy occurred by a
company who had never been rated BBB, but had
been previously downgraded from BBB+ to BB-.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
burden upon the Agency associated
with the review and verification of
financial statements and attestations
from financial test submissions.
Alternatively, the ‘‘Higher-thanInvestment-Grade Rating Test’’ is being
proposed, as it was the best financial
test, from among those considered, at
providing cost savings to industry while
limiting the risks to the Government and
the public. The Higher-than-InvestmentGrade Rating Test was selected as the
least risky option for the co-proposal,
relative to the other tests considered,
because it results in the lowest expected
potential costs that may be borne by the
Government, while offering significant
cost savings to industry. In addition, the
Higher-than-Investment-Grade Rating
Test performed better than the other
tests at predicting which owners or
operators may have a higher potential
for defaulting on their obligations.
Finally, the Higher-than-InvestmentGrade Rating Test also takes advantage
of publically available credit analyses
conducted by independent ratings
agencies as a way to help lower
administrative burdens on both industry
and the Government.
EPA solicits comment on both
proposed options.
5. Corporate Guarantee (§ 320.44)
(Option 2 Only)
Under proposed Option 2, which
would allow a financial test, EPA also
is proposing to allow owners and
operators to demonstrate financial
responsibility by obtaining a written
corporate guarantee from another firm
that meets the financial test
requirements. The corporate guarantee
serves as a contract through which a
related firm guarantees to third-party
CERCLA claimants that it will make
payment for CERCLA response costs,
health assessment costs, and/or natural
resource damages as provided in the
guarantee.
a. Issuer Eligibility (§ 320.44(b) and (c))
The Agency would allow guarantees
from the direct or higher-tier parent
corporation of the owner or operator, a
firm owned by the same parent
corporation as the owner or operator, or
a firm with a substantial business
relationship with the owner or operator.
These potential guarantors are the same
as those allowed to provide guarantees
under the RCRA Subtitle C Closure and
Post-closure financial assurance and
third-party liability regulations.
Initially, under the RCRA Subtitle C
financial assurance requirements for
closure and post-closure care, EPA
allowed for guarantees provided only by
immediate corporate parents believing
PO 00000
Frm 00057
Fmt 4701
Sfmt 4702
3443
that that relationship between the owner
operator and the guarantor would aid in
the enforceability of the guarantee and
its strength. Further, EPA adopted a
definition of ‘‘parent corporation’’ to
ensure the relationship was close and
direct.135 EPA is proposing the same
definition of parent corporation as
employed in the RCRA Subtitle C
financial assurance program. EPA
believes that the definition will be
familiar to the regulated community and
EPA implementers which should ease
implementation efforts. Furthermore,
because the definition ensures that the
connection between the parent and the
subsidiary is close and direct, the parent
will likely have a strong interest in the
financial and environmental
performance of the subsidiary and the
facility which the Agency believes
strengthens the guarantee. The proposed
definition of parent corporation is ‘‘a
corporation that which directly owns at
least fifty percent of the voting stock of
the corporation which is the facility
owner or operator; the latter corporation
is deemed a ‘subsidiary’ of the parent
corporation.’’
However, EPA received several
comments on the July 11, 1986 interim
final rule that urged EPA to allow nonparent firms to provide guarantees. EPA
analyzed the validity and enforceability
of guarantee contracts by non-parent
firms and decided to authorize the
guarantees provided by ‘‘sibling’’ firms
(firm whose parent corporation is also
the parent corporation of the owner or
operator) and firms with a substantial
business relationship with the owner or
operator in the third party liability
regulations provided they were able to
provide certain additional
information.136 EPA later authorized
non-parent guarantors in the closure
and post-closure regulations as well.137
EPA has determined that guarantees
issued by non-parent corporations can
be valid and enforceable when they are
issued in accordance with the
regulations and thus EPA proposes this
same suite of potential guarantors in
this proposal provided they supply the
same necessary information to make the
guarantee enforceable as required under
the RCRA Subtitle C regulations.
Specifically, if the guarantor’s parent
corporation is also the parent
135 See Standards Applicable to Owners and
Operators of Hazardous Waste Treatment, Storage,
and Disposal Facilities; Financial Assurance
Requirements, 47 FR 15037 April 7, 1982; and See
Standards Applicable to Owners and Operators of
Hazardous Waste Treatment, Storage, and Disposal
Facilities; Financial Assurance Requirements;
Liability Coverage, 51 FR 25350 @253511 July 11,
1986.
136 See 53 FR 33941, September 1, 1988.
137 See 57 FR 42833, September 16, 1992.
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3444
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
corporation of the owner or operator,
the letter from the guarantor’s CFO
would have to describe the value
received in consideration of the
guarantee. If the guarantor is a firm with
a ‘‘substantial business relationship’’
with the owner or operator, this letter
would be required to describe this
‘‘substantial business relationship’’ and
the value received in consideration of
the guarantee. These proposed
descriptions were determined by EPA to
be important in ensuring the ultimate
validity and enforceability of the
guarantee contract in past Agency
financial responsibility rulemakings.
Under fundamental principles of
contract law, contracts must be
supported by ‘‘consideration.’’
Consideration is generally defined as a
legal detriment that has been bargained
for and exchanged for the promise. The
general principle underlying the
concept of consideration is that the law
will not enforce gratuitous promises.
For the demonstration of sufficient
consideration for the contract if the
guarantor has a substantial business
relationship with the owner or operator,
the guarantor must describe the
substantial business relationship in a
way that would meet the proposed
definition. EPA is proposing the same
definition of substantial business
relationship as used in the RCRA
Subtitle C financial assurance program
which recognizes that no single legal
definition exists of what constitutes a
business relationship between two firms
that would justify upholding a
guarantee between them and that such
a determination would depend upon the
application of the laws of the States of
the involved parties. The proposed
definition of substantial business
relationship is ‘‘the extent of a business
relationship necessary under applicable
State law to make a guarantee contract
issued incident to that relationship
valid and enforceable. A ‘‘substantial
business relationship’’ must arise from a
pattern of recent or ongoing business
transactions, in addition to the
guarantee itself, such that a currently
existing business relationship between
the guarantor and the owner or operator
is demonstrated to the satisfaction of the
Administrator.’’
In addition, if the guarantor’s parent
corporation is also the parent
corporation of the owner or operator or
if the guarantor is a firm with a
‘‘substantial business relationship’’ with
the owner or operator the letter from the
guarantor’s CFO would have to describe
the value received in consideration of
the guarantee. In some cases, preexisting
business relationships, no matter how
substantial, will be insufficient by
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
themselves to demonstrate
consideration because they will not
have been bargained for to induce the
promise in the guarantee contract. For
this reason, these guarantors must also
describe the consideration for the
contract in the letter from their chief
financial officer. As mentioned earlier,
these requirements are the same as
under the RCRA Subtitle C financial
assurance closure post-closure and
third-party liability financial assurance
programs. These requirements would be
familiar to the regulated community and
the regulators familiar with RCRA
financial assurance and were based on
analysis to ensure the enforceability of
the contract.
Furthermore, EPA would allow a
guarantee from a non-U.S. guarantor
that meets the financial test
requirements outlined in the proposed
regulations provided the guarantor also
has identified a registered agent for
service of process in the state in which
the facility covered by the guarantee is
located and in the state in which it has
its principal place of business. This
requirement is identical to that required
in the RCRA third party liability
regulations and was required to ensure
a non-US guarantor be subject to
enforcement proceedings in the U.S.
The function of the agents is to accept
service of process for the guarantor
corporation for legal actions in a given
state.138 In addition, and as described
earlier, all guarantors would have to
pass the financial test requirements
including a U.S. assets requirement. The
Agency has included U.S. Assets
requirements to ensure assets are
available in the United States to be
levied against if a judgment is entered
against the guarantor.139 EPA believes
this situation is similar and wants
similar assurance that there are assets
available in the U.S. should claimants
need to recover funds from the
guarantor.
The guarantor would be required to
provide the same evidence and
supporting documentation that the
guarantor passes the financial test. In
addition, the guarantor would be
required to submit a signed copy of the
guarantee and comply with the terms in
the guarantee. The wording in the
guarantee would have to be identical to
that specified in § 320.50(f).
b. Wording of the Corporate Guarantee
(§ 320.50(f))
In developing the proposed corporate
guarantee language EPA looked to the
guarantee language used in the RCRA
138 See
139 See
PO 00000
52 FR 44317, November 18, 1987.
52 FR 44317, November 18, 1987
Frm 00058
Fmt 4701
Sfmt 4702
Subtitle C program. Those guarantees
were the product of iterative proposals,
responses to comment and EPA
analysis.
In the proposed CERCLA § 108(b)
guarantee, the guarantor would
guarantee payment up to the most
current CERCLA § 108(b) financial
responsibility amount required at each
facility covered by the guarantee
exclusive of any legal defense costs
incurred by the guarantor in the same
three scenarios for which the other
instruments intend to provide financial
responsibility (discussed later in this
preamble). The value of the guarantee
thus is designed to adjust with the value
of the CERCLA § 108(b) financial
responsibility amount. As evidence that
the guarantor passes the financial test,
the guarantor would be required to
submit the letter from its CFO that
identifies, for all the facilities for which
it is providing a corporate guarantee, the
amount of CERCLA § 108(b) financial
responsibility covered by the guarantee.
This would occur annually or as
required by a change in the CERCLA
§ 108(b) financial responsibility amount.
The CERCLA § 108(b) financial
responsibility amounts covered by the
guarantee identified in the CFO letter at
each facility would serve as the basis for
the value of the guarantee under the
proposed guarantee language.
A similar arrangement is used in the
RCRA Subtitle C closure post-closure
guarantee whereby the value of the
guarantee is linked to the current
closure and post-closure cost estimates.
The RCRA Subtitle C closure and post
closure guarantee provides that, if the
owner or operator fails to perform
closure or post closure care of the
facilities covered by the guarantee in
accordance with the closure or postclosure plans and other permit or
interim status requirements whenever
required to do so, ‘‘the guarantor shall
do so or establish a trust fund as
specified in subpart H of 40 CFR part
264 or 265, as applicable, in the name
of [owner or operator] in the amount of
the current closure or post-closure cost
estimates as specified in subpart H of 40
CFR parts 264 and 265. In this way the
value of the guarantee adjusts without
required amendments or modifications
to the guarantee. EPA is proposing that
the value of the guarantee similarly
adjust to the current CERCLA § 108(b)
financial responsibility amount.
To help effectuate this intent, the
proposed language of the corporate
guarantee would require the guarantor
to agree to comply with the reporting
requirements for guarantors and to
report the full amount of CERCLA
§ 108(b) financial responsibility for
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
which it is eligible to cover as
determined by the financial test criteria
for each facility covered by the
guarantee in the letter from its CFO.
EPA believes it is necessary for the
guarantor to report the full amount of
CERCLA § 108(b) financial
responsibility for which it is eligible to
cover as determined by the financial test
criteria for each facility covered by the
guarantee in the letter from its CFO as
those amounts would form the basis of
the guarantor’s potential liability under
the guarantee. If the guarantor was able
to report an amount lower than the
maximum amount for which the
guarantor is allowed to cover under the
financial test criteria, the guarantor
could unilaterally adjust the ‘‘value’’ of
the guarantee downwards by reporting
some percentage of the maximum
amount. Such a provision is not
necessary in the RCRA Subtitle C
closure post-closure guarantee as the
owner operator is responsible for
preparing the cost estimates and thus
the guarantor could not unilaterally
change the ‘‘value’’ of the guarantee.
An alternative approach would be to
include specific dollar values for each
facility in the guarantee itself as the
basis of the guarantor’s liability. Under
this option, the guarantee would have to
be amended or modified regularly as the
amounts of CERCLA § 108(b) financial
responsibility changed and create
additional reporting burdens. Further,
EPA anticipates that potential
guarantors will typically seek to provide
a guarantee for the maximum amount
allowable under the regulations to
realize the maximum cost savings.
Nevertheless, EPA requests comment on
the proposed arrangement whereby the
guarantor’s liability is linked to the
current CERCLA § 108(b) financial
responsibility amount and does not
require regular amendment of the
guarantee as well as the alternative
whereby the guarantee would specify
specific dollar amount and would
require routine amendment.
c. Payment for CERCLA Response Costs,
Health Assessment Costs, and/or
Natural Resource Damages From the
Guarantee
The proposed language of the
corporate guarantee would allow
claimants to make claims against the
guarantor under three scenarios in
addition to the direct action scenario.
First, in the event that payment was not
made for CERCLA response costs, health
assessment costs, and/or natural
resource damages associated with the
facility as required in a final court
judgment from a Federal court against
one of the current owners or operators
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
within thirty days, the guarantor would
do so. Secondly, in the event that
payment is not made as required in a
CERCLA settlement associated with the
facility between a current owner or
operator and EPA or another Federal
government agency, the guarantor
would do so. Third, in the event that
performance does not occur as required
at the facility under a CERCLA
unilateral administrative order issued to
a current owner or operator by EPA or
another Federal agency and for which
the owner or operator provided a
written statement allowing the
guarantee to serve as financial
responsibility assuring the work in the
order, the guarantor would make
payment into a trust fund established
pursuant to the order.
The payment scenarios in the
proposed guarantee are analogous to
those in the other instruments proposed
today. Similar documentary
requirements are also required for a
claimant to receive payment under these
three scenarios in the proposed
guarantee. Specifically, under the terms
of the proposed guarantee, the guarantor
would satisfy a third-party CERCLA
claim on receipt of specific documents.
Claimants seeking satisfaction of a valid
final court judgment from a Federal
court awarding payment for CERCLA
response costs, health assessment costs,
and/or natural resource damages
associated with the facility against any
of the current owners or operators at the
facility that had not been satisfied
within thirty days would need to submit
the final court judgment itself. In
addition, the claimant would need to
submit a signed statement from the
claimant certifying that the amounts had
not been recovered or paid from any
other source, including, but not limited
to, the owner operator, insurance,
judgments, agreements, and other
financial responsibility instruments.
These documentary payment
requirements were selected as it
removes EPA from the claims
administration process but ensures that
a court has determined that payment is
due to the party making the claim under
CERCLA and that the party has not
already recovered or been paid the
funds from another source. EPA believes
that guarantors will be able to review
such objective documentary
submissions and determine whether
payment should occur under the terms
of the guarantee. A similar provision
requiring the submission of a valid final
court order is required in the RCRA
third party liability guarantee (see 40
CFR 264.151(h)(2)).
In the payment scenario where
payment was not made as required in a
PO 00000
Frm 00059
Fmt 4701
Sfmt 4702
3445
CERCLA settlement associated with the
facility between a current owner or
operator and EPA or another Federal
government agency, Administrator or
another Federal agency may make a
claim by presenting two documents to
the guarantor for payment. The first
document would be a written signed
statement from the Administrator or
another Federal government agency
requesting payment from the guarantor
on the grounds that payment had not
been made as required by a CERCLA
settlement associated with the facility
and with any of the current owners or
operators. The second document is the
signed statement from the claimant
certifying that these amounts have not
been recovered or paid from any other
source, including, but not limited to, the
owner operator, insurance, judgments,
agreements, and other financial
responsibility instruments.
In the payment scenario where
performance at the facility does not
occur as required under a CERCLA
unilateral administrative order issued to
a current owner or operator, the
Administrator or another Federal agency
may make a claim by presenting a
similar set of two documents as
described earlier in the settlement
scenario to the guarantor for payment.
Specifically, the first document required
to make a claim in this scenario under
the terms of the proposed guarantee
would be a written signed statement
from the Administrator or other Federal
government agency requesting payment
from the Guarantor into a trust fund
established pursuant to a CERCLA
unilateral administrative order on the
grounds that performance at the facility
had not occurred as required by a
CERCLA administrative order issued to
a current owner or operator. The second
document that would be required to
make a claim under this scenario would
be a signed statement from the claimant
certifying that these amounts have not
been recovered or paid from any other
source, including, but not limited to, the
owner operator, insurance, judgments,
agreements, and other financial
responsibility instruments.
EPA believes, similar to the case of
the letter of credit issued in favor of any
and all third-party CERCLA claimants,
the trust fund and the surety bond, that
in instances where the claimant is a
Federal government agency acting
pursuant to delegated CERCLA
authority a simpler set of documentary
requirements are appropriate. EPA
believes the relatively simple
requirements of signed statements from
EPA or another Federal agency acting
pursuant to delegated CERCLA
authority will streamline the claims
E:\FR\FM\11JAP2.SGM
11JAP2
3446
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
process and reduce uncertainty as to
whether or not payment should be made
under the terms of the guarantee. EPA
requests comment on the proposed
documentary requirements for payment
from the guarantee.
In addition to the three defined
payment scenarios, the guarantor could
also be subject to direct action under
CERCLA § 108(c)(2). Specifically, the
proposed terms of the guarantee include
an explicit acknowledgement that in the
case of a release or threatened release of
(a) hazardous substance(s) from a
facility covered by the guarantee, any
claim authorized by § 107 or § 111 of
CERCLA may be asserted directly
against the guarantor as provided by
CERCLA § 108(c). Further, the proposed
terms of the guarantee require that the
guarantor consents to suit with respect
to these claims subject to the limitations
in CERCLA § 108(d) and acknowledge
that the guarantor would be entitled to
the rights and defenses provided to
guarantors by the statute in § 108(c).
Finally, under the proposed language of
the guarantee, the guarantor would
agree to provide notice of any claims
and payments resulting from a direct
action to the Administrator. EPA
believes this notification requirement is
valuable as the owner operator may not
be around to provide such a notice of
claims and payments in a direct action
scenario yet EPA wishes to remain
informed of claims against the
instrument and of the value of the
financial responsibility.
The proposed language of the
guarantee would also explicitly specify
that the limit of the guarantor’s liability
under the guarantee would be exclusive
of legal defense costs incurred by the
guarantor. A similar provision is being
proposed for insurer and surety liability
today. To the maximum extent possible,
EPA would like the value of the
financial responsibility be preserved for
the payment of valid third-party
CERCLA claims. EPA requests comment
on this proposed provision.
d. Notification Requirements in the
Guarantee
The proposed language of the
CERCLA § 108(b) corporate guarantee
also includes several other notification
requirements. First, under the proposed
language, the guarantor would agree that
if, at any time before the termination of
the guarantee, the guarantor fails to
meet the financial test criteria, guarantor
shall send within ninety days, by
certified mail, notice to the
Administrator and to the owner or
operator that he intends to provide
alternate financial responsibility as
specified in Subpart C of 40 CFR part
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
320 in the name of the owner or
operator. A similar provision is also
employed in the RCRA Subtitle C
closure post closure and third-party
liability guarantee. The provision would
provide EPA notice that the guarantee
no longer passes the financial test and
an acknowledgment from the guarantor
that he intends to provide alternate
financial responsibility as required
under the terms of the guarantee should
the owner or operator fail to do so. EPA
believes it is important for the Agency
to receive prompt notice of the
guarantor’s inability to continue to pass
the financial test as the guarantor’s
financial strength is foundational to the
efficacy of the guarantee. Further, EPA
believes that it is not just consistent
with past precedent but important that
the guarantor be responsible for
obtaining alternate financial
responsibility in these instances. The
proposed provision helps limit the risk
that, in instances when a guarantor no
longer passes the financial test, the
facility will be left without alternate
financial responsibility.
Likewise, the proposed terms of the
guarantee would require the guarantor
to agree that within thirty days after
being notified by the Administrator of a
determination that the guarantor no
longer meets the financial test criteria or
that he is disallowed from continuing as
a guarantor, the owner or operator
would be required to establish alternate
financial responsibility as specified in
Subpart C of 40 CFR part 320, as
applicable, in the name of the owner or
operator unless the owner or operator
had done so. This provision serves the
same intent as the provision described
earlier—that the guarantor be
responsible for obtaining alternate
financial responsibility in an instance
where the guarantor notices EPA that it
no longer passes the financial test. The
provision helps limit the risk that, in
instances when a guarantor no longer
passes the financial test, the facility will
be left without alternate financial
responsibility. This would be a very
similar requirement to those used in the
RCRA Subtitle C corporate guarantees so
the regulated community should be
familiar with the provision.
Under the proposed terms of the
guarantee the guarantor would also be
required to notify the Administrator by
certified mail, of a voluntary or
involuntary proceeding under Title 11
U.S.C. (Bankruptcy), naming the
guarantor as debtor, within ten days
after commencement of the proceeding.
This provision is also required in both
the RCRA Subtitle C closure post
closure and third-party liability
guarantees. EPA recognizes the value of
PO 00000
Frm 00060
Fmt 4701
Sfmt 4702
this notification provision and proposes
its inclusion to the CERCLA § 108(b)
guarantee in order for EPA to be
promptly notified of such indicators of
the guarantor’s financial distress.
Finally, under the proposed terms of
the guarantee, the guarantor would need
to send a notice by certified mail to the
Administrator and to the owner operator
of its intent to terminate the guarantee.
The intent of this provision is to provide
notice to the Administrator and the
owner operator that the guarantor
wishes to cease providing a guarantee
on behalf of the owner operator. Such a
provision helps ensure continuity of
financial responsibility coverage.
e. Provisions in the Guarantee Ensuring
Continuity of Coverage
As described earlier, under the
proposed terms of the guarantee, the
guarantor would need to send a notice
by certified mail to the Administrator
and to the owner operator of its intent
to terminate the guarantee. The
corporate guarantee would remain in
force and may not be terminated unless
and until the owner or operator obtains,
and the Administrator approves
alternate financial responsibility. If the
owner or operator failed to provide
alternate financial responsibility as
specified in the regulations and obtain
the written approval of such alternate
financial responsibility from the
Administrator within ninety days after
receipt by both the owner or operator
and the Administrator of a notice of
termination of the corporate guarantee
from the guarantor, the guarantor would
be required, under the terms of the
guarantee, to provide such alternative
financial responsibility in the name of
the owner or operator. This provision
would ensure the continuity of financial
responsibility and is similar to that
required for the other instruments.
However, in the case of the guarantee,
unlike the other instruments, the
guarantor would not necessarily need to
fund a trust fund. The guarantor could
choose from the range of acceptable
financial responsibility instruments
when obtaining a financial
responsibility mechanism on behalf of
the owner or operator. This provision,
and the similar provisions for other
proposed instruments, as well as
alternatives are discussed in more depth
in the preamble section headed ‘issuer
cancellation provisions.’
f. Requirements for Attorneys General or
Insurance Commissioners written
statements (§§ 320.44(f) and (g))
In the case of corporations
incorporated in the United States, a
guarantee would only be able to be used
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
to satisfy the CERCLA § 108(b) financial
responsibility requirements if the
Attorneys General or Insurance
Commissioners of the State in which the
guarantor is incorporated, and each
State in which a facility covered by the
guarantee is located have submitted a
written statement to EPA that a
guarantee executed as described in the
regulations at §§ 320.44 and 320.50(f) is
a legally valid and enforceable
obligation in that State.
For non-US corporate guarantors a
guarantee would be able to be used to
satisfy the CERCLA § 108(b) financial
responsibility requirements only if the
Attorney General or Insurance
commissioner of each state in which a
facility covered by this guarantee is
located and the state in which the
guarantor corporation has its principal
place of business has submitted a
written statement to EPA that a
guarantee executed as described in the
regulations and §§ 320.44 and 320.50(f)
is a legally valid and enforceable
obligation in that State.
These requirements for written
statements from state Attorneys General
and Insurance Commissioners are
similarly used in the RCRA Subtitle I
Underground Storage Tank financial
responsibility regulations and the RCRA
Subtitle C third-party liability
regulations. The reason for the
requirements is that EPA is concerned
that guarantors may be subject to states
insurance laws.140 State insurance
regulation and law are by and large the
purview of the states and thus the
Agency does not believe it can state
with certainty whether any particular
guarantee would subject the guarantor
to state insurance law, and whether it
would be valid with respect to such law.
Therefore, the Agency is today
proposing that the responsibility would
rest with the owner or operator to obtain
the written statement from the relevant
state Attorneys General and Insurance
Commissioners stating that a guarantee
as described and worded in the
regulations would be valid and
enforceable. EPA invites comments as to
whether or not this requirement would
be necessary or on alternative means by
which the owner or operator could
provide assurances to the Agency that
the guarantee would be valid and
enforceable.
140 See, for example, Liability Requirements for
Hazardous Waste Facilities; Corporate Guarantee,
52 FR 44314 @ 44316–44317; and Standards
Applicable to Owners and Operators of Hazardous
Waste Treatment, Storage, and Disposal Facilities;
Liability Coverage 53 FR 33938 @ 33942, September
1, 1988.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
6. Trust Fund (§ 320.45)
An owner or operator would be able
to satisfy the proposed CERCLA § 108(b)
financial responsibility requirements by
establishing a trust fund in accordance
with the proposed requirements
including the proposed required
wording. Funds transferred to the trust
fund by the owners and operators or any
letters of credit held by the trust would
be held in the trust for the purpose of
paying valid third-party CERCLA claims
in certain circumstances identified in
the trust agreement. In this way, the
trust fund acts as a means of selfinsurance whereby the owner and
operator set aside funds to pay future
claims which otherwise may not be
satisfied at such a future date.
a. Submission of Trust Agreement and
Trustee Eligibility (§ 320.45(a))
The owner or operator would be
required to submit an originally signed
duplicate of the trust agreement to the
Administrator. This is a similar
reporting requirement to those under
EPA’s RCRA Subtitle C financial
assurance regulations and aids in the
evaluation of compliance. The Agency
does not anticipate this to be a
significant burden to owners and
operators. The trustee would be
required to be an entity that has the
authority to act as a trustee and whose
trust operations are regulated and
examined by a Federal or state agency.
This requirement is the same as that
under the RCRA Subtitle C financial
assurance program, which EPA required
in order to establish a minimal level of
reliability and security for trustee
institutions managing trust funds under
the Agency’s financial assurance
regulations (see 46 FR 2824, January 12,
1981). EPA considered alternative
qualifications for trust providers but is
proposing to utilize those that EPA has
found to work well under the RCRA
Subtitle C program. In making this
decision, EPA considered the impact on
the potential number of trustees and the
administrative burden on EPA of
reviewing additional qualifications. For
more information on the consideration
of alternative provider qualifications,
please see the background document on
instrument provider qualifications.
b. Required Wording and Updates to
Schedule A of Trust Agreement
(§ 320.45(b))
The wording of the trust agreement
would be required to be identical to the
wording specified in § 320.50(a)(1), and
the trust agreement would be required
to be accompanied by a formal
certification of acknowledgment (for
PO 00000
Frm 00061
Fmt 4701
Sfmt 4702
3447
example, see § 320.50(a)(2)). As
discussed in the introduction to Subpart
C of the preamble ‘‘Available Financial
Responsibility Instruments’’ EPA
believes there are significant benefits to
standardized wording. Namely, a
standardized trust agreement reduces
the administrative burden of reviewing
the wide range of possible trust
agreement wording that may otherwise
be employed and ensures uniform
integration with the Superfund program
and enforcement of the CERCLA
§ 108(b) instruments nationwide. The
trust agreement would be required to be
accompanied by a formal certificate of
acknowledgment. The language of the
acknowledgment would be expected to
vary by state to accommodate individual
state requirements but the intent would
be to ensure the validity and
authenticity of the signatures on the
trust agreement. This requirement exists
for trust agreements in other EPA
financial responsibility programs,141
and adds to the legal standing and
enforceability of the instrument.
Under the proposed regulations,
Schedule A of the trust agreement,
which would identify the facilities
covered by the trust agreement and their
EPA Identification Numbers, names,
addresses, current owners and
operators, and the current financial
responsibility amount, or portions
thereof, for which financial
responsibility is being demonstrated by
the trust agreement, would have to be
updated within sixty days of a change
in the amount of CERCLA § 108(b)
financial responsibility at a facility
covered by the agreement. Maintaining
the accuracy of the information in
Schedule A, including the current
amount of CERCLA § 108(b) financial
responsibility the trust fund is covering
at each facility, would be important to
ensure the trustee would have an
accurate accounting of the value of
CERCLA § 108(b) financial
responsibility for each facility covered.
This amount would serve as an upper
bound for the value of payments made
for valid third-party CERCLA claims
associated with any given facility.
c. Payments Into the Trust (§ 320.45(c))
Payments by the owner or operator
into the trust fund would be required so
that the value of the trust fund would
be at least as great as the required
CERCLA § 108(b) financial
responsibility amount. For existing
facilities subject to this proposed rule,
these payments would be made by the
owner or operator in accordance with
141 See, for example, 40 CFR 264.151(a)(2) and
280.103(b)(2).
E:\FR\FM\11JAP2.SGM
11JAP2
3448
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
the compliance schedule for the
CERCLA § 108(b) financial
responsibility regulations in proposed
§ 320.1. The trust fund would thus need
to be fully funded within four years of
the owner operator being subject to the
regulations. In addition to payments,
this requirement would also be able to
be met by obtaining a letter of credit that
conforms to the requirements of the
proposal and is held by the trust. The
four-year implementation window
established by the statute and discussed
earlier would thus serve as the trust
fund’s pay-in period.
EPA is aware that four years is shorter
than the pay-in period provided by
some EPA financial assurance programs.
However, under the proposed
regulations owners and operators would
be allowed to use a combination of
instruments to demonstrate the required
CERCLA § 108(b) financial
responsibility amount. Owners and
operators would thus be able to simulate
a longer trust fund pay-in period by
combining the trust fund with another
appropriate instrument. The trust fund
could be funded over a longer period of
time with the unfunded portion of the
trust provided by a separate instrument.
EPA believes this would help relieve
any burdens that may be encountered
because of the relatively short pay-in
period required by the statute.
For new facilities, owners and
operators would also be required to
make payments into the trust fund so
that the value of the trust fund is at least
as great as the required CERCLA
§ 108(b) financial responsibility amount.
However, in these cases there would not
be a pay-in period as is provided for
existing facilities by the four-year
implementation period in the statute.
For this first CERCLA § 108(b) rule, EPA
expects that new hardrock mining
facilities would likely have lower
financial responsibility amounts as their
footprint would be smaller initially and
then grow over time, obviating the need
for a pay-in period. EPA requests
comment on the need for a pay in
period for new facilities. EPA is
specifically interested in comments as
to the appropriate length of a pay-in
period that could be provided for new
facilities.
d. Language of the Trust Agreement
(§ 320.50(a))
In developing required trust
agreement language for this proposed
rule, EPA first looked to the trust
agreement language used in the RCRA
Subtitle C financial assurance program.
The basic terms and conditions of the
RCRA Subtitle C trust agreement were
defined by EPA in close consultation
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
with trust experts at the American
Banking Association and legal
practitioners in the late 1970s and early
1980s. Additionally, the trust agreement
was published for public comment
multiple times. The required wordings
of the RCRA trust agreements have
served as templates adopted by other
financial responsibility programs, both
within EPA and across many States.
This proposal includes proposed trust
agreement language primarily modified
to suit the needs of the proposed
CERCLA § 108(b) financial
responsibility program. The most
significant aspects of the proposed trust
agreement are discussed in following
sections. Please also see the background
document ‘‘Potential Requirements for
Insurance, Surety Bonds, Letters of
Credit and Trust Agreements and
Standby Trust Agreements under
CERCLA § 108(b)’’ that discusses
potential instrument specifications and
alternatives considered for more
information on the proposed trust
agreement specifications.
e. Specification of Beneficiary of the
Trust Agreement
The proposed trust agreement
language specifies that the trust fund is
established for the benefit of any and all
parties with valid third-party CERCLA
claims against the grantor or other
current owners and operators arising
from the operation of the facilities
covered by the agreement. EPA elected
to propose such a beneficiary
specification as the Agency believes it
provides adequate flexibility to
accommodate the various payment
scenarios envisioned by the trust
agreement and the CERCLA § 108(b)
regulations. The RCRA Subtitle C
closure post-closure trust agreement
specifies EPA as beneficiary. However,
due to the potential for multiple
claimants including, but not limited to,
EPA, the Agency considered such an
arrangement sub-optimal. In such an
arrangement, EPA would need to review
all claims and assess the merits of the
claims and direct payment from the
trust fund accordingly. As discussed
earlier in the letter of credit section,
there are several draw backs to EPA
administering the claims process. These
draw backs include the redirection of
Superfund resources to claims
administration activities and away from
cleanups or other programmatic
priorities, frustrating the intent of the
direct action provision and the potential
for EPA to be in the awkward position
of administering a claims process in
which it is a potential claimant.
As a result, EPA elected a variation of
the beneficiary specification employed
PO 00000
Frm 00062
Fmt 4701
Sfmt 4702
in the RCRA Subtitle C third-party
liability program that identifies ‘‘any
and all third parties injured or damaged
by [sudden and/or non-sudden]
accidental occurrences arising from
operation of the facility(ies) covered by’’
the trust agreement as beneficiaries.
EPA believes that the proposed
beneficiary specification provides
adequate flexibility in that parties that
obtain final court judgments or have
other valid third-party CERCLA claims
against one of the current owners or
operators for CERCLA response costs,
health assessment costs, or natural
resource damages associated with the
facility could make a claim without
having to be specifically named in the
trust agreement (see discussion of
claims against the trust fund in
following sections). At the same time,
EPA intends that the beneficiary
language combined with the payment
instructions in the trust agreement will
provide adequate clarity to trustees as to
when to make payment from the trust
fund. The EPA requests comments on
the proposed specification of the
beneficiary of the CERCLA § 108(b) trust
agreement.
f. Claims Against the Trust Fund
Claims against the trust fund could be
made by parties with valid third-party
claims for CERCLA response costs,
health assessment costs, and/or natural
resource damages against one of the
current owners or operators at the
facility.
Under the proposed regulations, the
trust would be available to claimants
that obtain a final court judgment from
a Federal court against any of the
current owners or operators at the
facility awarding CERCLA response
costs, health assessment costs, and/or
natural resource damages associated
with the facility should payment not
occur as required by the judgment
within thirty days. Under the proposed
terms of the trust, the claimant would
need to present the valid final court
judgment to the trustee. The judgment
would have to be dated at least thirty
days earlier and be accompanied by an
additional signed statement from the
claimant certifying that the amounts had
not been recovered or paid from any
other source, including, but not limited
to, the owner operator, insurance,
judgments, agreements, and other
financial responsibility instruments.
The two proposed documentary
requirements are being proposed with
the intent of ensuring that a court has
awarded such payment of CERCLA
response costs, health assessment costs,
and/or natural resource damages, the
owner operator had thirty days to make
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
payment himself and that the claimant
is not attempting to be paid twice for the
same claim. Based on discussions with
representatives of trust institutions, EPA
believes that a final court judgment
would be a documentary payment
condition acceptable to potential
trustees. The representatives expressed
comfort in the concept of a court having
ordered payment and a desire for
minimal due diligence to be required on
the part of the trustee.
Under the proposed regulations, the
trust would also provide for payment as
required in a CERCLA settlement
associated with the facility between a
current owner operator and the EPA or
another Federal agency if payment had
not been made. In this scenario, to make
a claim, the Administrator or other
Federal agency would have to present
two documents: (1) A written signed
statement requesting payment from the
trust fund on the grounds that payment
had not been made as required by a
CERCLA settlement associated with the
facility and with any of the current
owners or operators; and (2) a signed
statement certifying that the amounts
had not been recovered or paid from any
other source, including, but not limited
to, the owner operator, insurance,
judgments, agreements, and other
financial responsibility instruments.
Finally, under the proposed
regulations, the trust fund would also be
available to pay into a trust fund
established pursuant to a CERCLA
unilateral administrative order issued to
a current owner or operator by EPA or
another Federal agency in the event
performance at the facility did not occur
as required by the order. The
Administrator or other Federal agency
would only make such a claim if the
owner or operator had provided written
consent for the financial responsibility
instrument to assure the obligations
under the administrative order.
In this scenario, to make a claim, the
Administrator or other Federal agency
would have to present two documents:
(1) A written signed statement
requesting payment from the trust fund
into a trust fund established pursuant to
a CERCLA unilateral administrative
order on the grounds that performance
at the facility had not occurred as
required by a CERCLA administrative
order issued to a current owner or
operator; and (2) A signed statement
certifying that the amounts had not been
recovered or paid from any other source,
including, but not limited to, the owners
or operators, insurance, judgments,
agreements, and other financial
responsibility instruments.
EPA selected these straightforward
certifications as documentary payment
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
conditions because EPA believes that in
the instances when the potential
claimants are limited to Federal
government agencies a more
streamlined payment condition is
optimal to limit the administrative
burden on the trustee. This is a similar
documentary payment condition to that
proposed for the letter of credit issued
in favor of any and all third-party
CERCLA claimants and the surety bond.
EPA considered alternative
documentary requirements for the
claims scenarios limited to Federal
claimants but did not believe they
added additional benefit and may
burden the trustee with additional
administrative expenses. For example,
the proposed trust agreement could
specify the presentation of the CERCLA
settlement itself as a requirement for
making a claim but the benefits of such
a requirement were unclear to EPA. EPA
believes that the requirement of signed
statements from the Administrator or
another Federal agency acting pursuant
to delegated CERCLA authority is a clear
documentary condition and will require
minimal due diligence on the part of
trustees. EPA requests comment on the
proposed documentary requirements for
making a claim against a CERCLA
§ 108(b) trust fund.
g. Direct Action Claims Against the
Trust Fund
In addition to the three payment
scenarios, like all CERCLA § 108(b)
financial responsibility instruments, the
direct action provision in CERCLA
§ 108(c)(2) could come into play at
facilities where a trust fund is the
financial responsibility instrument. EPA
is proposing trust agreement language
that acknowledges that cause of action
in the trust agreement itself.
In discussions with representatives of
the trust industry, representatives
expressed some concern about the direct
action provision. Specifically,
representatives suggested that
interpreting ‘‘guarantor’’ as defined in
CERCLA §§ 101(13) and 108(c)(2) to
include a trustee of a CERCLA § 108(b)
trust fund would greatly reduce the
willingness of trust institutions to offer
such services. EPA believes that in the
CERCLA § 108(b) context, whereby a
trust fund is funded by the owner or
operator for the purposes of satisfying
future valid third-party CERCLA claims,
such an interpretation would be
inappropriate. The trustee is simply
providing administrative and fiduciary
services over the funds set aside by the
owner or operator and is not providing
the instrument itself. EPA believes a
more appropriate reading is that the
trust fund itself is the guarantor as it
PO 00000
Frm 00063
Fmt 4701
Sfmt 4702
3449
provides for the funds set aside by the
owner or operator to be available to
third-parties with valid CERCLA claims.
As a result, the proposed trust
agreement language expressly provides
that in the case of a release or
threatened release of (a) hazardous
substance(s) from a facility covered by
the agreement, any claim authorized by
§§ 107 or 111 of CERCLA could be
asserted directly against the trust fund
as provided by CERCLA § 108(c)(2)
subject to the limitations in CERCLA
§ 108(d). The proposed language of the
agreement goes on to state that the trust
fund shall be entitled to all rights and
defenses provided to guarantors by
CERCLA § 108(c) and that the trust fund
itself is available for paying and
defending claims in those instances.
Further, the proposed trust agreement
language further clarifies the intent of
the trust agreement with respect to
direct action under section 3 of the
agreement that deals with establishment
of the fund. The relevant proposed
wording in section 3 states that ‘‘The
Grantor and Trustee do not intend for
the Trustee to qualify as a ‘‘guarantor’’
as that term is used in CERCLA
§§ 101(13) and 108(c)(2), and therefore
intend that the Trustee will not be
subject to a direct action by Trustee’s
agreement to act as Trustee for the
Fund. The Grantor and Trustee intend
for the Fund to qualify as a ‘‘guarantor’’
as that term is used in CERCLA
§§ 101(13) and 108(c)(2), and therefore
intend that only the Fund will be
subject to any direct action brought
pursuant to CERCLA § 108(c)(2).’’
EPA believes that clearly specifying
the Agency’s intent that the trust fund
itself, not the trustee, be the subject of
any direct actions is optimal. Such an
approach is more consistent with the
role the two entities serve and does not
suggest that trust institutions would be
put in the unfamiliar and potentially
unwelcome position of being sued
under CERCLA. The downside to this
arrangement is that the trust fund could
incur significant legal expenses under a
direct action scenario that may reduce
the value of the trust fund available to
make payment for valid third-party
CERCLA claims. EPA has proposed to
specify that trust expenses generally be
paid by the owner operator that
established the trust fund (the grantor)
to reduce the impact of trustee expenses
on the value of the financial
responsibility. However, by its very
nature, in a direct action scenario, the
owner operator is unlikely to be
available or able to pay such expenses
and thus such expenses may be paid
from the trust fund itself. This is a
limitation of the proposed arrangement
E:\FR\FM\11JAP2.SGM
11JAP2
3450
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
that EPA requests comment on.
Specifically, EPA is interested in
provisions that could help effectuate the
direct action provision in CERCLA
§ 108(c)(2) that may ameliorate the
concern of trustee expenses significantly
reducing the value of the trust fund.
h. Payment of CERCLA Claims
The proposed trust agreement
language also provides additional
direction to the trustee with respect to
when and how claims should be
satisfied from the trust fund.
Specifically, the proposed trust
agreement specifies that claims be paid
on a first come first serve basis.
Additionally, the proposed trust
agreement language also clarifies that in
the event of simultaneous valid claims
that exceed the value of the fund, the
trustee would pay the claimants a pro
rata share of their claim determined by
the size of each valid claim. This
language was included to reduce the
potential uncertainty and ambiguity a
trustee may face in the event multiple
claims against the trust fund occur that
exceed the value of the fund. Finally,
the proposed language of the trust
agreement specifies that payments for a
claim should not exceed the value of the
CERCLA § 108(b) financial
responsibility for that facility provided
by the trust fund which would be
identified and updated in schedule A.
The language is intended to provide
added clarity that, if the trust agreement
covers multiple facilities, claims against
the fund associated with one facility
should not exceed the value of the
CERCLA § 108(b) financial
responsibility for that facility provided
by the trust fund. EPA believes that
such facility-specific sub-limits are
important to the extent multiple
facilities are covered by one trust
agreement as other current owners and
operators at the facilities, in addition to
the grantor, may have all contributed
funds but may not be owner operators
at all the facilities covered by the
agreement.
Ambiguity in instances where a
trustee may have to decide how much
and if to make payment was a concern
EPA heard from representatives of the
banking community. EPA intends the
proposed trust agreement language to
reduce such uncertainty, but requests
comment as to other language or
specifications that might provide added
clarity and provide trustees greater
certainty.
i. Provisions Authorizing Trustee To
Hold and Draw on Letter of Credit
As discussed in the letter of credit
section of the preamble, this proposed
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
trust agreement expressly authorizes
and anticipates that a trustee may hold
a CERCLA § 108(b) letter of credit for
the purposes of drawing on the letter of
credit to make payments to third-parties
with valid CERCLA claims as provided
by the trust agreement. EPA has
included language in whereas clauses,
section 4 of the trust dealing with
payment from the fund, section 5
dealing with payments comprising the
fund, section 6 dealing with trustee
management, section 8 dealing with the
express powers of the trustee, and
section 10 dealing with annual
valuations providing for and accounting
for this possible role of the trustee. The
intent of the language is to ensure that
a trustee will be able to hold, account
for, and draw upon, as necessary, a
CERCLA § 108(b) letter of credit issued
in favor of the trustee. As discussed in
the letter of credit section, EPA believes
this a worthwhile feature to propose
based on input from members of the
banking community that suggested a
trustee may be better suited to manage
the CERCLA § 108(b) claims process
than an institution issuing a letter of
credit. EPA requests comments on other
provisions that could be included in the
trust agreement that may provide further
clarity of the trustee’s ability to hold
and draw on the letter of credit as
provided for in the terms of the trust
agreement.
In addition to the trust providing the
trustee the authority to draw on the
letter of credit to satisfy valid thirdparty CERCLA claims brought to the
trust fund, under the proposed trust
agreement, the trustee would also have
the responsibility to draw on the letter
of credit in order to maintain continuity
of coverage. Specifically, the proposed
trust agreement language provides that
in the event of receipt of a notice of a
decision not to extend the letter of
credit from an institution issuing a letter
of credit held by the trust fund, the
trustee shall draw on the letter of credit
and deposit any unused portion of the
credit into the trust fund if the
Administrator informs the Trustee that
the owner operator did not establish
alternate financial responsibility and
obtain written approval of such
alternate financial responsibility from
the Administrator within the time frame
provided by the regulations. The trust
agreement would specify that this draw
must occur prior to the expiration of the
letter of credit. EPA believes this a
necessary provision as in the case of a
letter of credit issued in favor of a
CERCLA § 108(b) trust fund trustee, EPA
would not be authorized to draw on the
letter of credit. EPA requests comment
PO 00000
Frm 00064
Fmt 4701
Sfmt 4702
on this proposed trust agreement
language.
j. Trustee Management
In specifying the trustee’s
responsibilities with respect to trust
management, EPA looked to the
‘‘prudent investor’’ standard which has
become prevalent in trust law and
practice. Specifically, the proposed
language of the trust agreement reads as
follows: ‘‘In investing, reinvesting,
exchanging, selling, and managing the
Fund, the Trustee shall discharge its
duties with respect to the trust fund
with undivided loyalty and solely in the
interest of the beneficiaries and with the
reasonable care, skill, and caution of a
prudent investor, in light of the
purposes, terms, distribution
requirements, and other circumstances
of the trust.’’ However, while EPA is
proposing the prudent investor rule
form the basis of the instruction to the
trustee, the Agency is proposing a
modified prudent investor standard.
Specifically, the proposed trust
agreement language would prohibit the
trustee from acquiring or holding
securities or other obligations of the
grantor, or any other current owner or
operator of the facilities, or any of their
affiliates as defined in the Investment
Company Act of 1940, as amended, Title
15 U.S.C. 80a–2(a) unless they are
securities or other obligations of the
Federal or a state government. This
provision is similar to language used in
other EPA financial assurance programs
including the RCRA Subtitle C Closure
Post-closure and third-party liability
programs. The intent of the modification
to the prudent investor rule is to restrict
investments in assets whose
performance may be correlated with the
financial performance of the owners and
operators at the facility. A further
proposed modification to the prudent
investor standard employed in the
proposed trust agreement is an explicit
authorization that the trustee may hold
and draw upon standby letters of credit
as specified in 40 CFR 320.40. EPA
intends for the trustee management
instructions in the trust agreement be
consistent with current trust practice
and requests comment on the proposed
trustee management language in the
trust agreement.
k. Refunds to the Grantor
The proposed language of the trust
agreement also includes a provision that
if notified by the Administrator that the
trust fund contains amounts in excess of
the required CERCLA 108(b) financial
responsibility amount, the trustee shall
refund to the grantor such amounts in
excess of the CERCLA § 108(b) financial
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
responsibility amount covered by the
trust fund. A similar provision was used
in the RCRA Subtitle C Closure and
Post-Closure trust agreement. EPA
believes this provision is necessary to
allow for excess funds in the trust
agreement to be released back to the
owner operator. EPA envisions that
such a scenario could arise either due to
growth of the value of the trust fund, the
owner operator substituting alternate
financial responsibility for some portion
of the trust fund, or as a result of a
downward adjustment in the required
amount of CERCLA § 108(b) financial
responsibility. EPA believes that
providing for the possibility of a release
of funds from the trust fund that did not
necessitate the termination of the trust
agreement was advantageous.
l. Termination of the Trust (§ 320.45(i))
The Administrator would agree to the
termination of the trust when the owner
or operator substituted alternate
financial assurance as specified in the
regulations or the Administrator
released the owner or operator from the
requirements of these regulations in
accordance with the proposed release
provisions. As the proposed trust is
irrevocable, 142 termination of the trust
would necessarily require the approval
of the Administrator. The trust
agreement itself specifies that the trust
shall be irrevocable and shall continue
until terminated at the written
agreement of the trustee, the grantor,
and the Administrator or by the Trustee
and the Administrator, if the Grantor
ceases to exist. The irrevocability of
trust agreements is a common
requirement in financial responsibility
programs and ensures that the trust fund
will not unilaterally be terminated and
will be available to satisfy third-party
CERCLA claims when necessary.
sradovich on DSK3GMQ082PROD with PROPOSALS2
7. Issuer Cancellation Provisions
One similar feature across many of the
instruments (surety bond, insurance,
letter of credit and corporate guarantee,
if allowed) in this proposal are
cancellation provisions that include the
potential requirement for the instrument
provider to fund a standby trust (or in
the case of a corporate guarantor, if a
corporate guarantee is ultimately
provided for, obtain alternate financial
responsibility in the name of the owner
operator). For the specifics related to
cancellation for each instrument please
see the instrument specific preamble
discussions earlier in this preamble.
142 An irrevocable trust agreement may not be
revoked or amended without the agreement of key
parties to the instrument.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
In each of the scenarios governing
insurance, surety bond, letter of credit
and guarantee cancellation, the proposal
specifies that the issuer would be liable
for the value of the instrument in the
event the owner or operator failed to
obtain alternate financial responsibility
and obtain the Administrator’s written
approval of the financial responsibility
provided within ninety days after
receipt of a notice of cancellation from
the issuer by the relevant parties. In the
case of insurance, letter of credit or
surety bond, the issuer would be liable
to fund the accompanying standby trust
to the value of the instrument. In the
instance of a guarantee, if allowed, the
guarantor would be required to provide
alternate financial responsibility, in
accordance with the regulatory
requirements, in the name of the owner
or operator.
Such cancellation provisions are very
similar to provisions in other EPA
financial assurance programs for letters
of credit, surety bonds and corporate
guarantees. EPA is proposing such
cancellation provisions to ensure
continuity of financial responsibility
coverage and provide assurance that
funds will be available to EPA and other
third party claimants when necessary to
pay for CERCLA response costs, health
assessment costs, and natural resource
damages incurred by claimants while
limiting the implementation burden on
EPA.
EPA acknowledges that such a
provision may impact providers’
appetite to issue instruments in
particular for insurance, where there is
not past precedent in EPA financial
assurance programs of a requirement for
the insurer to fund a standby trust. EPA
did consider alternatives that may
reduce the likelihood the instrument
provider would need to make payment
and thus may provide greater flexibility
but, for the reasons provided in
subsequent preamble discussion,
believes this proposed approach is the
best option available.
One possible alternative would be to
specify issuer liability to fund a standby
trust only after notice of cancellation by
the provider if the owner or operator
does not obtain alternate financial
responsibility and obtain written
approval of such alternate financial
responsibility from the Administrator
within ninety days after receipt by both
the owner or operator and the
Administrator of the notice and some
additional triggering event had
occurred. For example, additional
conditions necessary to trigger issuer
payment into a trust fund could include
bankruptcy of the owner or operator,
abandonment of the facility, and/or the
PO 00000
Frm 00065
Fmt 4701
Sfmt 4702
3451
issuance of a CERCLA notice letter.
These are all indications of potential
higher risk at the facility and a potential
more imminent need for the financial
responsibility. However, EPA is
concerned that such criteria alone may
not provide adequate assurance funds
will be available when necessary to pay
valid third-party CERCLA claims.
Facilities owned or operated by nonbankrupt companies and nonabandoned facilities can present risks
and require Superfund actions or create
natural resource damages for which the
owner operator may not be able to pay.
Further, EPA was told by potential
providers of CERCLA § 108(b)
instruments that the credit profile of the
owner or operator is an important
consideration of theirs. If cancellation
occurred when the owner operator was
in marked financial decline, the facility
may end up abandoned and the
company bankrupt before alternate
financial responsibility could be
obtained, highlighting the risk of
allowing cancellation of the financial
responsibility instrument in a wide
range of scenarios without a
requirement to fund a standby trust. The
inclusion of a CERCLA notice letter as
another condition that would trigger
issuer responsibility to fund a standby
trust would provide some added
assurance. However, this would
potentially require EPA to perform a
preliminary assessment/site
investigation to assess the site which in
many cases would not be possible in the
120-day notice of cancellation period.
As EPA is not necessarily the primary
regulator or permitting authority at
these facilities, EPA may not have the
same level of understanding of the
conditions and risks at the facilities as
it does in other EPA financial assurance
programs. Beyond just practical timing
and feasibility concerns, such an
approach would raise serious resource
concerns for the Superfund program.
Such a provision may require the
Superfund program to shift its resources
from its priority sites to facilities where
financial responsibility maintenance
was in question. If EPA did not or could
not take action to investigate the
facility’s condition to determine
whether a notice letter should be issued,
financial responsibility coverage could
lapse in a broader range of
circumstances that may ultimately be
optimal and financial responsibility
may not be available if a CERCLA action
was necessary.
EPA also considered a notification of
a release of a hazardous substance at the
facility to the National Response Center
as required under CERCLA § 103(a) as a
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3452
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
possible additional condition that could
be proposed as a trigger for issuer
liability to fund a standby trust in the
instances of an issuer sending notice of
cancellation and the owner operator’s
failure to obtain replacement financial
responsibility. However, such a notice
would be limited to only releases. The
proposed CERCLA § 108(b) financial
responsibility program intends to cover
CERCLA liabilities as defined in
CERCLA § 107 which is much broader
than just costs associated with
responding to releases. For example,
response costs may also be incurred by
reacting to a threat of a release which
would not be accounted for in the notice
of a release and may almost universally
exist at facilities regulated under
CERCLA § 108(b). Further, such a
provision may create a perverse
incentive to not report releases in order
to avoid triggering issuer liability and
any costs to the owner operator that may
result from payment from the
instrument. In light of these
considerations, and with the desire not
to skew Superfund priorities while also
providing strong assurance that funds
would be available when necessary to
pay valid third-party CERCLA claims,
EPA is not proposing such a nuanced
payment requirement into a standby
trust. By proposing that the issuer be
liable for the owner operator’s obtaining
alternate financial responsibility in all
instances, EPA recognizes that it is
erring on the side of caution with the
intent of not creating additional
administrative burden on EPA while
providing a high level of assurance that
funds would be available when
necessary to pay valid third-party
CERCLA claims.
EPA requests comment, however, on
any additional criteria (e.g. bankruptcy,
abandonment of the facility), for
requiring the issuer to fund the standby
trust beyond the requirements
previously discussed—the owner
operator does not obtain alternate
financial responsibility; and obtain
written approval of such alternate
financial responsibility from the
Administrator within ninety days after
receipt by both the owner or operator
and the Administrator of the notice.
EPA is interested in whether such
additional criteria may be optimal for
certain instruments, despite reducing
the level of assurance provided that
financial responsibility will be available
to pay valid third-party CERCLA claims.
Further, EPA is interested in other
objective, readily identifiable
supplemental criteria that EPA could
include if such an option was ultimately
pursued.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
Another option EPA considered to
address the potential lapse in coverage
that may result from the issuer of a
financial responsibility instrument
cancelling the instrument is to specify
non-cancellation triggering events.
Under such an option, cancellation of
the instrument could not occur after
notice of cancellation by the provider if:
(1) The owner operator does not obtain
alternate financial responsibility and
obtain written approval of such
alternate financial responsibility from
the Administrator within ninety days
after receipt by both the owner or
operator and the Administrator of the
notice of cancellation, and (2) some
additional triggering event had
occurred. A further refinement to such
an option would be to also restrict the
scenarios in which cancellation can
occur. EPA’s RCRA Subtitle C closure
and post-closure insurance regulations
offer an example. Those regulations do
not require the establishment of a
standby trust alongside insurance.
Rather, the provider is only permitted to
cancel the policy in instances where the
owner and operator failed to pay the
premium and the provider gave at least
120 days advance notice. Further,
cancellation, termination or failure to
renew the policy may not occur in the
event of one of several ‘‘triggering
events.’’ Specifically, the RCRA Subtitle
C closure insurance regulations state
that cancellation, termination, or failure
to renew may not occur and the policy
will remain in full force and effect in
the event that on or before the date of
expiration: (1) The Administrator deems
the facility abandoned; (2) the permit is
terminated or revoked or a new permit
is denied; (3) closure is ordered by the
Administrator or a U.S. district court or
other Federal court; (4) the owner or
operator is named as debtor in a
voluntary or involuntary proceeding
under Title 11 U.S.C (Bankruptcy); or
(5) the premium due is paid.143
Such a series of non-cancellation
provision was one alternative to a
requirement to fund a standby trust that
EPA considered. Such an option could
potentially be used for all instruments.
However, the non-cancellation
triggering events used in the RCRA
Subtitle C closure post-closure would
not all be applicable in the instance of
the proposed CERCLA § 108(b) financial
responsibility program which does not
compliment a broader permitting
program. For example, two of the
triggering events (the termination,
revocation or denial of a permit and the
Administrator ordering closure) are not
applicable here as EPA does not have
143 See
PO 00000
40 CFR 264.143(e)(8).
Frm 00066
Fmt 4701
Sfmt 4702
permitting authority over these
facilities.
Additional triggering events similar to
those identified (e.g. issuance of a
CERCLA notice letter, notification of a
release at the facility) could bolster such
a provision to lower the likelihood that
financial responsibility was not
available when needed to pay valid
third-party CERCLA claims. However,
these supplemental criteria would
present the same limitations,
implementation challenges and resource
issues as they would in the option
where they would be additional triggers
for issuer liability to fund a trust fund.
Moreover, EPA was also concerned that
such an arrangement may lead to
scenarios whereby instruments may
need to remain in effect and noncancellable for many years. For
example, it could take several years
before a claimant could obtain a
judgment for CERCLA response costs,
health assessment costs, and/or natural
resource damages that may prompt a
claim against the instrument. Based on
conversations with instrument
providers, EPA believes multi-year noncancellation periods would likely be
unpalatable to instrument providers.
This concern is substantiated by past
EPA experience. In the development of
the RCRA Subtitle C closure and postclosure financial assurance programs
EPA proposed that instruments would
not be able to be terminated when a
compliance procedure was pending.
Specifically, after notice of intent to
cancel or terminate an instrument was
sent by the issuer, EPA would issue a
compliance order requiring the owner
operator to obtain alternate financial
assurance. EPA would have been able to
draw on the instrument to fund a
standby trust had the owner operator
not complied with the order. In the
interim, the instrument would be noncancellable as a result of the pending
compliance proceeding and thus a lapse
in financial assurance coverage would
have been avoided.144 However, such
proposal was met with dissatisfaction
from issuers of letters of credit and
surety bonds. Institutions that issue
letters of credit commented that noncancellation provisions would preclude
a defined date on which the letter of
credit could expire—an important
feature of letters of credit. Sureties
noted that such an arrangement did not
provide them adequate opportunity to
limit their risk. As a result, the RCRA
Subtitle C closure post-closure financial
assurance regulations include a 120
days’ notice period of the intent to
cancel or fail to extend a surety bond or
144 See
E:\FR\FM\11JAP2.SGM
46 FR 2822–2823 January 12, 1981.
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
letter of credit during the last thirty days
of which the instrument provider would
be liable if the owner operator did not
obtain alternate financial assurance.
Such a provision is what is being
proposed today for surety bonds, letters
of credit and insurance.
Nevertheless, EPA requests comments
on the option to specify noncancellation triggering events and
provisions that could eliminate the need
for providers to fund a standby trust
after a notice of intent to cancel the
instrument. Specifically, commenters
are asked to identify appropriate noncancellation triggers, how instrument
providers may react to the prospect of
protracted periods of non-cancellation
and whether such an arrangement may
be appropriate for some mechanisms but
not others.
EPA also considered an option
whereby after the 120-day notice of
cancellation period, issuers would face
no potential liability and the instrument
would be terminated regardless of
whether the owner or operator provided
alternate financial responsibility and
obtained the Administrator’s approval
of the financial responsibility. This
option has the advantage of possibly
being the most palatable to instrument
providers; however, it was not proposed
for a variety of reasons. In particular, it
provides the least assurance that funds
would be available when necessary to
pay CERCLA claimants. EPA believes
the incentive to cancel, terminate, fail to
renew or extend the coverage may be
greatest in times when the facilities may
present the greatest need for the
instrument (e.g. the owner operator is
experiencing financial decline, after a
release of hazardous substances) and
thus coverage may be lost precisely
when it is most needed. Moreover, this
concern is elevated in the case of
CERCLA § 108(b) which may require the
cost recovery process to run its course
before a claim could be made against an
instrument.
With all of these considerations in
mind, EPA has decided to propose that
the instruments would require a 120 day
notice of cancellation, termination,
failure to extend or failure to renew and
that the issuer would become liable for
the value of the instrument if the owner
operator does not obtain alternate
financial responsibility and obtain
written approval of such alternate
financial responsibility from the
Administrator within ninety days after
receipt by both the owner or operator
and the Administrator of the notice. The
proposed approach provides strong
assurance that funds will be available
when necessary to pay CERCLA claims
and limits the extent to which
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
Superfund resources are shifted from
conducting cleanups to administering
the proposed financial responsibility
program. This approach also has the
virtue of ensuring a trust fund is
available to hold financial responsibility
funds at each facility if necessary after
facility closure or the owner operator no
longer exists. EPA recognizes that a trust
fund is unique when compared to thirdparty mechanisms such as surety bonds,
letters of credit or insurance in that
ongoing payments from the owner or
operator are not necessary if funded
adequately upfront. Depending on the
duration of risk at a given facility,
financial responsibility may need to
remain in place long after the owner or
operator ceases to exist. The proposed
arrangement whereby if the owner or
operator does not provide alternate
financial responsibility in instances of
cancellation of the instrument a trust is
funded, ensures financial responsibility
can remain in place for the long term.
However, EPA acknowledges that
under this construction there would be
instances where issuers would be
required to make payment into a
standby trust at facilities where a
CERCLA claim may never arise. EPA
requests comments on these provisions
of the proposal. Furthermore, EPA
requests comment on whether a hybrid
of the options may be most appropriate
whereby for one instrument one option
be employed, and for another
instrument a different option might be
employed.
8. Use of Multiple Financial
Responsibility Instruments (§ 320.46)
An owner or operator would be able
to satisfy the requirements of this
section by establishing more than one
financial instrument per facility. The
instruments would be required to meet
the regulatory specifications applicable
to each instrument except that it would
be the combination of instruments,
rather than the single instrument, which
would have to demonstrate financial
responsibility for an amount at least
equal to the required amount of
CERCLA § 108(b) financial
responsibility. If an owner or operator
were to use a trust fund in combination
with a surety bond, letter of credit or
insurance policy, including a trust fund
holding a letter of credit, the owner or
operator would be able to use the trust
fund as the standby trust fund for the
other instruments. Should the owner or
operator obtain a letter of credit issued
in the favor of a trust fund trustee in
combination with a surety bond or
insurance policy, the owner or operator
would be able to use the trust fund
holding the letter of credit as the
PO 00000
Frm 00067
Fmt 4701
Sfmt 4702
3453
standby trust fund for the other
mechanisms. A single standby trust
fund could be established for two or
more instruments. A claimant would be
able to elect against which instrument
used to provide evidence of financial
responsibility to make a claim for
CERCLA response costs, health
assessment costs, and/or natural
resource damages. In this way, there
would not be ‘primary’ or ‘excess’
instruments where the ability to draw
on one instrument may be predicated on
the exhaustion of another. EPA is
electing to provide for multiple
instruments in this fashion as the
Agency believes it will be significantly
less administratively cumbersome and
will make implementation of the claims
process easier.
9. Use of a Financial Instrument for
Multiple Facilities (§ 320.47)
An owner or operator would be able
to use a financial responsibility
instrument specified in this section to
meet the requirements of this section for
more than one facility. Evidence of
financial responsibility submitted to the
Administrator must include, for each
facility, the EPA Identification Number,
name, address, and the amount of funds
for CERCLA § 108(b) financial
responsibility assured by the
instrument. If the facilities covered by
the instrument are in more than one
Region, identical evidence of financial
assurance would be required to be
submitted to and maintained with the
regional delegees of the Administrator,
as applicable, of all such Regions. The
amount of funds available through the
instrument would be required to be no
less than the sum of funds that would
be available if a separate instrument had
been established and maintained for
each facility. EPA is proposing this as it
may provide for some administrative
ease in the compliance and
implementation process.
This is also provided for in RCRA
Subtitle C closure and post-closure
financial assurance program. However,
in the proposed CERCLA § 108(b)
financial responsibility program there is
a much wider range of potential parties
that may make a claim against an
instrument than in the Subtitle C
program. Therefore, the instruments
proposed today are intended to have
clear facility-specific sub-limits.
Maintaining the accuracy of the facilityspecific sub-limits is important as the
consolidated form provision in CERCLA
§ 108(b)(4) provides that multiple
owners and operators may obtain an
instrument together while only one may
be a common owner or operator at each
facility covered by the instrument.
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3454
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
Ensuring the accuracy of the amount of
coverage an instrument provides at each
facility may occasion additional burden
on the regulated community and on
EPA. For example, EPA is proposing
that schedule A of the trust agreement
that identifies the facilities and amounts
covered by the trust agreement, be
updated within sixty days of a change
in the information, even if the trust is
not currently funded. EPA believes such
a provision is necessary as the trust may
ultimately be funded when the grantor
of the trust is not around and such
information should be as current as
possible. However, EPA believes that
such additional burden will likely be
offset by the burden reduction provided
by using one mechanism across
facilities.
One final consideration is whether the
inclusion of facility specific sub-limits
might affect instrument providers’
willingness to provide instruments. EPA
believes that the added clarity and clear
delineation of a provider’s potential
liability at any given facility combined
with the lower administrative burden of
preparing only one instrument would be
a welcome specification. However, EPA
could envision a scenario where a
provider found issuing multiple
instruments cleaner and easier than
maintaining an accounting of the sublimits within an instrument. For
example, the proposed wording of the
letter of credit would require the
identification of the amount of financial
responsibility at each facility covered by
the credit. EPA, in past Agency
rulemakings had proposed including
such information in the letter of credit
but was informed by commenters that
such information typically would not be
included in a letter of credit. As, in that
case, the information could be included
in a separate letter from the owner
operator, EPA decided not to require the
inclusion of facility specific amount in
the letter of credit itself (See 47 FR
15042 April 7, 1982). However, as the
Administrator will not be directing
payments from CERCLA § 108(b)
instruments such information would
need to be included in the instrument
were a letter of credit to cover multiple
facilities.
The proposed instruments do not
require that multiple facilities be
covered and thus EPA believes and
intended that they provide flexibility for
regulated entities and instrument
providers to identify the most efficient
arrangement. EPA requests comment on
the proposed allowance for mechanisms
to cover multiple facilities. Specifically,
EPA is interested in hearing if there are
alternative means of specifying facility-
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
specific sub-limits that may have certain
advantages.
10. Consolidated Form and Multiple
Owners and/or Operators (§ 320.48)
EPA had to consider how best to
implement the provision for multiple
owners or operators at a facility in
CERCLA § 108(b)(4). The provision
provides guidance on how a financial
responsibility instrument could provide
financial responsibility for the CERCLA
response costs, health assessment costs,
and or natural resource damages of all
the current owners and operators of the
facility in instances where there is not
one single owner and operator. Under
the proposal, where a facility is owned
and/or operated by more than one
person, evidence of financial
responsibility covering the facility may
be established and maintained by one of
the owners or operators, or, in
consolidated form, by or on behalf of
two or more owners or operators. In
practice, the instruments would follow
the same form regardless of whether one
of the owners or operators establishes a
single instrument at the facility,
whether multiple owners or operators
establish a single instrument at the
facility, or whether multiple owners or
operators establish one or more
instruments at the facility. EPA believes
the flexibility in establishing financial
responsibility at a facility when there
are multiple owner operators is
important as each arrangement may
lend itself best to certain instruments.
For example, EPA understands that
sureties and banks issuing letters of
credit have strong preference for one
party obtaining the instrument. In
discussions with the surety community,
EPA learned that the surety typically
interacts and has a surety relationship
with one party at a facility and thus
prefer one principal on the bond. While
the bond would cover the valid CERCLA
claims associated with all current
owners and operators at the facility,
only one principal need be listed.
Representatives from the banking
community also expressed a preference
for one applicant per letter of credit on
whom the lending institution would
perform its credit assessment. Similar to
the bond, the credit will cover the
CERCLA response costs, health
assessment costs, and/or natural
resource damages associated with all
current owners and operators at the
facility. On the other hand, EPA
understands that with insurance a
multiple insured arrangement is more
common and may be required for the
policy to cover claims against all the
parties at the facility. In that case, EPA
anticipates additional insureds may be
PO 00000
Frm 00068
Fmt 4701
Sfmt 4702
listed on the policy. In this way, EPA
proposes to implement the rule in a way
that is consistent with both CERCLA’s
liability scheme and with commercial
practice.
When evidence of financial
responsibility is established in a
consolidated form, the proportional
share of the cost of demonstrating the
financial responsibility for each
participant would have to be shown in
a separate letter submitted to the
Administrator. This provision will
require the owners and operators to plan
out and apportion the responsibility of
obtaining and maintaining the
instrument up front which EPA believes
may help reduce the likelihood of an
instrument obtained by multiple parties
lapsing due to failure to pay any
premiums or fees required by the
instrument provider.
In either scenario, the evidence of
financial responsibility would have to
be accompanied by a statement
authorizing the owner or operator
submitting the evidence of financial
responsibility to act for and on behalf of
each participant in submitting and
maintaining the evidence of financial
responsibility. It is worth noting that all
of the current owners and operators at
the facility would still be responsible for
ensuring financial responsibility at the
facility is obtained and maintained in
accordance with the regulations. EPA
would thus retain enforcement authority
for the regulations against all of the
current owners and operators.
E. Subpart H—Requirements Applicable
to Hardrock Mining Facilities
1. Universe of Hardrock Mining
Facilities Covered by the Rule (§ 320.60)
a. Applicability of the Rule
The Agency is proposing that the
classes of facilities within the hardrock
mining industry that are identified in
§ 320.60 be subject to this rule. The
classes of facilities that EPA is
proposing for regulation are the classes
of facilities that were identified in the
2009 Priority Notice with the exception
of four classes determined by the
Agency to present a lower level of risk
of injury than the remainder of the
classes identified in the notice, if they
meet certain conditions. The classes
EPA is proposing not to include in the
rule are: (1) Mines conducting only
placer mining activities as defined in
§ 320.62, (2) mines conducting only
exploration activities as defined in
§ 320.62, (3) surface mines with a
disturbance as defined in § 320.62 of
less than five acres not located within
a mile of mine disturbance that occurred
in the prior ten-year period that do not
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
In the 2009 Priority Notice, EPA
identified classes of facilities within the
hardrock mining industry as those for
which the Agency would first develop
CERCLA § 108(b) regulations. EPA
stated, for purposes of the notice, that
hardrock mining facilities include those
which extract, beneficiate and process
metals (e.g., copper, gold, iron, lead,
magnesium, molybdenum, silver,
uranium, zinc) and non-metallic, nonfuel minerals (e.g., asbestos, phosphate
rock, sulfur). The Agency also noted
that it was not identifying non-hardrock
mineral mines, such as sand, gravel,
limestone, and stone; oil, oil shale or gas
operations; or the mining and
preparation of coal as priority classes of
facilities.145 In the 2009 Priority Notice,
EPA stated it would inform its selection
of classes based on indicators of risk
and the related effects, and reviewed
information contained in a number of
studies, reports, and analyses. This
review identified numerous factors EPA
could consider. For example, typical
elements in evaluating risk to human
health and the environment include the
probability of release, type and duration
of exposure, and toxicity.146 147
Based on the information available at
the time, EPA concluded that hardrock
mining facilities present such risk that
warranted giving those classes of
facilities priority in the development of
financial responsibility requirements
under CERCLA § 108(b).
Throughout the discussion of its data
analysis, EPA addresses several topics
that were raised in public comments
that EPA received on its data analysis
for the 2009 Priority Notice and in
response to EPA’s 2010 ANPR relating
to other facility classes, where those
topics are relevant to the data analysis
for this proposal. It is important to note,
however, that the 2009 Priority Notice
was a one-time event, under which EPA
identified the classes for which EPA
would first develop CERCLA § 108(b)
requirements. Consistent with this
approach, EPA did not seek public
comment on the notice, and nothing in
CERCLA required EPA to issue its 2009
Priority Notice in proposed form, or
required EPA to provide responses to
comments received. The 2009 Priority
Notice’s sole purpose was to identify a
set of facilities for which EPA would
begin the process of developing
CERCLA § 108(b) regulations, as
provided for in CERCLA § 108(b)(1)
(second sentence), and EPA provided a
significant amount of factual
information in support of its
conclusions. EPA is not reopening its
identification in the 2009 Priority Notice
of hardrock mining as the classes for
which it would first develop CERCLA
§ 108(b) regulations by this proposal.
EPA requests public comment on its
data analysis. However, EPA is not
seeking comment on the 2009 Priority
Notice.
As previously discussed, CERCLA
§ 108(b) states that ‘‘[p]riority in the
development of such requirements shall
be accorded to those classes of facilities,
owners, and operators which the
President determines present the
highest level of risk of injury.’’ Though
the 2009 Priority Notice identified the
classes of facilities within the hardrock
mining industry as those for which the
Agency will first develop financial
responsibility requirements, it did not
provide criteria to define classes of
facilities, or to identify which classes of
facilities within that universe present
the highest level of risk of injury. In
developing this proposed rule, EPA thus
considered these issues to determine
which facilities within the universe
described in the 2009 Priority Notice
would be included in this proposed
rule.
The Agency considered how to define
classes of mining facilities. EPA
considered two options. EPA first
considered identifying classes of mines
based on the commodity mined. This
approach had two advantages—it was
consistent with the approach taken in
the 2009 Priority Notice to identify the
universe to be considered, and it was
consistent with general industry
practice to identify mines (e.g. gold
mine, silver mine, phosphate mine, etc.)
so would have been readily
understandable to the regulated
community. However, that approach
had several drawbacks. First, the
commodity mined is not necessarily the
source of risk of injury at a mine.
Numerous hardrock mining facilities
mine multiple ores. Thus, it alone
served as a poor basis to compare level
of risk of injury. Second, similar sources
of releases exist at facilities within a
range of commodities. Third, minerals
are not located in consistent geologic
settings, so the risks associated with a
specific commodity could vary on that
basis alone from case to case. Under the
second option considered by EPA,
processes that are known to affect the
level of risk of injury at a mine would
be identified and facilities would be
grouped based on the presence of those
characteristics and the risk they present.
EPA believes this approach created a
more logical link to risk of injury, and
the Agency adopted it in developing
this proposed rule. As previously noted,
EPA had identified hardrock mining
facilities as those involved in 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,
phosphate rock, and sulfur) but not the
specific classes of mining listed in a
memorandum to the record for the 2009
Priority Notice.148 Based on the
Agency’s analysis of the current
universe of hardrock mining and
mineral processing facilities, for
illustration purposes the following table
provides examples of commodities that
the Agency expects are subject to the
regulations being proposed today.
However, it is important to note that
this list is not intended to be an allinclusive list of the universe of
commodities potentially subject to this
rulemaking. This includes commodities
with no currently active or abandoned
facilities that might in the future
commence/resume operation, e.g.,
asbestos, arsenic, bismuth. Any facility
that meets the definition of a hardrock
mining or mineral processing facility
(see section VI.D.3. of this preamble),
would also be subject to the
requirements in this proposed
rulemaking.
145 EPA excluded several classes of facilities
(identified by commodity sector), that otherwise fell
within the broad definition of ‘‘hardrock mining.’’
See memorandum to Jim Berlow, from Stephen
Hoffman and Shahid Mahmud, entitled: Mining
Classes Not Included in Identified Classes of
Hardrock Mining, June 2009.
146 See Risk Assessment in the Federal
Government: Managing the Process. National
Research Council. National Academy Press,
Washington, DC. 1983.
147 See U.S. EPA 2004. Nationwide Identification
of Hardrock Mining Sites. Office of Inspector
General. Report No. 2004–P–00005. Available at:
https://epa.gov/oig/reports/2004/20040331-2004-p00005.pdf.
148 See supra note 130.
employ hazardous substances in their
processes; and (4) mineral processors as
defined in § 320.62 with less than five
acres of surface impoundment and
waste pile disturbance. Owners or
operators of facilities that conduct only
these limited activities would not be
required to comply with the
requirements of Part 320.
b. Universe Development
(1) Identification of Classes of Facilities
Within the Hardrock Mining Universe
for Rule Development
sradovich on DSK3GMQ082PROD with PROPOSALS2
3455
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
PO 00000
Frm 00069
Fmt 4701
Sfmt 4702
E:\FR\FM\11JAP2.SGM
11JAP2
3456
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
COMMODITY
Alumina ...................................
Antimony .................................
Arsenic ....................................
Asbestos .................................
Bastnaesite .............................
Barite ......................................
Bauxite ....................................
Beryl .......................................
Beryllium .................................
Bismuth ...................................
Boron ......................................
Cadmium ................................
Cerium ....................................
Chromite .................................
Chromium ...............................
Cinnabar .................................
Cobalt .....................................
Columbite ...............................
Columbium .............................
Copper ....................................
Fluorspar ................................
Germanium .....................................................................
Gold .................................................................................
Hafnium ...........................................................................
Huebnerite .......................................................................
Ilmenite ............................................................................
Iridium .............................................................................
Iron (including hematite, magnetite, siderite, taconite) ...
Lead ................................................................................
Limonite ...........................................................................
Lithium .............................................................................
Magnesium ......................................................................
Manganese .....................................................................
Manganite .......................................................................
Mercury ...........................................................................
Microlite ...........................................................................
Molybdenite .....................................................................
Molybdenum ....................................................................
Molybdite .........................................................................
Monazite ..........................................................................
Nickel ..............................................................................
Niobium ...........................................................................
sradovich on DSK3GMQ082PROD with PROPOSALS2
EPA has described in the following
sections the basis for determining that
exploration mines, placer mines, small
surface mines of less than five acres,
and mineral processors with less than
five acres of surface impoundment and
waste pile disturbance present a lower
level of risk of injury. These classes, it
should be noted, were identified based
on facility characteristics and
operations, rather than on the
commodity mined.
EPA solicits comment on whether it
would be feasible and appropriate to
identify additional classes of hardrock
mining facilities as presenting a lower
level of risk of injury, particularly
classes of mines that differ in their
operations and associated risk from
more tradition hardrock mining
operations. For consistency with the
approach taken by EPA to identify the
lower level of risk of injury classes
proposed in this rule, information to
support additional lower level of risk of
injury classes should address facility
characteristics and operations, and
should not rely on the commodity
mined as a classification factor.
However, EPA further solicits comment
on whether classes of mines identified
by commenters as presenting a lower
level of risk of injury based on facility
characteristics and operations could
potentially encompass iron ore,
phosphate, and uranium mines.
(2) Basis for Determination of Lower
Level of Risk of Injury for Classes Not
Included in Proposal
(a) Exploration Mines
EPA has determined that exploration
mines present a lower level of risk of
injury and thus propose that owners and
operators of facilities that conduct only
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
Osmium .................................
Palladium ...............................
Phosphate .............................
Phosphorus ...........................
Platinum ................................
Potash ...................................
Potassium ..............................
Psilomelane ...........................
Pyrolusite ...............................
Quicksilver .............................
Radium ..................................
Rare earth metals .................
Rhenium ................................
Rhodium ................................
Rhodochrosite .......................
Ruthenium .............................
Rutile .....................................
Scheelite ................................
Selenium ...............................
Silver .....................................
Strontium ...............................
exploration activities as defined in
§ 320.62 would not be required to
comply with the CERCLA § 108(b)
financial responsibility requirements.
Mineral exploration is a precursor to the
production of ores and associated
wastes at hardrock mining and mineral
processing facilities. The primary
purpose of mineral exploration is to
locate ore deposits and/or find
significant extension of previously
located deposits associated with
operating or abandoned mines.149 150
However, exploration activities do not
typically result in the generation of
significant amounts of hazardous
substances or mineral waste.
Many exploration projects have only
minimal surface disturbances or
impacts. Mineral exploration efforts
begin with surface explorations for signs
of potential mineral deposits, commonly
utilizing initial field surveys generally
involving low-impact techniques, such
as aerial photography and remote
sensing.151 152 Additional geochemical
and geophysical survey techniques use
149 See Lee-Moreno, J.L. 2011. In SME Mining
Engineering Handbook. Third Edition. Volume 1.
Chapter 3.2: Minerals Prospecting and Exploration.
United States: Society for Mining, Metallurgy, and
Exploration, Inc.
150 See BLM defines exploration as the creation of
non-negligible surface disturbance to evaluate the
type, extent, quantity, or quality of mineral values
present, including sampling, drilling, or developing
surface or underground workings. 43 CFR Subpart
3809.5
151 See International Council on Mining & Metals
(ICMM). Good Practice Guidance for Mining and
Biodiversity. Accessed February 25, 2015 at: https://
www.icmm.com/document/13.
152 See A. Erickson and J. Padgett. 2011. Chapter
4.1 Geological Data Collection. In SME Mining
Engineering Handbook. Ed. P. Darling. Third
Edition. Volume 1.
PO 00000
Frm 00070
Fmt 4701
Sfmt 4702
Sulfur
Talc
Tantalite
Tantalum
Tellurium
Thallium
Thorite
Thorium
Tin
Titanium
Trona
Tungsten
Uranium
Vanadium
Vermiculite
Wolframite
Wulfenite
Zinc
Zinc
Zirconium
either low-volume surface sampling 153
or no sampling, relying on sophisticated
tools to determine geologic properties of
sites, such as chemical composition and
magnetism. For most commodities,
these result in only limited surface
sampling as only a few minerals, such
as gold and platinum-group metals,
economically justify deep subsurface
exploration.154 In many cases,
exploration activities thus present a
negligible level of risk.
Potential impacts of mineral
exploration can arise when sub-surface
exploration does occur and include
clearing land and potential
contamination from boreholes (narrow
shafts penetrating below the surface).
Poor planning and management of
drilled holes may cause aquifer
contamination by infiltration of polluted
surface water or by migration of
materials in other layers of the earth that
previously did not come in contact with
the aquifer. However, due to nature of
these operations where large-scale
extraction of resources has not occurred,
the disturbance and impact would be
expected to be significantly smaller. For
example, tailings facilities, large open
pits, heap and dump leach operations,
and large waste rock deposits, leading
sources of releases of hazardous
153 For example, a survey conducted over goldsilver vein mineralization in Canada described the
optimal sample depth of 18–24 inches. For most
stream sediment surveys, about 1.1 to 2.2 lbs of
material are collected from the near-surface
sediment layer. See: Jaacks, J.A., Closs, L.G., and J.
A. Coope. 2011. Chapter 3.4. Geochemical
Prospecting. In SME Mining Engineering Handbook,
Ed. P. Darling. Third Edition. Volume 1.
154 See Lee-Moreno, J.L. 2011. Chapter 3.2:
Minerals Prospecting and Exploration. In SME
Mining Engineering Handbook. Third Edition.
Volume 1. United States: Society for Mining,
Metallurgy, and Exploration, Inc.
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
substances at hardrock mining sites
historically, would not be expected to
exist at exploration projects. Moreover,
hazardous substances would typically
not be employed in the exploration
activities further lowering the risk posed
by exploration activities compared to
commercial or larger-scale mining
operations. The limitation that
exploration excludes activities where
material from the site is extracted for
commercial use or sale limits the
construction of large facilities such as
those named earlier.
EPA found no evidence directly
linking exploration activities to releases
leading to CERCLA listing. Although
CERCLA documents noted the presence
of mineral exploration activities at eight
sites, exploration activities appear to
have played little to no direct role in
releases of hazardous contaminants.
For the reasons stated, EPA believes
that mineral exploration presents a
lower level of risk. As such, these
mineral exploration activities are not
included in today’s proposed rule. EPA
requests public comment regarding our
determination to not include
exploration mines in today’s proposal.
(b) Placer Mines
EPA has determined that placer
mines, as defined by EPA in this
proposal (See proposed definition in
section 320.62) present a lower level of
risk of injury. EPA recognizes that
placer mining would not typically be
considered hardrock mining; however
such mining practices would fall within
the definition of hardrock mining used
by EPA in identifying the priority class
for regulation in the 2009 Priority
Notice. As a result, and due to the lower
level of risk of injury presented by
placer operations, EPA is proposing that
placer mines not be included in the
CERCLA 108(b) hardrock mining
financial responsibility regulations.
Placer mining is a method of mining
in which the unconsolidated
overburden is removed to expose
valuable mineral-bearing gravel deposits
beneath. Placer mines, commonly in
alluvial deposits, typically seek to
recover gold, titanium, and rare earths
minerals. Alluvial deposits are
commonly non-lithified (non-cemented)
sands and gravels that rarely contain
minerals that are more commonly the
sources of contamination in other
deposits (e.g. lode deposits). Placer
mining can involve open pit,
underground, or dredging operations
using backhoes, bulldozers, or other
excavating equipment to extract sand
and gravel; at frozen placer mines,
drilling and blasting techniques can be
used to tunnel into the ground. Most
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
3457
commonly, dredges are used to break
apart sand and gravel and remove
valuable minerals. Dredge types vary
widely, but generally use either
mechanical methods to transport
material on moving buckets or belts, or
hydraulic methods to bring raw
materials to the surface using pumps
and pipes. Most placer recovery
involves only sizing and separation by
physical properties such as specific
gravity, color, or magnetism.155 For
example, vibrating screens can separate
the ore into particles of different sizes.
This stands in contrast to non-placer
mines that may employ chemicals in
their heap leaching processes, a
significant source of releases or
threatened releases at hardrock mining
facilities. Placer mines may have
tailings, open pits and other features
common at other mines. However, due
to the environmentally benign nature of
typical alluvial deposits, such features
would not be expected to result in
releases of hazardous substances as such
features would not typically contain
minerals (e.g. pyrite) that are more
commonly the sources of contamination
in non-placer deposits at other mines.
Placer mining sediment discharges
may diminish the quality of
surrounding environmental resources
such as surface water, ground water,
soil, wetlands, and wildlife.
Historically, the primary environmental
impact from placer mining has been
increases in sedimentation and heavy
metals concentrations downstream from
mining operations. Most current placer
mining does not utilize added
chemicals, nor would a placer operation
using hazardous substances meet EPA’s
definition of placer mine, minimizing
the potential for release of hazardous
substances.
Placer mining practices were directly
linked to releases leading to a CERCLA
listing at two mining sites stemming
from methods not typically recently
employed domestically as a result of
enhanced environmental regulation and
law. Evidence revealed that at one of the
sites sediment discharges resulted from
hydraulic mining techniques which
disturbed large volumes of sediment.
Hydraulic mining, which was common
in California and Alaska through the
1980s, used high-pressure jets of water
to break apart gravel beds, washing
mixtures of water, sand and minerals
into a collection area. However,
regulatory regimes that have since
emerged greatly restrict hydraulic placer
mining 156 and EPA thus does not
expect it to be a common practice at
placer mines in the US going forward.
At the other site where placer mining
practices were directly linked to
releases leading to a CERCLA listing,
contamination stemmed from mercury
amalgamation, which was historically
used for processing gold in placer
mining operations. By following this
process, mercury and gold would form
an amalgamated substance from which
pure gold could be extracted. The use of
amalgamation processes, however, has
fallen precipitously in the US since the
1970s due to its high cost, inefficiency
for larger-scale mines, growing scarcity
of ores for which the technique can be
used, and the introduction of various
environmental regulations.157
Furthermore, a placer mine that did
employ mercury amalgamation would
need to comply with the Part 320
financial responsibility regulations as
they would fail to meet the proposed
definition of placer mine which
specifies that a placer mine does not use
CERCLA hazardous substances in the
concentration or processing of materials
(see definitions at § 320.62).
In light of the benign nature of
alluvial deposits and the absence of
hazardous substances in the processing
operations at placer mines meeting
EPA’s proposed definition, EPA believes
such placer mines are unlikely to result
in contamination. EPA requests public
comment regarding our determination to
not include placer mines in today’s
proposal. EPA requests comment on
whether the class of placer mines as
defined that is proposed as a lower level
of risk of injury classes is appropriate,
or whether that class should be further
defined to limit the placer mines not
included under this proposal.
155 Chemicals are rarely used for processing.
Flotation may be used in phosphate operations, and
hot acid leaching using sulfuric or hydrochloric
acid is sometimes used for zircon sand. In these
operations, effluent treatment involves the addition
of neutralizers and the removal of solids, with
effluent water being recycled back to avoid off-site
discharges.
156 See Bullock, Richard L et al., Placer Mining
and Dredging. SME Mining Engineering Handbook.
3rd ed. Vol. 2. Society for Mining, Metallurgy, and
Exploration, (SME), 2011. 1062.
157 See U.S. Environmental Protection Agency.
Gold Placers. Technical Resource Document:
Extraction and Beneficiation of Ores and Minerals,
Volume 6. October 1994.
PO 00000
Frm 00071
Fmt 4701
Sfmt 4702
(c) Small Surface Mines of Less Than
Five Acres
EPA has determined that small
surface mines with a disturbance of less
than five acres not located within a mile
of mine disturbance that occurred in the
prior ten-year period that do not employ
hazardous substances in their processes,
and are not underground, present a
lower level of risk of injury. While
individual small mines may cause
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3458
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
releases or contamination as a result of
certain hazardous substances or mining
practices used, such contamination
tends to be more limited due to their
lower volumes of mining. Superfund
sites are therefore not generally
associated with small individual surface
mining facilities, except in
circumstances where there are major
clusters that increase the potential for
cumulative impacts.
Small surface mines tend to extract
near-surface higher grade ores and
previously unmined placer deposits.
Larger mines are more able to take
advantage of new ultra-mechanized
mining; metallurgical techniques allow
them to use lower-grade, large-volume
extraction and processing. Small surface
mines likely do not engage in these
more modern practices due to financial
factors. As a result, small surface mines
will have much lower volumes of waste
and the features from which releases
have historically occurred (e.g. waste
rock piles, open pits) will be much
smaller. Furthermore, lower level of risk
is further ensured by the requirement
that the small mine also not employ
hazardous substances in their mining
practices. As a result, cyanide leaching,
one source of releases or threatened
releases, would not be practiced at small
mines; nor would hazardous process
chemicals be stored at the facility
lowering the possibility of spills or
other mishandling of hazardous
substances. Additionally, it is worth
noting that because this determination
of lower risk is being made for small
surface mines, processing operations
would not be included in this lower risk
class. As such, practices such as
electrowinning, hydrometallurgy, or
pyrometallurgy would not occur at these
facilities; nor would tailings facilities
exist. Underground mines are excluded
because an underground mine can
expose significant reactive material (e.g.
pyrite) in underground workings,
thereby causing contaminated mine
drainage, and still be in an area covering
less than 5 acres if the mined material
is hauled off site for processing. Please
see a discussion of low risk mineral
processing facilities later in this
preamble for more information on what
class of mineral processing facilities
EPA has determined present lower
levels of risk of injury.
In current Federal and state
regulations, ‘‘small’’ mines are also
typically defined by acreage or volume
of ore processed. Small mines are
regulated by the BLM, Forest Service
and most states based on their potential
impacts and in most cases face reduced
permitting and operation
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
requirements.158 In the case of both
BLM and the Forest Service, small mine
projects causing a surface disturbance of
less than five acres are eligible for
exemptions from certain financial
responsibility requirements. Alaska,
Montana, Nevada, and other states also
have reduced requirements for facilities
and projects no greater than five acres
in size. BLM, USFS, and most states do
not extend non-major mining
exemptions to operations that use toxic
process chemicals or that have the
potential to discharge hazardous
substances to water resources.
The reduced risk presented by small
mines is evident by the lack of small
mines individually becoming Superfund
sites. Historically, Superfund sites with
smaller-scale mines reflect the
combined environmental impacts of
non-major mines in close proximity.
One example consists of numerous
abandoned and inactive hardrock mine
sites that produced gold, lead, zinc and
copper.159 160 Mining waste problems
impacting the 53-square mile watershed
from abandoned and inactive mine sites
led to CERCLA listing. EPA identified
150 individual mine sites within the
watershed boundary, of which 70 have
been prioritized for cleanup. Concern
over the potential issues that may arise
from the cumulative impact of
numerous small mines in close
proximity is the rationale for the
proposed additional qualification for
small mines determined to present a
lower level of risk as those not located
within a mile of mine disturbance that
occurred in the prior 10-year period.
EPA believes that small surface mines
of less than five acres present a lower
level of risk when such mines are not in
close proximity to another mine and do
not use hazardous substances. EPA
requests public comment on the
proposal that owners and operators of
such small mines would not be required
to comply with the CERCLA § 108(b)
hardrock mining financial responsibility
regulations.
158 See Kuipers, J., 2000, Hardrock Reclamation
Bonding Practices in the Western United States,
National Wildlife Federation.
159 See https://www2.epa.gov/region8/uppertenmile-creek-mining-area.
160 Additional Superfund sites representing
mining districts with multiple smaller-scale
operations include: Copper Basin Mining District
(CERCLIS ID TN0001890839), Oronogo-Duenweg
Mining Belt (CERCLIS ID MOD980686281),
Cherokee County (CERCLIS ID KSD980741862),
Washington County Lead District (CERCLIS ID
MON000705027), Basin-Cataract Mining District
(CERCLIS ID MTD982572562), California Gulch
(CERCLIS ID COD980717938), and Carpenter Snow
Creek Mining District (CERCLIS ID
MT0001096353).
PO 00000
Frm 00072
Fmt 4701
Sfmt 4702
(d) Mineral Processors With Less Than
Five Acres of Surface Impoundment and
Waste Pile Disturbance
EPA is proposing that owners and
operators of mineral processing facilities
with less than five acres of surface
impoundment and waste pile
disturbance not be required to comply
with the financial responsibility
requirements in Part 320. EPA is
proposing this because the Agency
believes that releases from surface
impoundments and waste piles present
elevated risk at mineral processing
facilities. These features were identified
as contamination sources at many
superfund sites historically. For
example, surface impoundments which
contained tailings and wastewater were
the source of contamination for more
than 160 different response actions; slag
and heap leach waste piles were sources
of contamination for more than 54 and
17 responses respectively. Further waste
piles and surface impoundments at
mineral processing and combined
mining and mineral processing sites
have caused natural resource
damages.161 Additionally, releases from
surface impoundments have resulted in
EPA needing to issue imminent and
substantial endangerment orders and
other orders requiring injunctive
relief.162 Moreover, in a 1998 EPA study
of mineral processing damage cases,
EPA found that many of the cases
involved releases from waste piles and
surface impoundments. Additionally,
the report noted at least one additional
NPL site (not included in the damage
cases reviewed) where contamination
appeared to be from land-based mineral
processing units. The report also noted
that land placement of products,
byproducts, in-process materials, and
intermediates can result in
environmental problems.163 Since 2004,
EPA’s National Enforcement Initiative
on Mining and Mineral Processing has
performed over 100 inspections of
mineral processing facilities. These
facilities ranged from small to very large
operations and had a wide variety of
waste management practices. However,
EPA found that facilities that managed
wastes in large surface impoundments
or piles posed higher environmental risk
to human health and the environment
161 For examples, see Select NRD Cases at Mineral
Processing Facilities, PDF portfolio available in the
docket for this proposed rule.
162 For examples, see Select Enforcement Cases at
Mineral Processing Facilities, PDF portfolio
available in the docket for this proposed rule.
163 See U.S. EPA. Damage Cases and
Environmental Releases from Mines and Mineral
Processing Wastes. April 1998.
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
than facilities with smaller waste
management units.164
Some of the risk of surface
impoundments and waste piles stems
from poor environmental practice (e.g.
failure to use liners, overtopping,
instability of berms). For example, in
2004, an EPA inspection of a mineral
processing facility in Florida found that
storage and disposal of hazardous waste
into unlined ditches and surface
impoundments released hazardous
substances off-site. Nearby groundwater
and private drinking water wells were
contaminated as a result of these
releases.165
As the volume of wastes disposed of
in a surface impoundment or pile
increase, the units become larger and
hydraulic pressure increases. This
results in higher incidents of leaks and
structural failures.166 Larger units also
have increased pressure due to larger
surface areas exposed to rainfall.
Sometimes a surface impoundment may
be located on top of or adjacent to a
waste pile. For example, releases from a
large waste pile/surface impoundment
(referred to as a ‘‘phosphogypsum
stacks’’) in Florida, Texas, and
Mississippi released millions of gallons
of highly acidic wastewater resulting in
fish kills and impacting other aquatic
life and natural resources.167
Mineral processing facilities with less
than five acres of surface impoundment
and waste pile disturbance generally
pose lower risk due to the lower
quantities of hazardous substances
present, and less likelihood of spills and
structural instability and the smaller
expected impact of any releases. As
such, EPA proposes that owners and
operators of mineral processing facilities
with less than five acres of surface
impoundment and waste pile
disturbance not be required to comply
with the financial responsibility
requirements in Part 320. EPA requests
comment on this proposal. Specifically,
EPA is interested in damage cases that
have arisen at mineral processing
facilities with less than five acres of
waste pile or surface impoundment
disturbance.
164 See U.S. EPA. National Enforcement Initiative
for Mining and Mineral Processing Summary of
Activities 2005 to 2016. November 15, 2016.
165 For examples see 2004 Coronet compliance
evaluation inspection report file in Select
Enforcement Cases at Mineral Processing Facilities,
PDF portfolio available in the docket for this
rulemaking.
166 See Select Surface Impoundment Technical
Reports PDF portfolio in the docket.
167 See Mosaic, Agrifos, and Piney Mulberry
examples in Select NRD Cases at Mineral
Processing Facilities, and Select Enforcement Cases
at Mineral Processing Facilities, PDF portfolios,
available in the docket for this rulemaking.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
2. Timeframes for Compliance (§ 320.61)
CERCLA § 108(b)(3) requires a
phased-in approach to implementation
of the financial responsibility
requirements of this proposal. That
section requires that financial
responsibility requirements be imposed
as quickly as can reasonably be
achieved but in no event more than four
years after the date of promulgation of
the final rule. The statute further
requires that, where possible, the
amount of financial responsibility shall
be achieved through incremental,
annual increases. This phased approach
provides time for the financial markets
to develop and make available
instrument capacity while, at the same
time, has financial responsibility put
into place at facilities subject to the rule
quickly.
Under the proposed schedule for
implementation of financial
responsibility requirements, owner or
operator’s would be required to
demonstrate financial responsibility for:
(1) Health assessment costs by twenty
four months after promulgation of the
final rule, i.e., after publication of the
final rule in the Federal Register; (2) for
fifty percent of the response and natural
resource damages amount of financial
responsibility by thirty six months after
promulgation of the final rule; and (3)
for full response and natural resource
damages amount by forty eight months
after promulgation of the rule.
In developing this proposed schedule
for implementation of financial
responsibility requirements, EPA
considered the requirement in the
statute that financial responsibility
implemented in incremental annual
increases, as well as the need for the
financial markets do develop and make
available capacity. EPA also sought to
provide the maximum amount of time
for owners or operators to establish a
financial responsibility level for their
facilities.
EPA proposed that owners or
operators provide the amount of
financial responsibility for the health
assessment component of the formula
first as that amount does not require a
calculation, and thus requires no input
of information by the facility. This
approach provides three years before the
first amount of financial responsibility
that must be calculated is due to EPA.
EPA believes that this is a reasonable
approach, and that it balances the needs
of the owner or operator as well as the
financial market. Delaying further
significant levels of financial
responsibility would have resulted in a
surge in demand on the financial market
in year four. Requiring calculated
PO 00000
Frm 00073
Fmt 4701
Sfmt 4702
3459
financial responsibility earlier would
have provided less time for owners or
operators to become familiar with the
formula, gather any necessary
information, and perform necessary
calculations.
EPA believes that this schedule would
meet the statutory requirement for
phased implementation, and would
provide owners and operators an
adequate time period to identify the
necessary financial responsibility
amount for their sites. Further, these
phased-in requirements would help to
assure the availability of instruments by
providing extended time for market
capacity to build. EPA solicits comment
on this approach to implementation of
the financial responsibility
requirements, on the schedule for
compliance, and on whether this
approach would help assure availability
of instruments. EPA solicits comment
on this approach.
For owners and operators of hardrock
mining facilities that come into
operation after the effective date of this
rule, the Agency is proposing a different
approach.
Facilities that become subject to the
rule after the effective date of the final
rule and on or before the date four years
after the effective date would be comply
with the requirements for demonstrating
financial responsibility that are
applicable to facilities that were
authorized to operate, or should have
been authorized to operate on the
effective date of the final rule. For
example, if a facility were to become
subject to the requirements of this rule
two years after the effective date, the
owner or operator would be required to
demonstrate financial responsibility for
the health assessment amount prior to
beginning operations, and then follow
the schedule provided in § 320.61(a).
Finally, facilities that become subject
to the rule more than four years after the
effective date of the final rule would be
required to demonstrate financial
responsibility for the full amount
required under this rule before
beginning operations.
The Agency believes this approach is
reasonable in that the capacity concerns
that arise when a newly promulgated
rule becomes effective are not relevant
as the Agency does not expect a large
number of newly regulated facilities to
enter the market seeking financial
responsibility instruments after the rule
initially becomes effective. The Agency
solicits comment on this approach.
3. Definitions (§ 320.62)
The Agency is proposing definitions
in § 320.62 that are applicable to this
E:\FR\FM\11JAP2.SGM
11JAP2
3460
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
Subpart. The Agency solicits comment
on these definitions.
4. Determining the Financial
Responsibility Amount (§ 320.63)
EPA considered options for how to
calculate financial responsibility
amounts for classes of facilities under
CERCLA § 108(b). The statute provides
only very general direction on this
question, and thus confers upon EPA
significant discretion in both
methodology and in the ultimate
selection of the appropriate amount.
CERCLA § 108(b) establishes a general
end-point for the Agency’s financial
responsibility requirements, which must
be ‘‘consistent with’’ the ‘‘degree and
duration of risk associated with the
production, transportation, treatment,
storage, or disposal of hazardous
substances’’ at the facility. EPA does not
interpret this to require any precise
association with a risk calculation.
Standard dictionary definitions of the
term ‘‘consistent’’ include merely
‘‘being in agreement’’ or
‘‘compatible.’’ 168 Moreover, as
discussed earlier, CERCLA § 108(b)
amounts are necessarily established in
the absence of any response action,
although it is through such response
actions that the precise level of risk
associated with a particular site is
ascertained. Thus, EPA believes that
Congress intended for the Agency to set
a level of risk that is generally reflective
of risk for each facility class.
The statute also does not specify any
particular methodology to reach that
general end-point, specifying simply
that the amount of financial
responsibility be established at the level
that the EPA ‘‘determines is
appropriate.’’ The statute does provide a
non-exclusive list of information
sources in CERCLA § 108(b)(2) on which
it is to base its decision—the payment
experience of the Superfund; courts
settlements and judgments; and
voluntary claims satisfaction. Notably, it
does not specify how the information
from these sources is to be used—for
example, how the data from each source
should be weighted relative to the other
sources. Similarly, the list of sources
does not specify whether EPA is to
derive particular values from each
category to be aggregated into one
amount that is ‘‘consistent with the
degree and duration of risk,’’ or whether
EPA is to identify from each category,
particular practices (that is, for example,
the types of activities for which the
Fund has paid) the cost of which can
form the basis for an amount. Therefore,
168 301 Webster’s II New Riverside University
Dictionary (1988).
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
EPA has concluded that these
provisions of the statute confer a
significant amount of discretion upon
the Agency in how it uses the data it
has, to determine the appropriate
amount for which owners and operators
must provide evidence of financial
responsibility.
EPA considered four approaches to
identify a financial responsibility
amount for a facility—fixed amount,
site-specific amount, parametric
approach, and formulaic approach. A
description of each approach follows.
This proposed rule uses a combination
of these approaches—specifically, a
fixed cost approach for certain costs
(health assessments) and a formulaic
approach to identify an amount for
potential response costs consistent with
the risks to human health and the
environment based on facility features.
Under a fixed amount approach, the
Agency would identify a standard cost
for the class. This method does not rely
on site-specific factors but rather on
historical costs associated with similar
facilities to calculate an expected future
amount. This approach is best applied
where the costs at issue are fairly
uniform, as the wider the variation, the
lower the accuracy of the financial
responsibility amount for that cost. If
there is wide variation in the costs
associated with the facilities within the
class to which the fixed amount is
applied, the result can be significant
over-regulation at those facilities with
lower levels of liabilities, and
significant under-regulation of facilities
with higher levels of liabilities. At the
same time, this approach has advantages
in that it requires a lower level of effort
on the part of the regulated community
and the Agency to implement because
the rule does not require a site-specific
calculation to be developed, submitted,
or evaluated. Thus, EPA believes that in
certain circumstances the fixed amount
approach may be the best choice to
implement CERCLA § 108(b)
requirements.
For example, as discussed in section
VI.D.4. of this preamble, the Agency was
able to determine a fixed level for health
assessment costs under this proposed
rule, but applied a formulaic approach
to determine financial responsibility
amounts for response costs and natural
resource damage costs.
The second method considered by
EPA is a site-specific approach. Under
this approach, the owner or operator
would calculate the cost of conducting
known activities to address identified
problems. This approach is the most
precise of the three approaches
considered by EPA. However, it is also
the most resource intensive to
PO 00000
Frm 00074
Fmt 4701
Sfmt 4702
implement. It requires gathering
detailed information about the site,
including an assessment of the site
conditions, and is most easily
implemented where a release has
occurred, a response is necessary, and a
remedy determination has been made.
As described earlier, CERCLA § 108(b)
financial responsibility is not based on
a remedy determination; therefore, EPA
determined that a site-specific approach
was not appropriate or practical for use
under this rule. EPA solicits comment
on how a site-specific approach might
be developed for future CERCLA
§ 108(b) rulemakings in situations where
there has been no remedy decision.
Having identified reasons that a sitespecific approach may not be
appropriate or practical to determine
financial responsibility amounts for
response costs and for natural resource
damages, EPA sought to develop an
approach that was more accurate than
the fixed amount, yet could be
implemented without conducting a full
site investigation at the facility. The
Agency’s efforts resulted in
development of a formula designed for
facilities within the hardrock mining
industry.
(a) Information Used To Determine
Financial Responsibility Amounts
Under CERCLA § 108(b)
As discussed earlier, CERCLA
§ 108(b)(2) requires that the level of
financial responsibility must be ‘‘based
on the payment experience of the Fund,
commercial insurers, courts settlements
and judgments, and voluntary claims
satisfaction.’’ Thus, in developing this
proposed rule, EPA considered how to
consider those factors. EPA considered
two approaches to basing financial
responsibility levels on the ‘‘payment
experience of the Fund.’’ Under one
approach, the Agency would consider
the cost of past cleanups at similar
facilities, and use those costs as a basis
for financial responsibility. For
example, EPA would look to historical
cost data and, if a Superfund remedy at
similar facilities averaged $X dollars,
EPA would consider that the
appropriate amount of financial
responsibility for that class of facilities
and promulgate a regulation requiring
that amount at facilities in the class.
This interpretation would best be
applied to the fixed amount
methodology. Thus, if past Superfund
actions at a class of facilities averaged
$X dollars, the Agency would identify
by rule that amount as the financial
responsibility amount required for that
class of facilities. EPA recognized
limitations associated with this
approach. For example, because it looks
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
to historical data, it assumes that
operations at historical facilities are
similar to current operations, and that
costs will be similar. The Agency
recognizes, however, that past operating
procedures, before the advent of
environmental laws, were likely in
many cases to give rise to environmental
problems that current regulations and
modern operating practices can prevent
or minimize. In addition, Superfund
cost data represents only a portion of
the expenditures at historical facilities,
especially those with ongoing cleanups
or maintenance, and a uniform set of
data that includes all expenditures at
facilities is not available. However, EPA
believes this approach is appropriate in
some circumstances—for example,
where current costs are available for an
activity that is fairly consistent in cost
from facility to facility. Thus, EPA has
proposed adopting this approach to
determine the financial responsibility
amount for health assessment costs as
discussed in section VI.D.4. of this
preamble.
Under a second approach, EPA would
look at components of response actions
taken by Superfund in the past—that is,
distinct activities Superfund paid for—
at facilities within the to-be-regulated
class, and determine the cost of those
activities today. For example, if a
Superfund remedy involved installing
an impermeable cap at a surface
impoundment, the Agency would
calculate the cost of installing such a
cap today at the regulated facility with
a similar unit to determine the financial
responsibility amount. This second
approach to considering the ‘‘payment
experience of the Fund’’ was used by
EPA in developing the formula for
determining financial responsibility
amounts for response costs and natural
resource damages under this proposal.
The Agency solicits comment on these
two approaches to basing financial
responsibility under this proposal on
the criteria in CERCLA § 108(b)(2).
It should be noted that the Agency’s
decision to not propose requirements in
this rule based on a site-specific
approach to determining financial
responsibility amounts does not mean
that the Agency has concluded that
methodology is not appropriate under
CERCLA § 108(b). In fact, following
initial implementation of financial
responsibility at facilities subject to this
proposed rule, EPA may identify sitespecific conditions that indicate a
response action is needed at the facility,
and that the current amount of financial
responsibility implemented under
CERCLA § 108(b) is not adequate to
cover the costs associated with the
response. In those cases, the Agency
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
believes it could apply a site-specific
methodology at the facility to determine
a more precise amount of financial
responsibility more consistent with the
degree and duration of risk at the
facility. EPA would increase the amount
of financial responsibility required at
the facility under CERCLA § 108(b)
rather than apply CERCLA § 106
authority to require a separate financial
responsibility instrument. The Agency
solicits comment on this approach.
(b) Development of the Hardrock Mining
Financial Responsibility Formula
EPA developed a financial
responsibility formula for owners and
operators of hardrock mining facilities
to use to calculate the amount of
financial responsibility that would be
required under this proposed rule. EPA
considered how to develop an amount
of financial responsibility that reflected
an estimate of funds that might be
required in the event of a release from
a regulated facility.
As described in section IV.B of this
preamble, EPA is proposing to make the
financial responsibility instruments
available for all types of CERCLA
liabilities enumerated in CERCLA § 107.
Thus, in developing the financial
responsibility formula, EPA sought to
take into account the same three
categories of costs (response costs
(including both removals and remedial
actions), natural resource damages, and
health assessment costs) that may be
incurred by owners and operators of
facilities subject to the rule. To do so,
EPA separately developed three formula
components to estimate financial
responsibility for each of those three
categories. These three components—
response costs, natural resource
damages, and health assessment costs—
make up the final formula.
EPA collected and analyzed data on
both the total funds expended at
CERCLA sites and the types of goods
and services on which those funds were
spent. Total funds expended were used
to estimate both the health assessment
component and the natural resource
damage component, while the types of
goods and services were used to
estimate the response component. For
each, this preamble discusses EPA’s
data collection efforts, how the Agency
developed estimates of costs from that
data, and how it developed the resulting
formula.169 EPA has followed the
169 For a detailed discussion of the development
of the formula, see the CERCLA 108(b) Financial
Responsibility for Hardrock Mining Facilities
Background Document—Peer Review Draft
(Background Document), located in the docket for
this proposal (Docket No. EPA–HQ–SFUND–2015–
0781).
PO 00000
Frm 00075
Fmt 4701
Sfmt 4702
3461
Agency’s Peer Review Policy with
respect to the underlying formula
supporting this action. Specifically, EPA
has conducted a peer review of the
Background Document. Peer review
materials, including charge questions,
are available in docket for this proposed
rule (Docket No. EPA–HQ–SFUND–
2015–0781).
(i) Response Component
EPA collected information on
response costs from national priorities
list (NPL) and non-NPL CERCLA
response activities. This data consisted
of records of decision (RODs),
settlements, actual expenditures to date
by EPA, and estimated expenditures for
present and future work by potentially
responsible parties. EPA used these data
to generate a best estimate of total
response costs at these hardrock mining
facilities. EPA was able to collect this
information for 319 sites.
In addition to the total response cost
data, EPA also collected data on specific
activities conducted at 438 operable
units at 88 NPL or Superfund alternative
hardrock mining sites. From this data on
activities themselves, EPA could link
specific site features to releases or
threatened releases of hazardous
substances, and to remedies that
incurred response costs. EPA found that
thirteen site features 170 171 served as the
source of release that resulted in
remedies within the following twelve
categories: (1) On-site disposal
(excavation, capping, covering,
revegetation); (2) off-site disposal; (3)
engineering and/or containment (other);
(4) surface water diversion; (5) water
treatment (other); (6) water treatment
(lime addition); (7) no action; (8)
alternative drinking water; (9) sediment
dredging/disposal; (10) monitoring (all
media and as separate remedy); (11)
monitored natural attenuation/recovery;
and (12) deconstruction/
decontamination of buildings. EPA
solicits comments on additional
remedies or categories of CERCLA
170 The 13 site features include (in order of
frequency): (1) Contaminated soils, (2) tailings
(pond, pile), (3) waste rock or overburden, (4)
contaminated sediments, (5) acid mine/rock
drainage, (6) slag, (7) smelter emissions, (8)
underground workings, (9) process areas and
buildings, (10) leachate (from failed cap/cover or
similar system), (11) demolition debris, (12) heap
leach piles/leaching waste, and (13) open pits/pit
lakes.
171 The 13 site features include (in order of
frequency): (1) Contaminated soils, (2) tailing
(pond, pile), (3) waste rock or overburden, (4)
contaminated sediments, (5) acid mine/rock
drainage, (6) slag, (7) smelter emissions (8)
underground workings, (9) process areas and
buildings, (10) leachate failed cap/cover or similar
system), (11) demolition debris, (12) heap leach
piles/leaching waste, and (13) open pits/pit lakes.
E:\FR\FM\11JAP2.SGM
11JAP2
3462
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
response costs that do not appear in this
list, as well as the data supporting the
inclusion of those remedies.
(aa) Linking Response Categories to
Current Cost Estimates
EPA’s prior experience with CERCLA
cleanups leads it to expect that similar
types of remedies will continue to be
selected for mining sites in the future.
EPA also expects that for eleven of the
twelve remedy categories described
earlier (the exception being ‘‘no
action’’), the magnitude of that cost will
differ with changing site characteristics.
For example, the expected costs of
constructing a cap over a unit to prevent
water infiltration can be expected to
increase with the acreage of that cap.
Thus, in order to produce more accurate
estimations of costs at a particular
facility, it is necessary to consider both
specific response costs and specific
response activities. However, EPA
generally found that the response cost
data discussed earlier were available in
the form of payments or total
expenditures. Since these payments or
expenditures were aggregated across
various activities, they could not be
separated into more specific cost
amounts (e.g., the cost to construct a
particular cap on a particular tailings
impoundment).
Given this difficulty, EPA considered
how to estimate the expected costs
associated with these particular
activities. EPA searched for existing,
publicly available engineering cost
estimates that contained costs specific
to these activities. EPA found that such
engineering cost data was readily
available from cost estimates developed
for state and Federal mining reclamation
and closure plans, and associated
documents. These engineering cost data
were available for currently operating
facilities potentially regulated under the
proposed rule, and represented similar
site features (e.g., tailings facilities, open
pits) as facilities for which prior
response actions were taken. Thus,
these data reflect recent engineering cost
values appropriate for EPA’s statistical
analysis.
In order to monetize the expected
costs for eight of the twelve types of
remedies listed earlier, EPA linked these
remedy types to similar tasks identified
in the current engineering cost data. The
remaining three CERCLA remedy types,
‘‘No action,’’ ‘‘Alternative drinking
water,’’ and ‘‘Monitored natural
attenuation’’ are excluded from the
initial list of twelve remedy types. Since
these three remedy types do not involve
engineered controls, EPA was
concerned that including them as part of
a nationally-applicable rule could have
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
the effect of producing an inadequate
amount of financial responsibility for
those sites where engineered controls
were necessary. Therefore, as a
conservative assumption to help ensure
thea adequacy of the amount of
financial responsibility should
engineering controls prove necessary,
EPA excluded these three remedy types
from further consideration.
Also excluded was ‘‘Sediment
dredging/disposal.’’ Although this
element has appeared historically as a
response category, EPA notes that it was
already incorporated in the natural
resource damages component. For
example, the final restoration plan for
the Upper Arkansas River/California
Gulch Superfund site (one of the data
points used in developing the natural
resource damages multiplier) includes
dredging of contaminated soils as a
restoration alternative.172 Thus, EPA
believes that since this cost is already
represented in the natural resource
damages multiplier, it is inappropriate
to duplicate that cost in the response
component of the formula. EPA solicits
comment on whether this activity is
more appropriately included in the
response component or the natural
resource damages component of the
formula.
‘‘On-site disposal (excavation,
capping, covering, revegetation)’’ and
‘‘Engineering/containment (other)’’ were
linked to engineering cost estimates
categorized as backfill, portal closure,
earthwork, revegetation, feature-specific
stormwater controls, and source
controls. These first two remaining
categories were further linked to the
specific site feature being addressed:
Open pit, underground mine, waste
rock, tailings facility, heap/dump leach,
process ponds and reservoirs, and slag
piles. Since not all currently operating
facilities have all of these site features,
this site-feature linkage allowed EPA to
identify costs for only the features
present at a given mine.
‘‘Off-site disposal’’ and
‘‘Deconstruction/decontamination of
buildings’’ were linked to engineering
cost estimates categorized as solid waste
disposal, hazardous waste disposal,
organic solution removal, building
decontamination, contaminated soils
disposal, and haulage and disposal.
‘‘Surface water drainage’’ was linked to
drainage controls. ‘‘Water treatment
(lime)’’ and ‘‘Water treatment (other)’’
were linked to engineering cost
estimates categorized as site and water
172 See Stratus Consulting Inc. (2010). Restoration
Plan and Environmental Assessment for the Upper
Arkansas River Watershed. Available at: https://
www.fws.gov/mountain-prairie/nrda/leadvillecolo/
californiagulch.htm.
PO 00000
Frm 00076
Fmt 4701
Sfmt 4702
management, process fluid stabilization,
neutralization, solution disposal,
reclamation of well-field and disposal
wells, seepage capture, and water
treatment. Finally, ‘‘Monitoring (all
media and as separate remedy)’’ was
linked to engineering cost estimates
categorized as groundwater and surface
water monitoring, geotechnical stability
monitoring, erosion and vegetation
monitoring, fish and wildlife
monitoring, and other short- and longterm monitoring.
While not specific to any remedy
category, multiple remedies’ operations
and maintenance activities were linked
to the reclamation and closure plan
tasks of road maintenance, stormwater
repairs, revegetation repairs,
reclamation of monitoring and
pumpback wells, well maintenance,
evaporation pond maintenance, and
stormwater, erosion, and vegetation
maintenance. Additionally, all remedies
were linked to reclamation and closure
plan tasks necessary to conduct direct
engineering work including
mobilization/demobilization,
engineering design/redesign,
contingency, contractor profit and
overhead, contractor liability insurance,
payment and performance bonds,
agency direct costs, and agency indirect
costs. EPA solicits comment on the
accuracy of these linkages, and specific
data or examples that would indicate an
alternative linkage should be made.
(bb) Response Component Data
Collection
EPA sought through its engineering
cost estimate data collection effort to
accumulate as much recent, high quality
cost information for currently-operating
hardrock mining facilities as possible
and represent the range of states and
commodities produced. EPA obtained
and sorted data from the Mining Safety
and Health Administration (MSHA) and
the U.S. Geological Survey (USGS) to
generate a combined list of 354
facilities. To derive this group of 354,
EPA identified facilities that would
correspond to the scope of the proposed
rule. Thus, EPA excluded from the
combined MSHA/USGS data set, those
facilities that were not identified in the
2009 Priority Notice,173 as well as
closed or abandoned facilities.
Therefore, the data set consisted of
active, intermittent, or temporarily idled
mining or mineral processing facilities.
Comprehensive lists of all data sources
173 See Identification of Priority Classes of
Facilities for Development of CERCLA Section
108(b) Financial Responsibility Requirements, 74
FR 37213, July 28, 2009.
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
are available in Appendices A through
M of the Background Document.
EPA obtained a sample of 63 facilities’
reclamation and closure plan
engineering cost data. This 63 facility
subset was representative of the
frequency of states and commodities
identified in the full universe of 354
potentially regulated mines. Thus, EPA
expected it would be representative of
the larger group of facilities. This
dataset included costs as well as related
inputs that drive these cost components.
For example, acreage is an input of the
Standardized Reclamation Cost
Estimator model used to conduct several
of the collected engineering cost
estimates. One of the highest-dollar
response categories, water treatment,
also presented one of the smallest cost
sample sizes with only 15 facilities
represented. As a result, EPA
supplemented the closure plan cost data
on water treatment costs with data from
the three CERCLA sites contained in
EPA’s CERCLA site data set, for which
water treatment cost data were readily
available, and could be disaggregated
from the sites’ full costs. EPA solicits
comment on additional cost estimates,
whether historical or current, that
would appropriately represent active
hardrock mining facilities. EPA solicits
comment on data generally, and
specifically regarding industrial
minerals, slag pile, in-situ leach, and
water flows. EPA solicits comment on
expanding the water treatment variable
to capture additional facilities that
would necessarily need more advanced
water treatment due to the nature of
their leachate.
EPA subject-matter experts believed
that other variables could explain the
differences between higher and lower
costs at sites based on their professional
experience. First, these experts believed
that water-related factors such as
distance to groundwater or surface
water, as well as net precipitation could
influence the costs estimated for a site.
Second, these experts believed that the
process methods used could influence
costs necessary for a site. These data are
not included in the reclamation plan
data collected. Therefore, EPA located
and collected them from Environmental
Impact Statements or other publicly
available documents.
Water-balance-related data that were
available in these public documents
included precipitation, evaporation,
distance to surface water, and depth to
groundwater. EPA solicits comment on
the collection of these water balance
data. In particular, six of the hardrock
mining facilities in EPA’s data set did
not contain depth to groundwater data.
EPA solicits comments on depth to
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
groundwater data for the six hardrock
mining facilities for which data were
not collected. These facilities are: Silver
Bell (Arizona), Clear Creek (Colorado),
Hibbing Taconite (Minnesota), SCRAM
(Minnesota), Standard (Nevada), and
Trenton Canyon (Nevada).
In addition to water-balance-related
data, EPA collected data related to
process methods for the four leaching
processes identified at the 63 sites in
EPA’s data set. These process method
data included the use of floatation,
cyanide, acid, and in-situ leaching
processes. EPA solicits comments on
data characterizing the process methods
for these 63 sites as well as how EPA
might analyze such data.
For more details about the data
collected, see Section 4 of the
Background Document. EPA solicits
comment on alternative uses of its
actual cost data from Section 2.2 of the
background document. EPA solicits
comment on additional data points that
may be more appropriately apportioned
to other site features. EPA solicits
comments on the use of a 62 percent
upward adjustment based on Ernst &
Young (2015). The Agency also solicits
comment on the proposal to use the
2013 Reclamation and Closure Plan
document for Pinto Valley.
(cc) Response Component Regression
Analysis
EPA performed statistical analysis on
the engineering cost data collected, for
each response category. The purpose of
this statistical analysis was to establish
a numerical relationship between a
limited number of a facility’s sitespecific characteristics and the resulting
associated reclamation and closure plan
costs. Once this relationship was
established, it could be used to generate
a sub-formula that results in an
expected financial responsibility
amount for each response category, on
a nation-wide basis. To ensure the
accuracy of the regressions, EPA solicits
comment on whether the reclamation
and closure plan data is accurately
described in Appendix G of the Formula
Background Document. Specifically,
EPA solicits comment on the accuracy
of the estimated cost figures, acres, and
source control tags for the thirteen
response categories, as described in
Appendix G.
A number of site-specific engineeringbased models generated the detailed
engineering cost estimates collected by
EPA. However, certain parameters
appeared to be central to the workings
of those calculations. For instance,
capital costs appeared to be affected by
the relevant acreage that these costs
were applied. While EPA did not know
PO 00000
Frm 00077
Fmt 4701
Sfmt 4702
3463
the exact suite of variables that might be
relevant for any particular response
category, some variables were much
more likely to be statistically significant
based on the use of these variables in
reclamation and closure plan cost
estimates. As a result, EPA chose to
conduct a bidirectional elimination
stepwise regression that started with
variables believed to be most significant
and test the addition or deletion of
individual variables. Further details on
the regression methodology, as well as
the results of the regressions are
available in Section 5 of the Background
Document.
These results generally confirmed the
significance of the variables EPA
expected to be predictive. EPA
performed an additional 88 robustness
tests to demonstrate that the regressions
selected by the stepwise regression
process were the best fit possible for the
data. EPA solicits comment on the
appropriateness of the bidirectional
elimination stepwise regression used
here as well as alternative methods that
may be appropriate and justifications for
using those methods. EPA also solicits
comments generally on the steps and
criteria used in the stepwise regression
process as applied. In particular, EPA
solicits comment on the retention of the
source control variable in the heap/
dump leach regression (including
additional data points that would
supplement the two source controls in
the dataset) and on the addition or
removal of variables from the starting
suite of variables when such additions
or removals were made. EPA solicits
comment on influence points
Continental and Chino Mines for the
Interim O&M regression, and Phoenix
Copper for Water Treatment regression.
Further, because the formula is trying
to monetize potential future CERCLA
liability response costs, in the absence
of an actual release/response to
monetize, a potential drawback of this
approach of predicting levels of
financial responsibility could be that
future major incidents will not have
sufficient assurance to cover the
necessary response costs, and that there
could be an associated risk that the rule
will potentially require financial
responsibility that may never be
required. EPA solicits comments on this
potential drawback to the chosen
approach.
EPA also calculated overhead and
oversight costs (OCs) as a percent of
direct engineering costs rather than
through regressions on site-specific
characteristics. However, not every
facility calculated or reported every
category of oversight costs. Thus, to
avoid biasing any of the oversight cost
E:\FR\FM\11JAP2.SGM
11JAP2
3464
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
estimates low, EPA calculated each
oversight cost separately, and used only
data from facilities which had
calculated that oversight cost. EPA
estimated each oversight cost category at
each facility as a percent of engineering
costs. This was done by dividing the
oversight cost in question at a facility by
that facility’s total direct engineering
costs. Once all facility-specific oversight
cost percentages were calculated, EPA
averaged these oversight cost
percentages for each category. EPA
solicits comment on the approach of a
fixed percentage of direct engineering
costs for estimating oversight costs.
sradovich on DSK3GMQ082PROD with PROPOSALS2
(dd) Converting O&M Costs into a Net
Present Value
Four of the response cost categories—
interim O&M, water treatment, shortterm O&M, and long-term O&M—
represent the expected costs for
activities over time. Thus, the regression
equations for represent annualized
amounts. These annualized amounts
must further be converted into a single
net present value, so that they can be
included as part of the final formula,
which represents a facility’s total
financial responsibility amount. EPA
converted to net present value using the
same equation as that presented in U.S.
EPA (2001).174
EPA used an O&M period of ten years
for converting both the short-term O&M
and interim O&M costs into a net
present value. This period has been
discussed and used in guidance
documents such as U.S. EPA and
USACE (2000).175 O&M after ten years
could prove to be unnecessary, or
continue indefinitely. The cost
estimation formula uses a perpetual
period of O&M for both water treatment
and long-term O&M. EPA considered
using a period of thirty years similar to
the default long-term O&M period of
thirty years historically used by EPA for
purposes of cost estimation in the
absence of detailed estimates of project
duration (U.S. EPA, 1988).176 However,
174 See U.S. EPA (Environmental Protection
Agency). 2001. Groundwater Pump and Treat
Systems: Summary of Selected Cost and
Performance Information at Superfund-financed
Sites. EPA 542–R–01–021a. OSWER. Washington,
DC 20460. December. Available at: https://www.epa.
gov/superfund/cleanup/postconstruction/
p1report.pdf.
175 See U.S. EPA (Environmental Protection
Agency) and USACE (Army Corps of Engineers).
2000. A Guide to Developing and Documenting Cost
Estimates during the Feasibility Study. EPA 540–R–
00–002. OSWER. Washington, DC 20460. July.
Available at: www.epa.gov/superfund/policy/
remedy/pdfs/finaldoc.pdf.
176 See U.S. EPA (Environmental Protection
Agency). 1988. Guidance for Conducting Remedial
Investigations and Feasibility Studies under
CERCLA (Interim Final). EPA/540/G–89/004.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
more recent guidance relies less heavily
on this default period and more heavily
on the actual project duration of each
alternative considered in the RI/FS
process (U.S. EPA and USACE, 2000).
In addition, EPA’s CERCLA data from
hardrock mining facilities indicates that
perpetual O&M expenditures are
common. Specifically, in U.S. EPA
(2004),177 EPA’s Office of Inspector
General collected survey responses from
regional experts regarding expected
long-term O&M durations at 156
hardrock mining facilities. The median
response from that survey was that longterm O&M at hardrock mining facilities
would continue into perpetuity.
Therefore, the financial responsibility
formula uses a perpetual period of O&M
for both water treatment and long-term
O&M. EPA solicits comment on the
timeframes used in the net present value
conversion. Specifically, EPA solicits
comment on whether justifications of
alternate timeframes exist for long-term
O&M.
Finally, annualized O&M costs are
converted to a net present value based
on the ten-year short-term and perpetual
long-term time horizons seen in the
CERCLA cost data using the rate of
return of the Superfund. Analysis of
these real rates of return from the
Superfund yielded a geometric mean of
2.63 percent. This approach is also
consistent with recent EPA guidance on
O&M cost estimation processes in the
separate context of CERCLA settlement
agreements and unilateral orders (U.S.
EPA, 2015) 178 which recommends using
a discount rate representative of real
investment returns. EPA solicits
comments on whether and how future
rates of return should be automatically
used to update the 2.63 percent rate of
return of the Superfund. The Agency
also solicits comments on the use of net
present value of O&M.
(ee) State-Specific Adjustment Factors
On average, the sub-total of overhead
costs calculated by EPA was found to be
35.78 percent of direct engineering
costs. However, a similar sub-total of
oversight cost percentages was not
OSWER. Washington, DC 20460. October. Available
at: www.epa.gov/superfund/policy/remedy/pdfs/
540g-89004-s.pdf.
177 See U.S. EPA (Environmental Protection
Agency). 2004. Nationwide Identification of
Hardrock Mining Sites. Report No. 2004–P–00005.
OIG. Washington, DC. 20460. March. Available at:
https://www.epa.gov/sites/production/files/201512/documents/20040331-2004-p-00005.pdf.
178 See U.S. EPA (Environmental Protection
Agency). 2015. Guidance on Financial Assurance in
Superfund Settlement Agreements and Unilateral
Administrative Orders. OECA. Washington, DC
20460. April 6. Available at: https://www.epa.gov/
sites/production/files/2015-04/documents/fa-guide2015.pdf.
PO 00000
Frm 00078
Fmt 4701
Sfmt 4702
estimated due to the region-specific
nature of agency indirect costs. To
calculate these percentages, regionspecific indirect cost rates are
multiplied by the national average
agency direct cost percentage to
estimate the agency indirect costs as a
percentage of direct engineering costs.
Adding agency direct cost percentage to
the region-specific indirect cost
percentages yields region-specific
agency cost percentages. Total nonconstruction costs are estimated by
adding the 35.78 percent overhead cost
percentage sub-total to the regionspecific total agency cost percentages.
Using this approach, EPA calculated ten
region-specific oversight cost
percentages to be applied to the direct
engineering costs estimated in the
formula response components. These
percentages can be found in Appendix
II of the proposed rule.
Furthermore, the relationships
estimated represent only a generic,
nationwide engineering cost of a
CERCLA response because the response
category regressions were estimated
using reclamation and closure plan cost
data that had been normalized to
national values. While this was
necessary to perform regression analysis
and develop a nationwide formula, the
same labor and materials can have
different prices in different locations.
Hence, the resulting estimates described
in earlier sections would immediately
be inaccurate for any given state. To
adjust for these locality differences in
prices, the response component of the
formula is multiplied by the most
current state cost adjustment factors in
USACE (2015).179 These adjustment
factors can be found in Appendix III of
the proposed rule.
(ii) Natural Resource Damage
Component
EPA collected data on both natural
resource damages and natural resource
damage assessment costs at hardrock
mining sites from CERCLA court
settlements and judgments, and
voluntary payments. This effort resulted
in data on 64 sites. EPA’s data indicate
that natural resource damages and
response costs are not independent of
each other. Instead, response actions
have regularly been shown to influence
natural resource damages. This is
particularly true in the case of sites
receiving technical impracticability
179 See U.S. Army Corps of Engineers, ‘‘Civil
Works Construction Cost Index System,’’ Manual
No. 1110–2–1304 (31 March 2012, revised through
September 30, 2015). Available at: https://www.
publications.usace.army.mil/Portals/76/
Publications/EngineerManuals/EM_1110-21304.pdf.
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
waivers. When a technical
impracticability waiver is issued,
previously projected response costs may
be reduced. However, the remaining
contamination may lead to additional
natural resource damages.
One example summarized in U.S.
EPA (2012) 180 is the technical
impracticability waiver at the Silver
Bow Creek/Butte Area. At that site, an
EPA evaluation concluded that the
water quality in an affected alluvial
aquifer could not be improved within a
reasonable time frame even assuming
the most extensive and costly
alternatives. Thus, EPA issued a
technical impracticability decision that
waived cleanup levels for several
constituents in that aquifer. However,
when such an aquifer is left
contaminated, trustees may seek natural
resource damages for that aquifer. In the
case of the Silver Bow Creek/Butte Area,
this same groundwater appeared in the
trustees’ final restoration plan.181 So
while the technical impracticability
waiver reduced response costs, it
increased the natural resource damages.
Thus, while the proportion of total
liabilities relating to response costs and
natural resource damages was altered,
the overall magnitude was similar.
EPA notes that although the extent of
response actions ultimately necessary as
a result of a release may affect the
relative portion of how much natural
resource damages may be in comparison
with damages, the total magnitude of
potential liabilities (response costs and
natural resource damages combined)
will increase or decrease together. This
is effectively captured by a multiplier.
Thus, EPA uses a similar approach here
as to U.S. EPA (2014) 182 where the
180 See U.S. EPA (Environmental Protection
Agency). 2012. Summary of Technical
Impracticability Waivers at National Priorities List
Sites. OSWER Directive 9230.2–24. August.
Available at: https://nepis.epa.gov/Exe/ZyNET.exe/
P100EYIC.TXT?ZyActionD=ZyDocument&Client=
EPA&Index=2011+Thru+2015&Docs=&Query=&
Time=&EndTime=&SearchMethod=1&TocRestrict=
n&Toc=&TocEntry=&QField=&QFieldYear=&
QFieldMonth=&QFieldDay=&IntQFieldOp=0&Ext
QFieldOp=0&XmlQuery=&File=D%3A%5Czyfiles
%5CIndex%20Data%5C11thru15%5CTxt
%5C00000005%5CP100EYIC.txt&User=
ANONYMOUS&Password=anonymous&Sort
Method=h%7C-&MaximumDocuments=1&Fuzzy
Degree=0&ImageQuality=r75g8/r75g8/x150y
150g16/i425&Display=hpfr&DefSeekPage=x&
SearchBack=ZyActionL&Back=ZyActionS&Back
Desc=Results%20page&MaximumPages=1&
ZyEntry=1&SeekPage=x&ZyPURL.
181 See Butte Natural Resource Damage
Restoration Council (BNRC) and Montana Natural
Resource Damage Program (NRDP). 2012. Butte
Area One: Final Restoration Plan. December.
Available at: https://dojmt.gov/wp-content/uploads/
Final-BAO-Restoration-Plan.pdf.
182 See U.S. EPA (Environmental Protection
Agency). 2014. Regulatory Impact Analysis (RIA)
for EPA’s 2015 Coal Combustion Residuals (CCR)
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
Agency estimated natural resource
damages as a percent of cleanup costs
where both future cleanup costs and
future natural resource damages were
uncertain. This average percent was
used as a multiplier for the purposes of
estimating natural resource damages
once potential future response costs
were estimated. As with that previous
study, the natural resource damages and
response costs are uncertain, but EPA
found that a similar relationship
between damages and costs was
presented.
Within this dataset, EPA had both
natural resource damages and total
response costs from the response
component data collection for 24 sites.
From this subset of 24, EPA divided the
average natural resource damages by the
average response costs to generate a
hardrock mining-specific natural
resource damages multiplier. This
resulted in average natural resource
damages and natural resource damage
assessment costs of 13.4 percent of the
response costs to account for natural
resource damages and assessment costs.
Thus, EPA included a multiplier of
1.134 in the financial responsibility
formula for the natural resource damage
component. EPA solicits comment
providing additional natural resource
data. The Agency also solicits comment
on the appropriateness of a fixed
multiplier to estimate natural resource
damages within the hardrock mining
class of facilities, particularly with
respect to the risk of magnifying any
potential bias from the response cost
formula. EPA solicits comment on
alternate approach such as the use of a
geometric mean or median instead of
the mean for the multiplier calculation.
EPA solicits comment on the feasibility
of running the response component of
the model for facilities which EPA has
natural resource damages data for an
alternative method, if data is readily
available.
EPA is also considering an alternative
approach. Under this approach, EPA
would use the median natural resource
damages and natural resource damage
assessment costs of 3.8 percent of the
response costs to account for natural
resource damages and assessment costs.
Thus, EPA would include a multiplier
of 1.038 in the financial responsibility
formula for the natural resource damage
component. EPA solicits comment on
whether the median or average NRD
multiplier is more representative for
application to future hardrock mining
facilities.
Final Rule. OSWER. Washington, DC. December.
Available at: www.regulations.gov Document ID#:
EPA–HQ–RCRA–2009–0640–12034.
PO 00000
Frm 00079
Fmt 4701
Sfmt 4702
3465
(iii) Health Assessment Component
Under 42 CFR 90.14, by the Agency
for Toxic Substances and Disease
Registry (ATSDR) is required to
maintain documentation pertaining to
the costs associated with all phases of
a Public Health Assessment or a Health
Consultation (HA) performed by the
Agency to form the basis for cost
recovery by EPA.183 Upon EPA’s
request, ATSDR provided cost
information for recently completed
health assessments. ATSDR limited the
data provided to the minimum,
maximum, and average costs of health
assessments conducted over the past 18
months (as of March 2016). ATSDR did
not provide hardrock mining-specific
data, and thus non-mining health
assessment costs are included in this
dataset.
Based on the information available to
it, EPA adopted a fixed amount of
$550,000 representing the average
health assessment cost reported by
ATSDR as the health assessment
component of the proposed formula.
Health assessments often make use of
EPA-collected data. Because this
approach avoids potentially costly data
collection activities, a relatively low
amount of $550,000 is not unexpected
for an average cost. Furthermore, EPA
expects future health assessments to
generally be consistent with this amount
since ATSDR has experience performing
the same types of reports routinely.
Finally, EPA notes that this average
health assessment cost reported by
ATSDR is consistent with additional
second-hand sources of estimates that
EPA presents in Section 7 of the
Background Document. EPA solicits
comment on the appropriateness of a
fixed health assessment cost for all
classes, including data that would
justify any alternate approaches
suggested.
(c) Hardrock Mining Financial
Responsibility Formula
EPA’s proposed rule requires that a
facility’s financial responsibility amount
be adjusted for inflation to preserve the
real value of the financial responsibility.
This inflation adjustment must be made
to the entire financial responsibility
amount as calculated in 2014 dollars.
The proposed rule uses an inflation
183 See 42 CFR 90.14 Documentation and cost
recovery: (a) During all phases of ATSDR health
assessments and health effects studies,
documentation shall be completed and maintained
to form the basis for cost recovery, as specified in
§ 107 of CERCLA; (b) Where appropriate, the
information and reports compiled by ATSDR
pertaining to costs shall be forwarded to the
appropriate EPA regional office for cost recovery
purposes.
E:\FR\FM\11JAP2.SGM
11JAP2
3466
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
factor derived from the most recent
Implicit Price Deflator for Gross
Domestic Product (GDP) published by
the U.S. Department of Commerce in its
Survey of Current Business. The
inflation factor is the result of dividing
the latest published annual Deflator by
the Deflator for 2014. EPA selected the
Implicit Price Deflator for the GDP as
that has become the Department of
Commerce’s favored basis for the
Implicit Price Deflators a representation
of national output. Furthermore, the
data is readily accessible from the
Department of Commerce’s Bureau of
Economic Analysis providing for
transparent implementation.184 The
Agency solicits comment on the
appropriateness of the Engineering
News-Record Construction Cost Index
as an alternative inflation adjustment.
Additionally, in the absence of a sitespecific remedial investigation/
feasibility study (RI/FS) or ROD, EPA
cannot categorically determine that
source controls and water treatment
activities would not be necessary to
minimize the volume, toxicity, or
mobility of hazardous substances.
Therefore, as a conservative assumption
to help ensure the adequacy of the
amount of financial responsibility
should source controls and water
treatment prove necessary, EPA assumes
that both will be used, and sets the
variables corresponding to the activities
equal to one for all hardrock mining
facilities calculating CERCLA § 108(b)
financial responsibility amounts. EPA
solicits comment on two alternatives to
this approach that could be used alone
or in conjunction. In the first
alternative, EPA solicits comment on
whether a weighted average of costs
with and without source controls or
water treatment would be appropriate.
The weights for this average would be
determined based on historical use of
these responses. EPA also solicits
comment on whether a conservative
upper confidence interval such as the 95
percent confidence levels presented in
Appendix J of the background document
would be appropriate to avoid
184 See Table 1.1.9, Implicit Price Deflators for
Gross Domestic Product. Available at: https://
www.bea.gov/iTable/iTableHtml.cfm?reqid=9&
step=3&isuri=1&903=13.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
underestimating future financial
responsibility needs.
Incorporating the net present value
calculations and the assumptions of
source controls and water treatment into
the regression results, the response
category equations for the response
component are:
(1) Solid and hazardous waste
disposal category = $2,600,000 185
(2) Open pit category =
5.07×10∧(4.24+1.08×Log10[Open Pit
Disturbed Acres])
(3) Underground mine category =
$4,500,000 for an underground mine
with hydraulic head or $200,000 for an
underground mine otherwise.
(4) Waste rock category =
1.85×10∧(5.18+0.75×Log10[Waste Rock
Disturbed Acres])
(5) Heap/dump leach category =
2.29×10∧(4.57+1.01×Log10[Heap and
Dump Leach Disturbed Acres])
(6) Tailings category = 1.71×10∧
(5.32+0.68×Log10[Tailings Disturbed
Acres])
(7) Process pond and reservoir
category = 1.64×10∧(4.29+1.03×Log10
[Process Pond and Reservoir Disturbed
Acres])
(8) Drainage category = 9.56×10∧
(3.42+0.57×Log10[Total Disturbed
Acres+1])
(9) Slag pile category = $64,000×[Slag
Pile Acres] 186
(10) Interim O&M category = {1.46×
10∧(6.04+0.01×[Net Precipitation]+0.34×
Log10[Heap and Dump Leach Disturbed
Acres+1]+0.10×Log10[Tailings
Impoundment Disturbed Acres+1])}×{1/
0.0263}×{1¥(1/[1.0263∧10])}
(11) Water treatment category = {1.16×
10∧(3.22+1.10×Log10[Flow]+0.70×[InSitu Leach])}/0.0263
(12) Short-term O&M and monitoring
category = {1.82×10∧(4.01+0.38×Log10
[Total Disturbed Acres+1])}×{1/0.0263}
×{1¥(1/[1.0263∧10])}
(13) Long-term O&M and monitoring
category = {1.64×10∧(3.12+0.58×
Log10[Total Disturbed Acres+1])}/0.0263
Furthermore, the cost equation for
water treatment requires the input of
185 No variables were found to predict the
variability in solid and hazardous waste costs.
Thus, an average cost was applied as discussed in
Section 5 of the Background Document.
186 Slag piles were represented by only one cost
data point, and therefore were included as a fixed
cost of $64,000 per acre based on that data point.
PO 00000
Frm 00080
Fmt 4701
Sfmt 4702
gallon per minute flows that require
treatment. However, as discussed
earlier, EPA calculates the potential
costs associated with the use of source
control covers for many site features.
Albright (2015) 187 provides results of
EPA’s Alternative Cover Assessment
Program (ACAP). These results indicate
that such controls in place will
necessarily reduce the amounts of
seepage that may require capture and
treatment prior to discharge. Thus, EPA
expects that source controls would have
the effect of reducing the expected
volumes of water requiring treatment.
The average infiltration for the ACAP
data set was five percent of
precipitation. As a result of these
considerations, EPA has adopted the
presumption of 95 percent effectiveness
for source control covers, resulting in a
residual five percent infiltration based
on gross precipitation. EPA solicits
comment on data demonstrating that
source controls reduce the costs of
diversion and/or O&M other than water
treatment.
This results in flows being calculated
as 0.05 × Precipitation × [Total
Disturbed Acres] × 0.05166 for all flows
except for underground mine flows and
in-situ leach flows which are not
assumed to receive the same types of
source controls evaluated in ACAP. The
Agency solicits comment on this
approach for calculating the gallons per
minute flow at a facility. EPA also
solicits comment providing data
demonstrating that source controls
reduce the costs of diversion and/or
O&M other than water treatment. EPA
solicits comment on the exercise of
validating the formula by running it for
CERCLA sites that have incurred costs
across all site features.
For a hypothetical facility with a
single site feature of each type (e.g., a
single heap leach), EPA shows the
proposed financial responsibility
formula in Equation 1. EPA solicits
comment on the appropriateness of this
draft formula developed in the formulaapproach to determine a reasonable
amount for CERCLA § 108(b) financial
responsibility.
187 See Albright, William. 2015. Final Covers for
Mine Tailings. Desert Research Institute Clu-In
Seminar. Available at: https://clu-in.org/conf/tio/
mining_052015/slides/Albright_Day_Two.pdf.
E:\FR\FM\11JAP2.SGM
11JAP2
Where:
Deflatory = the most recent available GDP
Implicit Price Deflator for year y; and
Deflator 2014 = the GDP Implicit Price Deflator
for 2014
i = the ith response category (e.g., water
treatment costs);
n = the total number of relevant response
categories;
r = EPA region r (e.g., EPA Region 3); and
s = state s (e.g., Montana).
sradovich on DSK3GMQ082PROD with PROPOSALS2
(d) Inputs to the Financial
Responsibility Formula
To implement the formula and
calculate a financial responsibility
amount for the facility, the owner or
operator will have to input facility
information. The Agency anticipates
that the information required by the
formula will largely be existing
information, and that most facilities will
not have to develop information to
implement the financial responsibility
formula. EPA solicits comment on
whether the information required is
largely existing at facilities.
The first piece of information required
is acreage. For the site feature-specific
calculations, the acreage is the total of
all areas covered by the particular site
feature. For example, a facility with two
waste piles would add the acreage of
each together and input the total acreage
into the calculation. For site-wide
calculations, such as short-term O&M,
the acreage entered would be the entire
area covered by the hardrock mine and/
or mineral processor.
Several inputs to the formula are yes/
no determinations. These include the
presence of a pressurized bulkhead, insitu leaching, and underground mines.
If these are not present, the owner or
operator should enter a zero into the
formula.
(e) Reductions to the Financial
Responsibility Amount
The Agency is proposing under
§ 320.63(c) to allow (but not require)
owners or operators to reduce the
response cost component under
§ 320.63(b) by making an adequate
demonstration that risk reducing
regulatory requirements are in place.
Owners and operators will have to
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
demonstrate that they meet specific
minimum standards for various formula
components, along with a general
performance standard, and other
requirements. This approach is
specifically designed to account for
reductions in risk at a facility that may
result from compliance with applicable
Federal, state, tribal, and local
requirements. The Agency solicits
comment on this approach.
In developing these proposed
requirements, EPA sought to balance a
number of competing concerns. EPA
desires to account for risk-reducing
effects of compliance with other
programs, while acknowledging that
requirements for hardrock mining and
mineral processing facilities, and
implementation of them, vary
substantially across the country. The
CERCLA § 108(b) proposed rules,
however, are nationally applicable. EPA
was thus concerned that, should it allow
an owner or operator to invoke other
requirements as justification for
reducing the amount otherwise required
by the formula, it should do so only to
the extent that reductions can
confidently be tied to reductions in risk
in a nationally-applicable rule.
Similarly, in order for EPA to allow an
owner or operator to reduce the amount
of financial responsibility that it must
obtain under CERCLA § 108(b) based on
its compliance with non-CERCLA
regulatory requirements imposing future
risk-reducing controls, EPA must be
confident that those non-CERCLA
requirements will have their intended
risk-reducing effects, by ensuring the
controls will be implemented when
necessary. Lastly, as discussed earlier,
EPA has sought to develop an effective,
nationally-applicable formula that can
be readily applied by the regulated
community and overseen by EPA. EPA
is accordingly proposing to allow for
simple, all-or-nothing reductions for the
formula sub-components, when they
can be justified. In sum, therefore, this
proposed rule allows an owner or
operator to rely on other regulatory
controls in order to obtain reductions in
the amount of CERCLA financial
assurance it must obtain, but includes
PO 00000
Frm 00081
Fmt 4701
Sfmt 4702
3467
several conditions that must first be met
by the owner or operator. EPA intends
for this approach to allow for a more
tailored amount of financial
responsibility under the nationallyapplicable formula, while still providing
assurance that the resultant amount is
consistent with the level of risk.
First, the reductions incorporate a
general performance standard in
paragraph 326.63(c). In order to qualify
for a reduction, the owners and
operators must be prepared to
demonstrate to EPA that any
requirements relied upon under
paragraph 320.63(d) also meet the
general standard, that the engineering
requirements will result in a minimum
degree and duration of risk associated
with the production, transportation,
treatment, storage, or disposal, as
applicable, of all hazardous substances
present at that site feature. This general
requirement will provide a benchmark
against which the controls can be
measured. In addition, this provision is
intended to reflect that if the general
performance standard is met, the
proposed approach allows for a
complete reduction from the financial
responsibility formula component.
Where the requirements do not result in
a minimum level of risk, EPA cannot be
confident that a complete reduction for
that cost component is warranted.
Next, EPA is proposing to require that
any of the requirements relied upon be
enforceable against the owner or
operator claiming the reduction, that
they have in place adequate financial
responsibility to assure that the
requirements will be implemented, and
that they certify that the facility is in
compliance with the requirements.
These conditions are intended to ensure
that the underlying controls that form
the basis of the risk reduction are highly
likely to occur and thereby achieve their
intended risk-reducing effect.
Third, EPA is proposing to require
that the owner or operator certify that
the facility is in compliance with the
requirements relied upon in claiming a
reduction to the facility’s financial
responsibility amount. This condition is
intended to ensure that the controls
E:\FR\FM\11JAP2.SGM
11JAP2
EP11JA17.000</GPH>
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
3468
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
upon which the reduction is based are,
in fact, currently implemented at the
facility.
Fourth, the proposed rule also
includes a general requirement that the
owner and operator provide the
information necessary for EPA to
evaluate the claimed reductions.
Specifically, § 320.63(c)(2) provides that
information submitted must provide
sufficient and detailed supporting
information adequate to allow EPA to
evaluate the adequacy of the financial
assurance and of the underlying
requirements for meeting the reduction.
Finally, EPA is proposing specific
minimum standards for the various
categories of reductions.188 These are
specified in § 320.63(d)(3). This portion
of the proposed rule provides the
criteria that owners or operators must
meet for particular reductions. The
performance standards in paragraph (c)
describe objectives for reducing risk at
facilities and include future engineering
controls and practices that reduce the
risk associated with the hazardous
substances at the site. That paragraph
provides reduction criteria for each
component of the maximum financial
responsibility formula—capital costs,
interim O&M, short-term O&M, longterm O&M, water treatment, hazardous
materials management, and surface
water drainage. For capital costs, the
paragraph provides reductions for each
site-feature category—open pits,
underground mines, waste rock, heap
and dump leach, tailings impoundments
and stacks, process ponds and
reservoirs, and slag piles. Owners and
operators that meet the criteria for a
formula component reduction would
not have to calculate financial
responsibility for that component.
Because the natural resource damage
component is calculated by a multiplier,
this component would produce a
correspondingly smaller amount, as the
reductions are claimed.
EPA solicits comment on the
proposed reductions to the financial
responsibility amount. EPA solicits
comment specifically on whether the
Agency has identified the appropriate
criteria for the reductions, and whether
the reduction criteria will provide
incentives for owners or operators to
implement more protective practices at
their facilities to lower their financial
responsibility amounts. EPA solicits
comment on whether the criteria for the
188 See U.S. EPA, Office of Land and Emergency
Management, Reductions Technical Support
Document: Financial Responsibility Requirements
under CERCLA § 108(b) for Classes of Facilities in
the Hardrock Mining Industry Proposed Rule,
November 30, 2016 for discussion of the
development of the reduction criteria.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
reductions are described in sufficient
detail to allow for effective
implementation and, if not, how they
might be modified. EPA solicits
comment on whether the reduction
criteria are likely to be complied with
and/or enforced such that, at the
applicable time, risk at the facility will,
in fact, be reduced.
EPA solicits comment on whether
alternate or more flexible engineering
standards can substitute for some or all
of the numeric engineering standards in
the proposed reduction criteria (e.g.
planning for a 200-year storm event,
reduction of net precipitation by 95
percent). In addition, EPA requests
comment on whether the proposed
reduction criteria would limit flexibility
necessary for innovative or different
site-specific approaches and, if so, how
those might be preserved under the
proposed rule. EPA also invites
comment on a possible role for thirdparty certifiers or other regulatory
authorities in identifying alternative,
protective site-specific controls as a
basis for financial responsibility
reductions. EPA also requests comment
on whether other regulatory programs
already impose the requirements that
would satisfy the reduction criteria.
Finally, EPA solicits comment on
allowing reductions to the financial
responsibility amount for other riskreducing practices and/or controls (e.g.,
voluntary practices) that are
implemented at hardrock mining
facilities that should be accounted for in
the reductions, and on how, if
reductions were allowed for such
practices and/or controls, EPA could
assure that those controls would remain
in place and be effective over time
where there is no regulatory program
overseeing their maintenance and
operation.
As discussed above, EPA is seeking to
develop reduction criteria standards
that are appropriate in the context of a
nationally applicable rule. The Agency
requests comment on whether any
particular reduction criteria in
paragraph 320.63(c) might be
inappropriate under particular facility
conditions that could still be defined in
the context of a national rule.
Specifically, EPA requests that
commenters identify particular facility
conditions where a nationally
applicable standard different from the
reduction criteria proposed should be
applied. EPA requests that commenters
identify both those alternative facility
conditions and any appropriate
reduction criteria with particularity.
EPA is particularly interested in
objective criteria that define facility
PO 00000
Frm 00082
Fmt 4701
Sfmt 4702
conditions that could be verified by a
certified professional.
Program Deferral Approach
As described above, EPA is proposing
to allow reductions to the financial
responsibility amount for the response
component of the financial
responsibility formula. Those
reductions are based on criteria
established in the rule for each of the
thirteen response categories that
together determine the response
component amount. EPA is proposing
that eligibility for the reductions be
determined by owners and operators on
a site-specific basis, subject to EPA
review.
EPA has also considered whether
reductions to the financial
responsibility amount could be made by
EPA, on a broader basis, to avoid
expenditure of facility resources to
determine eligibility for reductions, and
reduce the burden on EPA to review
each facility’s claimed reductions
individually. EPA is therefore also
soliciting comment on whether the rule
should also allow for EPA to conduct a
programmatic review of other regulatory
requirements and their implementation,
with the objective of determining
whether the reduction criteria are met
across the program in question. Such a
program deferral approach would
provide for programmatic-based
reductions in situations where the
program meets the requirements for
deferral of CERCLA § 108(b)
requirements for the full response
component of the financial
responsibility formula—that is, for all
facilities and all response categories.
Under this approach, owners and
operators of facilities would not be
required to comply with the
requirements to calculate a financial
responsibility amount and to obtain a
financial responsibility instrument
under EPA’s CERCLA 108(b) regulations
after EPA determines that a state or
federal program meets certain criteria.
The remainder of the requirements of
Part 320 would remain applicable at the
facility (e.g., notification to EPA, public
notice requirements). Facilities would
remain subject to these other
requirements in order for EPA to
monitor the regulated universe and
ensure the continuing validity of any
deferral determination. EPA would be
able to withdraw its determination and
impose all CERCLA § 108(b)
requirements if the requirements for
deferral are no longer met.
The criteria for deferral would be
designed to assure that EPA would be
able to make a program-wide
determination that facilities regulated
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
by a particular program would be
subject to, and in compliance with,
requirements that will result in a
minimum degree and duration of risk
associated with the production,
transportation, treatment, storage, or
disposal of all hazardous substances
present. This would involve EPA
making a determination that: (1) The
federal or state program has authority to
impose all of the requirements
necessary for the reductions described
in proposed 320.63(d); (2) the program
would impose those requirements on
the same regulated universe subject to
the proposed rule; (3) the program
ensures that each facility obtains
adequate financial assurance to ensure
the other requirements will be
implemented; and (4) the requirements
will be enforced to assure compliance.
EPA recognizes potential advantages
to this approach. First, deferral of these
requirements would minimize the
implementation of the CERCLA § 108(b)
rule at facilities that are already subject
to programmatic requirements that, if
implemented and enforced, can be
determined to result in a minimum level
of risk, thereby focusing implementation
resources on the remaining universe of
facilities with less protective practices.
This approach would also reduce costs
for owners and operators subject to
programs that qualify for deferral of
CERCLA § 108(b) requirements, as they
would not have to submit information to
support the calculation of a financial
responsibility amount, or the reductions
to that amount. Finally, providing for
deferral provides an incentive for
programs to adopt the necessary
requirements to comply with the
reduction criteria.
At the same time, EPA recognizes
several disadvantages to the
programmatic deferral approach. First,
EPA is concerned that it may be difficult
for the Agency to ensure that facilities
remain in compliance with the
underlying requirements, and thus
ensure that the facilities continue to
present a minimum degree and duration
of risk over time. Potential problems
could include the necessity for EPA to
monitor changes to permitting regimes
and substantive technical requirements.
EPA is also concerned about how it
could ensure that the financial
assurance actually provided by every
facility under a given regulatory regime
is sufficient to ensure that the reduction
criteria would be met in practice.
Without such an assurance, EPA may
find it difficult to conclude that the
regulatory program requirements relied
upon for the deferral determination will
result in minimum risk. This concern is
presented particularly where the
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
determination of the amount of financial
assurance is subject to the discretion of
the regulator, instead of being identified
with particularity in the terms of the
regulations. In this case, EPA is unsure
how it could make a broad-based
determination that financial assurance
requirements will be sufficient, if they
have potential for varying stringency in
practice. Finally, EPA is concerned that
as a practical matter it may be difficult
for the Agency to withdraw a
programmatic deferral once granted,
even where there is evidence that the
criteria for programmatic deferral are no
longer met. Thus, EPA expects that any
deferral option would necessitate an
oversight mechanism short of full
withdrawal. EPA also expects that a
dispute resolution process to resolve
differences that arise among
implementers would be an important
component of a programmatic deferral
approach.
It should be noted, however, that in
taking this approach, EPA would not
expect to review Federal and state
closure and reclamation programs for
adequacy, or to judge the quality or
efficacy of those programs. EPA’s
concern would be whether requirements
meeting the reduction criteria, designed
for purposes of CERCLA § 108(b), are
imposed and enforced at facilities, and
secured with financial assurance
adequate to assure their
implementation. Those questions are
separate from the question of whether
the Federal or state closure program is
adequate for its intended purpose or
whether the financial assurance
required is adequate financial
responsibility for the purpose of that
program.
EPA solicits comment on the
programmatic deferral approach. EPA
particularly solicits comment on
whether regulators would be interested
in seeking an EPA determination of
programmatic deferral, whether existing
programs would qualify for
programmatic deferral based on the
proposed reduction criteria, whether
commenters believe EPA could assure
compliance with the proposed
reduction criteria if a programmatic
deferral was implemented, how a
conflict resolution process might be
developed and implemented, and how a
programmatic deferral approach might
be improved.
Partial Program Deferral Approach
EPA also solicits comment on
whether to consider partial deferral
from the response component of the
formula where a federal or state program
met the criteria for deferral for some but
not all of the thirteen response
PO 00000
Frm 00083
Fmt 4701
Sfmt 4702
3469
categories. This would result in a
requirement to calculate a financial
responsibility amount and to obtain a
CERCLA § 108(b) instrument, for a
lower overall amount. This would not,
however, otherwise change the
operation of the rule in practice. As was
discussed in section IV.D of this
preamble, because the formula employs
an aggregation of individual costs to
obtain an overall amount for the facility,
the individual cost components are not
themselves intended to represent any
sub-limits within the actual financial
responsibility instrument—in other
words, the total amount of funds would
be available for any future Superfund
action anywhere across the facility, and
would not be tied to particular site
features. This would remain the case in
any partial deferral approach. For
example, a program might include
requirements that would satisfy the
reduction criteria for the waste pile
response category but not for the open
pit category. In that situation, under this
approach, owners or operators would
not have to calculate an amount for
waste pile areas at their facilities, or
make the demonstrations necessary to
qualify for reductions to that amount.
Those facilities would still have to
calculate a financial responsibility
amount for open pit areas at their
facilities, and any other portions of the
formula not subject to an EPA partial
deferral determination. The total
amount of funds would be available for
any future Superfund action
EPA sees a potential advantage to the
regulated community from such an
approach, because of the timing
requirements of the statute. As was
discussed in section VI.D.2 of this
preamble, CERCLA § 108(b)(3) includes
a statutory phasing provision that
requires financial responsibility
requirements to be imposed as quickly
as can reasonably be achieved but in no
event more than four years after the date
of promulgation of the final rule. Thus,
EPA has included provisions in the
proposed rule reflecting this provision
(§ 320.61). Owners and operators will
need to comply with the requirement to
calculate a financial responsibility
amount and obtain a CERCLA § 108(b)
instrument in accordance with the
phase-in provisions of the proposed
rule, until EPA makes a final
determination on deferral. EPA’s ability
to make any deferral decisions (partial
or complete) quickly, may in turn
depend upon the actions of another
regulator to make changes to its
regulations, and/or the resources
available to the Agency to undertake the
necessary reviews. A partial program
E:\FR\FM\11JAP2.SGM
11JAP2
3470
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
deferral approach, even if adopted on a
temporary basis, may allow EPA to
make more rapid determinations on
deferral requests, while federal and state
mining programs make any necessary
modifications to qualify for
programmatic deferral. On the other
hand, a partial deferral approach may
increase the burden on EPA to
undertake multiple reviews of many
different programs.
EPA solicits comment on this
approach. EPA requests comment on
any drawbacks to allowing for partial
deferral and, if the Agency were to
adopt this approach, whether this
approach should be a long-term
component of the CERCLA § 108(b)
requirements, or whether it should be a
temporary mechanism to allow time for
program modifications necessary to
comply with the reduction criteria.
Partial Reductions Within Formula SubComponents
Finally, EPA is also soliciting
comment on whether partial reductions
should be allowed within the formula
sub-components, and how partial
reductions might be structured. As was
explained above, EPA is proposing to
allow for all-or-nothing reductions
when all reduction criteria are met, and
when the general performance standard
(and other requirements) are met. As
also explained above, one key
consideration is how to ensure that the
reductions can confidently be tied to
reductions in risk in a nationallyapplicable rule. Accordingly, EPA does
not expect that allowing partial
reductions for a response category
amount based on partial compliance
with the reduction criteria would be
appropriate, as the reduction criteria are
not intended to reflect proportional
reductions in risk—rather, EPA’s intent
is to establish a combined system of
requirements that together, would result
in a set of conditions that result in a
minimum degree and duration of risk.
Nonetheless, EPA solicits comment on
whether partial reductions should be
allowed for response categories. EPA
requests information regarding how the
amount of a partial reduction could be
determined, and the basis upon which
EPA could apportion the reduction in
risk among the reduction criteria to
assign a corresponding decrease in the
financial responsibility, while still
providing assurance that the resultant
financial responsibility amount will be
consistent with the level of risk.
5. Information Submission and
Recordkeeping Requirements (§ 320.64)
Owners or operators are required
under § 320.66 to submit information to
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
support the calculation of financial
responsibility at their facility, and to
maintain that information for a period of
three years. The information submitted
must be in sufficient detail to enable
EPA to review the cost estimate and
determine its adequacy.
The Agency anticipates that the type
of information can be found in existing
documents such as the owners or
operator’s plan of operations,
reclamation and/or closure plans, and
permits. EPA solicits comment on these
reporting and recordkeeping
requirements.
6. Third-party Certification (§ 320.65)
EPA is proposing that elements of the
calculation of the financial
responsibility amount submitted to EPA
be certified by an independent qualified
professional engineer. EPA believes that
this requirement would improve the
accuracy of submissions, and would
thereby facilitate implementation of the
rule by requiring less review by EPA of
financial responsibility amount
submissions.
The requirements to determine a
financial responsibility amount that are
proposed in § 320.63 include a formula
in § 320.63(b) and criteria for reducing
the financial responsibility amount in
§ 320.63(c). EPA solicits comment on
the use of professional certifications in
the implementation of those
requirements. EPA is particularly
interested in which elements of the
formula would be best suited to
certification by an independent
professional engineer, what other
independent professional certifications
might be appropriate, and whether
independent professional certifications
are beneficial.
Proposed § 320.65 includes the
requirement that the qualified
professional engineer that certifies the
financial responsibility amount be
‘‘independent.’’ EPA is considering
whether the requirement for
independence would help strengthen
the certifications under this proposal,
and whether that extra level of
protection is necessary in this rule
where EPA is not the permitting
authority and will therefore have less
familiarity with the facility than it
would in other circumstances (e.g.,
RCRA closure requirements under 40
CFR part 264 and Part 265). EPA solicits
comment on the proposed requirement
for independence of the qualified
professional engineer, on whether a
requirement that a qualified
professional engineer be independent
would strengthen the certification
requirement, and on whether such a
requirement is appropriate under this
PO 00000
Frm 00084
Fmt 4701
Sfmt 4702
proposed rule. EPA wants to ensure that
the definition of ‘‘independent’’
contribute to the objectivity of the
certifier. Thus, EPA solicits comment on
criteria to define ‘‘independent,’’
including criteria related to personal,
professional, and economic
relationships between the owner or
operator and the certifier.
Finally, EPA solicits comment on
whether certification by other
professionals other than professional
engineers could be incorporated into
this proposed rule to facilitate
implementation. For example, EPA has
heard from states that they are using
third parties to review site features,
bonding requirements, and financial
documents. EPA request comment on
the experience of implementers and the
regulated community on the use of
professional certifications in regulatory
programs, including the benefits and
disadvantages of such an approach.
7. Continued Risk at Hardrock Mining
Facilities
Since issuing the 2009 Priority Notice,
EPA has continued to gather data and
information on hardrock mines,
practices, and risks associated with
classes of facilities within the industry.
EPA’s review of available data indicates
abundant evidence that hardrock
mining facilities continue to pose risks
associated with the management of
hazardous substances at their sites. EPA
reached this determination after further
identifying and analyzing various
sources of data, including: (1) CERCLA
site data to better understand the types
and sources of releases that occurred at
National Priority List (NPL) and NPLequivalent cleanups, (2) Toxics Release
Inventory (TRI) and Resource
Conservation and Recovery Act (RCRA)
Hazardous Waste Biennial Report (BR)
data to determine which facilities
reported CERCLA hazardous
substances/hazardous wastes, (3)
Emergency Response Notification
System (ERNS) to learn about the types
and causes of releases reported, and (4)
numerous existing reports that
evaluated releases that occurred at
hardrock mining and processing
facilities.189 Each of these are further
discussed later in this preamble.
In developing this proposed rule, EPA
also documented examples of releases
and threatened releases of hazardous
substances from recent and current
mining operations. The documents
developed by EPA can be found in the
docket for this rulemaking, and are
discussed below.
189 These databases are all available on the EPA
Web site—www.epa.gov.
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
a. Releases from Mining and Mineral
Processing Facilities 190
This document discusses sources of
releases at approximately thirty recently
or currently operating mines and
mineral processing facilities that had no
previous significant legacy mining
issues. These releases to the
environment from mining and mineral
processing activities, including tailings
impoundments, waste rock piles, open
pits, and leach pads were subsequently
mitigated using CERCLA or CERCLA
like actions under Federal and/or state
statutory authority. Mines that have
predicted future discharges to the
environment and have proposed either
preventative actions or CERCLA like
mitigations also are discussed.
Examples of releases at currently
operating facilities discussed in this
document include:
Smoky Canyon Mine/Pole Canyon
Overburden Disposal Area (ODA): At
the Smoky Canyon Mine in Idaho,
phosphate ore is extracted from a series
of open pits, located on the eastern
slope of the Webster Range between
Smoky Canyon and South Fork Sage
Creek. To extract the ore, JR Simplot
removes and disposes the overburden
nearby; the Pole Canyon Overburden
Disposal Area (ODA). The Pole Canyon
ODA is an external disposal area that
covers approximately 120 acres.
Downstream of the ODA, selenium
concentrations in groundwater and
surface water emanating from the toe of
the ODA exceed risk-based screeninglevel benchmarks for human receptors
(surface water and groundwater) and
ecological receptors (surface water).
Removal and remedial actions are
currently ongoing at the site.
Buckhorn Mine: The Buckhorn gold
mine owned by Kinross Corp. located in
Washington has been in operation since
2007. The site is an underground mine
that includes waste rock. Water
management during spring snow melt
has been a well-documented problem at
the mine. In 2011 and 2012, the
Buckhorn Mountain mine’s
groundwater capture zone failed to
contain spring rains and snow melt,
resulting in contaminated water
reaching Gold Bowl Creek. Water
generated in the underground mine can
carry high concentrations of heavy
metals such as copper, lead and zinc
that must be captured and processed
before being discharged at approved
outfalls. Violations in 2011 include
allowing water discharges causing slope
instability and erosion, and for
190 See U.S. EPA, Office of Land and Emergency
Management, Memorandum to the Record: Releases
from Hardrock Mining Facilities, November 2016.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
discharging water at an unauthorized
point. The mine is required to capture
contaminated groundwater from around
mine excavations and tunnels and
under surface stockpiles, and pump it to
a treatment plant. Since operations
began at the mine in 2007, the
Washington Dept of Ecology has issued
$62,000 in penalties, six notices of
violation and six administrative orders
directing the company to control
stormwater, rectify groundwater capture
zone inadequacies, prevent slope
failures, and comply with permit limits
for nitrates, sulfate, acidity, copper,
lead, zinc and solids from stormwater
ponds.
Florida Canyon Mine: The Florida
Canyon gold and silver open pit mine
with cyanide heap leach operation,
located in Nevada, has been in
operation since 1986. A groundwater
plume consisting of weak acid
dissociable (WAD) cyanide, mercury
and nitrate was identified on the west
side of the mine’s leach pad and
appeared to be related to process
solution leakage. As a result of
continued contamination of
groundwater the Nevada Division of
Environmental Protection (NDEP)
issued a Finding of Alleged Violation
and Order in August 2012. BLM also
placed the mine in non-compliance in
August 2012. The facility has identified
and mitigated groundwater contaminant
sources, as well as operated and
optimized the groundwater plume
pump-back system and evaluates on a
quarterly basis to verify that the plume
migration has been halted, and that
groundwater cleanup is occurring.
Jerritt Canyon: The Jerritt Canyon
mine located in Nevada has been in
operation since 1981. The gold and
silver mine is an open pit and
underground cyanide vat leach
operation that also processes refractory
ores using both roasting and
chlorination processes. Seepage from
the Tailings Storage Facility 1 (TSF–1)
was detected in the alluvium in 1987. In
an effort to address the seepage issue
nine trench drains were constructed
along the embankment toes in 1988 to
intercept and collect seepage from the
impoundment. As of January 2015, a
ring of ninety monitoring wells
surrounded TSF–1, of which 76 are
operational. The facility is required to
operate, maintain and monitor the
Seepage Remediation System at all
times to ensure the capture of affected
groundwater, to preclude further
migration, and to ensure contraction of
the overall extent of the TSF–1 seepage
groundwater contaminant plume.
Contamination from TSF–1 leakage has
degraded groundwater in the immediate
PO 00000
Frm 00085
Fmt 4701
Sfmt 4702
3471
vicinity, including in some cases with
antimony, arsenic, cadmium,
magnesium, manganese, mercury,
selenium, and WAD cyanide.
Authorization by NDEP to impound
tailings slurry into another tailings
storage facility (TSF–2) was granted in
July 2013 and almost immediately, the
150 gpd permitted leak detection rate
was exceeded. The facility believed that
the specific cause of the exceedance was
unknown but it was assumed to be
puncture(s) in the primary liner system
and/or residual meteoric waters that
entered the system during liner repairs
before operation began. After several
unsuccessful attempts at addressing the
leakage, the facility opted to manage
TSF–2 as a single-lined facility and
agreed to install vadose zone wells
outside the periphery of TSF–2.
b. Overview of Practices at Hardrock
Mining and Mineral Processing
Facilities and Related Releases 191
EPA also gathered information on
current mining and mineral processing
practices to better understand the extent
to which present day practices might
have changed, determine whether
currently operating hardrock mining
and processing facilities continue to
release CERCLA hazardous substances,
and evaluate the present and future
concerns regarding these releases. Initial
research efforts focused on
characterizing practices within each
commodity sector. However, hardrock
mining encompasses multiple
commodities that represent a broad
range of activities and marketable
products. Through initial research and
consultation with mining experts, EPA
concluded that, for the most part, many
of the mining, mineral processing, and
waste management practices that are in
widespread use within the current U.S.
hardrock mining industry have a
common thread regardless of the
commodity. EPA therefore concluded
that rather than evaluate releases on a
commodity by commodity basis, a better
approach was to focus on commonly
employed practices and, when
necessary, also evaluate commodityspecific issues and processes. EPA thus
identified the following thirteen
hardrock mining, mineral processing,
and associated waste management
practices for detailed evaluation: (1)
Surface and underground mining; (2)
non-entry (in-situ leaching or solution)
mining; (3) physical, gravity, and
magnetic processing; (4) flotation; (5)
191 See U.S. Environmental Protection Agency,
Draft Comprehensive Report: An Overview of
Practices at Hardrock Mining and Mineral
Processing Facilities and Related Releases of
CERCLA Hazardous Substances, November 2016.
E:\FR\FM\11JAP2.SGM
11JAP2
3472
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
cyanidation; (6) acid leach, solvent
extraction, and electrowinning; (7)
pyrometallurgical processes; (8) Bayer
process for refining alumina; (9) ion
exchange in uranium and phosphoric
acid processing; (10) mine-influenced
water; (11) waste rock piles; (12) tailings
management; and (13) mining processes
leaks and spills.
For each practice, EPA gathered
information including literature reviews
of technical references, academic
sources, and government publications.
EPA also consulted with United States
Geological Survey (USGS) staff and
mining experts. EPA focused this
research and discussions on the
following topics for each practice listed
earlier: (1) Historical and current use,
(2) technical description, (3) potential
sources and releases of CERCLA
hazardous substances and management
practices to address those potential
sources and releases, and (4)
documented releases at historical sites
and currently operating
facilities.192 193 194 195
EPA developed a profile of historical
and contemporary practices and the
environmental releases of CERCLA
hazardous substances associated with
each practice. Information about
historical sites was gathered largely
from Record of Decision (ROD) and
Remedial Investigation/Feasibility
Study (RI/FS) documents. Information
about currently operating sites came
from various EPA databases, Emergency
Response Notification System (ERNS)
incident notifications, Mine Safety and
Health Administration (MSHA) records,
Federal and state permit documents,
and general research.
EPA selected a sample of the 102
historical CERCLA sites (including both
NPL and non-NPL sites at which
removal actions occurred), involving
hardrock mining and primary mineral
processing sites, for additional data
192 See U.S. Environmental Protection Agency
Region 10, EPA and Hardrock Mining: A Source
Book for Industry in the Northwest and Alaska
(Washington, DC: U.S. Government Publishing
Office, 2003).
193 See U.S. Environmental Protection Agency,
Damage Cases and Environmental Releases from
Mines and Mineral Processing Sites, March, 2007.
194 See Mining Sites on Superfund’s National
Priorities List—Past and Current Mining Practices,
Van E. Housman and Stephen Hoffman, U.S.
Environmental Protection Agency, Washington,
D.C., Published in: Proceedings, Chapter 6, Risk
Assessment/Management Issues in the
Environmental Planning of Mines, Society for
Mining, Metallurgy and Exploration (SME)
(September 1992), Proceedings, Second
International Conference on Environmental Issues
and Management of Waste in Energy and Mineral
Production, University of Calgary (1992).
195 See U.S. EPA, Office of Land and Emergency
Management, Memorandum to the Record: Releases
from Hardrock Mining Facilities, November 2016.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
collection to characterize the practices
and releases of hazardous substances.
Some findings of the study follow.
Underground and surface mining
create large amounts of excavated
material, with surface mining tending to
generate greater amounts of waste rock.
Large-scale surface (open-pit) mining
techniques generally create a greater
surface impact than underground or
non-entry (e.g., in situ leaching) mining
methods. Surface mines generate dust,
large piles of waste rock, and large,
usually permanent holes in the earth’s
surface. The corresponding amount of
waste rock and tailings being mined and
deposited is increasing as a result of
large-scale mining operations. The scale
of these mining operations poses
formidable obstacles to effectively and
efficiently addressing releases. Such
large scale mining operations cause a
significant increase in exposure of ore
constituents to precipitation, resulting
in the leaching of hazardous substances
to ground and surface waters, and to the
wind, resulting in air emissions. The
Rio Tinto Kennecott Bingham Canyon
site, an open-pit copper, gold, silver,
and molybdenum mine located near Salt
Lake City, Utah provides an example of
the problems posed by such large scale
mining operations. As part of its
operations, Kennecott had deposited
waste rock on the slopes of the nearby
Oquirrh Mountains. The waste rock
dumps leached metals-rich acidic water
first through an unlined reservoir and
then into a groundwater plume that
extended 72 square miles. The State of
Utah took legal action against Kennecott
as a result of the contamination in 1986;
as a result of a consent decree reached
in 2007, Kennecott agreed to treat the
contaminated groundwater for the next
forty years.196
Similar to practices at some mines
that became NPL sites, mining is
currently performed in open pits and
underground mines, both of which may
discharge acidic waters, referred to as
acid mine drainage that can result when
stormwater, surface water or ground
water comes in contact with sulfur
bearing minerals, creating acidic water
which dissolves and leaches toxic
metals into the environment. The
Formosa Mine, a former copper, zinc
and thorium mine in southwest Oregon,
provides an example of the risk posed
196 See Earthworks Factsheet: Problems with
Bingham Canyon Mine, Earthworks, published
2011. Accessed December 29, 2015, at: https://
www.earthworksaction.org/files/publications/FS_
Problems_BinghamCanyon_2011_low.pdf; and U.S.
EPA Region 8 and Utah Department of
Environmental Quality, Five-Year Review Report:
Kennecott North Zone Superfund Site, Salt Lake
County and Tooele County, Utah (Washington, DC:
U.S. Government Printing Office, 2014).
PO 00000
Frm 00086
Fmt 4701
Sfmt 4702
by releases from underground mines. In
this case, storm water-driven
contaminant releases from the mine
have led to an annual discharge of
approximately five million gallons of
acid rock drainage, containing up to
30,000 pounds of dissolved copper and
zinc, along with other metals. One of the
primary sources of these metals is
underground mine workings; low pH
shallow ground water and adit drainage
to surface water, both laden with high
concentrations of metals. According to
the State of Oregon, the mine has
contaminated 18 miles of the Oregon’s
Umpqua watershed (Middle Creek and
South Fork of Middle Creek and Cow
Creek)—eliminating prime habitat for
the threatened Oregon coast Coho
salmon and steelhead.197
Dust and waste rock, produced during
both open-pit and underground mining,
can release trace elements and other
toxic substances. Waste rock and
overburden piles are typically stored onsite and remain an important
consideration for the environmental
performance of currently operating
mines. Disposal typically involves
depositing the waste rock in dedicated
dumps or piles, or in some cases using
it as mine backfill. Waste rock can also
be co-disposed with filtered tailings, or
in a slurry pond. Further, releases from
waste rock disposals can arise years
after operations have ceased, through
discharges of mine influenced water,
and pile deformation or collapse. Thus,
waste rock disposals are often the focus
of reclamation and closure plans and
require consistent and long-term
maintenance, monitoring, and
potentially treatment.
As with acid mine drainage, other
mine influenced water can also be of
concern. Mine influenced water
encompasses any water whose chemical
composition has been affected by
mining or mineral processing. This
includes not only acid mine drainage
but also drainage that is neutral or
alkaline. In addition to environmental
concerns posed by acidity or alkalinity,
mine influenced water often contains
elevated concentrations of mobilized
contaminants, suspended solids, or
sulfate or arsenate content. There are
many potential sources of mine
influenced water, because it includes
any natural waters that come into
contact with mining operations.
Common sources include groundwater
affected by pits or underground
workings, surface water that has entered
197 Also see: Earthworks, Modern Mining Needs a
Modern Mining Law. Available at: https://www.
earthworksaction.org/library/detail/modern_
mining#.V-QlSk37VD8.
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
surface excavations, or any precipitation
that comes into contact with pit faces,
leach piles, waste rock piles, or tailings
piles.
The risk for contamination from
hazardous substances originating in
waste rock depends on the mineralogy
and geochemical composition of the
waste rock and its level of exposure to
air and water at the disposal site. For
example, sulfide rock can generate acids
that dissolve trace elements that,
without long-term containment,
collection, and treatment, pose a
significant concern long after initial
disposal. Discharges can take years to
develop, and pose a long-term risk of
hazardous releases at the site.
Environmental issues resulting from
mine influenced water vary depending
on commodity, climate, type of mine or
mineral processing facility, and mine
phase. A key characteristic for most
mine influenced water (whether acidic,
neutral, or alkaline drainage) is an
elevated concentration of trace elements
that have leached from surrounding
solids such as waste rock, tailings, or
mine surfaces. These acidic and metalcontaminated fluids are frequently a
serious problem at mines and may be
acutely or chronically toxic and may
have harmful effects on humans, fish,
animals, and plants.
An example of such a situation is the
Barite Hill/Nevada Goldfields facility.
The Barite Hill gold/silver mine located
in South Carolina was previously
owned by Nevada Goldfields, Inc., who
operated an open pit cyanide heap leach
operation on the property from 1989
until 1994. Nevada Goldfields
conducted mine reclamation activities
from 1995 until 1999 when they went
bankrupt and subsequently abandoned
the property. After the mine closed, the
10-acre Main Pit began to fill with
water. At its highest, the Main Pit
contained approximately sixty million
gallons of highly acidic water with high
dissolved metals content. The main
mine pit, ponds, sediment, surface
water and soil are contaminated with
arsenic, cadmium, chromium, copper,
lead, mercury, nickel, selenium, silver,
zinc, and cyanide. Contamination
affected surface water and sediment in
Hawe Creek and its tributaries, posing a
threat to people who eat fish from the
Hawe Creek fishery as well as a nearby
drinking water reservoir. When acid
mine drainage occurs, it is extremely
difficult and often very expensive to
control, and also often requires costly
long-term management measures.
Mineral processing practices likewise
raise significant release issues. For
example, flotation processes generate
tailings that consist of a mixture of
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
waste material and the remaining liquid,
which consists mostly of water and any
remaining reagents. These are generally
pumped to a tailings impoundment,
where solids are settled out of the
solution. In some cases, reagents have
the potential for environmental harm.
Although most of these reagents are
consumed during flotation and only
small residual quantities make it into
the tailings, facilities might dispose of
wastes from various processes in the
same waste management units, with the
resulting mixture containing more
hazardous constituents than tailings
from flotation alone.
The use of cyanide in gold mining
operations creates additional risks,
including the potential release of
cyanide into soil, groundwater, and/or
surface waters, which has resulted in
catastrophic cyanide spills. Cyanide
leaching has occurred since the mid
1900’s. While the use of acid to leach
copper dumps, the use of cyanide to
leach gold in heaps, and the spread of
solvent extraction techniques have
changed some aspects of mining, the
basic operation of removing ore from the
ground and concentrating it through
beneficiation has remained
fundamentally the same as when most
of the non-active NPL sites were in
operation. In the case of heap and dump
leaching, the metals and other
compounds in the ores have become
more mobile due to the increased use of
efficient lixiviants. In addition to the
release of cyanide, discharges from
cyanidation processes both during
operations and after closure can also
contain potentially toxic elements
including lead, cadmium, copper,
arsenic, and mercury. Leaching tanks,
leach pads, piping and storage facilities
(e.g., process solution ponds and
facilities associated with leaching) can
release sulfuric acid and mobilized
contaminants into the environment.
These leaching solutions can pose
significant environmental and human
health risks if they are not contained
successfully. Information on
documented releases reveals that acid
leach operations have caused
contamination of both surface and
ground waters in addition to injuring
habitat and wildlife. Releases due to
equipment failures, chronic seepage, or
weather-related overflows seem to be
the most common problems; acid leach
operations need to ensure proper
reclamation of spent dump or heap
leach piles, maintenance of equipment,
and preparation of systems for severe
weather in order to minimize
environmental impacts. Cyanide
leaching processes create wastes that
PO 00000
Frm 00087
Fmt 4701
Sfmt 4702
3473
can present risks of releases of
hazardous substances such as cyanide,
cyanide-metal complexes, and metals
via groundwater and surface water
routes. In addition, sulfuric acid can
leach metals from other mining wastes
and containment areas, transporting
other contaminants to surface and
groundwater systems. While leaching
solutions are generally recycled back to
the process, failure to contain them
properly can result in releases. After
leaching has been discontinued, the
abandoned leach site can be a source of
acidic effluents, hazardous trace
elements, and total dissolved solids if it
is not properly monitored and managed.
Mine influenced water (e.g., acid,
alkaline, or neutral mine drainage), i.e.,
runoff originating from exposed heap
leach piles or tailings, is also a distinct
risk associated with this practice.
The Beal Mountain Mine, a gold and
silver mine in Montana, used
cyanidation to extract precious metals
until it was closed in 1997 when
Pegasus gold went bankrupt. Although
the mine is no longer operating, it has
continued to pollute neighboring
streams with cyanide, selenium and
copper. Ongoing issues include the
geotechnical stability of the pit high
wall and leach pad dike, infiltration of
precipitation and groundwater into the
leach pad, and treatment and disposal of
excess solution accumulating on the
heap leach pad.198 This mine also
demonstrates the limitations of
predicting environmental impacts of
these facilities -when this mine was
permitted, the Environmental Analysis
concluded that the operation of the
mine would have no impacts to water
quality, because there will be no
discharge of mine or process water to
surface waters.199
Zortman and Landusky Mines, in
Montana, likewise used cyanidation to
extract precious metals and also
underwent bankruptcy and left
significant pollution at their respective
sites. In addition to a heap leach pad
leak, the Zortman and Landusky facility
experienced cyanide releases from a
leach pad pipe, a solution pond liner
leak, and a process pond liner leak.200
198 See USDA–FS, Preliminary Leach Pad
Investigation Beal Mountain Mine, February 2010.
Available at: https://www.fs.usda.gov/detail/bdnf/
landmanagement/projects/?cid=stelprdb5076989.
199 See False Promises: Water Quality Predictions
Gone Wrong—Large Mines and Water Pollution,
2012. Available at: https://wman-info.org/wpcontent/uploads/2012/08/FalsePromisesWater.pdf.
200 See U.S. Bureau of Land Management, Final
Engineering Evaluation/Cost Analysis (EE/CA) For
Water Management at the Zortman and Landusky
Mines, Phillips County Montana, prepared by
Spectrum Engineering (Washington, DC: U.S.
E:\FR\FM\11JAP2.SGM
Continued
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3474
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
According to BLM, ‘‘modern’’ open pit
heap leach operations began in 1977.201
The BLM, as the lead Federal agency,
conducted removal actions under its
CERCLA authority. In response to the
numerous issues associated with
cyanide leaching in Montana, the state,
in 1998, enacted a referendum banning
the development of new open pits that
use cyanide leaching.
Releases also have occurred from
other leach pad operations, including
the Barrick Goldstrike mine in Nevada,
where there was a release of 159,000
gallons of cyanide in 2003 and 21,625
gallons of sodium cyanide in 1995.
Also, the Florida Canyon mine in
Nevada released 52,500 gallons of
sodium cyanide (30 percent solution) in
1996. The groundwater contamination
that resulted from releases from this
facility’s leach pad operation was
previously discussed.
Similar to historical releases, tailings
management played a role in roughly
half of the publicly documented
releases. Tailings are the waste material
created when valuable minerals or
metals have been extracted from ore.
Depending on the commodity and the
mineral processing method, tailings may
contain chemical residues inherent to
processing. For example, milling
operations that practice flotation or
leaching may produce tailings
containing reagents such as lime or
glycol ether and lixiviants including
acids and cyanide. The Robinson
Nevada Mining Company operates the
Robinson Operation surface mine in
White Pine County, Nevada. This
facility produces gold and copper using
flotation processes. The facility released
copper flotation tailings five times in
1996, leading to violations of its water
pollution control permit.
Tailings usually take the form of a
slurry (e.g., wet tailings), but may also
undergo dewatering and disposal as
paste or filtered tailings. Depending on
the commodity and the beneficiation
process, tailings may contain a variety
of hazardous materials, originating from
geologic components of the ore or
chemicals introduced during
processing. Therefore, they require
proper disposal and storage.
In addition to the previously
discussed releases from the tailings
storage units at the Jerritt Canyon mine,
Government Printing Office, 2006). Accessed
August 28, 2015 at: https://www.blm.gov/style/
medialib/blm/mt/field_offices/lewistown/
zortman.Par.62509.File.dat/finaleeac.pdf.
201 See Zortman and Landusky Mines—Project
History, February 2006. Available at: https://
www.blm.gov/style/medialib/blm/mt/field_offices/
lewistown/zortman.Par.32256.File.dat/
ZLbackground.pdf.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
there have been releases at other tailings
storage units, including: ArcelorMittal
Minorca is an iron mining and
processing facility located in Virginia,
Minnesota. Three failures in the tailings
and waste rock pipe and tailings dike at
the site occurred in 2013 and 2014,
discharging 8,500 cubic yards of tailings
and waste rock and affecting 15.3 acres
of wetlands, potentially destroying the
area’s ability to function as a natural
aquatic habitat and filtration system.202
The U.S. Silver Galena mine is a
silver-lead and silver-copper
underground mine located near
Wallace, Idaho, and operated by the
U.S. Silver Corporation since 2007. In
2014, U.S. Silver Corporation signed a
Consent Agreement and Final Order
with EPA Region 10 admitting to
discharging wastewater from the Osburn
tailings pond into Lake Creek and the
Coeur d’Alene River that carried
excessive concentrations of mercury and
copper in 2012 and 2013. The discharge
was the result of a failure to monitor
treated water normally discharged to
water system. U.S. Silver also admitted
that on March 14, 2014, it discharged
tailings slurry directly into Lake
Creek.203
The Golden Sunlight mine located in
Montana is a gold and silver open pit
mine and underground cyanide vat
leach operation. This facility’s original
tailing disposal facility operated from
1983 to 1995. Seepage was detected
from Tailing Impoundment No. 1 in
1983. To control effluent from the
impoundment, the bentonite cut-off
wall was immediately repaired. An
extensive system of monitoring wells
has been installed over the years, and
several hydrogeologic investigations
have been undertaken to continue to
monitor, evaluate, and control leakage
from the impoundment.
Tailings management presents
significant environmental challenges to
current mining operations. Because acid
may not be generated for many years
and most tailings ponds are designed to
allow infiltration of water through the
pond, the potential of acid generation
and mobile metals are of such concern
that many mines construct complex
monitoring and water management
systems for their tailings ponds. It is
likely that some constituents of concern
(i.e., arsenic, sulfates, etc.) have become
more mobile due to crushing the ore to
a smaller particle size. Although
202 See Pipeline, Storage Basin Failures Send Ore
Tailings and Road Aggregate into Wetlands,
Minnesota Pollution Control Agency, June 24, 2015.
203 See U.S. Environmental Protection Agency,
Consent Agree and Final Order In the Matter of U.S.
Silver—Idaho Inc., Coeur and Galena Mines and
Mills, Wallace, Idaho, effective 16 September 2014.
PO 00000
Frm 00088
Fmt 4701
Sfmt 4702
operators now generally attempt to
contain these waste management
features, proper long-term management
is required to safeguard against leaks,
runoff, and catastrophic failure. Because
reclamation and closure are yet to occur
at currently operating facilities, the
available data do not capture
information characterizing the scope
and efficacy of these practices. Based on
the experience of currently closed sites,
the environmental impacts of releases to
groundwater and runoff from tailings
impoundments and waste rock piles
will continue to be of concern at these
facilities long after closure.
Fugitive dust emissions from tailings
storage units also can be a concern. For
example, Hecla Greens Creek is a lead,
zinc, silver, and gold underground mine
located near Juneau, Alaska, and
operated by the Hecla Greens Creek
Mining Company. The mill produces
650,000 tons of tailings annually. In
2013, elevated concentrations of metals
were detected in the snow and lichens
adjacent to the tailings disposal facility.
The USFS, who installed the lichen to
act as a biomonitor of the recently
expanded tailings facility, concluded
the contamination was the result of
fugitive dust emissions from the
tailings.204
EPA recognizes various
environmental regulatory programs may
affect releases of CERCLA hazardous
substances at hardrock mining and
mineral processing facilities. Examples
of the regulations include requirements
under: (1) The Clean Water Act (CWA),
(2) the Uranium Mill Tailings Radiation
Control Act (UMTRCA), and (3)
reclamation requirements such as the
BLM’s 3809 regulations. However, EPA
has found that significant issues
involving noncompliance with
regulatory requirements resulting in
releases of hazardous substances persist.
EPA’s ongoing concern with reducing
the risk of mining waste contamination
of drinking water, rivers, and streams,
and work to cleanup mining and
mineral processing facilities has been an
enforcement priority for almost ten
years, as reflected in the Agency’s
National Enforcement Initiative (NEI):
Reducing Pollution from Mineral
Processing Operations reflects the
Agency’s concerted effort to reduce the
risk of mining waste contamination of
drinking water, rivers, and streams, and
work to cleanup mining and mineral
204 See United States Department of Agriculture,
Forest Service, Greens Creek Mine Tailings Disposal
Facility Expansion: Final Environmental Impact
Statement and Record of Decision (Washington, DC:
U.S. Government Printing Office, 2013), Volume 1.
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
Priority List (NPL) requiring cleanup; (2)
mining and mineral processing practices
at sites cleaned up under Superfund in
the past continue to be used at sites
operational in 2009, especially when
comparing sites that mine or process the
same range of commodities; (3) there are
similarities between the Contaminants
of Concern 207 at sites cleaned up under
Superfund in the past, and the CERCLA
hazardous substances present at sites
operational in 2009; (4) human and
ecological receptors at sites cleaned up
under Superfund in the past have
parallel potential receptors at sites
operational in 2009; and (5)
environmental settings and exposure
pathways at sites cleaned up under
Superfund in the past have
corresponding environmental settings
and potential exposure pathways at sites
operational in 2009.
Overall, the compiled information
demonstrates that sites requiring
cleaned up under Superfund in the past,
and sites operational in 2009 share
characteristics related to the potential
release of CERCLA hazardous
substances and the exposure of human
and ecological receptors, and illustrates
the applicability of EPA’s CERCLA
experience to evaluating currently
operating mines and processors.
c. Evidence of CERCLA Hazardous
Substances and Potential Exposures at
CERCLA § 108(b) Mining and Mineral
Processing Sites 206
sradovich on DSK3GMQ082PROD with PROPOSALS2
processing facilities.205 The Agency’s
FY 2011–2013 National Enforcement
Initiatives states ‘At some sites, EPA’s
inspections have found significant noncompliance with hazardous waste and
other environmental laws.’ EPA’s
National Enforcement and Compliance
Strategy for Mineral Processing FY2008–
2010 states ‘Environmental impacts
caused by the mineral processing and
mining sectors are significant. The
mineral processing and mining sectors
generate more wastes that are corrosive
or contain toxic metals than any other
industrial sector. Over the past decade,
we have found that many of the
facilities that manage these wastes, due
either to noncompliance with state or
Federal environmental requirements or
legally permissible waste management
practices, have created groundwater,
surface water, and soil contamination.’
EPA believes the results of this
relatively recent effort to further
document the state of current mining
practices substantiates the findings from
the other documents described herein
and further reinforces the Agency’s
belief that currently operating hardrock
mining and mineral processing facilities
subject to this proposal continue to
present risks of release of hazardous
substances.
d. Previous Studies About Releases
From Hardrock Mining and Mineral
Processing Facilities
EPA has also identified numerous
documents showing recent releases of
CERCLA hazardous substances at
hardrock mining and processing
facilities and thus continuing risks of
release or threatened release of CERCLA
hazardous substances associated with
those activities. These documents are
available in the docket for this proposed
rule and include:
The document ‘‘Evidence of CERCLA
Hazardous Substances and Potential
Exposures at CERCLA § 108(b) Mining
and Mineral Processing Sites’’ reports
EPA preliminary efforts from 2009–2012
to examine CERCLA site-specific
documents for estimated exposures of
human and ecological receptors to
CERCLA hazardous substances from
mining and mineral processing sites
cleaned up under Superfund in the past.
The report also collects available
information on potential exposures of
human and ecological receptors to
CERCLA hazardous substances from
mining and mineral processing sites that
were operational in 2009 (the most
current available data at the time the
evaluation took place).
EPA concluded the following: (1)
Some of the sites operational in 2009 are
already on Superfund’s National
205 See
U.S. EPA Office of Enforcement and
Compliance Assurance, National Program Manager
Guidance, April 2015. Available at: https://
www.epa.gov/sites/production/files/2015-02/
documents/oecas_draft_fy_2016-2017_national_
program_manager_guidance_february_19_2.pdf.
206 See U.S. EPA, Office of Land and Emergency
Management, Memorandum to the Record: Releases
from Hardrock Mining Facilities, November 2016.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
Damage Cases and Environmental
Releases from Mines and Mineral
Processing Sites 208
This document, published in 1997,
presents summaries about mining and
mineral processing damage cases that
occurred since 1990. Many of the
damage cases included in this document
involved mining and mineral processing
of commodities covered by this
proposed rule. The release incidents
occurred from the production,
treatment, storage or disposal of
hazardous substances involving
207 A CERCLA hazardous substance found at a
concentration that a Superfund risk assessment has
determined poses an unacceptable risk to human
health or the environment.
208 See U.S. EPA 1997. Damage Cases and
Environmental Releases from Mines and Mineral
Processing Sites.
PO 00000
Frm 00089
Fmt 4701
Sfmt 4702
3475
extraction and beneficiation operations,
including inadequate containment of
tailings, clay ponds, waste rock, process
water, process solution (e.g., cyanide),
wastewater, acid mine drainage, and
stormwater. Many of the releases
occurred through spills resulting from
equipment failure, and operator error
while others resulted from unusually
heavy rains and, consequently, the
generation of high stormwater volumes.
The typical management practices used
for storage or disposal of mineral
processing secondary materials and
wastes were found to have created or
exacerbated ground water
contamination in the immediate area. In
some cases, a combination of feedstock,
in-process materials, secondary
materials, and wastes contributed to
ground water, surface water, or soil
contamination. EPA believes that this
document presents a relatively accurate
description of current mining and
processing practices and the potential
releases associated with these practices.
Mining Sites on Superfund’s National
Priorities List—Past and Current Mining
Practices 209
This document provides an overview
of the types of releases of hazardous
substances associated with the
production, storage, and disposal of
hazardous substances and the associated
impacts, including NPL cleanups. It also
documents that ‘although some mining
waste management practices have
changed over time, the basic technology
for extraction and beneficiation of
mineral ores have remained fairly
constant over the last fifty years.’
This document states that mining
activities at many NPL sites resulted in
the generation of tailings, acid drainage,
waste dumps, and waste rock and that
these are the same types of wastes
generated by current mines. It further
reports that tailings, mine water, and
waste rock are the highest volume
wastes generated by all past and current
mining operations. In the case of
tailings, it is likely that some
constituents (i.e., arsenic, sulfates, etc.)
have become more mobile due to
crushing the ore to a smaller particle
size. In the case of heap and dump
leaching, the metals and other
compounds in the ores have become
more mobile due to the increased use of
209 See Van E. Housman and Stephen Hoffman
U.S. Environmental Protection Agency Washington
D.C. Published in: Proceedings, Chapter 6, Risk
Assessment/Management Issues in the
Environmental Planning of Mines, Society for
Mining, Metallurgy and Exploration (SME)
(September 1992), and in: Proceedings, Second
International Conference on Environmental Issues
and Management of Waste in Energy and Mineral
Production, University of Calgary (1992).
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3476
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
efficient lixiviants (i.e., the solution
used in hydrometallurgy to assist in
extracting the desired metal from ore in
heap leaching, dump leaching, and in
situ leaching).
The document also states that ‘many
current mining operations are extracting
sulfide ores, having exhausted the less
acidic oxide ores. Therefore, the
potential for environmental damage
from acid mine drainage at existing
mines is possible, if favorable geologic
and climatic factors exist. There are
dozens of current mining operations
with open pits or that have extensive
underground tunnels are, similar to NPL
sites, located in high sulfide
environments.’ These current operations
continuously pump and treat
groundwater that enters the pit or mined
tunnels as part of the overall mine water
management system. Some of the larger
currently operating mines are not only
pumping and chemically treating mine
water, they are using other control
methods such as intercepting aquifers to
control water flow into the mine and
diverting entire surface streams. In
many cases, once the decision is made
to divert streams and intercept aquifers,
active water management will have to
continue indefinitely, long after the
mine is closed.
Finally, the document states that
current mining practice is to impound
tailings behind engineered dams and
attempt to control and treat discharges
to surface water and groundwater.
Current design rarely includes lining the
ponds. Unlined tailings ponds are
specifically designed either to introduce
water directly to groundwater or direct
it to leachate collection systems that
flow into surface ponds at the base of a
dam (toe ponds). Tailings management
presents significant environmental
challenges to current mining operations.
Because acid may not be generated for
many years and most tailings ponds are
designed to allow infiltration of water
through the pond, the potential for acid
generation and mobile metals are of
such concern that many mines construct
complex monitoring and water
management systems for their tailings
ponds.
Although this document was
published almost 25 years ago, EPA has
concluded that it still presents a
relatively accurate description of
current mining and mineral processing
practices and the potential releases
associated with these practices, as
identified in the more recent documents
previously described.210 211
210 See
U.S. EPA, Draft Comprehensive Report:
An Overview of Practices at Hardrock Mining and
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
Human Health and Environmental
Damages from Mining and Mineral
Processing Wastes 212
EPA developed this document to
illustrate the human health and
environmental damages caused by
management of wastes from mining (i.e.,
extraction and beneficiation) and
mineral processing, particularly
damages caused by placement of mining
and mineral processing wastes in landbased units, including piles, surface
impoundments, and ponds as part of its
‘‘Phase IV’’ Land Disposal Restrictions
rulemaking under the RCRA Subtitle C
program. This document presents 66
mining and mineral processing damage
cases, including mining and mineral
processing of commodities covered by
this proposed rule. The damage cases
demonstrate that land-based
management practices for mining and
mineral processing wastes are
responsible for considerable damages to
human health and the environment.
These damages commonly arise from
land placement of wastes in unlined
units having minimally engineered
release controls. These units include
piles of slags, dusts, refractory bricks,
sludges, waste rock and overburden,
and spent ore; surface impoundments
containing mill tailings and/or process
wastewaters; and heap leaching solution
ponds. In addition, many, if not most of
the damage case facilities have caused
human health or environmental
damages through leaks or spills, such as
releases from lined management units,
valves, and pipes.
The damage cases illustrate the wide
variety of human health and
environmental impacts caused by
wastes from mining and mineral
processing operations, including
groundwater, surface water, and soil
contamination; human health damages
or risks; and damages to vegetation,
wildlife, and other biota. As noted
earlier, in more recent documents
prepared by EPA, many of the damage
Mineral Processing Facilities and Related Releases
of CERCLA Hazardous Substances, November 2016.
211 See U.S. EPA, Draft Report—Discharges from
Recently or Currently Operating Mines and Mineral
Processing Facilities. September 2016.
212 See U.S. EPA December 1995. Technical
Background Document Supporting the
Supplemental Proposed Rule Applying Phase IV
Land Disposal Restrictions to Newly Identified
Mineral Processing Wastes. Damage cases used for
this document were derived from previous studies
by EPA identifying human health and
environmental damages caused by mining and
mineral processing waste management activities,
including: Report to Congress on Special Wastes
from Mineral Processing, July 1990; Mining Waste
Release and Environmental Effects Summaries,
Draft, March 1994; Mining Sites on the National
Priorities List: NPL Site Summary Report, June 21,
1991; and Mining Sites on the NPL, August 1995.
PO 00000
Frm 00090
Fmt 4701
Sfmt 4702
cases cited in this document involved
releases that EPA has concluded are still
indicative of current mining and
mineral processing practices and the
potential releases associated with these
practices.
e. Data Concerning Releases,
Generation, and Management of
CERCLA Hazardous Substances
EPA evaluated several databases, as
follows:
(1) Releases Reported Under the
Emergency Response Notification
System (ERNS)
EPA also looked at releases of
CERCLA hazardous substances reported
under the Emergency Response
Notification System (ERNS). EPA
considered these data because of the
potential insights the data offered on an
annual basis over a prolonged period of
time—providing a means by which to
show the extent of and reasons for
reported releases of CERCLA hazardous
substances by hardrock mining and
mineral processing facilities.
ERNS primarily contains initial
accounts of releases reported to the
National Response Center, made during
or immediately after a release occurs.
The National Response Center receives
all reports of releases involving
hazardous substances and oil that
trigger Federal notification requirements
under several laws. It also should be
noted that the National Response Center
is strictly an initial report-taking agency
and does not participate in the
investigation or incident response. The
National Response Center receives
initial reporting information only and
notifies Federal and state On-Scene
Coordinators for response.
From the National Response Center
Web site (https://www.nrc.uscg.mil/),
EPA downloaded, by year, the details
for each call reporting a release—from
1990 through 2014. Although releases
have been reported to the National
Response Center since 1982, the data
from 1982–1989 are difficult to use
because of inconsistent formats, and
missing and/or inconsistent data fields,
among other problems. A more uniform
and consistent format for documenting
calls was put into place in 1990, so EPA
examined National Response Center
data from 1990 through 2014. For the
purpose of this rulemaking, EPA only
focused on reported releases that
involved CERCLA hazardous
substances.213 The ERNS data contains
information about the material and the
213 See U.S. EPA, Extracting Useable Data from
ERNS Incidents Applicable to HRM Facilities,
December 2015.
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
quantity released, where and when the
release occurred, and information about
property damage, injuries, and deaths
occurring due to the release. The ERNS
data include a general Incident Type
and Incident Cause. Analyzing
information from the Incident
Description for each reported release,
EPA developed and assigned a more
detailed description of the incident type
and cause.
EPA’s analyses show that, since 1990,
more than 950 reported releases of
CERCLA hazardous substances were
associated with currently operating
facilities in the hardrock mining
industry.214 Looking at the more recent
data, approximately 435 of the releases
were reported since 2000, for an average
of about thirty reported releases per year
since 2000. These ERNS data provide
yet another indicator of ongoing
reported releases of CECLA hazardous
substances at hardrock mining and
mineral processing facilities. Many of
the reported releases were due to: (1)
Damage to/overflow of pond/
impoundment/pile/landfill due to
storms, (2) breaks or leaks of piping/
hoses, (3) accidents/operator error, and
(4) failure or overflow of process units
and storage/treatment tanks/sumps.
EPA also reviewed a report that
substantially relied on ERNS data to
show pipeline, seepage control and
tailings impoundment failures at
operating copper porphyry mines in the
U.S., and the associated water quality
impacts.215 This document states that
‘copper porphyry mines are often
associated with water pollution
associated with acid mine drainage,
metals leaching and/or accidental
releases of toxic materials.’
sradovich on DSK3GMQ082PROD with PROPOSALS2
(2) Analysis of Toxics Release Inventory
(TRI) Data
The Toxics Release Inventory (TRI)
includes data on chemicals (including
numerous CERCLA hazardous
substances) that are released, recycled,
treated, or used for energy recovery.
Under TRI, releases include air
emissions, surface water discharges,
underground injection wells, and
placement to land, including RCRA
hazardous waste landfills and other
landfills. TRI data also show quantities
transferred to publicly owned treatment
214 See U.S. EPA, Analyses of ERNS Data
Applicable to HRM Facilities, December 2015.
215 See Bonnie Gestring, U.S. Copper Porphyry
Mines Report: The Track Record of Water Quality
Impacts Resulting from Pipeline Spills, Tailings
Failures, and Water Collection and Treatment
Failures (Washington, DC: Earthworks, July 2012).
Available at: https://www.fxsp0;earth
workfxsp0;saction.fxsp0;org/files/publications/
Porphyry_Copper_Mines_Track_Record✖82012.pdf.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
works (POTWs) and to off-site facilities.
In developing this proposal, EPA
examined recent TRI data 216 in order to
identify the types, amounts, and
methods of hazardous substance
management at facilities potentially
subject to the rule. EPA’s 2010 through
2013 Toxic Release Inventory (TRI) data
indicates that the metal mining industry
(e.g., gold ore mining, lead ore and zinc
ore mining, and copper ore and nickel
ore mining) reported quantities of onsite
releases of hazardous substances,
averaging nearly 1.7 billion pounds per
year. In 2013, the metal mining sector
reported the largest quantity of total
disposal or other releases, accounting
for 47 percent of the releases for all
industries. It also represents almost
three quarters (71 percent) of the on-site
land disposal for all sectors in 2013.
(See: https://www.epa.gov/toxics-releaseinventory-tri-program/2013-tri-nationalanalysis-metal-mining.) The preliminary
2014 TRI data likewise show nearly 1.8
billion pounds of onsite releases.
Specific hazardous substances of
concern that are released into the
environment by mining facilities
include: Ammonia, benzene, chlorine,
hydrogen cyanide, hydrogen fluoride,
toluene, and xylene, as well as heavy
metals and their compounds (e.g.,
antimony, arsenic, cadmium,
chromium, cobalt, copper, lead,
manganese, mercury, nickel, selenium,
vanadium and zinc).
More than 99 percent of these onsite
releases involved surface
impoundments (e.g., tailings) and other
land placement (e.g., waste piles) not
subject to RCRA Subtitle C permits.217
In addition to the placement of these
quantities of CERCLA hazardous
substances on the land, for the period
covering 2010–2013, metal mining
facilities also reported an average of
three million pounds of air releases and
over 800,000 pounds of surface water
discharges. Over the time period of
2010–2012, releases of hazardous
substances (ranging between 425,000
pounds and 978,000 pounds) also were
reported due to catastrophic or one-time
216 TRI is a publicly available EPA database that
contains information on a list of 581 individually
listed chemicals and thirty chemical categories that
are being used, manufactured, treated, transported,
released into the environment, or recycled.
Facilities (certain regulated industries and federal
facilities) are required to annually report to TRI
under the Emergency Planning and Community
Right to Know Act (EPCRA § 313).
217 Many of the wastes generated by mining and
processing operations, i.e., those processes that
remove, concentrate, and/or enhance values
contained in ores and minerals or beneficiated ores
and minerals, have been excluded from regulation
under RCRA Subtitle C per the Bevill Amendment.
PO 00000
Frm 00091
Fmt 4701
Sfmt 4702
3477
events; in 2013, nearly 194 million
pounds of such releases were reported.
In the 2009 Priority Notice, EPA used
Toxics Release Inventory (TRI) data to
provide an indication of the quantities
of hazardous substances that were
associated with facilities in the hardrock
mining industry. Commenters objected
to EPA’s use of these data. Commenters
noted that releases reported to TRI
encompass releases that may be
permitted under the Clean Air Act,
Clean Water Act, Safe Drinking Water
Act, and RCRA Subtitle C. Thus, these
commenters argued that these releases
should not be used to predict the risk of
releases and exposures to hazardous
substances associated with potential
mismanagement of hazardous
substances.
EPA considered these objections to
the use of these data, in developing its
data for this proposal. The Agency
recognizes that a significant portion of
the TRI releases reported as air
emissions and surface water discharges
are likely permitted by Federal/state
regulatory authorities. EPA also
recognizes that some of the surface
impoundments, landfills, and waste
piles used to manage wastes containing
these large volumes of hazardous
substances might be designed and
operated to mitigate releases into the
environment.
These data provide some perspective
about the number of currently operating
facilities and offer insights on the types,
amounts, and management of hazardous
substances at hardrock mining and
mineral processing facilities potentially
subject to this proposed rule. The
presence of such significant amount of
hazardous substances, even if subject to
regulatory controls, provides some
indication of the potential for risks to
result if improperly managed. In
addition, EPA previously has discussed
the evidence of non-compliance with
regulatory standards. Thus, the TRI data
provide relevant information on the
risks associated with hardrock mining
facilities.
(3) Analysis of RCRA Hazardous Waste
Biennial Report (BR) Data
The RCRA Hazardous Waste Biennial
Report (BR) contains data reported by
hazardous waste handlers and must be
submitted by large quantity hazardous
waste generators and treatment, storage,
and disposal facilities every two years.
Because RCRA hazardous wastes, by
statute, are designated CERCLA
hazardous substances, EPA analyzed the
BR data for the 2009, 2011, and 2013
reporting cycles. These data show the
quantities of RCRA hazardous waste
streams generated and how the waste
E:\FR\FM\11JAP2.SGM
11JAP2
3478
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
was managed. It is important for the
reader to note that many wastes
generated by mining and mineral
processing operations are excluded from
RCRA Subtitle C hazardous waste
regulation under the Bevill
Amendment.)
EPA found a wide variation in the
quantity of hazardous waste generated
by facilities in the hardrock mining
industry, including nearly 3,000 tons in
2009, nearly 25,000 tons in 2011, and
more than 13,000 tons in 2013. These
generated quantities, for the most part,
do not represent actual releases to the
environment but instead represent
amounts of hazardous substances
produced and managed at the reporting
facilities. The sources and types of
hazardous wastes generated by these
facilities are numerous and varied,
including: (1) Contaminated soil from
remediation and/or past contamination;
(2) contaminated soil and debris from
spills and accidental releases; (3) filters,
solid adsorbents, ion exchange resins
and spent carbon from air pollution
control devices; (4) sludges, liquids,
solids from cleanout of process
equipment; (5) laboratory analytical
wastes; (6) spent process liquids or
catalysts, (7) removal of tank sludge,
sediments, or slag; and (8) discarding
off-specification or out-of-date
chemicals or products.
To a large extent, facilities in the
hardrock mining industry ultimately
transfer their RCRA hazardous wastes to
offsite treatment and disposal facilities.
However, for those facilities that do
treat and dispose of hazardous wastes
onsite, the potential co-mingling of
hazardous wastes with Bevill excluded
wastes or non-hazardous wastes is a
concern to EPA. Indeed, EPA has
determined that some facilities place
mixtures of exempt wastes (e.g. tailings)
and non-exempt wastes in an on-site
waste management unit.218 Recently,
EPA and the U.S. Department of Justice
announced a settlement with Mosaic
Fertilizer, LLC that will ensure the
proper treatment, storage, and disposal
of an estimated sixty billion pounds of
hazardous waste at Mosaic’s facilities in
Bartow, Lithia, Mulberry and Riverview
in Florida and St. James and Uncle Sam
in Louisiana. At these facilities, sulfuric
acid is used to extract phosphorus from
218 See U.S. EPA, Mineral Processing Facilities
Placing Mixtures of Exempt and Non-Exempt
Wastes in On-Site Waste Management Units,
Technical Background Document Supporting the
Supplemental Proposed Rule Applying Phase IV
Land Disposal Restrictions to Newly Identified
Mineral Processing Wastes, December 1995. (Note:
See EPA’s Supplemental Phase IV LDR Final Rule
[63 F.R. 28595–97 (May 26, 1998), which included
discussion of mineral processing secondary
materials and Bevill Exclusion issues.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
mined phosphate rock, which produces
large quantities of a solid material called
phosphogypsum and wastewater that
contains high levels of acid. EPA
inspections revealed that Mosaic was
mixing certain types of highly-corrosive
substances from its fertilizer operations,
which qualify as hazardous waste, with
the phosphogypsum and wastewater
from mineral processing (Bevill wastes),
which is a violation of Federal and state
hazardous waste laws. The
phosphogypsum piles can contain
several billion gallons of highly acidic
wastewater, which can threaten human
health and cause severe environmental
damage if it reaches groundwater or
local waterways. In August 2016, one of
these facilities (the New Wales in
Mulberry) experienced a sinkhole,
leaking 215 million gallons of
contaminated water into the Floridian
aquifer.
In the 2009 Priority Notice, EPA also
used BR data to show the quantities of
hazardous wastes that were associated
with facilities in the hardrock mining
universe. Commenters objected to EPA’s
use of these data to justify the need for
financial responsibility requirements.
Specifically, commenters stated: (1)
That the BR data simply show the
quantities of RCRA hazardous wastes
that are generated and managed in
accordance with the RCRA Subtitle
regulations. They argued that thus these
data are not an indicator of
mismanagement and provide no
information concerning the degree and
duration of risk associated with the
production, transportation, treatment,
storage, or disposal of hazardous
substances; (2) that EPA did not discuss
whether, or how often, the generation of
hazardous waste corresponds to on-site
discharges of hazardous substances, or
to costly cleanups; and (3) that the
volume of hazardous waste reported on
the RCRA BR may not be a realistic
indicator of risk for CERCLA § 108(b)
purposes. High volume waste streams
often are highly dilute aqueous wastes
that are managed in Clean Water Act
wastewater treatment facilities.
EPA recognizes that the BR data
concerning volume of hazardous waste
generated and managed onsite, when
considered alone, does not provide a
direct indicator of risk of release or of
mismanagement of wastes.
Notwithstanding the issues pointed out
by commenters, EPA believes these data
do offer insights on the types, amounts,
and management of RCRA hazardous
wastes (by definition, CERCLA
hazardous substances) at hardrock
mining and mineral processing facilities
potentially subject to this proposed rule.
PO 00000
Frm 00092
Fmt 4701
Sfmt 4702
e. Government Expenditures—Historical
CERCLA Costs
EPA conducted analysis of historical
response costs at 319 hardrock mining
and processing sites on the National
Priorities List (NPL) and at non-NPL
CERCLA sites. EPA used this
information to help further identify the
magnitude of continuing risks from
hardrock mining facilities potentially
subject to the rule. Such costs also serve
as a measure of the severity of
consequences impacting human health
and the environment as a result of
releases of and exposure to hazardous
substances. Specifically, the past and
estimated future costs associated with
protecting public health and the
environment through what is often
extensive and long-term reclamation
and remediation efforts can be
substantial.
The Agency developed a database for
purposes of analysis that uses the
‘‘Expenditures’’, ‘‘ROD Costs’’, and
‘‘Settlements’’ data derived from
CERCLIS, Integrated Financial
Management System (IFMS), and Office
of Enforcement and Compliance
Assurance (OECA) information
resources. These data sources for
response costs included: (1) Fund
expenditures incurred at each site to
date, the type of expenditure (broadly
speaking, construction versus nonconstruction) and the source of funds
(whether the Fund was reimbursed by
the potentially responsible party (PRP)
through a ‘‘special account’’); and (2)
Records of Decision (RODs) at each site.
A ROD is a document that provides the
justification for the remedial action
(treatment) chosen at a Superfund site.
It also contains information concerning
site history, site description, and site
characteristics. The ROD Costs database
provides a dollar estimate for each
remedial action chosen at a site. Last,
information was compiled about
settlements with PRPs, including ‘‘cash
out’’ funds accrued and deposits into
special accounts associated with
settlements at each site.
Following a review of the discussed
data sources, EPA developed a tailored
approach that attempts to characterize
the total (i.e., past and future) response
cost at each of the historical sites
identified, taking advantage of all
available data sources and site
characteristics. EPA then verified and
adjusted the response costs using
reports from the U.S. Government
Accountability Office (GAO) and from
the Office of the Inspector General
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
sradovich on DSK3GMQ082PROD with PROPOSALS2
(OIG)) that investigated past and future
costs at NPL sites.219 220
In considering the total remediation
and other expenditures experienced at
these sites (including both past and
projected future expenditures necessary
to complete cleanup), EPA estimates
that the historical response costs total
$12.9 billion at 243 hardrock mining
and minerals processing facilities
evaluated for which data were available
at the time of the analyses. The estimate
of response costs for just 117 NPL sites
from the sample totals more than $12
billion, or an average of more than $103
million per site. Federal expenditures to
date total roughly one-third of the total
(or $4 billion), paid for through EPA’s
Superfund program. Such significant
cleanup costs may be considered as an
indication of the relative risks present at
these sites, and the potential magnitude
of environmental liabilities associated
with this industry overall. It should be
noted that this data does not capture
funds spend cleaning up hardrock
mining facilities outside of the
Superfund program (e.g., by a state
cleanup authority).
Costs associated with ATSDR Health
Assessments and Natural Resource
Damages further increase the liabilities
attributable to the hardrock mining and
mineral processing sectors. EPA
identified documented natural resource
damages settlements at 64 sites within
this sector. This statistic alone suggests
that as many as 25 percent of CERCLA
sites in this sector have also been the
source for associated damages to natural
resources. Based on the natural resource
damages cases identified, the values of
the damages average more than $16
million across all of the cases, with
individual settlements ranging from
$32,000 to over $400 million.
f. EPA’s Conclusions Regarding Risks
Posed by Facilities in the Hardrock
Mining Universe
Information available to EPA
indicates strongly that the hardrock
mining industry continues to present
risks associated with the production,
transportation, treatment, storage, and
disposal of hazardous substances.
Mining activities at many NPL sites
resulted in the generation of tailings,
acid drainage, waste dumps, and waste
rock; these are the same types of wastes
219 See U.S. Government Accountability Office,
Superfund: EPA’s Estimated Costs to Remediate
Existing Sites Exceed Current Funding Levels, and
More Sites Are Expected to Be Added to the
National Priorities List. Report No. GAO–10–380.
May 2010 (the GAO Report).
220 See Office of Inspector General, Nationwide
Identification of Hardrock Mining Sites. Report No.
2004–P–00005. March 31, 2004 (the OIG Report).
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
generated by current mines. In many
cases, releases were largely due to the
direct discharge of wastes into the local
environment or minimal containment
efforts. For example, the P4/MonsantoSouth Rasmussen facility, operating
near Soda Springs in southeast Idaho,
discharged wastewater containing high
concentrations of selenium and heavy
metals from a waste rock dump at the
mine without a required permit.
Further, P4’s unpermitted discharges,
which contained selenium levels far
above Idaho’s state water quality
standards, polluted a nearby wetland
and an unnamed tributary of Sheep
Creek, as well as downstream waters
that drain to the Snake River. P4 agreed
to pay a $1.4 million civil penalty for
alleged Clean Water Act violations and
to continue collecting seleniumcontaminated leachate from the waste
rock pile and to prevent leachate from
entering nearby creeks and wetlands
until such time as the company either
obtains a National Pollution Discharge
Elimination System permit, or it
undertakes a restoration of the waste
rock dump under another state or
Federal order.
Additionally, many releases described
in publicly available information
occurred after closure of the mine or
mineral processing site, suggesting that
the potential for releases and adequate
monitoring remains a long-term concern
after closure of the mining or mineral
processing operation.
While some mining waste
management practices have changed
over time, the basic technologies for
extracting and processing of mineral
ores have remained fairly constant over
approximately the last 50 years. Mining
technology has become more efficient
over time in recovering mineral
values—allowing lower grade ores to be
mined which produce more waste. At
the same time, a combination of
economic and technological factors have
increased the scale of surface
disturbance and waste generation.
Mining and mineral processing facilities
generate more toxic and hazardous
waste than any other industrial sector.
Underground and surface mining
create large amounts of excavated
material. Disposal typically involves
depositing the waste rock in dedicated
dumps or piles, or in some cases using
it as mine backfill. Waste rock can also
be co-disposed with paste or filtered
tailings, or in a slurry pond. Waste rock
and overburden piles are typically
stored on-site, which may result in
acidic or other mine-influenced water.
Common sources include groundwater
affected by pits or underground
workings, surface water that has entered
PO 00000
Frm 00093
Fmt 4701
Sfmt 4702
3479
surface excavations, or any precipitation
that contacts pit faces, leach piles, waste
rock piles, or tailings piles. Sulfide rock
can generate acids that dissolve trace
elements which, without long-term
containment, collection, and treatment,
pose a significant concern long after
initial disposal.
Further, releases from waste rock
disposal can arise years after operations
have ceased, through discharges of mine
influenced water, and pile deformation
or collapse. Most mines require ongoing
management for acidic drainage.
Evidence has shown that such problems
continue to be a problem even at sites
that have been inactive for more than a
century. Thus, discharges can take years
to develop, and pose a long-term risk of
hazardous releases at the site.
EPA’s research indicates that all
processing of ore, including physical
and magnetic processing, can result in
spills of intermediate material and
waste. This is because transport within
the facility of the many different
commodities and process chemicals
used in hardrock mining activities is
required between subsequent processing
steps, thus resulting in risk of release. In
addition, where operators use toxic
process chemicals, the potential for
harm associated with these spills is
increased. Similarly, ore must be
transported from the extraction site to
the mineral processing facility. Process
water and solutions are often stored in
ponds on site for use and recycling.
Slurries are piped from mill facilities to
storage facilities (which can include
waste management features such as
tailings ponds) by pipeline, truck, or
conveyor. The slurry, containing ore
and process chemicals, can contain
mobilized contaminants and other
hazardous substances. EPA has
documented that leaks also often occur
due to liner failures, containment
failures during transport or at exchange
points (e.g., conveyor drop points or
truck offloads), and defects in pipe
seams. EPA has also documented that
operator error, such as mishandling of
solutions (e.g., over-fills) or equipment,
and severe weather events that
overwhelm containment systems can
contribute to these types of releases.
Finally, information available to EPA
indicates that potential risks posed by
hardrock mining and mineral processing
facilities can affect all environmental
media. Air, land, and water
contamination may result when waste
rock dumps, tailings disposal facilities
and open pits are not maintained
properly and release hazardous
E:\FR\FM\11JAP2.SGM
11JAP2
3480
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
substances to the environment.221 EPA
has also documented that releases of
CERCLA hazardous substances have
occurred and continue to occur,
including ongoing releases that have not
yet been detected and/or mitigated.
VII. Statutory and Executive Orders
Reviews
A. Executive Order 12866: Regulatory
Planning and Review and Executive
Order 13563: Improving Regulation and
Regulatory Review
This action is an economically
significant regulatory action that was
submitted to the Office of Management
and Budget (OMB) for review. Any
changes made in response to OMB
recommendations have been
documented in the docket. The EPA
prepared an analysis of the potential
costs and benefits associated with this
action. This analysis, Regulatory Impact
Analysis, is available in the docket.
Section I.C. of this preamble
summarizes the results of the RIA. As
discussed in that section of the
preamble, on annualized basis, the
estimated regulatory costs to private
entities for the two options in the
proposed action are $171 million
(without a financial test), and $111
million (with a financial test). EPA also
segregated the costs borne by private
entities into social cost (borne by
society) and intra-industry transfers.
The majority of the industry costs
represent a transfer from the regulated
industry to the financial industry, and
hence the quantified annualized net
social costs are estimated at $30 million
to $44 million. Similarly, the Agency
conducted a qualitative analysis of the
benefits of the rule; however, the results
were not monetized. As such, the net
benefit-cost analysis of the two options
may have an annual effect on the
economic near $100 million or more.
Accordingly, EPA submitted this action
to the OMB for review under Executive
Order 12866, and plans to incorporate
changes in response to OMB
recommendations on the proposal rule.
sradovich on DSK3GMQ082PROD with PROPOSALS2
B. Paperwork Reduction Act (PRA)
The information collection activities
in this proposed rule have been
submitted for approval to the OMB
under the PRA. The ICR document that
the EPA prepared has been assigned
EPA ICR number 2554.01. You can find
a copy of the ICR in the docket for this
rule, and it is briefly summarized here.
221 See U.S. EPA. 2004. Cleaning Up the Nation’s
Waste Sites: Markets and Technology Trends. EPA
542–R–04–015. Accessed at: https://www.epa.gov/
tio/pubisd.htm.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
The proposed rule would require that
owners or operators of facilities subject
to the rule submit information to EPA.
This ICR addresses the following
proposed information requirements that
are part of the rule: (1) Submit an initial
Notification Form to EPA within thirty
days of the effective date of the
regulation; (2) make relevant
information available to the public on
the company’s website; (3) calculate
financial responsibility amount and
submit information to support the
calculation to EPA; (4) submit evidence
that support the establishment of
financial responsibility; (5) update
financial responsibility amount at
minimum every three years and submit
evidence of proper maintenance of
financial responsibility; (6) notify EPA
when the owner or operator and the
issuer of financial instruments enter
Chapter 11 bankruptcy proceedings; (7)
notify EPA of any claim pursuant to
CERCLA naming the owner, operator, or
guarantor as defendant; (8) notify EPA
when the facility is no longer authorized
to operate or the date by which the
owner or operator must provide
notification that the facility is ceasing
operations under another regulatory
program; and (9) maintain a record of all
of the information related to financial
responsibility requirements and retain
those records for three years after the
owner or operator released from
financial responsibility requirements.
EPA believes that submission of the
information would be needed for
effective implementation of CERCLA
§ 108(b) requirements. By requiring the
owner or operator to submit information
about the facility to EPA, these
requirements would better enable the
Agency to assure full compliance with
the requirements for financial
responsibility throughout the time the
facility is subject to those requirements.
As discussed in section VI.A.3. of this
preamble, some element of the
information required for submission
under this proposed rule may be
claimed as proprietary business
information or trade secrets. As
described in that section, the proposal
would not require or provide for posting
of this sensitive information. However,
the Agency expects that much of the
information submitted to EPA under the
proposal could be made available.
Respondents/affected entities:
Hardrock Mining Industry.
Respondent’s obligation to respond:
Mandatory, pursuant to CERCLA §§ 104,
108, and 115, 42 U.S.C. §§ 9604, 9608,
9615.
Estimated number of respondents:
221.
PO 00000
Frm 00094
Fmt 4701
Sfmt 4702
Frequency of response: One to three
times (the first three years).
Total estimated burden: 7,057 hours
(per year). Burden is defined at 5 CFR
1320.3(b).
Total estimated cost: $490,504 (per
year), includes $12,532 annualized
capital or operation & maintenance
costs.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid OMB
control number. The OMB control
numbers for the EPA’s regulations in 40
CFR are listed in 40 CFR part 9.
Submit your comments on the
Agency’s need for this information, the
accuracy of the provided burden
estimates, and any suggested methods
for minimizing respondent burden to
EPA. This information should be
submitted to the docket for tis proposed
rule (Docket No. EPA–HQ–SFUND–
2015–0781). You may also send your
ICR-related comments to OMB’s Office
of Information and Regulatory Affairs
via email to OIRA_submission@
omb.eop.gov, Attention: Desk Officer for
EPA. Since OMB is required to make a
decision concerning the ICR between
thirty and sixty days after receipt, OMB
must receive comments no later than
February 10, 2017. EPA will respond to
any ICR-related comments in the final
rule.
C. Regulatory Flexibility Act (RFA)
Pursuant to section 603 of the RFA,
EPA prepared an initial regulatory
flexibility analysis (IRFA) that examines
the impact of the proposed rule on small
entities along with regulatory alternative
that could minimize that impact. The
complete IRFA is available for review in
the docket and is summarized here.
1. Why EPA is Considering This Action
A series of studies and reviews
conducted by the EPA Office of
Inspector General (OIG) and the
Government Accountability Office
(GAO) from 2004 through 2008
demonstrated that the hardrock mining
industry presented a risk to EPA and
taxpayers with respect to the amount of
cleanup costs for which they would be
responsible. Information available to
EPA indicates strongly that the hardrock
mining industry continues to present
risks associated with the production,
transportation, treatment, storage, and
disposal of hazardous substances. In
accordance with CERCLA § 108(b) and
in response to these concerns, EPA is
publishing the proposed rule that would
create a financial responsibility program
in CERCLA.
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
2. Objectives of, and Legal Basis for, the
Proposed Rule
The proposed rule endeavors to
increase the likelihood that owners and
operators will provide funds necessary
to address the CERCLA liabilities at
their facilities, thus preventing the
burden from shifting to the taxpayer. In
addition, the rule would provide an
incentive for implementation of sound
practices at hardrock mining facilities
that would decrease the need for future
CERCLA actions.
sradovich on DSK3GMQ082PROD with PROPOSALS2
3. Estimate of the Number of Small
Entities To Which the Proposed Rule
Would Apply
For purposes of assessing the impacts
of this regulation on small entities, a
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
small entity is defined as: (1) A small
business as defined by the Small
Business Administration’s (SBA)
regulations at 13 CFR part 121.201; (2)
a small governmental jurisdiction that is
a government of a city, county, town,
school district or special district with a
population of less than 50,000; and (3)
a small organization that is any not-forprofit enterprise which is independently
owned and operated and is not
dominant in its field.
For the purposes of this analysis, EPA
identified approximately 221 mines/
processing facilities in the potentially
regulated universe; of these, 53 facilities
are estimated to have a small owner
(including joint ventures),
corresponding to 43 firms. Twelve
PO 00000
Frm 00095
Fmt 4701
Sfmt 4702
3481
additional mines have owners of
unknown size (due to lack of available
company data). Most (38) of these 53
facilities engage in mining/extraction;
15 facilities engage in processing/
refining only.
Depending on the specific NAICS
code of the owner, the determination of
‘‘small entity’’ status depends on either
the revenue or the number of employees
of the firm. The minimum threshold for
revenue in the relevant NAICS codes
ranges from $11 million to $36.5
million. The employment qualifications
ranges from 100 employees to 1,500
employees. Table C–1 lists summary
information on the small entity
universe.
E:\FR\FM\11JAP2.SGM
11JAP2
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
PO 00000
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
Frm 00096
Fmt 4701
...........
...........
...........
...........
...........
...........
Sfmt 4702
E:\FR\FM\11JAP2.SGM
TOTAL ....
522390 ...........
551112 ...........
561499 ...........
561990 ...........
Unknown ........
423520 ...........
331491 ...........
238910
325180
325312
327992
331313
331410
236115 ...........
211111
212210
212221
212234
212291
212392
212393
212399
213114
213115
NAICS code
Industry
........................................................................................
....................
20.5
20.5
15
11
....................
....................
....................
15
....................
....................
....................
....................
....................
36.5
....................
....................
....................
....................
....................
....................
....................
....................
20.5
7.5
Revenues
($millions)
....................
....................
....................
....................
....................
....................
100
750
....................
1000
750
500
1000
1000
....................
1250
750
1500
1500
250
1000
500
500
....................
....................
Employees
SBA small business size
standard (as of February
2016)
.....................
.....................
.....................
.....................
.....................
.....................
44 to 56 firms
1 .....................
2 .....................
1 .....................
1 .....................
Up to 12 additional.
1 .....................
1 .....................
2
2
1
2
1
1
1 .....................
1 .....................
1 .....................
10 ...................
5 .....................
2 .....................
<1 ...................
1 .....................
3 .....................
2 .....................
1 .....................
Number of
small firms
........................
<1 ...................
<1 ...................
<1 ...................
<1 ...................
Unknown ........
15 ...................
34 ...................
2 .....................
168 .................
47 ...................
32 ...................
2 .....................
13 ...................
8 .....................
$61 .................
100 .................
96 ...................
22 ...................
15 ...................
<1 ...................
<1 ...................
329 .................
<1 ...................
<1 ...................
Average
annual
revenues of
small firms
($Millions)
........................
1 .....................
2 .....................
1 .....................
2 .....................
Unknown ........
54 ...................
500 .................
100 .................
295 .................
315 .................
111 .................
550 .................
83 ...................
10 ...................
194 .................
475 .................
261 .................
80 ...................
48 ...................
6 .....................
3 .....................
173 .................
7 .....................
2 .....................
Average
number of
employees
of small firms
TABLE C–1—SUMMARY OF SMALL BUSINESS STATISTICS (COMPANY REVENUES)
Crude Petroleum and Natural Gas Extraction ..............
Iron Ore Mining .............................................................
Gold Ore Mining ............................................................
Copper Ore and Nickel Ore Mining ..............................
Uranium-Radium-Vanadium Ore Mining .......................
Phosphate Rock Mining ................................................
Other Chemical and Fertilizer Mineral Mining ..............
All Other Nonmetallic Mineral Mining ............................
Support Activities for Metal Mining ...............................
Support Activities for Nonmetallic Minerals (except
Fuels).
New Single-family Housing Construction (Except ForSale Builders).
Site Preparation Contractors .........................................
Other Basic Inorganic Chemical Manufacturing ...........
Phosphatic Fertilizer Manufacturing ..............................
Ground or Treated Mineral and Earth Manufacturing ...
Alumina Refining and Primary Aluminum Production ...
Nonferrous Metal (except Aluminum) Smelting and
Refining.
Nonferrous Metal (except Copper and Aluminum) Rolling, Drawing and Extruding.
Coal and Other Mineral and Ore Merchant Wholesalers.
Other Activities Related to Credit Intermediation ..........
Offices of Other Holding Companies ............................
All Other Business Support Services ............................
All Other Support Services ............................................
Unknown ........................................................................
sradovich on DSK3GMQ082PROD with PROPOSALS2
35 to 49 firms
1 .....................
2 .....................
1 .....................
1 .....................
Up to 12 additional firms.
0 .....................
1 .....................
2 .....................
0–1 .................
1 .....................
2 .....................
1 .....................
1 .....................
1 .....................
1 .....................
1 .....................
6–7 .................
5 .....................
1 .....................
1 .....................
1 .....................
2 .....................
2 .....................
1 .....................
Number of
small firms
facing annual
compliance
costs >1%
(Median)*
25 to 42 firms.
1.
2.
1.
1.
Up to 12 additional firms.
0.
1.
1.
0.
0–1.
1.
1.
0.
0.
0–1.
0–1.
5–6.
4.
0–1.
1.
1.
2.
2.
1.
Number of
small firms
facing annual
compliance
costs >3%
(Median)*
3482
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
As required by section 609(b) of the
RFA, EPA convened a Small Business
Advocacy Review (SBAR) Panel to
obtain advice and recommendations
from small entity representatives that
potentially would be subject to the
rule’s requirements. The SBAR Panel
evaluated the assembled materials and
small-entity comments on issues related
to elements of an IRFA. A copy of the
full SBAR Panel Report is available in
the rulemaking docket.
The SBAR Panel recommended that
EPA:
(1) Solicit comment on whether to
provide for programmatic-based deferral
of the requirement for owners and
operators of facilities to calculate an
individual financial responsibility
amount and to obtain a financial
responsibility instrument in situations
where all facilities regulated by a
particular Federal or state mining
program could qualify for reductions for
the full response component of the
financial responsibility formula—that is,
for all response categories, and at all
facilities.
(2) propose to allow reductions to the
financial responsibility amount
applicable at facility for future
requirements that are enforceable
against the owner and operator, that are
supported by adequate financial
assurance, and with which the owner
and operator are in compliance, and
solicit comment on allowing reductions
to the financial responsibility amount
for other risk-reducing practices and/or
controls (e.g., voluntary practices) that
are implemented at hardrock mining
facilities that should be accounted for in
the reductions, and on how, if
reductions were allowed for such
practices and/or controls, EPA could
assure that those controls would remain
in place and be effective over time
where there is no regulatory program
overseeing their maintenance and
operation.
(3) provide in the rule discussion and
solicitation of comment on the impact of
the financial test on small businesses.
The discussion and solicitation of
comment should consider whether
making a financial test available would
increase the available capacity for thirdparty instruments in the marketplace
and increase the availability of such
instruments to owners or operators of
small businesses and/or whether it
would create a competitive
disadvantage for small business, and
solicit comment on those concerns.
(4) solicit comment on all aspects of
the proposed financial responsibility
formula, including comment on specific
elements of the formula such as the
robustness of the regression analyses,
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
identification and treatment of
influential data points (i.e. potential
outliers), the use and calculation of the
individual smear factors, and the
assumption of source controls.
(5) solicit comment on the criteria
used to identify lower-level of risk of
injury classes in the proposed rule, and
whether it would be feasible and
appropriate to identify additional
classes as presenting a lower level of
risk of injury, particularly classes of
mines that differ in their operations and
associated risks from more traditional
hardrock mines, and on whether such
classes of mines, defined based on
facility characteristics, could potentially
encompass iron ore, phosphate, and
uranium mines.
(6) request comment on whether more
alternate or more flexible engineering
standards can substitute for some or all
of the numeric engineering standards in
the proposed reduction criteria (e.g.
planning for a 200-year storm event,
reduction of net precipitation by 95
percent), on whether the proposed
reduction criteria would limit flexibility
necessary for innovative or different
site-specific approaches and, if so, how
those might be preserved, and on
whether other regulatory programs
already impose the requirements that
would satisfy the reduction criteria.
EPA revised the rule to include in
§ 320.63 a proposal to allow reductions
to the financial responsibility amount
applicable at facility for future
requirements that are enforceable
against the owner and operator, that are
supported by adequate financial
assurance, and with which the owner
and operator are incompliance. These
reductions are described in section
VI.D.4. of this preamble. EPA also
solicited comment on most of the areas
recommended by the Panel.
4. Projected Reporting, Recordkeeping,
and Other Compliance Requirements of
the Proposed Rule
EPA estimates industry costs for the
owner/operator companies that are
unable to utilize a self-insurance option
under the proposed rule as the resources
expended and/or foregone to obtain a
third-party financial responsibility
instrument. Additional administrative
and recordkeeping costs to industry
include reading the regulations,
submitting initial facility information to
EPA and the public, calculating
financial responsibility amounts,
choosing a financial responsibility
instrument, acquiring and maintaining a
financial responsibility instrument,
recalculating financial responsibility
amounts to reflect any changes in
facility operations, and any functions
PO 00000
Frm 00097
Fmt 4701
Sfmt 4702
3483
the rule requires of owners and
operators upon the transfer of a facility,
owner or operator default, a CERCLA
claim against the owner or operator, and
release from financial responsibility.
As described earlier, EPA began its
assessment of the impact of regulatory
options on small entities by first
estimating the number of small entities
owning hardrock mining facilities that
would be subject to the proposed rule.
EPA then assessed whether these small
entities would be expected to incur
costs that constitute a significant
impact; and whether the number of
those small entities estimated to incur a
significant impact represent a
substantial number of small entities.
To assess whether small entities’
compliance costs might constitute a
significant impact, EPA averaged the
annualized compliance costs as a
percentage of entity revenue (cost-torevenue test). EPA compared the
resulting percentages to impacts criteria
of one percent and three percent of
revenue. Small entities estimated to
incur compliance costs exceeding one or
more of the one percent and three
percent impact thresholds were
identified as potentially incurring a
significant impact.
Table C–1 shows that 35 to 49 small
entities may face an average annual
compliance cost of greater than the one
percent of revenues. Similarly, 25 to 42
small entities may experience impact on
revenues above three percent. The
results of the impacts analysis do not
vary significantly between the two
regulatory options. However, impacts
are generally lower under Option 2 due
to the lower compliance costs when a
financial test is available.
These results may suggest that a
significant number of small entities
expected to incur annualized cost of
more than the three percent of the
revenue thresholds. However, because
of data limitations, the screening level
analysis relied upon estimated financial
responsibility amounts for each facility
based on facility type, rather than actual
size and nature of operations. Further,
reliable and current revenues
information for small, private firms was
not readily available. As a result, these
results are not suggestive of impacts for
any specific company or entity.
5. Related Federal Rules
These are the only financial
responsibility requirements for nontransportation related facilities pursuant
to CERCLA.
E:\FR\FM\11JAP2.SGM
11JAP2
3484
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
6. Description of Alternatives to the
Proposed Rule
The Agency considered alternatives to
provisions of this rule. Those
alternatives are discussed in section
VII.K. of this preamble.
D. Unfunded Mandates Reform Act
(UMRA)
This action contains a Federal
mandate under UMRA, 2 U.S.C. 1531–
1538, that may result in expenditures of
$100 million or more for state, local and
tribal governments, in the aggregate, or
the private sector in any one year.
Accordingly, EPA has prepared a
written statement required under
section 202 of UMRA. The statement is
included in the docket for this action
and briefly summarized here.
The RIA estimates the rule may affect
221 hardrock mining and processing
facilities. EPA estimates that the
regulation will have aggregate annual
compliance costs ranging from $111
million to $171 million to the private
sector. A detailed assessment of the
anticipated costs and benefits
(presented qualitatively) of the Federal
mandate is provided in the RIA.
In accordance with UMRA § 205, EPA
is proposing a range of regulatory
options. The options can be summarized
as: (1) A financial responsibility
regulation that allows for a financial
test, and (2) a financial responsibility
regulation that does not allow for a
financial test. These options are all
considered to be technologically feasible
and economically achievable.
This action is not subject to the
requirements of § 203 of UMRA because
it contains no regulatory requirements
that might significantly or uniquely
affect small governments.
sradovich on DSK3GMQ082PROD with PROPOSALS2
E. Executive Order 13132: Federalism
EPA believes that this action will not
have federalism implications as defined
by agency policy for implementing
Executive Order 13132, entitled
‘‘Federalism.’’
Earlier in the development of this
proposed rule, EPA projected that the
CERCLA § 108(b) rules would have
federalism implications under the terms
of Executive Order 13132, and EPA
planned certain outreach activities
accordingly. As discussed in Section IV
of this preamble, EPA spent significant
time and effort gathering and evaluating
information on regulated entities and
considering various approaches to
structuring the proposed rule. EPA also
considered as part of this the potential
relevance of CERCLA § 114(d). In light
of further development of the proposed
rule and its resultant analysis of the
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
question of federalism implications as
explained below, EPA has come to
expect that this action does not, in fact,
have federalism implications.
Regardless of this determination on the
applicability of the Executive Order,
EPA nonetheless engaged its
intergovernmental partners in the same
pre-proposal outreach activities
expected under the Executive Order.
As part of the regulatory impact
analysis, EPA analyzed the CERCLA
§ 108(b) proposed rule’s potential for
federalism implications as defined in
the Executive Order to include
regulations that have ‘‘substantial direct
effects on the states, on the relationship
between the national government and
the states, or on the distribution of
power and responsibilities among the
various levels of government.’’ EPA
typically considers a policy or
regulation to have federalism
implications if it results in the
expenditure by State and/or local
governments in the aggregate of $25
million or more nationally in any one
year, or if the policy or regulation
results in preemption, whether by intent
or effect, of State of local government
law. The proposed CERCLA § 108(b)
rule does not impose requirements on,
nor is expected to result in significant
expenditure by, state and/or local
governments. Further, as discussed in
Section V of the preamble, EPA does not
believe that CERCLA § 114(d) gives a
preemptive effect to EPA’s CERCLA
§ 108(b) financial responsibility
regulations over state reclamation
bonding requirements.
In any case, this proposed rule is of
significant interest to state and/or local
governments. Therefore, consistent with
the EPA’s policy to promote
intergovernmental communication and
cooperation, and in response to the
considerable interest shown by states
prior to and during the development of
this action, EPA engaged in extensive
pre-proposal consultation, under the
auspices of Executive Order 13132, to
ensure that our state and local partners
would have the opportunity to provide
meaningful and timely input into its
development. EPA also anticipates
additional state and local government
input in response to the proposed rule.
In this regard, EPA is interested in
receiving information on any state
hazardous substance response
program(s) that require demonstrations
of financial responsibility for claims
made and that states believe could be
preempted by this proposal. EPA is
committed to continued interactions
with the states before promulgating any
final rule.
PO 00000
Frm 00098
Fmt 4701
Sfmt 4702
F. Executive Order 13175: Consultation
and Coordination With Indian Tribal
Governments
This action does not have tribal
implications as specified in Executive
Order 13175 (Executive Order 13175).
Executive Order 13175, Consultation
and Coordination with Indian Tribal
Governments,222 requires EPA to
develop an accountable process to
ensure ‘‘meaningful and timely input by
tribal officials in the development of
regulatory policies that have tribal
implications.’’ EPA believes that any
tribal impacts from this regulation will
be limited, because no tribal
governments own or operate facilities in
the potentially regulated universe.
Earlier in the development of this
proposed rule, EPA projected that the
CERCLA 108(b) rules would have tribal
implications and EPA planned certain
outreach activities accordingly. As
discussed in Section IV of this
preamble, EPA spent significant time
and effort gathering and evaluating
information on regulated entities and
considering various approaches to
structuring the proposed rule. In light of
further development of the proposed
rule and its resultant analysis of the
question of tribal implications as
explained below, EPA has come to
expect that this action does not, in fact,
have tribal impacts. Regardless, EPA
held early engagement with tribal
governments as guided by EPA Policy
on Consultation and Coordination with
Indian Tribes.
To assess the impact on tribal
governments, EPA identified tribal
lands and associated tribes that overlap
with the ‘‘included’’ universe of
currently operating facilities potentially
subject to the CERCLA § 108(b)
rulemaking. Relevant tribal lands were
identified through a GIS dataset
available from the U.S. Census
Bureau.223 This dataset included the
following legal and statistical entities:
Federally recognized American Indian
reservations and off-reservation trust
land areas; 224 State-recognized
222 See
65 FR 67249, November 9, 2000.
U.S. Census Bureau. (2014). ‘‘TIGER/Line
Shapefile, 2014, Series Information File for the
Current American Indian/Alaska Native/Native
Hawaiian Areas National (AIANNH) National
Shapefile.’’ Accessed at: https://catalog.data.gov/
dataset/tiger-line-shapefile-2014-series-informationfile-for-the-current-american-indian-ala.
224 The Census Bureau defines off-reservation
trust land as ‘‘areas for which the United States
holds title in trust for the benefit of a tribe (tribal
trust land) or for an individual American Indian
(individual trust land). Trust lands can be alienated
or encumbered only by the owner with the approval
of the Secretary of the Interior or his/her authorized
representative. Trust lands may be located on or off
a reservation; however, the Census Bureau tabulates
223 See
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
American Indian reservations; Hawaiian
home lands (HHLs); Alaska Native
village statistical areas (ANVSAs);
Oklahoma tribal statistical areas
(OTSAs); Tribal designated statistical
areas (TDSAs); and State designated
tribal statistical areas (SDTSAs).
To estimate the physical extent of the
facilities, buffers of varying sizes were
projected around these coordinates in
ArcGIS. Half mile, one-mile, and tenmile buffers were projected around each
set of coordinates. The number of
facilities overlapping tribal lands varied
considerably depending on the size of
the buffer used: with the half-mile
buffer, four facilities overlapped three
tribal land areas; with the one-mile
buffer, six facilities overlapped four
tribal land areas; and with the ten-mile
buffer, 35 facilities overlapped 38 tribal
land areas. A complete list of the
facilities and tribes that fall within these
buffers is presented in the RIA.
EPA has concluded that this action
will have limited tribal implications to
the extent that the facilities in its
regulated universe are located close to
tribal lands. As no tribal governments
own or operate any of the regulated
facilities, and therefore will not incur
any direct compliance costs as a result
of the proposed rule, Executive Order
13175 does not apply to this rule.
Although Executive Order 13175 does
not apply, the EPA consulted with tribal
officials during the development phase
of the proposed rule, consistent with the
EPA Policy on Consultation and
Coordination with Indian Tribes. In
early June 2016, EPA sent letters to all
federally recognized Indian tribes,
notifying them of the opportunity to
provide input to the proposed rule
during the consultation and
coordination period. EPA conducted
tribal outreach activities including a
tribal webinar on June 22, 2016, and
conference calls with the National
Tribal Caucus on August 3, 2016, and
the Great Lakes Fish and Wildlife
Commission on August 8, 2016. EPA
also participated in the Tribal Lands
and Environment Forum from August
15–18, 2016, where several tribal
leaders expressed interest in the
proposed rulemaking. The EPA also
intends to hold a second round of
consultation and coordination with
tribal officials aligned with the public
data only for off-reservation trust lands with the offreservation trust lands always associated with a
specific federally recognized reservation and/or
tribal government.’’
See U.S. Census Bureau. ‘‘Geographic Terms and
Concepts—American Indian, Alaska Native, and
Native Hawaiian Areas.’’ Accessed August 21, 2015
at: https://www.census.gov/geo/reference/gtc/gtc_
aiannha.html.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
comment period for the proposed rule.
EPA also intends to summarize
comments and input received from both
consultation and coordination periods
with the final action.
G. Executive Order 13045: Protection of
Children From Environmental Health
and Safety Risks
This action is not subject to Executive
Order 13045 because EPA does not
expect the environmental health risks or
safety risks addressed by this action
present a disproportionate risk to
children. EPA expects that by adjusting
the amount of financial responsibility to
account for environmentally safer
practices, the proposed rule would
provide an incentive for implementation
of sound practices at hardrock mining
facilities and thereby decrease the need
for future CERCLA actions. To the
extent that environmental conditions
surrounding mine sites improve
following this rule, the children living
in close proximity to mining facilities
are likely to benefit. To assess the
proportional distribution of the benefits
of the proposed rule, EPA prepared an
analysis of the demographic
characteristics of populations
surrounding hardrock mining site to
identify the number and proportion of
children living in close proximity to
these sites. This analysis is presented in
the Regulatory Impact Analysis (RIA),
which is available in the docket.
As discussed in the RIA, of the
775,000 people living within one mile
of regulated facilities, approximately
188,000 or 24.3 percent, are under the
age of 18. Nationwide, approximately
23.5 percent of the population is under
the age of 18. To the extent that
environmental conditions surrounding
mine and mineral processor sites
improve following this rule, the
children living in close proximity to
mining facilities are likely to benefit.
H. Executive Order 13211: Actions That
Significantly Affect Energy Supply,
Distribution, or Use
This action is not a ‘‘significant
energy action’’ because it is not likely to
have a significant adverse effect on the
supply, distribution or use of energy.
This proposed rule would establish
financial responsibility requirements
under CERCLA designed to assure that
owners and operators of facilities
provide funds to address CERCLA
liabilities at their sites, and to create
incentives for sound practices that will
minimize the likelihood of a need for a
future CERCLA response. The proposed
rule is not expected to impact energy
production, distribution, or
consumption.
PO 00000
Frm 00099
Fmt 4701
Sfmt 4702
3485
I. National Technology Transfer and
Advancement Act (NTTAA)
This rulemaking does not involve
technical standards.
J. Executive Order 12898: Federal
Actions To Address Environmental
Justice in Minority Populations and
Low-Income Populations
EPA believes that this action does not
have disproportionately high and
adverse human health or environmental
effects on minority populations, lowincome populations and/or indigenous
peoples, as specified in Executive Order
12898 (59 FR 7629, February 16, 1994).
The documentation for this decision
is contained in the Regulatory Impact
Analysis (RIA). A copy of the RIA can
be found in the docket for this rule. As
discussed in Section 8 of the RIA, EPA
examined whether the actions being
proposed under the proposed rules
present environmental justice concerns
for communities surrounding mining
facilities.
EPA conducted an analysis of
demographic characteristics of
populations near hardrock mining and
mineral processing facilities to
determine whether the benefits of the
proposed rule are differentially
distributed. For this analysis, the agency
analyzed national census population
data within one-mile, five-mile, 15-mile,
and 25-mile radii from mining facilities,
and compared them with the
demographic characteristics of states
and national levels. Of the 221 hardrock
mining/mineral processing facilities in
the RIA universe, the total population
within one mile of these sites is
approximately 775,000 people, of which
260,000 (34 percent), belong to a
minority group. In addition, 157,000 (21
percent) live below the Federal Poverty
Level. Both of these proportions are
roughly comparable to nationwide
benchmarks. Nationally, 37 percent of
the population belongs to a minority
group, and 16 percent of the population
lives below the Federal Poverty Level.
The analysis also compared the
concentrations of minority groups and
people living in poverty to state
averages. The results show that within
one-mile radius, 230 (36 percent) census
block groups exceeded the statewide
minority average, and 356 (56 percent)
census block groups exceeded their
respective statewide poverty levels.
EPA expects this proposed rule will,
when made final, increase the
likelihood that owners and operators
will provide funds necessary to address
the CERCLA liabilities at their facilities,
thus preventing owners or operators
from shifting the burden of cleanup to
E:\FR\FM\11JAP2.SGM
11JAP2
3486
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
other parties, including the taxpayer. In
addition, EPA expects that by adjusting
the amount of financial responsibility to
account for environmentally safer
practices, the proposed rule would
provide an incentive for implementation
of sound practices at hardrock mining
facilities and thereby decrease the need
for future CERCLA actions. Groups
within the proximity of hardrock
mining sites are expected to benefit
from the environmental performance
improvements, and other benefits of the
rule. This analysis shows that the
percentage of minority and low-income
populations in and near hardrock
mining sites are proportionally
represented (in some case higher)
compared to national and state averages.
This analysis indicates that minority
and low-income communities are
expected to benefit as much as any other
group under the proposed rule.
List of Subjects in 40 CFR Part 320
Environmental protection, Financial
responsibility, Hardrock mining,
Hazardous substances.
Dated: December 1, 2016.
Gina McCarthy,
Administrator.
For the reasons set forth in the
preamble, title 40, chapter I of the Code
of Federal Regulations is proposed to be
amended by adding part 320 to read as
follows:
PART 320—FINANCIAL
RESPONSIBILITY REQUIREMENTS
FOR CERCLA LIABILITIES
320.7 Requirement for electronic
submission of information.
320.8 Recordkeeping requirements.
320.9 Requirements for public notice.
Subpart A—General Facility
Requirements
Subpart B—General Financial
Responsibility Requirements
(a) The purpose of this part is to
establish requirements under § 108(b) of
the Comprehensive Environmental
Response, Compensation, and Liability
Act (CERCLA), 42, U.S.C. 9601, et seq.,
for current owners and operators of nontransportation-related facilities to
establish and maintain evidence of
financial responsibility.
(b) The amount of financial
responsibility under this part must be
consistent with the degree and duration
of risk associated with the production,
transportation, treatment, storage, or
disposal of hazardous substances at
their facilities, and must be available to
pay for the response costs, health
assessment costs, and natural resource
damages under CERCLA for which the
owner and operator are responsible.
320.20 Applicable financial responsibility
amounts.
320.21 Procedures for establishing
financial responsibility.
320.22 Maintenance of instruments.
320.23 Incapacity of owners or operators,
corporate guarantors, or financial
institutions.
320.24 Notification of claims brought
against owners, operators, or guarantors.
320.25 Facility transfer.
320.26 Notification of cessation of
operations.
320.27 Release from financial
responsibility requirements.
Subpart C—Available Financial
Responsibility Instruments.
320.40 Letter of credit.
320.41 Surety bond.
320.42 Insurance.
320.43 [Reserved] (Option 1—Preferred
Option).
320.43 Financial test (Option 2).
320.44 [Reserved] (Option 1—Preferred
Option).
320.44 Corporate guarantee (Option 2).
320.45 Trust fund.
320.46 Use of multiple financial
responsibility instruments.
320.47 Use of a financial instrument for
multiple facilities.
320.48 Consolidated form and multiple
owners and/or operators.
320.49 [Reserved]
320.50 Wording of the Instruments.
Subpart D—G [Reserved]
Subpart A—General Facility Requirements
Sec.
320.1 Purpose, scope.
320.2 Applicability.
320.3 Definitions and usage.
320.4 Availability of information;
confidential business information.
320.5 Notification requirement.
320.6 General information submission
requirements.
Subpart H—Hardrock Mining Facilities
320.60 Applicability
320.61 Timeframes for Compliance
320.62 Definitions
320.63 Determining the Financial
Responsibility Amount
320.64 Information Submission and
Recordkeeping Requirements
320.65 Third-party Certification.
§ 320.1
§ 320.2
Purpose and Scope.
Applicability.
(a) The regulations of this part apply
to current owners and operators of
facilities that are authorized to operate,
or should be authorized to operate, on
or after the effective date of the rule
under which they become subject to this
part. The Federal Government and
States are exempt from the requirements
of this part.
(b) Owners and operators of all
facilities within the classes identified in
Table A–1 must comply with the
applicable requirements of subparts A
through C of this part.
(c) Owners and operators of facilities
identified in Table A–1 of this section
must also comply with the applicable
class-specific requirements as specified
in Table A–1 of this section.
(d) The requirements of this part
apply until EPA releases the owner and
operator from the obligation to maintain
financial responsibility for its facility in
accordance with § 300.25 or § 300.27.
TABLE A–1
Facility class(es)
sradovich on DSK3GMQ082PROD with PROPOSALS2
Owners and operators of hardrock mining facilities
identified in § 320.60(a).
§ 320.3
Definitions and usage.
(a) As used in this part, words in the
singular include the plural; words in the
plural include the singular; and words
in the masculine gender also include the
feminine and neuter genders as the case
may require.
(b) When used in this part, the
following terms have the meanings
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
Applicable class-specific
requirements
Effective date
[Date 30 days after date of publication of Final Rule].
given in this paragraph. Terms not
defined in this part have the meaning
given by CERCLA or the national Oil
and Hazardous Substances Pollution
Contingency Plan, 40 CFR part 300.
Administrator means the EPA
Administrator, or designee thereof.
Authoriz(-ed)(-ation) to operate means
the owner or operator has obtained
PO 00000
Frm 00100
Fmt 4701
Sfmt 4702
Subpart H.
permission through a permit, license, or
other legally applicable form of
permission to conduct the activities
under Federal, state, or local law, and is
irrespective of the level of activity at the
facility that causes the owner and
operator to be subject to this part.
Current § 108(b) financial
responsibility amount means the most
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
recent amount required to be prepared
under § 320.20 of this part.
Electronic financial responsibility
reporting compliance date means the
date that EPA announces in the Federal
Register, on or after which owners and
operators are required to file
submissions required by this part in an
EPA electronic system, or its successor
system.
Enforceable Document means a
document issued under a Federal, state,
tribal, or local governmental authority,
to which the owner or operator is
currently subject, and the requirements
of which can be enforced against the
owner or operator by the issuing
authority. An enforceable document can
be a permit, a settlement, an order, or
any other document that meets the
above criteria.
Parent Corporation means a
corporation that directly owns at least
50 percent of the voting stock of the
corporation which is the facility owner
or operator; latter corporation is deemed
a subsidiary of the parent corporation.
Substantial Business Relationship
means the extent of a business
relationship necessary under applicable
State law to make a guarantee contract
issued incident to that relationship
valid and enforceable. A ‘‘substantial
business relationship’’ must arise from a
pattern of recent or ongoing business
transactions, in addition to the
guarantee itself, such that a currently
existing business relationship between
the guarantor and the owner or operator
is demonstrated to the satisfaction of the
Administrator.
sradovich on DSK3GMQ082PROD with PROPOSALS2
§ 320.4 Availability of information;
confidential business information.
(a) Any information provided to EPA
under this part, or required to be
provided to the public by the owner or
operator under this part, will be made
available to the public to the extent and
in the manner authorized by the
Freedom of Information Act, 5 USC 552,
section 104 of CERCLA, and EPA
regulations implementing the Freedom
of Information Act and section 104 of
CERCLA, as applicable.
(b) Any person who submits
information to EPA in accordance with
this part, or who is required to provide
information to the public under this
part, may assert a claim of business
confidentiality covering part or all of
that information by following the
procedures set forth in § 2.203(b).
Information covered by such a claim
will be disclosed by EPA, or will be
required to be released by the owner or
operator only to the extent, and by
means of the procedures, set forth in
part 2, subpart B, of this chapter.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
However, if no such claim accompanies
the information when it is received by
EPA, it may be made available to the
public without further notice to the
person submitting it.
(c) Assertions of claims of business
confidentiality will not be considered
by EPA if the information is covered by
a Class Determination of nonconfidentiality.
§ 320.5
Notification requirement.
(a) (1) Each owner and operator that
is authorized to operate or should be
authorized to operate on the effective
date of the final rule under which the
facility becomes subject to the
requirements of this part must complete
the Notification Form in Appendix A of
this part, providing all information
requested, and submit it to the
Administrator within thirty days of the
effective date of that regulation.
(2) Owners or operators that become
authorized to operate after the effective
date of the final rule that makes their
facility subject to the requirements of
this part must submit the notification
form required in paragraph (a)(1) of this
section prior to beginning operations.
(b) Within thirty days of receiving
notification EPA will:
(1) Provide the owner or operator
acknowledgement of receipt of the
notification, and
(2) If the facility has not received one,
assign and provide an EPA
Identification number to the facility.
(c) Owners and operators must notify
EPA of changes at their facilities by
updating their Notification Form, and/or
other documents required under the
applicable class-specific subpart, and
resubmitting it to EPA within thirty
days of the change.
§ 320.6 General information submission
requirements.
Owners and operators must submit
information as required by this part to
support financial responsibility
requirements including:
(a) The notification form required in
§ 320.5;
(b) Information required under the
public involvement requirements of
§ 320.9;
(c) Notifications required under
subpart B of this part;
(d) Demonstration of financial
responsibility as required under subpart
C of this part; and
(e) Information required under classspecific requirements identified in
Table 1 of § 320.1(f) as applicable to the
facility.
PO 00000
Frm 00101
Fmt 4701
Sfmt 4702
3487
§ 320.7 Requirement for electronic
submission of information.
(a) Information submitted to the
Administrator under the requirements
of this part must be submitted in paper
format until the electronic reporting
compliance date, defined in § 320.3.
(b) Electronic submissions that are
obtained, completed, and transmitted in
accordance with this section, and used
in accordance with this section, are the
legal equivalent of paper submissions
bearing handwritten signatures, and
satisfy for all purposes any requirement
in these regulations to obtain, complete,
sign, provide, use, or retain such
information.
(c) Where an electronic signature is
required, such signature must be a
legally valid and enforceable signature
under applicable EPA and other Federal
requirements pertaining to electronic
signatures.
(d) The Administrator may waive the
requirement for electronic submission
under the following conditions:
(1) General waiver. The Administrator
may grant a general waiver for a
renewable period of one year to owners
or operators that cannot comply with
the requirement for electronic
submission. The owner or operator must
submit a written request for a general
waiver to the Administrator at least
thirty days in advance of the date the
first submission that would be subject to
the requested general waiver is due to
EPA or, for a renewal, thirty days in
advance of the expiration of the waiver.
The request for a general waiver must
describe the conditions(s) in paragraphs
(i) through (iv) that prevent electronic
submission of information. The
Administrator may grant a general
waiver upon a finding that:
(i) The owner or operator is unable to
gain access to a system allowing
electronic reporting because the owner
or operator is located in an area with
insufficient broadband access;
(ii) Obtaining a system to support
electronic submission would impose an
undue cost burden on the owner or
operator,
(iii) The owner or operator’s
electronic system is incompatible with
the Agency’s, or
(iv) Religious practices of the owner
or operator prohibit the use of necessary
technologies.
(2) Emergency waiver. The
Administrator may grant a nonrenewable emergency waiver for an
individual submission required under
this part to an owner or operator that
would not is unable to comply with the
requirement for electronic submission.
The owner or operator must submit a
written request for an emergency waiver
E:\FR\FM\11JAP2.SGM
11JAP2
3488
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
within ten days of the date the
submission was due to EPA. The request
for an emergency waiver must describe
the condition(s) in paragraphs (i)
through (iii) that prevented the
electronic submission of information
and must be accompanied by a paper
copy of the information due. The
Administrator may grant an emergency
waiver upon a finding that one of the
following events occurred that
prevented the electronic submission of
information by the owner or operator:
(i) A large-scale national disaster (e.g.,
hurricane);
(ii) A prolonged electronic reporting
system outage; or
(iii) A prolonged failure of the
owner’s and operator’s computer
system.
§ 320.8
Recordkeeping requirements.
(a) The owner or operator must
develop a facility record that contains
information related to its compliance
with the financial responsibility
requirements under this part.
(b) The facility record must include,
at a minimum, the information that
must be submitted to EPA under
§ 320.6(a), as applicable, and all
notifications received from EPA related
to the financial responsibility
obligations of the facility.
§ 320.9
Requirements for public notice.
sradovich on DSK3GMQ082PROD with PROPOSALS2
[PROPOSED REGULATORY TEXT FOR
APPROACH 1]
(a) Within sixty days of the date it
becomes subject to the requirements of
this part, the owner or operator must
establish and maintain a website titled
‘‘CERCLA Section 108(b) Financial
Responsibility Information’ and submit
to EPA the URL of a location on its
company Web site where it will make
information available to the public.
(b) Within thirty days of receiving the
URL, EPA will post on its website notice
to the public that the facility is subject
to § 108(b) requirements, and provide
the public the facility name, EPA ID,
and the URL.
(c) Beginning ninety days after the
effective date of the final rule under
which the facility becomes subject to
the requirements of this part, the owner
or operator must make information
available to the public on its company
website at the URL provided to EPA.
The initial posting must include at least
the information required under
paragraph (d)(1).
(d) The information on the website
must include, at a minimum:
(1) The current name and contact
information for a person that will
provide the public information about
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
the facility’s financial responsibility
requirement under CERCLA § 108(b);
(2) Information the owner or operator
is required to submit, or has submitted,
to EPA under this part so long as that
information is not successfully claimed
as Confidential Business Information
under 40 CFR 2.203(b).
(3) Notifications from EPA to the
owner or operator.
(e) The owner or operator must assure
that the information is readily available
to the public by placing it in a
prominent position on the company’s
website, and by assuring that public
access is not obstructed by complex or
overly burdensome access processes,
passwords, or other information
requirements.
(f) The owner or operator must update
the website with new information
including information submitted to EPA
in compliance with this part.
Information submitted to EPA must be
posted on the owner or operator’s
website within thirty days of submitting
it to EPA.
[PROPOSED REGULATORY TEXT FOR
APPROACH 2]
(a) EPA will provide the public
information related to facilities subject
to financial responsibility requirements
under this part. That information may
include, at a minimum:
(1) The current name and contact
information for a person that can
provide the public information about
the facility’s financial responsibility
requirement under this part;
(2) Information the owner or operator
is required to submit, or has submitted,
to EPA under this part so long as that
information is not successfully claimed
as Confidential Business Information
under 40 CFR 2.203(b).
(3) Notifications from EPA to the
owner or operator.
Subpart B—General Financial
Responsibility Requirements
§ 320.20 Applicable financial responsibility
amounts.
Owners and operators must calculate
a current amount of financial
responsibility at their facilities in
accordance with the requirements of
this section, and in accordance with
applicable class-specific subparts
identified in § 320.1(f) Table 1.
§ 320.21 Procedures for establishing
financial responsibility.
Owners and operators must submit
evidence of financial responsibility and
supporting information to EPA in
accordance with the requirements of
this section, and in accordance with
PO 00000
Frm 00102
Fmt 4701
Sfmt 4702
applicable class-specific subparts
identified in § 320.2 Table 1.
§ 320.22
Maintenance of instruments.
(a) An owner or operator must
recalculate the financial responsibility
level three years after the date the owner
or operator is first required to submit
the full amount of financial
responsibility under § 320.61, every
three years thereafter, and within sixty
days after every successful claim against
a CERCLA § 108(b) financial
responsibility instrument. The
recalculation must use the most current
facility information available. The
owner or operator must submit the
revised financial responsibility amount
to EPA, along with supporting
documentation.
(b) If the resulting amount of financial
responsibility required is greater than
the amount of financial responsibility
provided by the current CERCLA
§ 108(b) financial responsibility
instrument(s), the owner or operator
must submit evidence of the increased
value of the instrument(s) within sixty
days of the recalculation.
(c) If the resulting amount of financial
responsibility required is less than the
amount of financial responsibility
provided by the current CERCLA
§ 108(b) financial responsibility
instrument(s), the owner and operator
may submit a written request to the
Administrator to lower the required
financial responsibility amount at the
facility. The request must include
updated information to support the
revised financial responsibility amount.
The amount of financial responsibility
required at the facility may be reduced
to the recalculated amount only with
written approval by the Administrator.
§ 320.23 Incapacity of owners or
operators, corporate guarantors, or
financial institutions.
[PROPOSED REGULATORY TEXT FOR
OPTION 1 (Preferred Option)]
(a) An owner or operator must notify
the Regional Administrator by certified
mail of the commencement of a
voluntary or involuntary proceeding
under Title 11 (Bankruptcy), U.S. Code,
naming the owner or operator as debtor,
within ten days after commencement of
the proceeding.
(b) An owner or operator who
demonstrates financial responsibility
under this part by obtaining a trust
fund, surety bond, letter of credit, or
insurance policy will be deemed to be
without the required financial
responsibility in the event of
bankruptcy of the trustee or issuing
institution, or a suspension or
revocation of the authority of the trustee
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
institution to act as trustee or of the
institution issuing the surety bond,
letter of credit, or insurance policy to
issue such instruments. The owner or
operator must provide other evidence of
financial responsibility within sixty
days after such an event.
[PROPOSED REGULATORY TEXT FOR
OPTION 2]
(a) An owner or operator must notify
the Administrator by certified mail of
the commencement of a voluntary or
involuntary proceeding under Title 11
(Bankruptcy), U.S. Code, naming the
owner or operator as debtor, within ten
days after commencement of the
proceeding. A corporate guarantor of a
corporate guarantee as specified in
§ 320.44, if named as a debtor, must
make such a notification, as required
under the terms of the corporate
guarantee (§ 320.50(f)).
(b) An owner or operator who
demonstrates financial responsibility
under this part by obtaining a trust
fund, surety bond, letter of credit, or
insurance policy will be deemed to be
without the required financial
responsibility in the event of
bankruptcy of the trustee or issuing
institution, or a suspension or
revocation of the authority of the trustee
institution to act as trustee or of the
institution issuing the surety bond,
letter of credit, or insurance policy to
issue such instruments. The owner or
operator must provide other evidence of
financial responsibility within sixty
days after such an event.
§ 320.24 Notification of claims brought
against owners, operators, or guarantors.
An owner or operator subject to this
part must notify the Administrator by
certified mail of the filing of any claim
pursuant to CERCLA naming the owner
or operator or the owner or operator’s
guarantor, as defendant, within ten days
after commencement of the proceeding.
Such notification shall include a copy of
any papers filed by the claimant with a
court, or other information allowing the
Administrator to identify the court, case
name and number, and parties.
sradovich on DSK3GMQ082PROD with PROPOSALS2
§ 320.25
Facility transfer.
(a) If a facility, or a portion of a
facility, subject to the requirements of
this part is sold or otherwise transferred
to another owner, or if the operation of
a facility is transferred to another
operator, the previous owner or operator
must maintain financial responsibility
for the facility, or transferred portion of
the facility, in accordance with this part,
until the Administrator releases the
previous owner or operator from the
obligation to maintain financial
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
responsibility under paragraph (b) of
this section.
(b) Any new owner or operator of a
facility must provide evidence of
financial responsibility as required in
this part for the facility or portion of the
facility prior to assuming ownership or
operation. Upon the new owner or
operator’s demonstration of financial
responsibility in accordance with this
part, the Administrator will provide
notice to the prior owner and operator
that they are no longer required to
provide evidence of financial
responsibility in accordance with this
part.
§ 320.26 Notification of cessation of
operations.
The owner or operator must notify the
Administrator thirty days prior to:
(1) The date the facility is no longer
authorized to operate, or
(2) The date the owner or operator is
required under another applicable
regulatory program to notify the relevant
regulatory authority that the facility is
ceasing operations, whichever is earlier.
§ 320.27 Release from financial
responsibility requirements.
(a) The owner or operator may
petition to be released from its
obligations under this part by
submitting a request to the
Administrator, which must include
evidence demonstrating that the degree
and duration of risk associated with the
production, transportation, treatment,
storage and disposal of hazardous
substances is minimal. Upon receiving
such request, the Administrator will
evaluate facility information, including
the information submitted by the owner
or operator, regarding the degree and
duration of risk associated with the
production, transportation, treatment,
storage, and disposal of hazardous
substances at the facility, and make a
determination regarding the owner’s or
operator’s request.
(1) If the Administrator determines
that the degree and duration of risk
associated with the production,
transportation, treatment, storage, and
disposal of hazardous substances at the
facility is minimal, and that the facility
should therefore be released from the
requirements of this part, the
Administrator will post the draft
decision on the EPA website, provide
the public opportunity to comment on
the decision, and post the Agency’s final
decision, and response to comments
received, on the EPA website.
(2) If the Administrator determines
(either initially or following
consideration of public comment during
the procedures described in paragraph
PO 00000
Frm 00103
Fmt 4701
Sfmt 4702
3489
(a)(1) of this section), that the degree
and duration of risk associated with the
production, transportation, treatment,
storage, and disposal of hazardous
substances is not minimal, the
Administrator will not release the
owner or operator from the requirement
to maintain financial responsibility in
accordance with this part. The
Administrator will provide notice of the
Agency’s final decision, and response to
comments received, and will provide
the owner or operator a detailed written
statement explaining the decision.
(3) An owner or operator that
petitions the Administrator under the
procedures in this section and does not
obtain a release from requirements
under this part may submit a petition
for a renewed determination under this
section only if the owner or operator can
provide additional, relevant
information, not previously considered
by the Administrator, demonstrating
that there is minimal risk associated
with the production, transportation,
treatment, storage, and disposal of
hazardous substances at the facility.
(b) [Reserved].
Subpart C—Available Financial
Responsibility Instruments
[PROPOSED REGULATORY TEXT FOR
OPTION 1 (Preferred Option)]
Owners and operators may
demonstrate financial responsibility
using one or a combination of the
financial responsibility instruments
provide in §§ 320.40 through 320.43.
[PROPOSED REGULATORY TEXT FOR
OPTION 2]
Owners and operators may
demonstrate financial responsibility
using one or a combination of the
financial responsibility instruments
provide in §§ 320.40 through 320.45.
§ 320.40
Letter of Credit.
(a) An owner or operator may satisfy
the requirements of this part by
obtaining an irrevocable standby letter
of credit which conforms to the
requirements of this section and is
issued by an institution which has the
authority to issue letters of credit and
whose letter of credit operations are
regulated and examined by a Federal or
state agency.
(b) The wording of the letter of credit
must be identical to the wording
specified in § 320.50(b). The letter of
credit must either be issued in favor of:
(1) The trustee of a trust fund
established by an agreement worded
identical to the language in § 320.50(a)
and must authorize the trustee to make
draws on the letter of credit to
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3490
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
administer the claims process for
CERCLA response costs, health
assessment costs, and natural resource
damages in accordance with the terms
of the trust agreement; or
(2) Any and all third-party CERCLA
claimants and must provide for payment
directly to claimants for CERCLA
response costs, health assessment costs,
and natural resource damages.
(c) If the letter of credit is issued in
favor of the trustee of a trust fund, the
owner or operator must submit a
certified copy of the letter of credit to
the Administrator and submit the
original letter of credit to the trustee
authorized to make draws on the letter
of credit. An acknowledgment of the
receipt of the letter of credit from the
trustee must be submitted by the owner
or operator to the Administrator.
(d) If the letter of credit is issued in
the favor of any and all third-party
CERCLA claimants, the owner or
operator must submit the originally
signed letter of credit to the
Administrator.
(e) An owner or operator who uses a
letter of credit to satisfy the
requirements of this part must also
establish a trust fund and update
Schedule A of the trust agreement
within sixty days after a change in the
amount of CERCLA § 108(b) financial
responsibility. This trust fund must
meet the requirements of the trust fund
specified in § 320.45, except that:
(1) An originally signed duplicate of
the trust agreement must be submitted
to the Administrator with the original or
the certified copy of the letter of credit;
and
(2) Unless the trust fund is funded
pursuant to the requirements of this
part, including by holding the letter of
credit as specified in this section, the
following are not required by these
regulations:
(i) Payments into the trust fund as
specified in § 320.45;
(ii) Annual valuations as required by
the trust agreement; and
(iii) Notices of payment as required by
the trust agreement.
(f) The letter of credit must be
irrevocable and issued for a period of at
least one year. The letter of credit must
provide that the expiration date will be
automatically extended for a period of at
least one year unless, at least 120 days
before the current expiration date, the
issuing institution notifies both the
owner or operator, the trust fund trustee
(if the letter is issued in favor of the
trustee), and the Administrator by
certified mail of a decision not to extend
the expiration date. Under the terms of
the letter of credit, the 120 days will
begin on the date when the owner or
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
operator, the trust fund trustee (if
applicable), and the Administrator have
received the notice, as evidenced by the
return receipts. If the issuing institution
timely notifies the owner or operator,
the trustee, and the Administrator, and
the owner or operator fails to submit
and obtain the Administrator’s approval
of alternate financial responsibility
within ninety days of the receipt of such
notice, the Administrator is authorized
to draw on the letter of credit as
specified in paragraphs (k) and (l) of this
section.
(g) The letter of credit must be issued
in an amount at least equal to the
current required CERCLA § 108(b)
financial responsibility amount, except
as provided in § 320.46.
(h) Whenever the required amount of
CERCLA § 108(b) financial
responsibility increases to an amount
greater than the credit, the owner or
operator, within sixty days after the
increase, must either cause the credit to
be increased to an amount at least equal
to the CERCLA § 108(b) financial
responsibility amount and submit
evidence of such increase to the
Administrator and the trust fund trustee
(if the letter is issued in favor of the
trustee), or obtain other financial
responsibility as specified in this part to
cover the increase. Whenever the
required amount of CERCLA § 108(b)
financial responsibility decreases, the
credit may be reduced to the amount of
the current required CERCLA § 108(b)
financial responsibility amount
following written approval by the
Administrator.
(i) If the letter of credit is issued in
favor of the trust fund trustee, parties
may make claims against the trust fund
in accordance with the terms of the trust
agreement in order to receive payment
from the letter of credit.
(j) If the letter of credit provides for
direct payment, claimants may make
claims as follows:
(1) Any party that obtains a final
judgment from a Federal court awarding
CERCLA response costs, health
assessment costs, and/or natural
resource damages associated with the
facility against any of the current
owners or operators may make a claim
against the letter of credit. The party
may only make a claim after the
thirtieth day after the judgement and if
they have not recovered or been paid
the funds from any other source.
(2) The Administrator or other
authorized Federal agency may make a
claim against the letter of credit for
payment if payment has not been made
as required by a CERCLA settlement
associated with the facility between a
PO 00000
Frm 00104
Fmt 4701
Sfmt 4702
current owner or operator and EPA or
another Federal agency.
(3) The Administrator or another
authorized Federal agency may make a
claim against the letter of credit
requesting payment into a trust fund
established pursuant to a CERCLA
unilateral administrative order issued to
a current owner or operator if
performance at the facility as required
by the order has not occurred. The
Administrator or another Federal agency
may only make the claim against the
letter of credit if the owner or operator
has provided a written statement that
the letter of credit may be used to assure
the performance of the work required in
the order.
(k) If the owner or operator does not
establish alternate financial
responsibility as specified in this part
and obtain written approval of such
alternate financial responsibility from
the Administrator within ninety days
after receipt by the owner or operator,
the trust fund trustee (if the letter is
issued in favor of the trustee), and the
Administrator of a notice from the
issuing institution that it has decided
not to extend the letter of credit beyond
the current expiration date:
(1) The Administrator will draw on
the letter of credit if the letter of credit
is issued in favor of any and all third
party CERCLA claimants; or
(2) If the letter of credit is issued in
favor of the trust fund trustee, the
Administrator will inform the trustee of
the trust fund that the owner or operator
did not establish alternate financial
responsibility and obtain written
approval of such alternate financial
responsibility within ninety days. In
accordance with the terms of the trust
agreement, this notice will prompt the
trustee to draw on the letter of credit
and deposit any unused portion of the
letter of credit into the trust fund.
(l) The Administrator may delay the
drawing or the notification to the trustee
of the trust fund that the owner or
operator did not establish alternate
financial responsibility and obtain
written approval of such alternate
financial responsibility within ninety
days if the issuing institution grants an
extension of the term of the credit.
During the last thirty days of any such
extension the Administrator will draw
on the letter of credit or notify the
trustee of the trust fund that the owner
or operator did not establish alternate
financial responsibility and obtain
written approval of such alternate
financial responsibility if the owner or
operator has still failed to provide
alternate financial responsibility as
specified in this section and obtain
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
written approval of such financial
responsibility from the Administrator.
(m) The Administrator will return the
letter of credit to the issuing institution
for termination or agree to the
termination of the trust holding the
letter of credit when:
(1) An owner or operator substitutes
alternate financial assurance as
specified in this part; or,
(2) The Administrator releases the
owner or operator from the
requirements of this part in accordance
with § 320.27.
sradovich on DSK3GMQ082PROD with PROPOSALS2
§ 320.41
Surety bond.
(a) An owner or operator may satisfy
the requirements of this part by
obtaining a surety bond which conforms
to the requirements of this paragraph
and submitting the originally signed
bond to the Administrator.
(b) The surety company issuing the
bond must, at a minimum, be among
those listed as acceptable sureties on
Federal bonds in Circular 570 of the
U.S. Department of the Treasury.
(c) The wording of the surety bond
must be identical to the wording
specified in § 320.50(c).
(d) A surety bond may be used to
satisfy the requirements of this section
only if the Attorneys General or
Insurance Commissioners of:
(1) The state in which the surety is
incorporated, and
(2) Each state in which a facility
covered by the surety bond is located
have submitted a written statement to
EPA that a surety bond executed as
described in this section and § 320.50(c)
of this part is a legally valid and
enforceable obligation in that state.
(e) The surety bond may be issued by
multiple sureties provided that each is
liable for its individual vertical
percentage share of the total penal sum
of the bond.
(f) An owner or operator who uses a
surety bond to satisfy the requirements
of this part must also establish a standby
trust fund and update Schedule A of the
trust agreement within sixty days after
a change in the amount of CERCLA
§ 108(b) financial responsibility. This
standby trust fund must meet the
requirements specified in § 320.45,
except that:
(1) An originally signed duplicate of
the trust agreement must be submitted
to the Administrator with the surety
bond; and
(2) Until the standby trust fund is
funded pursuant to the requirements of
this section, the following are not
required by these regulations:
(i) Payments into the trust fund as
specified in § 320.45;
(ii) Annual valuations as required by
the trust agreement; and
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
(iii) Notices of nonpayment as
required by the trust agreement.
(g) The surety bond must guarantee
that the owner or operator will:
(1) Make payments or ensure that
payments are made for CERCLA
response costs, health assessment costs,
and/or natural resource damages
associated with the facility as required
in a final court judgment from a Federal
court against any current owner or
operator within thirty days to the party
or parties obtaining the judgment;
(2) Make payments or ensure
payments are made as required in a
CERCLA settlement associated with the
facility between any of the current
owners and operators at the facility and
EPA or another Federal agency;
(3) Perform or ensure the performance
of the work required at the facility by a
CERCLA unilateral administrative order
issued to any of the current owners or
operators by EPA or by another Federal
agency for which the owner or operator
provides a written statement allowing
for the bond to assure performance of
the work; and
(4) Provide alternate financial
responsibility as specified in this part or
ensure that alternate financial
responsibility as specified in this part is
provided for facilities covered by the
bond, and obtain the Administrator’s
written approval or ensure the
Administrator’s written approval is
obtained of the financial responsibility
provided, within ninety days after
receipt by both the owner or operator
and the Administrator of a notice of
cancellation of the bond from the surety.
(h) Under the terms of the surety
bond, the surety will become liable on
the bond obligation when the owner or
operator fails to perform as guaranteed
by the bond and must make payment in
accordance with the direction of the
claimant and the terms of the bond.
Provided, however, the liability of the
surety will be limited to the penal sum
of the bond plus the amount of any
investigation or legal defense fees
incurred by the surety.
(i) The penal sum of the bond must be
in an amount at least equal to the
required current CERCLA § 108(b)
financial responsibility amount, except
as provided in § 320.46.
(j) Whenever the required amount of
CERCLA § 108(b) financial
responsibility increases to an amount
greater than the penal sum, the owner
or operator, within sixty days after the
increase, must either cause the penal
sum to be increased to an amount at
least equal to the CERCLA § 108(b)
financial responsibility amount and
submit evidence of such increase to the
Administrator, or obtain other financial
PO 00000
Frm 00105
Fmt 4701
Sfmt 4702
3491
assurance as specified in this section to
cover the increase. Whenever the
required amount of CERCLA § 108(b)
financial responsibility decreases, the
penal sum may be reduced to the
amount of the current required CERCLA
§ 108(b) financial responsibility amount
following written approval by the
Administrator.
(k) Under the terms of the bond, the
surety may cancel the bond by sending
notice of cancellation by certified mail
to the owner or operator and to the
Administrator. Cancellation may not
occur, however, during the 120 days
beginning on the date of receipt of the
notice of cancellation by both the owner
or operator and the Administrator, as
evidenced by the return receipts.
(l) The owner or operator may
terminate the bond if the Administrator
has given prior written authorization
based on his receipt of evidence of
alternate financial responsibility as
specified in this part or the
Administrator releases the owner or
operator from the requirements of this
part in accordance with § 320.27.
§ 320.42
Insurance.
(a) An owner or operator may satisfy
the requirements of this part by
obtaining insurance for CERCLA
response costs, health assessment costs,
and natural resource damages that
conforms to the requirements of this
section. Each insurance policy must be
amended by the attachment of a
CERCLA § 108(b) endorsement as
worded in § 320.50(d).
(b) At a minimum, the insurer must be
licensed to transact the business of
insurance, or eligible to provide
insurance as an excess or surplus lines
insurer, in one or more states.
(c) The owner or operator must
submit a signed duplicate original of the
CERCLA § 108(b) financial
responsibility endorsement to the
Administrator, or regional delegees of
the Administrator as applicable if the
endorsement covers facilities located in
multiple regions. The endorsement must
provide coverage effective when
required by the compliance schedule in
§ 320.2.
(d) The owner or operator may obtain
insurance from up to four insurers to
demonstrate CERCLA § 108(b) financial
responsibility. If the owner operator
obtained insurance from multiple
insurers, an endorsement from each
insurer must be submitted and must
provide that a claimant may make a
claim against each of the insurers
providing evidence of financial
responsibility for the insurer’s
proportional share of the CERCLA
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3492
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
§ 108(b) financial responsibility up to
the face value of the policy.
(e) The insurance policy must provide
coverage for third-party CERCLA claims
against all current owners and operators
at the facility as required by this part.
(f) An owner or operator who uses
insurance to satisfy the requirements of
this part must also establish a standby
trust fund and update Schedule A of the
trust agreement within sixty days after
a change in the amount of CERCLA
§ 108(b) financial responsibility. This
standby trust fund must meet the
requirements of the trust fund specified
in § 320.45, except that:
(1) An originally signed duplicate of
the trust agreement must be submitted
to the Administrator with the
endorsement; and
(2) Unless the standby trust fund is
funded pursuant to the requirements of
this part, the following are not required
by these regulations:
(i) Payments into the trust fund as
specified in § 320.45;
(ii) Annual valuations as required by
the trust agreement; and
(ii) Notices of payment as required by
the trust agreement.
(g) The insurance must provide first
dollar coverage irrespective of any
deductibles or self-insured retention
both of which must be paid by the
insurer with a right of reimbursement
from the insured. The policy must be
issued for a face amount at least equal
to the required current CERCLA § 108(b)
financial responsibility amount, except
as provided in § 320.46, § 320.1(g)(1)
and paragraph (d) of this section. The
term ‘‘face amount’’ means the total
amount the insurer is obligated to pay
under the policy as required by this
section, without sub-limits except for
those that specify facility specific
amounts of coverage, exclusive of legal
defense and investigation costs, and
must be segregated and independent
from other coverage provided for by the
policy that is outside the scope of
paragraphs (h), (i), (j), and (l) of this
section. Actual payments by the insurer
will not change the face amount,
although the insurer’s future liability
will be lowered by the amount of the
payments.
(h) The policy must provide for the
payment awarded in final court
judgments from a Federal court against
any of the current owners and operators
for CERCLA response costs, health
assessment costs, and/or natural
resource damages associated with the
facility to the party obtaining the
judgment should such payment not be
made within thirty days.
(i) The policy must provide for
payment as required by a CERCLA
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
settlement associated with the facility
between any of the current owners or
operators at the facility and EPA or
another Federal government agency
should payment as required by the
settlement not be made.
(j) The policy must also provide for
payment into a trust fund established
pursuant to a CERCLA unilateral
administrative order issued to any of the
current owners or operators at the
facility by EPA or another Federal
agency in instances where performance
at the facility as required by the order
does not occur. The owner or operator
must have provided a written statement
allowing the insurance policy be used to
assure performance of the work required
in the order.
(k) The endorsement must provide
that cancellation, failure to renew, or
any other termination of the insurance
by the insurer will be effective only
upon written notice to the owner
operator and the Administrator by
certified mail and only after the
expiration of 120 days beginning with
the date of receipt of the notice by both
the Administrator and the owner or
operator, as evidenced by the return
receipts. Such automatic renewal of the
policy must, at a minimum, provide the
insured with the option of renewal at
the face amount of the expiring policy.
(l) The endorsement must specify that
in instances where the owner or
operator fails to obtain alternate
financial responsibility and obtain
written approval of such alternate
financial responsibility from the
Administrator within ninety days after
receipt by both the owner or operator
and the Administrator of a notice from
the insurer that it has decided to cancel,
not renew or otherwise terminate the
insurance policy the insurer will be
liable up to the face value of the policy
for payment into the standby trust
following notification by the
Administrator.
(m) The endorsement must also
provide that in the case of a release or
threatened release of (a) hazardous
substance(s) from a facility covered by
the policy, the insurer acknowledges
that any claim authorized by section 107
or section 111 of CERCLA may be
asserted directly against the insurer as
provided by CERCLA § 108(c)(2).
Further, the endorsement must state that
the insurer consents to suit with respect
to these claims subject to the limitations
in section 108(d) of CERCLA.
(n) The owner or operator must
maintain the insurance in full force and
effect until the Administrator consents
to termination of the insurance by the
owner or operator as specified in
paragraph (p) of this section.
PO 00000
Frm 00106
Fmt 4701
Sfmt 4702
(o) Whenever the required CERCLA
§ 108(b) financial responsibility amount
increases to an amount greater than the
face amount of the policy, the owner or
operator, within sixty days after the
increase, must either cause the face
amount of the policy to be increased to
an amount at least equal to the required
amount and submit evidence of such
increase to the Administrator, or obtain
other financial responsibility as
specified in this section to cover the
increase. Whenever the amount of
required CERCLA § 108(b) financial
responsibility decreases, the face
amount may be reduced to the amount
of the current required CERCLA § 108(b)
amount following written approval by
the Administrator.
(p) The Administrator will give
written consent to the owner or operator
that he or she may terminate the
insurance policy when:
(1) An owner or operator substitutes
alternate financial responsibility as
specified in this part; or
(2) The Administrator releases the
owner or operator from the
requirements of this section in
accordance with § 320.27.
[PROPOSED REGULATORY TEXT FOR
§ 320.43 OPTION 1 (Preferred Option)]
§ 320.43
[Reserved]
[PROPOSED REGULATORY TEXT FOR
§ 320.43 OPTION 2]
§ 320.43
Financial Test.
(a) An owner or operator may satisfy
the requirements of this section, up to
the amount specified in this section, by
demonstrating that it passes a financial
test.
(1) To cover up to the full amount of
financial responsibility required at its
facility, the owner or operator must
have:
(i) At least one-long term credit rating
of AAA, AA+, AA, AA¥, A+, A or A¥
as issued by Standard and Poor’s (S&P),
or an equivalent as issued by another
Nationally Recognized Statistical Rating
Organization (NRSRO);
(ii) Tangible net worth at least six
times the amount of environmental
obligations, including guarantees,
covered by a financial test or guarantee,
including this financial test and the
corporate guarantee in § 320.44; and
(ii) Assets located in the United States
amounting to either at least ninety
percent of total assets; or at least six
times the amount of financial
responsibility obligations covered by a
financial test or guarantee, including
this financial test and the corporate
guarantee in § 320.44; and
(2) To cover up to one half of the
value of the financial responsibility
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
amount specified in this section, the
owner or operator must have:
(i) At least one-long term credit rating
of BBB+ or BBB as issued by S&P, or the
equivalents as issued by another
NRSRO;
(ii) Tangible net worth at least six
times the financial responsibility
obligations covered by a financial test or
guarantee, including this financial test
and the corporate guarantee in § 320.44;
and
(ii) Assets located in the United States
amounting to either at least ninety
percent of the firm’s total assets or at
least six times the amount of financial
responsibility obligations covered by a
financial test or guarantee, including
this financial test and the corporate
guarantee in § 320.44.
(b) To demonstrate that it satisfies this
financial test, an owner or operator must
post on its website, include in its
facility record, and annually submit all
of the following:
(1) A letter to the Administrator
signed by its chief financial officer
(CFO) as worded in § 320.50(e).
(2) A special report of procedures and
findings from an independent certified
public accountant (CPA) resulting from
an agreed-upon procedures engagement
in accordance with the American
Institute of Certified Public
Accountants’ (AICPA) Statement on
Standards for Attestation Engagements
(SSAE) and Related Attestation
Interpretations, AT section 201—Agreed
Upon Procedures Engagements, or any
future superseding standards set by
AICPA or any superseding body. The
report would be required to describe the
procedures performed and related
findings as to whether or not there were
differences or discrepancies identified
between the financial information in the
owner’s or operator’s CFO’s letter and
the owner’s or operator’s most recent
audited annual financial statements.
Where differences or discrepancies were
found in the comparison of the owner’s
or operator’s CFO’s letter and the
owner’s or operator’s most recent
audited annual financial statements, the
report of procedures and findings would
reconcile any differences or
discrepancies.
(3) A copy of the owner’s or operators’
most recent independently audited
annual financial statements prepared in
accordance with an accounting standard
deemed acceptable by the SEC.
(c) An owner or operator of a facility
must submit the three items specified in
paragraph (b) of this section to the
Administrator within sixty days of the
date on which the CERCLA financial
responsibility amount is first
established.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
(d) After the initial submission of the
items specified in paragraph (b) of this
section, the owner or operator must
send annually updated information to
the Administrator within sixty days
after the close of each succeeding fiscal
year. This information must consist of
the three items specified in paragraph
(b) of this section.
(e) An owner or operator who no
longer meets the requirements of
paragraph (a) of this section for any
portion of his CERCLA financial
responsibility requirement must send
notice of the intent to establish an
alternate financial responsibility
instrument as specified in this section to
the Administrator to cover the portion
of the obligations that can no longer be
covered by the financial test. This notice
must be sent by certified mail within
thirty days. The owner operator must
then obtain alternate financial
responsibility for the entire amount of
required coverage as specified in
paragraph (a) of this section. The owner
or operator must submit evidence of
coverage to the Administrator within
120 days of no longer meeting the
requirements.
(f) The Administrator may, based on
a reasonable belief that the owner or
operator may no longer meet the
requirements of paragraph (a) of this
section for any portion of the CERCLA
financial responsibility obligation,
require reports of financial condition at
any time from the owner or operator in
addition to those specified in paragraph
(b) of this section. If the Administrator
finds, on the basis of such reports or
other information, that the owner or
operator no longer meets the
requirements of paragraph (a) of this
section for any portion of the CERCLA
liability financial responsibility
obligation, the owner or operator must
provide alternate financial
responsibility as specified in this
section within thirty days after
notification of such a finding.
(g) The Administrator may disallow
use of this test on the basis of
qualifications of opinion given in the
independent certified public
accountant’s report in the agreed upon
procedures engagement or the audited
financial statements. An adverse
opinion or disclaimer of opinion in
either report will result in disallowance
of the test. The Administrator will
evaluate other qualifications on an
individual basis. The owner or operator
must provide alternate evidence of
financial responsibility within thirty
days after notification of the
disallowance.
PO 00000
Frm 00107
Fmt 4701
Sfmt 4702
3493
(h) The owner or operator is no longer
required to submit the items specified in
paragraph (b) of this section when:
(1) An owner or operator substitutes
alternate financial responsibility as
specified in this section; or
(2) The Administrator releases the
owner or operator from the
requirements of this section in
accordance with § 320.27.
[PROPOSED REGULATORY TEXT FOR
§ 320.44 OPTION 1 (Preferred Option)]
§ 320.44
[Reserved]
[PROPOSED REGULATORY TEXT FOR
§ 320.44 OPTION 2]
§ 320.44
Corporate guarantee.
(a) An owner or operator may meet
the requirements of this part by
obtaining a written guarantee,
hereinafter referred to as ‘‘guarantee.’’
(b) The guarantor must be the direct
or higher-tier parent corporation of the
owner or operator, a firm whose parent
corporation is also the parent
corporation of the owner or operator, or
a firm with a ‘‘substantial business
relationship’’ with the owner or
operator. The guarantor must meet the
requirements for owners or operators in
§ 320.43 (a) through (g) and must
comply with the terms of the guarantee.
(c) The wording of the guarantee must
be identical to the wording specified in
the Corporate Guarantee at § 320.50(f) of
this part. A certified copy of the
guarantee must accompany the items
sent to the Administrator as specified in
§ 320.43(b). One of these items must be
the letter from the guarantor’s chief
financial officer. If the guarantor’s
parent corporation is also the parent
corporation of the owner or operator,
this letter must describe the value
received in consideration of the
guarantee. If the guarantor is a firm with
a ‘‘substantial business relationship’’
with the owner or operator, this letter
must describe this ‘‘substantial business
relationship’’ and the value received in
consideration of the guarantee.
(d) The terms of the guarantee must
provide that:
(1) In the event that payment for
CERCLA response costs, health
assessment costs, and/or natural
resource damages associated with the
facility required in a final court
judgment from a Federal court against
one of the current owners or operators
is not made within thirty days, the
guarantor shall do so;
(2) In the event payment is not made
as required in a CERCLA settlement
associated with the facility between a
current owner or operator and EPA or
another Federal government agency, the
guarantor shall do so;
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3494
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
(3) In the event that performance at a
facility covered by the guarantee does
not occur as required under a CERCLA
unilateral administrative order issued to
a current owner or operator by EPA or
another Federal agency and for which
the owner or operator provides a written
statement allowing the guarantee to
serve as financial responsibility assuring
the work in the order, the guarantor
shall make payment into a trust fund
established pursuant to the order;
(4) The corporate guarantee will
remain in force unless the guarantor
sends notice of termination by certified
mail to the owner or operator and to the
Administrator. Termination may not
occur, however, unless and until the
owner or operator obtains, and the
Administrator approves alternate
financial responsibility complying with
the requirements of this part; and
(5) If the owner or operator fails to
provide alternate financial
responsibility as specified in this part
and obtain the written approval of such
alternate financial responsibility from
the Administrator within ninety days
after receipt by both the owner or
operator and the Administrator of a
notice of termination of the corporate
guarantee from the guarantor, the
guarantor will provide such alternative
financial responsibility, in accordance
with the requirements of this part, in the
name of the owner or operator.
(e) The guarantee must provide for
payment as described in this section up
to the required amount of the CERCLA
§ 108(b) financial responsibility covered
by the guarantee.
(f) In the case of a corporation
incorporated in the United States, a
guarantee may be used to satisfy the
requirements of this part only if the
Attorneys General or Insurance
Commissioners of:
(1) The state in which the guarantor
is incorporated, and
(2) Each state in which a facility
covered by the guarantee is located have
submitted a written statement to EPA
that a guarantee executed as described
in this section and § 320.50(f) is a
legally valid and enforceable obligation
in that state.
(g) In the case of a guarantee provided
by a corporation incorporated outside
the United States, a guarantee may be
used to satisfy the requirements of this
part only if:
(1) The non-U.S. corporation has
identified a registered agent for service
of process in each state in which a
facility covered by the guarantee is
located and in the state in which it has
its principal place of business; and
(2) The Attorney General or Insurance
commissioner of each state in which a
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
facility covered by this guarantee is
located and the state in which the
guarantor corporation has its principal
place of business has submitted a
written statement to EPA that a
guarantee executed as described in this
section and § 320.50(f) is a legally valid
and enforceable obligation in that state.
§ 320.45
Trust fund.
(a) An owner operator may satisfy the
requirements of this section by
establishing a trust fund that conforms
to the requirements of this paragraph,
and submitting an originally signed
duplicate of the trust agreement to the
Administrator. The trustee must be an
entity which has the authority to act as
a trustee and whose trust operations are
regulated and examined by a Federal or
state agency.
(b) The wording of the trust agreement
must be identical to the wording
specified in § 320.50(a)(1), and the trust
agreement must be accompanied by a
formal certification of acknowledgment
(for example, see § 320.50(a)(2)).
Schedule A of the trust agreement must
be updated within sixty days after a
change in the amount of § 108(b)
financial responsibility.
(c) Payments into the trust fund must
be made so that the value of the trust
fund is at least as great as the required
CERCLA § 108(b) financial
responsibility amount required under
§ 320.20. The trust must be fully funded
within four years of the owner operator
being subject to the regulations. This
funding amount may include the value
of any letters of credit held by the trust
in accordance with § 320.40. Receipt
from the trustee for these payments
must be submitted by the owner or
operator to the Administrator.
(d) Whenever the required financial
responsibility amount increases, the
owner operator must compare the new
amount with the trustee’s most recent
annual valuation of the trust fund. If the
value of the fund is less than the new
amount, the owner or operator, within
sixty days after the change in the
required § 108(b) financial
responsibility amount, must either
deposit an amount into the fund so that
its value after this deposit at least equals
the required § 108(b) financial
responsibility amount, or obtain other
financial assurance as specified in this
section to cover the increase.
(e) If the value of the trust fund is
greater than the required financial
responsibility amount, the owner or
operator may submit a written request to
the Administrator for release of the
amount of in excess of the required
CERCLA § 108(b) financial
responsibility amount.
PO 00000
Frm 00108
Fmt 4701
Sfmt 4702
(f) If the owner or operator substitutes
other financial responsibility as
specified in this section for all or part
of the trust fund, it may submit a
written request to the Administrator for
release of the amount in excess of the
required amount of CERCLA § 108(b)
financial responsibility.
(g) Within sixty days after receiving a
request from the owner operator for
release of funds as specified in
paragraph (e) or paragraph (f) of this
section, the Administrator will notify
the trustee that the trust fund contains
amounts in excess of the required
amount. Following this notification, the
trustee may release the excess funds in
accordance with the terms of the trust
agreement.
(h) The trust, up to the value of funds
held including letters of credit held in
accordance with § 320.40, is required to
provide for payment:
(1) To parties that obtain a final court
judgment from a Federal court against
any of the current owners or operators
at the facility for awarding CERCLA
response costs, health assessment costs,
and/or natural resource damages
associated with a facility covered by the
trust agreement should payment not
occur as required by the judgment
within thirty days.
(2) As required in a CERCLA
settlement associated with the facility
between a current owner or operator
and EPA or another Federal agency if
payment is not otherwise made.
(3) Into a trust fund established
pursuant to a CERCLA unilateral
administrative order issued to one of the
current owners or operators by EPA or
another Federal agency in the event the
work is not performed at the facility as
required by the order. The
Administrator or other Federal agency
shall only make such a claim if the
owner or operator provides written
consent for the financial responsibility
instrument to assure the obligations
under the unilateral administrative
order.
(i) The Administrator will agree to the
termination of the trust when:
(1) The owner operator substitutes
alternate financial assurance as
specified in this section; or
(2) The Administrator releases the
owner or operator from the
requirements of this section in
accordance with § 320.27.
§ 320.46 Use of multiple financial
responsibility instruments.
(a) An owner or operator may satisfy
the requirements of this part by
establishing more than one financial
instrument per facility.
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
(b) The instruments must be as
specified in §§ 320.40 through 320.45,
respectively, except that it is the
combination of instruments, rather than
the single instrument, which must
demonstrate financial responsibility for
an amount at least equal to the required
CERCLA § 108(b) financial
responsibility amount.
(c) An owner or operator using a trust
fund in combination with a surety bond,
letter of credit or insurance policy,
including a trust fund holding a letter of
credit, may use the trust fund as the
standby trust fund for the other
instruments.
(d) A single standby trust fund may be
established for two or more instruments.
A claimant may make a claim against
any of the instruments used to provide
evidence of financial responsibility.
§ 320.47 Use of a financial instrument for
multiple facilities.
(a) An owner or operator may use a
financial responsibility instrument
specified in this part to meet the
requirements of this section for more
than one facility.
(b) Evidence of financial
responsibility submitted to the
Administrator must include for each
facility, the EPA Identification Number,
name, address, and the amount of funds
for § 108(b) financial responsibility
assured by the instrument.
(c) If the facilities covered by the
instrument are in more than one Region,
identical evidence of financial
responsibility must be submitted to and
maintained with the regional delegees of
the Administrator, as applicable, of all
such Regions.
(d) The amount of funds available
through the instrument must be no less
than the sum of funds that would be
available if a separate instrument had
been established and maintained for
each facility.
sradovich on DSK3GMQ082PROD with PROPOSALS2
§ 320.48 Consolidated form and multiple
owners and/or operators.
(a) Where a facility is owned or
operated by more than one person,
evidence of financial responsibility
covering the facility may be established
and maintained by one of the owners or
operators, or, in consolidated form, by
or on behalf of two or more owners or
operators.
(b) When evidence of financial
responsibility is established in a
consolidated form, the proportional
share of the cost of demonstrating the
financial responsibility for each
participant shall be shown in a separate
letter to the Administrator.
(c) The evidence shall be
accompanied by a statement authorizing
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
the owner or operator submitting the
evidence of financial responsibility to
act for and on behalf of each participant
in submitting and maintaining the
evidence of financial responsibility.
§ 320.49
[Reserved]
§ 320.50
Wording of the instruments.
(a)(1) A trust agreement for a trust
fund, as specified 40 CFR 320.45 must
be worded as follows, except that
instructions in brackets are to be
replaced with the relevant information
and the brackets deleted.
TRUST AGREEMENT
EPA contact information:
[Insert Name, Phone Number, Mailing
Address of EPA and Point of
Contact(s)]
Account Number: [insert account
number]
Trust Agreement (the ‘‘Agreement’’) is
entered into as of [insert date] by and
between [insert name of owner(s)/
operator(s)], a business [insert relevant
entity (corporation, partnership,
association, proprietorship, etc.)], (the
‘‘Grantor’’) and [insert name of
corporate trustee], [insert ‘‘incorporated
in the state of [name of state]’’ or ‘‘a
national bank’’] (the ‘‘Trustee’’).
Whereas, the United States
Environmental Protection Agency
(‘‘EPA’’) has established regulations
applicable to the Grantor requiring that
an owner or operator of a facility subject
to the regulations demonstrate financial
responsibility as proof that funds will be
available when needed for payment of
CERCLA response costs, health
assessment costs, and natural resource
damages at the facility.
Whereas, the Grantor has elected to
establish a trust to provide all or part of
such financial responsibility and/or to
receive the proceeds from a letter of
credit to assure all or part of such
financial responsibility for the facilities
identified herein.
Whereas, the Grantor, acting through
its duly authorized officers, has selected
the Trustee to be the trustee under this
agreement, and the Trustee is willing to
act as trustee,
Now, therefore, the Grantor and the
Trustee agree as follows:
Section 1. Definitions as used in this
Agreement.
a) ‘‘Grantor’’ means the owner or
operator who enters into this Agreement
and any successors or assigns of the
Grantor.
b) ‘‘Trustee’’ means the Trustee who
enters into this Agreement and any
successor Trustee.
Section 2. Identification of Facilities
and Financial Responsibility Amounts.
PO 00000
Frm 00109
Fmt 4701
Sfmt 4702
3495
This Agreement pertains to the facilities
and CERCLA 108(b) financial
responsibility amounts identified on
attached Schedule A [on Schedule A,
for each facility list the EPA
Identification Number, name, address,
current owners and operators, and the
current financial responsibility amount,
and portions thereof, for which financial
responsibility is being demonstrated by
this Agreement.]
Section 3. Establishment of Fund. The
Grantor and the Trustee hereby establish
a trust fund (the ‘‘Fund’’) for the benefit
of any and all parties with valid thirdparty CERCLA claims against the
Grantor or other current owners and
operators arising from the operation of
the facilities covered by this Agreement.
The Grantor and Trustee do not intend
for the Trustee to qualify as a
‘‘guarantor’’ as that term is used in
CERCLA sections 101(13) and 108(c)(2),
and therefore intend that the Trustee
will not be subject to a direct action by
Trustee’s agreement to act as Trustee for
the Fund. The Grantor and Trustee
intend for the Fund to qualify as a
‘‘guarantor’’ as that term is used in
CERCLA sections 101(13) and 108(c)(2),
and therefore intend that only the Fund
will be subject to any direct action
brought pursuant to CERCLA section
108(c)(2). The Fund is established
initially as consisting of property, which
are acceptable to the Trustee, described
in Schedule B attached hereto. Such
property, along with any other monies
and/or property subsequently
transferred to the Trustee, together with
all earnings and profits thereon, less any
payments or distributions made by the
Trustee pursuant to this Agreement, are
referred to herein collectively as the
Fund. The Fund shall be held by the
Trustee, IN TRUST, as hereinafter
provided. The Trustee shall not be
responsible nor shall it undertake any
responsibility for the amount or
adequacy of, nor any duty to collect
from the Grantor, any payments
necessary to discharge any liabilities of
the Grantor under CERCLA.
Section 4. Payments from the Fund.
The Trustee shall make payments from
the Fund to parties with valid CERCLA
claims against the Grantor or other
current owners or operators at the
facility(-ies). To make these payments,
the Trustee shall draw on any letters of
credit described in Schedule B and/or
make payments from the funds held by
the Fund described in Schedule B. The
Trustee shall make payment from the
Fund for valid third-party CERCLA
claims only up to the lesser of: (1) The
value of the valid third-party CERCLA
claim; or (2) the amount of CERCLA
108(b) financial responsibility provided
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3496
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
for the facility(ies) associated with the
claim provided by the Fund as
identified in Schedule A.
The Trustee shall satisfy valid unpaid
CERCLA claims by making payments on
a first come first served basis from the
Fund only upon receipt of one or more
of the following documents and only in
amounts up to the values specified in
the document(s):
(i) A final court judgment dated at
least 30 days earlier from a Federal
court, in favor of the claimant, awarding
CERCLA response costs, health
assessment costs, and/or natural
resource damages associated with a
facility covered by this Agreement
against the Grantor or any of the current
owners or operators at a facility covered
by this agreement;
(ii) A written signed statement from
the EPA Administrator or another
Federal government agency requesting
payment from the Fund on the grounds
that payment has not been made as
required by a CERCLA settlement
associated with a facility covered by this
Agreement and with any of the current
owners or operators; or
(iii) A written signed statement from
the EPA Administrator or other Federal
government agency requesting payment
from the Fund into a trust fund
established pursuant to a CERCLA
unilateral administrative order on the
grounds that performance at a facility
covered by this Agreement has not
occurred as required by a CERCLA
unilateral administrative order issued to
a current owner or operator that
references this trust agreement.
In addition to one of the documents
listed above, all claimants must also
present the following:
A signed statement from the claimant
certifying that these amounts have not
been recovered or paid from any other
source, including, but not limited to, the
owners or operators, insurance,
judgments, agreements, and other
financial responsibility instruments.
In the event of simultaneous valid
claims that exceed the value of the
Fund, the Trustee shall pay the
claimants a pro rata share of their claim
determined by the size of each valid
claim.
In addition to the payment
instructions above, in the case of a
release or threatened release from a
facility covered by the Agreement, any
claim authorized by section 107 or 111
of CERCLA may be asserted directly
against the Fund as provided by
CERCLA section 108(c)(2) subject to the
limitations in CERCLA section 108(d).
The Fund shall be entitled to all rights
and defenses provided to guarantors by
CERCLA section 108(c). The Fund is
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
available for paying and defending
claims in these instances.
In addition, if notified by the EPA
Administrator that the trust fund
contains amounts in excess of the
required CERCLA 108(b) financial
responsibility amount, the Trustee shall
refund to the Grantor such amounts in
excess of the required CERCLA 108(b)
financial responsibility amount.
Section 5. Payments Comprising the
Fund. Payments made to the Trustee for
the Fund shall consist of cash or
securities acceptable to the Trustee and/
or a standby letter of credit as specified
in 40 CFR 320.50(b). In the event of
receipt of a notice of a decision not to
extend the expiration date of a letter of
credit from an institution issuing a letter
of credit held by the Fund, the Trustee
shall draw on the letter of credit prior
to expiration occurring and deposit any
unused portion of the credit into the
Fund if the EPA Administrator informs
the Trustee that the owner operator did
not establish alternate financial
responsibility and obtain written
approval of such alternate financial
responsibility from the EPA
Administrator within the time frame
provided by 40 CFR 320.40(k) and (l).
Section 6. Trustee Management. The
Trustee shall invest and reinvest the
principal and income of the Fund and
keep the Fund invested as a single fund,
without distinction between principal
and income, in accordance with the
Grantor’s disclosures communicated in
writing to the Trustee from time to time
of the names of all current owners and
operators and their affiliates including
issuers of securities or other obligations,
subject, however, to the provisions of
this Section. In investing, reinvesting,
exchanging, selling, and managing the
Fund, the Trustee shall discharge its
duties with respect to the trust fund
with undivided loyalty and solely in the
interest of the beneficiaries and with the
reasonable care, skill, and caution of a
prudent investor, in light of the
purposes, terms, distribution
requirements, and other circumstances
of the trust; except that:
(i) Securities or other obligations of
the Grantor, or any other current owner
or operator of the facilities, or any of
their affiliates as defined in the
Investment Company Act of 1940, as
amended, 15 U.S.C. 80a–2(a), shall not
be acquired or held, unless they are
securities or other obligations of the
Federal or a state government;
(ii) The Trustee is authorized to invest
the Fund in time or demand deposits of
the Trustee, to the extent insured by an
agency of the Federal or state
government;
PO 00000
Frm 00110
Fmt 4701
Sfmt 4702
(iii) The Trustee is authorized to hold
and draw upon standby letters of credit
specified as in 40 CFR 320.50(b); and
(iv) The Trustee is authorized to hold
cash awaiting investment or distribution
un-invested for a reasonable time and
without liability for the payment of
interest thereon.
Section 7. Common and Collective
Investment Practices. The Trustee is
expressly authorized in its discretion:
(a) To transfer from time to time any
or all of the assets of the Fund to any
common or collective trust fund created
by the Trustee in which the Fund is
eligible to participate, subject to all of
the provisions thereof, to be jointly
invested with the assets of other trusts
participating therein; and
(b) To purchase shares in any
investment company registered under
the Investment Company Act of 1940,
15 U.S.C. 80a–1 et seq., including one
which may be created, managed,
underwritten, or to which investment
advice is rendered or the shares of
which are sold by the Trustee. The
Trustee may vote such shares in its
discretion.
Section 8. Express Powers of Trustee.
Without in any way limiting the powers
and discretions conferred upon the
Trustee by the other provisions of this
Agreement or by law, the Trustee is
expressly authorized and empowered:
(a) To sell, exchange, convey, transfer,
or otherwise dispose of any property
held by it, by public or private sale. No
person dealing with the Trustee shall be
bound to see to the application of the
purchase money or to inquire into the
validity or expediency of any such sale
or other disposition;
(b) To hold and draw upon standby
letters of credit that are worded as
specified in 40 CFR 320.50(b);
(c) To make, execute, acknowledge,
and deliver any and all documents of
transfer and conveyance and any and all
other instruments that may be necessary
or appropriate to carry out the powers
herein granted;
(d) To register any securities held in
the Fund in its own name or in the
name of a nominee and to hold any
security in bearer form or in book entry,
or to combine certificates representing
such securities with certificates of the
same issue held by the Trustee in other
fiduciary capacities, or to deposit or
arrange for the deposit of such securities
in a qualified central depositary even
though, when so deposited, such
securities may be merged and held in
bulk in the name of the nominee of such
depositary with other securities
deposited therein by another person, or
to deposit or arrange for the deposit of
any securities issued by the United
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
States Government, or any agency or
instrumentality thereof, with a Federal
Reserve bank, but the books and records
of the Trustee shall at all times show
that all such securities are part of the
Fund;
(e) To deposit any cash in the Fund
in interest-bearing accounts maintained
or savings certificates issued by the
Trustee, in its separate corporate
capacity, or in any other banking
institution affiliated with the Trustee, to
the extent insured by an agency of the
Federal or state government;
(f) To compromise or otherwise adjust
all claims in favor of or against the
Fund.
Section 9. Taxes and Expenses. All
taxes of any kind that may be assessed
or levied against or in respect of the
Fund and all brokerage commissions
incurred by the Fund shall be paid from
the Fund. All other expenses shall be
paid directly by the Grantor. All other
expenses incurred by the Trustee in
connection with the administration of
this Trust including fees for legal
services rendered to the Trustee, the
compensation of the Trustee, and all
other proper charges and disbursements
of the Trustee not paid directly by the
Grantor shall be paid from the Fund.
Section 10. Annual Valuation. The
Trustee shall annually, at least 30 days
prior to the anniversary date of
establishment of the Fund, furnish to
the Grantor and to the appropriate EPA
Administrator a statement confirming
the value of the Trust including the
value of any funds held by the Trust and
of any letters of credit held by the Trust.
Any letters of credit shall be valued at
the face amount less the value of any
draws. Any securities in the Fund shall
be valued at market value as of no more
than sixty days prior to the anniversary
date of establishment of the Fund. The
failure of the Grantor to object in writing
to the Trustee within 90 days after the
statement has been furnished to the
Grantor and the EPA Administrator
shall constitute a conclusively binding
assent by the Grantor barring the
Grantor from asserting any claim or
liability against the Trustee with respect
to matters disclosed in the statement.
Section 11. Advice of Counsel. The
Trustee may from time to time consult
with counsel, who may be counsel to
the Grantor, with respect to any
question arising as to the construction of
this Agreement or any action to be taken
hereunder. The Trustee shall be fully
protected, to the extent permitted by
law, in acting upon the advice of
counsel.
Section 12. Trustee Compensation.
The Trustee shall be entitled to
reasonable compensation for its services
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
as agreed upon in writing from time to
time with the Grantor.
Section 13. Successor Trustee. The
Trustee may resign or the Grantor may
replace the Trustee, but such resignation
or replacement shall not be effective
until the Grantor has appointed a
successor trustee and this successor
accepts the appointment. The successor
trustee shall have the same powers and
duties as those conferred upon the
Trustee hereunder. Upon the successor
trustee’s acceptance of the appointment,
the Trustee shall assign, transfer, and
pay over to the successor trustee the
funds and properties then constituting
the Fund. If for any reason the Grantor
cannot or does not act in the event of
the resignation of the Trustee, the
Trustee may apply to a court of
competent jurisdiction for the
appointment of a successor trustee or for
instructions. The successor trustee shall
specify the date on which it assumes
administration of the trust in a writing
sent to the Grantor, the EPA
Administrator, and the present Trustee
by certified mail 10 days before such
change becomes effective. Any expenses
incurred by the Trustee as a result of
any of the acts contemplated by this
Section shall be paid as provided in
Section 9.
Section 14. Instructions to the
Trustee. All orders, requests, and
instructions to the Trustee shall be in
writing, signed by such persons as are
designated in the attached Exhibit A or
such other designees as the Grantor may
designate by amendment to Exhibit A.
The Trustee shall be fully protected in
acting without inquiry in accordance
with the Grantor’s orders, requests, and
instructions. All orders, requests, and
instructions by the EPA Administrator
to the Trustee shall be in writing, signed
by the EPA Administrator, or designee
thereof, and the Trustee shall act and
shall be fully protected in acting in
accordance with such orders, requests,
and instructions. The Trustee shall have
the right to assume, in the absence of
written notice to the contrary, that no
event constituting a change or a
termination of the authority of any
person to act on behalf of the Grantor or
EPA hereunder has occurred. The
Trustee shall have no duty to act in the
absence of such orders, requests, and
instructions from the Grantor and/or
EPA, except as provided for herein.
Section 15. Notices of Payment. If a
payment for CERCLA response costs,
health assessment costs, and/or natural
resource damages is made under Section
4 of this trust, the Trustee shall notify
the Grantor of such payments and the
amounts thereof within five (5) working
days. If the Grantor ceases to exist, such
PO 00000
Frm 00111
Fmt 4701
Sfmt 4702
3497
notice shall be provided to the EPA
Administrator. Further, the Trustee
shall notify the EPA Administrator of all
claims against the Fund resulting from
a direct action under CERCLA section
108(c).
Section 16. Amendment of
Agreement. This Agreement may be
amended by an instrument in writing
executed by the Grantor, the Trustee,
and the EPA Administrator, or by the
Trustee and the EPA Administrator if
the Grantor ceases to exist.
Section 17. Irrevocability and
Termination. Subject to the right of the
parties to amend this Agreement as
provided in Section 16, this Trust shall
be irrevocable and shall continue until
terminated at the written agreement of
the Grantor, the Trustee, and the EPA
Administrator, or by the Trustee and the
EPA Administrator, if the Grantor ceases
to exist. Upon termination of the Trust,
all remaining trust property, less final
trust administration expenses, shall be
paid to the Grantor.
Section 18. Immunity and
Indemnification. The Trustee shall not
incur personal liability of any nature in
connection with any act or omission,
made in good faith, in the
administration of this Trust, or in
carrying out any directions by the
Grantor or the EPA Administrator
issued in accordance with this
Agreement. The Trustee shall be
indemnified and saved harmless by the
Grantor or from the Trust Fund, or both,
from and against any personal liability
to which the Trustee may be subjected
by reason of any act or conduct in its
official capacity, including all expenses
reasonably incurred in its defense in the
event the Grantor fails to provide such
defense. EPA does not indemnify either
the Grantor or the Trustee due to the
restrictions imposed by the AntiDeficiency Act, 31 U.S.C. 1341.
Section 19. Choice of Law. This
Agreement shall be administered,
construed, and enforced according to
the laws of the state of [enter name of
state].
Section 20. Interpretation. As used in
this Agreement, words in the singular
include the plural and words in the
plural include the singular. The
descriptive headings for each section of
this Agreement shall not affect the
interpretation or the legal efficacy of
this Agreement.
In Witness Whereof the parties have
caused this Agreement to be executed
by their respective officers duly
authorized and their corporate seals to
be hereunto affixed and attested as of
the date first above written. The parties
below certify that the wording of this
Agreement is identical to the wording
E:\FR\FM\11JAP2.SGM
11JAP2
3498
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
specified in 40 CFR 320.50(a) as such
regulations were constituted on the date
first above written.
llllllllllllllllll
l
[Signature of Grantor
llllllllllllllllll
l
[Printed Name of Grantor]
[Title]
Attest:
[Title]
[Seal]
llllllllllllllllll
l
[Signature of Trustee]
llllllllllllllllll
l
[Printed Name of Trustee Official]
llllllllllllllllll
l
[Mailing Address, Telephone Number,
Email of Trustee Official]
Attest:
[Title]
[Seal]
(2) The following is an example of the
certification of acknowledgement which
must accompany the trust agreement for
a trust fund as specified in 40 CFR
320.45 of this chapter. State
requirements may differ on the proper
content of this acknowledgement.
State of
llllllllllllll
County of lllllllllllll
On this [date], before me personally
came [owner or operator] to me known,
who, being by me duly sworn, did
depose and say that she/he resides at
[address], that she/he is [title] of
[corporation], the corporation described
in and which executed the above
instrument; that she/he knows the seal
of said corporation; that the seal affixed
to such instrument is such corporate
seal; that it was so affixed by order of
the Board of Directors of said
corporation, and that she/he signed her/
his name thereto by like order.
[Signature of Notary Public] lllll
(b) A letter of credit, as specified in
40 CFR 320.40 of this chapter, must be
worded as follows, except that
instructions in brackets are to be
replaced with the relevant information
and the brackets deleted:
sradovich on DSK3GMQ082PROD with PROPOSALS2
Irrevocable Standby Letter of Credit
IRREVOCABLE STANDBY LETTER OF
CREDIT NUMBER: [insert number]
ISSUER: [insert name and address of
issuing institution]
ISSUANCE DATE: [insert date]
MAXIMUM AMOUNT: $[insert dollar
amount]
APPLICANT:
[Insert name of Owner or Operator of
Facility]
[Insert contact person(s), title(s), and
contact information (address, phone,
email, etc.)]
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
FACILITY:
[Insert EPA Identification number(s),
name(s), address(es) and CERCLA
108(b) financial responsibility
amount(s) covered by the letter of
credit for facility(ies) to be covered by
this instrument]
TO:
[If the letter of credit is established in
favor of any and all third-party
CERCLA claimants insert:
‘‘Administrator(s)
Region(s) [region numbers]
U.S. Environmental Protection Agency
(EPA)
[Insert name and mailing address of
Administrator or designee(s)]’’
Or,
If letter of credit is established in favor
of a trust fund trustee insert the name
and mailing address of trustee]
Dear Sir or Madam:
We hereby establish our Irrevocable
Standby Letter of Credit No. [insert
number] in the favor of [insert either
‘‘any and all third-party CERCLA
claimants’’ or the name of trustee of the
trust fund that will hold the letter of
credit], at the request and for the
account of [insert name of Owner or
Operator of Facility] (the ‘‘Applicant’’),
in the amount of $[insert amount] (the
‘‘Maximum Amount’’) for the [insert
name(s) and address(es) of the
facility(ies) to be covered by this
instrument] (the ‘‘Facility’’). The letter
of credit is established to assure
payment for the current owners or
operators’ CERCLA response costs,
health assessment costs, and/or natural
resource damages associated with the
facilities covered by this letter. Payment
shall be made up to amounts provided
above for each facility and not to exceed
in total the Maximum Amount, upon
presentation of:
[If letter of credit is established in
favor of a trust fund trustee insert: ‘‘A
demand for payment from [name of trust
fund trustee] bearing reference to this
letter of credit number No. [insert
number]
If letter of credit is issued in favor of
any and all third-party CERCLA
claimants insert: ‘‘A demand for
payment bearing reference to this letter
of credit number No. [insert number];
and
A final court judgment dated at least
30 days earlier from a Federal court, in
favor of the claimant, awarding CERCLA
response costs, health assessment costs,
and/or natural resource damages
associated with a facility covered by the
letter of credit against any of the current
owners or operators at a facility covered
by the letter of credit accompanied by
a certification from the claimant that
PO 00000
Frm 00112
Fmt 4701
Sfmt 4702
reads as follows: ‘I hereby certify that
the amount of the demand is payable
pursuant to regulations issued under the
Comprehensive Environmental
Response, Compensation and Liability
Act of 1980 as amended.’; or
A certification from the EPA
Administrator or another Federal agency
that reads as follows: ‘I hereby certify
that the amount of the demand is
payable pursuant to regulations issued
under the Comprehensive
Environmental Response, Compensation
and Liability Act of 1980 as amended.’’’]
This letter of credit is effective as of
[date] and shall expire on [date at least
one year later], but such expiration date
shall be automatically extended for a
period of [at least one year] on [date at
least one year later as specified above]
and on each successive expiration date,
unless, at least 120 days before the
current expiration date, we notify [If
letter of credit is issued in favor of a
trust fund trustee insert: ‘‘[name of
trustee],’’ ] the EPA Administrator and
the Applicant by certified mail that we
have decided not to extend this letter of
credit beyond the current expiration
date. In the event of such notification,
any unused portion of the credit shall be
paid into the accompanying trust fund
issued by [insert name of issuing
institution of trust fund] with account
number [insert account number of the
trust fund] upon presentation by [If
issued in favor of any and all third-party
CERCLA claimants enter ‘‘the EPA
Administrator’’; if issued in favor of a
trust fund trustee insert name of trustee]
of a demand for payment compliant
with the terms above within 120 days
after the date of receipt of such
notification by both you and [owner’s or
operator’s name], as shown on the
signed return receipts.
Whenever this letter of credit is
drawn on under and in compliance with
the terms of this credit, we shall duly
honor such demand upon presentation
to us and shall pay as directed by
claimant or the trustee.
[Insert if letter of credit is issued in
favor of any and all third-party CERCLA
claimants: ‘‘In the case of a release or
threatened release of (a) hazardous
substance(s) from a facility covered by
the letter of credit, we acknowledge that
any claim authorized by section 107 or
111 of CERCLA may be asserted directly
against us as provided by CERCLA
section 108(c)(2). We consent to suit
with respect to these claims subject to
the limitations in CERCLA section
108(d). We acknowledge that we are
entitled to all rights and defenses
provided to guarantors by CERCLA
section 108(c). We will provide notice of
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
any such resulting claims and payments
to the EPA Administrator.’’]
This credit is subject to [insert the
most recent edition of either the
Uniform Customs and Practice for
Documentary Credits or International
Standby Practices published and
copyrighted by the International
Chamber of Commerce.]
We certify that the wording of this
letter of credit is identical to the
wording specified in 40 CFR 320.50(b)
as such regulations were constituted on
the date shown immediately below.
[Signature(s) and title(s) of official(s) of
issuing institution] [Date].
(c) A surety bond, as specified in 40
CFR 320.41 of this chapter, must be
worded as follows, except that
instructions in brackets are to be
replaced with the relevant information
and the brackets deleted:
EPA contact information:
U.S. Environmental Protection Agency
[Insert Name, Phone Number, Mailing
Address of the Administrator and
Points of Contact]
llllllllllllllllll
l
Surety Bond No. [Insert number]
Date bond executed: [Insert date]
Parties [Insert name and address of
owner or operator], Principal,
incorporated in [Insert state of
incorporation] of [Insert city and state
of principal place of business] and
[Insert name and address of surety
company(ies)], Surety Company(ies),
of [Insert surety(ies) place of
business].
EPA Identification Number, name,
address, and CERCLA 108(b) financial
responsibility amount, specifying the
portion covered by this bond, for each
facility guaranteed by this bond:
llllllllllllllllll
l
Total penal sum of bond: llllll
Purpose: This is an agreement
between the Surety(ies) and the
Principal under which the Principal and
Surety(ies) hereto are firmly bound to
any and all third-party CERCLA
claimants , in the above penal sum plus
the amount of any investigation or legal
defense fees incurred by Surety(ies) for
the payment of which we bind
ourselves, our heirs, executors,
administrators, successors and assigns
jointly and severally; provided that,
where the Surety(ies) are corporations
acting as co-sureties, we, the Sureties,
bind ourselves in such sum ‘‘jointly and
severally’’ only for the purpose of
allowing a joint action or actions against
any or all of us, and for all other
purposes each Surety binds itself,
jointly and severally with the Principal,
for the payment of such percentage of
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
the total penal sum only as is set forth
opposite the name of each Surety plus
the amount of any investigation or legal
defense fees incurred by Surety, but if
no limit of liability is indicated, the
limit of liability shall be the total penal
sum of the bond plus the amount of any
investigation or legal defense fees
incurred by Surety. We agree to be
responsible for the following:
(1) the satisfaction of valid third-party
CERCLA claims against the Principal or
the other current owners and operators
for CERCLA response costs, health
assessment costs, and natural resource
damages associated with the facility(ies)
covered by this bond in the sums
prescribed herein; and
(2) the guarantee that the Principal or
other current owners and operators shall
obtain alternate financial responsibility
as specified in subpart C of 40 CFR 320
for the facility(ies) covered by this bond
and obtain written approval of that
financial responsibility provided within
90 days of receipt by the EPA
Administrator and the Principal of a
notice of cancellation of the bond from
the Surety(ies).
The aforementioned responsibilities
are subject to the governing provisions
and the following conditions. Any
provision in this bond conflicting with
the following governing provisions or
conditions shall be deemed deleted
herefrom and provisions conforming to
such governing provisions or condition
shall be deemed incorporated herein.
Governing Provisions:
(1) the Comprehensive Environmental
Response, Compensation and Liability
Act of 1980, as amended.
(2) Rules and regulations of the U.S.
Environmental Protection Agency
(EPA), particularly 40 CFR part 320.
Conditions:
(1) The Principal and all the current
owners and operators at the facility(ies)
covered by this bond are subject to the
applicable governing provisions that
require the Principal and all the current
owners and operators to have and
maintain CERCLA § 108(b) financial
responsibility to cover CERCLA
response costs, health assessment costs,
and natural resource damage claims.
(2) This bond assures that the
Principal will ensure that at facilities
covered by this bond: (a) payments will
be made as required by final court
judgments from a Federal court against
a current owner or operator for CERCLA
response costs, health assessment costs,
and/or natural resource damages within
30 days; (b) payments will be made
when required by a CERCLA settlement
with a current owner or operator; (c)
work will be performed as required in
CERCLA unilateral administrative
PO 00000
Frm 00113
Fmt 4701
Sfmt 4702
3499
orders issued to a current owner or
operator for which the owner or
operator has provided a written
statement allowing the bond to assure
the performance of the work in the
order; and (d) CERCLA 108(b) financial
responsibility coverage will be
maintained as described in condition 1.
(3) If the Principal fails to perform as
described above the Surety(ies) becomes
liable on this bond obligation.
(4) The Surety(ies) shall satisfy a valid
claim for CERCLA response costs,
health assessment costs, and/or natural
resource damages only upon the receipt
of one of the following documents plus
the additional signed statement
specified below:
(a) A final court judgment dated at
least 30 days earlier from a Federal
court, in favor of the claimant, awarding
CERCLA response costs, health
assessment costs, and/or natural
resource damages associated with a
facility covered by this bond against the
Principal or any of the current owners
or operators at a facility covered by this
bond;
(b) A written signed statement from
the EPA Administrator or another
Federal government agency requesting
payment from the Surety(ies) on the
grounds that payment has not been
made as required by a CERCLA
settlement associated with a facility
covered by this bond and with any of
the current owners or operators; or
(c) A written signed statement from
the EPA Administrator or other Federal
government agency requesting payment
from the Surety(ies) into a trust fund
established pursuant to a CERCLA
unilateral administrative order on the
grounds that performance at a facility
covered by this bond has not occurred
as required by a CERCLA unilateral
administrative order issued to a current
owner or operator.
AND
A signed statement from the claimant
certifying that these amounts have not
been recovered or paid from any other
source, including, but not limited to, the
owner operator, insurance, judgments,
agreements, and other financial
responsibility instruments.
(5) In addition to condition 4, in the
case of a release or threatened release of
(a) hazardous substance(s) from a
facility covered by the bond, the
Surety(ies) acknowledge that any claim
authorized by section 107 or 111 of
CERCLA may be asserted directly
against the Surety(ies) as provided by
CERCLA section 108(c)(2). The
Surety(ies) consent(s) to suit with
respect to these claims subject to the
limitations in CERCLA section 108(d).
The Surety(ies) shall be entitled to all
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3500
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
rights and defenses provided to
guarantors by CERLCA section 108(c).
The Surety(ies) will provide notice of
any such resulting claims and payments
to the EPA Administrator.
(6) If upon notice of cancellation by
the Surety(ies) the Principal fails to
obtain replacement CERCLA financial
responsibility consistent with subpart C
of 40 CFR 320 and written approval of
the EPA Administrator of that
replacement financial responsibility
within 90 days of receipt of said notice
by the EPA Administrator and the
Principal the Surety(ies) shall become
liable on this bond and shall make
payment into the standby trust fund as
directed by the EPA Administrator.
(7) The liability of the Surety(ies)
shall not be discharged by any payment
or succession of payments hereunder,
unless and until such payment or
payments shall amount in the aggregate
to the penal sum of the bond. In no
event shall the obligation of the
Surety(ies) hereunder exceed the
amount of said penal sum plus the
amount of any investigation or legal
defense fees.
(8) The Surety(ies) may cancel the
bond by sending notice of cancellation
by certified mail to the Principal and the
EPA Administrator, provided, however,
that cancellation shall not occur during
the 120 days beginning on the date of
receipt of the notice of cancellation by
the Principal and the EPA
Administrator, as evidenced by the
return receipt.
(9) The Principal may terminate this
bond by sending written notice to the
Surety(ies), provided however, that no
such notice shall become effective until
the Surety(ies) receive(s) written
authorization for termination of the
bond by the EPA Administrator.
(10) The Surety(ies) hereby waive(s)
notification of amendments to
applicable laws, statutes, rules and
regulations and agree(s) that no such
amendment shall in any way alleviate
its (their) obligation on this bond.
(11) This bond is effective from [insert
date] (12:01 a.m., standard time, at the
address of the Principal as stated herein)
and shall continue in force until
cancelled or terminated as described
above.
In Witness Whereof, the Principal and
Surety(ies) have executed this Bond and
have affixed their seals on the date set
forth above.
The persons whose signatures appear
below hereby certify that they are
authorized to execute this surety bond
on behalf of the Principal and
Surety(ies) and that the wording of this
surety bond is identical to the wording
specified in 40 CFR 320.50(c), as such
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
regulations were constituted on the date
this bond was executed.
PRINCIPAL
[Signature(s)]
[Name(s)]
[Name, Telephone Number, Email of
Representative]
[Title(s)]
[Corporate Seal]
CORPORATE SURETY[IES]
[Name and address]
State of incorporation:___
Liability Limit: %___
[Signature(s)]
[Name(s) and title(s)]
[Corporate seal]
[For every co-surety, provide
signature(s), corporate seal, liability
limit and other information in the
same manner as for Surety above.]
Bond premium: $___
(d) A CERCLA § 108(b) insurance
endorsement as required in 40 CFR
320.42 must be worded as follows,
except that instructions in brackets are
to be replaced with the relevant
information and the brackets deleted:
CERCLA § 108(b) Financial
Responsibility Endorsement
EPA contact information:
[Insert Name, Phone Number, Mailing
Address of EPA Administrator and
Points of Contact]
1. This endorsement certifies that the
policy to which the endorsement is
attached provides liability insurance
covering CERCLA response costs, health
assessment costs, and natural resource
damages in connection with the
insured’s obligation to demonstrate
financial responsibility under 40 CFR
320. The coverage applies at [list EPA
Identification Number, name, address,
total CERCLA 108(b) financial
responsibility amount for each facility]
for CERCLA response costs, health
assessment costs, and natural resource
damages at a covered facility. The limits
of liability are [insert the dollar
amount(s) of the limits and the
percentage share of the Insurer’s
liability for each covered facility],
exclusive of legal defense and
investigation costs.
2. The insurance afforded with
respect to such facilities is subject to all
of the terms and conditions of the
policy; provided, however, that any
provision, exclusion, definition,
condition, retroactive date, clause,
defense, or other term of the policy
inconsistent with 40 CFR 320.42, or
subsections (a) through (f) of this
Paragraph 2 are hereby amended to
conform with 40 CFR 320.42 and
subsections (a) through (f) below:
(a) The Insurer will make payment
only for third-party CERCLA claims as
PO 00000
Frm 00114
Fmt 4701
Sfmt 4702
defined in section 101 of CERCLA; the
insurance coverage is not available for
payments to the insured. The Insurer
will make:
i. payments awarded in final court
judgments from a Federal court against
any of the current owners and operators
for CERCLA response costs, health
assessment costs, and/or natural
resource damages associated with a
facility covered by the policy to the
party obtaining the judgment should
such payments not otherwise be made
within 30 days.
ii. payments as required by a CERCLA
settlement associated with a facility
covered by the policy between EPA or
another Federal government agency and
any of the current owners and operators
should such payments not occur.
iii. payments in instances where
performance does not occur at a facility
covered by the policy as required by a
CERCLA unilateral administrative order
issued by EPA or another Federal
agency for which the owner or operator
has provided a written statement that
the policy be used to assure
performance of the work required in the
order.
iv. payment into a standby trust in
instances where the owner or operator
fails to obtain alternate financial
responsibility and obtain written
approval of such alternate financial
responsibility from the EPA
Administrator within 90 days after
receipt by both the insured and the EPA
Administrator of a notice from the
insurer that it has decided to cancel,
terminate or fail to renew the insurance
policy beyond the current expiration
date as provided for in paragraph (f)
below.
(b) In addition to the payment
condition in subsection (a), in the case
of a release or threatened release of (a)
hazardous substance(s) from a facility
covered by the policy, the insurer
acknowledges that any claim authorized
by section 107 or section 111 of
CERCLA may be asserted directly
against the insurer as provided by
section 108(c)(2) of CERCLA. Insurer
consents to suit with respect to these
claims subject to the limitations in
section 108(d) of CERCLA. The Insurer
will be entitled to all rights and
defenses provided to guarantors by
section 108(c) of CERCLA. Insurer will
provide notice of any such resulting
claims and payments to the EPA
Administrator.
(c) Bankruptcy or insolvency of the
insured shall not relieve the Insurer of
its obligations under the policy to which
this endorsement is attached.
(d) The Insurer is liable for the
payment of amounts within any
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
deductible or self-insured retention
applicable to the policy, with a right of
reimbursement by the insured for any
such payment made by the Insurer.
(e) Whenever requested by the
Administrator of the U.S.
Environmental Protection Agency
(EPA), the Insurer agrees to furnish to
the EPA Administrator a signed
duplicate original of the policy and all
endorsements.
(f) Cancellation, failure to renew or
any other termination of the insurance
by the insurer will be effective only
upon written notice to the owner
operator and the EPA Administrator by
certified mail and only after the
expiration of 120 days beginning with
the date of receipt of the notice by both
the Administrator and the owner or
operator, as evidenced by the return
receipts.
Attached to and forming part of policy
No. __ issued by [name of Insurer],
herein called the Insurer, of [address of
Insurer] to [name of insured] of
[address] this___ day of___, 20__. The
effective date of said policy is___ day of
___, 20__.
I hereby certify that the wording of
this endorsement is identical to the
wording specified in 40 CFR 320.50(d)
as such regulation was constituted on
the date first above written, and that the
Insurer is licensed to transact the
business of insurance, or eligible to
provide insurance as an excess or
surplus lines insurer, in one or more
states.
[Signature of Authorized Representative
of Insurer]
[Type name]
[Title], Authorized Representative of
[name of Insurer]
[Address, Phone Number, Email of
Representative]
[PROPOSED REGULATORY TEXT FOR
PARAGRAPHS (e) and (f)—Option 2
only]
(e) A letter from the chief financial
officer, as specified in § 320.43, must be
worded as follows, except that
instructions in brackets are to be
replaced with the relevant information
and the brackets deleted:
FINANCIAL TEST
sradovich on DSK3GMQ082PROD with PROPOSALS2
Letter from Chief Financial Officer
[Address to EPA Administrator or
Regional delegees for every Region in
which facilities for which financial
responsibility is to be demonstrated
through the corporate financial test are
located.]
I am the Chief Financial Officer
(‘‘CFO’’) of [insert name and address of
firm] (‘‘firm’’). This letter is in support
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
of this firm’s use of the financial test to
demonstrate Financial Responsibility
for CERCLA 108(b) as specified in 40
CFR part 320.43.
[Fill out paragraphs 1–4, below, and
provide supporting documentation,
when required as specified below. If
your firm has no facilities that belong in
a particular paragraph, write ‘‘None’’ in
the space indicated.]
1. This firm is the owner or operator
of the facilities, listed below, for which
Financial Responsibility is
demonstrated through the financial test
specified in 40 CFR part 320.43. The
current CERCLA § 108(b) Financial
Responsibility amount and the amount
covered by the financial test are
provided for each listed facility:
[For each facility, identify: Facility
name; Address; EPA Identification
Number; CERCLA § 108(b) financial
responsibility amount; and amount
covered by financial test]
2. This firm guarantees, through the
guarantee specified in 40 CFR part
320.44, financial responsibility of the
following facilities owned or operated
by the guaranteed party. The current
CERCLA § 108(b) financial
responsibility amount so guaranteed are
shown for each listed facility:
[For each facility, identify: Facility
name; Address; EPA Identification
Number; CERCLA § 108(b) financial
responsibility amount; and amount
covered by financial test]
The firm identified above is: [insert
one or more: (1) The direct or higher-tier
parent corporation of the owner or
operator; (2) owned by the same parent
corporation as the parent corporation of
the owner or operator, and receiving the
following value in consideration of this
guarantee lll [insert description of
value received] ; or (3) engaged in the
following substantial business
relationship with the owner or operator
lll [insert characterization of
relationship] , and receiving the
following value in consideration of this
guaranteelll [insert description of
value received]].
[Attach a written description of the
business relationship or a copy of the
contract establishing such relationship
to this letter].
3. The firm, as owner or operator or
guarantor, is using a financial test to
secure the environmental obligations of
the facilities listed below for which
financial responsibility is required.
These obligations include, but are not
limited to: current cost estimates for
corrective action, closure, post-closure
care, and amounts required for thirdparty liability for hazardous waste
treatment, storage and disposal facilities
under 40 CFR 264.101, 264.142,
PO 00000
Frm 00115
Fmt 4701
Sfmt 4702
3501
264.144, 264.147, 265.142, 265.144 and
265.147 and as required by order under
section 3008(h) of RCRA, 42 U.S.C.
6928(h); cost estimates for municipal
solid waste landfill units under 40 CFR
258.71, 258.72 and 258.73; current
plugging and abandonment cost
estimates for underground injection
control facilities under 40 CFR 144.62;
cost estimates for underground storage
tanks under 40 CFR 280.93; cost
estimates for facilities storing
polychlorinated biphenyls under 40
CFR 761.65; cost estimates for
underground injection control class VI
facilities for corrective action under 40
CFR 146.84, for injection well plugging
under 40 CFR 146.92, for post injection
facility care and facility closure under
40 CFR 146.93, and emergency and
remedial response under 40 CFR 146.94;
any financial responsibility required
under any CERCLA settlement or order;
and any other environmental obligation
assured through a financial test or
guarantee, excluding those costs
represented in paragraphs 1 and 2 listed
above. The cost estimates by obligation
are provided for each listed facility:
[For each facility, identify: Facility
name; Address; EPA Identification
Number (if any); and amount covered by
financial test]
4. The total of all such environmental
obligations the firm is covering with a
financial test or for which it issued a
corporate guarantee for the listed
facilities in paragraphs 1–3 above [sum
of the portion covered by the financial
test in paragraph 1 plus the sums in
paragraphs 2 and 3] is $ [insert amount],
as oflll [insert date].
5. The firm [insert ‘‘is required’’ or ‘‘is
not required’’] to file a Form 10–K or
20–F with the Securities Exchange
Commission (SEC) for the latest fiscal
year.
6. The fiscal year of the firm ends on
[month, day]. The figures for the
following items marked with asterisk
are derived from this firm’s
independently audited, year-end
financial statements for the latest
completed fiscal year, ended [date].
7. The firm has received a qualified or
adverse accountant’s opinion for the
latest completed fiscal year ended
[insert date] lll (Yes/ No) lll
8. The firm represents that as of the
latest completed fiscal year-end [insert
date] lll, the Assets located in the
United States in the amount of $lll
amount to at least 90% of the firm’s
total assets. (Yes/No) lll
Test Worksheet:
1. The total of all environmental
obligations the firm is covering with a
financial test or for which it issued a
E:\FR\FM\11JAP2.SGM
11JAP2
3502
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
corporate guarantee [enter the sum from
paragraph 4 above] lll.
2. The firm represents that it holds the
following long term credit ratings: [list
all ratings and their dates that apply
including but not limited to Long-Term
Issuer Credit Ratings from Standard and
Poor’s, Long-Term Corporate Family
Ratings from Moody’s Investor Services,
Long-Term Issuer Default Ratings from
Fitch Ratings, and any other long-term
credit rating from a Nationally
Recognized Statistical Rating
Organization (NRSRO)]
*3. Tangible Net Worth $lll
4. Is line 3 at least 6 times line 1?
(Yes/No) lll
*5. Total assets in U.S. [required only
if the answer in paragraph 8 above is
‘‘No’’] $lll
6. Is line 5 at least 6 times line 1?
(Yes/No) lll
I hereby certify that the information
included in this letter, including all
attachments and exhibits, is true and
accurate. I further certify that the
wording of this letter is identical to the
wording specified in 40 CFR 320.50(e)
as such regulations were constituted on
the date shown immediately below.
[Signature] lllllllllllll
[Name] lllllllllllllll
[Title] lllllllllllllll
[Date] lllllllllllllll
(f) A corporate guarantee, as specified
in § 320.44 must be worded as follows,
except that instructions in brackets are
to be replaced with the relevant
information and the brackets deleted:
sradovich on DSK3GMQ082PROD with PROPOSALS2
Corporate Guarantee for CERCLA 108(b)
Financial Responsibility
Guarantee made this [date] by [name
of guaranteeing entity], a business
corporation organized under the laws of
[if incorporated within the United States
insert ‘‘the State of lll’’ and insert
name of state; if incorporated outside
the United States insert the name of the
country in which incorporated, the
principal place of business within the
United States, and the name and
address of the registered agent in the
state of the principal place of business],
herein referred to as guarantor. This
guarantee is made on behalf of the
[owner or operator] of [business
address], which is [one of the following:
‘‘our subsidiary’’; ‘‘a subsidiary of [name
and address of common parent
corporation], of which guarantor is a
subsidiary’’; or ‘‘an entity with which
guarantor has a substantial business
relationship, as defined in 40 CFR
320.3’’ to any and all third-party
CERCLA claimants.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
Recitals
1. Guarantor meets or exceeds the
financial test criteria and agrees to
comply with the reporting requirements
for guarantors as specified in 40 CFR
320.44 and will report the full amount
of CERCLA 108(b) financial
responsibility for which it is eligible to
cover as determined by the financial test
criteria at 40 CFR 320.43 for each
facility covered by the guarantee in the
letter from its chief financial officer.
2. [Owner or operator] owns or
operates the following facilities subject
to CERCLA 108(b) financial
responsibility requirements covered by
this guarantee: [List for each facility:
EPA Identification Number, name,
address and if guarantor is incorporated
outside the United States list the name
and address of the guarantor’s registered
agent in each state.]
3. For value received from [owner or
operator], and up to the most current
§ 108(b) financial responsibility amount
required at each facility covered by the
guarantee as identified in paragraph 2 of
the guarantor’s most recent CFO letter
submission required under 40 CFR
320.44, and exclusive of any legal
defense costs incurred by the guarantor,
guarantor guarantees to any and all
third-party CERCLA claimants that:
a) in the event that payment for
CERCLA response costs, health
assessment costs, and/or natural
resource damages associated with a
facility identified above as required in a
final court judgment from a Federal
court against one of the current owners
or operators is not made within 30 days,
the guarantor shall do so;
b) in the event payment is not made
as required in a CERCLA settlement
associated with a facility identified
above between a current owner or
operator and EPA or another Federal
government agency, the guarantor shall
do so; and
c) in the event that performance at a
facility covered by the guarantee does
not occur as required under a CERCLA
unilateral administrative order issued to
a current owner or operator by EPA or
another Federal agency and for which
the owner or operator provides a written
statement allowing the guarantee to
serve as financial responsibility assuring
the work in the order, the guarantor
shall make payment into a trust fund
established pursuant to the order.
4. The guarantor shall satisfy a thirdparty CERCLA claim only on receipt of
one of the following documents plus the
additional signed statement specified
below:
(a) A final court judgment dated at
least 30 days earlier from a Federal
PO 00000
Frm 00116
Fmt 4701
Sfmt 4702
court, in favor of the claimant, awarding
CERCLA response costs, health
assessment costs, and/or natural
resource damages associated with a
facility covered by this guarantee
against any of the current owners or
operators at a facility covered by this
guarantee;
(b) A written signed statement from
an EPA Administrator or another
Federal government agency requesting
payment from the Guarantor on the
grounds that payment has not been
made as required by a CERCLA
settlement associated with a facility
covered by this guarantee and with any
of the current owners or operators; or
(c) A written signed statement from
the EPA Administrator or other Federal
government agency requesting payment
from the Guarantor into a trust fund
established pursuant to a CERCLA
unilateral administrative order on the
grounds that performance at a facility
covered by this guarantee has not
occurred as required by a CERCLA
administrative order issued to a current
owner or operator.
AND
A signed statement from the claimant
certifying that these amounts have not
been recovered or paid from any other
source, including, but not limited to, the
owner operator, insurance, judgments,
agreements, and other financial
responsibility instruments.
5. In addition to the payment
provisions in paragraph 4 of this
agreement, in the case of a release or
threatened release of (a) hazardous
substance(s) from a facility covered by
the guarantee, guarantor acknowledges
that any claim authorized by section 107
or 111 of CERCLA may be asserted
directly against the guarantor as
provided by CERCLA section 108(c).
Guarantor consents to suit with respect
to these claims subject to the limitations
in CERCLA section 108(d). Guarantor
will be entitled to all defenses provided
to guarantors by CERCLA section 108(c).
Guarantor agrees to provide notice of
any such resulting claims and payments
to the EPA Administrator.
6. The guarantor agrees that if, at any
time before the termination of this
guarantee, the guarantor fails to meet
the financial test criteria, guarantor shall
send within 90 days, by certified mail,
notice to the EPA Administrator and to
[owner or operator] of its intent to
provide alternate financial
responsibility as specified in subpart C
of 40 CFR part 320 in the name of
[owner or operator]. Within 120 days
after the guarantor fails to meet the
financial test criteria, the guarantor shall
establish such financial responsibility
unless [owner or operator] has done so.
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
7. The guarantor agrees to notify the
EPA Administrator by certified mail, of
a voluntary or involuntary proceeding
under Title 11 (Bankruptcy), U.S. Code,
naming guarantor as debtor, within 10
days after commencement of the
proceeding.
8. Guarantor agrees that within 30
days after being notified by an EPA
Administrator of a determination that
guarantor no longer meets the financial
test criteria or that he is disallowed from
continuing as a guarantor, he shall
establish alternate financial
responsibility as specified in subpart C
of 40 CFR part 320, as applicable, in the
name of [owner or operator] unless
[owner or operator] has done so.
9. Guarantor agrees to remain bound
under this guarantee notwithstanding
any or all of the following: enforcement
action taken under CERCLA at a covered
facility, or any modification or
alteration of an obligation of owner or
operator pursuant to 40 CFR part 320, or
the bankruptcy of an owner or operator
at a facility covered by the agreement.
10. Guarantor agrees to remain bound
under this guarantee for as long as
[owner or operator] must comply with
the applicable financial assurance
requirements of subpart C of 40 CFR
part 320 for the above-listed facilities,
except as provided in paragraph 11 of
this agreement.
11. Guarantor may terminate this
guarantee by sending notice by certified
mail to the EPA Administrator and to
[owner or operator], provided that this
guarantee may not be terminated unless
and until [the owner or operator]
obtains, and the EPA Administrator
approves, alternate financial
responsibility complying with subpart C
of 40 CFR part 320.
12. Guarantor agrees that if [owner or
operator] fails to provide alternate
financial assurance as specified in
subpart C of 40 CFR part 320 and obtain
written approval of such assurance from
the EPA Administrator within 90 days
after a notice of cancellation by the
guarantor is received by the EPA
Administrator from guarantor, guarantor
shall provide such alternate financial
assurance in the name of [owner or
operator].
13. Guarantor expressly waives notice
of acceptance of this guarantee by the
EPA or by [owner or operator].
Guarantor also expressly waives notice
of any modification or alteration of an
obligation of owner or operator pursuant
to 40 CFR part 320.
I hereby certify that the wording of
this guarantee is identical to the
wording specified in 40 CFR part
320.50(f) as such regulations were
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
constituted on the date first above
written.
Effective date: lllllllllll
[Name of guarantor] lllllllll
[Authorized signature for guarantor] l
[Name of person signing] llllll
[Title of person signing] lllllll
Signature of witness or notary: llll
Subpart D—G [Reserved]
Subpart H—Hardrock Mining Facilities
§ 320.60
Applicability
(a)(1) The requirements of this subpart
apply to owners or operators of
hardrock mining facilities within the
classes identified in the Federal
Register notice issued by EPA at 74 FR
37213 (July 28, 2009) that are authorized
to operate, or should be authorized to
operate, on [Date 30 days after
publication of Final Rule], or who
become authorized to operate, or should
become authorized to operate, after
[Date 30 days after publication of Final
Rule] except for the classes identified in
paragraph (b) of this section.
(2) The requirements of this subpart
do not apply to owners or operators of
the following classes of hardrock mining
facilities identified in the Federal
Register notice referred to in paragraph
(a) of this section:
(i) Mines conducting only placer
mining activities
(ii) Mines conducting only
exploration activities
(iii) Mines with less than five
disturbed acres that are not located
within one mile of another area of mine
disturbance that occurred in the prior
ten-year period, and that do not employ
hazardous substances in their processes,
and
(iv) Processors with less than five
disturbed acres of waste pile and surface
impoundment
§ 320.61
Timeframes for compliance.
(a) Owners and operators of hardrock
mining facilities that are authorized to
operate, or should be authorized to
operate, on [Date 30 days after
publication of Final Rule] must
demonstrate financial responsibility
according to the following schedule:
(1) For the amount of the health
assessment cost component identified in
this subpart by [Date 24 months after
promulgation of the final rule];
(2) For fifty percent of the response
and natural resource damages cost
components amount identified in this
subpart by [Date 36 months after
promulgation of the final rule]; and
(3) For the full response and natural
resource damages component amount
identified in this subpart by [Date 48
PO 00000
Frm 00117
Fmt 4701
Sfmt 4702
3503
months after promulgation of the Final
Rule].
(b) Owners and operators of hardrock
mining facilities that are authorized to
operate, or should be authorized to
operate, between [Date of publication of
final rule] and [Date four years after
publication of the final rule] must be
incompliance with the schedule in
paragraph (a) and continue to comply
with that schedule after beginning
operations.
(c) Owners or operators of hardrock
mining facilities that become authorized
to operate, or should become authorized
to operate, after [Date four years after
the effective date of this rule] must
demonstrate financial responsibility for
the full financial responsibility amount
required under this subpart before
beginning or resuming operations.
§ 320.62
Definitions.
When used in this subpart, the
following terms are defined as follows:
Critical structure means a feature
where a significant or high hazard
potential is determined to exist. A
significant hazard potential exists where
failure or mis-operation is unlikely to
cause loss of human life but is could
cause economic loss, environmental
damage, or other concerns; a high
hazard potential exists where failure or
mis-operation is likely to cause loss of
human life.
Disturbed acreage/acres means the
area of land or surface water that has
been altered for purposes of
accommodating mining and/or
processing activities. The term includes
the area from which the overburden,
tailings, waste materials, ore, or targeted
minerals have been removed or placed,
and areas where tailings ponds, waste
dumps, roads, conveyor systems, loadout facilities, heap leach, dump leach,
ponds and impoundments, slag and
other mineral processing waste, and all
similar excavations or placements that
result from the operation are located.
Dump leach means ore or mineralized
material that has been stacked without
a liner and has been leached, is
currently being leached, or has been
placed in a pile for the purpose of being
leached.
Exploration means activities
conducted to ascertain the existence,
location, extent and/or quality of a
deposit of ore or other mineral and does
not include activities where 1000 tons
or more of presumed ore have been
removed for testing or where
development or production has
occurred. Exploration does not include
activities where material is extracted for
commercial use or sale.
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3504
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
Extraction means the sequence of
activities intended to physically gain
access to and remove ore or a mineral
body.
Feature means open pit, underground
mine, waste rock pile, tailings
impoundment, tailings stack, heap leach
pile, dump leach pile, process pond,
impoundment, reservoir, slag pile, insitu leach facility, or other area or
feature used for mining or processing
activities.
Heap leach means ore or mineralized
material that has been stacked on a
lined leach pad and has been leached,
is currently being leached, or has been
placed in a pile for the purpose of being
leached.
Heap/dump leach means both heap
and valley leach facilities, which are
used for gold and sometimes copper
processing, or run-of-mine copper leach
dumps (or piles), that may have
originally been intended for leaching, or
originally were waste rock that was later
leached in place.
In-situ Leaching means the removal of
targeted materials by injection and
extraction of an acidic or alkaline
solvent solution.
Mine means all areas and equipment
used for mining, including but not
limited to injection and extraction wells
used for in-situ mining or the extraction
of mineral-bearing groundwater brines;
surface excavations, pits, slopes, and
spoil; underground passageways, shafts,
stopes, tunnels, adits and workings;
waste rock, slag and tailings; piles,
ponds, impoundments and reservoirs;
retention dams; dump, heap, or other
leach facilities; mills, smelters,
structures, tanks, equipment, machines,
tools, and process components; private
roads, ports, transmission lines,
pipelines, or any other means of access
owned or maintained by the operator;
and any other ancillary areas or
activities owned or used by the operator
and resulting from the work of
extracting minerals from their natural
deposits. Adjacent and/or
noncontiguous properties located
within close proximity of the extraction
site are part of the mine if those
properties are managed under a unified
operational control (e.g., under the same
owner or operator and with oversight by
a unified managerial staff and budget)
provided those adjacent and/or
noncontiguous properties are engaged in
any of the above activities as part of the
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
sequential management of ore,
beneficiated ore, mineral concentrate,
waste rock or tailings.
Mineral processing means the
sequence of activities following
extraction of metallic or non-fuel nonmetallic minerals to: (1) Separate and
concentrate a target metallic or non-fuel
non-metallic mineral from the ore, and/
or (2) to refine ores or mineral
concentrates to extract a target metallic
or non-fuel non-metallic material.
Mineral processing includes the
mechanical, thermal, and/or chemical
treatment of naturally occurring earthen
materials, either solid or liquid (e.g.,
rock, ore, mineral or extracted
subsurface brine) to recover, purify or
create a final mineral product (e.g.,
dimension stone, expanded vermiculite,
or refractory clay) or a feedstock of
sufficient purity that it can then be used
in further industrial or manufacturing
operations.
Mineral processor means all areas and
equipment used for mineral processing.
Mining means the extraction of rock
and other materials that contain a target
ore or mineral deposit from the earth.
Mining includes, but is not limited to,
in-situ solution mining, extraction of
mineral-bearing groundwater brines,
and surface or underground excavation
of solid earthen materials.
Net precipitation means annual
precipitation minus annual pan
evaporation, or gross precipitation
minus pan evaporation loss. Net
precipitation is in inches.
Open pit means any open pits, cuts,
or other surface features from which ore
was extracted. It does not include
borrow pits, sand boxes, or other surface
features used for extracting soil, gravel,
or sand for any purposes other than ore
extraction.
Pile is as defined in 40 CFR 260.10
Placer mining is the extraction or
prospecting of materials in
unconsolidated deposits using water to
excavate, transport, concentrate and
recover heavy minerals using
beneficiation methods such as
screening, hand-panning, sluicing or
dredging provided they are otherwise in
compliance with applicable state and
Federal regulations and do not use
CERCLA hazardous substances (e.g.,
mercury, cyanide) in the concentration
or processing of materials.
Pressurized hydraulic head means a
discharge from underground mine
workings at greater than 100 kPa.
PO 00000
Frm 00118
Fmt 4701
Sfmt 4702
Process pond/reservoir means process
ponds, reservoirs, impoundments,
ditches, channels or other wet acreage
that were used in heap leach, dump
leach, metals or minerals processing and
other activities that have resulted in
deposits of sludge and other potentially
toxic and/or hazardous materials within
those features.
Qualified professional engineer means
an individual who is licensed by a state
as a Professional Engineer to practice
one or more disciplines of engineering
and who is qualified by education,
technical knowledge, and experience to
make the specific technical
certifications required under this
subpart. Professional engineers making
these certifications must be currently
licensed in the state where the hardrock
mining facility is located.
Slag pile means the storage location of
glass-like particles generated when
molten materials produced by a smelter
are quenched.
Surface impoundment is as defined in
40 CFR 260.10.
Surface mine means the open pits,
adits, general workings, and other
features associated with surface
extraction of ore.
Tailings means the remaining waste
material following the removal of
valuable minerals from ore.
Tailings facility means ponds, dams,
and other facilities including spillways
and associated features used for the
deposition of process/beneficiation
waste or tailings from either pulp or vat
leaching, flotation, or gravity processing
facilities. This also includes paste and
dry stacks.
Underground mine means adits,
portals, shafts, raises, drifts, and general
workings (stopes, rooms or caving
areas), vents and other features
associated with underground extraction
of ore.
Waste rock means waste rock and
overburden piles, dumps, and other
features associated with run-of-mine
disposal of waste on the surface whether
from open pit or underground mines.
§ 320.63 Determining the financial
responsibility amount.
(a) Owners and operators subject to
the requirements of this subpart must
calculate the financial responsibility
amount for their facilities in accordance
with this section.
E:\FR\FM\11JAP2.SGM
11JAP2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
3505
i = the ith response category (e.g., water
treatment costs);
n = the total number of relevant response
categories;
r = EPA region r (e.g., EPA Region 3); and
s = state s (e.g., Montana).
Determine the response component of
the financial responsibility amount for
the facility by totaling the response
category amounts in paragraphs (i)
through (xii) for all applicable response
categories. Include in the calculation all
site features that are authorized to
operate, or should have been authorized
to operate on [Effective Date of the Final
Rule], or on the date the facility first
becomes subject to requirements of this
part, and have not been released from
financial responsibility obligations
under § 320.27.
(i) Open pit category. The open pit
category amount equals: 5.07 × 10∧
(4.24 + 1.08 × Log10[Open Pit Disturbed
Acres])
(ii) Underground mine category. The
underground mine category amount for
an underground mine with a hydraulic
head is $4,500,000. The amount for an
underground mine without a hydraulic
head is $200,000.
(iii) Waste rock category. The waste
rock category amount equals: 1.85 × 10∧
(5.18 + .75 × Log10[Waste Rock
Disturbed Acres])
(iv) Heap and dump leach category.
The heap and dump leach category
amount equals: 2.29 × 10∧ (4.57 + 1.01
× Log10[Heap and Dump Leach
Disturbed Acres])
(v) Tailings category. The tailings
category amount equals: 1.71 × 10∧
(5.32 + .68 × Log10[Tailings Disturbed
Acres])
(vi) Process pond and reservoir
category. The process pond and
reservoir category amount equals: 1.64 ×
10∧ (4.29 + 1.03 × Log10[Process Pond
and Reservoir Disturbed Acres])
(vii) Slag pile category. The slag pile
category amount equals: $64,000 × [Slag
Pile Disturbed Acres].
(viii) Solid and hazardous waste
disposal category. The solid and
hazardous waste disposal category
amount is $2,600,000.
(ix) Drainage category. The drainage
category amount equals: 9.56 × 10∧
(3.42 + .57 × Log10(Total Disturbed
Acres + 1)
(x) Short-term O&M and monitoring
category. The short-term O&M and
monitoring category amount equals:
{1.82 × 10∧ (4.01 + 0.38 × Log10[Total
Disturbed Acres + 1])} × {1/0.0263} × {1
¥ (1/[1.0263∧10])}
(xi) Interim O&M category. The
interim O&M category amount equals:
{1.46 × 10∧ (6.04 + 0.01 × [Net
Precipitation] + 0.34 × Log10[Heap and
Dump Leach Disturbed Acres + 1] + 0.10
× Log10[Tailings Impoundment
Disturbed Acres + 1])} × {1/0.0263} × {1
¥(1/[1.0263∧ 10])}
(xii) Long-term O&M category. The
long-term O&M amount equals: {1.64 ×
10∧ (3.12 + 0.58 × Log10[Total Disturbed
Acres + 1])} /0.0263
(xiii) Water treatment category. The
water treatment category amount is:
{1.16 × 10∧ ( 3.22 + 1.10 × Log10[flow]
+ .70 × [In-Situ leach])}/.0263
(iii) Natural resource damage
component. The financial responsibility
amount for natural resource damages at
a facility is 13.4 percent of the total
response component.
(3) Add the health assessment
component to the amount calculated
under paragraph (b)(2) of this section.
The financial responsibility amount for
the health assessment component is
$550,000.
(c) Owners and operators may satisfy
requirements of paragraph (b)(i) through
(xiii), in whole or in part, by
demonstrating that they are subject to,
and in compliance with, requirements
that will result in a minimum degree
and duration of risk associated with the
production, transportation, treatment,
storage, or disposal, as applicable, of all
hazardous substances present at that site
feature. A demonstration under this
paragraph will reduce the amount of
financial responsibility that an owner
and operator must demonstrate under
this part.
(1) The demonstration must be made
individually for each site feature that
must be included in the calculation as
required by paragraph (b)(1) of this
section, and must include, at a
minimum:
(i) Evidence that the owner or
operator is subject to the requirements
described in paragraph (d) of this
section,
(ii) Evidence that the owner’s or
operator’s obligation to implement such
requirements are imposed in an
enforceable document as defined in
§ 320.61,
(iii) Evidence that the owner or
operator has demonstrated, and is
required to demonstrate, adequate
financial responsibility to assure
implementation of the required
activities, and
(iv) Certification by the owner or
operator that the facility is in
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
(2) Multiply the response cost amount
calculated under paragraph (b)(1) of this
section by the following:
(i) Overhead and oversight percentage
([1 + OverheadOversightr]) The
applicable OverheadOversightr value is
the value in Appendix II for the Region
in which the largest disturbed acreage of
the facility is located.
(ii) State adjustment factor (
StateAdjustmentFactors).The applicable
state adjustment factor is the factor in
Appendix III for the state in which the
largest disturbed acreage at the facility
is located.
PO 00000
Frm 00119
Fmt 4701
Sfmt 4702
E:\FR\FM\11JAP2.SGM
11JAP2
EP11JA17.002</GPH>
Where:
Flow = flow in gallons/minute through insitu leach features + flow in gallons/
minute through underground mine
features + 0.05 × Precipitation × [Total
Disturbed Acres] × 0.05166.
In-situ leach = 1 if present; 0 if not present.
(b)(1) Response component—
EP11JA17.001</GPH>
sradovich on DSK3GMQ082PROD with PROPOSALS2
Where:
Deflatory = the most recent available GDP
Implicit Price Deflator for year y; and
Deflator2014 = the GDP Implicit Price Deflator
for 2014
sradovich on DSK3GMQ082PROD with PROPOSALS2
3506
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
compliance with the requirements
described in paragraph (d) of this
section.
(2) Information provided to make the
demonstration in paragraph (c)(1) of this
section must provide sufficient and
detailed supporting information
adequate to allow EPA to evaluate the
adequacy of the financial responsibility
and the underlying requirements.
(3) In the event that an owner or
operator that reduces the maximum
financial responsibility at its facility
based on a reduction under paragraph
(d) of this section becomes ineligible for
that reduction because the facility no
longer meets the requirements in
paragraph (c)(1)(i) through (iii) of this
section, it must recalculate the financial
responsibility level at its facility and
submit evidence of financial
responsibility for the increased amount
within thirty days of the date it no
longer is eligible. The requirement to
recalculate a financial responsibility
level and submit evidence of financial
responsibility under this paragraph does
not affect the owner’s or operator’s
obligations for instrument maintenance
under § 320.22.
(d) Reductions to the response
component amount.
(1) To satisfy the open pit category
component in paragraph (b)(1)(i) of this
section:
(i) A plan to address safety by
prevention of public access by means of
security fencing, or other effective
methods.
(ii) Where ponding will occur, a plan
that requires:
(A) regrading the bottom surface
during closure to a stable configuration
that prevents ponding and promotes the
conveyance of surface water off the unit
(B) closure of all open pits where
public access is not restricted
(C) structures that are considered to
be critical structures to be designed for
a long-term static factor of safety of 1.5
or greater
(D) structures that are considered to
be non-critical structures to be designed
for a long-term static factor of safety of
1.3 or greater
(E) units being closed be designed for
a factor of safety of 1.1 or greater under
pseudostatic analysis, and
(F) a stability analysis to be conducted
for the unit and include evaluation for
static and seismic induced liquefaction.
(iii) A plan for the management of all
stormwater and sediment generated
during reclamation and following
closure that includes permanent
stormwater conveyances, ditches,
channels, and diversions, as necessary,
designed to convey the peak flow and
ponds and other collection devices, and
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
that provides for controls designed to
store the volume generated during a 24hour period by a 200-year return
interval storm event.
(iv) Where conditions at the open pit
may allow a pit lake to form, or where
meteoric water may percolate through
the pit rock into groundwater below,
and pit lake or any discharges may not
meet water quality standards, a plan for
the minimization, prevention, or
collection and treatment of water in the
pit lakes, discharges, and/or seepage,
that factors in information on site
hydrology, water quality
characterization information, and pit
lake ecological risk assessment
information. The plan must address and
provide for capture and treatment at
closure consisting of a capture and
treatment system that meets a minimum
200-yr life design criteria, and that is
designed to either prevent pit lake
formation or groundwater
contamination exceeding applicable
water quality standards to achieve at
least a 95 percent capture efficiency of
the affected groundwater, and to meet
applicable water quality standards.
(v) If prevention/avoidance is relied
on, a management plan that
demonstrates geochemically active
materials will effectively be avoided,
and that includes provisions for
sampling and monitoring
documentation.
(vi) Requirements for concurrent or
sequential reclamation of mined areas as
they become available prior to final
cessation of operations and closure.
(2) To satisfy the underground mine
category component in paragraph
(b)(1)(ii) of this section:
(i) A plan to address public safety by
prevention of public access by means of
security fencing, or other effective
methods.
(ii) A plan for the minimization,
prevention or collection and treatment
of discharges and or seepage based on
site hydrology and water quality
characterization information that
provides for necessary additional source
controls and/or capture and treatment at
closure, all of which meet a minimum
200-year life design criteria, and
includes:
(A) If seepage and/or discharge water
quality is not expected to meet
applicable water quality standards,
requirements for a capture and
treatment system designed to achieve at
least a 95 percent capture efficiency and
to meet applicable water quality
standards, and
(B) If there will be a pressurized plug
as a permanent feature controlling a
discharge from underground mine
workings at moderate to high heads
PO 00000
Frm 00120
Fmt 4701
Sfmt 4702
(100–1,000+ kPa), a requirement to
maintain the plug as a permanent
feature.
(iii) If prevention/avoidance is relied
on, a management plan that
demonstrates geochemically active
materials will effectively be avoided,
and that includes provisions for
sampling and monitoring
documentation.
(iv) Requirements for concurrent or
sequential reclamation of mined areas as
they become available prior to final
cessation of operations and closure.
(3) To satisfy the waste rock category
component in paragraph (b)(1)(iii) of
this section:
(i) A plan to address public safety by
prevention of public access by means of
security fencing, or other effective
methods.
(ii) If prevention/avoidance is relied
on, a management plan that
demonstrates geochemically active
materials will effectively be avoided,
and that includes provisions for
sampling and monitoring
documentation.
(iii) Requirements for concurrent or
sequential reclamation of mined areas as
they become available prior to final
cessation of operations and closure.
(iv) Requirements to regrade the
surface during closure to a stable
configuration that prevents ponding and
promotes the conveyance of surface
water off the unit, that requires closure
of all waste rock piles considered to be
critical structures to be designed for a
long-term static factor of safety of 1.5 or
greater, that requires all non-critical
structures to be designed for a long-term
static factor of safety of 1.3 or greater;
and that requires that the units being
closed be designed for a factor of safety
of 1.1 or greater under pseudostatic
analysis.
(v) Requirements to provide for a
stability analysis to be conducted for the
unit as part of the original design, and
as part of mine modifications during the
active life of the mine.
(vi) A plan for the management of all
stormwater and sediment generated
during operations and during and
following closure. For existing units, the
plan must provide for permanent
stormwater conveyances, ditches,
channels and diversions designed to
convey the peak flow and ponds and
other collection devices designed to
store the volume generated during a 24hour period by a 100-year return
interval storm event. For unit that
become authorized to operate after [Date
of the Final Rule], the plan must
provide for controls designed to store
the volume generated during a 24-hour
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
period by a 200-year return interval
storm event.
(vii) A plan for the minimization,
prevention, or collection and treatment
of discharges and/or seepage, based on
site hydrology and water quality
characterization information, that
provides for a cover system of, at a
minimum, a store and release earthen
cover system with a thickness of at least
twelve inches and, if necessary,
additional source controls or capture
and treatment at closure, all of which
meet a minimum 200-year life design
criteria. If seepage water quality is not
expected to meet applicable Federal and
state groundwater and surface water
quality standards at the point of
compliance, the plan must provide for:
(A) Implementation of a containment
system that immobilizes hazardous
substances to meet applicable water
quality standards (e.g., an engineered
cover system designed to achieve, at a
minimum, a 95 percent reduction in
annual net-percolation based on the
long-term average to reduce seepage
discharges to meet applicable water
quality standards;
(B) A capture and treatment system
designed to achieve at least a 95 percent
capture efficiency and meet applicable
water quality standards; or a
combination of an engineered cover
system and a capture and treatment
system to achieve at least a 95 percent
reduction in discharged load and meet
applicable water quality standards at the
point of compliance, or
(C) A solution containment system to
assure seepage flows are collected,
contained, conveyed, and treated to
achieve at least a 95 percent reduction
to meet applicable water quality
standards.
(4) To satisfy the heap and dump
leach category component in paragraph
(b)(1)(v) of this section:
(i) A plan to address public safety by
prevention of public access by means of
security fencing, or other effective
methods.
(ii) A plan to regrade surface during
closure to a stable configuration that
prevents ponding and promotes the
conveyance of surface water off the unit,
and that requires closure of all heap
leach and dump leach piles considered
to be critical structures to be designed
for a long-term static factor of safety of
1.5 or greater and all non-critical
structures to be designed for a long-term
static factor of safety of 1.3 or greater;
and requires that the units being closed
be designed for a factor of safety of 1.1
or greater under pseudostatic analysis.
The plan must also provide for a
stability analysis to be conducted for the
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
unit and include evaluation for static
and seismic induced liquefaction.
(iii) A plan for the management of all
stormwater and sediment generated
during operations and during and
following closure. For existing units, the
plan must provide for permanent
stormwater conveyances, ditches,
channels and diversions designed to
convey the peak flow and ponds and
other collection devices designed to
store the volume generated during a 24hour period by a 100-year return
interval storm event. For unit that
become authorized to operate after [Date
of the Final Rule], the plan must
provide for controls designed to store
the volume generated during a 24-hour
period by a 200-year return interval
storm event.
(iv) A plan for the minimization,
prevention, or collection and treatment
of discharges and/or seepage, based on
site hydrology and water quality
characterization information, that
provides for a cover system of, at a
minimum, a store and release earthen
cover system with a thickness of at least
twelve inches and, if necessary,
additional source controls or capture
and treatment at closure, all of which
meet a minimum 200-year life design
criteria. If seepage water quality is not
expected to meet applicable water
quality standards, the plan must provide
for:
(A) Implementation of an engineered
cover system designed to achieve at
least a 95 percent reduction in annual
net-percolation based on the long-term
average and reduce seepage discharges
to meet applicable water quality
standards;
(B) A capture and treatment system
designed to achieve at least a 95 percent
capture efficiency and meet applicable
water quality standards; or combination
of an engineered cover system and a
capture and treatment system to achieve
at least a 95 percent reduction in
discharged load and meet applicable
water quality standards; or
(C) A solution containment system to
assure seepage flows are collected,
contained, conveyed, and treated to
achieve at least a percent reduction to
meet applicable water quality standards.
(v) (For heap leach) A liner designed
to minimize/eliminate releases from the
unit based on site specific conditions.
(vi) Requirements for concurrent or
sequential reclamation of mined areas as
they become available prior to final
cessation of operations and closure.
(5) To satisfy the tailings category
component in paragraph (b)(1)(v) of this
section:
(i) A plan to address public safety by
prevention of public access by means of
PO 00000
Frm 00121
Fmt 4701
Sfmt 4702
3507
security fencing, or other effective
methods.
(ii) A plan to regrade surface during
closure to a stable configuration that
prevents ponding and promotes the
conveyance of surface water off the unit,
and that requires closure of all tailings
impoundments and stacks considered to
be critical structures to be designed for
a long-term static factor of safety of 1.5
or greater and all non-critical structures
to be designed for a long-term static
factor of safety of 1.3 or greater; and
requires that the units being closed be
designed for a factor of safety of 1.1 or
greater under pseudostatic analysis. The
plan must also provide for a stability
analysis to be conducted for the unit
and include evaluation for static and
seismic induced liquefaction.
(iii) A plan for the management of all
stormwater and sediment generated
during operations and during and
following closure. For existing units, the
plan must provide for permanent
stormwater conveyances, ditches,
channels and diversions designed to
convey the peak flow and ponds and
other collection devices designed to
store the volume generated during a 24hour period by a 100-year return
interval storm event. For unit that
become authorized to operate after [Date
of the Final Rule], the plan must
provide for controls designed to store
the volume generated during a 24-hour
period by a 200-year return interval
storm event.
(iv) A plan for the minimization,
prevention, or collection and treatment
of discharges and/or seepage, based on
site hydrology and water quality
characterization information, that
provides for a cover system of, at a
minimum, a store and release earthen
cover system with a thickness of at least
twelve inches and, if necessary,
additional source controls or capture
and treatment at closure, all of which
meet a minimum 200-year life design
criteria. If seepage water quality is not
expected to meet applicable water
quality standards, the plan must provide
for:
(A) Implementation of an engineered
cover system designed to achieve at
least a 95 percent reduction in annual
net-percolation based on the long-term
average and reduce seepage discharges
to meet applicable water quality
standards;
(B) A capture and treatment system
designed to achieve at least a 95 percent
capture efficiency and meet applicable
water quality standards; or combination
of an engineered cover system and a
capture and treatment system to achieve
at least a 95 percent reduction in
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
3508
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
discharged load and meet applicable
water quality standards, or
(C) A solution containment system to
assure seepage flows are collected,
contained, conveyed, and treated to
achieve at least a percent reduction to
meet applicable water quality standards.
(v) A liner designed to minimize/
eliminate releases from the unit based
on site specific conditions.
(vi) If prevention/avoidance is relied
on, a management plan that
demonstrates geochemically active
materials will effectively be avoided,
and that includes provisions for
sampling and monitoring
documentation.
(vii) If a wet tailings impoundment is
present:
(A) A requirement to develop and
implement a Tailings Operations,
Maintenance and Surveillance (TOMS)
manual, or similar plan, that defines
and describes roles and responsibilities
of personnel assigned to the facility;
procedures and processes for managing
change; the key components of the
facility; procedures required to operate,
monitor the performance of, and
maintain a facility to ensure that it
functions in accordance with its design,
meets regulatory and corporate policy
obligations, and links to emergency
planning and response; downstream
notification; and, requirements for
analysis and documentation of the
performance of the facility.
(B) Annual tailings inspection reports
by a qualified engineer, and an
inspection report by an independent
qualified engineer at least every five
years.
(viii) Requirements for concurrent or
sequential reclamation of mined areas as
they become available prior to final
cessation of operations and closure.
(6) To satisfy the process pond and
reservoir category component in
paragraph (b)(1)(vi) of this section:
(i) A plan to address public safety by
prevention of public access by means of
security fencing, or other effective
methods.
(ii) A plan for the design and
operation of such ponds and reservoirs
to ensure they have adequate freeboard
and are designed to prevent discharges
of hazardous substances.
(iii) A liner and collection system
designed to minimize/eliminate releases
from the unit based on site specific
conditions.
(iv) A requirement that sludge and the
sub-base below the liner be sampled and
addressed in a manner that is protective
of human health and the environment as
part of closure.
(v) Requirements for concurrent or
sequential reclamation of mined areas as
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
they become available prior to final
cessation of operations and closure.
(vi) A plan for the management of all
stormwater and sediment generated
during operations and during and
following closure. For existing units, the
plan must provide for permanent
stormwater conveyances, ditches,
channels and diversions designed to
convey the peak flow and ponds and
other collection devices designed to
store the volume generated during a 24hour period by a 100-year return
interval storm event. For unit that
become authorized to operate after [Date
of the Final Rule], the plan must
provide for controls designed to store
the volume generated during a 24-hour
period by a 200-year return interval
storm event.
(7) To satisfy the slag pile category
component in paragraph (b)(1)(iv) of
this section:
(i) A plan to address public safety by
prevention of public access by means of
security fencing, or other effective
methods.
(ii) If prevention/avoidance is relied
on, a management plan that
demonstrates geochemically active
materials will effectively be avoided,
and that includes provisions for
sampling and monitoring
documentation.
(iii) Requirements for concurrent or
sequential reclamation of mined areas as
they become available prior to final
cessation of operations and closure.
(iv) Requirements to regrade surface
during closure to a stable configuration
that prevents ponding and promotes the
conveyance of surface water off the unit,
and that requires closure of all waste
rock piles considered to be critical
structures to be designed for a long-term
static factor of safety of 1.5 or greater
and all non-critical structures to be
designed for a long-term static factor of
safety of 1.3 or greater; and requires that
the units being closed be designed for a
factor of safety of 1.1 or greater under
pseudostatic analysis.
(v) Requirements to provide for a
stability analysis to be conducted for the
unit as part of the original design, and
as part of mine modifications during the
active life of the mine.
(vi) A plan for the management of all
stormwater and sediment generated
during operations and during and
following closure. For existing units, the
plan must provide for permanent
stormwater conveyances, ditches,
channels and diversions designed to
convey the peak flow and ponds and
other collection devices designed to
store the volume generated during a 24hour period by a 100-year return
interval storm event. For unit that
PO 00000
Frm 00122
Fmt 4701
Sfmt 4702
become authorized to operate after [Date
of the Final Rule], the plan must
provide for controls designed to store
the volume generated during a 24-hour
period by a 200-year return interval
storm event.
(vii) A plan for the minimization,
prevention, or collection and treatment
of discharges and/or seepage, based on
site hydrology and water quality
characterization information, that
provides for a cover system of, at a
minimum, a store and release earthen
cover system with a thickness of at least
twelve inches and, if necessary,
additional source controls or capture
and treatment at closure, all of which
meet a minimum 200-year life design
criteria. If seepage water quality is not
expected to meet applicable Federal and
state groundwater and surface water
quality standards at the point of
compliance, the plan must provide for:
(A) Implementation of a containment
system that immobilizes hazardous
substances to meet applicable water
quality standards (e.g., an engineered
cover system designed to achieve, at a
minimum, a 95 percent reduction in
annual net-percolation based on the
long-term average to reduce seepage
discharges to meet applicable water
quality standards;
(B) A capture and treatment system
designed to achieve at least a 95 percent
capture efficiency and meet applicable
water quality standards; or combination
of an engineered cover system and a
capture and treatment system to achieve
at least a 95 percent reduction in
discharged load and meet applicable
water quality standards at the point of
compliance, or
(C) A solution containment system to
assure seepage flows are collected,
contained, conveyed, and treated to
achieve at least a 95 percent reduction
to meet applicable water quality
standards.
(8) To satisfy the solid and hazardous
waste disposal component in paragraph
(b)(1)(viii):
(i) Requirements for disposal of all
solid and hazardous wastes in a manner
that is protective of human health and
the environment and that is compliance
with all applicable Federal, state, and
local requirements.
(ii) Requirements for contaminated
soil disposal in a manner that is
protective of human health and the
environment and that is in compliance
with all applicable Federal, state, and
local requirements.
(iii) Requirements to decontaminate
buildings and structures to remove and
safely dispose of hazardous substances.
(9) To satisfy the drainage category
component in paragraph (b)(1)(ix) of
E:\FR\FM\11JAP2.SGM
11JAP2
sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
this section, a plan for the management
of all stormwater and sediment
generated during operations and during
and following closure. For existing
units, the plan must provide for
permanent stormwater conveyances,
ditches, channels and diversions
designed to convey the peak flow and
ponds and other collection devices
designed to store the volume generated
during a 24-hour period by a 100-year
return interval storm event. For unit that
become authorized to operate after [Date
of the Final Rule], the plan must
provide for controls designed to store
the volume generated during a 24-hour
period by a 200-year return interval
storm event.
(10) To satisfy the short-term O&M
category component in paragraph
(b)(1)(x) of this section:
(i) A plan for groundwater and surface
water monitoring to assure that
monitoring wells are located to detect
an exceedance(s) or trends towards
exceedance(s) of the applicable
standards, and are detected at the
earliest possible occurrence, so that
investigation of the extent of
contamination and actions to address
the source of contamination may be
implemented as soon as possible. The
plan must be currently in effect and
must cover a period of at least five
years.
(ii) A plan for inspection and
monitoring of erosion and revegetation
to ensure reclamation success.
(iii) A plan for routine maintenance
and repairs to roads, stormwater
conveyances and collection devices and
revegetation maintenance (e.g. weed
controls) and repairs (e.g. areas of
revegetation failure).
(11) To satisfy the interim O&M
category component in paragraph
(b)(1)(xi) of this section:
(i) A plan for the purpose of interim
emergency water management to
provide information on how process
water systems, interceptor wells,
seepage collection systems and storm
water management systems are operated
and maintained to prevent discharges in
the event the regulator assumes
management of the mine facility. The
plan must include process water flow
charts showing electrical system
requirements, pump operations, seepage
collection and interceptor well
operations and applicable operation and
maintenance requirements. The plan
must be updated as major process water
system changes occur that would affect
the interim emergency water
management plan.
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
(ii) A conceptual engineering
document that describes the processes
and methods that are expected to be
used to reduce the quantities of process
water in storage and circulation
inventory at the end of mine production
until all process solutions are
eliminated and steady-state discharge is
reached, in preparation for long-term
water management or treatment. The
document must include:
(A) A description and list of the
current or proposed process water
management units and inventories of
process water;
(B) A description of the modifications
to the process water management
system required to create an efficient
process water reduction system;
(C) The operation and maintenance
requirements for the system with
material take-offs of sufficient detail to
prepare an engineering-level cost
estimate; and
(D) An estimate of the required water
reduction period based on the water
reduction calculations provided in the
plan to be used for planning and
operation and maintenance cost
calculations.
(12) To satisfy the long-term O&M
category component in paragraph
(b)(1)(xii) of this section:
(i) A plan for groundwater and surface
water monitoring to assure that
additional monitoring wells are located
to detect an exceedance(s) or trends
towards exceedance(s) of the applicable
standards and that they are detected at
the earliest possible occurrence, so that
investigation of the extent of
contamination and actions to address
the source of contamination may be
implemented as soon as possible. The
plan must be currently in effect, and
must cover a period of at least 200 years.
(ii) A plan for inspection and
monitoring of mass stability, erosion
and revegetation certified by a
professional engineer to ensure
reclamation success.
(iii) A plan for routine maintenance
and repairs to roads, stormwater
conveyances and collection devices,
cover systems, and revegetation
maintenance (e.g. weed controls) and
repairs (e.g. areas of revegetation failure)
and monitoring wells.
(13) To satisfy the water treatment
category component in paragraph
(b)(1)(xiii) of this section:
(i) A plan for closure water
management and water treatment
consisting of a conceptual engineering
document that describes the processes
and methods that are expected to be
used for long-term management or
PO 00000
Frm 00123
Fmt 4701
Sfmt 4702
3509
treatment of seepage and includes an
analysis of the expected operational life
of each long-term water management or
water treatment system, including
collection/interceptor systems, until
each system is no longer needed to
protect water quality and applicable
standards are met. The plan must
describe whether active or passive
treatment is proposed and include all
operations and maintenance activities
required to support all collection and
treatment systems. The plan must
describe the long-term water
management and water treatment
systems with sufficient detail, including
locations of key components, expected
operational life, material take-offs, and
capital, operational and maintenance
costs to prepare an engineering-level
cost estimate. The plan must be
currently in effect and must cover a
period of at least 200 years.
(ii) A plan for disposal of wastes
produced from water treatment that is
protective of human health and the
environment and meets applicable
Federal, state, and local requirements.
§ 320.64 Information submission and
recordkeeping requirements
(a) Owners or operators must submit
to EPA information that supports the
cost calculation including the maximum
financial responsibility amount, final
financial responsibility amount,
information to support all inputs to the
formula, and information to support
reductions to the maximum financial
responsibility amount in accordance
with paragraph (c), including necessary
components of applicable enforceable
documents. Such information must
provide sufficient detail about facility
conditions to allow the Administrator to
review the formula calculation and
determine if the inputs to the formula
were accurate, and should include site
characterization information and
evaluations that support the enforceable
documents provided to support
reductions.
(b) Owners or operators must retain
the calculation of the financial
responsibility amount and the
information supporting it for a period of
three years following submission to
EPA.
§ 320.65
Third-Party Certification
The financial responsibility amount
submitted by owners or operators in
compliance with § 320.63 must be
certified by an independent qualified
professional engineer as defined in
§ 320.62.
BILLING CODE 6560–50–P
E:\FR\FM\11JAP2.SGM
11JAP2
3510
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
Appendix I
OMB#_ _ _ _ _ ; Expires _ _ _ __
SEND
COMPLETED
FORM to the
EPA Regional
Of11ce in which
the facility is
located.
1. Reason for
Submittal
United States Environmental Protection Agency
CERCLA § 108(b)
NOTIFICATION FORM
Reason for Submittal:
D
D
2. EPA ID
Number
To provide an Initial Notification that the owner or operator of the facility is subject to
CERCLA § 108(b) requirements (first time submitting facility identification information I to
obtain an EPA ID number for this location)
To provide a Subsequent Notification (to update facility information for this location)
lEE 8 ID .Nllmherl I I II I I II I I II I I I
3. Facility Name Name:
4. Facility
Location
Information
Street Address:
1.
City, Town, or Village:
1.
State:
County:
Country:
Zip Code:
5. Facility Land
Private
Type
County
District
Federal
Country
7. Facility
Contact
Person
First Name:
MI:
Other
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
PO 00000
Frm 00124
Fmt 4701
Zip Code:
Last:
Sfmt 4725
E:\FR\FM\11JAP2.SGM
11JAP2
EP11JA17.003</GPH>
State:
State
City, Town, or Village:
1.
Municipal
Street or P.O. Box:
1.
sradovich on DSK3GMQ082PROD with PROPOSALS2
6. Facility
Mailing
Address
Tribal
3511
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
8.
Title:
8.
Street or P.O. Box:
8.
City, Town or Village:
8.
State:
8.
Email:
8.
Phone:
8. Legal
Owner(s)
and
Operator(s)
of the
Facility
8.
Icountry:
Zip Code:
IExt.:
Fax:
Date Became
Owner:
A. Name of Facility's Legal Owner(s) (include all names under
which you do business):
Owner
Type:
Private
State
Other
Date Became
B. Name of Facility Operator(s) (include all names under which you
Operator:
do business):
Operator
Private
County District
Federal Tribal
Municipal State
Type:
Other
8.
State:
Federal
Tribal
Municipal
City, Town, or Village:
8.
District
Street or P 0. Box
8.
County
8.
8.
Phone:
Icountry:
Zip Code:
~.Type of activity requiring CERCLA § 108(b) financial responsibility at your facility:
VerDate Sep<11>2014
19:18 Jan 10, 2017
Jkt 241001
PO 00000
Frm 00125
Fmt 4701
Sfmt 4725
E:\FR\FM\11JAP2.SGM
11JAP2
EP11JA17.004</GPH>
sradovich on DSK3GMQ082PROD with PROPOSALS2
10. Certification. 1 certify under penalty oflaw that this document and all attachments were prepared under my
direction or supervision in accordance with a system designed to assure that qualified personnel properly gather and
evaluate the information submitted. Based on my inquiry of the person or persons who manage the system, or those
persons directly responsible for gathering the information, the information submitted is, to the best of my knowledge
and belief, true, accurate, and complete. I am aware that there are significant penalties for submitting false
information, including the possibility of fines and imprisonment for knowing violations.
3512
Federal Register / Vol. 82, No. 7 / Wednesday, January 11, 2017 / Proposed Rules
STATE ADJUSTMENT FACTORS—
Continued
Appendix II
REGION-SPECIFIC OVERHEAD AND
OVERSIGHT PERCENTAGES
Region
1 ............................................
2 ............................................
3 ............................................
4 ............................................
5 ............................................
6 ............................................
7 ............................................
8 ............................................
9 ............................................
10 ..........................................
Total OC
percentage
48.64
47.60
51.42
49.57
50.13
48.66
47.63
48.19
48.73
48.14
Appendix III
STATE ADJUSTMENT FACTORS
sradovich on DSK3GMQ082PROD with PROPOSALS2
State
State
adjustment
factor
AK .........................................
AL .........................................
AR .........................................
AZ .........................................
CA .........................................
CO ........................................
CT .........................................
DE .........................................
FL ..........................................
GA .........................................
HI ..........................................
IA ..........................................
ID ..........................................
IL ...........................................
IN ..........................................
KS .........................................
KY .........................................
LA .........................................
MA ........................................
MD ........................................
ME ........................................
MI ..........................................
MN ........................................
MO ........................................
MS ........................................
MT .........................................
NC .........................................
ND .........................................
NE .........................................
NH .........................................
VerDate Sep<11>2014
19:18 Jan 10, 2017
1.19
0.91
0.87
0.96
1.17
0.97
1.18
1.10
0.92
0.89
1.19
0.98
0.97
1.15
1.00
0.94
0.99
0.89
1.20
0.99
1.03
1.04
1.12
1.04
0.89
0.97
0.87
0.92
0.97
1.06
Jkt 241001
State
adjustment
factor
State
NJ .........................................
NM ........................................
NV .........................................
NY .........................................
OH ........................................
OK .........................................
OR ........................................
PA .........................................
RI ..........................................
SC .........................................
SD .........................................
TN .........................................
TX .........................................
UT .........................................
VA .........................................
VT .........................................
WA ........................................
WI .........................................
WV ........................................
WY ........................................
1.20
0.92
1.08
1.17
1.02
0.88
1.06
1.09
1.16
0.87
0.87
0.91
0.89
0.95
0.94
1.01
1.05
1.06
1.04
0.92
[FR Doc. 2016–30047 Filed 1–10–17; 8:45 am]
BILLING CODE 6560–50–P
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 320
[EPA–HQ–OLEM–2016–0212; FRL–9956–
56–OLEM]
RIN 2050–AG56
Financial Responsibility Requirements
for Facilities in the Chemical,
Petroleum and Electric Power
Industries
Environmental Protection
Agency (EPA).
ACTION: Notice of intent to proceed with
rulemakings.
AGENCY:
Section 108(b) of the
Comprehensive Environmental
Response, Compensation, and Liability
Act (CERCLA) establishes certain
regulatory authorities concerning
financial responsibility requirements.
SUMMARY:
PO 00000
Frm 00126
Fmt 4701
Sfmt 4702
Specifically, the statutory language
addresses the promulgation of
regulations that require classes of
facilities to 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. On
January 6, 2010, the Environmental
Protection Agency (EPA) published an
Advance Notice of Proposed
Rulemaking (ANPRM) that identified
additional classes of facilities within
three industry sectors that may warrant
the development of financial
responsibility requirements under
CERCLA section 108(b)—the Chemical
Manufacturing industry (NAICS 325),
the Petroleum and Coal Products
Manufacturing industry (NAICS 324),
and the Electric Power Generation,
Transmission, and Distribution industry
(NAICS 2211). This document formally
announces EPA’s intention to publish a
notice for proposed rulemaking for
classes of facilities within the three
industries identified in the 2010
ANPRM, as well as gives an overview of
some of the comments received on the
ANPRM and initial responses to those
comments. The announcement in this
action is not a determination that
requirements are necessary for any or all
of the classes of facilities within the
three industries, or that EPA will
propose such requirements—rather, it is
an announcement that EPA intends to
move forward with the regulatory
process. After that process, EPA will
determine whether proposal of
requirements for any or all of the classes
of facilities within the three industries
is necessary.
DATES:
January 11, 2017.
For
more information on this action, contact
Peggy Vyas, U.S. Environmental
Protection Agency, Office of Resource
Conservation and Recovery, Mail Code
5303P, 1200 Pennsylvania Ave. NW.,
Washington, DC 20460; telephone (703)
FOR FURTHER INFORMATION CONTACT:
E:\FR\FM\11JAP2.SGM
11JAP2
EP11JA17.005</GPH>
BILLING CODE 6560–50–C
]]>Agencies
[Federal Register Volume 82, Number 7 (Wednesday, January 11, 2017)]
[Proposed Rules]
[Pages 3388-3512]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30047]
[[Page 3387]]
Vol. 82
Wednesday,
No. 7
January 11, 2017
Part II
Environmental Protection Agency
-----------------------------------------------------------------------
40 CFR Part 320
Financial Responsibility Requirements; Proposed Rules
Federal Register / Vol. 82 , No. 7 / Wednesday, January 11, 2017 /
Proposed Rules
[[Page 3388]]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 320
[EPA-HQ-SFUND-2015-0781; FRL-9953-75-OLEM]
RIN 2050-AG61
Financial Responsibility Requirements Under CERCLA Sec. 108(b)
for Classes of Facilities in the Hardrock Mining Industry
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Environmental Protection Agency (EPA) is proposing
requirements under section 108(b) of the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA) for demonstrating
financial responsibility. This proposed rule would create a new Part in
the CERCLA regulations to require financial responsibility under CERCLA
Sec. 108(b), define requirements for demonstration of financial
responsibility, define requirements for maintenance of financial
responsibility instruments, and establish criteria for owners and
operators to be released from financial responsibility requirements. In
addition, this proposal would establish specific financial
responsibility requirements applicable to certain classes of mines and
associated mineral processing facilities within the hardrock mining
industry. EPA expects this proposed rule will, when made final,
increase the likelihood that owners and operators will provide funds
necessary to address the CERCLA liabilities at their facilities, thus
preventing owners or operators from shifting the burden of cleanup to
other parties, including the taxpayer. In addition, EPA expects that by
adjusting the amount of financial responsibility to account for
environmentally safer practices, it would provide an incentive for
implementation of sound practices at hardrock mining facilities and
thereby decrease the need for future CERCLA actions.
DATES: Comments must be received on or before March 13, 2017. Under the
Paperwork Reduction Act (PRA), comments on the information collection
provisions are best assured of consideration if the Office of
Management and Budget (OMB) receives a copy of your comments on or
before February 10, 2017.
ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
SFUND-2015-0781, at https://www.regulations.gov. Follow the online
instructions for submitting comments. Once submitted, comments cannot
be edited or removed from Regulations.gov. EPA may publish any comment
received to its public docket. Do not submit electronically any
information you consider to be Confidential Business Information (CBI)
or other information whose disclosure is restricted by statute.
Multimedia submissions (audio, video, etc.) must be accompanied by a
written comment. The written comment is considered the official comment
and should include discussion of all points you wish to make. EPA will
generally not consider comments or comment contents located outside of
the primary submission (i.e. on the Web, cloud, or other file sharing
system). For additional submission methods, the full EPA public comment
policy, information about CBI or multimedia submissions, and general
guidance on making effective comments, please visit https://www2.epa.gov/dockets/commenting-epa-dockets.
FOR FURTHER INFORMATION CONTACT: For more information contact Barbara
Foster, Program Implementation and Information Division, Office of
Resource Conservation and Recovery, Mail Code 5303P, Environmental
Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460;
telephone (703) 308-7057; (email) Foster.Barbara@epa.gov; or Michael
Pease, Program Implementation and Information Division, Office of
Resource Conservation and Recovery, Mail Code 5303P, Environmental
Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460;
telephone (703) 308-0008; or (email) Pease.Michael@epa.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive Summary
A. Purpose of the Regulatory Action
B. Summary of the Major Provisions of the Regulatory Action
C. Costs and Benefits of the Regulatory Action
II. Authority
III. Background Information
A. Overview of CERCLA Sec. 108(b) and Other CERCLA Provisions
B. Recent Litigation Under CERCLA Sec. 108(b)
C. Hardrock Mining 2009 Priority Notice
D. Additional Classes Advance Notice of Proposed Rulemaking
E. Market Capacity Study
F. Approach to Developing This Proposed Rule
IV. Major Issues in the Development of the Proposed Rule
A. Relationship to Existing Superfund Processes
B. Liabilities Covered
C. Universe Covered
D. Notification Requirement
E. Determining the Financial Responsibility Amount for Hardrock
Mining Facilities
F. Available Instruments
V. Relationship of CERCLA Sec. 108(b) to Other Federal Laws, and to
State and Tribal Laws.
VI. Section-by-Section Analysis
A. Subpart A--General Facility Requirements
1. Purpose and Scope (Sec. 320.1) and Applicability (Sec.
320.2)
2. Definitions and Usage (Sec. 320.3)
3. Availability of Information: Confidential Business
Information (Sec. 320.4)
4. Initial Notification Requirement (Sec. 320.5)
5. Information Submission Requirements (Sec. 320.6)
6. Requirement for Electronic Submission of Information (Sec.
320.7)
7. Recordkeeping Requirements (Sec. 320.8)
8. Requirements for Public Notice (Sec. 320.9)
B. Subpart B--General Financial Responsibility Requirements
1. Applicable Financial Responsibility Amounts and Procedures
for Establishing Financial Responsibility (Sec. 320.20 and Sec.
320.21)
2. Maintenance of Instruments (Sec. 320.22)
3. Incapacity of Owners or Operators, Guarantors, or Financial
Institutions; or Instrument Cancellation (Sec. 320.23)
4. Notification of Claims Brought Against Owners, Operators, or
Guarantors (Sec. 320.24)
5. General Provisions for Instrument Payment
6. Facility Transfer (Sec. 320.25)
7. Notification of Cessation of Operations (Sec. 320.26)
8. Release From Financial Responsibility Requirements (Sec.
320.27)
C. Subpart C--Available Financial Responsibility Instruments
1. Letter of Credit (Sec. 320.40)
2. Surety Bond (Sec. 320.41)
3. Insurance (Sec. 320.42)
4. Financial Test (Options) (Sec. 320.43)
5. Corporate Guarantee (Options) (Sec. 320.44)
6. Trust Fund (Sec. 320.45)
7. Issuer Cancellation Provisions (Sec. 320.23)
8. Use of Multiple Financial Responsibility Instruments (Sec.
320.46)
9. Use of a Financial Instrument for Multiple Facilities (Sec.
320.47)
10. Consolidated Form and Multiple Owners and/or Operators
(Sec. 320.48)
D. Subpart H--Hardrock Mining Facilities
1. Universe of Hardrock Mining Facilities Covered by the Rule
(Sec. 320.60)
2. Timeframes for Compliance (Sec. 320. 61)
3. Definitions (Sec. 320.62)
4. Determining the Financial Responsibility Amount (Sec.
320.63)
5. Information Submission and Recordkeeping Requirements (Sec.
320.64)
6. Third-Party Certification (Sec. 320.65)
7. Continued Risk at Hardrock Mining Facilities
VII. Statutory and Executive Orders Reviews
A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review
B. Paperwork Reduction Act (PRA)
[[Page 3389]]
C. Regulatory Flexibility Act (RFA)
D. Unfunded Mandates Reform Act (UMRA)
E. Executive Order 13132: Federalism
F. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
G. Executive Order 13045: Protection of Children From
Environmental Health Risks and Safety Risks
H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy
I. National Technology Transfer and Advancement Act (NTTAA)
J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
I. Executive Summary
A. Purpose of the Regulatory Action
Section 108(b) of the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA), also known as Superfund,
directs EPA to develop regulations that require classes of facilities
to 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. When releases of hazardous substances occur, or
when a threat of release of hazardous substances must be averted, a
Superfund response action may be necessary. Since the Superfund tax has
expired, EPA's Superfund appropriation is increasingly funded by the
general revenues. Therefore, the costs of such response actions can
fall to the taxpayer if parties responsible for the release or
potential release of hazardous substances are unable to assume the
costs. In addition, the likelihood of a CERCLA response action being
needed, as well as the costs of such a response action, are likely to
be higher where protective management practices were not utilized
during facility operations. This proposed rule is intended to address
both concerns. By assuring that owners and operators establish
financial responsibility consistent with the risks associated with the
production, transportation, treatment, storage, and disposal of
hazardous substances at their facilities, this proposed rule would
increase the likelihood that owners and operators will provide funds
necessary to address the CERCLA liabilities at their facilities, thus
preventing the burden from shifting to the taxpayer or to other
parties. In addition, this proposed rule would provide an incentive for
implementation of sound practices at hardrock mining facilities that
would decrease the need for future CERCLA actions.
B. Summary of the Major Provisions of the Regulatory Action
EPA identified hardrock mining as the classes for which it would
first develop financial responsibility requirements in a Federal
Register notice dated July 28, 2009 (2009 Priority Notice).\1\ In that
notice, EPA provided a general definition of ``hardrock mining'' \2\
and has refined that general definition for purposes of this proposal.
This proposed rule would apply to certain classes of facilities that
engage in the extraction, beneficiation, and processing of metals,
(e.g., copper, gold, iron, lead, magnesium, molybdenum, silver,
uranium, and zinc) and non-metallic, non-fuel minerals (e.g., asbestos,
phosphate rock, and sulfur).\3\
---------------------------------------------------------------------------
\1\ Identification of Priority Classes of Facilities for
Development of CERCLA Section 108(b) Financial Responsibility
Requirements, 74 FR 37213, July 27, 2009.
\2\ Id. at 37213.
\3\ The details on the facilities that would be subject to this
proposed rule are provided in Subpart H of this preamble.
---------------------------------------------------------------------------
The proposed rule would require owners and operators subject to the
rule to demonstrate and to maintain financial responsibility consistent
with the degree and duration of risk associated with the treatment,
production, transportation, storage and disposal of hazardous
substances at their facilities. The Agency is proposing that current
owners and operators of facilities subject to the rule be required to
demonstrate financial responsibility to cover the three types of costs
associated with releases and potential releases of hazardous substances
from their facilities, including response costs, health assessment
costs, and natural resource damages. These are the same types of costs
that CERCLA makes specified parties, including current owners or
operators, liable for under CERCLA Sec. 107. Thus, by requiring
current owners or operators of facilities that manage hazardous
substances to set aside funds for cleanup (or otherwise demonstrate
their ability to pay for it), EPA expects this proposed rule would
increase the likelihood that owners or operators subject to the rule
will be able to pay the costs associated with releases or potential
releases of hazardous substances from their facilities for which they
are responsible, in the event a CERCLA cleanup becomes necessary.
The proposal would establish a process for owners and operators
subject to the proposed rule to identify a financial responsibility
amount for their sites, to demonstrate evidence of financial
responsibility, and to maintain the required amount of financial
responsibility until the requirement for financial responsibility for
the site is released by EPA. The proposed rule would promote efficiency
and accuracy of information collected by requiring electronic
submission of information. Further, the proposal would encourage public
participation in the effective implementation of the rule by requiring
owners or operators to post information related to their compliance
with the financial responsibility requirements of this rule on their
company Web sites.
The proposal includes a formula by which EPA expects facilities to
calculate an amount of financial responsibility. The formula is also
structured to allow facilities, upon certain showings, to reduce that
calculated amount to account for the current conditions of their sites.
EPA expects that many, if not most, facilities, will be able to adjust
the amount required based on the calculation. By requiring an amount of
financial responsibility consistent with the degree and duration of
risk at the site, while allowing for adjustments as a result of
environmentally-protective practices, the proposed rule should create
economic incentives for owners and operators to employ environmentally
sound practices. In turn, EPA expects that the proposed rule would
ultimately have the effect of decreasing Superfund liabilities because
it would create incentives for owners and operators to minimize the
risk associated with their facilities thereby lowering their financial
responsibility amounts. This is also consistent with CERCLA's
overarching goal of encouraging potentially responsible parties to
increase the level of care with which they manage the hazardous
substances at their sites. Similarly, the proposed rule would provide
for the release of the owner and operator's financial responsibility
requirements when EPA makes a determination that the risks from the
facility are minimal. This provision would encourage protective and
responsible closure and cleanup of their facilities.
The proposed rule also would establish conditions for payment of
funds from the financial responsibility instruments. Under the proposed
rule, financial responsibility instruments could be used to pay a party
that has sought reimbursement through the courts for costs; to pay as
specified in a settlement with the Federal Government, or to pay into a
trust fund established by the owner or operator pursuant to a Federal
Government administrative order under CERCLA Sec. 106(a). EPA has thus
sought to ensure
[[Page 3390]]
that its proposed CERCLA Sec. 108(b) instruments would complement the
current Superfund framework for obtaining cleanup and reimbursement
from those parties responsible for contamination.
C. Costs and Benefits of the Regulatory Action
1. Introduction
EPA assessed the industrial and social costs as well as benefits of
the regulatory options of the proposed rule. The details of the
analysis are presented in the Regulatory Impact Analysis (RIA), which
can be accessed in the docket supporting this rulemaking (Docket No.
EPA-HQ-SFUND-2015-0781). This preamble provides an overview of the
methodology that EPA applied in the RIA and the key results including
the identification and characterization of the potentially regulated
universe; the projected economic impacts from industry and society
standpoints; and potential social welfare benefits of the proposed
rule. Detailed discussions of the uncertainties and limitations of the
analysis are provided in the RIA.
2. Characterization of Baseline Affected Entities
Hardrock mining is the extraction and beneficiation of rock and
other materials from the earth that contain a target metallic or non-
fuel non-metallic mineral. Mineral processing separates and refines
mineral concentrates to extract the target material.\4\ In order to
establish the universe of facilities likely to be subject to this
proposed rule, EPA primarily relied on July 2015 data from the U.S.
Mine Safety and Health Administration (MSHA) Mine Data Retrieval System
(MDRS) accessed on July 2015,\5\ U.S. Energy Information Administration
(EIA) (2015),\6\ and the 2015 U.S. Geological Survey (USGS) Mineral
Commodity Summaries (MCSs).\7\
---------------------------------------------------------------------------
\4\ Identification of Priority Classes of Facilities for
Development of CERCLA Section 108(b) Financial Responsibility
Requirements. 74 FR 37213, July 28, 2009.
\5\ MDRS data are available at: https://www.msha.gov/drs/drshome.htm and Mines Data Set, https://www.msha.gov/OpenGovernmentData/OGIMSHA.asp.
\6\ U.S. Energy Information Administration. 2015. 2014 Domestic
Uranium Production Report. Washington, DC. April. Available at:
https://www.eia.gov/uranium/production/annual/pdf/dupr.pdf.
\7\ MCS can be accessed at https://minerals.usgs.gov/minerals/pubs/mcs.
---------------------------------------------------------------------------
From a list of potentially regulated facilities, EPA excluded
35,103 coal mining operations. EPA also removed 44,845 mines associated
with 59 non-fuel hardrock commodities to conform with the scope of
those classes of facilities identified in the 2009 Priority Notice.\8\
Furthermore, EPA removed an additional 4,548 mines classified as
abandoned (non-currently operating) sites by MHSA. From the remaining
354 facilities, EPA identified and removed classes of facilities that
may present a lower level of risk of injury than other facilities
within the 2009 Priority Notice universe. These facilities are mines
engaged solely in exploration projects, placer mines that do not use
hazardous substances to extract ore, and mining operations of less than
five acres that are not located within a mile of other mining
activities. In addition, mineral processors with less than five acres
of disturbed surface impoundment and waste pile disturbed acres would
not be subject to the proposed rule. Overall, EPA removed 133
facilities in these classes, leaving 221 facilities in what is referred
to here as the ``included universe.''
---------------------------------------------------------------------------
\8\ U.S. EPA. 2009. Mining Classes Not Included in Identified
Hardrock Mining Classes of Facilities. Available online at: https://www.regulations.gov/contentStreamer?documentId=EPA-HQ-SFUND-2009-0265-0033&disposition=attachment&contentType=pdf.
---------------------------------------------------------------------------
EPA believes that 221 facilities (208 active and thirteen
intermittent or temporarily idled) will currently be subject to this
rule. The Agency acknowledges that the population of mines and mineral
processors that are operating at any given point in time can fluctuate
significantly due to fluctuating commodity prices, other business-
related factors, mining and processing technical operations issues, and
weather conditions. As such, EPA may not have accurately identified all
facilities that would be subjected to the rule. Thus, the Agency
requests comments on the included universe.
The most common activities at these facilities are surface mining
(88), underground mining (56), and processing (68).\9\ Geographically,
the potentially regulated universe spans over 38 states, mostly
concentrated in the western states. The states with the most
potentially regulated facilities are Nevada (45), Arizona (21), and
Minnesota (14). The potentially regulated universe currently mines 33
commodities, although the scope of the rule is not limited to the 33
commodities currently mined at the potentially regulated facilities.
The most common commodities mined in the potentially regulated universe
are Gold (70), Copper (25), and Iron Ore (17). A wide range of NAICS
codes (approximately 45 types) are represented by the owners of the
facilities in the potentially regulated universe, the most common of
which are 212221: Gold Ore Mining (18), 213114: Supporting Activities
for Metal Mining (10), and 212234: Copper Ore and Nickel Ore Mining
(8). However, there were twelve owners for which no NAICS code could be
identified.
---------------------------------------------------------------------------
\9\ Many of the 184 facilities conduct multiple activities,
causing the total number of facilities to be less than the summation
of all activities practiced.
---------------------------------------------------------------------------
3. Cost of the Proposed Rule
This rule includes two proposed Options for use of a financial
test--the no financial test option (Option 1), and the financial test
option (Option 2). Option 1 requires all owners and operators to
acquire third-party financial instruments to demonstrate financial
responsibilities. Alternatively, under Option 2 the owner or operator
could qualify to self-insure (or use the corporate guarantee) by
passing the proposed financial test. Owners or operators unable to
qualify for the Option 2 financial test must acquire a third-party
instrument or a trust fund to comply with the rule. EPA's RIA assessed
the costs associated with obtaining third-party instruments under the
two options, as well as costs associated with the reporting and
recordkeeping requirements of the rule. These costs represent the
primary economic impacts of the proposed rule to the regulated
industry.
To assess the cost, EPA developed and implemented a multi-
dimensional analysis that involves: (1) An estimation of the owner or
operator's financial responsibility obligations under baseline
scenario; (2) estimation of the price of third-party instruments; and
(3) assessment of the industrial (i.e., cost imposed on the regulated
industry), and social costs (i.e., costs from the standpoint of
society) associated with obtaining financial assurance. In addition,
EPA's analysis also examined the extent to which the rule shifts the
burden of financing potential Superfund cleanups and related
expenditures away from the taxpayer and toward the regulated owners or
operators. This section provides an overview of the methodology EPA
used to assess the industrial and social costs, and intra-industry
transfers (i.e., payment between two industries). This section also
discusses the transfer of cost from the government (taxpayer) to the
regulated industry.
a. Industry Compliance Costs
As described earlier in this preamble, EPA identified 221
facilities owned by 121 ultimate parent companies that would be subject
to the rule. To estimate
[[Page 3391]]
the impact of acquiring financial assurance, EPA collected facility-
specific data (e.g., mine site features, acreage, and meteorological
data) and company-level financial information. However, this effort
rendered facility-specific data for only 49 facilities, and financial
information for 21 publically traded firms. Thus, EPA's assessment of
compliance costs relied on this subset of mining/mineral processing
facilities and related owner companies for which detailed technical
data was obtained (herein referred to as the ``modeled universe''). EPA
extrapolated the results of the analysis of this subset of facilities
to the full universe of facilities covered by the rule. EPA requests
comments on using the modeled universe to estimate the overall
industrial compliance costs.
The compliance costs of acquiring third-party financial instruments
depends on the financial responsibility amounts the instrument covers.
Thus, EPA first estimated the baseline financial responsibility amounts
for facilities in the modeled universe. EPA used a financial
responsibility formula that the Agency developed for facilities to
calculate their financial responsibility amount on a national basis. As
described in Section VI.D.4. of this preamble, the proposed formula
consists of three key components that capture the potential costs
associated with release of hazardous substances at hardrock mining
facilities. These include the response component; health assessment
component; and natural resources damages.
For the response component, EPA estimated the financial
responsibility amounts for each facility for twelve categories of
response activities that EPA has undertaken at hardrock mining sites.
These include categories for types of engineering costs (e.g., capital
cost to construct source control for an open pit); operation and
maintenance (O&M) costs (e.g., interim, short-term, and long-term O&M);
and long-term water treatment costs. EPA aggregated the twelve response
categories and adjusted the amount to account for other costs related
to response activities that may be experienced by the Agency including
mobilization/demobilization; engineering design and redesign;
contingency; contractor profit and overhead; contractor liability
insurance; payment and performance bonds; and Agency direct and
indirect costs. EPA also applied locality adjustment factors to account
for regional variation in labor and material costs. EPA then combined
the aggregated financial responsibility estimates for the response
component with the health assessment and natural resource damages
components to arrive at the maximum financial responsibility amount for
each facility. EPA applied a proposed multiplier to obtain the
financial responsibility amount for natural resource damages and a
fixed financial responsibility amount for health assessment.\10\
---------------------------------------------------------------------------
\10\ 13.4 percent of the response costs estimated for each site.
For health assessment costs, EPA estimated a fixed financial
responsibility amount of $550,000 per facility based upon health
assessment cost information obtained from the Agency for Toxic
Substances and Disease Registry (ATSDR).
---------------------------------------------------------------------------
The proposed rule is also structured to provide reductions in the
financial responsibility amount required at a facility for risk-
reducing practices, including controls established in compliance with
Federal and state reclamation and closure programs. For the purpose of
the RIA, EPA adjusted the maximum financial responsibility amount for
owners and operators, where EPA identified risk-reducing practices in
enforceable documents backed by financial bonding. In applying the
reductions, EPA assumed that identified risk-reducing practices would
fully meet EPA's proposed criteria. As such, for qualified facilities,
EPA applied full reductions in the financial responsibility amount for
the relevant response categories. EPA acknowledges this assumption
simplifies the construct of the proposed rule's requirements for
reductions.
Table X-1 presents the adjusted baseline financial responsibility
estimates for future CERCLA liability of owners and operators in the
modeled universe. The table also provides the extrapolation of results
from the modeled universe to the full universe. As shown in the table,
Column C presents the median financial responsibility amount of the
modeled universe by facility types. EPA used these median values to
estimate the financial responsibility amounts of the full universe.
Column D presents the financial responsibility amount for the full
universe, which was calculated by multiplying the total number of mines
in the full universe (Column A) by the median financial responsibility
amount calculated for modeled universe.
Table X-1--Extrapolation FR From the Modeled Universe to the Potentially Regulated Universe
----------------------------------------------------------------------------------------------------------------
Potentially
regulated universe
Potentially Modeled universe total FR amount
Facility type regulated Modeled universe facility FR-- across facilities,
universe (n=49) Median ($2015 median-based
(n=221) millions) extrapolation
($2015 millions)
(A) (B)................... (C) (D) = A * C
----------------------------------------------------------------------------------------------------------------
Brine Extraction/Processing........ 6 (none; assume equal to $1 $8
ISR).
In-situ recovery................... 8 3..................... 1 10
Processor/Refiner.................. 33 1..................... 76 2,496
Surface Mine....................... 62 25.................... 48 2,961
Surface Mine/Processing............ 27 13.................... 28 766
Surface Mine/Processing/Primary 2 (none; assume equal to 28 57
Smelter. surface mine/
processing).
Surface/Underground mine........... 1 (none; assume equal to 48 48
surface mine).
Underground Mine................... 53 5..................... 5 284
Underground Mine/Processing........ 6 2..................... 29 172
Primary Smelter.................... 23 (none; approximated 11 263
separately).
----------------------------------------------------------------------------------------------------------------
All Facilities..................... 221 49.................... 37 7,064
----------------------------------------------------------------------------------------------------------------
Note: This exhibit presents extrapolation based on median values of financial responsibility amounts for the
modeled universe.
[[Page 3392]]
As shown in the table, the estimated financial responsibility
amount for the regulated industry is $7.1 billion. EPA assumed this
amount represents the baseline financial responsibility amount of the
regulated industry, for which owners and operators must demonstrate
financial assurance under the proposed rule by procuring third-party
financial instruments, or through self-insurance (or corporate
guarantee).
EPA estimated the compliance costs to industry assuring payment of
financial responsibility amounts by focusing on the 21 owners and
operators of 38 mining facilities \11\ in the modeled universe \12\ for
which detailed financial data is publically available. EPA conducted
the cost analysis in two primary steps: (1) EPA first subjected the
modeled universe to the two regulatory options (with or without
financial test) to identify entities that may be required to acquire
third-party instruments; and (2) for entities unable to self-insure,
EPA estimated the compliance cost of obtaining third-party financial
responsibility instruments.
---------------------------------------------------------------------------
\11\ The identified owner/operator companies of the 49
facilities in the modeled universe were matched to S&P's financial
database. This crosswalk identified the owner/operator companies of
40 facilities in S&P financial database. Two of these facilities
have entered bankruptcy and therefore did not have the necessary
recent financial data to be included in the analysis.
\12\ It is important to distinguish between the mine facilities,
to which the financial responsibility amount applies, and the owner/
operator company that is obligated to fund, or secure, this
financial responsibility amount. One owner/operator may have this
obligation for more than one mine.
---------------------------------------------------------------------------
To determine whether owners and operators pass the financial test,
EPA compared the relevant financial characteristics of each company to
the financial test described in Sec. 320.43 of the preamble.
Consistent with the proposed test, EPA's analysis allowed owners and
operators to self-insure their entire obligation if they hold at least
one long-term corporate credit rating equal to or higher than A- as
issued by S&P or another equivalent rating agency. Furthermore, EPA
also allowed self-insurance of up to one-half of an owner or operator's
obligation if it holds at least one long-term credit rating of BBB+ or
BBB. EPA assumed owners and operators that pass the test would elect to
self-insure either the full or one-half of their obligations. For these
facilities, EPA assumed compliance costs associated with acquiring
third-party instruments would be zero, and that the owner or operator
would only incur compliance costs associated with the reporting and
recordkeeping requirements of the proposed rule.
For owners or operators that did not pass the financial test, and
for the regulatory option where the financial test is precluded (Option
1), EPA estimated the costs of obtaining third-party financial
responsibility instruments. For each facility, EPA modeled separately
the costs of three representative financial instruments, which included
letter of credit, trust fund, and insurance.\13\ EPA assumed owners and
operators would choose the instrument option with the lowest cost.
Overall, the pricing of the instruments is case-specific, and informed
by several parameters. Specifically, the factor considered included the
baseline financial responsibility level determined by the formula, the
financial health of the owner or operator (credit rating and default
probability), the corresponding fee structure of the specific financial
instrument, and the project's risk profile (probability and timing of
costs associated with the facility's CERCLA liabilities). In estimating
the cost of the instruments, EPA also assumed that no market capacity
constraints exist for the issuance of third-party instruments
sufficient to cover the financial responsibility amounts estimated
earlier in this discussion.
---------------------------------------------------------------------------
\13\ EPA limited the analysis to three instruments because it
believed that these reasonably represent the ranges of costs for the
other instruments allowed by the rule.
---------------------------------------------------------------------------
The actual compliance cost incurred by industry in securing these
instruments comes from the transactional costs (e.g., the fees and
commissions paid to financial institutions) and the net cost of
acquiring capital to fund the purchase of financial instruments. EPA
did not attempt to predict whether the funds come from internal sources
or from debt or equity markets. Regardless of the sources of funding,
EPA assumed the net cost to the owner or operator of acquiring funds is
the weighted average cost of capital (WACC).\14\ EPA collected firm
specific WACCs from each company's Web site.
---------------------------------------------------------------------------
\14\ WACC is defined as the average cost of obtaining capital in
the debt and equity markets.
---------------------------------------------------------------------------
EPA assumed owners and operators would need to acquire funding to
purchase financial instruments every three years \15\ (as required by
the rule) until released from their obligations. Thus, EPA annualized
the compliance cost using a seven percent discount rate over the life
of the mine. To investigate the sensitivity of results, EPA also
applied a three percent discount rate. In addition, EPA assumed a
period of analysis from 2021 to end of mine life (capped at 2055). The
start date is based on a year before the end of the four-year
implementation schedule of the rule, which represents the year mines
will start to incur significant costs. The end date is mainly based on
the end of mining operations. However, where EPA could not identify the
end date for mining operations, EPA capped the analysis at 2055, which
represents the ninetieth percentile of mine lives in the modeled
universe. Furthermore, EPA also assumed that the owner and operator
would be released from their financial responsibility obligations when
the facility ceases its operation. However, under the proposed rule
owners and operators may not be released of their obligations until EPA
makes a determination.
---------------------------------------------------------------------------
\15\ The proposed rule would require facilities to update
financial responsibility amount calculations every three years, and
maintain financial assurance consistent with the revised financial
responsibility amount.
---------------------------------------------------------------------------
Table X-2 summarizes the average annualized compliance costs for
the two regulatory options, as a percentage of the financial
responsibility amounts of owners and operators in the modeled universe.
The annualized costs are categorized based on the credit worthiness of
the firms in the modeled universe. Entities with a stronger financial
profile (Category 1) were simulated to experience an annual cost as low
as 1.1 percent of the financial responsibility amount. Similarly,
poorly rated entities (Category 4) would experience annual costs as
high as four percent. Overall, on a weighted average basis, annualized
compliance costs as a percentage of the financial responsibility amount
equal approximately 2.3 to 2.4 percent.
Table X-2--Instrument Pricing Outcomes
----------------------------------------------------------------------------------------------------------------
Average annualized cost as
Company category percentage of financial Percent of companies in
responsibility amounts category
----------------------------------------------------------------------------------------------------------------
BBB........................................... 1.1 to 1.7....................... 26.3
BB............................................ 2.5.............................. 26.3
[[Page 3393]]
B............................................. 2.4.............................. 36.8
CCC........................................... 4.0.............................. 10.5
----------------------------------------------------------------------------------------------------------------
Note:
1. Pricing categories based on credit ratings and other financial metrics. Ranges of costs are presented for
Option 2 (low) and Option 1 (high).
2. This exhibit presents costs discounted using a 7 percent social discount rate. Supplementary results
discounted using a 3 percent social discount rate are presented in Appendix E of the RIA.
EPA applied these weighted average percentages to extrapolate
results to the entire universe. Table X-3 presents the calculation of
annualized compliance costs for the full universe under the two
regulatory options. As shown in the table, Column A lists the
aggregated financial responsibility amount covered by third-party
instruments by mine type under the proposed financial test regulatory
option, while Column B lists the financial responsibility amounts under
the no-test option. Columns C and D calculate the annualized
acquisition costs for each facility type by multiplying the aggregate
financial responsibility amounts under each regulatory option with the
respective weighted average annualized costs generated for the model
universe, as shown in Table X-3. The extrapolation calculation assumes
that the full universe of owners and operators would have similar
financial characteristics as the modeled universe. Similarly, for the
financial test option, EPA assumed that a similar proportion of owners
and operators would pass the financial test in both the full universe
and in the modeled universe. EPA acknowledges that there are
uncertainties with this supposition, and request comments from the
public.
Table X-3--Calculation of Annualized Compliance Cost
[$ million]
----------------------------------------------------------------------------------------------------------------
FR amount FR amount Annualized cost Annualized cost
covered by covered by of third-party of third-party
Facility type third party third party FR instruments-- FR instruments--
(Option 1) (Option 2) Option 1 ($ Option 2 ($
($2015 millions) ($2015 millions) millions) millions)
(A) (B) (C) = 2.4 * (A) (D) = 2.3 * (A)
----------------------------------------------------------------------------------------------------------------
Brine Extraction/Processing............. $8 $5 $0.2 $0.1
In-situ recovery........................ 10 7 0.2 0.2
Processor/Refiner....................... 2,496 1,747 60 39
Surface Mine............................ 2,961 2,073 72 47
Surface Mine/Processing................. 766 536 18 12
Surface Mine/Processing/Primary Smelter. 57 40 1 1
Surface/Underground Mine................ 48 33 1 1
Underground Mine........................ 284 199 7 4
Underground Mine/Processing............. 172 120 4 3
Primary Smelter......................... 263 184 6 4
-----------------------------------------------------------------------
All Facilities...................... 7,064 4,944 171 111
----------------------------------------------------------------------------------------------------------------
Note: This table presents costs discounted using a 7 percent social discount rate. Supplementary results
discounted using a 3 percent social discount rate are presented in Appendix E of the RIA.
As shown in the table, under the baseline scenario, the total
financial obligation amount for the potentially regulated universe is
approximately $7.1 billion. Under the financial test, the amount of
financial obligations covered through third-party instruments is $4.9
billion, whereas for the no-financial test option, the entire baseline
financial responsibility amounts would be covered by third-party
instruments. In addition, the annualized industry compliance costs to
secure the third-party instruments under the no-financial test option
is $171 million, whereas annualized costs are $111 million for the
financial test option. The difference between the two regulatory
options is approximately 35 percent. These values represent the range
of potential incremental costs of the proposed rule to industry.
In addition, EPA's compliance cost estimate also included the
administrative reporting and recordkeeping costs to industry associated
with the proposed rule for the potentially regulated universe. These
costs consist of labor, O&M, and capital costs and include the costs of
reading the regulations; submitting initial facility information to EPA
and to the public; calculating financial responsibility amounts;
choosing a financial responsibility instrument; acquiring and
maintaining a financial responsibility instrument, recalculating
financial responsibility amounts to reflect any changes in facility
operations; and any requirements that apply to the owners and operators
upon the transfer of a facility, owner or operator default, a CERCLA
claim against any of the owners and operators, or release of the owners
and operators from the regulations. The labor costs are estimated on an
annual basis, as of the first year of compliance. Table X-4 presents
the annualized administrative cost of the rule under the two options
using a seven percent social discount rate.
[[Page 3394]]
Table X-4--Annualized Administrative Costs
------------------------------------------------------------------------
Option 2
Option 1 (No test) (Financial
test)
------------------------------------------------------------------------
$225,302.................................................. $269,038
------------------------------------------------------------------------
Note: This exhibit presents costs discounted using a 7 percent social
discount rate. Supplementary results discounted using a 3 percent
social discount rate are presented in Appendix E.
b. Social Cost and Intra-Industry Transfers
The annualized compliance costs calculated and presented in Table
X-3 and X-4 represent industry costs, i.e., costs imposed on owners and
operators. However, much of the costs borne by the owners and operators
represent a transfer \16\ to financial firms that provide financial
responsibility instruments. In the context of this rule, the net
incremental costs of acquiring capital to secure financial instruments
(i.e., insurance) are treated as a transfer. Table X-5 presents the
intra-industry transfers of the rule. The RIA estimated the intra-
industry transfer amount by tabulating the net acquisition cost of
capital excluding transactional costs that are considered social costs.
---------------------------------------------------------------------------
\16\ Transfer payments are monetary payments from one group to
another that do not affect total resources available to society.
---------------------------------------------------------------------------
Some portion of the industry cost is also a social cost,\17\ that
is, a cost on society as a whole, rather than just the regulated
entities. These costs reflect the value of the real resources (e.g.,
labor and capital) needed to comply with the rule. These costs include:
(1) The fees and commissions paid to financial institutions to obtain
financial instruments; and (2) the administrative costs incurred in
complying with reporting and recording keeping requirements of the
proposed rule. Table X-5 presents the social cost of the rule. EPA
estimated the social costs associated with acquiring instruments by
taking the difference between the industrial costs less the intra-
industry transfers. The table summarizes the annualized social costs
and intra-industry transfers using seven percent discount rates.
---------------------------------------------------------------------------
\17\ The value of real resources--land, labor, energy and so
forth--needed to comply with the regulations.
Table X-5--Summary of Social Costs and Intra-Industry Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Option 1: No financial test Option 2: Proposed financial test
-----------------------------------------------------------------------------------------------
Annualized Transfer from Annualized Transfer from
Outcome cost of third- mining Annualized cost of third- mining Annualized
party FR industry to social cost ($ party FR industry to social cost ($
instruments ($ others ($ millions) instruments ($ others ($ millions)
millions) millions) millions) millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Amount....................................... 171 127 44 111 81 30
Administrative Cost to Industry......................... N/A N/A $0.2 N/A N/A $0.3
-----------------------------------------------------------------------------------------------
Total Social Costs and Transfers.................... N/A $127 $44 N/A $81 $30
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: This exhibit presents costs discounted using a 7 percent social discount rate. Supplementary results discounted using a 3 percent social discount
rate are presented in Appendix E.
Under proposed Option 1, of the $174 million cost to industry, the
annualized intra-industry transfer is estimated to be $127 million.
Thus, the social cost amounts to $44 million. Option 2 engenders
slightly lower social costs at $30 million. As shown in the table, the
administrative costs related to the reporting and recordkeeping
requirements of the rule are approximately $0.3 million under the two
regulatory options.
c. Government Costs and Risk Transfers
The primary effect of this proposed rule is to transfer the risk
associated with CERCLA liabilities from the taxpayer to the private
sector. Table X-6 presents the estimated magnitude of this shift of
potential CERCLA liabilities across the baseline and regulatory
scenario. For the purposes of estimating changes in government burden
due to the rule, EPA calculated the government burden assuming that
financial responsibility amounts are representative of costs associated
with future CERCLA cleanups. In the baseline, the Government is
burdened with the CERCLA cost if an owner or operator defaults, as no
third-party instruments will be in place. For the baseline, EPA
estimated, the government burden rate using the firm exit rate derived
from the Census Bureau's Business Dynamics Statistics (BDS).\18\ This
represents a (high-end) estimate that assumes exiting firms fail to
meet any of their CERCLA obligations. Under proposed Option 2,
government costs were calculated based on estimated probabilities of
default for firms in the modeled universe. Under this option, if a
company passes the financial test but later files for bankruptcy and
defaults on its financial responsibility obligations, EPA assumed that
taxpayers would assume these obligations. Under proposed Option 1,
there are no government costs, as no company may self-insure.
---------------------------------------------------------------------------
\18\ The BDS provides the number of firms operating and number
of firm exits each year in the mining sector. Firm exits identify
when all establishments of a firm cease operations for reasons other
than reorganization, merger, or acquisition. Because of the
``corporate veil'' enjoyed by legal subsidiaries, this analysis uses
a facility-based failure rate to model government costs in the
baseline due to owner/operator failure. Compared to other measures
of failure or default, the BDS firm exit rate also captures both
private and public companies.
Exhibit X-6--Summary of Potential Government Costs
----------------------------------------------------------------------------------------------------------------
Option 2:
Cost category Baseline Option 1: No Proposed
financial test financial test
----------------------------------------------------------------------------------------------------------------
Industry Liabilities ($2015 Millions)
----------------------------------------------------------------------------------------------------------------
CERCLA FR Amount Insured through Third-Party Instruments........ N/A $7,064 $4,944
[[Page 3395]]
CERCLA FR Amount Self-Insured................................... 7,064 0 2,120
----------------------------------------------------------------------------------------------------------------
Expected Government Costs ($2015 Millions)
----------------------------------------------------------------------------------------------------------------
Government Burden Rate.......................................... 7.5% N/A 0.7%
Government Cost................................................. 527 0 16
----------------------------------------------------------------------------------------------------------------
Decrease in Expected Government Costs ($2015 Millions)
----------------------------------------------------------------------------------------------------------------
Expected Transfers from Government to Industry.................. 527 511
----------------------------------------------------------------------------------------------------------------
As shown in Table X-6, under the baseline scenario, the potential
liability transfer from private parties to government is $527 million
over the period of analysis (i.e., 34 years). Under the financial test
option, the potential burden to taxpayer is reduced to $16 million. For
the no-financial test option, the potential CERCLA liabilities are
fully internalized by the regulated community.
4. Economic Impact Analysis
EPA assessed the economic impacts of the proposed rule in two
areas: (1) An assessment of the impact of compliance costs on the
modeled universe, based on the comparison of compliance costs with
relevant financial characteristics of the owner and operator; and (2)
an assessment of the potential for employment impacts at the national
level of the proposed rule. The following sections summarize the
methods and findings for these analyses.
a. Screening Analysis for Potentially Significant Economic Impacts
EPA assessed the economic impacts of the proposed regulatory
options relying on the modeled universe for which detailed financial
data are available. EPA assessed the impacts using two financial
characteristics of the owner and operator: (1) A screening-level
assessment which compares the annualized industrial costs to the firms'
revenue; and (2) an alternative assessment that utilizes the firms'
operating cash flow.
For the 21 firms in the modeled universe, the annual revenues range
from approximately $300 million to over $60 billion. Their annual cash
flow from operations (cash flow associated with their primary business
activity) ranges from $800,000 to over $3 billion. Relative to the
companies' revenues, the per-company annualized costs of financial
responsibility range from zero percent to 1.1 percent, with the
majority of companies (20 of 21) falling between zero and 1 percent.
Relative to operating cash flow, the range of annualized financial
responsibility cost percentages is wider: From zero to over 160 percent
(the latter is for the company whose operating cash flow is under $1
million). Approximately eighty percent of all companies experience
impacts that are under one percent of operating cash flow and
approximately 95 percent of companies experience impacts under ten
percent.
Due to limitation in financial data, EPA did not expand the
screening analysis to the full universe of regulated facilities. EPA
acknowledges that the results generated based on the modeled universe
may not be reflective of the impacts on the entire industry.
b. Employment Impact Analysis
EPA routinely assesses the employment impacts of economically
significant regulations. Executive Order 13563, ``Improving Regulation
and Regulatory Review,'' states, ``Our regulatory system must protect
public health, welfare, safety, and our environment while promoting
economic growth, innovation, competitiveness, and job creation.'' In
general, the national employment effects of environmental regulation
are complex and multi-faceted and very likely involve both negative and
positive effects. Neoclassical theory of production and factor demand
provides a constructive framework for understanding and conducting
employment impacts analysis of environmental regulations. It describes
how firms adjust their demand for inputs, such as labor, in response to
changes in economic conditions.\19\ Theory predicts that regulated
firms will respond to regulation by adjusting input demands and output.
The theory suggests the direction of the total impact of a regulation
on the demand for labor in the regulated sector is indeterminate.\20\
---------------------------------------------------------------------------
\19\ For an overview of textbook discussions of the neoclassical
theory of production and factor demand, see, for example, Layard and
Walters, Microeconomic Theory (1978), chapter 9 ``The Derived Demand
for Factors''.
\20\ For theoretic frameworks that conceptualize and incorporate
the impacts of regulation, see Berman and Bui, 2001 or Deschenes,
2012, 2014).
---------------------------------------------------------------------------
EPA did not have sufficient data to model and quantify the
potential changes in mines' employment levels as a result of the
proposed regulation. Analysis provided by the U.S. Geological Survey
(USGS) suggests that ``the primary metals industry and the nonmetallic
minerals products industry are fundamentally cyclical.'' The industries
are affected both by the domestic business cycle and the global
economic environment. Composite indices constructed by USGS suggest
that the industry experienced significantly decreased activity
surrounding the Great Recession. In 2014, the most recent year analyzed
by USGS, industry growth rates were positive.\21\
---------------------------------------------------------------------------
\21\ See: U.S. Geological Survey, Mineral Commodity Summaries,
2015, pp. 4, 7. The USGS generates composite indexes for primary
metals and separately for nonmetallic mineral products. Their
indices are intended to measure economic activity in these
industries using production, employment, and shipments data.
---------------------------------------------------------------------------
5. Benefits of the Rule
This section provides an overview of the methodology EPA used to
assess or identify benefits of the proposal. EPA expects the CERCLA
Sec. 108(b) financial responsibility provisions to yield social
welfare benefits because of reductions in overall mining facility
environmental obligations and an increase in the proportion of those
obligations borne by the private sector through financial
responsibility instruments.
Identified benefits of the proposed rule include a reduction in
costs the government must bear to fulfill cleanup obligations, improved
environmental practices at mining sites, avoided impacts to impaired
waters, and faster cleanups. The reduction in the cost to
[[Page 3396]]
government is the only benefit that can be measured with sufficient
accuracy to allow for a quantitative assessment. A qualitative benefit
assessment of the proposed rule was performed utilizing literature on
related topics, such as the effect of environmental liabilities
disclosure on financial markets. The benefits of the proposed rule are
as follows:
a. Reduced Costs to Government
The establishment of financial responsibility requirements for
potential CERCLA Sec. 108(b) liabilities will reduce the costs
incurred by the Government to finance remediation expenditures for
companies that are unable to meet cleanup obligations. Section 7 of the
RIA considered government costs associated with potentially responsible
parties' (PRP) defaults on CERCLA Sec. 108(b) liabilities at mining
facilities, including response costs, natural resource damages, and
health assessment costs. Without the rule, EPA estimated that the
Government would potentially incur a total cost of $527 million (over
the 34-year period of analysis) for the cost categories described
earlier. Under the proposed financial test option, the Government would
incur an estimated $16 million in costs, whereas for the no-test
option, the taxpayer's burden would be reduced to zero. Thus, the
analysis concluded that the public, through the Government, would
experience a cost savings from $511 million to $527 million over 34
years because of the proposed rule.
b. Improvement in Environmental Performance
Financial responsibility requirements may provide an incentive for
regulated entities to minimize future environmental obligations. When
regulated entities rely on a letter of credit, insurance policy, or
other third-party instrument to meet financial responsibility
requirements, the issuer will have an incentive to require sound
environmental management as a condition for providing access to these
instruments.
To the extent that the proposed rule leads to improvements in
facilities' environmental performance, the rule may reduce acid mine
drainage and other discharges into waterways caused by mining
activities. Waterways identified as impaired waters by section 303(d)
of the Clean Water Act (CWA) and waters identified as wild and scenic
rivers under the 1968 Wild and Scenic Rivers Act may benefit the most
from improved environmental performance. Adverse impacts to waterbodies
may be reduced or avoided in accordance with improvements in the
environmental performance of mines. To gauge the potential magnitude of
the benefits associated with avoided environmental impacts, EPA
identified the number of sites in the potentially regulated universe
that are located near CWA impaired waters or wild and scenic rivers. Of
the 221 facilities in the potentially regulated universe, EPA
identified the status of waterways adjacent to 172 facilities. Overall,
EPA believes that the magnitude of these benefits in the context of the
proposed rule is contingent upon changes in behavior among regulated
entities to reduce the environmental risk.
c. Speed of Site Cleanups
Under the financial responsibility requirements outlined in the
proposed rule, the cleanup of sites owned by companies in default could
begin more rapidly than under the baseline. Because funding for site
remediation would be secured prior to a firm's insolvency, the
initiation of cleanup would not be delayed by EPA budget constraints.
Expedited cleanups would benefit human health and ecosystems as
exposure to harmful contaminants may decline.
II. Authority
EPA is issuing these proposed regulations under the authority of
sections 101, 104, 108 and 115 of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C
Sec. Sec. 9601, 9604, 9608 and 9615, and Executive Order 12580. 52 FR
2923, 3 CFR, 1987 Comp., p. 193.
III. Background Information
A. Overview of CERCLA Sec. 108(b) and other CERCLA Provisions
CERCLA, as amended by the Superfund Amendments and Reauthorization
Act of 1986 (SARA), establishes a comprehensive environmental response
and cleanup program. Generally, CERCLA authorizes EPA \22\ to undertake
removal or remedial actions in response to any release or threatened
release into the environment of ``hazardous substances'' or, in some
circumstances, any other ``pollutant or contaminant.'' As defined in
CERCLA Sec. 101, removal actions include actions to ``prevent,
minimize, or mitigate damage to the public health or welfare or to the
environment,'' and remedial actions are ``actions consistent with [a]
permanent remedy[.]'' Remedial and removal actions are jointly referred
to as ``response actions.'' CERCLA Sec. 111 also established the
Superfund Trust Fund (the Fund) to finance response actions undertaken
by EPA. In addition, CERCLA Sec. 106 gives EPA \23\ authority to
compel action by liable parties in response to a release or threatened
release of a hazardous substance that may pose an ``imminent and
substantial endangerment'' to public health or welfare or the
environment.
---------------------------------------------------------------------------
\22\ Although Congress conferred the authority for administering
CERCLA on the President, most of that authority has since been
delegated to EPA. See Exec. Order No. 12580, 52 FR 2923 (Jan. 23,
1987).
\23\ 1 CERCLA Sec. Sec. 106 and 122 authority is also delegated
to other Federal agencies in certain circumstances. See Exec. Order
No. 13016, 61 FR 45871 (Aug. 28, 1996).
---------------------------------------------------------------------------
CERCLA Sec. 107 imposes liability for response costs on a variety
of parties, including certain past owners and operators, current owners
and operators, and certain transporters of hazardous substances. Such
parties are liable for any costs of removal or remedial action incurred
by the Federal Government, so long as the costs incurred are ``not
inconsistent with the national contingency plan,'' (NCP).\24\ CERCLA
Sec. 107 also imposes liability for natural resource damages and
health assessment costs.\25\ In accordance with CERCLA, in 1990 EPA
issued the current version of the NCP.\26\ These regulations provide
the organizational structure and procedures for preparing for, and
responding to, discharges of oil and releases of hazardous substances,
pollutants, and contaminants. The NCP is codified at 40 CFR part 300.
Among other provisions, the NCP provides procedures for hazardous
substance response including site evaluation, removal actions, remedial
investigation/feasibility studies (RI/FS), remedy selection, remedial
design/remedial action (RD/RA), and operation and maintenance.\27\ The
NCP also designates Federal, state, and tribal trustees for natural
resource damages, and identifies their responsibilities under the
NCP.\28\
---------------------------------------------------------------------------
\24\ See CERCLA Sec. 107 (a)(4)(A).
\25\ See CERCLA Sec. 107 (a)(4)(C)-(D).
\26\ See 55 FR 8666, March 8, 1990.
\27\ See 40 CFR 300, Subpart E.
\28\ See 40 CFR 300, Subpart G.
---------------------------------------------------------------------------
CERCLA Sec. 108(b) generally requires that EPA develop regulations
requiring owners and operators of facilities to establish evidence of
financial responsibility, and provides for publication of a ``Priority
Notice'' identifying the classes of facilities for which EPA would
first develop requirements. Paragraph (b)(1) also directs that priority
in the development of requirements shall be accorded to those classes
of facilities, owners, and operators that present the highest level of
risk of injury. This proposed rule for
[[Page 3397]]
hardrock mining facilities prioritizes among the classes of facilities
in that sector, and proposes financial responsibility requirements for
those hardrock mining facilities that EPA has identified as presenting
the highest level of risk of injury. More details on this analysis are
provided in section VI.D.1.A of this preamble.
Under CERCLA Sec. 108(b), classes of facilities must 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.'' \29\ CERCLA Sec. 108(b)(2) directs that the level of
financial responsibility shall be initially established, and, when
necessary, adjusted to protect against the level of risk that EPA in
its discretion believes is appropriate based on the payment experience
of the Fund, commercial insurers, courts settlements and judgments, and
voluntary claims satisfaction. EPA discusses its interpretation of
these provisions in section VI.D.4. of this preamble.
---------------------------------------------------------------------------
\29\ Executive Order 12580 delegates the responsibility to
develop these requirements to the Administrator of EPA for non-
transportation related facilities. 52 FR 2923, 3 CFR, 1987 Comp., p.
193.
---------------------------------------------------------------------------
CERCLA Sec. 108(b) also discusses particular instruments for EPA
to consider in its regulations. Specifically, paragraph (b)(2) states
that financial responsibility may be established by any one, or any
combination, of the following: insurance, guarantee, surety bond,
letter of credit, or qualification as a self-insurer. Paragraph (b)(2)
further authorizes the President to specify policy or other contractual
terms, conditions, or defenses that are necessary, or that are
unacceptable in establishing evidence of financial responsibility.
Paragraph (b)(2) also requires EPA to cooperate with and seek the
advice of the commercial insurance industry to the maximum extent
practicable when developing financial responsibility requirements.
Paragraph (b)(4) provides direction on how the CERCLA Sec. 108(b)
instruments are to address multiple owners and operators at a single
facility. Section VI.C. of this preamble discusses each of these
financial responsibility instruments in detail.
CERCLA Sec. 108(b)(3) requires that regulations promulgated under
CERCLA Sec. 108(b) incrementally impose financial responsibility
requirements as quickly as can reasonably be achieved, but in no event
more than four years after the date of promulgation. Section VI.A.1. of
this preamble discusses how EPA intends to phase in the CERCLA Sec.
108(b) requirements in accordance with this provision.
CERCLA Sec. 108(c) also includes a ``direct action'' provision,
under which CERCLA claims can be brought directly against an insurer or
other entity issuing an instrument pursuant to the CERCLA Sec. 108(b)
regulations. CERCLA Sec. 108(c)(2) provides that any claim authorized
by CERCLA Sec. 107 or Sec. 111 may be asserted directly against any
guarantor providing evidence of financial responsibility under CERCLA
Sec. 108(b) if the person liable under CERCLA Sec. 107 is: (1) In
bankruptcy, reorganization, or arrangement pursuant to the Federal
Bankruptcy Code, or (2) likely to be solvent at the time of judgment
but over whom jurisdiction in the Federal courts cannot be reached with
reasonable diligence. EPA discusses the direct action provision and
other ways that it envisions the instruments provided pursuant to the
CERCLA Sec. 108(b) program may pay out and otherwise support cleanup
efforts in section VI.B.5. of this preamble.
CERCLA Sec. 114(d) is an express preemption provision addressing
state, tribal, and local financial responsibility requirements. This
provision states:
Except as provided in this subchapter, no owner or operator of a
. . . facility who establishes and maintains evidence of financial
responsibility in accordance with this subchapter shall be required
under any State or local law, rule or regulation to establish or
maintain any other evidence of financial responsibility in
connection with liability for the release of a hazardous substance
from such . . . facility. Evidence of compliance with the financial
responsibility requirements of this subchapter shall be accepted by
a State in lieu of any other requirement of financial responsibility
imposed by such State in connection with liability for the release
of a hazardous substance from such . . . facility.\30\
---------------------------------------------------------------------------
\30\ 42 U.S.C. 9614(d).
Many states already have financial responsibility requirements
applicable to some of the hardrock mining facilities that would be
subject to this proposed rule. Thus, in developing this proposal, EPA
had to carefully consider the effects of its CERCLA Sec. 108(b) rules
on other programs to avoid any unanticipated consequences. The Agency's
conclusions regarding the relationship of CERCLA Sec. 108(b)
requirements to financial responsibility requirements under other laws
is discussed in Section V. of this preamble.
B. Recent Litigation under CERCLA Sec. 108(b)
On March 11, 2008, Sierra Club, Great Basin Resource Watch, Amigos
Bravos, and Idaho Conservation League filed a suit against former EPA
Administrator Stephen Johnson and former Secretary of the U.S.
Department of Transportation Mary E. Peters, in the U.S. District Court
for the Northern District of California. Sierra Club, et al. v.
Johnson, No. 08- 01409 (N. D. Cal.). On February 25, 2009, that court
ordered EPA to publish the 2009 Priority Notice required by CERCLA
Sec. 108(b)(1) later that year. The 2009 Priority Notice is described
in more detail in section III.C. The court later dismissed the
remaining claims.
EPA issued the Advance Notice of Proposed Rulemaking discussed in
section III.D. in early 2010, and continued to work on this proposed
rule for the next several years. Dissatisfied with the pace of EPA's
progress, however, in August 2014, the groups Idaho Conservation
League, Earthworks, Sierra Club, Amigos Bravos, Great Basin Resource
Watch, and Communities for a Better Environment filed a new lawsuit in
the U.S. Court of Appeals for the District of Columbia Circuit, for a
writ of mandamus requiring issuance of CERCLA Sec. 108(b) financial
assurance rules for the hardrock mining industry and for three other
industries--chemical manufacturing; petroleum and coal products
manufacturing; and electric power generation, transmission, and
distribution.\31\ Companies and organizations representing business
interests in the hardrock mining and other sectors also sought to
intervene in the case.
---------------------------------------------------------------------------
\31\ See In re: Idaho Conservation League, et al., No. 14-1149.
---------------------------------------------------------------------------
Following oral argument, the court issued an Order in May 2015
requiring the parties to submit, among other things, supplemental
submissions addressing a schedule for further administrative
proceedings under CERCLA Sec. 108(b). The Court's May 19, 2015 Order
further encouraged the parties to confer regarding a schedule and, if
possible, to submit a jointly agreed upon proposal. Petitioners and EPA
were able to reach agreement on a schedule. The parties requested an
Order from the court with a schedule calling for the Agency to sign for
publication in the Federal Register a proposed rule for the hardrock
mining industry by December 1, 2016, and a final rule by December 1,
2017.
On January 29, 2016, the court granted the joint motion and issued
an Order that mirrored the submitted
[[Page 3398]]
schedule in substance. The court Order can be found in the docket for
this proposed rule (Docket No. EPA-HQ-SFUND-2015-0781). The signing of
this proposed rule for publication by December 1, 2016 will satisfy one
component of the court order.
C. Hardrock Mining 2009 Priority Notice
As described earlier in this preamble, CERCLA Sec. 108(b)(1)
requires the President to identify those classes of facilities for
which requirements will be first developed and to publish notice of
such identification in the Federal Register. That paragraph also
directs that priority in the development of such requirements shall be
accorded to those classes of facilities, owners, and operators that
present the highest level of risk of injury. As discussed in section
III.C., EPA published a Federal Register notice entitled
``Identification of Priority Classes of Facilities for Development of
Section 108(b) Financial Responsibility Requirements.'' \32\ EPA chose
to evaluate indicators of risk and its related effects to inform its
decision on the classes of facilities for which it would first develop
requirements.\33\ EPA specifically pointed to eight factors that it
considered,\34\ and stated that its review of those factors and the
associated information in the docket led the Agency to conclude that
hardrock mining facilities present the type of risk that, in light of
its then-current evaluation, justified them being the first for which
EPA issued CERCLA Sec. 108(b) requirements.\35\ The 2009 Priority
Notice and supporting documentation have been included in the docket
for this proposal (Docket No. EPA-HQ-SFUND-2015-0781) .
---------------------------------------------------------------------------
\32\ See 74 FR 37213 (July 28, 2009)
\33\ See Id. at 37214
\34\ These eight factors were: (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 NPL
sites and non-NPL sites); (6) government expenditures; (7) projected
clean-up expenditures; and (8) corporate structure and bankruptcy
potential (see 74 FR 37214, July 28, 2009).
\35\ Id.
---------------------------------------------------------------------------
The 2009 Priority Notice also provided a working definition of
``hardrock mining,'' namely, ``facilities which extract, beneficiate,
or process metals . . . and non-metallic, non-fuel minerals.'' \36\ EPA
generally explained the processes that constitute extraction,
beneficiation, and processing, and how those processes relate to one
another and how they differ.\37\ EPA explained that because of their
interrelationships, EPA was identifying them as a group, yet the
distinctions between them made it appropriate to consider such
operations as encompassing multiple ``classes'' of facilities.\38\
---------------------------------------------------------------------------
\36\ Id.
\37\ Id. at 37214-15
\38\ Id. at 37214
---------------------------------------------------------------------------
It is important to recognize the necessary, but limited, role of
the 2009 Priority Notice. The 2009 Priority Notice directly satisfied
the notice requirement in CERCLA Sec. 108(b)(1), by identifying where
EPA would start in its development of requirements. The 2009 Priority
Notice did not, however, serve to comprehensively analyze the universe
of hardrock mining facilities that would necessarily be covered by a
proposed or final CERCLA Sec. 108(b) rule. As EPA stated in the
notice, ``[a]dditional research, outreach to stakeholders, proposed
regulations, review of public comments, and finalization of those
regulations are needed before hardrock mining facilities are subject to
any financial assurance requirements.'' \39\ Nor did that notice
purport to identify which ``classes of facilities, owners and operators
. . . present the highest level of risk of injury'' as required by
CERCLA Sec. 108(b) (1). The initial identification of hardrock mining
facilities provided in the 2009 Priority Notice included classes of
facilities of varying degrees of risk of injury, and EPA has identified
in this proposed rule what it believes are the classes of facilities
that present the highest risk from among the classes of facilities
identified in the Priority Notice.
---------------------------------------------------------------------------
\39\ Id. at 37214, n. 5.
---------------------------------------------------------------------------
D. Additional Classes Advance Notice of Proposed Rulemaking
The 2009 Priority Notice described in section III.C. stated EPA's
view that classes of facilities outside of the hardrock mining industry
may warrant the development of financial responsibility
requirements.\40\ The Agency committed to gather and analyze data on
additional classes of facilities and consider them for possible
regulation.
---------------------------------------------------------------------------
\40\ Id. at 37218.
---------------------------------------------------------------------------
On January 6, 2010, EPA published an Advanced Notice of Proposed
Rulemaking (2010 ANPR) \41\, in which the Agency identified three
additional industrial sectors for the development of a proposed
regulation--the Chemical Manufacturing industry (NAICS 325), the
Petroleum and Coal Products Manufacturing industry (NAICS 324), and the
Electric Power Generation, Transmission, and Distribution industry
(NAICS 2211). Th 2010 ANPR did not set requirements for any of these
three sectors. However, for transparency and completeness, this
preamble includes information on the development of the 2010 ANPR, the
litigation related to these sectors, and the companion notice on these
sectors.
---------------------------------------------------------------------------
\41\ See 75 FR 816.
---------------------------------------------------------------------------
In the 2010 ANPR, EPA requested public comment on whether to
propose a regulation under CERCLA Sec. 108(b) for any class or
classes, or the industry as a whole, including information
demonstrating why such financial responsibility requirements would not
be appropriate for those particular classes. In addition, the Agency
requested information related to the industry categories discussed in
the notice, including data on facility operations, information on past
and expected future environmental responses, use of financial
instruments by the industry categories, existing financial
responsibility requirements, and other information the Agency might
consider in setting financial responsibility amounts. Finally, EPA
requested information from the insurance and the financial sectors
related to instrument implementation and availability, and potential
instrument conditions.
As noted earlier, the In re: Idaho Conservation League case also
involved EPA's actions on these sectors as well. The same order
addressing the CERCLA Sec. 108(b) hardrock mining rule also required
the Agency to sign for publication in the Federal Register a decision
on whether to issue a notice of proposed rulemaking for these
additional sectors by December 1, 2016. EPA has developed that notice
as required by the court order. That notice appears elsewhere in this
Federal Register.
EPA received comments on the 2010 ANPR, which can be found in the
docket for that notice (Docket ID No. EPA-HQ-SFUND-2009-0834). EPA
considered those comments as part of its decision whether to proceed
with issuing proposed rules for the additional sectors, as described in
the companion noticed issued by the Agency. EPA intends the future
rulemaking processes for these sectors to be the venue through which
the public can engage with EPA on issues related to those sectors. In
this proposed rule for hardrock mining, EPA is not seeking, nor will it
respond to, comments on issues relating only to sectors outside of
hardrock mining, including its determinations on whether to proceed
with the rulemakings for those other sectors.
[[Page 3399]]
E. Market Capacity Study
In accordance with an instruction regarding the CERCLA Sec. 108(b)
proposed rule in the Conference Committee Report for the Consolidated
Appropriations Act (2016), EPA conducted a study of the market capacity
regarding the necessary instruments (surety bonds, letters of credit,
insurance and trusts) for meeting any new CERCLA Sec. 108(b) financial
responsibility requirements and post the study on the Agency's website
ninety days prior to this proposed rulemaking. The Agency also provided
an explanation of how the CERCLA Sec. 108(b) rule will avoid requiring
financial responsibility obligations that are duplicative of those
already required by other Federal agencies as of the time it was
released to the public. EPA also included the Market Capacity Study in
the docket for this proposal.
The Market Capacity Study assessed the likely availability of
financial responsibility instruments and the capacity of third-party
markets to underwrite financial responsibility requirements for
responsible parties subject to CERCLA Sec. 108(b). The study relies on
a substantial amount of quantitative and qualitative data in the public
domain from readily referenced industry sources, as well as information
gained in meetings held during 2015 and 2016 with instrument providers
regarding factors that may affect instrument availability.
The Agency's evaluation further focuses on characterizing that
portion of the commercial insurance and surety markets that
specifically underwrite environmental liability coverage as a way to
gauge future capacity. The results of the research suggest that
sufficient capacity likely will be available to cover the financial
responsibility obligations called for under CERCLA Sec. 108(b), but
caution that this capacity will be highly dependent upon the overall
amount of financial responsibility that the market will need to
accommodate. Overall capacity may also be influenced by: (1) The
diversity of instruments allowed, (2) whether the rule allows insurance
and surety markets to form risk retention groups (RRGs), and (3)
whether the proposed rule permits the use of a financial test. All such
features, if included in the rule, could help to relieve pressure on
third-party surety markets and ensure greater market capacity.
In consideration of these market issues, the rule as currently
proposed includes a number of specific features to help ensure that the
capacity of the market for financial responsibility instruments will be
sufficient to meet demand subsequent to promulgation. First,
preliminary results from draft regulatory impact analyses reveal
estimates of total demand for instruments to be below that of the
Agency's estimate of overall capacity. The proposal also offers further
flexibility by permitting owners and operators to use a variety of
alternative instruments to meet the requirements of the rule. Further,
RRGs are not prohibited under the proposed provision for insurance, and
the Agency is taking comment on their potential permissibility for the
final rule. Lastly, as discussed in detail in VI.C.9 of this preamble,
EPA has co-proposed options regarding the availability of a financial
test and corporate guarantee mechanism. Under Option 1 (EPA's preferred
option), use of a financial test and corporate guarantee would not be
allowed. However, under Option 2, use of a financial test and corporate
guarantee would be allowed, thus those instruments would be available
as well if Option 2 were to be adopted in the final rule.
Given the number of unknown factors, the ultimate availability of
CERCLA Sec. 108(b) financial responsibility instruments cannot be
predicted with certainty until the final rule has been promulgated. At
that time, the available instruments will be determined, and the market
will have an opportunity to respond.
F. Approach to Developing This Proposed Rule
This is the first EPA proposed rule under the authority of CERCLA
Sec. 108(b). As a result, this proposed rule would establish a
financial responsibility program under CERCLA Sec. 108(b), in addition
to imposing requirements specific to the hardrock mining industry. EPA
anticipates that core financial responsibility program requirements
established under this proposal, such as procedures for establishing
financial responsibility, public involvement, recordkeeping and
reporting, establishing and maintaining instruments, and the wording of
some of the instruments would apply to hardrock mining facilities
subject to this rule and to classes of facilities subject to further
rules promulgated under CERCLA Sec. 108(b) authority. EPA therefore
solicits comments on these provisions from all interested parties,
including representatives of industries other than the hardrock mining
industry.
Other requirements of this proposed rule would likely apply only to
the hardrock mining facilities for which they were designed. For
example, the financial responsibility formula proposed in this rule was
designed for use by hardrock mining facilities. A method for
determining financial responsibility amounts would be identified for
future industry sectors in future proposed rulemakings. EPA intends
that the provisions of this rule be severable. In the event that any
individual provision or part of this rule is invalidated, EPA intends
that this would not render the entire rule invalid, and that any
individual provisions that can continue to operate will be left in
place.
Development of these regulations has proven to be a complex and
unique task for EPA, and the Agency has explored a number of options
for key components of the proposed rule. Thus, while the Agency is
proposing an approach for implementing CERCLA Sec. 108(b), the Agency
also has attempted to present a broad range of options and is seeking
comment on a variety of issues throughout the preamble. Because this
proposed rule represents the initial steps in development of a CERCLA
Sec. 108(b) program, EPA is particularly interested in receiving
information from a broad range of parties with suggestions for
improving EPA's proposed new CERCLA Sec. 108(b) program.
IV. Major Issues in the Development of the Proposed Rule
This proposed rule is the first to be issued by EPA under the
authority of CERCLA Sec. 108(b).\42\ In developing this proposal, EPA
has given significant consideration to a number of issues. In this
preamble section, EPA discusses those issues and its proposed
approaches to them. EPA expended considerable effort over several years
before deciding how to structure this proposal, and the various options
included throughout reflect varying ways that EPA is considering
reconciling the policy purposes of the CERCLA Sec. 108(b) rule in
light of the information before the Agency and the general statutory
direction. EPA explains these considerations in the more detailed
discussions of the various provisions in later sections of this
preamble. In general, however, this proposed rule would establish
requirements for financial responsibility applicable to certain
facilities within the hardrock mining industry. Owners and operators of
facilities subject to this rule would be required to demonstrate
financial responsibility to cover costs
[[Page 3400]]
associated with liabilities identified in CERCLA Sec. 107, that is,
for response costs, health assessment costs, and natural resource
damage costs.
---------------------------------------------------------------------------
\42\ Regulations were promulgated by the Coast Guard under Sec.
108(a) (insert cite).
---------------------------------------------------------------------------
A. Relationship to Existing Superfund Processes
The proposed rule would not establish any regime regulating the
conduct of hardrock mining and mineral processing activities. Instead,
EPA intends for CERCLA Sec. 108(b) requirements to apply alongside
other programs that directly regulate the operation of hardrock mines.
Nor does the proposed rule modify the existing Superfund enforcement
authorities, including those to gather information, identify
responsible parties, effect cleanup (especially through EPA's
enforcement first policy), assess penalties, or provide for citizen
suits. Instead, the proposal is designed to complement and support
those existing processes. The impact of this proposal on existing
processes would be to increase the likelihood that parties have funds
to conduct cleanup; increase the likelihood of successful recovery of
costs under CERCLA, including claims brought under CERCLA Sec. Sec.
107 or 113(f) from the parties providing the financial responsibility
instruments, increase the likelihood that funds will be available for
owners and operators to settle their Superfund liabilities with the
Federal Government, and provide an instrument that may be used by an
owner or operator, to assure work required under a CERCLA Sec. 106
unilateral administrative order by EPA and other Federal agencies.
Set within the context of CERCLA's response program, CERCLA Sec.
108(b) establishes a broad authority for EPA to promulgate requirements
that classes of facilities establish and maintain evidence of financial
responsibility consistent with the risk associated with various
hazardous substance management activities. CERCLA as a whole is
generally designed to ensure that, ultimately, risks to human health
and the environment are addressed by those responsible for
contamination in the first instance (commonly called the ``polluter
pays'' principle). The CERCLA Sec. 108(b) requirements can complement
this goal in two particular ways. First, the rules should help assure
that businesses make financial arrangements to address risks from the
hazardous substances at their sites in the event that a CERCLA cleanup
ultimately becomes necessary. The rules can thus promote the polluter
pays principle underlying the CERCLA scheme. Second, CERCLA Sec.
108(b) rules should serve to create effective incentives for regulated
entities to manage the hazardous substances present at their facilities
more carefully and thereby minimize the threats of future releases.
These sorts of measures directly promote protection of human health and
the environment by preventing the environmental harm caused by
releases, and by creating a culture of responsible behavior among the
regulated community that will minimize the need for future Superfund
actions.
B. Liabilities Covered
CERCLA Sec. 108(b) does not provide specific direction on the
types of liabilities that the regulations for facilities are to cover.
Paragraph (a)(1) of Sec. 108 requires evidence of financial
responsibility for vessels explicitly ``to cover the liability
prescribed under paragraph (1) of section 107(a).'' By contrast, CERCLA
Sec. 108(b)(1) provides only that classes of facilities establish and
maintain evidence of financial responsibility ``consistent with the
degree and duration of risk'' associated with various aspects of
hazardous substance management. Thus CERCLA Sec. 108(b) does not
include the same direct cross-reference to the categories of
liabilities under CERCLA Sec. 107 that it does for vessels. Therefore,
in developing this proposal EPA considered whether it was appropriate
to require evidence of financial responsibility for all types of CERCLA
liabilities, only a subset of those liabilities (for example, only for
potential response costs), or even extend the instruments beyond the
categories included in CERCLA Sec. 107 (for example, for personal
injury costs). EPA is today proposing to make the instruments available
for all types of CERCLA liabilities enumerated in CERCLA Sec. 107. EPA
believes that this approach furthers both policy objectives described
earlier, by helping to ensure adequate funding for all types of
potential CERCLA liabilities at regulated facilities, and by
encouraging owners and operators to take into account the full breadth
of potential CERCLA liability when structuring their operations,
thereby minimizing those risks in the first instance. Thus, the
instruments provided under this proposed rule would be available to pay
costs incurred by a government or private party for response costs,
natural resource damage costs, and health assessment costs.\43\
---------------------------------------------------------------------------
\43\ See 42 U.S.C. 9607(a)(4)(A)-(D).
---------------------------------------------------------------------------
Finally, EPA has not identified a basis for it to exclude any of
these particular types of costs based upon the data EPA has gathered in
preparing this proposal. All three types of CERCLA Sec. 107 costs have
been incurred by hardrock mining facilities as EPA has documented
elsewhere in this preamble. (see Section VI.F.3.).
C. Universe Covered
Under this proposal, requirements would apply to owners and
operators of mining facilities that fall within the classes described
in the 2009 Priority Notice except for three classes that EPA has
identified as presenting a lower level of risk of injury--mines
conducting only placer mining activities, mines conducting only
exploration activities, and mines with less than five disturbed acres
that are not located within one mile of another area of mine
disturbance that occurred in the prior ten year period. In addition,
requirements under this proposal would apply to owners or operators of
mineral processing facilities identified in the 2009 Priority Notice
with less than five disturbed acres of waste pile and surface
impoundment. Other mineral processing facilities identified in the 2009
Priority Notice would not be subject to the proposed rule. Further, the
proposed rule would apply only to facilities that are authorized to
operate, or should be authorized to operate, on the effective date of
the rule. The applicability of this rule is described further in
section VI.A.1. of this preamble.
D. Notification Requirement
The proposal would require owners and operators subject to the rule
to notify EPA that they are subject to the rule and intend to comply,
and to provide basic facility information, within thirty days of the
effective date of the final rule. Those owners and operators would then
be required to identify a CERCLA Sec. 108(b) financial responsibility
amount for their facility, and to submit evidence of financial
responsibility to EPA.
E. Determining the Financial Responsibility Amount for Hardrock Mining
Facilities
The rule proposes a hardrock mining financial responsibility
formula for determining a financial responsibility amount for response
costs, health assessment costs, and natural resource damages. The
formula, and EPA's approach and methodology for developing the formula,
are described in detail in section VI.D.4. of this preamble. In
summary, the proposed formula is designed to reflect the relative risk
to human health and the environment, of facility practices for managing
hazardous substances, including reductions in risk that may
[[Page 3401]]
result from compliance with other regulatory requirements or other
facility practices. The formula assigns values for a facility based on
facility and unit characteristics (e.g., open pits, waste rock,
tailings, heap leach, process ponds, water management, and operations,
maintenance, and monitoring). These values correspond to calculated
cost levels, and the formula then aggregates these cost levels to
establish the facility-wide financial responsibility amount. The
formula is not intended to establish any CERCLA liability or define a
particular remedy for a unit or facility. Rather, the purpose of the
formula is simply to establish an amount of financial responsibility
that reflects the costs that might be expected to result, if a
Superfund action should ultimately be required at the site, based on
the information EPA has compiled on a national basis in the record for
this proposal. Any remedy decisions will continue to be developed on a
site-specific basis through standard CERCLA processes, including the
processes in the NCP. Because the CERCLA Sec. 108(b) cost estimate is
necessarily developed in the absence of any site-specific remedy
selection, EPA cannot ensure that the particular costs the formula
assigns for a particular feature will necessarily ultimately be
identical to the actual costs for cleaning up that site feature.
Therefore, although the formula employs an aggregation of individual
costs to obtain an overall amount for the facility, the individual cost
components are not themselves intended to represent any sub-limits
within the actual financial responsibility instrument. In other words,
the total amount of funds would be available for any future Superfund
action anywhere across the facility, and would not be tied to
particular site features. Moreover, to impose sub-limits based on the
particular values for the formula subcomponents has the potential to
result in partial over- and under-funding of unit- and site-specific
remedies in the future, once a CERCLA remedy is defined and claims are
made against the instrument. In addition, making those claims would
potentially require protracted negotiations over which response costs
are ultimately payable from the instrument. Such a situation would
hinder, instead of support, CERCLA cleanups.
Once the amount is ascertained through the formula, owners and
operators would then be required to obtain an acceptable financial
responsibility instrument for that amount, submit evidence of the
instrument to the Agency, and make information about the instrument
available to the public. EPA is not proposing to require a preliminary
review and approval of the application of the formula to the facility's
features, nor prior review and approval of the financial responsibility
instrument, prior to it becoming effective. The Agency may choose to
review and verify the adequacy of a financial responsibility amount, or
the terms of the instrument provided to EPA under CERCLA Sec. 108(b),
at a facility at any time. If EPA determines the financial
responsibility amount submitted by the owner or operator to be
inadequate, EPA may choose to initiate enforcement proceedings.
The Agency considered an alternative approach to establishing a
CERCLA Sec. 108(b) cost estimate that more closely resembles more
traditional financial responsibility programs developed to complement a
permit-based regulatory program. Financial responsibility requirements
under many other programs \44\ are typically components of an
overarching regulatory program, such as a permit program, and are
designed to assure compliance with the requirements of that program.
CERCLA Sec. 108(b) requirements in contrast, are freestanding in that
they are not directly associated with regulatory program requirements
with which an owner and operator must comply, or with a remedy that has
been selected that an owner and operator must implement. Under the
``closure plan'' alternative EPA considered, the Agency would first
identify a set of technical engineering requirements for a facility
subject to CERCLA Sec. 108(b) requirements that could be consolidated
into a complete facility closure, and in turn could be used as the
basis for calculating an amount that ultimately would need to be
assured for under CERCLA Sec. 108(b). In effect, the ``closure plan''
would have had to include the engineering controls necessary to compete
a CERCLA-style clean up at a facility where the owner or operator had
walked away and failed to complete reclamation and closure activities.
The plan itself would not be intended to be enforceable, but would only
have served as a method to calculate the amount of financial
responsibility that would be required under CERCLA Sec. 108(b), using
site-specific information. Based on the closure plan, EPA would then
have calculated the amount of financial responsibility necessary under
CERCLA Sec. 108(b), after taking into account other Federal and/or
state engineering controls and associated financial responsibility
requirements. This could integrate CERCLA Sec. 108(b) requirements
into the existing Federal and state financial responsibility
requirements applicable at hardrock mining facilities, and allow for
more consistency among financial responsibility requirements
nationally, as the CERCLA Sec. 108(b) amount would in concept, fill in
any gaps EPA identified under other programs.
---------------------------------------------------------------------------
\44\ See summaries of state financial responsibility programs in
the docket for this rulemaking (EPA-HQ-SFUND-2015-0781).
---------------------------------------------------------------------------
However, EPA soon recognized that there may be problems adopting
such an approach. First, selection of a particular response under
CERCLA is determined in accordance with the NCP, but after a release or
threatened release is identified, and on a case-by-case basis. By
contrast, a permit program has the advantage of identifying the
appropriate engineering controls for closure before they become
necessary, through the permit process. EPA was unable to identify a
basis to specify a site-specific set of engineering controls for a
site-specific cost estimate, without going through a process similar to
applying the NCP at each facility. Such an approach would present a
significant regulatory burden on the Agency. First, it would
necessitate a case-by-case evaluation of each facility to determine the
appropriate engineering controls that CERCLA might require, and then
the Agency would need to compare that set of controls to any applicable
regulatory requirements, such as state or Federal reclamation
requirements. Second, it would be difficult for EPA to create a CERCLA
Sec. 108(b) financial responsibility instrument that would be written
to cover only the particular ``gaps'' the Agency sought to cover for
each engineering requirement at a facility without having the
instrument overlap with other requirements given that some closure
programs conduct activities that reduce CERCLA risks. This would
present problems those presented by sub-limits on instruments
(discussed earlier). EPA has other important concerns with such an
approach aside from these implementation concerns. EPA has policy
concerns about overseeing other Federal and state programs' financial
responsibility requirements for adequacy, given other authorities'
expertise with mining regulation. Based on these considerations, EPA is
proposing the formula approach in this rule. EPA solicits comment on
the proposed approach.
It should be noted that, as mentioned in section III.F. of this
preamble, the financial responsibility formula developed for this
proposed rule is
[[Page 3402]]
specific to the hardrock mining industry, and is not designed for use
in future rulemakings under CERCLA Sec. 108(b). In future rulemakings
under CERCLA Sec. 108(b), EPA will evaluate how to determine financial
responsibility amounts for each particular rule, and will propose an
appropriate methodology.
F. Available Instruments
The proposed rule considers the use of all financial responsibility
instruments identified in CERCLA Sec. 108(b)(2) of the statute, that
is, insurance, guarantee, surety bond, letter of credit, or
qualification as a self-insurer. The proposal includes a trust fund as
an available form of qualifying as a self-insurer. The proposed rule
would allow owners and operators to demonstrate the financial
responsibility amount required at a facility using one or a combination
of these instruments. In addition, the proposed rule would allow the
owner or operator to demonstrate financial responsibility for multiple
facilities using a single instrument.
The Agency is proposing two approaches for qualifying as a self-
insurer through a financial test instrument for self-insurance. Under
Option 1, EPA would not include a financial test as a form of self-
insurance. EPA prefers this option because it believes the weight of
the evidence supports more secure forms of financial responsibility.
With respect to Option 2, EPA would include a stringent credit rating-
based financial test to cover all or partial costs of a facility's
obligations, depending on the owner or operator's credit rating. Under
Option 2, the owner or operator could use the financial test itself, or
the test may be used by a corporate parent, a firm owned by the same
parent corporation as the owner or operator, or a firm with a
substantial business relationship with the owner or operator, to
demonstrate financial responsibility for the owner or operator through
a corporate guarantee. The proposed approaches are discussed in section
VI.C.4. of this preamble.
The proposed rule includes wording for the financial responsibility
instruments. The instruments would be required to conform to this
wording. This simplifies administration of the rule. The proposed
financial responsibility instruments are designed to pay costs under
CERCLA for which the owner or operator is responsible at the facility.
Depending on the requirements of the instrument provider, both the
owner and operator may or may not be named on the financial
responsibility instrument, but all instruments must be available to pay
for costs of either party.
The financial responsibility instruments proposed are designed to
pay for CERCLA response costs, health assessment costs, and natural
resource damages under three scenarios in addition to, and independent
of, the direct action scenario provided in CERCLA Sec. 108(c). First,
the instruments are designed to pay the party obtaining the judgment
after a court finding of CERCLA liability against any owner or operator
covered by the instrument. In this case, the instrument would pay any
party obtaining a judgment.
Second, the instruments are designed to pay upon settlement of
CERCLA liability with the United States, into an account designated
under the settlement. This could include a CERCLA special account under
CERCLA Sec. 122, in which those funds can be used for carrying out the
settlement at the site, or into the Superfund. In situations where a
facility is in bankruptcy or jurisdiction over the owner or operator is
not available and a direct action is brought against the instrument
provider under CERCLA Sec. 108(c), the instrument would be available
to pay in settlement of the owner or operator's CERCLA liabilities upon
settlement with the instrument provider, standing in the shoes of the
owner or operator.
Finally, the instruments are designed to pay in certain limited
administrative order situations under CERCLA Sec. 106; that is, where
the financial responsibility instrument is named in an administrative
order and a trust fund is established pursuant to the order, the funds
would be available to be paid into that trust fund if performance at
the facility as required by the order had not occurred.
V. Relationship of CERCLA Sec. 108(b) to Other Federal Laws, and to
State and Tribal Laws
In considering options for this proposed rule, EPA examined how
CERCLA Sec. 108(b) may relate to other financial responsibility
authorities currently implemented by EPA and from closure and
reclamation programs implemented by other Federal agencies and by
states and tribes. EPA has concluded that CERCLA Sec. 108(b)
requirements apply in addition to requirements under other Federal law.
EPA also believes that preemption of state reclamation bonding programs
is not intended by CERCLA, nor necessary or appropriate. Thus, EPA
expects CERCLA Sec. 108(b) to effectively complement, not duplicate or
disrupt, those programs.
CERCLA Sec. 108(b) Applies To Address CERCLA Liabilities at Facilities
in Addition to Other Federal Financial Responsibility Requirements
CERCLA authorizes EPA to issue financial assurance requirements to
cover CERCLA liabilities, whether or not a facility is subject to
financial responsibility requirements under another Federal law. Thus,
CERCLA Sec. 108(b) requirements apply even where a hardrock mine or
mineral processor may be subject to, for example, Federal reclamation
bonding requirements. This interpretation gives full effect to CERCLA
Sec. 108(b) and carries out its purpose in ensuring that facilities
that manage CERCLA hazardous substances make arrangements to cover any
CERCLA liabilities that may arise.
This approach is fully consistent with the plain language of the
statute. CERCLA Sec. 108(b)(1) addresses other Federal law only in a
very limited way. It states that the requirements under that section
are to be ``for facilities in addition to those under [RCRA] Subtitle C
. . . and other federal law.'' The section does not further elaborate
on what ``in addition to'' means. EPA reads this provision in a most
straightforward way: Requirements in this proposed rule are quite
literally ``in addition to'' whatever financial responsibility
requirements may be imposed under other Federal laws for other
purposes. EPA does not, for instance, see this reference to other
Federal law as any limitation on the applicability of the section.
Indeed, the phrase ``in addition to'' is inconsistent with the notion
that other Federal law is to be a limitation on the scope of CERCLA
Sec. 108(b)'s applicability. By contrast, when Congress intended to
insert limitations based on other Federal law into CERCLA, it clearly
stated them as such. See, e.g., CERCLA Sec. 101(22)(C) (definition of
release ``excludes . . . (C) release of source, byproduct, or special
nuclear material from a nuclear incident, as those terms are defined in
the Atomic Energy Act of 1954, if such release is subject to
requirements with respect to financial protection established by the
Nuclear Regulatory Commission under Sec. 170 of such Act. . . .);
101(39) (``The term `brownfield site' does not include'' facilities to
which permits have been issued under RCRA, the Clean Water Act, the
Toxic Substances Control Act, or the Safe Drinking Water Act; or
facilities subject to RCRA corrective action, RCRA closure, or TSCA
clean up obligations). Nor would reading this reference as a limitation
on the scope of CERCLA Sec. 108(b) make much practical sense, as
[[Page 3403]]
the need for a CERCLA response may arise regardless of whether another
Federal law already applies.
EPA's intent in this proposal, consistent with its interpretation
described earlier, is to apply CERCLA Sec. 108(b) to address potential
CERCLA risks at a facility, even when that facility is subject to
regulation and/or financial responsibility requirements under other
Federal law, such as mine reclamation bonding requirements required by
Bureau of Land Management (BLM) or the U.S. Forest Service (USFS). As
explained elsewhere, these proposed regulations are not designed to
ensure compliance with technical engineering requirements imposed
through a permit, or to ensure proper closure or reclamation of an
operating mine. Instead, EPA has structured these rules to address the
CERCLA liabilities at a regulated facility, and to create incentive for
practices that will prevent the need for future CERCLA responses.
Provision of a Financial Responsibility Instrument Under CERCLA Sec.
108(b) Does Not Preempt State Mine Bonding Regulations Under CERCLA
Sec. 114(d)
EPA has also considered, in developing the proposed CERCLA Sec.
108(b) regulations for hardrock mining classes, what effect, if any,
compliance with the Federal requirements would have under CERCLA Sec.
114(d), an express preemption provision relating to specific state
financial responsibility requirements. Many states have mine financial
responsibility requirements. EPA compiled summaries of all 50 states'
mine bonding requirements to get a general understanding of the types
of requirements applicable under other programs. These summaries are
also available in the docket. EPA's general understanding of state
mining programs indicates that those programs vary, and that states use
mine permitting authorities to enforce compliance with state mining
regulations. Some states may address different risks, or address risks
in a different manner from those for which EPA's proposed Financial
Responsibility Formula is designed to account. In developing the
proposed rule, the Agency sought the input of several states with
significant mining regulatory programs on the state preemption
question. EPA received responses from Alaska, Arizona, Colorado, and
New Mexico. The comment letters also are included in the docket for
this proposal.
EPA does not intend its CERCLA Sec. 108(b) regulations to result
in widespread displacement of those programs, nor does EPA believe that
such preemption is intended by CERCLA, necessary, or appropriate.
EPA does not believe that CERCLA Sec. 114(d) \45\ gives a broad
preemptive effect to EPA's CERCLA Sec. 108(b) financial responsibility
regulations, over state reclamation bonding requirements generally.\46\
This follows from consideration of the structure and language of the
statute and case law. First, both CERCLA Sec. Sec. 108(b) and 114 are
expressly focused on hazardous substances, the risks they present, and
financial responsibility associated with liability stemming from their
release or threatened release. Consistent with this, as described in
section V.B. of this preamble, EPA has interpreted the scope of CERCLA
Sec. 108(b)'s mandate for evidence of financial responsibility to
reflect the types of costs for which parties may be liable under CERCLA
Sec. 107 that result from releases or threatened releases of hazardous
substances. As the state commenters have made clear, many state
reclamation bonding regimes are not similarly limited to CERCLA
hazardous substances or their release. For example, the New Mexico
Environment Department stated that reclamation under the state Mining
Act is a goal in itself, which may or may not be connected with the
release of hazardous substances in a particular instance.
---------------------------------------------------------------------------
\45\ CERCLA Sec. 114 states, in relevant part:
(a) Nothing in this chapter shall be construed or interpreted as
preempting any State from imposing any additional liability or
requirements with respect to the release of hazardous substances
within such State.
. . .
(d) Except as provided in this subchapter, no owner or operator
of a . . . facility who establishes and maintains evidence of
financial responsibility in accordance with this subchapter shall be
required under any State or local law, rule, or regulation to
establish or maintain any other evidence of financial responsibility
in connection with liability for the release of a hazardous
substance from such . . . facility. Evidence of compliance with the
financial responsibility requirements of this subchapter shall be
accepted by a State in lieu of any other requirement of financial
responsibility imposed by such State in connection with liability
for the release of a hazardous substance from such . . . facility.
\46\ By this discussion, EPA is providing its general views on
the preemption issue for transparency and to obtain public comment.
It is the courts that would make any final determinations about the
preemptive effect of CERCLA 108(b) regulations at any particular
facility. These determinations would necessarily be based on case-
by-case evaluations.
---------------------------------------------------------------------------
Second, CERCLA Sec. 114 taken as a whole makes clear that states
are not prohibited from requiring reclamation bonding. The section
begins with a general disclaimer of preemptive effect in paragraph (a),
specifically directing that ``nothing in this chapter'' ``be construed
or interpreted as preempting any State from imposing any additional
liability or requirements with respect to the release of hazardous
substances within such State.'' This reflects Congressional intent that
preemption of state law requirements should be minimized. Moreover,
CERCLA Sec. 114(d)'s preemptive effect is qualified--``except as
provided in this subchapter''--a reference that logically encompasses
the limitations on preemption outlined in paragraph (a). Taken
together, these references quite naturally preserve state mine bonding
requirements as ``additional requirements'' to the extent that they may
also address the release of hazardous substances.
Third, many state requirements serve significantly different
purposes from any final CERCLA Sec. 108(b) regulations, and for this
reason alone those state requirements should not be considered to be
``in connection with liability for the release of hazardous
substances'' within the meaning of CERCLA Sec. 114(d). As discussed,
the CERCLA Sec. 108(b) regulations being proposed today are intended
to address facilities' potential for releases or threatened releases
that result in CERCLA liability. By contrast, many mine bonding
programs are designed to ensure that a facility can comply with
otherwise-applicable regulatory requirements, that may or may not be
connected with (or may be only partially connected with) hazardous
substance releases or threatened releases. See ALASKA STATUTE Sec.
27.19.040(a), Reclamation Financial Assurance (requiring financial
responsibility to ensure performance of a reclamation plan); ARIZ. REV.
STAT. Sec. 27-971(B)(11), Submission and contents of reclamation plan
(financial responsibility is required to ensure completion of all
activities in the approved reclamation plan for mining units); CAL.
PUB. RES. CODE Sec. 2773.1(a), Reclamation of Mined Lands and the
Conduct of Surface Mining Operations (financial responsibility is
required to ensure the completion of the lead agency-approved
reclamation plan); 2 COLO CODE REGS. Sec. 407-1 R. 4.2.1(1), Adequacy
of Financial Warranties (For mining operations, financial
responsibility is required to ensure the fulfillment of the
requirements of the reclamation plan that is attached to the
reclamation permit application); FLA. ADMIN. CODE ANN. r. 62C-
16.0075(5)(f), Financial Responsibility (required to demonstrate
financial responsibility in order to cover reclamation through the
initial revegetation of the reclaimed area); IDAHO ADMIN. CODE
r.20.03.02.070(01), Reclamation Plan
[[Page 3404]]
Approval Required and IDAHO ADMIN. CODE r.20.03.02.071(01), Permanent
Closure Plan Approval Required (Financial responsibility is required to
ensure that all reclamation activities included in an approved
reclamation plan and that all closure activities in an approved
permanent closure plan are completed for surface mining operations and
cyanidation facilities, respectively); MINN. R. 6130.6000 Subp. 1-Subp.
2, Performance Bonds (Financial responsibility also may be required to
cover the estimated cost of ``satisfactorily accomplishing reclamation
of all lands disturbed and unreclaimed up to the date of annual
[financial responsibility] review.''); NEV. ADMIN. CODE ch.
519A.350(1), General requirements (Financial responsibility is required
to ensure that reclamation activities in the approved reclamation plan
will be completed); N.M. STAT Sec. 69-36-11, Existing mining
operations; closeout plan required (Financial responsibility under NMMA
is required to assure reclamation or ``closeout.''); UT CODE ANN. 40-8-
4(13)(a), Definitions (Financial responsibility is required to assure
reclamation of affected lands); WASH. REV. CODE Sec. 78.44.087(1)(a),
Performance security required (Financial responsibility is required for
reclamation of affected surface mining lands).
Fourth, it makes sound policy sense for CERCLA Sec. 114(d) to be
read to allow these programs to apply in tandem. EPA cannot write its
national CERCLA Sec. 108(b) requirements to simultaneously correspond
to 50 different states' reclamation requirements. These requirements
can vary substantially, and particular requirements may have only a
limited relationship to liability for the release of hazardous
substances.\47\
---------------------------------------------------------------------------
\47\ EPA also notes that concerns about duplication are
separately addressed in CERCLA's prohibition on double recovery in
CERCLA Sec. 114(b). That section allows for harmonizing recoveries
where claims could also be brought under other state causes of
action. This helps provide assurance, for example, that reclamation
requirements that may otherwise be similar to CERCLA response
actions and compensable through a CERCLA 108(b) financial
responsibility instrument would not be unfairly paid twice.
---------------------------------------------------------------------------
VI. Section-by-Section Analysis
A. Subpart A--General Facility Requirements
1. Purpose and Scope (Sec. 320.1) and Applicability (Sec. 320.2)
This proposed rule would establish financial responsibility
requirements under CERCLA applicable to current owners and operators of
hardrock mining facilities that are authorized to operate or should be
authorized to operate, that is, owners and operators that are required
to obtain authorization to operate and have done so, as well as those
who are required to obtain authorization to operate and have failed to
do so. The proposed rule would not apply to owners or operators of past
hardrock mining facilities, such as abandoned mines, nor would it apply
to former owners or operators of mines that are covered by the rule.
The financial responsibility requirements for those current owners or
operators would extend to all potential CERCLA liabilities at the
facility, based on current conditions at the site. This approach
balances the dual goals of providing funds to address CERCLA
liabilities at their sites, and of creating incentives for sound
practices that will minimize the likelihood of a need for a future
CERCLA response.
In developing this proposed rule, EPA considered whether to propose
conditions applicable to all owners and operators, past and present, of
facilities covered by the rule, or whether to limit the rule to current
owners and operators. EPA also considered whether CERCLA Sec. 108(b)
requirements could be applied to abandoned facilities. Although CERCLA
Sec. 108(b) could potentially be interpreted to cover such owners,
operators and facilities, EPA is proposing requirements applicable only
to current owners and operators of currently authorized to operate
facilities for a number of reasons.
The plain language of CERCLA Sec. 108(b) is ambiguous on the
owners, operators and facilities to which it is intended to apply. The
section uses the terms ``owner'' and ``operator'' and ``facility''
repeatedly, but says nothing about whether these terms could include
past owners and operators, or owners or operators of former facilities.
Looking at the statute more broadly, however, indicates that it is
appropriate to adopt a narrower interpretation than the bare terms in
CERCLA Sec. 108(b) would suggest. First, reading CERCLA Sec. 108(b)
as applying to current owners and operators of currently-active or -
idled facilities comports with CERCLA Sec. 108 when read as a whole.
CERCLA Sec. 108 requires evidence of financial responsibility for
three different types of facilities: vessels under CERCLA Sec. 108(a),
motor carriers under CERCLA Sec. 108(b)(5), and other facilities under
CERCLA Sec. 108(b). The provisions applicable to vessels and motor
carriers logically apply to current owners and operators of existing
vessels and motor carriers. For example, CERCLA Sec. 108(a) refers, as
does CERCLA Sec. 108(b), to ``owners'' and ``operators'' of
``vessels'' without qualification. However, logically only current
owners and operators of existing vessels are able to ``use[] any port
or place within the United States'' as required by CERCLA Sec. 108(a),
and only those entities and vessels would be subject to the remedies
available to the Secretaries of the Treasury and Transportation in
CERCLA Sec. Sec. 108(a)(2) and (3). Indeed, the U.S. Coast Guard's
CERCLA Sec. 108(a) regulations apply only to current owners and
operators of vessels used or capable of being used as a means of
transportation on the water. See 33 CFR Sec. Sec. 138.12 and 138.20.
DOT's motor carrier financial responsibility requirements also only
apply prospectively.
Current owners and operators are the primary actors at facilities
and as such would be able to evaluate the applicability of the rules
and apply the formula to the features present. EPA anticipates that
requiring entities that may no longer have the legal rights to access a
facility to evaluate it for purposes of determining whether they are
subject to the rule and if so, the appropriate amount of financial
responsibility, would be difficult in many cases. Thus EPA intends for
this proposal to be focused upon an easily-identified, particular
subset of parties that has control over and are thus in the best
position to control and address hazardous substance management
activities. Such incentives would not exist in the case of owners and
operators that no longer have activities at the site. Nor does EPA
expect that applying the rules to such former owners would further a
primary goal of financial responsibility, that is, to develop
incentives for good practices.
Similar reasoning leads EPA to propose applying the CERCLA Sec.
108(b) requirements only to currently-active or currently-idled
facilities. These facilities are readily identifiable and because they
are ongoing concerns, are more likely to be able to obtain the kind of
financial responsibility necessary under the regulation, and to further
the dual goals of CERCLA Sec. 108(b) regulations. By contrast, EPA is
concerned that a rule applicable to facilities that are not currently
active or currently idled would be very difficult to implement, and has
the potential to divert significant resources from existing Superfund
priorities with minimal benefit to the program. Therefore, EPA believes
that attempting to regulate and oversee CERCLA Sec. 108(b)
requirements for this vast universe of facilities would impose a
tremendous administrative burden on the Superfund program, with the
likelihood of very little return. EPA
[[Page 3405]]
believes that the Superfund and existing enforcement processes are
significantly better suited for use at sites that are not currently
active or currently idled to effect cleanup directly. Thus, EPA expects
that the approach in this proposed rule would maximize the
effectiveness of CERCLA Sec. 108(b) requirements.
EPA has sought to complement CERCLA's liability provisions by
requiring owners and operators subject to the rule, to provide
assurance against all potential risks associated with hazardous
substance management at their facility. In this way EPA's proposed
approach thus also is intended to support CERCLA's broad remedial
purposes, while accounting for the differences between CERCLA Sec.
108(b)'s regulatory program and CERCLA's liability and enforcement
provisions.
As discussed in further detail in following sections of this
preamble, requirements for financial responsibility under CERCLA Sec.
108(b) do not affect the liability of any parties potentially
responsible for CERCLA costs. This would include that of any former
owners and operators. The existing CERCLA processes for enforcement,
contribution, cost recovery, and assignment of liability are unaffected
by CERCLA Sec. 108(b) financial responsibility requirements, and are
available to ensure that responsible parties pay the costs associated
with releases or threatened releases of hazardous substances. In fact,
while not required by the proposed rule itself, EPA believes that
requiring current owners and operators to demonstrate CERCLA Sec.
108(b) financial responsibility may have the salutatory effect of
inducing those subject to the rule to seek out any other parties who
may be liable for contamination at their facility in order to obtain
their assistance with cleanup. The result could be a potential
reduction in threats to human health and the environment at the site
which could in turn result in a reduced CERCLA Sec. 108(b) financial
responsibility amount. Given the practical difficulties of imposing
CERCLA Sec. 108(b) financial responsibility requirements upon past
owners and operators, EPA expects that those existing processes are the
appropriate means for parties to divide liabilities amongst themselves.
Exemption for States and the Federal Government
The proposed rule at Sec. 320.1(c) would exempt states and the
Federal Government from the requirements of part 320. This provision is
modeled on a similar, long-standing exemption in EPA's regulations for
RCRA Subtitle C hazardous waste treatment, storage, and disposal
facilities.\48\ In EPA's view, the Federal and state governments have
adequate resources and taxing authority to ensure that they will be
able to pay for any CERCLA Sec. 107 costs that may arise at facilities
where they are owners or operators. Local governments, however, are not
exempt. As EPA explained in 1980, local governments can and do become
insolvent, and if small enough, may not be able to cover their
liabilities. EPA requests comment on this exemption.
---------------------------------------------------------------------------
\48\ See 45 FR 33198-99 (May 19, 1980); 45 FR 33262 (May 19,
1980).
---------------------------------------------------------------------------
Non-Transportation-Related Facilities
E.O. 12580 delegates the responsibility for developing regulations
under CERCLA Sec. 108(b) for non-transportation-related facilities to
EPA. Responsibility for developing regulations for transportation-
related facilities is delegated to the Department of Transportation.
Thus, transportation-related facilities at hardrock mining sites would
not be subject to requirements under this proposed rule. The Agency
anticipates that jurisdictional issues between EPA and the Department
of Transportation will be worked out in implementation. EPA solicits
comment on this approach.
2. Definitions (Sec. 320.2)
The Agency is proposing the following definitions for use in Part
320:
Hardrock Mining Facility means a hardrock mine, as defined in
subpart H of part 320, and/or a mineral processor, as defined in
subpart H part 320.
Administrator means the EPA Administrator, or designee thereof.
3. Availability of Information; Confidential Business Information
(Sec. 320.4)
Section 2.203(b) of this chapter provides procedures through which
any person submitting information to EPA in accordance with this Part
may assert a claim of business confidentiality covering part or all of
that information. Information covered by such a claim will be disclosed
by EPA only to the extent, and by means of the procedures, set forth in
Part 2, Subpart B, of this chapter. However, if no such claim
accompanies the information when it is received by EPA, it may be made
available to the public without further notice to the person submitting
it.
This rule proposes an option to require owners or operators to post
on their company website all information submitted to EPA that is not
identified as confidential business information (CBI). EPA anticipates
that owners or operators will claim some of the information submissions
required under this rule as CBI. However, the Agency believes that
there are categories of information required that will not be CBI
including, but not limited to, identification of the type of financial
responsibility instrument used, the amount of financial responsibility
required at a facility, the facility contact information, failure of
instrument providers, an owner or operator entering bankruptcy, claims
made against the owner or operator, or an owner or operator's request
for release from financial responsibility requirements. To facilitate
implementation of this proposed rule, the Agency is considering making
Class Determinations for certain types of CBI information. EPA solicits
comment on the types of information that owners or operators anticipate
would be CBI, and on the value of CBI Class Determinations.
4. Initial Notification Requirement (Sec. 320.5)
EPA is proposing to require owners or operators subject to the
requirements of this rule to submit a notification form to EPA. Owners
or operators authorized to operate on the promulgation date of this
rule would be required to submit the initial notification form within
thirty days of the effective date of the final rule. Owners or
operators that become authorized to operate after the effective date of
the final rule would be required to submit the notification form and
comply with the requirements of this proposed rule prior to beginning
operations
The notification form is specified in proposed Sec. 320.5. Owners
or operators would be required to provide, at a minimum, the following
information: (1) The name, mailing address, and location of the
facility, (2) the facility's EPA ID number, if one has been previously
issued, (3) the name and contact information for a contact person for
financial responsibility issues, (4) the land type on which the
facility is located, (5) owner and operator information, (6) and
information about the activities conducted at the facility.
Within thirty days of receiving the notification form, EPA would
issue an EPA identification number to the facility, if the facility has
not yet received one.
The requirement for this notification form would serve several
purposes important to the implementation of financial responsibility
requirements under this proposed rule. First, it would
[[Page 3406]]
allow EPA to identify the universe of facilities subject to the rule.
In addition, it would assure that all facilities subject to the rule
receive an EPA identification number, which will allow EPA to track
financial responsibility implementation information. Finally, it would
provide EPA information about the facility that EPA anticipates will be
important for effective rule implementation. The Agency solicits
comment on this proposed notification requirement, on the proposed
notification form, and on the timeframe for notification.
5. Information Submission Requirements (Sec. 320.6)
This proposed rule would require that owners or operators of
facilities subject to the rule submit information to EPA. The Agency
believes that submission of the information proposed in this rule would
be needed for effective implementation of CERCLA Sec. 108(b)
requirements. By requiring the owner or operator to submit information
about the facility to EPA, these requirements would better enable the
Agency to ensure full compliance with the requirements for financial
responsibility throughout the time the facility is subject to those
requirements.
Under Sec. 320.5, owners and operators would be required to submit
an initial notification form. The form would provide EPA basic
information about the facility. The form can be found in Appendix A of
Part 320. EPA solicits comment on the information required in the form.
Owners or operators would further be required to submit evidence of
financial responsibility. The precise submittal requirements for each
financial instrument are described in subpart C. Generally, owners or
operators demonstrating financial responsibility using a surety bond
would be required to submit the surety bond to EPA. Owners or operators
using a letter of credit would be required to submit the letter of
credit to EPA unless it is held by a trustee, as provided in Sec.
320.40, in which case they would be required to submit a certified
copy. Owners or operators using insurance would be required to submit
the endorsement. Owners or operators using a trust agreement (either a
stand-alone trust or a stand-by trust established for use with another
instrument) would be required to provide a duplicate original. If the
final rule allows for the use of a financial test and corporate
guarantee, owners or operators using the corporate guarantee would be
required to submit a signed corporate guarantee, as well as a letter
from the Chief Financial Officer (CFO letter), audited financial
statements, and agreed upon procedures report, as required in Sec.
320.44. Finally, owners or operators using the financial test, if
allowed in the final rule, would be required to submit the CFO letter,
audited financial statements, and agreed upon procedures report, as
required in Sec. 320.43. In the case of the corporate guarantee and
the financial test, the CFO letter, auditors report, and agreed upon
procedures report would be required to be updated annually.
This proposal also requires information submission to assure proper
maintenance of financial responsibility. The precise submittal
requirements for each of the following are described in Sec. 320.65.
These requirements include a requirement to update financial
responsibility amount calculations every three years, at a minimum, and
to notify EPA of changes in the information on the facility's initial
notification form, facility transfer, claims filed against the
instrument or owner or operator, intent to close the facility, failure
of an instrument provider, instrument provider intent to cancel, and
owner or operator bankruptcy.
Owners or operators are also required to submit information that
may vary according to facility class. These requirements will be
specified in the relevant Subparts to 40 CFR part 320, but for clarity,
those submission requirements are also incorporated into the general
information submission requirement in proposed Sec. 320.6. Thus, for
example, owners and operators of hardrock mining facilities must
calculate a financial responsibility amount for their facilities using
the formula in Sec. 320.66, and Sec. 320.67 requires submission of
information to support that calculation, including data inputs to the
proposed formula to determine a financial responsibility amount, and
documentation supporting all data inputs and assumptions. Under
proposed Sec. 320.6, this information must be submitted to EPA.
The Agency solicits comment on these information submission
requirements including comments on the need for these requirements and
suggestions for additional information that should be required under
this rule.
6. Requirement for Electronic Submission of Information (Sec. 320.7)
This proposed rule includes information submission requirements
throughout the financial responsibility process. These information
submission requirements include: (1) Initial notification, (2)
demonstration of financial responsibility, (3) notifications pursuant
to financial responsibility maintenance, (4) submission of a financial
responsibility amount and support for the amount, and (5) request for
release from financial responsibility. The Agency is proposing to
require that the submissions under this rule be in electronic format.
a. Benefits of Electronic Reporting
Adopting electronic information submission across its programs will
benefit the Agency, owners and operators, and the general public.
Electronic information submission will save Agency resources and
improve data quality by reducing the need for manual data entry, and
will help the Agency manage environmental programs more efficiently and
effectively. EPA also expects electronic information submission to
promote public participation by facilitating EPA's ability to make
information submitted more readily accessible to interested parties. In
this respect, electronic reporting can work in concert with another
requirement in the proposed rule--that owners and operators have a
publicly-accessible Web site (see Section VI.A.8. of this preamble). In
addition, electronic information submission will reduce the time needed
for owners and operators to submit information by eliminating the need
to print or mail forms, eliminate mailing or courier fees, and allow
members of the regulated community to obtain information about the
status of their submissions without requesting such information from
EPA by phone or mail.
Use of electronic forms should also facilitate the effective
submission of required information. Owners and operators may benefit
through integration of data entry error prevention and compliance
assistance into the reporting tool. Namely, electronic systems can
provide automatic data quality checks, such as for improperly formatted
addresses, math errors, or significant changes in cost estimates, and
flag these for correction, if needed, before submission. A system can
also provide automated reminders and prompts (e.g., when annual updates
are due) to owners and operators, and pre-populate forms with
information from prior reports. EPA does not expect that these or other
tools that could be built into such a system would guarantee compliance
or be a substitute for an owner or operator's own compliance
assessment, since they cannot account for every site-specific
situation, but EPA expects that such tools will make it easier for
owners and operators to comply with the rules. It can also facilitate
communication between EPA, owners and operators,
[[Page 3407]]
and instrument providers to immediately address data quality issues and
to provide compliance assistance or take other action when potential
problems are identified. Finally, the system may also provide a way for
entities to maintain records supporting financial responsibility
compliance, such as cost estimate documents.
This approach is also consistent with the Agency's 2013 E-Reporting
Policy Statement for EPA Regulations, which reflects that, in
developing new regulations, EPA will assume that reporting will be
electronic and not paper-based.\49\ As described by this policy, e-
reporting is not simply a regulated entity e-mailing an electronic copy
of a document (e.g., a PDF file) to the government, but a system in
which an electronic tool guides the regulated entity through the
reporting process, often with built-in compliance assistance and data
quality checks. This policy embraces the Digital Government Strategy
issued by the White House on May 23, 2012,\50\ which calls for EPA to
continue evolving its reporting systems to take advantage of new
technology and improve transparency for all of its stakeholders.
---------------------------------------------------------------------------
\49\ See E-Reporting Policy Statement for EPA Regulations
(September 30, 2013), https://www.epa.gov/sites/production/files/2016-03/documents/epa-ereporting-policy-statement-2013-09-30.pdf.
\50\ https://www.whitehouse.gov/sites/default/files/omb/egov/digital-govemment/digital-govemment-strategy.pdf.
---------------------------------------------------------------------------
Electronic reporting also is a key component of the Next Generation
Compliance Strategy.\51\ EPA's Next Generation Compliance Strategy is
an integrated strategy to improve regulations with new monitoring and
information technology and expanded transparency.\52\ It is designed to
motivate the regulated community to increase compliance, inform the
public about performance, and help ensure the public has access to
information about their communities that allows them to more fully
engage in environmental protection efforts.
---------------------------------------------------------------------------
\51\ See https://www.epa.gov/compliance/next-generation-compliance-strategic-plan-2014-2017.
\52\ See https://www2.epa.gov/compliance/next-generation-compliance.
---------------------------------------------------------------------------
b. Financial Responsibility Portal
To realize these benefits, EPA is considering development of a
Financial Responsibility Portal to collect information relevant to the
rule and to serve as an electronic tool that guides owners and
operators through the reporting and submission processes with built-in
compliance assistance and data quality checks. EPA envisions that this
system would be a component of EPA's Central Data Exchange,\53\ or an
equivalent technical architecture. If the Financial Assurance Portal is
created using Central Data Exchange, owners and operators will be
required to establish an account with Central Data Exchange in order to
use the system. Any electronic reporting system will comply with
subpart D of EPA's Cross-Media Electronic Reporting Regulation
(CROMERR).\54\ CROMERR sets performance-based, technology-neutral
standards for receiving electronic reports from facilities regulated
under EPA programs to protect users and their data.
---------------------------------------------------------------------------
\53\ CDX is EPA's electronic system for environmental data
exchange to the Agency. CDX also provides the capability for
submitters to access their data through the use of Web services. CDX
enables EPA to work with stakeholders, including governments,
regulated industries, and the public, to enable streamlined,
electronic submission of data via the Internet. For more information
about CDX, go to https://epa.gov/cdx.
\54\ see 40 CFR part 3.
---------------------------------------------------------------------------
EPA envisions that users would access the portal through a Web form
based on Extensible Mark-up Language (XML). EPA expects that XML
schemas and stylesheets, when combined with XML enabled browsers, data
bases, and other applications are currently the method of choice for
conducting data exchange using the Internet to transfer and manipulate
data.\55\ The Agency is seeking comment on using an XML format, or if
another type of electronic format, such as an Electronic Data
Interchange (EDI) would be preferable. EPA also requests comment on the
estimated burden reduction if EPA developed an option to submit
information electronically using a system-to-system based approach
using Extensible Mark-up Language (XML) through EPA's Central Data
Exchange.
---------------------------------------------------------------------------
\55\ EPA states a similar expectation in the Final Rule for
Hazardous Waste Manifest Revisions--Standards and Procedures for
Electronic Manifests (79 FR 7517, Aug. 6, 2004).
---------------------------------------------------------------------------
Once the Financial Assurance Portal is developed, EPA is proposing
to require that regulated facilities electronically submit the
following categories of information through the portal: (1) Initial
notification form required under Sec. 320.5, (2) submission of URL
where CERCLA Sec. 108(b) information will be available, (3) financial
responsibility formula data (upload documentation), (4) financial
responsibility instrument evidence, (5) notification of change in
financial responsibility amount, (6) notification of change in
instrument, (7) notification of claim filed against the instrument or
owner or operator, (8) notification of closure, (9) request for release
from financial responsibility; and (10) notice of owner or operator
bankruptcy. In addition, EPA is proposing to provide for both paper and
electronic submission of the following notices from instrument
providers: (1) Notice of cancellation (by provider), and (2) notice of
provider incapacity. Within these categories, EPA expects that certain
types of information will need to be submitted using different types of
electronic means, which are discussed in detail in later sections.
In order to gain the full benefits of electronic reporting,
obtaining as much information as possible in an electronic format is
preferable. At the same time, the Agency is considering whether some of
the information submission requirements of this proposed rule may not
be appropriate for electronic information submission. For example, some
of the information submission requirements proposed in this rule will
result in more frequent submissions to EPA than will others. An example
of submissions that EPA expects to occur more frequently relate to
facility conditions--every facility will have to notify the Agency, and
the notification form will have to be updated to reflect changed
facility conditions. On the other hand, other requirements may be less
frequent. For example, EPA's analysis of instrument providers
(conducted for purposes of evaluating provider qualifications)
indicates that failures are relatively uncommon. Thus, it is possible
that few owners or operators will have to submit notification of
instrument provider failure. Where infrequent submissions are likely,
EPA expects that developing an electronic form for that submission may
not have significant benefits. In addition, there may be specific types
of documents (e.g., cost estimate data, certain types of financial
responsibility instruments that may require wet ink signatures) that
cannot be submitted electronically. The Agency solicits comment on
types of information that are inappropriate for electronic submission,
including the reason they may not be appropriate, and the burden to the
regulated community if electronic submission of such information were
to be required. EPA also asks for comment on which types of information
commenters believe should be highest priority for EPA development of
electronic submission tools.
As EPA develops its data system, it is considering technical issues
associated with its development as described later in this section. EPA
solicits comment on how an electronic submission system can be
constructed to appropriately capture submission of the categories of
information that EPA proposes to
[[Page 3408]]
require. Specifically, EPA requests comment on whether specific
technical requirements are called for to support data submission of the
following categories of information: (1) The development of a financial
responsibility amount, (2) evidence of financial responsibility, (3)
updates to the facility's financial responsibility information, (4)
notice of closure of the facility, and (5) submission of instruments
and cancellations, including how to account for the acceptance of
originally signed financial responsibility documents. EPA is also
seeking comment on the feasibility and utility of developing tools
within the system that would assist users in complying with reporting
requirements, such as the use of decision-trees to determine if an
entity is regulated, checklists to ensure the proper form/documents are
submitted, or reminders when reports or updated documents are due.
c. Anticipated Format of Submissions
The electronic system envisioned by EPA would have both mandatory
and optional data entry fields. Submissions will not be processed until
each of the mandatory fields have data entered, ensuring complete data
entry before final submission. Data entry fields are expected to be a
variety of drop down lists, number fields, calendars, and open test
fields depending on the information that is required. For example, the
type of activities occurring at the facility could be chosen from a
drop down list, and the date of a facility's last financial
responsibility amount calculation or financial test submission could be
chosen from a calendar.
EPA expects these types of controls on data input can result in
reduced errors. In turn this should provide efficiencies by
substantially decreasing the time needed for EPA to review and process
the submissions, and the time needed for the submitter to correct
deficiencies. As discussed earlier, EPA is considering the ability to
duplicate previous submissions when seeking to update or renew
information. This will simplify future submissions to only those fields
that require updates. To address the issue of CBI (described in Sec.
320.4) the Agency envisions establishing a database that tags
information as public or confidential upon receipt. This would allow
the system to then auto-populate an EPA webpage to provide information
not identified as CBI to the public. EPA solicits comment on this
approach.
As discussed earlier, EPA would like to make it possible for users
to enter some types of information through electronic forms available
in the Portal. For example, EPA intends that the following information
would be entered into the Financial Assurance Portal using smart forms
with data-entry boxes that specify the exact information needed: (1)
Initial notification; (2) website URL; (3) amount of financial
responsibility required; (4) amount of financial responsibility
secured; (5) type of instrument; and, if the financial test is used,
credit rating, tangible net worth, and assets in the United States; and
(6) instrument provider information (e.g., name, address, etc.).
EPA intends other submissions to be accomplished through forms with
electronic signatures and verification: (1) Financial responsibility
instruments, (2) certain information demonstrating passage of the
financial test, (3) notice of a change in financial status if using the
financial test, (4) notice of cancellation of a financial assurance
instrument, (5) notice of a claim against the instrument, (6) notice of
bankruptcy; (7) notice of a change in instrument, (8) notification of
change in the amount of financial responsibility required, and (9)
notice of incapacity of the instrument provider. Where an electronic
signature is required, the proposal requires that the signature be a
legally valid and enforceable signature under applicable EPA and other
Federal requirements pertaining to electronic signatures.
EPA also expects that the user will need to upload other
information from outside the system. EPA expects that this information
will need to meet certain document requirements (e.g., downloadable,
not encrypted, printable, searchable, etc.). For this category of
documents, owners and operators would be required to produce duplicate
originals of certain electronic filings upon request by EPA. EPA
expects that the following information, if applicable, may fall into
this category: (1) Information supporting the financial responsibility
amount determination, (2) information to support a financial test
showing, for example financial statements; the CFO letter; a CPA audit
of financial information; and an agreed-upon procedures document; (3)
annual updates on trust properties and (4) evidence of financial
responsibility; and (5) PDF copies of instruments that cannot be
submitted electronically.
The Agency solicits comment on these expectations for information
submission format.
d. Access to the System
EPA envisions that owners or operators will receive a password and/
or user identification number to access the portal when they notify EPA
that they are a regulated entity. The system will then assist owners or
operators in obtaining a unique user identification number, similar to
the electronic interface that EPA has recently made available for
states and the regulated community to use to electronically submit RCRA
Site Identification (Site ID) forms, which are used by facilities to
notify regulators that they are involved in RCRA waste activities. EPA
intends to establish an electronic notification form for owners or
operators to comply with proposed Sec. 320.5. EPA solicits comment on
whether instrument providers should be given access to the Financial
Assurance Portal in order to submit notices to EPA and to owners and
operators as required under this rule (e.g., notice of cancellation).
EPA solicits comment from instrument providers specifically, on whether
they would use the electronic system described to file their notices
electronically.
e. Beginning Electronic Reporting Once Portal Developed
Because the Agency anticipates that the Financial Assurance Portal
will not be available to receive submissions when this rule is made
final, the Agency is proposing that owners or operators be required to
initially submit information in paper format until the electronic
capability is available. Thus, EPA is proposing to identify an
electronic filing compliance date in Sec. 320.7(a). Because that date
is not currently known, EPA is proposing to announce that date in the
Federal Registerat least sixty days in advance. The Agency is further
proposing that after that compliance date, owners or operators would be
required to submit information electronically unless they apply for and
receive a waiver from electronic reporting requirements under Sec.
320.7(d). This waiver provision is discussed in more detail later in
this section. The Agency solicits comment on this approach.
EPA is considering an alternative approach under which electronic
reporting would be phased in over the four-year compliance timeframe.
EPA would require the initial notification to be submitted
electronically, but would roll out other electronic forms as parts of
the rule become effective or required (e.g., the full amount of
financial responsibility is not required until four years after the
rule is promulgated). This will give EPA time to complete and fully
test a number of the electronic documents prior to requiring their use.
The disadvantage of this option is the increased burden to industry of
having to print and mail paper documents,
[[Page 3409]]
along with the Agency's burden of manually entering data into its data
system. EPA is considering whether such phasing may help ensure the
system is working effectively and efficiently. Under this option, EPA
would similarly identify an electronic filing compliance date for each
phase in future Federal Register notices in a similar manner as
described in the proposed option described earlier. Also similarly to
the proposed option, the facility would be required to submit
information in paper format until electronic submittals are possible
for submission of the facility's information, and electronic filing
would be subject to waiver.
f. Proposed Waivers
As part of the proposal for mandatory electronic reporting, the
proposed rule would provide two options through which the Administrator
could waive the requirement for electronic submission. EPA recognizes
that there may be some circumstances where it may be necessary to
provide for paper reporting of information otherwise required
electronically, e.g., in areas that lack sufficient broadband access,
during large-scale national disasters (e.g., hurricanes) or prolonged
electronic reporting system outages, or to accommodate the religious
practices of individuals that choose not to use certain technologies
(e.g., computers, electricity) in accordance with their religion. The
Agency solicits comment on situations where flexibility might be
required, and on what types of waivers should be provided under this
rule.
EPA has included both a general waiver provision and an emergency
waiver provision in the proposed rule. A general waiver could be
granted to owners or operators that cannot comply with the requirement
for electronic submission. The owner or operator would be required to
submit a request for a general waiver to the Administrator at least
thirty days in advance of the date the information is due to EPA. The
Administrator could grant a general waiver upon a finding that: (1) The
owner or operator is unable to gain access to a system allowing
electronic reporting because it is located in an area with insufficient
broadband access, or (2) religious practices of the owner or operator
prohibit the use of necessary technologies. A general waiver could be
granted for one year, and the owner or operator would be able to
reapply annually.
In addition, the Administrator could grant a waiver of the
requirements for electronic submission in emergency situations. To
obtain an emergency waiver, the owner or operator would be required to
submit a request within ten days of the date the information is due to
EPA. The request for an emergency waiver must describe the conditions
that prevent electronic submission of information and must be
accompanied by a paper copy of the information due. The Administrator
may grant an emergency waiver upon a finding that the owner or operator
was unable to comply with the requirement for electronic information
submission due to: (1) A large-scale national disaster (e.g.,
hurricane), (2) a prolonged electronic reporting system outage, or (3)
a prolonged outage of the owner's and operator's computer system. The
Agency solicits comment on the adequacy of these waiver provisions.
7. Recordkeeping Requirements (Sec. 320.8)
EPA is proposing that owners or operators be required to develop
and maintain a facility record that includes information documenting
compliance with the financial responsibility requirements of this
proposed rule. The facility record must include at least all
information required to be submitted to EPA under this Part, comments
received from the public, and all notifications received from EPA
related to the financial responsibility obligations of the facility.
The rule would require owners or operators to maintain this information
until three years after the Agency releases the owner or operator from
the requirement for financial responsibility. EPA solicits comment on
these recordkeeping requirements.
8. Requirements for Public Notice (Sec. 320.9)
EPA is proposing requirements for public notice for owners and
operators subject to CERCLA Sec. 108(b) requirements. This approach
will add the benefit of transparency to implementation of CERCLA Sec.
108(b) requirements. In addition, these proposed requirements are
consistent with EPA's commitment to assuring that the public is aware
of EPA's Superfund activities at sites, even when there may not be an
active Superfund action underway.\56\ EPA believes that the proposed
requirements for public notice would enhance the implementation of the
proposed rule in two respects.
---------------------------------------------------------------------------
\56\ See Superfund Community Involvement Handbook, 2005 page 5.
---------------------------------------------------------------------------
First, such public notice would help to ensure that the financial
responsibility formula is applied as intended, so that the resulting
financial responsibility level reflects the degree and duration of risk
at the facility. As discussed in the financial responsibility formula
section of this preamble, Sec. 320.63, the financial responsibility
formula is intended to be implemented by owners or operators, rather
than by EPA. While EPA expects that in the vast majority of cases the
financial responsibility formula will be applied accurately, EPA
believes that providing information to the public can enhance the
incentives for owners and operators to fully comply with regulatory
requirements. The reliance on public notice as an incentive for
compliance under this proposal is consistent with the 2010 guidance
issued by the Office of Management and Budget (OMB), where that office
recognized that the public disclosure of information is an increasingly
common and important regulatory tool.\57\
---------------------------------------------------------------------------
\57\ See United States Office of Management and Budget. Sharing
Data While Protecting Privacy. Memorandum from Jeffrey D. Zeints and
Cass R. Sunstein. November 3, 2010. Available at: https://www.whitehouse.gov/sites/default/files/omb/memoranda/2011/m11-02.pdf
---------------------------------------------------------------------------
Second, the proposed rules are structured to support CERCLA
responses undertaken by the Federal Government, states, and private
parties--a structure that is consistent with the CERCLA scheme. EPA is
proposing to require owners and operators to make readily available to
the public information about the levels of financial responsibility,
information on claims made, and information that may relate to the
continued validity of the instruments--for example, any notices of
instrument cancellation by providers. EPA believes that ready access to
this information will help ensure that parties with CERCLA claims, and
parties potentially impacted by the CERCLA claims of others, will have
the opportunity to monitor changes in the facility's financial
responsibility.
EPA is today proposing two approaches for public notice procedures.
Under the first approach, the owner or operator would be required to
maintain a web site to convey information regarding its compliance with
the requirements of proposed part 320. Under the second, EPA would
provide information to the public on the Agency's Web site.
Under the first approach, owners and operators would be required to
post information on a Web site created and maintained by the owner and
operator. EPA is considering this approach because, as those generating
the information, owners and operators are in the best position to track
information about their facilities. In addition,
[[Page 3410]]
requiring owners and operators to update information related to their
financial responsibility requirements would eliminate lag times between
when the information is submitted to EPA and when EPA can make that
information publicly available. Thus, EPA expects that requiring owners
and operators to create and maintain their own Web sites may be an
efficient way to ensure timely dissemination of information related to
CERCLA Sec. 108(b) financial responsibility.
The owner or operator would be required to establish a Web site
titled ``CERCLA Sec. 108(b) Financial Responsibility Information''
within sixty days of the date it first becomes subject to CERCLA Sec.
108(b) requirements to and provide EPA with the URL of the location on
its company Web site where it will make information available to the
public about the implementation of financial responsibility
requirements at the facility.
EPA would be required, within thirty days of receiving the URL, to
post on its Web site the facility name, company EPA identification
number, and the URL where information will be made available to the
public by the owner or operator.
The proposed rule would then require the owner or operator to
provide information on its company Web site beginning ninety days after
the date it becomes subject to requirements under CERCLA Sec. 108(b).
The initial posting of information must include the name and contact
information for a person that can provide the public information about
the facility's CERCLA Sec. 108(b) requirements. In addition to this
information, the rule would require the owner or operator to make
public at least the following information: (1) Any information that the
owner or operator is required to submit to EPA under this proposed
rule, and (2) notifications from EPA to the owner or operator .
This approach would also establish conditions for maintenance of
the information on the company Web site. For example, Sec. 320.9(e)
would require that the information be posted in a location where a
visitor to the Web site would reasonably expect to see announcement of
issues related to compliance with requirements of CERCLA. In addition,
that section would require that the owner or operator assure freely
available access to the information, and that the access not be
obstructed by complex access processes or passwords. The Agency
believes these requirements are necessary to assure meaningful access
to information.
To assure that current information is made available to the public,
this approach would require the owner or operator to post all
information submitted to EPA within thirty days of its submission.
Thus, for example, the rule would require the owner or operator to
submit to EPA the Initial Notification Form required under Sec. 320.5
within thirty days of the promulgation date of this rule, and to post
that form on the company's Web site within thirty days of submitting it
to EPA. By requiring that the owner or operator post information
submitted to EPA, the proposed rule will require that the Web site
information be updated at key financial responsibility implementation
points including: (1) When the level of financial responsibility
required at the facility is initially determined and when it changes,
(2) upon application for release from financial responsibility
requirements, (3) when a claim is made on the instrument, (4) upon
receiving notification of cancellation of an instrument, (5) upon
transfer of ownership of the facility, and (6) upon submitting notice
to a regulator of closure of the facility. The Agency believes that
this approach will allow the public or claimants the opportunity to
follow the implementation of financial responsibility requirements and
the facility and be aware of changes that occur.
Under the second approach proposed in this rule, the owner or
operator would not be required to post information on a Web site;
rather, EPA would make the required information available to the public
on the Agency's Web site.
EPA solicits comment on these approaches to providing notice to the
public regarding the CERCLA Sec. 108(b) financial responsibility at a
facility. EPA particularly solicits comment on whether the owner or
operator should be required to post information, what information would
be of most benefit to the public in the implementation of CERCLA Sec.
108(b) financial responsibility, and how the information would be used
for that purpose.
Class Determinations for Confidential Business Information
As discussed in section VI.A.3. of this preamble, some information
that owners and operators would be required to submit under this
proposed rule may be claimed as CBI. This proposal would not require or
allow posting of CBI. However, the Agency expects that much of the
information submitted to EPA under the proposal would not be CBI, and
could be made available. EPA is considering issuing a Class
Determination under 40 CFR 2.207 notifying parties how it intends to
treat information submitted under this rule. The purpose of a
Determination is to state the Agency's position regarding the manner in
which information within a class will be treated when information
received by the Agency shares characteristics and necessarily results
in identical treatment of the information. EPA expects that a Class
Determination would clarify the Agency position on what does and does
not constitute CBI under this rule. The Agency solicits comment on this
approach. In particular, the Agency requests information regarding what
the information that would be required under this proposed rule might
owners or operators consider to be CBI.
Finally, EPA notes that it is planning to develop a Financial
Responsibility Portal to receive and track financial responsibility
information. Ultimately, when developed and populated, the goal is for
that system to auto-populate an Agency public database and make
available to the public information submitted under this rule. EPA
solicits comment on whether, when the EPA public database becomes
available, the requirement for the owner or operator to maintain a Web
site should continue if that requirement is adopted in the final rule.
B. Subpart B--General Financial Responsibility Requirements
This proposed rule is designed to set up a regulatory program for
multiple classes of facilities. Thus, the proposed rule includes
several basic provisions that are intended to be used in conjunction
with the class-specific requirements in Subparts D-Z.
These requirements are intended to guide the regulated community
through the general requirements to establish the required evidence of
financial responsibility, and also provide requirements that EPA
anticipates will be applicable to multiple facility classes.
1. Applicable Financial Responsibility Amounts and Procedures for
Establishing Financial Responsibility (Sec. 320.20 and Sec. 320.21)
EPA has included a general requirement that owners and operators
calculate a current amount of financial responsibility at their
facilities in accordance with this part. Because this proposed rule
also includes requirements for hardrock mining classes, proposed Sec.
320.20 includes a cross reference to Table A-1 in Sec. 320.2, which
identifies the class-specific
[[Page 3411]]
requirements applicable to hardrock mining facilities. Those class-
specific requirements are found in subpart H, where the Financial
Responsibility Formula developed for those facilities is proposed. Upon
addition of future classes to the CERCLA Sec. 108(b) program, EPA
anticipates that additional cross references will be added to Table A-
1.
Each instrument included in the proposed rule has its own
particular supporting information. The specific instruments proposed in
this rule are further discussed in section VI.C.1. of this preamble.
2. Maintenance of Instruments (Sec. 320.22)
The proposed rule would require the owner or operator to
recalculate the financial responsibility level three years after the
date the facility is required to provide the full amount of financial
responsibility at its facility under Sec. 320.61, every three years
thereafter, and within sixty days after every successful claim against
a CERCLA Sec. 108(b) financial responsibility instrument. The
recalculation must use the most current facility information available.
The owner or operator must submit the revised financial responsibility
amount to EPA, along with supporting documentation.
Whenever the required financial responsibility amount changes, the
owner or operator would be required to compare the new amount with the
value of the financial responsibility instrument(s). If the resulting
amount of financial responsibility required is greater than the amount
of financial responsibility provided by the current CERCLA Sec. 108(b)
financial responsibility instrument(s), the owner or operator, within
sixty days after the change in the required financial responsibility
amount, would be required to increase the value of the instrument(s),
or obtain a new instrument(s), in accordance with Subpart C, so that
the value of the instrument(s) is at least equal to the newly required
financial responsibility amount. This proposed provision ensures that
adjustments to the required level are made promptly.
Conversely, if the resulting amount of financial responsibility
required is less than the amount of financial responsibility provided
by the current CERCLA Sec. 108(b) financial responsibility
instrument(s), the owner or operator may send a written request to the
Regional Administrator to lower the required financial responsibility
amount at the facility. The request must include updated information to
support the revised financial responsibility amount as required in
Sec. 320.22. The amount of financial responsibility required at the
facility would be reduced to the recalculated amount only with written
approval by the Administrator.
This provision would ensure that the owner or operator first
receive approval from EPA that the financial responsibility may be
lowered, which provides a check against improper implementation of the
requirements. Furthermore, under the proposed wording of the trust
agreement, EPA would need to provide notification to the trustee that
funds may be released (see Sec. 320.50(a)).
This proposed requirement is intended to ensure that the amount of
financial responsibility at the facility continues to reflect the level
of risk at the facility. EPA recognizes that facility conditions and
operations may change over time, or that new information may be
available that may affect the amount of financial responsibility
required. EPA thus is proposing a three-year periodic recalculation of
the required financial responsibility amount to ensure the amount
reflects the current risk at the facility. EPA expects that three years
was a frequent enough requirement to provide current information while
not overly burdening owners, operators and EPA with a more frequent
implementation of the recalculation requirements. EPA requests comment
on requiring recalculation of the amount of financial responsibility
every three years.
Furthermore, EPA recognized that claims against the instrument may
be successfully made that would correspondingly reduce the amount of
financial responsibility at the facility. In some cases, the claims may
be the result of responses that lower the risk at the facility.
However, this is not expected to always be the case. Accordingly, EPA
believes it is necessary for owners and operators to recalculate the
required amount of financial responsibility after successful claims
against the CERCLA Sec. 108(b) financial responsibility instruments in
order to compare the new required amount to the remaining financial
responsibility at the facility.
3. Incapacity of Owners or Operators, Guarantors, or Financial
Institutions; or Instrument Cancellation (Sec. 320.23)
Under this proposed rule, an owner or operator would be required to
notify the Administrator by certified mail of the commencement of a
voluntary or involuntary proceeding under Title 11 U.S.C. (Bankruptcy),
naming the owner or operator as debtor, within ten days after
commencement of the proceeding. [Option 2 only: A guarantor of a
corporate guarantee would be required to make such a notification if he
is named as debtor, as required under the terms of the corporate
guarantee. Those requirements are discussed in section VI.C.5. of this
preamble.]
This provision is modeled after a similar requirement in the
requirements for hazardous waste treatment, storage, and disposal
facilities at 40 CFR part 264 and 265. EPA believes it is important for
EPA to be made aware of the owner or operator entering bankruptcy, as
that event may have implications for the owner's or operator's ability
to meet financial obligations under CERCLA. Likewise, EPA believes it
is important for the Agency to be aware of situations where a guarantor
of a corporate guarantee is entering bankruptcy as it may have
implications for the guarantor's ability to meet financial obligations
under the guarantee.
An owner or operator who demonstrates CERCLA Sec. 108(b) financial
responsibility for CERCLA liabilities by obtaining a trust fund, surety
bond, letter of credit, or insurance policy would be deemed to be
without the required financial responsibility in the event of
bankruptcy of the trustee or issuing institution, or a suspension or
revocation of the authority of the trustee institution to act as
trustee or of the institution issuing the surety bond, letter of
credit, or insurance policy to issue such instruments. The owner or
operator would be required to provide other evidence of financial
responsibility within sixty days after such an event. This provision is
also modeled on existing RCRA Subtitle C requirements. As with those
regulations, EPA expects that this requirement will make clear what
must be done by the owner or operator when the institution providing
trustee services or issuing a bond, letter of credit, or insurance
policy goes bankrupt or loses its authority to act as a trustee or
issue such instruments.
4. Notification of Claims Brought Against Owners, Operators, or
Guarantors (Sec. 320.24)
The owner or operator would be required to notify the Regional
Administrator by certified mail, within ten days of a CERCLA claim
being filed against the owner or operator or financial responsibility
guarantor. The proposed rule also requires that this notification
include certain key information: a copy of any papers filed by the
claimant with a court, or other information allowing the Regional
Administrator to identify the court, case
[[Page 3412]]
name and number, and parties. This notification requirement would apply
to owners or operators regardless of the instrument they have elected
to use. This proposed notification requirement is important because EPA
will not, in many cases, be involved in the claims process against a
financial responsibility instrument. It is appropriate for EPA to
monitor potential claims because claims made may affect the adequacy of
the instrument provided under the regulations, because those claims may
reduce the amount available to below that which is required for that
facility class. In addition, EPA is also proposing these requirements
to apprise the Agency of potential issues at a site that could
ultimately lead to EPA or another governmental agency having to take a
response at the facility. This provision thus helps the CERCLA Sec.
108(b) requirements support the broader CERCLA response program.
5. General Provisions on Instrument Payment
In this section of the preamble EPA discusses generally the key
payment methods that are associated with each instrument. Proposed
Subpart B does not contain corresponding language. Instead, this is
contained in Subpart C of the proposed regulations, in the required
wording of each instrument. Instead of addressing these considerations
multiple times, however, EPA is presenting its approach to these common
provisions once in this section of this preamble.
Under this proposed rule, the funds from all types of financial
responsibility instruments except the financial test would be available
under three circumstances and also under direct action scenarios. In
essence, EPA has sought to allow for maximum flexibility in how the
instruments pay out through the payment terms. EPA believes this
approach will help integrate the operation of the CERCLA Sec. 108(b)
instruments into the various CERCLA enforcement and cleanup processes
and therefore will efficiently support the goal of ensuring that funds
be made available for the payment of CERCLA response costs, health
assessment costs, and natural resource damages.
It is EPA's intent that each payment term as well as direct action
be available independently of one another, and claimants may use any or
any combination of the terms as the circumstances dictate. Similarly,
use of one payment term by a particular claimant would not prevent its
reuse or use of another payment term by another claimant. Again, this
is to maximize flexibility in the manner in which the instruments can
be payable, to promote the goal of ensuring cleanup while avoiding
unnecessary litigation over whether the instruments are in fact
payable. EPA seeks comment on these proposed payment terms.
a. Payment of an Unsatisfied CERCLA Judgment
Under this proposed rule, the financial responsibility instruments
would be available to pay a final judgment from a Federal court
awarding CERCLA response costs, health assessment costs, and/or natural
resource damages associated with the facility against any of the
current owner or operators for which payment as required by the
judgment has not otherwise been made within thirty days. This is
intended to cover all types of CERCLA actions, including those under
CERCLA Sec. Sec. 107 or 113(f). This is also intended to cover
judgments in favor of both governmental claimants (e.g., EPA or another
Federal agency, a state, or an Indian tribe) as well as private
claimants. EPA solicits comments on this approach.
EPA is requiring that the claim be reduced to a final judgment
under this payment term for two reasons. First, this provision provides
court oversight to ensure the validity of the claims. This is important
because EPA or another regulatory agency may not be directly involved
in a particular cleanup. Second, the requirement to present a valid
final court judgment may help alleviate concerns of potential
instrument providers about instruments that could pay to multiple
potential claimants. In discussions with representatives of the
financial industry, certain representatives expressed concern that the
availability of the instruments to multiple claimants would either: (1)
Raise the risk to the instrument provider of fraudulent claims, or (2)
increase the potential claims management and investigation costs of
determining which claims are valid. While the preferred option of
several representatives of the financial community was to have EPA
specified as the beneficiary of the instrument, EPA had concerns with
such an option in the context of CERCLA Sec. 108(b) (see, for example,
discussion in Section VI.C.1. of this preamble in the section titled
``two letter of credit constructions''). Representatives did, however,
express greater comfort at a court having first ordered payment as that
would limit the prospect for fraudulent or specious claims against the
instruments. Further, having an objective documentary payment trigger
limits the amount of due diligence required on the part of the
instrument provider.
This payment provision also requires that the party may only make a
claim if they have not recovered or been paid the funds from any other
source. This is intended to provide further assurance to providers and
current owners and operators that the claims are valid and that the
claimant is not being paid twice for the same costs or damages.
It should be noted that EPA does not intend for this provision to
displace the standard manner in which CERCLA claims are brought and
resolved outside of the CERCLA Sec. 108(b) instrument. Claims can
continue to be asserted against the owner and/or operator in the first
instance, and EPA expects that in most instances, the owner or operator
would pay the claim itself, without resort to the instrument.\58\
Indeed, EPA expects owners and operators to continue to do so to the
extent they are able, in order to avoid the costs incurred in drawing
upon the instrument which in many cases would result in the provider
seeking to recoup those costs from the owner or operator. For example,
were a successful third-party CERCLA claimant to make a draw on a
CERCLA Sec. 108(b) letter of credit, the owner or operator would be
obligated to pay the financial institution that issued the letter of
credit for the amount paid under the instrument. Owners or operators
also have an obligation to reimburse the issuer of a surety bond for
payment made in accordance with the terms of the bond. The surety bond
issuer's right to reimbursement helps to ensure that it is the owner or
operator rather than the issuer of the surety bond that ultimately
bears the cost of fulfilling the CERCLA obligations owed to the
claimant. However, should the owner or operator fail to satisfy the
final judgment, the instruments are structured to become available to
the claimant within thirty days. EPA identified this time period based
upon current EPA settlement practice which typically provides thirty
days for performance to occur. EPA believes it provides adequate time
for payment to occur while not providing more time than under a
settlement scenario which may create a disincentive to settle. In this
role, the financial responsibility instruments serve as a backstop to
help assure that recovery will be successful.
---------------------------------------------------------------------------
\58\ Similarly, provision of financial responsibility under
CERCLA Sec. 108(b) by an owner or operator would not affect a
party's ability to make CERCLA claims against other potentially
responsible parties at a site.
---------------------------------------------------------------------------
[[Page 3413]]
b. Payment for a CERCLA Settlement With the Federal Government
Under this proposal, the financial responsibility instruments also
would be available to pay for a CERCLA settlement with agencies of the
Federal Government, including but not limited to administrative
settlements and consent decrees. Specifically, the instruments provide
for payment to the Administrator or another authorized Federal agency
if payment has not been made as required by a CERCLA settlement
associated with the facility with a current owner or operator. EPA's
current CERCLA model settlements often include a financial
responsibility component to ensure that funds are available, should the
respondent fail to perform. EPA expects that future settlements could
rely on an owner or operator's CERCLA Sec. 108(b) instrument for this
purpose if the settling parties agreed to employ the instrument in this
manner. EPA expects to review and, if necessary, modify its existing
models to account for the possibility that CERCLA Sec. 108(b)
instruments could be used to assure the work required by future
settlements. Additionally, some settlements are structured on a ``cash
out'' basis, where the respondent is not doing work, but is instead
resolving liability as a lump-sum payment to the United States. EPA's
intent is for this payment term to function in any of these settlement
scenarios. Such payments, in the case of settlements with EPA, would be
expected to be made into the Superfund and/or a CERCLA special
account.\59\ For settlements with other Federal government agencies
acting pursuant to delegated CERCLA authority, such as the Bureau of
Land Management, the payments would be made pursuant to the terms of
the settlement.
---------------------------------------------------------------------------
\59\ EPA retains money received through settlements with
potentially responsible parties in site-specific ``special
accounts'' to conduct planned future cleanup work at a site based on
the terms of a settlement agreement. These special accounts are sub-
accounts within the Superfund.
---------------------------------------------------------------------------
Again, EPA does not intend for this provision to displace the
standard manner in which CERCLA claims are brought and resolved outside
of the CERCLA Sec. 108(b) instrument. Federal agency claims may
continue to be asserted against the owner and/or operator, where
appropriate, and the parties would remain free to settle those claims
as they determine appropriate under the circumstances. EPA expects that
in most instances, the owner or operator would make the payment
required in the settlement directly, in order to avoid the costs
incurred in drawing upon the instrument which may result in the owner
or operator incurring costs as discussed earlier. However, should the
owner or operator fail to make payment as provided in a settlement, the
instruments are structured to become available for payment to (an)
authorized Federal government agency(ies).
EPA is proposing including this term for several reasons. First,
the Agency intends to make express provision for settlement
accomplished under direct Federal oversight to assure that any
necessary response actions are completed in a manner that protects
human health and the environment. Such a provision would provide the
flexibility for payment into special accounts under CERCLA Sec.
122(b)(3), when appropriate as determined in the particular settlement,
in order to provide an avenue for settlement funds to be used at a
particular site. This provision also would allow for money recovered by
the Federal Government to be deposited back into the Superfund Trust
Fund under 26 U.S.C. 9507(b). EPA expects that this payment term would
therefore provide a further incentive for owners and operators to
undertake necessary CERCLA response actions at their sites or otherwise
settle their liabilities without protracted litigation, even where
their ability to pay for such a settlement would otherwise be limited.
In this role, the instruments would help promote the goal of CERCLA
Sec. 108(b) to support CERCLA's ``polluter pays'' principle.
As noted earlier, this payment term is independent of other payment
terms. Thus for example, in the absence of any settlement, the
instruments could be made available upon obtaining a CERCLA judgment.
Similarly, this would not affect settlements between non-Federal
parties and owners and operators. Such settlements could also proceed
under the payment term discussed in the previous subsection, but would
require court approval and reduction to a CERCLA judgment for costs.
EPA solicits comment on this approach.
c. Payment Into a Trust Fund Established Under a Unilateral
Administrative Order
This proposal would also allow the financial responsibility
instruments to pay into a trust fund established pursuant to a
unilateral administrative order under CERCLA Sec. 106(a) under certain
circumstances. Specifically, under the proposal, the Administrator or
another Federal agency may make a claim against the instrument
requesting payment into a trust fund established pursuant to a CERCLA
unilateral administrative order issued to a current owner or operator
if performance at the facility as required by the order had not
occurred. The proposed rules also provide that the Administrator or
another Federal agency may only make the claim against the instrument
if the owner or operator has provided a written statement that the
instrument may be used to assure the performance of the work required
in the order.
These provisions of the proposed rule are intended to complement
existing EPA model orders. Under EPA's existing models, EPA requires
recipients to provide evidence of financial responsibility to ensure
that funds will be available to complete the work, should the recipient
fail to perform as required under the unilateral administrative order.
In essence, the owner or operator chooses the instrument to comply with
the financial responsibility provisions of the order. EPA expects to
review and, if necessary, modify its existing model administrative
orders to account for the possibility that CERCLA Sec. 108(b)
instruments could be used to assure the work required by future
unilateral administrative orders. EPA believes that this approach would
provide owners and operators the maximum amount of flexibility to use
the CERCLA Sec. 108(b) instrument, should they become subject to a
unilateral administrative order.
d. Payment Through the Direct Action Provision
Finally, CERCLA Sec. 108(c)(2) contains a ``direct action''
provision, under which claims can be brought against the guarantor,
instead of against the owner or operator, as in the case of the other
payment triggers discussed earlier. CERCLA Sec. 108(c)(2) generally
provides that any claim authorized by CERCLA Sec. Sec. 107 or 111 may
be asserted directly against the provider of the financial
responsibility instrument in situations where the owner or operator is
in bankruptcy or is unavailable. In addition, CERCLA Sec. 108(d)(1)
generally provides that the total liability of any guarantor in a
direct action suit is limited to the aggregate amount of the monetary
limits of the policy of insurance, guarantee, surety bond, letter of
credit, or similar instrument obtained from the guarantor by the person
subject to liability.
The proposed CERCLA Sec. 108(b) instruments are intended to
account for direct actions authorized by these provisions. Where an
owner or operator is bankrupt or unavailable, there is uncertainty
around a claimant's ability to obtain a judgment. Thus, the ability
[[Page 3414]]
to take direct action against the financial responsibility instrument
may be critical for assuring that funds will be made available for
necessary cleanup.
The direct action provisions of the statute received attention
during meetings EPA held with representatives of financial institutions
that provide financial instruments or services being considered for use
in the proposed rule. Information on these meetings is available in the
docket for this proposed rule (Docket No. EPA-HQ-SFUND-2015-0781).
Specifically, EPA asked representatives how the direct action provision
may affect their willingness to provide instruments for the CERCLA
Sec. 108(b) rule. Financial industry representatives indicated that
providers' willingness to issue instruments was impacted by the
availability of direct action and the potential scope of claimants,
although to varying degrees across the instruments. With the exception
of insurance providers, financial instrument providers expressed some
degree of aversion to the direct action provision.
Representatives of the insurance industry informed the Agency that
the industry is familiar with direct action because it is required
under some state insurance laws. Insurance providers indicated that
direct action would not generally have an effect on market
participation.
Representatives from the surety industry had a mixed reception to
the direct action provision. Sureties typically have some ability to
step into the shoes of the owner or operator to perform or fulfill the
obligation insured by the bond. Sureties have experience stepping into
the shoes of an owner or operator and thus had some level of comfort in
assuming the owner or operator's responsibilities in negotiating a
settlement for CERCLA response costs, health assessment costs, and
natural resource damages on behalf of the facility. However, surety
representatives were concerned about the risk of direct action
attracting class action suits and suits from environmental groups who
did not have valid claims. The representatives also communicated
concern over legal fees incurred in responding to numerous invalid
suits.
Members of the banking community who issue or are expert in letters
of credit or serve as trustees expressed great concern about the direct
action provision. Letter of credit specialists asserted that direct
action would be out of the realm of the typical responsibilities of a
bank providing letters of credit. In fact, EPA was told that banks in
their role as issuers of letters of credit can only be subject to suit
if they do not complete the obligation to pay according to the
specifications of the letter of credit.
Banking institutions that serve as trustees expressed that trust
institutions would not participate in a program where the institution
can be subject to any liability. Trustees also communicated that there
is a distinction between a trust and the trustee--the trust itself
holds the financial assurance, whereas the trustee executes the trust
agreement in order to manage the instrument. Following this argument
trustees suggested that the trust itself might qualify as a CERCLA
``guarantor'' and therefore direct action could be applied against the
trust itself. Trustees stated that the possibility of liability on the
trust institution would greatly and negatively impact their
participation in providing trustee services to facilities subject to
the proposed rule.
While the ability to bring a direct action against a guarantor is
created by the statute itself, EPA has nonetheless sought to address
the major issues raised by the financial community to the extent
possible, in development of the proposed rules. EPA has included
language in the instruments that mirror the terms of the direct action
provision, specifically referring to claims authorized by CERCLA
Sec. Sec. 107 or 111.
EPA has also sought to lessen the perceived barriers for
participation of banks issuing letters of credit and trustee
institutions acting as guarantors. Specifically, EPA is proposing two
structures for use of a letter of credit--first a letter of credit
payable directly to claimants, and second a letter of credit held and
managed by a trust fund. The owner or operator could choose either
option. In the second arrangement the trustee would have direct access
to draw on the letter of credit to satisfy the claims. EPA intends for
this arrangement to address concerns about direct action claims for
letters of credit, because claimants would bring those claims to the
trust fund holding the letter of credit, instead of the letter of
credit provider. In addition, EPA has structured the trust fund
instrument with the express intent that direct action would be taken
against the trust fund itself, not the trustee. This is intended to
address concerns about potential trustee liability from their role as
trustee under the trust agreement. Section 3 of the proposed trust
agreement states explicitly that the trust Grantor and Trustee do not
intend for the Trustee to qualify as a ``guarantor'' as that term is
used in CERCLA Sec. Sec. 101(13) and 108(c)(2), and therefore intend
that the Trustee will not be subject to a direct action by Trustee's
agreement to act as Trustee for the trust fund. The proposed trust
agreement further states that the Grantor and Trustee intend for the
trust fund to qualify as a ``guarantor'' as that term is used in CERCLA
Sec. Sec. 101(13) and 108(c)(2), and therefore intend that only the
trust fund will be subject to any direct action brought pursuant to
CERCLA Sec. 108(c)(2). The trust agreement provides further that any
claim authorized by Sec. Sec. 107 or 111 of CERCLA may be asserted
directly against the trust fund as provided by CERCLA Sec. 108(c)(2)
subject to the limitations in CERCLA Sec. 108(d). Stand-alone, funded
trusts are structured similarly. The proposed structure of the trust
fund is discussed in more detail in VI.C.6 of this preamble. EPA seeks
comment on the effectiveness of this structure for the proposed trust
and letter of credit to increase the likelihood that a bank or trustee
institution will issue letters of credit or agree to be a trustee under
the proposed regulations.
EPA recognizes that the direct action provision is an important and
potentially unfamiliar feature to potential instrument providers, and
the Agency requests comment on how its function in practice may affect
the availability of instruments.
6. Facility Transfer (Sec. 320.25)
This proposed rule would require that the owner or operator subject
to the rule maintain financial responsibility in accordance with part
320 upon transfer of ownership, in whole or in part, to a new owner, or
upon transfer of operations to a new operator, until the Administrator
releases the previous owner or operator. EPA would provide a release to
the former owner or operator upon the new owner or operator's
demonstration of financial responsibility in accordance with this
proposed rule.
These requirements assure continuity of financial responsibility
coverage and prevent circumvention of the requirements by changes in
facility ownership or operation. The Administrator's release of the old
owner and operator would not affect the old owner's and operator's
liability under CERCLA, only their responsibility to maintain financial
responsibility for the facility under Part 320. EPA solicits comment on
these requirements.
7. Notification of Cessation of Operations (Sec. 320.26)
Section 320.26 requires a facility owner or operator to notify the
Administrator thirty days prior to either the date the facility will no
longer be authorized to operate or the date the owner or operator is
required under
[[Page 3415]]
another applicable regulatory program to notify the relevant regulatory
authority that the facility is ceasing operations, whichever is
earlier. This requirement provides EPA notice of upcoming changes at
the facility that will likely affect the level of required financial
responsibility under CERCLA Sec. 108(b). EPA solicits comment on this
requirement.
The proposed rule provides that CERCLA Sec. 108(b) requirements
continue until EPA releases the owner or operator from such
obligations. Thus, closure of a facility would not, in and of itself,
trigger release from requirements under proposed part 320. Owners or
operators of closed facilities would be required to maintain financial
responsibility instruments until CERCLA Sec. 108(b) obligations are
released by EPA. In developing this proposed rule, the Agency has
considered whether some financial responsibility instruments might be
better suited than others where the owner or operator no longer is
operating the facility. For example, EPA has considered whether owners
or operators should be able to continue to use a financial test to
provide financial responsibility where they are no longer operating the
facility, or whether financial responsibility should be converted to a
trust instrument at facilities where obligations continue after the
facility ceases operation. EPA has not identified any reasons to
restrict the options for instruments, and is therefore proposing that
the same instruments available to owners and operators of operating
facilities would continue to be available to owners and operators of
facilities that cease operation. However, EPA solicits comment on the
reliability of instruments where an owner or operator is no longer
operating a site.
8. Release From Financial Responsibility Requirements (Sec. 320.27)
Under this proposed rule, owners or operators and operators subject
to CERCLA Sec. 108(b) requirements under part 320 would remain subject
to those requirements until released by EPA. Thus, those obligations
would continue regardless of the operating status of the facility.
Proposed Sec. 320.25 discussed earlier provides for release of the
owner or operator from its obligations under part 320 upon transfer of
ownership of the facility, or transfer of operations of the facility,
where the new owner or operator provides evidence of financial
responsibility that satisfies the requirements of this proposed rule.
Where release from the regulations is not accompanied by a transfer of
the regulatory obligation to maintain CERCLA Sec. 108(b) financial
responsibility, EPA is proposing a different process that reflects the
final nature of the determination. EPA also explains the importance of
this determination in its discussion of the public involvement
requirements in proposed Sec. 320.9.
Proposed Sec. 320.27 provides that the owner or operator may
petition to be released from its CERCLA Sec. 108(b) obligations by
submitting a request to the Administrator. The request must include
evidence demonstrating that the degree and duration of risk associated
with the production, transportation, treatment, storage and disposal of
hazardous substances is minimal. The opportunity provided in Sec.
320.27 is not intended to provide for adjustments of financial
responsibility levels, but is intended to be limited to decisions to
release the owner or operator from CERCLA Sec. 108(b) requirements.
Thus, owners or operators that cannot demonstrate minimal levels of
risk at the facility would not be eligible to petition the Agency under
this provision. A demonstration of minimal levels of risk at the
facility is important because following the owner's and operator's
release from the CERCLA Sec. 108(b) requirements financial
responsibility would not be available if needed at a later date. Upon
receiving such request, proposed Sec. 320.27 provides that the
Administrator would evaluate facility information, including the
information submitted by the owner or operator, regarding the degree
and duration of risk associated with the production, transportation,
treatment, storage, and disposal of hazardous substances at the
facility, and make a determination regarding the owner or operator's
request.\60\
---------------------------------------------------------------------------
\60\ Note that the proposed rule does not limit the ability of
the Administrator to take other measures (for example, under the
authority of CERCLA Sec. 104) if appropriate, to obtain relevant
information.
---------------------------------------------------------------------------
If the Administrator determines that the degree and duration of
risk associated with the production, transportation, treatment,
storage, and disposal of hazardous substances at the facility is
minimal, and that the facility should therefore be released from CERCLA
Sec. 108(b) requirements, the Administrator would follow the
procedures described in Sec. 320.9 to involve the public in the
decision. Under those procedures, EPA would post the draft decision on
the Agency's Web site, provide the public opportunity to comment on the
decision, and post the Agency's final decision, and response to
comments received, on the EPA Web site.\61\
---------------------------------------------------------------------------
\61\ It should be noted that any release from CERCRA Sec.
108(b) obligations does not affect the ability of the Federal
Government to make a CERCLA claim.
---------------------------------------------------------------------------
If, on the other hand, the Administrator determines that the degree
and duration of risk associated with the production, transportation,
treatment, storage, and disposal of hazardous substances is not
minimal, the Administrator would not release the owner or operator from
the requirement to maintain financial responsibility in accordance with
this part. Section 320.9 provides that upon a finding that the owner or
operator should not be released from financial responsibility
requirements, the Administrator would provide notice of the Agency's
final decision, and response to comments received, and will provide the
owner or operator with written notice of its decision. EPA is
considering whether to make these available through EPA's Web site, or
alternatively through traditional Federal Register notices. EPA
solicits comment on this approach, and method of public notice.
The Agency is proposing not to initiate a public involvement
process in cases where the Agency decides to deny the request of the
owner or operator to release its financial responsibility obligation.
In these cases, the obligation to maintain financial responsibility
continues, and thus continues to be available should CERCLA liabilities
arise. Thus, EPA does not see any benefit for public comment in these
situations. EPA solicits comment on this approach.
EPA is proposing a site-by-site evaluation of facility risk for
decisions to release an owner or operator from CERCLA Sec. 108(b)
requirements for a number of reasons. First and foremost, EPA has not
identified a set of circumstances that if followed, would allow it to
determine on a national basis that every facility across the country
would demonstrate a minimal degree and duration of risk. Moreover, EPA
has substantial experience making individualized determinations of site
risk, as this practice is consistent with EPA's practice under the
Superfund program, for example, in selecting remedies under the NCP.
EPA solicits comment on the proposed approach to releasing owners or
operators from CERCLA Sec. 108(b) financial responsibility
requirements.
The proposed rule also provides that owners or operators may
petition the Administrator for a renewed determination regarding its
continued
[[Page 3416]]
requirement to maintain financial responsibility. The Administrator
will consider a petition for a renewed determination only when it
presents new and relevant information not previously considered by the
Administrator.
While beyond the scope of this rulemaking, EPA notes in the
interest of transparency that EPA and the owner or operator might, in
some cases, elect to enter into a CERCLA settlement regarding the
facility. The work provided for in such a settlement, depending upon
its scope, may provide the basis for a renewed determination by the
agency that results in a release from part 320.
Finally, EPA recognizes that in some instances, facilities may be
located in locations under the jurisdiction, custody or control of
another Federal agency. In that instance, EPA will work with the other
agencies to gather the necessary information for it to make a
determination on whether to release an owner or operator from the
requirements of part 320.
C. Subpart C--Available Financial Responsibility Instruments
Under this proposed rule, an owner or operator would have to
establish financial responsibility by obtaining one or a combination of
mechanisms as specified in proposed subpart C. CERCLA Sec. 108(b)(2)
states that ``financial responsibility may be established by any one,
or any combination, of the following: Insurance, guarantee, surety
bond, letter of credit, or qualification as a self-insurer. In
promulgating requirements [under CERCLA Sec. 108(b)], EPA is
authorized to specify policy or other contractual terms, conditions, or
defenses which are necessary, or which are unacceptable, in
establishing such evidence of financial responsibility in order to
effectuate the purposes of [CERCLA].''
EPA is proposing to establish required wording for all of the
instruments (including the financial test and corporate guarantee) for
several reasons. By specifying the instrument terms, EPA reduces the
administrative burden to the Agency of reviewing the wide range of
potential instrument wording that may otherwise be employed. EPA does
not wish to create a situation where resources that otherwise would
have been devoted to cleanups would be expended reviewing the myriad
possible instrument constructions. EPA is also specifying the terms of
the instruments so that they operate in a manner that integrates the
CERCLA Sec. 108(b) instruments into the overall CERCLA scheme and are
uniformly enforceable by the Agency or other parties seeking
compensation for costs and damages. Third, EPA's RCRA Subtitle C,
subpart H financial assurance requirements (see 40 CFR 264.151)
similarly specify the required wording of the instruments and EPA has
found this to be a beneficial feature. Fourth, EPA has received comment
as it developed this proposal from stakeholders that the RCRA Subtitle
C instruments are well-understood by regulated entities and the
financial industry. Without nationally-consistent provisions, EPA does
not expect that a similar familiarity with the CERCLA Sec. 108(b)
regulations would be as likely to develop.
Those same commenters suggested that EPA use the RCRA Subtitle C
regulations as the basis for its proposed CERCLA Sec. 108(b)
instruments because those instruments are well-developed and understood
by regulators, the regulated community, and the financial-services
industry. This proposal does in fact use the instruments specified in
the RCRA Subtitle C, subpart H regulations as the model from which EPA
developed its proposed CERCLA Sec. 108(b) instruments, in part, for
that reason.\62\ EPA discusses particular provisions adapted from these
RCRA regulations in its discussions of individual instruments later in
this preamble, as well as new aspects necessitated by the CERCLA 108(b)
rule structure. In addition, this proposal reflects some of the lessons
EPA has learned in administering the RCRA Subtitle C financial
assurance program. For example, to ease administration EPA is proposing
that contact information for key parties (e.g., the EPA, the
representative of the financial institution) be identified in the
instruments to facilitate the notification requirements and other
necessary communication. More information on the required wording of
the instruments and the rationale for such wording is in the background
document entitled ``Potential Requirements for Insurance, Surety Bonds,
Letters of Credit, and Trust Agreements and Standby Trust Agreements
under CERCLA Section 108(b),'' which is in the docket for this proposal
(Docket No. EPA-HQ-SFUND-2015-0781). EPA requests comment on the
proposed wording of the financial responsibility instruments including
the proposed required documentary conditions required to make a claim
under several of the instruments.
---------------------------------------------------------------------------
\62\ EPA is not, however, reopening the RCRA Subtitle C, Subpart
H regulations by this proposal, nor will EPA respond to comments
related only to those regulations.
---------------------------------------------------------------------------
1. Letter of Credit (Sec. 320.40)
An owner or operator would be able to satisfy the requirements of
this section by obtaining an irrevocable standby letter of credit in
accordance with the proposed requirements of Sec. 320.40 and the
proposed wording of Sec. 320.50(b). A letter of credit is an
independent agreement by the issuer (e.g., a bank) to pay up to a
specified amount to parties upon the presentation of certain documents
on behalf of its customer. Through a letter of credit, the bank
provides assurance that the CERCLA response costs, health assessment
costs, and natural resource damages for which the owners and operators
are responsible would be paid. The financial strength of the bank would
backstop that of the owner and operator, reducing the credit risk to
potential claimants. EPA requests comment on the required wording and
specification of the letter of credit in this proposed rule.
Issuer Eligibility (Sec. 320.40(a))
The issuing institution would be required to be an entity that has
the authority to issue letters of credit and whose letter of credit
operations are regulated and examined by a Federal or state agency.
These proposed requirements ensure that the letter of credit operations
are overseen by a regulator, a requirement that EPA intends to help
protect against failure of the issuing institution by ensuring that the
operations are regularly examined (e.g., lending limits are being
observed). This requirement is the same as that in the RCRA Subtitle C
financial assurance requirements for closure and post-closure care,\63\
which EPA believes has worked well, and would be familiar to the
regulated community and to the Agency. EPA considered additional
qualifications for banks providing letters of credit but is today
proposing the same qualifications as are required in the Subtitle C
regulations. Some of the alternative criteria considered were minimum
ratings from a rating agency or differentiating between state or
nationally chartered institutions. Additional information on the
consideration of alternative provider qualifications is in the
background document titled ``Potential Issuer Eligibility Requirements
for Insurance, Surety Bonds, Letters of Credit, and Trust Agreements
and Standby Trust Agreements under CERCLA Sec. 108(b).'' EPA is
proposing a standard similar to
[[Page 3417]]
the Subtitle C standard so as to not unduly constrain supply because
additional requirements beyond the existing framework of Federal and
state examination and regulation would limit the pool of available
providers and also to avoid the administrative burden on EPA of
verifying additional qualifications.
---------------------------------------------------------------------------
\63\ See 46 FR 2826, January 12, 1981
---------------------------------------------------------------------------
The Institute of International Banking Law and Practice (IIBLP)
suggested to EPA that the minimum issuer qualifications may be improved
by specifying that the institution must be one that ``regularly issues
standby letters of credit.'' IIBLP's stated intent of the recommended
specification was to align the EPA requirement with the Uniform
Commercial Code \64\ (UCC) Sec. 5-108(e) that obligates issuers to
observe the standard practice of ``financial institutions that
regularly issue letters of credit''. However, such a provision would
require EPA to determine what constitutes regularly issuing letters of
credit and would increase the administrative burden of implementation.
Because the UCC would apply in the background as state law the Agency
does not expect it is necessary to include such a requirement in the
proposed regulations, and so is not proposing such a requirement.
---------------------------------------------------------------------------
\64\ The Uniform Commercial Code (UCC) is a comprehensive code
of law addressing commercial transactions in the United States
created to serve as a model for state adoption. Use of standby
letters of credit is governed by state laws that track Article 5 of
the UCC.
---------------------------------------------------------------------------
Required Standardized Wording (Sec. 320.40(b))
EPA is proposing required wording of the letter of credit. The
proposal would require that instruments be worded identically to the
language proposed in Sec. 320.50(b) of this proposed rule, except that
the instructions in brackets would be replaced with the relevant
information and the brackets deleted. The IIBLP also suggested that EPA
should allow for greater flexibility to accommodate confirmations,
other parties obtaining the letter of credit or state variations.
Specifically, IIBLP recommended that the letter of credit wording be
``substantially in accordance with'' the specified instrument language.
While flexibility may help accommodate a wider range of circumstances,
EPA has found in its financial assurance programs that standardized
wording is generally acceptable to providers, and provides significant
benefits. Most significantly, standardized wording saves EPA staff from
having to review and assess the myriad variations in instrument wording
that may arise, which the Agency may not have the technical expertise
to readily undertake. However, EPA requests comment on whether specific
additional aspects of the proposed wording could benefit from
additional flexibility. Specifically, EPA requests comments on
additional variations that should explicitly be provided for in
brackets that may improve the effectiveness of the proposed letter of
credit specifications.
Two Letter of Credit Constructions (Sec. 320.40(b)-(d))
The proposed required wording provides for two separate letter of
credit constructs--one in which the letter would be issued in favor of
any and all third-party CERCLA claimants and one in which the letter of
credit would be issued in favor of the trustee of a trust fund
established by an agreement worded identically to the language for the
proposed trust fund. EPA is proposing to allow for two possible letter
of credit constructions based on feedback the Agency received during
discussions with the banking community. Providing both options enhances
flexibility and is consistent with the RCRA third-party liability
program where a similar letter of credit arrangement is employed.\65\
---------------------------------------------------------------------------
\65\ See 40 CFR 264.151(k)
---------------------------------------------------------------------------
The first option for a letter of credit is for it to be issued in
favor of any and all third-party CERCLA claimants. Under this
arrangement, parties seeking payment from the letter of credit for
CERCLA claims against the current owners or operators of the facility
would be able to make claims by presenting the necessary documents
directly to the issuing institution. This would provide a streamlined
approach for paying claims and may entail lower fees and expenses than
the second option. EPA intends for the CERCLA 108(b) instruments to be
available to any potential CERCLA claimant. Given that the identity of
potential claimants is both difficult to ascertain at a given point and
because they may change over time, EPA is concerned that attempting to
name particular beneficiaries would be unworkable. For example, EPA
would be unable to determine in many cases what claims made by what
parties would arise. In addition, EPA wishes to avoid a claims
administration role that could result if EPA were the named
beneficiary. EPA is concerned about the resources that would be
necessary to assess the merits of and make all CERCLA claims that may
be made against the instruments nationwide. Such a role would have the
potential to redirect Superfund programmatic resources away from
cleanups and other high priority activities to assessing claims at
facilities where EPA may not otherwise have been involved or considered
a priority. Further, in instances where EPA is involved, EPA may be a
claimant. EPA was concerned that the Agency may be placed in the
awkward position of administering and prioritizing claims in that
situation. Finally, EPA is concerned that specifying EPA as the
beneficiary of the instruments may be inconsistent with the direct
action provision and preclude other claimants from taking direct
actions against the instruments as provided by 108(c)(2).
At the same time, several industry representatives expressed their
concerns about the possibility of such a wide range of potential
claimants who could not possibly be ascertained at the time the letter
of credit is established. Instead, these representatives indicated a
strong preference for a named beneficiary.
In light of this feedback, and because EPA does not intend to
restrict options such that institutions may be unwilling to issue
letters of credit, EPA is also proposing letter of credit language that
would provide the option for the letter of credit to be issued in favor
of a single named beneficiary, specifically the trustee of a trust fund
that would be established pursuant to the proposed trust fund
regulations. In this case, the letter of credit would authorize the
trustee to make draws on the letter of credit to administer the claims
process for CERCLA response costs, health assessment costs, and natural
resource damages in accordance with the terms of the trust agreement.
Parties seeking payment from the letter of credit for CERCLA claims
against the current owners or operators of the facility would be able
to present claims against the trust fund in accordance with the
proposed trust agreement language. The trustee would, upon receipt and
review of the required documents, accordingly make a draw on the letter
of credit and provide the claimant with payment.
This latter option also appears to provide other advantages. First,
letter of credit issuers indicated to EPA that this option is more
consistent with commercial practice. Second, representatives of trustee
institutions expressed a high level of comfort and willingness to
provide such administrative services over a letter of credit. Third,
the trust fund itself could be the subject of any direct actions
authorized by CERCLA Sec. 108(c). Accordingly, in this proposal, the
language acknowledging that direct action claims may be brought against
[[Page 3418]]
the issuing institution is required only for letters of credit issued
in favor of any and all third-party CERCLA claimants, and is not
required for those letters of credit issued in favor of a trustee.
Considerations regarding the direct action provisions are discussed in
more detail in section IV.B.5. of this preamble.
Even with these advantages, EPA expects that the principal
disadvantage in having the trustee hold the letter of credit and
channel claims through the trust fund is that it will result in higher
trustee expenses and fees in comparison with the letter of credit
issued in favor of any and all third-party CERCLA claimants. This is
because the trustee would need to hold the letter of credit and review
the documents presented as part of the claims process to determine
whether payment was merited under the terms of the trust. EPA is
proposing nevertheless to offer such an arrangement in order to provide
additional flexibility in compliance options for the owners and
operators subject to the rule as well as offer an option that the
Agency has been told is more consistent with commercial practice.
EPA considered a third possible letter of credit option. Under this
option, EPA would be the named beneficiary of the letter of credit and
would administer the claims process but would require that the letter
of credit provide for assignment of proceeds to other parties as
identified by EPA. EPA recognized that this approach may provide the
familiarity of a named beneficiary for issuers of letters of credit and
may reduce trustee expenses because they would not need to provide a
custodial service over the standby letter of credit. However, as
discussed earlier in this preamble section, EPA's concerns about
administering the claims process has led EPA not to include provisions
for this option in this proposal. However, EPA solicits comment on this
option.
Finally, the proposed rule also includes specific information
submission requirements in proposed Sec. 320.40(c) and (d). Where the
beneficiary is a trustee, the original letter of credit would be held
by the trustee as part of the trust fund property. A certified copy of
the letter of credit would be required to be submitted to the
Administrator. In addition, the owner or operator would be required to
submit the original letter to the trustee authorized to make draws on
the letter of credit, and then submit to the Administrator an
acknowledgment of receipt of the letter of credit by the trustee.
Submission of this information to EPA is intended to assist the Agency
in monitoring compliance as part of its program oversight role.
If the letter of credit is issued in the favor of any and all
third-party CERCLA claimants, under proposed Sec. 320.40(d) the
original letter of credit would be submitted to EPA, also to assist the
Agency to monitor compliance.
Requirement To Establish a Trust Fund, Automatic Extension and
Irrevocability Provisions of the Letter of Credit (Sec. Sec. 320.40(e)
Through (f) and (k) Through (l))
Standby letters of credit are typically issued for specific, finite
periods of time although they may automatically extend provided the
issuer has the right to allow the credit to expire. In developing this
proposal, one consideration for EPA was how to assure funds would be
available when necessary. One consideration with the letter of credit
was that the issuer may wish not to extend the letter of credit at some
point potentially leaving the owner or operator without the required
evidence of financial responsibility. EPA was concerned that the
decision not to extend a letter of credit may occur at a time when the
owner's or operator's finances were in decline at which point the
ability of the owner or operator to obtain alternate financial
responsibility may be constrained. To ensure continuity of financial
responsibility coverage EPA is proposing a suite of regulatory
provisions intended to provide strong assurance that funds would be
available when necessary.
First, an owner or operator who uses a letter of credit to satisfy
the requirements of this regulation would also be required to establish
a trust fund and update Schedule A of the trust agreement within sixty
days after a change in the amount of CERCLA Sec. 108(b) financial
responsibility. The requirement to establish a trust fund is included
regardless of whether the letter of credit is issued in favor of all
third-party CERCLA claimants, or in favor of the trustee of a trust
fund. EPA is proposing to require that a trust fund either hold the
letter of credit or be established alongside the letter of credit to
provide a repository for funds drawn from the letter of credit in
instances where the issuing institution declines to extend the letter
of credit and the owner or operator fails to obtain replacement
financial responsibility.
This standby trust fund would be worded identically to the proposed
trust fund language (see Sec. 320.50(a) for the proposed wording of
the trust agreement) and would meet the same requirements specified for
the trust funds (see Sec. 320.45 for proposed trust fund regulations)
with two exceptions. The first is that an originally signed duplicate
of the trust agreement would be submitted to the Administrator with the
original or the certified copy of the letter of credit. The second is
that, unless the standby trust fund was funded pursuant to the
requirements of this part including holding a letter of credit as
specified in Sec. 320.40 and described earlier, the following would
not be required: (1) Payments into the trust fund as specified in Sec.
320.45; (2) annual valuations as required by the trust agreement; and
(3) notices of payment as required by the trust agreement.
Second, EPA is proposing that the letter of credit must be
irrevocable and issued for a period of at least one year. Without this
provision the letter of credit could potentially be withdrawn or
modified for any reason and at any time by the issuer unilaterally,
without notification to the current owner or operator. With this
provision, the owner or operator, third-party CERCLA claimants, and EPA
are assured of at least one year of coverage.
Further, EPA is proposing that the letter of credit must provide
that the expiration date would automatically be extended for a period
of at least one year unless, at least 120 days before the current
expiration date, the issuing institution notifies the owner or
operator, the trust fund trustee (if the letter of credit is held by
the trustee) and the Administrator by certified mail of a decision not
to extend the expiration date. Under the terms of the letter of credit,
the 120 days would begin on the date when the owner or operator, the
trust fund trustee (if the letter is issued in favor of the trustee),
and the Administrator have received the notice, as evidenced by the
return receipts. This proposed automatic extension provision would help
to ensure that coverage continues. Combined with the irrevocability
provision, the owner and operator, EPA and other third-party CERCLA
claimants can be assured of continuous coverage unless notified by the
issuing institution.
As a final proposed provision to ensure continuity of coverage, the
proposed rule would provide for the possibility for the letter of
credit to fund the trust fund in one of two ways if the letter of
credit were not extended. The first way would apply when the letter of
credit is issued in favor of any and all third-party CERCLA claimants.
In that scenario, if the owner or operator did not establish alternate
financial responsibility as specified in this proposed rule and obtain
written
[[Page 3419]]
approval of such alternate financial responsibility from the
Administrator within ninety days after receipt of a non-extension
notice by the owner or operator and the Administrator, the
Administrator would draw on the letter of credit if the letter of
credit is issued in favor of any and all third party CERCLA claimants.
The issuing institution would then deposit the unused portion of the
credit into the standby trust. The second way would apply when the
letter of credit is issued in favor of the trust fund trustee. In such
scenarios, if the owner or operator did not obtain alternate financial
responsibility and obtain written approval of such alternate financial
responsibility from the Administrator within ninety days after receipt
of a non-extension notice by the owner or operator, the Administrator
and the trustee, the Administrator would inform the trustee that the
owner or operator had not established alternate financial
responsibility. This would prompt the trustee to draw on the letter of
credit and deposit any unused portion of the credit into the trust
fund.
The Administrator would be able to delay the drawing of funds or
the notification to the trustee of the trust fund that the owner or
operator had not established alternate financial responsibility, if the
issuing institution grants an extension of the term of the credit.
During the last thirty days of any such extension, if the owner or
operator has failed to provide alternate financial responsibility as
specified in this section and obtain written approval of such financial
responsibility from the Administrator, the Administrator would draw on
the letter of credit or notify the trustee of the trust fund that the
owner or operator had not established alternate financial
responsibility and obtained written approval of such alternate
financial responsibility. Under the terms of the letter of credit, all
amounts paid pursuant to a draft by the Administrator or the trust fund
trustee in the circumstances described in this paragraph would be
deposited by the issuing institution directly into the trust fund.
A similar arrangement is required under the RCRA Subtitle C closure
post closure financial assurance regulations and the Agency has found
it to be a valuable feature. The accompanying trust fund and the
automatic extension provisions for letters of credit are an important
feature of this proposal because letters of credit might otherwise not
be extended after a release of hazardous substances or after marked
financial decline of the owner or operator. Absent the ability for the
trustee or the Administrator to make a draw on the letter of credit in
instances of issuer notice of non-extension and the owner's or
operator's failure to obtain replacement financial responsibility,
financial responsibility may not be available when necessary. After
notice of non-extension, a CERCLA claim may not necessarily be possible
for some time because the CERCLA processes leading to a claim may be
lengthy. In such an instance, the letter of credit may expire, leaving
no financial responsibility instrument available. The proposed
arrangement would ensure that funds are still available to pay the
valid CERCLA claims. This provision, and the similar provisions for
other proposed instruments, as well as alternatives are discussed in
more depth in section VI.C.7 of this preamble.
IIPLP also provided comments to EPA on these proposed automatic
extension and non-extension notification requirements. With respect to
the non-extension notification, the IIBLP suggested that the wording of
the letter of credit should not explicitly require notification to the
owner or operator of the decision not to extend the credit as discussed
earlier. Rather, IIBLP noted that the means of how issuers and their
applicants communicate is typically left to a separate agreement from
the letter of credit itself. However, EPA believes that specifying such
a notification term in the letter of credit itself, including notice to
the owner or operator, is preferable because timely receipt of such
notice by both EPA and the owner or operator is important as it would
establish the timeframe in which the owner or operator must obtain
alternate financial responsibility. Further, the provision helps
prevent expiration from taking place without the knowledge of EPA and
the owner or operator, or a draw being necessitated due to pending
expiration without the knowledge of the owner or operator. Finally,
while it may be unusual as a general matter of commercial practice,
such a provision is a common feature of government financial
responsibility programs. For example, similar notification requirements
are required in the RCRA Subtitle C closure and post closure letter of
credit which has been broadly used as a financial assurance instrument
by regulated entities in that program.
With respect to the automatic extension provisions, the IIBLP
stated that a date should be identified beyond which extension should
not be able to occur. However, such a provision would be inconsistent
with other EPA financial assurance programs and necessitate more
frequent re-establishment of financial responsibility on the part of
the owner or operator or draws on the letter of credit prompted by
pending expiration. Further, given that the time horizon over which an
owner and operator must maintain financial responsibility under CERCLA
Sec. 108(b) may vary on a case-by-case basis, EPA could not identify a
nationally-uniform date beyond which the letter of credit should be
allowed to expire.
Claims Against a Letter of Credit Issued in Favor of Any and All Third-
Party CERCLA Claimants (Sec. Sec. 320.40(j) and 320.50(b))
Under the proposed letter of credit language (Sec. 320.50(b)) and
regulations (Sec. 320.40(j)), when the letter of credit is issued in
favor of any and all third-party CERCLA claimants, it would provide
payment to third-party CERCLA claimants under three scenarios provided
that the claimant provides the necessary documentation, in addition to
authorizing direct action claims against the issuing institution
itself. Under the proposed regulations the following claims would be
authorized against the letter of credit when issued in favor of any and
all third-party CERCLA claimants:
(1) Any party that obtained a final court judgment from a Federal
court awarding CERCLA response costs, health assessment costs, and/or
natural resource damages associated with the facility against any of
the current owners or operators to whom payment as required by the
judgment had not been made within thirty days would be able to make a
claim against the letter of credit. However, the party would only be
able to make a claim if it had not recovered or been paid the funds
from any other source.
(2) The Administrator or another authorized Federal agency would be
able to make a claim against the letter of credit requesting payment if
payment had not been made as required by a CERCLA settlement associated
with the facility between a current owner or operator and EPA or
another Federal agency.
(3) The Administrator or another authorized Federal agency would be
able to make a claim against the letter of credit requesting payment
into a trust fund established pursuant to a CERCLA unilateral
administrative order issued to a current owner or operator if
performance at the facility as required by the order had not occurred.
The Administrator or other Federal agency would be able to make the
claim against the letter of credit only if the owner or operator had
provided a written statement that the letter of credit may be
[[Page 3420]]
used to assure the performance of the work required in the order.
In order to make a draw on the letter of credit under these three
scenarios, claimants would need to present one of two sets of
documents. The first set of documents would consist of a demand for
payment bearing reference to the letter of credit by number, a final
court judgment dated at least thirty days earlier from a Federal court,
in favor of the claimant, awarding CERCLA response costs, health
assessment costs, and/or natural resource damages associated with the
facility against any of the current owners or operators, and a
certification from the claimant that reads as follows: ``I hereby
certify that the amount of the demand is payable pursuant to
regulations issued under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended.''
Because a claimant seeking satisfaction of a final court judgment
awarding CERCLA response costs, health assessment costs, and/or natural
resource damages may be any of a wide range of potential parties
including Federal and state government officials, natural resource
trustees, or private parties, EPA was told by several representatives
of the financial industry that the potential for inappropriate claims
in this scenario may be higher than in typical financial assurance
programs where a particular regulator is the only named beneficiary.
(The RCRA Subtitle C closure and post-closure letter of credit at 40
CFR 264.151(d) is an example of a single-beneficiary letter of credit).
EPA was informed by one bank representative that documentary payment
conditions requiring presentation of a court judgment would help ease
concerns in this regard. Specifically, the representative suggested
that the risk of fraud would be reduced if the rules required
production of a court judgment in addition to a demand and
certification. EPA does not expect that such a requirement would
present a significant burden to legitimate claimants, and wishes to
lower any perceived barriers to issuing the necessary instruments under
this proposed rule. Thus, EPA is proposing that the language of the
letter of credit issued in favor of any and all third-party CERCLA
claimants require not just a demand for payment and a certification
from the claimant but the presentation of the final court judgment as
well.
As discussed in the general payment provisions section of the
preamble, the proposed regulatory text in Sec. 320.40(j) regarding
letters of credit includes other requirements for making draws on the
letter of credit. EPA's proposed letter of credit certification
requirement is intended to encompass these requirements and thereby to
help ensure that those supplemental criteria have been met. These
requirements are designed to foster fairness for both potential
claimants as well as to the owners or operators who provide the CERCLA
Sec. 108(b) financial responsibility. These requirements are (1) that
a claim for satisfaction of a final court judgment may only be made
against a CERCLA Sec. 108(b) financial responsibility instrument if
the judgment has been obtained against a current owner or operator at
the facility and if the owner or operator has failed to make payment on
the judgment within thirty days; and (2) that the claimant may only
make such a claim if they have not recovered or been paid the funds
from any other source. EPA is aware that letters of credit are designed
to be an independent undertaking that would preclude the issuing
institution from considering non-documentary conditions such as whether
the previously-mentioned supplemental criteria had been met. EPA is
thus requiring that claimants certify that the funds are payable
pursuant to regulations issued under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended. EPA
believes this additional documentary condition helps curb the potential
for inappropriate draws when the letter of credit is issued in favor of
any and all third party claimants.
The second set of documents that could be presented in order for
EPA or another authorized Federal agency to make a draw when the letter
of credit is issued in favor of any and all third-party CERCLA
claimants is a demand for payment bearing reference to the letter of
credit by number and a certification from the Administrator or another
Federal agency that reads as follows: ``I hereby certify that the
amount of the demand is payable pursuant to regulations issued under
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 as amended.'' EPA intends for this second set of documents
to be presented by EPA or another authorized Federal agency in order to
obtain payment for a CERCLA settlement or into a trust fund established
pursuant to a CERCLA Sec. 106 unilateral administrative order in
instances where either (1) payment was not made as required by a CERCLA
settlement associated with the facility with a current owner or
operator, or (2) performance at the facility had not occurred as
required by a CERCLA Sec. 106 unilateral administrative order issued
to a current owner or operator.
Because these payment scenarios are explicitly provided for in the
proposed rules at 320.40(j)(2) and (3), and because those scenarios are
limited to Federal agencies acting pursuant to CERCLA, EPA sees no
reason to require any additional documentation beyond the demand for
payment and the certification. A similar documentary payment condition
is employed in the RCRA Subtitle C closure and post-closure letter of
credit. See 40 CFR 264.143(d)(8); 264.151(d). Requiring only a
certification and a demand for payment also streamlines the claims
process in these scenarios and imposes a lower administrative burden on
the claimants and on the issuing institutions because fewer documents
would require review.
Other supplementary documentary requirements EPA considered were
the presentation of the CERCLA settlement agreement or CERCLA
unilateral administrative order themselves. However, EPA did not
believe these additional requirements provided significant value beyond
the certification from the Administrator or other authorized Federal
agency. In discussions with representatives of the banking community,
participants suggested a high degree of comfort with a certification
from a Federal government agency as a documentary payment requirement,
provided it was specified in the letter of credit. Thus, to avoid
unnecessary documentary provisions, EPA is proposing that the required
wording of the letter of credit issued in favor of any and all third-
party CERCLA claimants not include a requirement to produce the
underlying settlement or unilateral administrative order, in the
scenarios limited to Federal government claimants.
Further, EPA is today also proposing letter of credit wording that
does not require that the original letter of credit itself be presented
by claimants requesting a draw. EPA's financial assurance programs
under RCRA Subtitle C (closure/post-closure letters of credit and
liability coverage letters of credit) similarly do not require
presentation of the original letter of credit itself. Such a
requirement would entail a greater level of administrative burden on
both EPA and claimants, in particular due to the wide range of
potential claimants and the need to coordinate between EPA and
potential claimants. In discussions with representatives of the banking
community, EPA was told that banks are likely to prefer that the
presentation of
[[Page 3421]]
the original letter of credit not be a requirement and that such a
requirement is a relic of the past. However, this does not mean there
could be no value in such a requirement. The issuing institution may
have noted on the letter of credit any prior payments that may help
keep EPA informed of the remaining balance; however, EPA should be able
to remain apprised of the value of the letter of credit based on claims
and payment notification requirements included elsewhere in the
proposal (see for example Sec. 320.24). On balance, EPA is proposing
to forgo such a requirement to be more consistent with current
commercial practice and reduce the administrative burden entailed in
the claims process. However, EPA solicits comment on whether such a
requirement would be useful.
Draws on the Letter of Credit When Held by a Trust Fund Trustee
(Sec. Sec. 320.40(i) and 320.50(b))
If the letter of credit is issued in favor of the trust fund
trustee, parties would be able to make claims against the trust fund in
accordance with the terms of the trust agreement in order to receive
payment from the letter of credit. Accordingly, the proposed language
of the letter of credit (Sec. 320.50(b)) would require only a demand
for payment from the trust fund trustee bearing reference to the letter
of credit by number. This is similar to the required documentary
provisions in the RCRA Subtitle C third-party liability letter of
credit when it is issued in favor of a trustee. Other documentary
requirements appear unnecessary under this construction because the
third-party CERCLA claimants would be making claims against the trust
fund instead of the letter of credit and would therefore need to meet
the documentary conditions laid out in the trust agreement or
successfully make a direct action claim against the trust fund itself.
(Payments from the trust fund are discussed further in the trust fund
section of the preamble.) This arrangement provides for a very
streamlined process for the trustee to draw on the letter of credit
when necessary to make payments to the successful claimants. EPA did
not intend to burden this process with extra documentary conditions as
that would only occasion greater fees and expenses on the part of the
trustee and provide no clear benefit beyond the documentary review
already performed by the trustee.
Such a documentary requirement would also provide the trustee of
the trust fund the ability to make draws on the letter of credit when
necessary to cover trustee expenses. While the proposed required
wording of the trust agreement specifies that fees and expenses would
be first paid by the grantor of the trust agreement, the proposed
language also provides that all expenses not paid directly by the
grantor shall be paid from the corpus of the trust fund which may
require a draw on a letter of credit held by the trust fund. This
allowance is important to allow trust expenses to be covered in
instances where the grantor may cease to exist or is otherwise
unavailable.
EPA recognizes that, when a letter of credit is issued in favor of
a trustee of a trust fund, the trustee may incur significant fees and
expenses in determining whether or not payment should be made from the
trust fund, particularly in instances of a direct action against the
trust fund. These expenses would likely reduce the value of the trust
fund (and by extension potentially the value of the letter of credit
held by the trust fund). However, given the apparent reluctance of
institutions that issue letters of credit to provide letters of credit
that could pay to a wide range of unnamed beneficiaries and
institutions' expressed concerns regarding the institution itself being
potentially subject to direct action suit from CERCLA claimants, EPA is
proposing this compliance option. EPA requests comment on both options:
(1) Where the letter of credit may pay to CERCLA claimants directly
(i.e. be issued in favor of any and all third-party CERCLA claimants)
or (2) where the letter of credit may pay to the trustee of a trust
fund issued in accordance with the proposed trust fund regulations who
would then pay valid claims (i.e. be issued in favor of the trustee).
EPA is also interested in provisions or specifications that may allow
for lower expenses or fees or that would protect the value of the trust
fund (and thus the letter of credit) from expenses and fees when the
letter of credit is issued in favor of the trust fund trustee.
Direct Action Language in the Letter of Credit (Sec. 320.50(b))
Under the proposed regulations, the issuing institution would be
subject to direct action claims only when the letter of credit is
issued in favor of any and all third-party CERCLA claimants. Because
direct action is authorized by the statute, the possibility of a direct
action suit should be clearly acknowledged by issuing institutions.
Thus EPA has included required language acknowledging that direct
action suits may be brought against the issuing institution for letters
of credit issued in favor of any and all third-party CERCLA claimants
and that the issuing institution consents to suit in those
circumstances. The language further acknowledges that the liability of
the issuing institution is limited by CERCLA Sec. 108(d) and that the
institution is entitled to the rights and defenses provided to
guarantors in CERCLA Sec. 108(c). The reader should note that this
language is not required for those letters of credit issued in favor of
a trustee. In the latter case, EPA intends the trust fund itself would
be the subject of direct action suits. However, under the proposed
regulations, the issuing institution would be subject to direct action
claims when the letter of credit is issued in favor of any and all
third-party CERCLA claimants.
Also included in the direct action language in the letter of credit
is a provision that the issuing institution will provide notice of any
such claims and payments resulting from a direct action to the
Administrator. EPA has included a similar provision applicable to the
owner and operator in proposed Sec. 320.24, under which they are
obligated to provide notice to EPA of claims made. However, EPA is
including this proposed term as part of the letter of credit, because
it expects that the owner or operator may not be able to provide such a
notice of payment in a direct action scenario. Providing a mechanism
for EPA to remain informed of claims against the instrument and of the
value of the letter of credit in case of a direct action, is
appropriate for similar reasons as described in proposed Sec. 320.24.
Identification of Facility Information in Letter of Credit (Sec.
320.50(b))
The proposed language of the letter of credit would require the
identification of the facilities covered, and the amount of financial
responsibility provided by the letter of credit. EPA is today proposing
language that allows (but does not require) a single letter of credit
to cover multiple facilities if that is determined to be optimal by the
owner and operator and their letter of credit provider. EPA anticipates
that allowing coverage of multiple facilities simultaneously may have
administrative efficiency benefits. As discussed in section VI.3.9. of
this preamble, providing for one instrument to cover multiple
facilities may provide for some administrative ease in the compliance
and implementation process and is a common feature of EPA financial
assurance programs.\66\
---------------------------------------------------------------------------
\66\ See for example, 40 CFR 264.143(h).
---------------------------------------------------------------------------
Thus, EPA has made provision in the letter of credit language for
facility-specific sub-limits (i.e. the identification
[[Page 3422]]
of an amount available for claims associated with each facility covered
by the letter of credit beyond which the issuer would have no
obligation to pay claims associated with that facility) when a letter
of credit is covering multiple facilities. The proposed letter of
credit would require the EPA identification number(s), name(s),
address(es) and CERCLA Sec. 108(b) financial responsibility amount(s)
covered by the letter of credit for facility(ies) that would be covered
by the instrument.
EPA recognizes that such information may not typically be included
in letters of credit, where the preference is typically for the
simplest and briefest language possible. However, this approach allows
the letter of credit to reflect the site-by-site amounts of financial
responsibility required, and at the same time, it will assist all
parties (e.g. the issuing institution, third-party CERCLA claimants) in
knowing the amount of financial responsibility available for claims
associated with any of the facilities.
EPA is also considering whether to limit each letter of credit to
coverage of a single facility. The additional information about other
facilities and facility-specific sub-limits would not need to be
included. In this way the letter of credit could be drafted in a
simpler manner. However, as the EPA is not proposing to require that
multiple facilities must be covered by one letter of credit, EPA
believes the proposed language provides the flexibility to draft a
relatively simple letter of credit. As such, EPA is today proposing
language that allows the letter of credit to cover multiple facilities
if that is determined to be optimal. EPA requests comment on this
proposed provision and the alternative option of requiring only one
facility per letter of credit.
2. Surety Bond (Sec. 320.41)
An owner or operator would be able to satisfy the proposed CERCLA
Sec. 108(b) financial responsibility requirements by obtaining a
surety bond in accordance with the proposed requirements including the
proposed required wording and submitting the originally signed bond to
the Administrator. Through a surety bond, the Surety would guarantee
that it will pay third-party CERCLA claims for response costs, health
assessment costs, and natural resource damages associated with the
facility against any of the current owners and operators, even if not
listed as the principal on the bond, under certain circumstances in the
event the claims are not satisfied by the owners or operators, up to
the bond limits.
Issuer Eligibility (Sec. 320.41(b))
The surety company issuing the bond would be required to, at a
minimum, be among those listed as acceptable sureties on Federal bonds
in Circular 570 of the U.S. Department of the Treasury. This
requirement for providers of surety bonds is the same as that in the
RCRA Subtitle C financial assurance regulations which EPA believes has
worked well and will provide familiarity for implementing staff and the
regulated community. In selecting this eligibility criteria EPA is also
taking advantage of a pre-existing Federal examination and
authorization process designed specifically for sureties. EPA
recognizes that a Federal government agency will not be listed as the
obligee of CERCLA Sec. 108(b) surety bonds under the proposed language
and thus Circular 570 listing may not be strictly necessary to comply
with Treasury regulations. However, EPA and other Federal government
agencies are likely to be claimants under the proposed CERCLA Sec.
108(b) construct and thus EPA believes a similar level of oversight of
the solvency of a surety providing a bond is merited. Further, upon
examination of eleven years of data EPA did not identify any instances
of default of a surety listed on Circular 570 suggesting the criterion
is robust. EPA considered additional qualifications for surety
companies but is today proposing the same qualifications as are
required in the RCRA Subtitle C regulations. This decision was based
largely on the desire to not unduly constrain supply, a desire to
leverage the pre-existing robust criterion for sureties already well
established, and to avoid the administrative burden on EPA of verifying
additional qualifications. For more information on the consideration of
alternative provider qualifications, please see the background document
on instrument provider qualifications titled ``Potential Issuer
Eligibility Requirements for Insurance, Surety Bonds, Letters of
Credit, and Trust Agreements and Standby Trust Agreements under CERCLA
Sec. 108(b).''
Requirements To Ensure Continuity of Financial Responsibility Coverage
(Sec. Sec. 320.41(f), (g)(4) and (k))
EPA is proposing a suite of regulatory provisions in order to
ensure continuity of CERCLA 108(b) financial responsibility coverage.
First, an owner or operator that elected to use a surety bond to
satisfy the requirements of this section would also be required to
establish a standby trust fund and update Schedule A of the trust
agreement within sixty days after a change in the amount of CERCLA
Sec. 108(b) financial responsibility. This standby trust fund would
have to be worded identically to the proposed trust fund language in
Sec. 320.50(a) and meet the same requirements specified for the trust
funds, except that: (1) an originally signed duplicate of the trust
agreement would be submitted to the Administrator with the surety bond;
and (2) until the standby trust fund is funded pursuant to the
requirements of this section, the following would not be required by
the proposed regulations: (1) payments into the trust fund as specified
in Sec. 320.45, (2) annual valuations as required by the trust
agreement; and (3) notices of payment as required by the trust
agreement.
The second proposed provision designed to ensure continuity of the
CERCLA Sec. 108(b) financial responsibility is the cancellation
provision in the bond. EPA is proposing that, under the terms of the
bond, the surety would be able to cancel the bond by sending notice of
cancellation by certified mail to the owner or operator and to the
Administrator. Cancellation would not occur, however, during the 120
days beginning on the date of receipt of the notice of cancellation by
both the owner or operator and the Administrator, as evidenced by the
return receipts.
Finally, EPA is proposing that, under the terms of the bond, the
surety would become liable up to the penal sum \67\ of the bond in the
event the owners or operators failed to provide alternate financial
responsibility and obtain the Administrator's written approval of the
financial responsibility provided, within ninety days after receipt by
both the owner or operator and the Administrator of a notice of
cancellation of the bond from the surety. Under the proposal, payment
from the bond into the standby trust would then occur.
---------------------------------------------------------------------------
\67\ The penal sum represents the maximum amount the surety will
pay for CERCLA response costs health assessment costs and/or natural
resource damages under the bond.
---------------------------------------------------------------------------
A similar arrangement is required under the RCRA Subtitle C
hazardous waste financial assurance regulations for closure and post
closure care and the Agency believes it has been a valuable feature.
EPA believes the standby trust and cancellation provisions are an
important feature of this proposal as bonds could otherwise be
cancelled after a release of hazardous substances from the facility or
after marked financial decline of the owner operator. A CERCLA claim
for payment from the bond would not necessarily be mature
[[Page 3423]]
for some time and thus financial responsibility may not be available
when necessary. EPA believes the proposed arrangement however will
ensure that funds are still available to pay the CERCLA response costs,
health assessment costs, and natural resource damage claims of third
parties. This provision, and the similar provisions for other proposed
instruments, as well as alternatives are discussed in more depth in the
preamble section headed `issuer cancellation provisions.'
Claims Against the Surety Bond (Sec. Sec. 320.41(g) and 320.50(c))
In addition to guaranteeing that replacement financial
responsibility will be obtained in the event the surety provides notice
of cancellation of the bond, the bond would also guarantee payment of
CERCLA response costs, health assessment costs, and natural resource
damages to third-parties. Under the proposed terms of the bond, the
bond would guarantee that the owner or operator would make payments for
or ensure payments are made for CERCLA response costs, health
assessment costs, and/or natural resource damages associated with a
facility covered by the bond as required in a final court judgment from
a Federal court awarding such costs against any of the owners or
operators within thirty days to the parties obtaining the judgment. In
these circumstances a claimant would present the unsatisfied final
court judgment dated at least thirty days earlier from a Federal court,
in favor of the claimant, awarding CERCLA response costs, health
assessment costs, and/or natural resource damages associated with the
facility against any of the current owners or operators at the facility
to the surety directly. Additionally, the claimant would be required to
provide a signed statement from the claimant certifying that the
amounts sought had not been recovered or paid from any other source,
including, but not limited to, the owner or operator, insurance,
judgments, agreements, and other financial responsibility instruments.
Upon receipt of these documents the surety would then make payment
in accordance with the instructions of the successful claimant. These
documentary payment requirements were selected as it removes EPA from
the claims administration process but ensures that a court has
determined that payment is due to the party making the claim under
CERCLA and that the party has not already recovered or been paid the
funds from another source. Further, by relying on objective documentary
submissions the Surety should be able to determine whether payment
should occur under the terms of the bond with only minimal due
diligence.
Additionally, the bond would guarantee the owner or operator would
make payments or ensure payments were made as required in a CERCLA
settlement associated with the facility between any of the current
owners and operators at the facility and EPA or another authorized
Federal agency. The Administrator or the other Federal agency, in these
situations, would present a written signed statement to the surety
requesting payment from the surety on the grounds that payment had not
been made as required by a CERCLA settlement associated with the
facility and with any of the current owners or operators. Additionally,
the Administrator or the Federal agency would need to present a signed
statement certifying that the funds sought had not been recovered or
paid from any other source, including, but not limited to, the owner or
operator, insurance, judgments, agreements, and other financial
responsibility instruments.
EPA believes that, similar to EPA's thinking on the documentary
payment conditions for the letter of credit issued in favor of any and
all third-party CERCLA claimants (discussed in section VI.C.1. of this
preamble), in the instances when the potential claimants are limited to
Federal government agencies a more streamlined payment condition is
optimal. EPA believes that the requirement of a signed statement from
the Administrator or another Federal agency is a clear documentary
condition and will require minimal due diligence on the part of
sureties.
Finally, the bond would guarantee that the owner or operator
performs or ensures the performance of the work at the facility as
required by a CERCLA unilateral administrative order issued to any of
the current owners or operators by EPA or another Federal agency for
which the owner or operator has provided a written statement allowing
for the bond to assure performance of the work. Payments would be made
at the request of EPA or another Federal agency into a standby trust
established pursuant to the administrative order if the work was not
performed in accordance with the order.
In this scenario, to make a claim against the surety bond the
Administrator or the other Federal agency would present a written
signed statement requesting payment from the surety into a trust fund
established pursuant to a CERCLA unilateral administrative order on the
grounds that performance at the facility had not occurred as required
by a CERCLA administrative order issued to a current owner or operator.
Additionally, the EPA Regional Administrator or the Federal agency
would need to present a signed statement certifying that the funds
sought had not been recovered or paid from any other source, including,
but not limited to, the owners or operators, insurance, judgments,
agreements, or other financial responsibility instruments.
As discussed earlier, in the two payment scenarios limited to
Federal government claimants EPA is attempting to limit the complexity
of the documentary requirements. EPA believes the relatively simple
requirements of signed statements from EPA or another Federal agency
will streamline the claims process and reduce uncertainty on the part
of the surety as to whether or not payment should be made.
EPA requests comment on the proposed documentary requirements for
payment from the surety bond. In particular, EPA is interested in
hearing if there are other documentary payment requirements that could
further limit the discretion required on the part of the surety and yet
still provide assurance against inappropriate claims being paid.
EPA recognizes that the payment mechanics of the surety bond
involve multiple parties that will not be listed explicitly on the
surety bond. In discussions with representatives of the surety bond
industry, EPA learned that such a construction may likely be less
palatable to potential providers of surety bonds than a construction
with one designated claimant. Similarly, the Surety and Fidelity
Association of America (SFAA) recommended that EPA be the only claimant
on the bond. SFAA stated that multiple claimants enlarges the surety's
exposure to claims and possibly dilutes the protection to EPA as the
Agency may have less assurance of the proper use of the funds by third-
parties other than EPA. However, EPA is not proposing to list EPA as
the sole obligee on the bond for several reasons. First, non U.S.
Government claimants would need a final court judgment from a Federal
court awarding payment for CERCLA response costs, health assessment
costs, and/or natural resource damages ensuring that a court had
reviewed the merits of the claim (e.g. the consistency of the action
with the national contingency plan) and found the claim to be valid. As
a result, EPA does not share the concern that payment of funds to
parties other than EPA will compromise the protection of human health
and the environment. EPA
[[Page 3424]]
believes that, given the nature of CERCLA where any number of parties
may have claims under CERCLA Sec. 107, it is necessary to provide
payment from the bond to a range of third-party CERCLA claimants.
EPA considered an option whereby EPA would be listed as the obligee
and administer the claims process however, as discussed in the letter
of credit Sec. 320.40 of the preamble. EPA is not proposing this
option for several reasons. First, EPA would not necessarily be
involved in all CERCLA actions at facilities and did not wish to
redirect its programmatic resources away from high priority sites to
administer the claims process for CERCLA Sec. 108(b). Moreover, EPA
may not be able to assess the merits of all CERCLA claims which include
natural resource damages and health assessments that are primarily the
responsibility of other entities. Finally, it may create a perception
of partiality were EPA to administer the claims process in scenarios
where the Agency was one of the claimants. EPA believes that the
proposed construction best achieves the need of providing payment to
the full range of potential CERCLA claimants while simultaneously
protecting against improper claims and preventing the sub-optimal
redirection of Superfund resources away from high-priority sites.
Surety Liability (Sec. 320.41(h))
Under the terms of the bond, the surety would become liable on the
bond obligation when the owner or operator fails to perform as
guaranteed by the bond. EPA believes that this is an additional
advantage of the proposed instrument payment terms. In discussions with
representatives of the surety industry, representatives stressed to EPA
that the surety company should be secondary to the owners and operators
and claimants should first look to the owner or operators for
satisfaction. EPA hopes that this feature of the proposed CERCLA Sec.
108(b) surety bond's consistency with that aspect of surety practice
will encourage participation on the part of surety companies in the
CERCLA Sec. 108(b) program.
The liability of the surety would be limited to the penal sum \68\
of the bond plus the amount of any investigation or legal defense fees
incurred by the surety. EPA, to the greatest extent possible, wishes to
preserve the value of the financial responsibility to pay CERCLA
claimants. EPA is thus proposing that any legal or investigation fees
incurred by the surety remain outside the penal sum of the bond and not
erode the value of the financial responsibility. A similar provision is
also being proposed for insurance and the corporate guarantee. EPA
requests comment on these proposed provisions.
---------------------------------------------------------------------------
\68\ The penal sum of a bond is the specified maximum amount
that the surety will be required to pay and is a required input in
the proposed surety bond language.
---------------------------------------------------------------------------
Direct Action Language in the Surety Bond (Sec. 320.50(c))
In addition to the payment triggers described earlier, the proposed
language of the CERCLA Sec. 108(b) surety bond would also include
language that the surety acknowledges that direct action suits may be
brought against the surety. The direct action provision would allow for
parties with CERCLA Sec. 107 or Sec. 111 claims, in certain instances
identified in CERCLA Sec. 108(c)(2), to take actions directly against
the surety. It is a cause of action authorized by the statute and EPA
expects it would operate independently of the three previously-
described payment scenarios. In these instances, as described in the
proposed bond language, the surety would have the rights and defenses
identified in CERCLA Sec. 108(c) and the liability protections in
CERCLA Sec. 108(d).
Similar to the corporate guarantee, insurance and letter of credit
issued in favor of any and all third-party CERCLA claimants, EPA is
proposing that the required wording of the bond include a provision
that the surety notify EPA of any claims and payments made as a result
of a direct action. EPA believes this notification requirement is
valuable as the owner or operator may not be available to provide such
a notice of claims and payments in a direct action scenario yet EPA
wishes to remain informed of claims against the instrument and the
value of the financial responsibility.
The SFAA also expressed concern that the direct action provision in
a CERCLA Sec. 108(b) surety bond may expose the sureties to too many
claims. Specifically, SFAA stated that a surety bond is a conditional
obligation under which the surety's obligation is triggered when the
principal defaults. SFAA stated that bankruptcy (one of the
preconditions for a direct action identified in CERCLA Sec. 108(c)) is
too broad as, in many cases, an owner or operator may still be able to
fulfill its responsibilities even though bankrupt. EPA agrees that the
owner or operator could still potentially fulfill its obligations even
though bankrupt. Claimants could still pursue the potentially
responsible party directly without implicating CERCLA Sec. 108(b)
instruments. EPA believes including the direct action provision is
important as in some cases it may not be possible for EPA, or another
third-party CERCLA claimant to obtain satisfaction from or obtain a
court judgment against the party liable under CERCLA Sec. 107 (or
other necessary documents to make a claim against the bond) and thus
recognizes the need for the surety, as guarantor, to stand in the
owner's or operator's shoes
Multiple Sureties (Sec. Sec. 320.41(e) and 320.50(c))
The surety bond would be able to be issued by multiple sureties
provided that each is liable for its individual vertical percentage
share of the total penal sum of the bond. (Sec. 320.41(e)) EPA is
proposing surety bond language that would provide the option for owners
and operators to obtain surety bonds from multiple issuers in the
required amount of financial responsibility. EPA expects the required
amounts of CERCLA Sec. 108(b) financial responsibility may be
relatively large at some facilities and wishes to provide this
flexibility. The proposed arrangement for allowing multiple sureties to
cover a single facility is consistent with the approaches employed by
all of the financial responsibility programs EPA reviewed. All
financial responsibility programs reviewed, including the Coast Guard
CERCLA Sec. 108(a), RCRA Subtitle C liability coverage, RCRA Subtitle
C closure/post-closure, and RCRA Subtitle I Underground Storage Tanks,
require sureties to bind themselves jointly and severally for purposes
of allowing a joint action(s) against the issuers of the surety bond,
but allow for payment based on pre-determined proportions of the penal
sum (several liability).
In the proposed CERCLA Sec. 108(b) surety bond language,
individual sureties would identify percentage limits of their liability
in the surety bond for which they would each be liable while these
individual surety limits would sum to the total penal sum of the bond.
EPA believes that such an arrangement may increase surety bond issuers'
capacity to collectively cover greater amounts of financial
responsibility because the surety's level of coverage would not be
impacted by the potential risk for non-payment by other sureties.
When multiple sureties issue a single bond, the proposed
regulations would require that each surety be liable for their
individual vertical percentage share of the total penal sum of the
bond. EPA is proposing that the sureties' individual amounts of
liability be
[[Page 3425]]
specified in the bond as a percentage of the penal sum of the bond. The
proposed specification would create a vertical relationship whereby a
surety's liability is not affected by other co-sureties' abilities to
pay their shares. EPA believes this provides greater protection against
the insolvency of one of the participating sureties. This approach also
simplifies the claims process as the exhaustion of one surety's
liability does not need to be determined before payment can be received
from another surety. An additional advantage of this proposed structure
is that sureties would be binding themselves jointly and severally for
purposes of allowing a joint action(s) against the issuers of the
surety bond. This would allow for a simpler claims process for
claimants.
An alternative EPA considered was proposing that multiple sureties
could form a tower of coverage comprised of horizontal layers. In such
an arrangement each surety in the horizontal tower would be agreeing to
cover its layer of the tower, not a percentage of the total. Those
sureties higher up the horizontal tower become responsible on a layer-
by-layer basis as the limits of each underlying surety's obligation
become exhausted. However, EPA is not proposing such an arrangement due
to several concerns with such an arrangement. First, a horizontal
arrangement presents the opportunity for sureties covering higher
coverage layers to avoid liability if a surety on a lower level becomes
insolvent and cannot cover the liability within its layer. This was a
concern also identified by the U.S. Coast Guard in development of its
CERCLA Sec. 108(a) regulations (see 59 FR 34220 (July 1, 1994)).
Secondly, such an option would raise the administrative burden on EPA
because EPA would need to ensure that each layer of coverage fits with
the layers above and below and EPA would also need to ensure that the
layers contained exhaustion provisions.
EPA requests comment on the proposed arrangement for allowing
multiple sureties to execute one bond by identifying their vertical
percentage share of the penal sum. Specifically, EPA is interested in
other potential arrangements that may encourage surety participation in
the program and provide for relatively high amounts of financial
responsibility coverage yet not overly complicate implementation of the
claims process.
Written Statements From Attorneys General and Insurance Commissioners
(Sec. 320.41(d))
EPA believes a bond written as required under this proposal may
implicate state insurance law and thus the validity of any such bond
may depend on state law. This issue has come up in other EPA
rulemakings including the financial responsibility requirements for
underground storage tanks containing petroleum (see, for example, 52 FR
12786, April 17, 1987) and the RCRA Subtitle C third party liability
requirements (see, for example, 53 FR 33941, September 1, 1988). State
insurance regulation and law is by and large the purview of the states
and thus the Agency does not believe it can state with certainty
whether any particular bond would subject the issuer to state insurance
law, and whether it would be valid with respect to such law. Similar to
the way the issue was handled in those programs, EPA is proposing that
a surety bond may be used to satisfy the requirements of this section
only if the Attorneys General or Insurance Commissioners of (i) the
state in which the surety is incorporated, and (ii) each state in which
a facility covered by the surety bond is located have submitted a
written statement to EPA that a surety bond executed as described in
the regulations is a legally valid and enforceable obligation in that
state. EPA believes that the surety bond would be an important
compliance option and welcomes comments from state Attorneys Generals
and Insurance Commissioners on this issue.
Termination of the Bond by the Owner or Operator (Sec. Sec. 320.41(l)
and 320.50(c))
The owner or operator would be able to terminate the bond if the
Administrator has given prior written consent based on his receipt of
evidence of alternate financial responsibility as specified in Part 320
or if the Administrator releases the owner and operator from the
financial responsibility requirements of that part. To assist in
implementing this requirement the proposed wording of the surety bond
includes a provision governing the principal's (i.e. the owner's or
operator's) termination of the bond. The proposed bond language states
that the principal may terminate the bond by sending written notice to
the surety(ies), provided however, that no such notice shall become
effective until the surety(ies) receive(s) written authorization for
termination of the bond by the Administrator. In this way, the owner or
operator would not be able to unilaterally terminate the bond without
the authorization of EPA.
Performance Bond
In meetings with potential providers EPA was told that sureties
typically prefer having an option of either performing or paying under
a bond. EPA considered providing such an option as the Agency believed
it may encourage greater participation from sureties in the CERCLA
Sec. 108(b) program as well as potentially allow sureties to conduct
work in certain cases, which may be more economical than EPA or another
Federal agency conducting the work itself. Specifically, EPA thought
that the option of performance could be advantageous in some
situations, for example, when the surety became liable because an owner
or operator either did not perform as required by a CERCLA unilateral
administrative order or failed to perform work as required by a CERCLA
settlement.
However, EPA could not determine how to specify a workable
performance option into the CERCLA Sec. 108(b) surety bond in light of
some of the features of the rule's framework. Unlike typical
reclamation and closure programs, CERCLA Sec. 108(b) does not include
a series of defined and costed-out activities (e.g. closure) which the
surety guarantees will be completed. In such programs, if the principal
defaults and the surety elects to perform, the surety is typically
liable until the defined tasks are all completed. CERCLA Sec. 108(b)
does not include any pre-defined obligations. Rather, a CERCLA Sec.
108(b) financial responsibility instrument could be subject to multiple
claims by a variety of claimants under the various payment scenarios
over the life of the instrument. Therefore, a very accurate accounting
of the liability of the surety is necessary with respect to the claims
paid and the penal sum of the bond. Such accounting would be difficult
if claims were satisfied by performance as it is not clear how the
performance should be valued absent a pre-existing accounting of the
activities to be conducted. Therefore, surety performance would leave
questions about the remaining value of the bond which would create
uncertainty around future claims and the availability of financial
responsibility. Further, as CERCLA Sec. 108(b) financial
responsibility amounts may be relatively large, EPA anticipates that
multiple sureties may issue single bonds. This would create even
greater complexity around coordinating performance and determining the
remaining value of the bond. In light of these considerations, EPA is
today
[[Page 3426]]
proposing surety bond language that provides only for payment, not
performance. EPA requests comment on how EPA could specify a
performance option in the CERCLA Sec. 108(b) surety bond in light of
the considerations discussed.
3. Insurance (Sec. 320.42)
An owner or operator would be able to satisfy the CERCLA Sec.
108(b) financial responsibility requirements by obtaining insurance for
CERCLA response costs, health assessment costs, and natural resource
damages which conforms to the requirements of the regulations. Through
the policy the insurer agrees to pay for the CERCLA response costs,
health assessment costs, and natural resource damages associated with
the facility of the current owners and operators under certain
circumstances should the current owners or operators fail to do so.
Each insurance policy would be required to be amended by the attachment
of a CERCLA Sec. 108(b) insurance endorsement as worded in Sec.
320.50(d).
Issuer Eligibility (Sec. 320.42(b))
At a minimum, the insurer would be required to be licensed to
transact the business of insurance, or eligible to provide insurance as
an excess or surplus lines insurer, in one or more states. These
proposed minimum criteria for an insurer providing insurance under the
regulations are the same as those used under the RCRA Subtitle C
financial assurance program, which EPA believes have worked well.
Additionally, these requirements would be familiar to the regulated
community and implementing EPA staff. EPA believes that such standards
help assure the integrity of the insurers whose policies are being used
by owners or operators to meet the financial responsibility
requirements. EPA believes these qualifications will assure that
insurers are subject to some regulatory oversight by state insurance
departments but will still permit broad participation in providing the
insurance. EPA considered alternative qualifications for providers of
insurance but is proposing that providers of insurance policies meet
the requirements described in this section. In making this decision EPA
attempted to balance the benefit of potentially lower default rates by
insurers providing insurance under the proposed regulations on the one
hand, and the potential impact on the supply of instruments and the
administrative burden on the Agency entailed in verifying providers met
additional qualifications of these alternatives on the other. For more
information on alternatives considered, please see the background
document that addresses instrument provider qualifications.
EPA also requests comment on allowing owners and operators to
obtain insurance policies from captive insurers and/or risk retention
groups. A captive insurer is an insurance company that provides
insurance primarily or exclusively to its owner(s). A pure captive is
defined as having only one owner and providing insurance coverage to
only one corporate entity, whereas a group captive is defined as having
more than one owner and providing insurance coverage only to members of
the group. A risk retention group (RRG) is a liability insurance
company owned by its members (policy holders) and organized under the
Federal Liability Risk Retention Act.
EPA is aware that some observers have noted concerns with such
forms of insurance suggesting that captive insurance and risk retention
groups may present a higher level of risk than commercial insurance.
EPA is particularly concerned about the risk that captive insurers may
present. Specifically, the EPA Inspector General in its 2001 and 2005
reports on the RCRA financial assurance program has pointed to the
limited financial independence between the insurer and the owner or
operator as one source of risk. The OIG, in the 2005 report, explained
that the financial health of the captive insurer is tied to the parent
company. Most captive insurance companies are wholly owned
subsidiaries, so there is a lack of independence between the captive
and the parent company. If the parent company has financial
difficulties, then the captive insurer may not have the funds to cover
the assured costs. (see Office of Inspector General, Audit Report: RCRA
Financial Assurance for Closure and Post-Closure, Report No. 2001-P-007
March 30, 2001; and Office of the Inspector General, Continued EPA
Leadership Will Support State Needs for Information and Guidance on
RCRA Financial Assurance, Report No. 2005-P-00026, September 26, 2005).
EPA has concerns that pure captive insurers in particular may offer
insufficient assurance in the context of CERCLA Sec. 108(b) financial
responsibility. Pure captive insurance has a limited ability to fulfill
a basic purpose of insurance: To spread the risks of potential losses
among multiple parties. In their 2007 report on captive insurance the
Environmental Financial Advisory Board (EFAB) noted that the greatest
risk to the solvency of a captive insurer is an infrequent, large
insurance claim. (See Environmental Financial Advisory Board. The Use
of Captive Insurance as a Financial Assurance Tool in Office of Solid
Waste and Emergency Response Programs. March 2007.) This may be the
very nature of claims for CERCLA response costs, health assessment
costs, and natural resource damages associated with hardrock mining
facilities, which can be quite large and difficult to predict with
certainty, for which the 108(b) financial responsibility instruments
would be intended to pay.
EPA believes that risk retention groups may also carry potentially
higher risk than commercial insurance but may be better suited to
provide insurance under CERCLA 108(b) than pure captive insurers due to
their greater ability to spread risk across multiple insureds. Risk
retention groups were the subject of a 2005 GAO report that identified
some concerns with risk retention groups. One of the primary concerns
identified by the GAO was the `patchwork' nature of state regulation
and oversight of risk retention groups. (See Government Accountability
Office, Risk Retention Groups: Common Regulatory Standards and Greater
Member Protections Are Needed, GAO-05-536. August 2005.) Such a
patchwork regime of state regulation and oversight may allow some risk
retention groups to operate with limited oversight, including solvency
regulation.
EPA also recognizes that allowing insurance policies written by
captive insurers and risks retention groups may add potential insurance
capacity. EPA believes insurance is an important financial
responsibility instrument under CERCLA Sec. 108(b). EPA also
understands from its discussions with representatives of the commercial
insurance industry as it developed this proposal that environmental
insurance policies commonly issued may be narrower in scope than the
proposed CERCLA Sec. 108(b) requirements. The Agency was also told
that the scope of the insurance coverage the Agency is proposing to
require today would likely be viewed as a hybrid between a closure and
risk transfer policy.\69\ EPA recognizes that a market for this type of
hybrid coverage thus may not currently exist and may need some time to
fully develop. EPA believes one benefit of allowing owners and
operators to purchase policies written by captive insurers and risk
retention groups may be, at least initially, a deeper market for
[[Page 3427]]
insurance policies to meet the CERCLA Sec. 108(b) regulations. EPA's
expectations in this respect are strongest for risk retention groups,
and are informed by the 2005 GAO report, which noted that many
insurance regulators have commented that risk retention groups have
filled voids where commercial insurers may not have had a strong
interest. The report identified medical malpractice insurance as an
area where risk retention groups were able to provide coverage where
the availability of affordable commercial insurance was limited.
Furthermore, EPA's evaluation of markets for financial responsibility
instruments suggested that risk retention groups may present an
opportunity for creation of additional capacity to serve the financial
service needs of the hardrock mining industry. Specifically, the report
stated RRGs have been able to offer additional capacity to the
insurance markets to cover volatile, capital-intensive risks like those
associated with hardrock mining.
---------------------------------------------------------------------------
\69\ A closure policy would assure the performance or
satisfaction of certain known or foreseeable obligations. A risk
transfer policy, on the other hand, addresses losses arising from
fortuitous events (e.g. releases) that may or may not occur.
---------------------------------------------------------------------------
In light of these tradeoffs between potentially higher risk to
third-party claimants and taxpayers presented by captive insurers and
risk retention groups and the possible additional capacity they may
provide, EPA requests comment on allowing policies written by these
types of insurers. Specifically, EPA requests comments on allowing
policies issued by captives or risk retention groups provided the
issuer had a minimum financial strength rating from A.M. Best or a
comparable rating from another Nationally Recognized Statistical
Ratings Organization (NRSRO). EPA believes requiring, at a minimum,
that captives and risk retention groups have a minimum financial
strength rating may address some of the concerns associated with these
types of policies. First, recognizing the limited financial
independence between the owner or operator and the insurer and that
captive insurance in particular has some similarities to self-
insurance, a financial strength rating would help to demonstrate that
the insurer has the financial wherewithal to pay claims on behalf of
the owner or operator. Secondly, the financial strength rating provides
an independent and common assessment of the financial strength of the
insurer and thus may alleviate the concerns of the state-by-state
variation in oversight and solvency examination the GAO noted with
respect to risk retention groups. Such a provision would also be
consistent with one of the findings in the 2007 EFAB report that the
use of independent credit analysis (i.e., credit ratings) is a cost-
effective mechanism for demonstrating the financial strength of a
captive insurer and that these ratings help address the limited
capacity of state regulatory bodies to undertake extensive credit
analysis.
The value of a potential rating requirement for a captive insurer
or risk retention group can also be illustrated by lower historical
default rates for higher rated insurers. In 2015 AM Best reported \70\
that US life/health and property/casualty insurers rated by AM Best
over the period 1977-2014 with secure ratings had a cumulative three-
year impairment rate of 1.05 percent. The same impairment rate for
life/health and property/casualty insurers rated by AM Best with
vulnerable ratings over that time period was 10.45 percent suggesting
that ratings requirement could meaningfully reduce the impairment risk
of a risk retention group or captive insurer.
---------------------------------------------------------------------------
\70\ A.M. Best. Best's Impairment Rate and Rating Transition
Study-1977-2014. U.S. Property/Casualty & Life/Health. Exhibit 2. Pg
5. (August 21, 2015)
---------------------------------------------------------------------------
EFAB also recommended to EPA in its 2007 report on captive
insurance that in addition to the captive insurer having a minimum
rating, the financially responsible affiliate (e.g. the owner or
operator demonstrating financial responsibility with insurance from a
captive) should also hold a minimum credit rating. EPA requests
comments on this additional potential requirement for captive insurance
should captive insurance be allowed in the final rule. EPA believes
that such a requirement would address some of the concern associated
with the similarities between pure captive insurance and a financial
test but would increase the administrative burden on the Agency.
EPA recognizes, however, that a requirement for a financial
strength rating would not address all concerns with these instruments.
These remaining concerns would include: (1) A concern that state
insurance regulation of captives and risk retention groups may not be
as uniform as that for commercial insurance and may be limited to only
the state in which the insurer is chartered; \71\ (2) a concern that
captives and risk retention groups may not be able to spread risk
across many insureds given the limitations inherent in for whom they
can write policies. EPA is therefore seeking comment on these issues,
and on suggested approaches to address these remaining concerns.
---------------------------------------------------------------------------
\71\ This concern is one of the concerns identified in the 2005
GAO report but may not be unique to captive or risk retention groups
in the context of environmental insurance. Similar to captive
insurers and risk retention groups, an excess or surplus lines
insurer must be licensed in the state that serves as its domicile
and must meet the solvency requirements of that state alone. Excess
or surplus lines insurers cover difficult to standardize risks which
often includes environmental insurance and, the Agency anticipates,
may include CERCLA 108(b) coverage initially due to the relatively
high dollar limits of liability and high risk facility classes.
---------------------------------------------------------------------------
For example, EPA requests comment on the concept of allowing
policies issued by risk retention groups or group captives that met a
certain minimum rating, but not allowing pure captive insurers to meet
the CERCLA Sec. 108(b) financial responsibility requirements. The
rationale for such a distinction would be that risk retention groups
and group captives may be able to spread risk across a larger pool of
financially and legally independent policy holders than a pure captive
insurer that may be restricted to spreading risk amongst its own
financially-related affiliates. As such, accepting insurance policies
from risk retention groups or group captives, but not pure captives,
may address the second concern identified. EPA also requests comment on
whether insurance policies provided by risk retention groups and group
captive insurers more generally should be treated equivalently.
EPA recognizes that a financial strength rating would not
necessarily be available in the near term as some captive insurers or
risk retention groups, were they to ultimately be considered acceptable
issuers, may be newly created in response to these regulations. EPA is
thus accepting comment on whether, if EPA ultimately allows policies
written by captives and/or risk retention groups, to phase in the
ratings requirement. A phased ratings requirement could operate by
requiring that owners and operators provide evidence of the requisite
financial strength of a captive insurer or risk retention group
beginning five years after the effective date of the rule. In this way,
a rating agency would be able to review a multi-year track record of
the insurer's performance which may be necessary in order to accurately
rate the insurer.
Submission of Endorsement (Sec. 320.42(c))
Typically, financial responsibility regulations require submission
of either a certificate of insurance or an endorsement as evidence of
the required insurance coverage. A certificate of insurance is a form
that typically is completed by an insurance broker or agent at the
request of an insurance
[[Page 3428]]
policyholder, which evidences the fact that an insurance policy has
been written. An endorsement to an insurance policy is a valid and
binding part of the contract considered to be part of the insurance
contract. EPA is today proposing that an endorsement be submitted as
evidence of financial responsibility by owners and operator that choose
to obtain insurance coverage as the means of complying with the CERCLA
Sec. 108(b) insurance requirements. Specifically, the owner or
operator would be required to submit a signed duplicate original of the
CERCLA Sec. 108(b) financial responsibility endorsement to the
Administrator, or to regional delegees of the Administrator, if
applicable, if the endorsement covers facilities located in multiple
regions. For more information on the required wording of the
endorsement and alternatives considered please see the discussions
later in this preamble, and the background document ``Potential
Requirements for Insurance, Surety Bonds, Letters of Credit and Trust
Agreements and Standby Trust Agreements under CERCLA Sec. 108(b)''
regarding instrument specifications.
In discussions with representatives of the insurance industry, EPA
was told by the participating representatives that they were
indifferent between a certificate of insurance and an endorsement as
the form of the evidence of financial responsibility. EPA did not want
to require the whole policy be submitted in all cases and is thus today
proposing that an endorsement be submitted as evidence of financial
responsibility. Other financial responsibility programs specify either
certificates, endorsement or both. In order to reduce the complexity of
the proposed regulations and provide a narrower range of documents EPA
would need to review during implementation, the Agency is proposing an
endorsement be submitted. Further, because an endorsement is part of
the insurance contract itself, it may provide greater certainty with
respect to the insurance coverage provided by the policy than a
certificate of insurance.
Requirements To Ensure Continuity of Financial Responsibility Coverage
(Sec. Sec. 320.42(f)(k) and (l))
An owner or operator using insurance to satisfy the requirements of
this section would also be required to establish a standby trust and
update Schedule A of the trust agreement within sixty days of a change
in the amount of CERCLA Sec. 108(b) financial responsibility. Similar
to the requirements for the letter of credit and surety bond, the
standby trust is being required alongside the insurance instrument to
ensure continued coverage, in conjunction with the automatic renewal
provision of the policy and the potential liability of the insurer if
the owner or operator does not obtain replacement financial
responsibility. EPA's concern is that an insurance policy might be
cancelled, not renewed or otherwise terminated leaving no financial
responsibility in place for the payment of valid third-party CERCLA
claims. EPA is especially concerned that policies may be cancelled,
terminated or otherwise not renewed following the issuance of a notice
letter of potential liability for the release of hazardous substances
or marked financial decline of the owner or operator, and financial
responsibility may not be in place when a claim is made. Amplifying
these concerns is the recognition that the CERCLA processes leading to
a claim (e.g. cost recovery) may be lengthy, which may make it
particularly difficult to ensure continuity of CERCLA Sec. 108(b)
insurance coverage without these requirements.
As a result, in addition to the requirement to establish a standby
trust, EPA is proposing an automatic renewal provision. Specifically,
EPA is proposing that the endorsement provide that cancellation,
failure to renew, or any other termination of the insurance by the
insurer will be effective only upon written notice to the owner and
operator and the Administrator by certified mail and only after the
expiration of 120 days beginning with the date of receipt of the notice
by both the Administrator and the owner or operator, as evidenced by
the return receipts. Such an automatic renewal provision in the policy
would be required to provide the insured with the option of renewal at
the face amount of the expiring policy. In this way, insurance coverage
could only lapse after 120 days' notice providing the owner and
operator an opportunity to obtain replacement financial responsibility.
The cancellation and termination language in the endorsement
proposed today was intended to closely follow the language used in the
RCRA Subtitle I insurance endorsement for underground storage tank
financial responsibility. A 2004 court decision held that those
regulations preclude rescission as a remedy for misrepresentation and
provide only for prospective cancellation of the insurance.\72\ EPA is
concerned that at the time a claim was made against a CERCLA Sec.
108(b) insurance policy, rescission (retrospective cancellation) of the
policy due to misrepresentation of the insured, would result in the
financial responsibility being unavailable and leave valid claims
unsatisfied. EPA recognizes the public policy merits of protections to
insurers in the event of misrepresentation. However, in the CERCLA
Sec. 108(b) context, EPA would not have access to the owner or
operator's application for insurance and any investigations into
misrepresentations or omissions would potentially be burdensome to the
Agency and redirect resources away from cleanups and other programmatic
priorities. EPA believes that the insurer is in the best position to
conduct investigations as to the accuracy of the information provided
in the application for insurance and thus should retain the risk from
misrepresentation rather than any CERCLA claimants. EPA's intent today
is to preclude rescission of the insurance coverage as a remedy for
misrepresentation and instead provide that prospective cancellation,
non-renewal or other termination of the insurance are the sole
remedies. EPA requests comment on this proposed provision and
endorsement language.
---------------------------------------------------------------------------
\72\ See: Zurich Am. Ins. Co. v. Whittier Props., Inc., 356 F.3d
1132 (9th Cir. 2004).
---------------------------------------------------------------------------
Finally, the endorsement would be required to specify that in
instances where the owner or operator fails to obtain alternate
financial responsibility and obtain written approval of such alternate
financial responsibility from the Administrator within ninety days
after receipt by both the owner or operator and the Administrator of a
notice from the insurer that it has decided to cancel, not renew or
otherwise terminate the insurance policy, the insurer would be liable
up to the face value of the policy for payment into the standby trust
in accordance with the terms of the endorsement. EPA believes the
combination of the requirements for a standby trust, a notice of
cancellation, failure to renew or other termination of the policy and
the insurers potential liability if the owner or operator did not
obtain alternate financial responsibility would provide assurance to
EPA and other claimants that funds will be available to make payment
for CERCLA response costs, health assessment costs, and natural
resource damages as required under the proposal. This requirement would
be similar to those for owners and operators using letters of credit or
surety bonds. This arrangement, and the similar provisions for other
proposed instruments, as well as alternatives are
[[Page 3429]]
discussed in more depth in the preamble section headed `issuer
cancellation provisions.'
A notable feature of the issuer cancellation provision proposed
today for insurance is how failure to pay the premium would be treated.
Under this proposed rule, if failure to pay the premium was the
rationale for the insurer's decision to cancel, not renew, or otherwise
terminate the policy, the insurer would be liable on the policy to fund
a standby trust if the owner or operator failed to obtain alternate
financial responsibility and obtain written approval of such alternate
financial responsibility from the Administrator within ninety days
after receipt by both the owner or operator and the Administrator of
the notice of the insurers intent to cancel, not renew, or otherwise
terminate the policy. EPA believes that this is the appropriate
treatment of the insured's failure to pay the premium. EPA believes
that the instances in which the owner or operator is unable to pay the
premium are likely instances where financial responsibility coverage is
most needed as the owner's or operator's ability to satisfy valid
third-party CERCLA claims is likely limited. EPA believes one of the
benefits of CERCLA Sec. 108(b) is that the credit risk of the owners
and operators of facilities managing hazardous substances can be
transferred from the taxpayer and other third-party CERCLA claimants to
the insurance and financial responsibility providers better able to
manage, assess and make arrangements for such credit risks.
One alternative option would be to allow cancellation in the event
of the insured's failure to pay the premium, without potential insurer
liability. While, for the reasons discussed earlier, EPA is not
proposing such an arrangement, the Agency requests comments on this
alternative and the proposed treatment of failure to pay the premium on
the part of the insured.
Payment for Third-Party CERCLA Claims From the Insurance (Sec. Sec.
320.42(h) Through (j) and (l) and Sec. 320.50(d))
Under the proposed regulations the insurance would provide for
payment to third-party CERCLA claims with three payment triggers in
addition to providing for direct action as provided by CERCLA. EPA
anticipates these four payment scenarios would operate independently of
each other. These payment scenarios are the same as for the other
instruments and are discussed more fully in section VI.B.5. of this
preamble.
The policy would be required to provide for the payment awarded in
final court judgments from a Federal court against any of the current
owners and operators awarding CERCLA response costs, health assessment
costs, and/or natural resource damages associated with the facility to
the party obtaining the judgment should such payment not be made within
thirty days.
The policy would be required to provide for payment as required by
a CERCLA settlement associated with the facility between any of the
current owners or operators at the facility and EPA or another Federal
government agency should the payment as required by the settlement not
be made.
The policy would also be required to provide for payment into a
trust fund established pursuant to a CERCLA unilateral administrative
order issued to any of the current owners or operators at the facility
by EPA or another Federal agency in instances where performance at the
facility as required by the order does not occur. The owner or operator
must have provided a written statement allowing the insurance policy be
used to assure performance of the work required in the order.
In addition to the three proposed payment scenarios identified for
which EPA intends to provide insurance coverage, the proposed CERCLA
Sec. 108(b) insurance would also be required to provide for direct
action against the insurer in instances identified in CERCLA Sec.
108(c)(2). Specifically, the proposed required wording of the CERCLA
Sec. 108(b) insurance endorsement includes language stating that in
the case of a release or threatened release of (a) hazardous
substance(s) from a facility covered by the policy, the insurer
acknowledges that any claim authorized by CERCLA Sec. Sec. 107 or 111
may be asserted directly against the insurer as provided by CERCLA
Sec. 108(c)(2). The endorsement would also state that the insurer
consents to suit with respect to these claims subject to the
limitations in CERCLA Sec. 108(d), and that the insurer will be
entitled to all rights and defenses provided to guarantors by CERCLA
Sec. 108(c). Further, under the proposed terms of the endorsement the
insurer would provide notice of any such resulting claims and payments
to the Administrator. EPA believes this notification requirement is
valuable as the owner and operator may not be available to provide such
a notice of payments or claims in a direct action scenario yet EPA
wishes to remain informed of claims against the instrument and the
value of the financial responsibility.
General Performance Clause (Sec. 320.50(d))
The proposed insurance endorsement language includes a general or
blanket performance clause as a means to address the myriad number of
ways the scope of insurance coverage provided by an insurance policy
may be limited. EPA recognizes that the ability to tailor insurance
coverage to the specific needs of the insured is one of the virtues of
insurance contracts; however, the Agency believes that in the context
of statutorily required financial responsibility such limiting
provisions of the policy may conflict with the intended scope of the
financial responsibility coverage and may frustrate the realization of
the public policy goals. Environmental insurance policies can be long,
complex contracts that operate as a whole to define and restrict the
coverage provided.
EPA believes it is necessary to propose a performance clause in the
language of the endorsement that would amend any terms of the policy
inconsistent with the regulatory requirements for CERCLA Sec. 108(b)
insurance or the terms specified in the endorsement. Similar
performance clauses are employed in the certificate of insurance
required as evidence of financial assurance for closure and post-
closure care of hazardous waste facilities in the RCRA Subtitle C
program (see 40 CFR 264.151(e)) and in the required wording of the
endorsement used in the RCRA Subtitle C third-party liability program
(see 40 CFR 264.151(i)). EPA believes that the proposed performance
clause in the endorsement will provide EPA evidence of financial
responsibility submitted by owners and operators electing to use
insurance without necessitating EPA review of the entire insurance
policy. Without such a provision, the administrative burden involved
with reviewing insurance submissions would be significantly higher and
may require expertise not readily available within EPA.
The proposed performance clause states that the insurance afforded
with respect to the covered facilities is subject to all of the terms
and conditions of the policy; provided, however, that any provision,
exclusion, definition, condition, retroactive date, clause, defense, or
other term of the policy inconsistent with 40 CFR 320.42 or certain
identified required specifications in the endorsement are hereby
amended to conform with 40 CFR 320.42 and the required specifications
in the endorsement. EPA intends for the performance clause to
[[Page 3430]]
help ensure that financial responsibility coverage will continue and
that the insurer will satisfy valid third-party CERCLA claims as
intended by the proposed regulations. In light of the fact that
insurance policies are often long, complex documents that may include
numerous exclusions, definitions, conditions, or other terms that may
undercut the intended coverage, EPA requests comment on the proposed
performance clause in the CERCLA Sec. 108(b) insurance endorsement.
Furthermore, EPA is interested in comments as to whether or not the
proposed insurance specifications, including the performance clause,
will reliably provide for the intended coverage (e.g. payment under the
scenarios described in IV B 5 ``General Provisions for Instrument
Payment'' of the preamble).
Retroactive Dates (Sec. 320.50(d))
The most notable aspect of the proposed performance clause may be
the specification that any retroactive date \73\ contained in the
policy inconsistent with the intended scope of CERCLA Sec. 108(b)
financial responsibility coverage is amended to conform with the
regulatory specifications and the terms of the endorsement. EPA
believes that such a specification is necessary to effectuate the
purpose of CERCLA Sec. 108(b) and has public policy merits. CERCLA
Sec. 108(c)(2) provides a cause of action against insurers providing
CERCLA Sec. 108(b) coverage in certain instances for any claim
authorized by CERCLA Sec. Sec. 107 or 111. CERCLA's liability scheme
is established in CERCLA Sec. 107 and is retroactive and includes
costs incurred addressing the threat of a release. EPA believes a
retroactive date would be inconsistent with the intended scope of
CERCLA Sec. 108(b) financial responsibility which is intended to cover
the full suite of potential CERCLA liabilities including threatened
releases, which could be a significant driver of costs and risk and may
exist at many facilities subject to CERCLA Sec. 108(b) financial
responsibility requirements.
---------------------------------------------------------------------------
\73\ The ``retroactive date'' or ``continuity date''
(terminology varies) establishes the foregoing temporal limits of
insurance policies: Pollution conditions commencing before the
specified date are not covered, even if a claim about such a
pollution condition is first made during the policy term.
---------------------------------------------------------------------------
This issue relates to the concept of CERCLA Sec. 108(b) presenting
a hybrid risk from the viewpoint of insurers mentioned earlier. In
discussions with representatives of the insurance community, EPA was
informed that the scope of a CERCLA response cost is broad and has
elements suited to risk transfer policies that commonly have
retroactive dates (e.g. costs incurred responding to fortuitous
releases) and closure insurance that typically would not have a
retroactive date (e.g. costs incurred responding to the threat of
release). EPA recognizes that for this reason, the CERCLA Sec. 108(b)
financial responsibility scope of coverage may, at least initially, be
perceived as an unfamiliar or hybrid risk by insurers yet believes that
allowing retroactive dates inconsistent with intended scope of coverage
could result in many valid third-party CERCLA claims being unsatisfied
on the basis that the pollution condition pre-dated the retroactive
date of the policy. EPA requests comment on the performance clause and
in particular the proposed language amending any retroactive dates
inconsistent with the scope of coverage prescribed by the regulations.
One possible arrangement that representatives from the insurance
community offered was to separate the financial responsibility
requirements into two separate obligations. Such an arrangement for
CERCLA Sec. 108(b) would allow EPA to specify an appropriate
retroactive date for the fortuitous risks and not have one for the more
``known'' CERCLA response and health assessment costs. In the RCRA
Subtitle C financial assurance program EPA was able to specify separate
instruments for known costs (e.g. closure) and third-party liability
financial assurance which is more fortuitous in nature. However, such a
construct is not possible in the case of CERCLA Sec. 108(b) financial
responsibility. Because CERCLA Sec. 108(b) financial responsibility
does not support a permitting program EPA cannot establish, by
regulation, performance requirements for owners and operators subject
to the rule (e.g. closure requirements that might address a threat of
release) which would be the basis for a separate amount of financial
responsibility. Further it is important to recognize that the
determination of a CERCLA Sec. 108(b) financial responsibility amount
does not constitute a determination of CERCLA liability for regulated
entities or establish any presumptive remedy which could be the basis
of an amount for costs amenable to a closure policy. This is one of the
reasons why CERCLA Sec. 108(b) financial responsibility is inherently
different from financial responsibility that complements reclamation
and closure programs. Given the uncertainty around what Superfund
actions may ultimately be required at a facility, EPA believes it
unwise to establish different pots of money. Such an approach would
only be optimal in instances where there is established certainty that
particular actions will need to take place at a facility (e.g. in a
program with regulatory requirements for closure or post-closure).
Multiple Insurers (320.42(d))
EPA is proposing that up to four insurers would be able to provide
the required amount of CERCLA Sec. 108(b) financial responsibility at
a single facility. EPA expects the required amounts of CERCLA Sec.
108(b) financial responsibility may be relatively large and wishes to
provide this flexibility. The proposed endorsement language would
require that the participating insurers identify their percentage share
of the coverage at facilities covered by the policy and the
corresponding dollar value of that percentage share.
The proposed arrangement for allowing multiple insurers to cover a
single facility is consistent with the proposed arrangement for
multiple sureties with a few exceptions. As described in the surety
bond section of the preamble, the proposed language of the surety bond
requires sureties to bind themselves jointly and severally for purposes
of allowing a joint action(s) against the issuers of the surety bond,
but allow for payment based on pre-determined proportions of the penal
sum (several liability). Unlike in the case of surety bonds where such
a provision has a great deal of precedent, such a provision for
insurers participating in vertical towers of coverage is less common in
the financial assurance programs EPA reviewed. As a result, EPA is
proposing that participation by multiple insurers be limited to four
insurers to ensure a manageable claims process. The U.S. Coast Guard
included the same cap on the number of participating insurers (59 FR
34220 (July 1, 1994)). EPA does not want to create a scenario whereby
claimants need to take action against many insurers which would
complicate the claims process and create a protracted process for the
satisfaction of valid claims. EPA requests comment on this limitation.
Specifically, EPA is interested in comments as to whether, in instances
where multiple insurers provide coverage at a single facility,
requiring participating insurers to bind themselves jointly and
severally for the purposes of allowing a joint action(s) against the
group of insurers would be possible and how such a provision might best
be specified.
When multiple insurers do provide coverage at a single facility,
the
[[Page 3431]]
proposed regulations would require that each insurer be liable for
their individual vertical percentage share of the total CERCLA Sec.
108(b) financial responsibility amount. The proposed specification
would create a vertical relationship whereby an insurer's liability is
not affected by the other insurers' abilities to pay their shares. EPA
believes this provides greater protection against the insolvency of one
of the participating insurers. The U.S. Coast Guard also restricted
multiple insurers to only providing vertical towers of coverage.\74\
This approach also simplifies the claims process as the exhaustion of
one insurer's liability does not need to be determined before payment
can be received from another insurer.
---------------------------------------------------------------------------
\74\ See 33 CFR 138.80(c)(1)(i).
---------------------------------------------------------------------------
An alternative EPA considered was proposing that multiple insurers
could form a tower of coverage comprised of horizontal layers. In such
an arrangement each insurer in the horizontal tower would be agreeing
to cover its layer of the tower, not a percentage of the total. Those
insurers higher up the horizontal tower become responsible on a layer-
by-layer basis as the limits of each underlying policy become
exhausted. However, EPA is not proposing such an arrangement due to
several concerns. First, a horizontal arrangement presents the
opportunity for insurers covering higher coverage layers to avoid
liability if an insurer on a lower level becomes insolvent and cannot
cover the liability within its layer. This is a concern also identified
by the U.S. Coast Guard when it developed its CERCLA Sec. 108(a)
regulations.\75\ Secondly, such an option would raise the
administrative burden on EPA because the Agency would need to ensure
that each layer of coverage fits with the layers above and below by
ensuring the insurance included the necessary ``follow form''
provisions.\76\ Further, EPA would also need to ensure that the layers
contained ``drop down'' provisions to address exhaustion issues that
might arise as a result of insolvency of an underlying insurer.\77\
---------------------------------------------------------------------------
\75\ See 59 FR 34220 (July 1, 1994).
\76\ A ``follow form'' provision means that the excess insurer
agrees to abide by the terms of the primary or underlying
policy(ies) to the extent that the excess policy does not contain a
conflicting parallel term. The intent of an EPA requirement for such
a provision would be to eliminate coverage gaps that may arise when
excess policies do not ``follow form'' of underlying policies. For
example, a gap may arise when the primary policy covers gradual
pollution but the excess policy does not.
\77\ An exhaustion provision states that an excess layer of
coverage cannot be triggered until all primary and underlying layers
have been exhausted. Problems in accessing excess layers can arise
when either the insured or an underlying insurer cannot pay due to
insolvency. A ``drop down'' specification can address the situation
of insolvency on the part of an underlying insurer, although other
terms and conditions in the excess policy will affect whether the
coverage will drop down.
---------------------------------------------------------------------------
EPA requests comment on the proposed regulatory provision allowing
up to four insurers to provide coverage at one facility by identifying
their vertical percentage share of the total CERCLA Sec. 108(b)
financial responsibility amount in the submitted endorsement.
Specifically, EPA is interested in other potential arrangements that
may encourage insurer participation in the program and provide for
relatively high amounts of financial responsibility coverage yet not
overly complicate implementation or the claims process.
Termination of Insurance Coverage by the Owner or Operator (Sec.
320.42(n) and (p))
The owner or operator would be required to maintain the insurance
in full force and effect until the Administrator consents to
termination of the insurance by the owner or operator. The
Administrator would give written consent to the owner or operator that
he or she may terminate the endorsement when: (1) An owner or operator
substitutes alternate financial responsibility as specified in this
section; or (2) the Administrator releases the owner or operator from
the requirements of this section in accordance with Sec. 320. 26. This
provision is intended to ensure that the coverage of the financial
responsibility does not cease, and that funds remain available when
needed, until the release provisions are met or alternate financial
responsibility is provided.
4. Financial Test (Sec. 320.43)
a. Overview and Introduction
CERCLA Sec. 108(b) (2) provides that financial responsibility may
be established by any one, or any combination of, the instruments
listed in that paragraph, including ``qualification for self-
insurance.'' A financial test is a financial responsibility instrument
that allows an owner or operator to qualify for self-insurance by
demonstrating that it has sufficient financial strength to meet its
environmental obligations. When allowing the use of a financial test,
the Government accepts the facility's demonstration of financial
strength as the only assurance that the owner or operator will meet its
environmental obligations, and does not require that it establish a
trust fund or obtain additional security in the form of a third-party
financial instrument, such as insurance, a surety bond, or letter of
credit.
The Agency is co-proposing two separate regulatory approaches in
the form of options regarding the use of a financial test to assure
that this important issue is thoroughly considered before the Agency
makes a decision in the final rule. The Agency is proposing, under
Option 1, not to allow the use of a financial test or corporate
guarantee, and is proposing under Option 2 allowing the use of a credit
rating-based financial test and corporate guarantee. At this time, EPA
prefers Option 1. However, the Agency is proposing both options to
fully evaluate this issue, and to gather as much information as
possible to inform its ultimate decision on whether the financial test
and corporate guarantee mechanisms are appropriate for use by hardrock
mining facilities under CERCLA Sec. 108(b). EPA has identified, and
presented in this preamble discussion, a number of factors that the
Agency will consider in making its final decision, and seeks public
comment on these factors, as well as additional information from the
public that could inform the Agency's final decision.
By replacing the requirement to obtain a third-party instrument
with a demonstration of financial strength, the financial test results
in significant cost savings to eligible owners or operators, from not
having to purchase a third-party financial responsibility instrument.
However, by allowing a financial test, EPA would accept the risk that,
if the company's financial situation deteriorates and it cannot obtain
a third-party instrument or fund a trust fund to meet its environmental
obligations, the costs of addressing the environmental risk at the
facility could fall to the public. With the added layer of a third-
party financial responsibility instrument, however, the risk of default
to the public would be lessened by the financial strength of the
instrument provider. Nonetheless, EPA recognizes that the risk of
default exists regardless of the type of financial responsibility
instrument. For example, even in the case of secured financial
responsibility instruments, the possibility remains that the banks and
insurance companies underwriting these instruments could also fail.
Regardless of the scenario, with or without a financial test, EPA and
the public are not without some risk of having to cover such
obligations.
EPA also is carefully considering the elements of the financial
test. Financial tests can vary in approach and in sensitivity. The
combination of terms
[[Page 3432]]
and conditions impacts the balance of cost savings to the regulated
community and the risk to the public, as well as a test's efficacy.
Thus for example, bond ratings and financial ratios are commonly used
measures of financial strength in financial tests. For bond-rating-
based tests, establishing a lower minimum rating(s) requirement for
self-insurance, can expand the availability of the test to the
regulated community. At the same time, such entities with lower credit
ratings also possess a higher likelihood of defaulting on their
obligations. Thereby, permitting less credit worthy companies the
ability to use the financial test increases the chance that an
obligation may go unpaid and be borne by the public.
Further, the financial strength of an owner or operator as measured
by a financial test represents a snapshot in time. Thus, for a
financial test to be effective, the owner or operator must provide
periodic evidence that it continues to pass the financial test and that
it can meet the costs associated with its facility over time. For a
financial test to be effective: (1) The financial test must accurately
reflect the financial strength of the owner or operator; (2) the Agency
and/or owners and operators must identify when the owner or operator no
longer qualifies for self-insurance under the financial test; (3) the
owners or operators that no longer qualify for the financial test must
be able to quickly obtain an alternate instrument(s) to cover their
obligations instead of self-insuring; and (4) the requisite instruments
must in turn be available to such owners and operators who no longer
are able to self-insure. The Agency is concerned, however, that third-
party financial instruments may not be available to a company that is
experiencing a period of financial hardship. While, in general, such an
issue has not been a widespread problem in other EPA financial
responsibility programs, the Agency is concerned that the highly
cyclical, capital-intensive nature of the mining industry may present
unique challenges under a CERCLA Sec. 108(b) rule for hardrock mines.
There are several other broader considerations with respect to the
adoption of a financial test. First, EPA has concerns regarding the
extent to which sufficient resources and expertise will be available to
implement a financial test under CERCLA Sec. 108(b). Second, EPA has
policy concerns about: (1) Whether offering a financial test would
adversely affect the incentives created by the rule for better
practices; (2) the potential inequity of offering a test due to the
advantage that the test may create for larger versus smaller owners and
operators; and (3) whether, given the potentially significant costs
associated with Superfund liabilities, should the financial test fail
as an instrument, these costs may not be paid or may fall to the
taxpayer to pay. All of these considerations are discussed elsewhere in
the preamble. The Agency remains extremely concerned regarding the boom
and bust nature inherent to the hardrock mining industry and recent
volatility in commodity prices and global markets. History suggests
that the increased risk of default for these companies makes this
sector particularly problematic from the perspective of allowing them
to self-insure through a financial test. Finally, many hardrock mining
facilities require long-term care, such as long-term water treatment of
acid mine drainage. Allowing owners or operators to self-insure where
such long-term liabilities are anticipated may be ill-advised given
that some sites require treatment into perpetuity. It should be noted
that, although EPA currently allows the use of a financial test under
various agency programs,\78\ other agencies have chosen not to allow
the use of a financial test for owners and operators in the mining
sector.79 80 81 EPA discusses all of these factors in the
following sections of this preamble.
---------------------------------------------------------------------------
\78\ The financial test is an allowable instrument under RCRA
Subtitle C, Subtitle D, and Subtitle I regulations, as well as under
the Underground Injection Control (UIC) program.
\79\ See 43 CFR Sec. 3809.570(a) through (c) related to self-
insurance and pre-existing self-bonds under BLM regulation.
\80\ See U.S. Forest Service, Forest Service Manual Sec. Sec.
2817.24; 6562 (2008).
\81\ For example, the Federal agency that regulates surface
mining of coal recently advised states to not allow self-insurance
by mining companies and also announced that it was changing the
federal rules regarding self-insurance under the Surface Mining
Control and Reclamation Act (SMCRA).
See: https://www.eenews.net/eenewspm/stories/1060041689
---------------------------------------------------------------------------
b. Option 1--No Financial Test (Preferred Option)
Under this option, which EPA prefers, the Agency is proposing an
approach under which a financial test would not be available for use by
hardrock mining facilities subject to this rule. Under this approach,
owners or operators could demonstrate financial responsibility only by
using a trust fund, insurance, a letter of credit, or a surety bond, or
a combination of those instruments. A corporate guarantee, which is
based on the financial test, would not be available. EPA is proposing
this option as a preferred option based on a number of factors. Covered
initially are four broader factors of concern regarding the
appropriateness of financial tests under CERCLA Sec. 108(b). Further
discussion follows that also outlines factors for why the use of any
financial test would be particularly problematic for the hardrock
mining industry. (1) Concerns regarding the use of a financial test
under CERCLA Sec. 108(b).
The Agency considered several concerns regarding the use of a
financial test under this proposed rule. The Agency first considered
the work involved in overseeing a financial test in the context of
CERCLA Sec. 108(b). EPA is particularly concerned about the
administrative burden of a test under CERCLA Sec. 108(b) given the
freestanding nature of the CERCLA Sec. 108(b) obligation that would
not be buttressed by a permitting program. Observers, more generally,
have commented that the financial test poses additional administrative
burden. For example, in a 2001 audit of the RCRA Subtitle C financial
assurance program, the Agency's OIG reported that financial tests pose
unique administrative complexities that raise their implementation
burden.\82\ In 2005, when GAO was tasked with identifying obstacles to
full realization of the ``polluter pays'' principle, GAO observed that
financial tests and corporate guarantees are among the instruments that
pose the greatest financial risk to the Government and are an
administrative burden since they require specialized expertise to
oversee.\83\ The Agency is considering whether the unique
characteristics of the CERCLA Sec. 108(b) financial responsibility
program and of the hardrock mining industry may increase the
administrative burden of implementing a financial test, and make the
use of a financial test less appropriate under this proposed rule than
under other Agency programs. EPA solicits comment on this issue.
---------------------------------------------------------------------------
\82\ See EPA Office of Inspector General. RCRA Financial
Assurance for Closure and Post-Closure. March 30, 2001. 2001-P-007.
\83\ See Government Accountability Office. Environmental
Liabilities: EPA Should Do More to Ensure That Liable Parties Meet
Their Cleanup Obligations. August 2005. GAO-05-658.
---------------------------------------------------------------------------
As discussed earlier, successful use of a financial test requires
adequate oversight by the regulatory agency to assure that financial
submissions are accurate and adequate, and that when owners or
operators no longer meet the requirements of the financial test they
secure an alternative financial responsibility instrument in a timely
manner. Generally, where a financial responsibility requirement is tied
to a permit, EPA has ongoing oversight of the owners or operators of
the facility,
[[Page 3433]]
which supports implementation of a financial test at that facility. For
example, under EPA's RCRA Subtitle C regulations for permitted
hazardous waste treatment, storage, or disposal facilities, EPA
receives extensive information about the facility in its permit
application under 40 CFR part 270, and conducts regular and detailed
inspections of the facility, including both the physical operations and
financial assurance information required under the permit. As described
earlier, however, CERCLA Sec. 108(b) is an independent financial
responsibility requirement that is not associated with a permit
program, so the Agency may have less immediate access to information
regarding the current status of the facility.
The Agency has attempted to address some of these concerns by
structuring the proposed financial test to reduce implementation
concerns, for example, by including reliance on credit rating. (This
issue is discussed in section VI.C.4. of this preamble). However, even
with the proposed financial test, the Agency would still be required
to, at a minimum, verify the credit ratings, and to annually review
financial submissions to assess whether the company meets other test
requirements, such as coverage multiple requirements \84\ related to a
company's tangible net-worth and the value of their U.S. Assets. This
review is potentially complex and may require a level of financial
expertise not readily available in all ten EPA Regional Offices. For
example, the data in the Chief Financial Officer (CFO) letter \85\ may
vary from the latest annual financial statements. Professional judgment
may be needed to evaluate deviations between the CFO letter and audited
statements, which increases the administrative burden and the demand
for technical expertise to implement the financial test.
---------------------------------------------------------------------------
\84\ In this proposal, an owner or operator eligible to use this
financial test for any portion of its CERCLA Sec. 108(b)
obligations also would be subject to a coverage multiple requiring
them to have both a tangible net worth and U.S. Assets each
equivalent to at least six times the amount of environmental
obligations covered by a financial test. The U.S. Asset requirements
could also be met by demonstrating that at least ninety percent of
total assets are located in the United States.
\85\ To demonstrate passage of the financial test, owners or
operators would be required to annually submit a standardized letter
to the Administrator signed by its CFO.
---------------------------------------------------------------------------
In addition, the efficacy of the financial test proposed under
Option 2 depends on the accurate and accessible accounting of covered
environmental obligations company-wide to meet the U.S. assets and
tangible net worth coverage multiple requirements. These requirements
will be implemented by EPA Regional offices, but the co-proposed
financial test includes nationwide obligations as part of the
calculation, to ensure effectiveness of the test. This may necessitate
verification of information located in another region or held by
another agency or state entity, which could be a very timely and costly
process.
The Agency has found implementation of a financial test under other
Agency financial responsibility programs to present challenges. EPA is
concerned that under CERCLA Sec. 108(b), without the structure of a
permit program and the level of interaction and knowledge of site
conditions that it provides, it may be even more challenging to
successfully oversee and implement.
Second, EPA is concerned that the use of a financial test may limit
the realization of one of the potential benefits of this rule--the
development of better mining practices. EPA believes that this is an
important impact of this proposed rule. As explained in the discussion
of the financial responsibility formula, EPA has built such incentives
into that aspect of the rule. Those incentives are reinforced by the
effect that an owner or operator adopting sound practices can be
expected to be able to purchase an instrument from a third party, for a
reduced amount of coverage and at a reduced cost. Similarly, some
third-party providers may encourage owners and operators to adopt safer
practices as well. However, with a financial test, so long as the owner
or operator can meet the test requirements and avoid the need to obtain
third party coverage, the cost savings incentive to implement improved
practices may be lost, along with the associated risk reductions they
would afford. Therefore, the Agency believes that providing a financial
test under this proposed rule could reduce salutary effects of the
rule. Further, because financial tests are available to the owners or
operators that are best able to bear the costs, this reduced incentive
affects the owners or operators in the best position to invest in
improved practices.
Third, the Agency is further concerned that because of the
potentially high costs associated with Superfund liabilities,
particularly from hardrock mining facilities, and the potential for
such costs falling to the taxpayer should the financial test fail, it
might not be an appropriate instrument for use under CERCLA Sec.
108(b). Under the proposed rule, owners or operators would be required
to establish and maintain financial responsibility to cover all CERCLA
Sec. 107 liabilities at their facilities--response costs, natural
resource damages, and health assessment costs.\86\ In many Superfund
cases, and particularly in the case of hardrock mining facilities,
these costs can be quite high. Thus as noted in the introductory
discussion, use of a financial test for such large amounts presents a
larger risk to the public should cases arise where the financial test
fails to be effective.
---------------------------------------------------------------------------
\86\ Facilities with obligations under other statutes will be
separately responsible for meeting the financial assurance
requirements, such as those under RCRA Subtitle C and Underground
Injection Controls (UIC) programs.
---------------------------------------------------------------------------
Finally, because the financial test co-proposed in this rule is by
design only available to the owners or operators best able to bear the
costs, the Agency recognizes that allowing the use of a financial test
in this rule would provide an economic advantage (in the form of a cost
savings) to the economically strongest owners or operators, and
potentially create an economic and competitive disadvantage for others.
The Agency solicits comment on the concerns identified by EPA
regarding the use of a financial test under CERCLA Sec. 108(b).
(2) Concerns Regarding Use of a Financial Test by the Hardrock Mining
Industry
Beyond concerns related to the use of a financial test under CERCLA
Sec. 108(b), EPA considered issues specific to the use of a financial
test for the hardrock mining industry under 108(b). First, there are
significant concerns that owners or operators that are no longer able
to meet the requirements of a financial test may become less able than
owners or operators in other industries to secure an alternative
financial responsibility instrument. One reason is because frequent
fluctuations in commodity prices within the hardrock mining industry
may result in sharp declines in production and accelerated mine
closures. This scenario is currently playing out in the case of the
coal mining industry.\87\
---------------------------------------------------------------------------
\87\ In recent years, the banking industry has been stepping
back from providing loans to the coal industry:
In 2015, Bank of America cut off its financing for coal
extraction projects to reduce its exposure. (Kate Sheppard, Bank of
America Backs Away from Funding Coal Mining, Huffington Post. May 6,
2015.)
In 2015, Citi Group and Goldman Sachs Group sold its
investments in mining and reduced its financing of coal mining
operations faced with large environmental obligations. (Jeanne
Dugan, Timothy Puko, Goldman Sachs Sells Colombian Coal Mines to
Murray Energy, The Wall Street Journal. April 13, 2015; Kadhim
Shubber, Citi Promises to Cut Lending to Coal Miners, Financial
Times. October 5, 2015.)
In 2016, JPMorgan announced it would be no longer
finance new coal-fired plants in the U.S. (Michael Corkery, As
Coal's Future Grows Murkier, Banks Pull Financing, New York Times.
March 20, 2016.)
---------------------------------------------------------------------------
[[Page 3434]]
Many mineral resource extraction firms are not able to absorb
market fluctuations because they lack diversified lines of business.
This may make it harder to ensure that owners or operators who do fail
the test obtain a replacement instrument.\88\ Furthermore, requiring a
company to purchase a more expensive means of financial assurance once
it begins to experience liquidity problems may only serve to aggravate
its financial difficulties. This effect also makes it harder for EPA to
oversee the use of the financial test. For example, rapid fluctuations
in financial status may necessitate more frequent reporting to the
Agency, resulting in increased oversight burden, as discussed earlier.
Thus, it may be more important in the case of mining than in other
industries to require an owner or operator to secure a third-party
financial responsibility instrument or fund a trust fund when it is
financially able to do so.
---------------------------------------------------------------------------
\88\ These concerns were noted in the 2005 report from the
Government Accountability Office, EPA Should Do More to Ensure that
Liable Parties Meet Their Cleanup Obligations, at p. 42. Available
at https://www.gao.gov/products/GAO-05-658.
---------------------------------------------------------------------------
Second, numerous troublesome cases have occurred involving hardrock
mining facilities that have gone through bankruptcy, while leaving
extremely significant environmental impacts in their wake. Remedial
work can be stopped or slowed in situations where the owner or
operator's cash flow and revenue is reduced or they go bankrupt. Such
impacts have occurred in the past when owners or operators of mines
engaged in CERCLA cleanups have had to negotiate changes to the scope
of work due to drops in metal prices. EPA experienced this problem when
a major mining company slowed work at sites and then filed for
bankruptcy in 2005. The company was using a financial test (which was a
less sensitive financial test than the test proposed under Option 2)
under a CERCLA Consent Decree with EPA at a smelter site in the
northwest part of the U.S. EPA discovered that the company was having
financial struggles, despite having recently submitted information that
it met the necessary financial test requirements. In response, EPA
requested that the company obtain a liquid financial responsibility
instrument under the provisions of a consent decree, but the company
was unable to do so, given its declining financial condition.
Third, given the relative market volatility observed within the
hardrock mining industry, some have argued that there are no
circumstances under which owners or operators of hardrock mining
companies should be allowed to self-insure through a financial test.
Analysis has shown that mining companies can be more likely to default
on their financial obligations than other types of companies.\89\ For
example, the recent downturn in metals prices has led to a default rate
in the metals and mining sector which is nearly three times the
economy-wide corporate default rate.\90\ Moreover, financial analysts
have predicted that mining sector default rates are likely to rise.\91\
Mining companies also tend to default more quickly than other types of
companies,\92\ and may have multiple mining operations, meaning that a
single failure could have broader impacts.
---------------------------------------------------------------------------
\89\ See Standard & Poor's 2014 Global Corporate Default Study
at p. 11. Available at: https://www.nact.org/resources/2014_SP_Global_Corporate_Default_Study.pdf. (While the total number
of defaults in 2014 declined from previous years, the default rate
in the energy and natural resources industry rose to 25 percent.
Eight of the 15 companies that defaulted were metals, mining, and
steel companies.)
\90\ See Energy, Mining Companies Lead Debt Default Rates
Higher,'' 24/7 Wall St. (Aug. 14, 2015). Available at: https://247wallst.com/banking-finance/2015/08/14/energy-mining-companies-lead-debt-default-rates-higher/ (Overall corporate default rate for
the twelve months trailing July 2015 was 2.5 percent, while the
trailing rate for exploration and production companies was 5
percent, and the rate for metals and mining companies was 7.1
percent).
\91\ See Why Bankruptcy Might be the Mining Industry's Last Best
Hope, Bloomberg Business (Dec. 2, 2015), https://www.bloomberg.com/news/articles/2015-12-03/why-bankruptcy-might-be-the-mining-industry-s-last-best-hope (warning that falling commodities prices
and an oversupplied market will trigger more bankruptcies in the
mining sector); Warning of another string of mining bankruptcies in
2016, (Mar. 1, 2016), https://www.mining.com/warning-of-another-string-of-mining-bankruptcies-in-2016/ (noting dramatic credit
deterioration in the oil & gas, and metals and mining sectors,
``with no other sectors even in the same ballpark,'' and with credit
conditions expected to worsen in 2016).
\92\ See Standard & Poor's 2014 Global Corporate Default Study
at p. 44. The time to default from original credit rating for energy
and mining companies is 3.9 years versus 5.7 years for the economy
overall. The time to default from ``post-original rating'' for the
energy & resources sector is even shorter, at an average of just 2.1
years.
---------------------------------------------------------------------------
EPA is concerned that close linkage between the hardrock mining
industry and global commodity prices means that companies that are
invested in the same minerals are likely to fail or experience
financial hardship at the same time, when the prices of these minerals
decline.\93\ If so, additional strain would be placed on EPA's ability
to administer the test and ensure compliance across multiple companies
at multiple sites simultaneously.
---------------------------------------------------------------------------
\93\ See Moody's Investors Service, ``Moody's places energy and
metals & mining issuers on review for downgrade,'' (Jan. 22, 2016),
https://www.moodys.com/research/Moodys-places-energy-and-metals-mining-issuers-on-review-for-PR_342773 (announcing placement of 55
metals and mining companies on review for downgrade); Moody's
Investors Service, Moody's places 11 mining companies in the U.S. on
review for downgrade (Jan. 21, 2016), https://www.moodys.com/research/Moodys-places-11-mining-companies-rated-in-the-US-on-PR_342543 (warning of an ``unprecedented shift'' in the mining
industry and advising that ``deteriorating industry fundamentals
require a recalibration of the global mining portfolio rated by
Moody's'').
---------------------------------------------------------------------------
Congress and the states have expressed concern over the volatility
in the mining industry and the potential inability of a financial test
to account for rapidly changing market conditions, asking the
Comptroller General for a review of self-insurance
practices.94 95
---------------------------------------------------------------------------
\94\ Self-bonding may be otherwise understood to mean self-
insurance.
\95\ A recent letter from Senators Maria Cantwell of Washington
and Richard Durbin of Illinois to the Comptroller General requested
an investigation by GAO into the use of self-bonding across federal
programs governing resource extraction, and a performance audit of
self-bonding under the Surface Mining Control and Reclamation Act.
The letter, dated Mar. 8, 2016, is available at https://www.energy.senate.gov/public/index.cfm/files/serve?File_id=47C14E0B-8A9D-457F-A1DE-0B7135144E1B.
---------------------------------------------------------------------------
EPA has information that decisions in the mining industry to expand
or open new facilities are generally made over a longer period of time
than some other industries (on for example, a ten-year, twenty-year, or
longer amortization and investment basis).\96\ Such investment
decisions often don't always correspond to the demand cycle for the
commodity.\97\ Moreover, mining assets generally are immobile, making
it difficult to transfer equipment and facilities to other productive
uses during periods of low demand.
---------------------------------------------------------------------------
\96\ Investments within the hardrock mining sector tend to be
longer term given the lifetime of typical mines and the extreme
amount of capital that must be invested up-front. Such investments
and assets must therefore be amortized or written-off over a longer
period of use. Firms will utilize amortization for spreading out of
capital expenses for intangible assets over a specific period of
time (usually over the asset's useful life) for accounting and tax
purposes. Amortization is similar to depreciation, which is used for
tangible assets, and to depletion, which is used with natural
resources.
\97\ See J.T. Bradbury, International Movements and Crises in
Resource Oriented Companies: The Case of Inco in the Nickel Sector,
Economic Geography, Vol. 61, No. 2, 1985.
---------------------------------------------------------------------------
Mining companies generally attempt to manage cyclical patterns by
balancing new investment with projected sales of minerals.\98\ Metal
prices, however, can
[[Page 3435]]
unfortunately experience substantial increases or decreases over a
relatively short time period. The speed of these price changes results
in swings in market volatility rendering it difficult for a capital-
intensive industry like mining to adjust quickly. Analysis of price
cycles from composite metals indices for certain metals, over the past
thirty years, reveal that there have been between three and five price
cycles lasting between five and eight years, depending on the metal.
Typically, the peak price occurs during the first half of the cycle,
often exactly halfway between the two trough prices. Price fluctuations
tend to happen rapidly with prices increasing by more than 75 percent
in one month, or decreasing by more than thirty percent over the course
of a month.\99\
---------------------------------------------------------------------------
\98\ See Philip Maxwell, Was there a Nickel Shakeout?, Minerals
and Energy, Vol 21, No. 3-4, 2006. J.T. Bradbury, International
Movements and Crises in Resource Oriented Companies: The Case of
Inco in the Nickel Sector, Economic Geography, Vol. 61, No. 2, 1985.
\99\ See Background Document for Financial Test Analyses,
Industrial Economics, Inc. (IEc). 2016.
---------------------------------------------------------------------------
``Mining companies have volatile earnings, coming from
macroeconomic factors that are not in their control. As the economy
weakens and strengthens, mining companies see their earnings and cash
flows track with the commodity price.'' \100\ And the stability of
earnings and cash flow of mining companies is significantly less than
the average of other industries.\101\ Significant income fluctuations
are also compounded by the fact that many mines use debt financing to
support the large infrastructure investments needed to get a mine
started and to expand operations.\102\ This leads to high volatility in
equity values and debt ratios for mining companies.\103\
---------------------------------------------------------------------------
\100\ See Valuation of Metals and Mining Companies, Svetlana
Baurens, p. 56 (July 11, 2010). Available at: https://www.basinvest.ch/upload/pdf/Valuation_of_Metals_and_Mining_Companies.pdf.
\101\ See Rating Companies in the Mining Industry, p.7 (June
2011). Available at: https://www.dbrs.com/research/240365/rating-companies-in-the-mining-industry.pdf.
\102\ See Valuation of Metals and Mining Companies, Svetlana
Baurens, p. 13 (July 11, 2010). Available at: https://www.basinvest.ch/upload/pdf/Valuation_of_Metals_and_Mining_Companies.pdf.
\103\ Ibid.
---------------------------------------------------------------------------
Mining profits are also generally tied to revenue rather than
operating costs because operating costs tend to be highly fixed in the
industry.\104\ ``Commodity price is a principal determinant of revenue,
but it is also the factor with which the greatest level of financial
risk is associated.'' \105\ Today, many mines cannot survive these
price fluctuations.\106\ During low price periods, the mining industry
tends to contract since they are losing revenue with increased periods
of bankruptcy and company consolidation. Over the past 25 years, the
rate of mining bankruptcies has spiked during sharp price declines and
sustained periods of low prices. Between 1981 and 2010, there were
approximately 43 mining company bankruptcies, not counting smaller
mining operations that may undergo personal, rather than corporate,
bankruptcy.
---------------------------------------------------------------------------
\104\ Ibid.
\105\ See Valuation of Metals and Mining Companies, Svetlana
Baurens, p. 36, July 11, 2010. Available at: https://www.basinvest.ch/upload/pdf/Valuation_of_Metals_and_Mining_Companies.pdf.
\106\ See Background Document for Financial Test Analyses,
Industrial Economics, Inc. (IEc). 2016.
---------------------------------------------------------------------------
During the recent economic recession (characterized by the stock
market drop in September 2008) for example, copper, nickel, tin, and
zinc prices fell more than twenty percent between September and October
2008.\107\ Notwithstanding periods of market volatility, on average,
metal prices also generally experience a three to seven percent
increase or decrease on a monthly basis. This further substantiates
that the mining industry must operate under a great deal of
uncertainty, often facing greater and more frequent changes in expected
market return than other sectors.
---------------------------------------------------------------------------
\107\ Gold responded differently. For ten years the price of
gold rose quickly, aided especially by the stock market meltdown of
2009. After hitting its high in August 2011, gold saw a gradual
decline, even as the stock market rose into record territory. Then
gold plummeted 25 percent in mid-April 2013, seeing its biggest one-
day decline in more than thirty years on April 15, 2013.
---------------------------------------------------------------------------
Such volatility impacts the effective use of a financial test by
hardrock mining facilities. The cyclical nature of the industry and the
rapid fluctuations in commodity prices may result in corresponding
fluctuations in the financial health of hardrock mining companies.
Whereas a mining company may accumulate substantial amounts of cash
flow from operating activities during a period of peak prices, a price
trough likely would result in decreased revenues, and corresponding
decreased cash flow.
However, because of falling revenues and potentially compromised
cash flow stemming from commodity price swings, EPA is concerned that
companies may have insufficient tangible assets (financial reserves) to
establish alternate financial instruments in years where they are
unable to pass the financial test.\108\
---------------------------------------------------------------------------
\108\ As stated by the U.S. General Accountability Office, ``If
a company that passed the test later files for bankruptcy or becomes
insolvent, the company in essence is no longer providing financial
assurance because it may no longer have the financial capacity to
meet its obligations. Such financial deterioration can occur
quickly. While companies no longer meeting the financial test are to
obtain other financial assurance, they may not be able to obtain or
afford to purchase it.'' GAO. EPA Should Do More to Ensure That
Liable Parties Meet their Cleanup Obligations (2005). Available at:
https://www.gao.gov/products/GAO-05-658.
---------------------------------------------------------------------------
In 2000, the BLM identified similar concerns when it decided to
prohibit new corporate guarantees for future reclamation work to
restore lands when hardrock mining operations cease.\109\ Commenters at
the time noted that because the value of the ore fluctuates over time
and may lose value as it is mined, that the soundness of the guarantee
might be most questionable at the time it is most needed.\110\ In
making the decision to eliminate self-insurance from its hardrock
mining regulations, BLM cited both the Bureau's lack of expertise to
perform the periodic reviews of companies' assets, liabilities, and net
worth that would be necessary to oversee guarantees, as well as the
fact that even with annual reviews by skilled staff, a default risk
would remain. BLM therefore decided to shift the financial risk to the
businesses they regulate who have to purchase financial assurances from
independent third parties, such as banks. In a 2005 report, GAO
identified examples of BLM's inability to collect funds for reclamation
when operators of hardrock mines using corporate guarantees filed for
bankruptcy.\111\ The inability of companies to be able to afford
alternate financial assurance when failing the financial test could be
exacerbated in the CERCLA Sec. 108(b) context by the potentially high
costs associated with Superfund liabilities, particularly from hardrock
mining facilities. Owners or operators would need to secure a third-
party financial responsibility instrument or fund a trust fund for a
high dollar amount in a time when their financial health may be
compromised, which may be difficult or impossible. The Agency solicits
comment on these concerns.
---------------------------------------------------------------------------
\109\ See 65 FR 69998, at 70074, November. 21, 2000, stating:
``We agree that a corporate guarantee is less secure than other
forms of financial guarantees, especially in light of fluctuating
commodity prices. Recent bankruptcies added to the concern that
corporate guarantees don't provide adequate protection. We believe
the number of new mines that might have wanted to rely on corporate
guarantees is relatively small, and we also believe, given the
economics of the industry, that companies that would have been
eligible to hold a corporate guarantee should not have a significant
problem finding a third-party surety, or posting the requisite
assets.''
\110\ Id., at 70073.
\111\ See GAO. Hardrock Mining: BLM Needs to Better Manage
Financial Assurances to Guarantee Coverage of Reclamation Costs,
GAO-05-377 (Washington, D.C.: June 20, 2005). Available at: https://www.gao.gov/products/GAO-05-377.
---------------------------------------------------------------------------
As a fourth and distinct concern, when a mine is reaching the end
of its life and is bringing in less revenue, the owner or operator may
not be able to secure a financial responsibility instrument for CERCLA
liabilities that may continue to be required after the
[[Page 3436]]
mine closes. If a company fails the financial test after its mining
facility closes, it may thus not be able to obtain alternate financial
responsibility that may be required after the facility closes. EPA
solicits comment on the likelihood of this scenario.
As a fifth concern, allowing a financial test under this proposed
rule for hardrock mining would be inconsistent with the approach taken
by some other Federal regulators that have experience and expertise in
the regulation of the hardrock mining facilities. After having formerly
allowed a financial test, BLM modified its regulations at 43 CFR part
3809 and removed the financial test as an available financial
responsibility instrument; \112\ the U.S. Forest Service regulations
governing financial responsibility requirements applicable to locatable
minerals operations also do not allow the use of a financial test;
\113\ and the Nuclear Regulatory Commission, explicitly prohibits the
use of self-insurance for uranium mills.\114\ EPA is concerned that
allowing the use of a financial test under this proposed rule would be
inconsistent with the approach to hardrock mining financial
responsibility that has developed through these other Federal programs.
Further, not allowing a financial test would reflect the experience and
expertise of these regulators, all of which have determined that a
financial test is not appropriate for hardrock mining facilities. The
Agency solicits comment on these concerns.
---------------------------------------------------------------------------
\112\ See Mining Claims under the General Mining Laws; Surface
Management 65 FR 69998 @70073-70074, November 21, 2000. BLM cited
the necessity to review submissions annually as well as its limited
capacity to do so, as contributing factors in its decision not to
allow additional use of a financial test. Further justifying its
decision, BLM stated that even if it had the expertise to perform
reviews on a periodic basis, the risk of default remains.
\113\ See 36 CFR 228.13 (allowing a bond, blanket bond, or
cash).
\114\ See 10 CFR 40 Appendix A criteria 9,
---------------------------------------------------------------------------
Finally, as noted earlier, the Agency is concerned that a financial
test for the hardrock mining industry may not fully reflect the
financial health of the owner or operator. Based on experience from
requiring financial responsibility for CERCLA consent decrees, EPA has
learned that mining companies often do not list ``contingent''
liabilities, such as the potential need for long-term operation and
maintenance (``O&M'') on their corporate balance sheets, at least not
during the early exploration and start-up phases of a mine. As such, a
balance sheet can show that a given company has sufficient assets to
meet the requirements of the financial test, despite the fact that all
or a portion the recorded assets may be zeroed out by unrecorded
``contingent'' liabilities. The Agency solicits comment on this
concern. Specifically, EPA is concerned that the six times multiples
for tangible net worth and U.S. assets that have worked well in the
RCRA Subtitle C program would not be effective for a mining industry
with the potential for large contingent liabilities.
For these reasons, the Agency is proposing, as its preferred
option, not to allow the use of a financial test under this proposed
rule. The Agency solicits comment on this proposal.
c. Option 2--Financial Test
Although the Agency's preferred option is to not allow a financial
test under the proposed rule (see Option 1), EPA is proposing a second
option--that is, to make a financial test available for use by hardrock
mining facilities subject to this proposed rule. The Agency is
proposing this option because it recognizes that allowance of a
financial test under this proposed rule could result in significant
savings to those members of the regulated community that could use it
and qualify to self-insure.
Under the option that would allow a financial test, EPA is
proposing the use of a credit rating--based financial test, developed
specifically for this proposed rule. In developing the proposed
financial test, the Agency attempted to address as many of the concerns
discussed in Option 1 as possible, though the Agency recognizes that it
cannot eliminate all of the concerns identified. EPA analyzed several
financial test options and selected one for proposal that carries with
it a relatively low risk to the Government that firms will pass the
financial test and still default on their obligations. EPA requests
comments on the extent to which its proposed financial test addresses
the concerns outlined in Option 1.
(1) Financial Test Overview
EPA is proposing the use of a financial test based on the long-term
corporate credit rating of the owner or operator. Under the terms of
the proposed financial test, an owner or operator could assure its
entire financial responsibility obligation by submitting annual
verification that it holds at least one long-term corporate credit
rating equal to or higher than A- as issued by Standard & Poor's (S&P)
or its equivalent by another NRSRO. In addition, for some owners and
operators with lower credit ratings, the proposed test would further
allow an owner or operator to alternatively assure one half of its
obligation by submitting annual verification that it holds at least one
long-term corporate credit rating of BBB+ or BBB from S&P or the
equivalent from another NRSRO.
In addition, an owner or operator electing to use the financial
test would be required to have: (1) a tangible net worth of at least
six times the amount of environmental obligations, including
guarantees, covered by a financial test or guarantee, including this
financial test and the corporate guarantee proposed in this rule; and
(2) U.S. assets equal to or greater than ninety percent of its total
assets, or six times the amount of environmental obligations covered by
a financial test or guarantee, including this financial test and the
corporate guarantee proposed in this rule.\115\ EPA discusses each of
these components in the sections that follow.
---------------------------------------------------------------------------
\115\ Tangible Net Worth and U.S. Asset thresholds have been
developed and historically utilized in financial responsibility
regulations for the purpose of controlling for the possibility of a
company that may have multiple obligations (both within the U.S.,
and/or abroad). Such scenarios could further limit the company's
ability to self-insure the totality of its obligations. Cases where
multiple obligations exist become very difficult for regulators to
readily identify, and having tangible net worth and U.S. Asset
thresholds already embedded within the financial test requirements
helps to temper this concern.
---------------------------------------------------------------------------
(2) Financial Test Components
(a) Credit Rating Thresholds
The proposed test would allow the owner or operator to self-insure
its entire obligation by submitting annual verification that the owner
or operator holds at least one long-term corporate credit rating equal
to or higher than A- as issued by S&P or its equivalent by another
NRSRO. Credit rating-based thresholds are widely relied upon as a
central feature of many financial tests. For example, this proposed
rating threshold is the same as that used in the NRC's financial test
for self-insurance of the decommissioning costs associated with
byproduct materials licensees (per 10 CFR 30 Appendix C). The Agency
chose this long-term corporate credit rating threshold based on
expected default rates over a three year horizon.\116\ Based on the
NRSROs'
[[Page 3437]]
extensive default data, EPA can expect three-year default rates below
0.4 percent for owners or operators meeting this ratings criteria.\117\
Because the probability of default is projected to be well below one
percent for hardrock mining companies thought to be capable of meeting
the requirements of the proposed financial test, the probability that
companies who pass the test will enter into bankruptcy is substantially
reduced. This in turn reduces the risk of defaults and lowers potential
costs for the public, when compared to less stringent tests.
---------------------------------------------------------------------------
\116\ Bankruptcy data from S&P are available for one, three, and
five-year periods, and it is the three-year horizon that is most
widely accepted for use in the projection of default rates for
purposes of financial assurance analyses. The three-year time
horizon was for example used in the analyses that were conducted
when the Agency's RCRA C financial test were originally promulgated.
The reason for this is that the one-year data would be
unrepresentative since this wouldn't allow sufficient time for the
government to respond to such bankruptcies. Conversely, the five-
year data results reflect an excessive period of time needed by the
government to identify and respond to a bankruptcy, while also
reflecting projected probabilities of default that are unnecessarily
high.
\117\ See: Default, Transition, and Recovery: 2013 Annual Global
Corporate Default Study and Rating Transitions. Standard and Poor's.
March 19, 2014 Table 26 p. 58; Corporate Default and Recovery Rates,
1920-2013. Moody's Investors Service. Special Comment. February
2014. Exhibit 35, p. 35; Fitch Ratings Global Corporate Finance 2013
Transition and Default Study. Fitch Ratings, March 17, 2014.
Appendix 1, p. 13.
---------------------------------------------------------------------------
The proposed test would further allow for coverage of up to one
half of an owner's or operator's obligation by submitting annual
verification that the owner or operator holds at least one long-term
corporate credit rating of BBB+ or BBB from S&P or the equivalents from
another NRSRO. This long-term corporate credit rating threshold was
also chosen based on expected default rates over a three-year horizon.
The Agency's analysis indicates that the risk of default roughly
doubles for these rating tiers compared to A-rated long-term issuer
credit ratings\118\ and thus EPA proposes to proportionately scale back
the coverage of the test for companies in these ratings tranches.
---------------------------------------------------------------------------
\118\ See: Default, Transition, and Recovery: 2013 Annual Global
Corporate Default Study and Rating Transitions. Standard and Poor's.
March 19, 2014 Table 26 p. 58; Corporate Default and Recovery Rates,
1920-2013. Moody's Investors Service. Special Comment. February
2014. Exhibit 35, p. 35; Fitch Ratings Global Corporate Finance 2013
Transition and Default Study. Fitch Ratings, March 17, 2014.
Appendix 1, p. 13.
---------------------------------------------------------------------------
Finally, under the proposed test EPA would not allow those
companies at the lowest tier of investment grade ratings (BBB- in S&P's
notation and the equivalent rating from other NRSROs) from using a
financial test. EPA determined that, based on the three-year horizon
default history for firms with the lowest tier investment grade
ratings, the risk of default was significantly higher than for firms
with investment grade ratings one tier higher. For example, the risk of
default for firms rated BBB- by S&P is roughly twice that of firms
rated BBB by the same rating agency.\119\
---------------------------------------------------------------------------
\119\ See Default, Transition, and Recovery: 2013 Annual Global
Corporate Default Study and Rating Transitions. Standard and Poor's.
March 19, 2014 Table 26 p. 58.
---------------------------------------------------------------------------
EPA is aware that this demarcation differs from the normal split
between investment grade and speculative grade ratings, and that often
investors distinguish on the basis of whether a particular issuer
carries an investment versus speculative grade rating. However, because
of the significantly higher default rates for the very bottom of
investment grade found in its analysis, the Agency proposes to
eliminate the very bottom notch of investment grade from being allowed
to self-insure under the proposed financial test.
EPA solicits comment on the credit-rating thresholds the Agency is
proposing for use in the proposed financial test under Option 2.
(b) Tangible Net Worth Requirement
In this proposal, an owner or operator eligible to use this
financial test for any portion of its CERCLA Sec. 108(b) liabilities
would also be subject to a coverage multiple requiring them to have a
tangible net worth of at least six times the amount of environmental
obligations, including guarantees, covered by a financial test or
guarantee, including this financial test and the corporate guarantee
proposed in this rule. This is an important additional component of the
proposed financial test as it would provide for a common check across
EPA financial responsibility programs that a firm is not assuming too
great a level of future costs that they might unduly strain the firm's
ability to pay for them.
EPA financial tests typically account for only cost estimates and
obligations covered by an EPA financial test. However, because of the
numerous regulatory agencies that regulate hardrock mines, EPA expects
that an owner or operator subject to this rule may have many of its
financial test demonstrations under other Federal or state programs. To
assure that a company is not using the same assets to self-insure
multiple obligations, EPA believes it is necessary to account for all
environmental obligations covered by a financial test or guarantee, and
not just EPA financial assurance obligations covered by a financial
test or guarantee.
(c) U.S. Asset Requirement
Owners or operators would also be subject to an additional coverage
multiple, requiring them to submit proof that the company either has
assets located in the United States amounting to at least ninety
percent of total assets or has U.S. assets totaling at least six times
the amount of environmental obligations covered by a financial test or
guarantee, including this financial test and the corporate guarantee
proposed in this rule. This would serve as an additional precautionary
measure to help ensure that U.S. assets would be available for
claimants to proceed against, in the event of a bankruptcy or other
default.
This proposed requirement would be very similar to that used for
U.S. assets in past financial tests the Agency has created. For
example, the RCRA Subtitle C closure and post-closure financial test
requires assets located in the U.S. amounting to at least ninety
percent of total assets or at least six times the sum of current
closure and post-closure cost estimates and the current plugging and
abandonment cost estimates.\120\ Similar financial test components are
also used in the Underground Injection Controls (UIC) financial
responsibility programs and in the CERCLA model financial test
instrument used to support financial responsibility under CERCLA orders
and settlements. Using a similar ninety percent or six times multiplier
allows for more effective financial responsibility across EPA programs.
---------------------------------------------------------------------------
\120\ See 40 CFR 264.143(f)(1)(i)(D) and (ii)(D).
---------------------------------------------------------------------------
For those firms without assets in the United States amounting to
ninety percent or more of total assets, the firms would be required to
demonstrate that they have U.S. assets greater than six times the sum
of all financial responsibility obligations covered by a financial
test. This six-times ratio is consistent with Alternative I of a recent
RCRA consent decree that EPA entered into with several phosphoric acid
mining companies, and is similar to other requirements in EPA's UIC
Class VI well regulations and the RCRA Subtitle C regulations. The six
times multiplier is intended to address the possibility that, in the
event of a bankruptcy, funds required to meet other environmental
obligations assured through other financial tests would reduce an owner
or operator's ability to satisfy any CERCLA claims.
(d) Reporting Requirements for Passage of the Financial Test
The proposed option that would allow a financial test would also
require reporting of information necessary to implement the financial
test. To demonstrate passage of the financial test, owners or operators
would be required to submit the following information annually:
[[Page 3438]]
Chief Financial Officer Letter (CFO Letter): A letter to the
Administrator signed by its chief financial officer (CFO) as worded in
Sec. 320.50. The CFO Letter confirms that the entity satisfies the
financial criteria required under the financial test that makes the
entity eligible to utilize the financial test as financial
responsibility under this regulation.
The Agency is proposing to require standardized the language in the
CFO Letter from the owner or operator. Such an approach is consistent
with other Agency rules such as the RCRA Subtitle C or the Standardized
Permit Rule and carries with it several benefits to the Agency. First,
a standard CFO Letter will provide for relatively quick Agency review
of financial test submissions and lowers the chances of administrative
error in the review of submissions. Administrative burden, once again,
is a key concern to the Agency as it wishes to preserve the resources
for conducting cleanups. The Agency believes a standardized CFO Letter
offers the additional potential advantage of improving the consistency
and completeness of submissions, thereby limiting delays caused by
human error and omissions.
(2) Annual Financial Statements: A copy of the owner's or
operator's most recent independently audited annual financial
statements prepared in accordance with U.S. Generally Accepted
Accounting Principles (U.S. GAAP). At present, EPA expects that firms
seeking to self-insure through the use of a financial test will do so
based on financial statements that are audited in accordance with U.S.
GAAP. The Agency recognizes that foreign firms might prepare audited
financial statements in accordance with either GAAP or International
Financial Reporting Standards (IFRS), and that IFRS and U.S. GAAP may
converge into a global set of accounting standards at some point in the
future. Until such time as a unified set of accounting standards is
established, the Agency is proposing to accept only audited financial
statements in accordance with U.S. GAAP for purposes of compliance with
the financial test criteria. However, EPA accepts comment on an
alternative whereby the acceptable accounting standards are linked to
those accepted by the Securities Exchange Commission (SEC) in order to
potentially lower the reporting burden for certain firms seeking to use
the financial test. Presently, such an option would allow foreign firms
that file with the SEC to be able to submit annual financial statements
prepared in accordance with IFRS or GAAP while domestic firms would
submit statements prepared in accordance with GAAP. However, the
underlying fundamentals of IFRS and GAAP differ with respect to the
accounting of liabilities and assets. As such, to accept both IFRS and
GAAP financial statements in support of the financial test would yield
a potentially disproportionate playing field wherein some companies
using IFRS may pass the test where they might otherwise fail under
GAAP, and vice versa. EPA would thus be accepting potentially divergent
levels of assurance.
(3) Special Audit Report: A special report of procedures and
findings of an audit conducted by a licensed, third-party, independent
certified public accountant (CPA) resulting from an agreed-upon
procedures (AUP) engagement in accordance with applicable Federal laws
governing independence and AUP engagements, or standards set by the
American Institute of Certified Public Accountants, Inc. (AICPA), to
supplement Federal laws or when Federal laws are not applicable. The
report would be required to describe the procedures performed and
related findings as to whether or not there were differences or
discrepancies identified between the financial information in the
owner's or operator's CFO Letter and the owner's or operator's most
recent audited annual financial statements. Where differences or
discrepancies were found in the comparison of the owner's or operator's
CFO Letter and the owner's or operator's most recent audited annual
financial statements, the report of procedures and findings would
reconcile any differences or discrepancies.
There are advantages to third-party auditing requirements,
particularly with strong auditor competence and independence criteria.
According to the Center for Chemical Process Safety (CCPS), ``Third-
party auditors . . . potentially provide the highest degree of
objectivity,'' \121\ A leading scholar on regulatory third-party
programs also found that a well-designed and implemented ``third-party
verification [program] could furnish more and better data about
regulatory compliance'' while providing additional compliance and
resources savings benefits.\122\ Studies show that auditors are more
likely to provide lenient or biased audit reports that can fail to
accurately identify problems or violations when there are insufficient
safeguards to ensure auditor independence.\123\
---------------------------------------------------------------------------
\121\ See CCPS. March 2007 Guidelines for Risk Based Process
Safety. Available at: https://www.aiche.org/ccps/resources/publications/books/guidelines-risk-based-process-safety.
\122\ See Regulation by Third-Party Verification, Lesley K.
McAllister. January 2012. 53 B.C. L. Rev. 1, 21-26. Available at:
https://lawdigitalcommons.bc.edu/bclr/vol53/iss1/1/.
\123\ See, e.g., Truth-Telling By Third-Party Auditors and the
Response of Polluting Firms: Experimental Evidence From India,
Esther Duflo et al., 128 Q. J. of Econ. 4 at pp. 1499-1545, 2013.
---------------------------------------------------------------------------
In audit engagements, CPAs are required by professional standards
and Federal and State laws to maintain independence (both in fact and
in appearance) from the entity for which they are conducting an
attestation (audit and review) engagement. However, the Public
Certified Accounting Oversight Board (PCAOB) found evidence that many,
if not most, of some types of financial audits are flawed due to
insufficient auditor competence, independence and/or lack of public
transparency. Third-party auditing is a cornerstone of financial
reporting, but the PCAOB found audit deficiencies in portions of
seventy of the ninety audits they reviewed in its third annual report
on audits of broker-dealers registered with the SEC. Independence
problems were found in 21 of the ninety audits where, contrary to SEC
rules, firms helped with the bookkeeping or preparation of the
financial statements they audited.\124\
---------------------------------------------------------------------------
\124\ See Third Progress Report on PCAOB Inspections of Broker
and Dealer Auditors Shows Continued High Number of Findings. PCAOB.
Aug. 18, 2014. Available at: https://pcaobus.org/Inspections/Documents/BD_Interim_Inspection_Program_2014.pdf.
---------------------------------------------------------------------------
Therefore, EPA is proposing to require that a CPA performing the
audit required under this proposal be licensed. This requirement is
designed to ensure the auditor has the requisite education and
experience to perform the audit. Each state has its own licensing
board. The proposal would also require that auditors be independent,
follow the independence rules and standards established by the AICPA's
Audit Standards Board (ASB), have passed the Uniform Certified Public
Accountant Examination, be licensed as a CPA, and be current with all
continuing professional education requirements.
The Agency also is proposing to require that the AUP engagement be
conducted in accordance with the AICPA Statement on Standards for
Attestation Engagement (SSAE) and related attestation interpretations,
AT Section 201--Agreed Upon Procedures Engagements, or any future
superseding standards set by AICPA or any superseding body. This
provides further assurance that the CPA's review was done in accordance
with accepted accounting industry standards. The Agency recognizes that
the AICPA may update its standards, and thus the
[[Page 3439]]
Agency is proposing a flexible standard for the CERCLA Sec. 108(b)
regulations that relies upon the method(s) currently accepted, instead
of specifying a particular standard that may need to be updated in the
future. EPA solicits comment on whether, in addition to those set by
the AICPA, applying SEC and/or PCAOB rules and standards would provide
appreciable additional assurances of independence. In this regard, EPA
further believes that some owners and operators who seek to use the
financial test, if available, may already be SEC registrants and
issuers. As such cases, the application of more stringent SEC/PCAOB
independency standards should result in little added burden for owners
and operators already subject to such standards.
The audited annual financial statements, the CFO Letter, and an AUP
engagement report signed and certified by an independent, licensed CPA
would be submitted annually, within ninety days of the close of the
owner's or operator's fiscal year. In so doing, the Agency receives up-
to-date financial information to ensure the company still meets the
standards of the test. In general, financial reports made directly to
the SEC are completed within ninety days of the company's fiscal year
end. Most small and medium-sized businesses, who are not filing with
the SEC, track their fiscal year end to a calendar-year end. These
companies tend to complete their annual financial reports in support of
tax filings to the Internal Revenue Service, and generally do so within
ninety days of the calendar year end. In either instance, most
companies already prepare annual financial statements, and therefore
the financial reporting requirements of the financial test should not
present too significant of a reporting challenge. The annual reporting
requirement is essential to ensure firms using the financial test
maintain the requisite financial strength and do not pose an undue
risk.
EPA believes, together, these reporting requirements will foster
accountability, improve compliance, and ensure EPA is receiving an
accurate portrayal of a company's financial ability to meet its
environmental obligations. Thus, if the use of a financial test were to
be allowed in the final rule, this would reduce the risk that the
taxpayer would have to finance cleanup in the future. EPA believes that
third-party reviews will help assist in rule compliance and oversight.
Independence is important to preserve the integrity and objectivity of
these audits, thereby providing reliable compliance information to
EPA.\125\
---------------------------------------------------------------------------
\125\ See The Integrity of Private Third-party Compliance
Monitoring. Short, Jodi L., and Michael W. Toffel. Harvard Kennedy
School Regulatory Policy Program Working Paper, No. RPP-2015-20,
November 2015. (Revised December 2015.)
---------------------------------------------------------------------------
The Agency believes that requiring an AUP engagement would also
further ease the implementation burden associated with reviewing
financial test submissions, and reduce the prospect for errors. Third-
party, independent audits will also promote cost-effective EPA
prioritization of Superfund resources, and provide benefits to
communities near facilities by assuring that secure financial
responsibility is in place. The AUP would give EPA an independent
third-party expert's opinion and attestation as to whether or not the
financial information provided in the CFO Letter is consistent with
that in the most recent audited financial statements and thus with U.S.
generally accepted accounting practices. EPA believes independent,
licensed CPAs are better suited to review such data and make such
determinations, as EPA is not primarily a financial regulator.
EPA is asking for comment on these reporting requirements.
Specifically, the public should comment on what other requirements, if
any, should be required to ensure the completeness, reliability, and
accuracy of the information submitted to determine that facilities have
the funds necessary to meet their environmental obligations, thereby
preserving taxpayer money. EPA is also accepting comments on the
application of these laws and standards, whether or not these
requirements are sufficient to ensure compliance with the financial
test, provide EPA with the necessary information to implement the
financial test, or preserve independence in performing under an AUP
engagement, and the ability of the requirements to help EPA respond to
deficiencies in financial test submissions or changes in financial
situations.
(e) Self-Reporting Requirements for Owners or Operators No Longer Able
To Pass the Financial Test
Additionally, owners or operators would be required to notify the
Administrator in the event of a change in their long-term issuer credit
rating or financial position that would disqualify them from using the
financial test. This requirement also exists in other EPA financial
tests including the RCRA Subtitle C test for hazardous waste
facilities. Such notification is designed to be independent from the
annual reporting requirements associated with the financial test.
Owners or operators would be required to notify the Administrator upon
verifying that a change in their financial status has resulted in their
becoming disqualified from using the financial test. In such
circumstances, owners or operators will be required to send notice to
the Administrator within thirty days, documenting their intent to
establish an alternate financial responsibility instrument to cover the
portion of their obligations for which they can no longer use the
financial test. As such, owners and operators that currently qualify
for self-insurance under the financial test will be responsible for
continually self-monitoring their qualification status whenever they
experience a change in their long-term issuer credit rating, tangible
net worth, or value of U.S. assets. The Agency is proposing this
reporting requirement to allow EPA to respond as quickly as possible to
negative changes in a company's financial position. In the event the
owner or operator no longer passes the financial test, the owner or
operator would have 120 days from the date the owner or operator no
longer qualifies to obtain a replacement instrument for that portion of
its CERCLA Sec. 108(b) financial responsibility requirement previously
covered by the test.
(f) Provisions for Administrator's Discretion
The proposed regulations would allow the Administrator to request
reports of financial condition at any time from the owner or operator
in addition to those specified in Sec. 320.43(b) in the event that the
Administrator has reason to believe the owner or operator may no longer
meet the financial test requirements. This is similar to a provision in
the RCRA Subtitle C financial test found at 40 CFR 264.143(f)(7), for
example. The Agency has found this provision very helpful in evaluating
compliance with the regulations and proposes to include a similar
provision in these regulations.
The Administrator would also have the discretion to disallow use of
this test on the basis of qualifications of opinion given in the
independent certified public accountant's report in the AUP engagement
or the audited financial statements. An adverse opinion or disclaimer
of opinion in either report will result in disallowance of the test.
The Administrator will evaluate other qualifications on an individual
basis. An adverse opinion suggests that the financial statements do not
present fairly the financial condition of the firm. A disclaimer of
opinion states that the auditor does not express an opinion on the
financial statements. In both cases,
[[Page 3440]]
the Agency believes there is inadequate assurance that the information
presented in the financial statements can be relied upon to evaluate
the credit risk of the firm.
The owner or operator would be released from the proposed
requirements of demonstrating financial responsibility with the
financial test when: (1) An owner or operator substitutes alternate
financial responsibility as specified in this section; or (2) The
Administrator releases the owner or operator from the requirements of
this section in accordance with Sec. 320 27.
(3) Discussion
The Option 2 proposed financial test was developed by EPA for use
by hardrock mining facilities under CERCLA Sec. 108(b). The Agency
believes that it is more suited for use by hardrock mining facilities
to demonstrate financial responsibility under CERCLA Sec. 108(b) than
are other financial tests currently implemented by EPA. As discussed
earlier, EPA has also attempted to address to the extent possible, many
of the concerns raised about the use of a financial test for hardrock
mining facilities under proposed Option 1.
The proposed financial test utilizes long-term corporate credit
ratings, rather than a series of ratios derived from a company's
financial statements, as other tests do. The Agency took this approach,
in part, to ease potential implementation challenges. A test based on
long-term corporate credit ratings is relatively easy to verify and
carries with it the lowest administrative burden of the financial test
options considered. Moreover, the use of long-term corporate credit
ratings is further substantiated by the robust data underpinning the
measures of risk associated with each rating level. For example,
default rate studies are often backed by large samples spanning many
years. The ratings agencies themselves have done extensive studies
demonstrating the efficacy of credit ratings as an indicator of credit
risk.\126\
---------------------------------------------------------------------------
\126\ See for example: Default, Transition, and Recovery: 2013
Annual Global Corporate Default Study and Rating Transitions.
Standard and Poor's. March 19, 2014; Corporate Default and Recovery
Rates, 1920-2013. Moody's Investors Service. Special Comment.
February 2014; Fitch Ratings Global Corporate Finance 2013
Transition and Default Study. Fitch Ratings, March 17, 2014.
---------------------------------------------------------------------------
The Agency's decision to propose a credit rating-based test also
reflects the EFAB's statements, made in its reporting on the financial
test and corporate guarantee under the RCRA programs, that independent
credit analysis, i.e. credit ratings, can be a cost effective mechanism
for demonstrating financial responsibility.\127\ The use of long-term
corporate credit ratings leverages the expertise of a third party,
relieving the Agency of the primary burden of performing credit
analysis.
---------------------------------------------------------------------------
\127\ See EFAB Initial Findings Concerning use of the Financial
Test and Corporate Guarantees to Meet Financial Assurance
Requirements under the RCRA programs. Environmental Financial
Advisory Board. January 11, 2006, p. 5.
---------------------------------------------------------------------------
EPA has used different systems of ratings in other financial tests.
This includes using the rating on the most recent bond issuance in the
RCRA Subtitle C financial test, for example, found in 40 CFR
264.143(f). The use of long-term issuer credit ratings is included in
this proposal as the Agency believes they most accurately reflect a
firm's ability to meet the entirety of its financial obligations over
the long term as opposed to the obligations related to a single debt
issuance (e.g. a bond rating), which is narrower in scope. This view is
based on EPA's review of the credit rating agencies' literature
performed for this proposal.\128\ An additional benefit of using a
credit rating is that a firm does not need to issue bonds or any other
debt instrument to be issued a credit rating, which may increase the
availability on instruments. While this approach allows the Agency to
rely on the evaluation of an outside party, rather than on in-house
financial expertise, this approach is not without concerns. For
example, there is continued criticism that the credit-rating agencies
themselves may not truly be independent from the entities they
rate.\129\ The Agency solicits comment on the use of a credit-rating-
based financial test.
---------------------------------------------------------------------------
\128\ See Guide to Credit Rating Essentials: What are Credit
Ratings and How Do They Work? Standard and Poor's (2010), pp. 11-12;
Moody's Rating Symbols & Definitions. Moody's Investors Service. New
York, NY (2009), p. 11; and Definitions of Ratings and Other Forms
of Opinion. Fitch Ratings (2011) pg 9.
\129\ See for example, CFR.org Staff, The Credit Rating
Controversy, Council on Foreign Relations, updated February 19,
2015. Available at: https://www.cfr.org/financial-crises/credit-rating-controversy/p22328.
---------------------------------------------------------------------------
The proposed financial test includes a high credit rating threshold
so an owner or operator with declining financial health will still have
a relatively high credit status when it initially becomes ineligible to
use the financial test. EPA expects that this will help to assure that
owners or operators that no longer qualify for the test will still be
sufficiently viable to obtain an alternate instrument. This is so,
because evidence from agency analyses of past bankruptcies in this
sector suggest that it usually takes many years for a company to enter
bankruptcy after its credit rating drops below BBB.\130\ In addition,
this is also the case given that the proposed financial test has two
tiers of credit rating thresholds. As such, should an owner's or
operator's credit rating drop below A-, the amount that they may self-
insurance for drops from 100 percent to 50 percent of the obligations,
provided that they still retain an investment grade credit rating. The
impact on a company may be more gradual when the owner or operator
experiences a decline in their credit rating. The Agency solicits
comment on the validity of this approach.
---------------------------------------------------------------------------
\130\ See Draft Background Document for Financial Test Analyses,
Industrial Economics, Inc. (IEc), November 2016.
---------------------------------------------------------------------------
The financial responsibility instruments proposed in this rule are
new and unique and the market's appetite for providing these
instruments is yet to be determined. The Agency expects that allowing a
financial test could potentially help to address market capacity
issues, should they arise.\131\ If there is limited capacity when this
rule becomes final, the availability of a financial test could help to
address that issue. The Agency solicits comment on whether the
financial test could help to address market capacity issues.
---------------------------------------------------------------------------
\131\ Under a no financial test option, limited market capacity
may be burdened by a need for all hardrock mining companies to
obtain third-party financial responsibility instruments. However,
under a financial test option, some companies would be able to self-
insure, possibly freeing up market capacity for companies unable to
do so.
---------------------------------------------------------------------------
Making a financial test available to owners or operators of
hardrock mining facilities under this proposed rule would be consistent
with EPA's approach in other programs. It would not, however, be
consistent with approaches taken by some other Federal agencies.
According to the CERCLA Sec. 108(b) Regulatory Impact Analysis
(RIA), the estimated annualized compliance cost to industry without a
financial test is $171 million. However, by allowing financial test,
the cost to industry goes down to $111 million, which represents a 35
percent in cost saving to industry.
With respect to the impacts on government, without the financial
test, the industry would internalize in approximately $527 million in
potential CERCLA liabilities that would otherwise assumed by the
Government (in instances of owner or operator failure) in the baseline
(without the rule). However, by allowing the financial test, the cost
internalized by the industry goes down to approximately $511 million.
Therefore, the increased risks to the Government from unforeseen
[[Page 3441]]
defaults of owners and operator allowed to self-insure is $16 million,
which is about three percent of the total potential liability, relative
to the baseline.
Finally, EPA solicits comment on the potential impacts on small
businesses of allowing a financial test under the proposed CERCLA Sec.
108(b) rule. As noted earlier, concerns exist regarding the potential
inequity of offering a test due to the advantages that it may create
for larger versus smaller owners and operators. This is in part because
the proposed financial test was designed to be highly stringent. As
proposed, only those owners and operators with strong long-term credit
ratings, plus substantial tangible net worth and U.S. assets would pass
the test. Designing the test in this manner greatly lowers the risk of
default by owners and operators that pass the test. Analyses conducted
by EPA of the financial test options considered offers evidence,
however, that fewer small businesses are likely to possess the credit
ratings and net worth necessary to qualify for self-insurance. EPA,
therefore, solicits comment on whether the availability of a financial
test would thus create a competitive disadvantage for small businesses.
EPA also solicits comment on how allowance of a financial test
under the CERCLA Sec. 108(b) rule could affect the potential
availability of third-party instruments to small businesses. EPA
anticipates that the impact would depend in part on the willingness of
instrument providers to provide instruments to small businesses. If
instrument providers are willing to provide instruments to small
businesses, allowing a financial test could make instruments more
available to small businesses by freeing up overall capacity of such
instruments in the open market. On the other hand, if instrument
providers prove less willing to provide instruments to small
businesses, the capacity freed by allowing the financial test may not
increase the availability of the instruments to those entities. EPA
therefore solicits comment on the likely impact on small businesses of
making a financial test available in the rule, both in terms of
potential disadvantages, and in terms of the availability of the
instruments themselves.
(4) EPA's Data Analysis: In this section, EPA discusses the data
analysis it performed in connection with developing financial test
options generally for the CERCLA Sec. 108(b) proposed rule, and in
connection with the particular test selected for proposal.
Specifically, EPA conducted several basic analyses to understand the
impacts of the rule and tradeoffs associated both with and without a
financial test. This is discussed in the following section (a). In
section (b), EPA discusses its data analysis of the expected cost
savings and potential costs to the public of alternative financial
tests considered for proposal under Option 2. In section (c), EPA
discusses its analysis of the ability of the alternative tests to
screen out bankruptcies.
(a) Analysis of Rule With and Without a Financial Test Option
For this proposal, EPA sought to estimate the overall cost to the
public from potential industry defaults that could occur absent the
rule, versus the potential cost to industry under a rule without any
financial test provisions (Option 1). All quantitative analyses
conducted in relation to financial tests are more thoroughly described
within the ``Background Information Document for Financial Test Options
Analysis for Hardrock Mining Industry under CERCLA Sec. 108(b).''
For purposes of analysis EPA adopted several assumptions. At the
time of these analyses, estimates were not yet available regarding the
amounts of the financial responsibility that individual companies would
be obligated to cover under this rule. Therefore, in order to
facilitate necessary analyses of options for a financial test, EPA
assumed an across-the-board obligation amount for all companies (both
at $50 million, as well as $200 million respectively).\132\ EPA also
assumed there would essentially be full recovery of instruments under
the rule, plus negligible recovery from bankruptcy proceedings.
---------------------------------------------------------------------------
\132\ While this assumption allows for comparison of a company's
cost accrual relative to other financial tests, it does not
correctly scale the obligation amount to the size of the company's
operations. To the extent that this amount overstates actual
obligations, specifically for smaller companies, the $50 million
coverage requirement may affect cost effectiveness determinations if
there is a systematic relationship between company size and
financial test passing rates.
---------------------------------------------------------------------------
The Agency's analyses puts the annualized response costs for public
taxpayers from bankruptcies and defaults at $1.22 billion in the
absence of any CERCLA Sec. 108(b) rule for the hardrock mining
industry. EPA also calculated that in order to eliminate such costs
borne by the public to the maximum extent possible, requiring financial
responsibility (absent a financial test) would result in additional
annualized costs to industry of approximately $488 million.
(b) Analytical Basis for the Proposed Financial Test
EPA evaluated the No Test and a range of alternative Financial Test
options, incorporating a variety of financial metrics, to assess the
ability of these tests and metrics to predict the likelihood of
bankruptcy and ensure that sufficient funds are available to meet a
company's ongoing environmental commitments. The Agency evaluated all
candidate hardrock mining firms for which financial information was
available against a variety of financial test options, including tests
promulgated under other Federal statutes such as RCRA, and two ratings-
based options designed by EPA (referred to as the Investment Grade and
Higher-than-Investment-Grade Rating Tests).
The least sensitive of the options considered looked at using a
test based solely on Investment Grade credit ratings. Under this test
option, all companies with a rating of BBB- or better qualify to self-
insure 100 percent of their financial responsibility obligations under
the rule.\133\ Similar, but somewhat more sensitive, is the option of
using the same test as that which is used under RCRA Subtitle C. The
RCRA Subtitle C Financial Test contains two alternative avenues by
which a company may successfully qualify for self-insurance (one with,
and one without a ratings-based threshold). To pass the test under RCRA
Subtitle C a company must either possess an investment grade rating on
its most recent bond issuance from Standard and Poor's or Moody's, or
must otherwise demonstrate that their financial status (including that
of total liabilities, net worth, net income, total assets, current
assets, and current liabilities) all meet certain minimum standards. In
order for companies to self-insure under either of these alternatives,
their tangible net worth must exceed their financial responsibility
obligations by a factor of six at a minimum (and not be less than $10
million), while their U.S. Assets must equal at least ninety percent of
their total assets (or be at least six times that of the financial
responsibility obligations).
---------------------------------------------------------------------------
\133\ While this section refers to ratings according to the
notation used by S&P, the financial test option considers ratings
from S&P or an equivalent NRSRO for the purposes of assessing a
company's ability to meet the financial test requirements.
---------------------------------------------------------------------------
EPA also developed a more sensitive ratings-based financial test
(the Higher-than-Investment-Grade Rating Test), which further limits
qualification for self-insurance to only those companies with a BBB or
better rating. Unlike the
[[Page 3442]]
other tests considered, companies with ratings of BBB- would not
qualify for any self-insurance under this test. Furthermore, this test
establishes a hybrid hierarchy whereby only companies with ratings of
A- or higher qualify at 100 percent, while those with ratings of BBB or
BBB+ qualify to self-insure no more than fifty percent of their
financial responsibility obligation. Lastly, because tangible net worth
and U.S. Asset requirements are frequently included as an important
feature of financial responsibility regulations, tangible net worth and
U.S. Asset limitations (similar to those stipulated under RCRA Subtitle
C) were added as a further component of the Higher-than-Investment-
Grade Rating Test.
(c) Analysis of Financial Test Options Considered
EPA first assessed the relative costs borne by industry to maintain
a financial test, or in lieu of doing so, to obtain a third-party
instrument (industry's expected cost). EPA also assessed the costs that
may be borne by the public in the event a company defaults on its
obligations (public's expected default cost).
Results of these analyses indicated that the estimated costs to
industry consistently increase, as the conditions of the alternative
financial tests become more sensitive and fewer companies qualify to
self-insure. As fewer companies are able to pass the test, they are
required to pay for third party financial responsibility instruments on
the open market, which comes at a cost. Conversely, as alternative
financial tests become more sensitive and fewer companies qualify to
self-insure, the potential for defaults decreases along with the
potential costs to the public associated with such potential defaults.
Under the Investment Grade Ratings Test, EPA's analysis estimates
the annualized cost savings to industry at approximately $112.5
million. As a result of allowing the test, the public would in turn
experience potential costs in annualized dollars of approximately $19.6
million due to the possibility of a company defaulting in spite of
having passed the test. Similarly, estimates for the RCRA Subtitle C
Test, reveal marginally lower annualized cost savings to industry of
roughly $110.2 million, with the public bearing potential costs from
defaults valued at an annualized cost of $16.4 million.
Under a Higher-than-Investment-Grade Rating Test (with and without
tangible net worth and U.S. Asset requirements), annualized cost
savings to industry range from $75.2 to $90.8 million, respectively.
Annualized costs to the public from potential defaults is further
diminished to between $10.4 and $12.0 million respectively. By creating
a stricter set of requirements, the Higher-than-Investment-Grade Rating
Test (with tangible net worth and U.S. Asset provisions) makes it more
difficult for companies with border-line investment grade ratings or
insufficient assets to qualify for self-insurance. In so doing, this
test further reduces the chance of defaults and potential costs to the
public precipitated by such defaults, as compared to the other
financial tests considered.
The Higher-than-Investment-Grade Rating Test is also the only
option designed to carry with it a provision allowing a company to
cover only a portion of its obligations depending on its current
rating. Companies with lower relative ratings (BBB and BBB+) may only
self-insure for up to 50 percent of their financial responsibility
obligation. Such lower rated companies are not only at greater risk of
default, but may also enter into default at a faster pace than
companies rated at A or better, based on probability of default
estimates for companies in different ratings tranches as seen in
historical default studies done by NRSROs. Consequently, this tailored
feature of the Higher-than-Investment-Grade Rating Test helps to
further diminish the potential costs to the public relative to other
financial tests, while still allowing some level of self-insurance in
recognition of the creditworthiness of companies with investment grade
ratings of BBB or higher.
(d) Analysis of Bankruptcy and Predictiveness of Alternative Tests
The Agency endeavored to craft a test that would be able to predict
bankruptcy in the hardrock mining industry. To assess both the no test
proposal and that of the financial test options in this respect, the
Agency collected as much financial information as possible for each of
3 years proceeding identified bankruptcies that had historically
occurred among hardrock mining companies. This data was matched with
bankruptcies in the industry identified over a 35-year period spanning
1980 to 2015, resulting in a sample of 25 unique occurrences of
bankruptcies in this industry for which data is available. The
financial data for each of these bankruptcies were then used to assess
whether any of these companies would have been capable of passing any
of the alternative tests, in each of the 3 years before entering
bankruptcy. Of the tests considered, it was the Higher-than-Investment-
Grade Rating Test (with Tangible Net Worth and U.S. Asset thresholds)
that performed best in disqualifying companies from passing the test
during the three-year period before they ultimately went bankrupt.
Indeed, the Agency's analysis shows that of the 25 hardrock mining
bankruptcies for which data were available, the proposed test would
have completely screened out 24 of the 25 companies at least three
years in advance of bankruptcy. However, even in the case of the one
company that the test did not screen out, the Higher-than-Investment-
Grade Rating Test succeeded in restricting the level of self-insurance
for which they qualified to just fifty percent of its financial
responsibility obligations (instead of 100 percent). This resulted from
the hybrid feature of the proposed Higher-than-Investment-Grade Rating
Test. This offers evidence of the effectiveness of the hybrid approach
included in the proposed test in meeting its objective of reducing the
exposure to unfunded costs (by fifty percent) for the subset of
companies with higher expected bankruptcy rates and ratings below that
of an A rating.
Further, since a BBB rating forms the minimum basis for whether a
company can qualify for any self-insurance of their financial
responsibility obligation, EPA conducted further analyses to evaluate
this ratings threshold more specifically. In particular, the Agency
sought to assess fluctuations in BBB ratings in relation to previous
bankruptcies in the hardrock mining industry. By looking at the
historical record of rating shifts below the BBB threshold, the Agency
sought to obtain perspective on how often BBB-rated companies
experienced ratings downgrades, how susceptible companies were to
receiving speculative-grade ratings after previously having been rated
BBB, and how quickly they may have entered bankruptcy subsequent to
their ratings having dropped to below BBB.
To assess these questions, EPA collected data on 102 hardrock
mining companies that were rated by S&P at least once between 1984 and
2010. These companies reflected both hardrock mining companies
(targets), and parents of hardrock mining companies (parents) who might
ultimately be in a position to provide a corporate guarantee for their
subsidiaries' obligations. The inclusion of parent companies within the
scope of these analyses furthermore supplemented the Agency's analysis
where hardrock mining target company data were unavailable.
Based on the data available from the 26-year sample period, the
Agency's
[[Page 3443]]
analyses identified only four bankruptcies of companies (out of 36)
that had ever historically been rated at the BBB level.\134\ In the
case of these bankruptcies, only one of these mining companies entered
bankruptcy within one year following a drop in its BBB rating. While
the company had retained BBB or better ratings presumably due to their
strength and longevity, they ultimately succumbed to multimillion-
dollar asbestos claims over a very short period. Of the other three
companies entering bankruptcy within the sample period, two did so
within three years of a downgrade, and the other entered bankruptcy 17
years later.
---------------------------------------------------------------------------
\134\ One additional bankruptcy occurred by a company who had
never been rated BBB, but had been previously downgraded from BBB+
to BB-.
---------------------------------------------------------------------------
What these results suggest are that relatively few bankruptcies
were shown to have occurred for companies rated at BBB. The results
also suggest that while ratings fluctuations do occur, such
fluctuations generally do not signal an unfailing decline towards
bankruptcy. Thirdly, they suggest that when a company that has been
rated at investment grade does experience a ratings decline and
ultimately defaults, this process is likely to take one or more years
for such relatively solid enterprises to enter into bankruptcy. In such
instances, the proposed annual Higher-than-Investment Grade Rating Test
(combined with RA notification requirements when a company's
qualification for the financial test ceases) will alert regulators as
to the company's inability to pass the Higher-than-Investment-Grade
Rating Test. Therefore, it appears that establishing the cutoff for
passing the proposed test at a rating of BBB or above is well
justified. Setting the ratings threshold at BBB, prevents companies
with ratings of BBB- or below from passing the Higher-than-Investment-
Grade Rating Test. This is designed to help ensure that there is
sufficient time for the Agency to intercede and enforce the test
requirements should a company's rating begin to decline.
Summary
EPA is proposing two options--to not allow a financial test (Option
1--preferred option), and to allow a ``Higher-than-Investment-Grade
Rating Test'' (Option 2). EPA believes that not allowing a financial
test would best avoid undue costs to the Government and to the public
from unsecured environmental obligations that companies may be unable
to cover when they go into default or bankruptcy, and that it would
eliminate administrative burden upon the Agency associated with the
review and verification of financial statements and attestations from
financial test submissions.
Alternatively, the ``Higher-than-Investment-Grade Rating Test'' is
being proposed, as it was the best financial test, from among those
considered, at providing cost savings to industry while limiting the
risks to the Government and the public. The Higher-than-Investment-
Grade Rating Test was selected as the least risky option for the co-
proposal, relative to the other tests considered, because it results in
the lowest expected potential costs that may be borne by the
Government, while offering significant cost savings to industry. In
addition, the Higher-than-Investment-Grade Rating Test performed better
than the other tests at predicting which owners or operators may have a
higher potential for defaulting on their obligations. Finally, the
Higher-than-Investment-Grade Rating Test also takes advantage of
publically available credit analyses conducted by independent ratings
agencies as a way to help lower administrative burdens on both industry
and the Government.
EPA solicits comment on both proposed options.
5. Corporate Guarantee (Sec. 320.44) (Option 2 Only)
Under proposed Option 2, which would allow a financial test, EPA
also is proposing to allow owners and operators to demonstrate
financial responsibility by obtaining a written corporate guarantee
from another firm that meets the financial test requirements. The
corporate guarantee serves as a contract through which a related firm
guarantees to third-party CERCLA claimants that it will make payment
for CERCLA response costs, health assessment costs, and/or natural
resource damages as provided in the guarantee.
a. Issuer Eligibility (Sec. 320.44(b) and (c))
The Agency would allow guarantees from the direct or higher-tier
parent corporation of the owner or operator, a firm owned by the same
parent corporation as the owner or operator, or a firm with a
substantial business relationship with the owner or operator. These
potential guarantors are the same as those allowed to provide
guarantees under the RCRA Subtitle C Closure and Post-closure financial
assurance and third-party liability regulations.
Initially, under the RCRA Subtitle C financial assurance
requirements for closure and post-closure care, EPA allowed for
guarantees provided only by immediate corporate parents believing that
that relationship between the owner operator and the guarantor would
aid in the enforceability of the guarantee and its strength. Further,
EPA adopted a definition of ``parent corporation'' to ensure the
relationship was close and direct.\135\ EPA is proposing the same
definition of parent corporation as employed in the RCRA Subtitle C
financial assurance program. EPA believes that the definition will be
familiar to the regulated community and EPA implementers which should
ease implementation efforts. Furthermore, because the definition
ensures that the connection between the parent and the subsidiary is
close and direct, the parent will likely have a strong interest in the
financial and environmental performance of the subsidiary and the
facility which the Agency believes strengthens the guarantee. The
proposed definition of parent corporation is ``a corporation that which
directly owns at least fifty percent of the voting stock of the
corporation which is the facility owner or operator; the latter
corporation is deemed a `subsidiary' of the parent corporation.''
---------------------------------------------------------------------------
\135\ See Standards Applicable to Owners and Operators of
Hazardous Waste Treatment, Storage, and Disposal Facilities;
Financial Assurance Requirements, 47 FR 15037 April 7, 1982; and See
Standards Applicable to Owners and Operators of Hazardous Waste
Treatment, Storage, and Disposal Facilities; Financial Assurance
Requirements; Liability Coverage, 51 FR 25350 @253511 July 11, 1986.
---------------------------------------------------------------------------
However, EPA received several comments on the July 11, 1986 interim
final rule that urged EPA to allow non-parent firms to provide
guarantees. EPA analyzed the validity and enforceability of guarantee
contracts by non-parent firms and decided to authorize the guarantees
provided by ``sibling'' firms (firm whose parent corporation is also
the parent corporation of the owner or operator) and firms with a
substantial business relationship with the owner or operator in the
third party liability regulations provided they were able to provide
certain additional information.\136\ EPA later authorized non-parent
guarantors in the closure and post-closure regulations as well.\137\
EPA has determined that guarantees issued by non-parent corporations
can be valid and enforceable when they are issued in accordance with
the regulations and thus EPA proposes this same suite of potential
guarantors in this proposal provided they supply the same necessary
information to make the guarantee enforceable as required under the
RCRA Subtitle C regulations. Specifically, if the guarantor's parent
corporation is also the parent
[[Page 3444]]
corporation of the owner or operator, the letter from the guarantor's
CFO would have to describe the value received in consideration of the
guarantee. If the guarantor is a firm with a ``substantial business
relationship'' with the owner or operator, this letter would be
required to describe this ``substantial business relationship'' and the
value received in consideration of the guarantee. These proposed
descriptions were determined by EPA to be important in ensuring the
ultimate validity and enforceability of the guarantee contract in past
Agency financial responsibility rulemakings. Under fundamental
principles of contract law, contracts must be supported by
``consideration.'' Consideration is generally defined as a legal
detriment that has been bargained for and exchanged for the promise.
The general principle underlying the concept of consideration is that
the law will not enforce gratuitous promises.
---------------------------------------------------------------------------
\136\ See 53 FR 33941, September 1, 1988.
\137\ See 57 FR 42833, September 16, 1992.
---------------------------------------------------------------------------
For the demonstration of sufficient consideration for the contract
if the guarantor has a substantial business relationship with the owner
or operator, the guarantor must describe the substantial business
relationship in a way that would meet the proposed definition. EPA is
proposing the same definition of substantial business relationship as
used in the RCRA Subtitle C financial assurance program which
recognizes that no single legal definition exists of what constitutes a
business relationship between two firms that would justify upholding a
guarantee between them and that such a determination would depend upon
the application of the laws of the States of the involved parties. The
proposed definition of substantial business relationship is ``the
extent of a business relationship necessary under applicable State law
to make a guarantee contract issued incident to that relationship valid
and enforceable. A ``substantial business relationship'' must arise
from a pattern of recent or ongoing business transactions, in addition
to the guarantee itself, such that a currently existing business
relationship between the guarantor and the owner or operator is
demonstrated to the satisfaction of the Administrator.''
In addition, if the guarantor's parent corporation is also the
parent corporation of the owner or operator or if the guarantor is a
firm with a ``substantial business relationship'' with the owner or
operator the letter from the guarantor's CFO would have to describe the
value received in consideration of the guarantee. In some cases,
preexisting business relationships, no matter how substantial, will be
insufficient by themselves to demonstrate consideration because they
will not have been bargained for to induce the promise in the guarantee
contract. For this reason, these guarantors must also describe the
consideration for the contract in the letter from their chief financial
officer. As mentioned earlier, these requirements are the same as under
the RCRA Subtitle C financial assurance closure post-closure and third-
party liability financial assurance programs. These requirements would
be familiar to the regulated community and the regulators familiar with
RCRA financial assurance and were based on analysis to ensure the
enforceability of the contract.
Furthermore, EPA would allow a guarantee from a non-U.S. guarantor
that meets the financial test requirements outlined in the proposed
regulations provided the guarantor also has identified a registered
agent for service of process in the state in which the facility covered
by the guarantee is located and in the state in which it has its
principal place of business. This requirement is identical to that
required in the RCRA third party liability regulations and was required
to ensure a non-US guarantor be subject to enforcement proceedings in
the U.S. The function of the agents is to accept service of process for
the guarantor corporation for legal actions in a given state.\138\ In
addition, and as described earlier, all guarantors would have to pass
the financial test requirements including a U.S. assets requirement.
The Agency has included U.S. Assets requirements to ensure assets are
available in the United States to be levied against if a judgment is
entered against the guarantor.\139\ EPA believes this situation is
similar and wants similar assurance that there are assets available in
the U.S. should claimants need to recover funds from the guarantor.
---------------------------------------------------------------------------
\138\ See 52 FR 44317, November 18, 1987.
\139\ See 52 FR 44317, November 18, 1987
---------------------------------------------------------------------------
The guarantor would be required to provide the same evidence and
supporting documentation that the guarantor passes the financial test.
In addition, the guarantor would be required to submit a signed copy of
the guarantee and comply with the terms in the guarantee. The wording
in the guarantee would have to be identical to that specified in Sec.
320.50(f).
b. Wording of the Corporate Guarantee (Sec. 320.50(f))
In developing the proposed corporate guarantee language EPA looked
to the guarantee language used in the RCRA Subtitle C program. Those
guarantees were the product of iterative proposals, responses to
comment and EPA analysis.
In the proposed CERCLA Sec. 108(b) guarantee, the guarantor would
guarantee payment up to the most current CERCLA Sec. 108(b) financial
responsibility amount required at each facility covered by the
guarantee exclusive of any legal defense costs incurred by the
guarantor in the same three scenarios for which the other instruments
intend to provide financial responsibility (discussed later in this
preamble). The value of the guarantee thus is designed to adjust with
the value of the CERCLA Sec. 108(b) financial responsibility amount.
As evidence that the guarantor passes the financial test, the guarantor
would be required to submit the letter from its CFO that identifies,
for all the facilities for which it is providing a corporate guarantee,
the amount of CERCLA Sec. 108(b) financial responsibility covered by
the guarantee. This would occur annually or as required by a change in
the CERCLA Sec. 108(b) financial responsibility amount. The CERCLA
Sec. 108(b) financial responsibility amounts covered by the guarantee
identified in the CFO letter at each facility would serve as the basis
for the value of the guarantee under the proposed guarantee language.
A similar arrangement is used in the RCRA Subtitle C closure post-
closure guarantee whereby the value of the guarantee is linked to the
current closure and post-closure cost estimates. The RCRA Subtitle C
closure and post closure guarantee provides that, if the owner or
operator fails to perform closure or post closure care of the
facilities covered by the guarantee in accordance with the closure or
post-closure plans and other permit or interim status requirements
whenever required to do so, ``the guarantor shall do so or establish a
trust fund as specified in subpart H of 40 CFR part 264 or 265, as
applicable, in the name of [owner or operator] in the amount of the
current closure or post-closure cost estimates as specified in subpart
H of 40 CFR parts 264 and 265. In this way the value of the guarantee
adjusts without required amendments or modifications to the guarantee.
EPA is proposing that the value of the guarantee similarly adjust to
the current CERCLA Sec. 108(b) financial responsibility amount.
To help effectuate this intent, the proposed language of the
corporate guarantee would require the guarantor to agree to comply with
the reporting requirements for guarantors and to report the full amount
of CERCLA Sec. 108(b) financial responsibility for
[[Page 3445]]
which it is eligible to cover as determined by the financial test
criteria for each facility covered by the guarantee in the letter from
its CFO. EPA believes it is necessary for the guarantor to report the
full amount of CERCLA Sec. 108(b) financial responsibility for which
it is eligible to cover as determined by the financial test criteria
for each facility covered by the guarantee in the letter from its CFO
as those amounts would form the basis of the guarantor's potential
liability under the guarantee. If the guarantor was able to report an
amount lower than the maximum amount for which the guarantor is allowed
to cover under the financial test criteria, the guarantor could
unilaterally adjust the ``value'' of the guarantee downwards by
reporting some percentage of the maximum amount. Such a provision is
not necessary in the RCRA Subtitle C closure post-closure guarantee as
the owner operator is responsible for preparing the cost estimates and
thus the guarantor could not unilaterally change the ``value'' of the
guarantee.
An alternative approach would be to include specific dollar values
for each facility in the guarantee itself as the basis of the
guarantor's liability. Under this option, the guarantee would have to
be amended or modified regularly as the amounts of CERCLA Sec. 108(b)
financial responsibility changed and create additional reporting
burdens. Further, EPA anticipates that potential guarantors will
typically seek to provide a guarantee for the maximum amount allowable
under the regulations to realize the maximum cost savings.
Nevertheless, EPA requests comment on the proposed arrangement whereby
the guarantor's liability is linked to the current CERCLA Sec. 108(b)
financial responsibility amount and does not require regular amendment
of the guarantee as well as the alternative whereby the guarantee would
specify specific dollar amount and would require routine amendment.
c. Payment for CERCLA Response Costs, Health Assessment Costs, and/or
Natural Resource Damages From the Guarantee
The proposed language of the corporate guarantee would allow
claimants to make claims against the guarantor under three scenarios in
addition to the direct action scenario. First, in the event that
payment was not made for CERCLA response costs, health assessment
costs, and/or natural resource damages associated with the facility as
required in a final court judgment from a Federal court against one of
the current owners or operators within thirty days, the guarantor would
do so. Secondly, in the event that payment is not made as required in a
CERCLA settlement associated with the facility between a current owner
or operator and EPA or another Federal government agency, the guarantor
would do so. Third, in the event that performance does not occur as
required at the facility under a CERCLA unilateral administrative order
issued to a current owner or operator by EPA or another Federal agency
and for which the owner or operator provided a written statement
allowing the guarantee to serve as financial responsibility assuring
the work in the order, the guarantor would make payment into a trust
fund established pursuant to the order.
The payment scenarios in the proposed guarantee are analogous to
those in the other instruments proposed today. Similar documentary
requirements are also required for a claimant to receive payment under
these three scenarios in the proposed guarantee. Specifically, under
the terms of the proposed guarantee, the guarantor would satisfy a
third-party CERCLA claim on receipt of specific documents. Claimants
seeking satisfaction of a valid final court judgment from a Federal
court awarding payment for CERCLA response costs, health assessment
costs, and/or natural resource damages associated with the facility
against any of the current owners or operators at the facility that had
not been satisfied within thirty days would need to submit the final
court judgment itself. In addition, the claimant would need to submit a
signed statement from the claimant certifying that the amounts had not
been recovered or paid from any other source, including, but not
limited to, the owner operator, insurance, judgments, agreements, and
other financial responsibility instruments. These documentary payment
requirements were selected as it removes EPA from the claims
administration process but ensures that a court has determined that
payment is due to the party making the claim under CERCLA and that the
party has not already recovered or been paid the funds from another
source. EPA believes that guarantors will be able to review such
objective documentary submissions and determine whether payment should
occur under the terms of the guarantee. A similar provision requiring
the submission of a valid final court order is required in the RCRA
third party liability guarantee (see 40 CFR 264.151(h)(2)).
In the payment scenario where payment was not made as required in a
CERCLA settlement associated with the facility between a current owner
or operator and EPA or another Federal government agency, Administrator
or another Federal agency may make a claim by presenting two documents
to the guarantor for payment. The first document would be a written
signed statement from the Administrator or another Federal government
agency requesting payment from the guarantor on the grounds that
payment had not been made as required by a CERCLA settlement associated
with the facility and with any of the current owners or operators. The
second document is the signed statement from the claimant certifying
that these amounts have not been recovered or paid from any other
source, including, but not limited to, the owner operator, insurance,
judgments, agreements, and other financial responsibility instruments.
In the payment scenario where performance at the facility does not
occur as required under a CERCLA unilateral administrative order issued
to a current owner or operator, the Administrator or another Federal
agency may make a claim by presenting a similar set of two documents as
described earlier in the settlement scenario to the guarantor for
payment. Specifically, the first document required to make a claim in
this scenario under the terms of the proposed guarantee would be a
written signed statement from the Administrator or other Federal
government agency requesting payment from the Guarantor into a trust
fund established pursuant to a CERCLA unilateral administrative order
on the grounds that performance at the facility had not occurred as
required by a CERCLA administrative order issued to a current owner or
operator. The second document that would be required to make a claim
under this scenario would be a signed statement from the claimant
certifying that these amounts have not been recovered or paid from any
other source, including, but not limited to, the owner operator,
insurance, judgments, agreements, and other financial responsibility
instruments.
EPA believes, similar to the case of the letter of credit issued in
favor of any and all third-party CERCLA claimants, the trust fund and
the surety bond, that in instances where the claimant is a Federal
government agency acting pursuant to delegated CERCLA authority a
simpler set of documentary requirements are appropriate. EPA believes
the relatively simple requirements of signed statements from EPA or
another Federal agency acting pursuant to delegated CERCLA authority
will streamline the claims
[[Page 3446]]
process and reduce uncertainty as to whether or not payment should be
made under the terms of the guarantee. EPA requests comment on the
proposed documentary requirements for payment from the guarantee.
In addition to the three defined payment scenarios, the guarantor
could also be subject to direct action under CERCLA Sec. 108(c)(2).
Specifically, the proposed terms of the guarantee include an explicit
acknowledgement that in the case of a release or threatened release of
(a) hazardous substance(s) from a facility covered by the guarantee,
any claim authorized by Sec. 107 or Sec. 111 of CERCLA may be
asserted directly against the guarantor as provided by CERCLA Sec.
108(c). Further, the proposed terms of the guarantee require that the
guarantor consents to suit with respect to these claims subject to the
limitations in CERCLA Sec. 108(d) and acknowledge that the guarantor
would be entitled to the rights and defenses provided to guarantors by
the statute in Sec. 108(c). Finally, under the proposed language of
the guarantee, the guarantor would agree to provide notice of any
claims and payments resulting from a direct action to the
Administrator. EPA believes this notification requirement is valuable
as the owner operator may not be around to provide such a notice of
claims and payments in a direct action scenario yet EPA wishes to
remain informed of claims against the instrument and of the value of
the financial responsibility.
The proposed language of the guarantee would also explicitly
specify that the limit of the guarantor's liability under the guarantee
would be exclusive of legal defense costs incurred by the guarantor. A
similar provision is being proposed for insurer and surety liability
today. To the maximum extent possible, EPA would like the value of the
financial responsibility be preserved for the payment of valid third-
party CERCLA claims. EPA requests comment on this proposed provision.
d. Notification Requirements in the Guarantee
The proposed language of the CERCLA Sec. 108(b) corporate
guarantee also includes several other notification requirements. First,
under the proposed language, the guarantor would agree that if, at any
time before the termination of the guarantee, the guarantor fails to
meet the financial test criteria, guarantor shall send within ninety
days, by certified mail, notice to the Administrator and to the owner
or operator that he intends to provide alternate financial
responsibility as specified in Subpart C of 40 CFR part 320 in the name
of the owner or operator. A similar provision is also employed in the
RCRA Subtitle C closure post closure and third-party liability
guarantee. The provision would provide EPA notice that the guarantee no
longer passes the financial test and an acknowledgment from the
guarantor that he intends to provide alternate financial responsibility
as required under the terms of the guarantee should the owner or
operator fail to do so. EPA believes it is important for the Agency to
receive prompt notice of the guarantor's inability to continue to pass
the financial test as the guarantor's financial strength is
foundational to the efficacy of the guarantee. Further, EPA believes
that it is not just consistent with past precedent but important that
the guarantor be responsible for obtaining alternate financial
responsibility in these instances. The proposed provision helps limit
the risk that, in instances when a guarantor no longer passes the
financial test, the facility will be left without alternate financial
responsibility.
Likewise, the proposed terms of the guarantee would require the
guarantor to agree that within thirty days after being notified by the
Administrator of a determination that the guarantor no longer meets the
financial test criteria or that he is disallowed from continuing as a
guarantor, the owner or operator would be required to establish
alternate financial responsibility as specified in Subpart C of 40 CFR
part 320, as applicable, in the name of the owner or operator unless
the owner or operator had done so. This provision serves the same
intent as the provision described earlier--that the guarantor be
responsible for obtaining alternate financial responsibility in an
instance where the guarantor notices EPA that it no longer passes the
financial test. The provision helps limit the risk that, in instances
when a guarantor no longer passes the financial test, the facility will
be left without alternate financial responsibility. This would be a
very similar requirement to those used in the RCRA Subtitle C corporate
guarantees so the regulated community should be familiar with the
provision.
Under the proposed terms of the guarantee the guarantor would also
be required to notify the Administrator by certified mail, of a
voluntary or involuntary proceeding under Title 11 U.S.C. (Bankruptcy),
naming the guarantor as debtor, within ten days after commencement of
the proceeding. This provision is also required in both the RCRA
Subtitle C closure post closure and third-party liability guarantees.
EPA recognizes the value of this notification provision and proposes
its inclusion to the CERCLA Sec. 108(b) guarantee in order for EPA to
be promptly notified of such indicators of the guarantor's financial
distress.
Finally, under the proposed terms of the guarantee, the guarantor
would need to send a notice by certified mail to the Administrator and
to the owner operator of its intent to terminate the guarantee. The
intent of this provision is to provide notice to the Administrator and
the owner operator that the guarantor wishes to cease providing a
guarantee on behalf of the owner operator. Such a provision helps
ensure continuity of financial responsibility coverage.
e. Provisions in the Guarantee Ensuring Continuity of Coverage
As described earlier, under the proposed terms of the guarantee,
the guarantor would need to send a notice by certified mail to the
Administrator and to the owner operator of its intent to terminate the
guarantee. The corporate guarantee would remain in force and may not be
terminated unless and until the owner or operator obtains, and the
Administrator approves alternate financial responsibility. If the owner
or operator failed to provide alternate financial responsibility as
specified in the regulations and obtain the written approval of such
alternate financial responsibility from the Administrator within ninety
days after receipt by both the owner or operator and the Administrator
of a notice of termination of the corporate guarantee from the
guarantor, the guarantor would be required, under the terms of the
guarantee, to provide such alternative financial responsibility in the
name of the owner or operator. This provision would ensure the
continuity of financial responsibility and is similar to that required
for the other instruments. However, in the case of the guarantee,
unlike the other instruments, the guarantor would not necessarily need
to fund a trust fund. The guarantor could choose from the range of
acceptable financial responsibility instruments when obtaining a
financial responsibility mechanism on behalf of the owner or operator.
This provision, and the similar provisions for other proposed
instruments, as well as alternatives are discussed in more depth in the
preamble section headed `issuer cancellation provisions.'
f. Requirements for Attorneys General or Insurance Commissioners
written statements (Sec. Sec. 320.44(f) and (g))
In the case of corporations incorporated in the United States, a
guarantee would only be able to be used
[[Page 3447]]
to satisfy the CERCLA Sec. 108(b) financial responsibility
requirements if the Attorneys General or Insurance Commissioners of the
State in which the guarantor is incorporated, and each State in which a
facility covered by the guarantee is located have submitted a written
statement to EPA that a guarantee executed as described in the
regulations at Sec. Sec. 320.44 and 320.50(f) is a legally valid and
enforceable obligation in that State.
For non-US corporate guarantors a guarantee would be able to be
used to satisfy the CERCLA Sec. 108(b) financial responsibility
requirements only if the Attorney General or Insurance commissioner of
each state in which a facility covered by this guarantee is located and
the state in which the guarantor corporation has its principal place of
business has submitted a written statement to EPA that a guarantee
executed as described in the regulations and Sec. Sec. 320.44 and
320.50(f) is a legally valid and enforceable obligation in that State.
These requirements for written statements from state Attorneys
General and Insurance Commissioners are similarly used in the RCRA
Subtitle I Underground Storage Tank financial responsibility
regulations and the RCRA Subtitle C third-party liability regulations.
The reason for the requirements is that EPA is concerned that
guarantors may be subject to states insurance laws.\140\ State
insurance regulation and law are by and large the purview of the states
and thus the Agency does not believe it can state with certainty
whether any particular guarantee would subject the guarantor to state
insurance law, and whether it would be valid with respect to such law.
Therefore, the Agency is today proposing that the responsibility would
rest with the owner or operator to obtain the written statement from
the relevant state Attorneys General and Insurance Commissioners
stating that a guarantee as described and worded in the regulations
would be valid and enforceable. EPA invites comments as to whether or
not this requirement would be necessary or on alternative means by
which the owner or operator could provide assurances to the Agency that
the guarantee would be valid and enforceable.
---------------------------------------------------------------------------
\140\ See, for example, Liability Requirements for Hazardous
Waste Facilities; Corporate Guarantee, 52 FR 44314 @ 44316-44317;
and Standards Applicable to Owners and Operators of Hazardous Waste
Treatment, Storage, and Disposal Facilities; Liability Coverage 53
FR 33938 @ 33942, September 1, 1988.
---------------------------------------------------------------------------
6. Trust Fund (Sec. 320.45)
An owner or operator would be able to satisfy the proposed CERCLA
Sec. 108(b) financial responsibility requirements by establishing a
trust fund in accordance with the proposed requirements including the
proposed required wording. Funds transferred to the trust fund by the
owners and operators or any letters of credit held by the trust would
be held in the trust for the purpose of paying valid third-party CERCLA
claims in certain circumstances identified in the trust agreement. In
this way, the trust fund acts as a means of self-insurance whereby the
owner and operator set aside funds to pay future claims which otherwise
may not be satisfied at such a future date.
a. Submission of Trust Agreement and Trustee Eligibility (Sec.
320.45(a))
The owner or operator would be required to submit an originally
signed duplicate of the trust agreement to the Administrator. This is a
similar reporting requirement to those under EPA's RCRA Subtitle C
financial assurance regulations and aids in the evaluation of
compliance. The Agency does not anticipate this to be a significant
burden to owners and operators. The trustee would be required to be an
entity that has the authority to act as a trustee and whose trust
operations are regulated and examined by a Federal or state agency.
This requirement is the same as that under the RCRA Subtitle C
financial assurance program, which EPA required in order to establish a
minimal level of reliability and security for trustee institutions
managing trust funds under the Agency's financial assurance regulations
(see 46 FR 2824, January 12, 1981). EPA considered alternative
qualifications for trust providers but is proposing to utilize those
that EPA has found to work well under the RCRA Subtitle C program. In
making this decision, EPA considered the impact on the potential number
of trustees and the administrative burden on EPA of reviewing
additional qualifications. For more information on the consideration of
alternative provider qualifications, please see the background document
on instrument provider qualifications.
b. Required Wording and Updates to Schedule A of Trust Agreement (Sec.
320.45(b))
The wording of the trust agreement would be required to be
identical to the wording specified in Sec. 320.50(a)(1), and the trust
agreement would be required to be accompanied by a formal certification
of acknowledgment (for example, see Sec. 320.50(a)(2)). As discussed
in the introduction to Subpart C of the preamble ``Available Financial
Responsibility Instruments'' EPA believes there are significant
benefits to standardized wording. Namely, a standardized trust
agreement reduces the administrative burden of reviewing the wide range
of possible trust agreement wording that may otherwise be employed and
ensures uniform integration with the Superfund program and enforcement
of the CERCLA Sec. 108(b) instruments nationwide. The trust agreement
would be required to be accompanied by a formal certificate of
acknowledgment. The language of the acknowledgment would be expected to
vary by state to accommodate individual state requirements but the
intent would be to ensure the validity and authenticity of the
signatures on the trust agreement. This requirement exists for trust
agreements in other EPA financial responsibility programs,\141\ and
adds to the legal standing and enforceability of the instrument.
---------------------------------------------------------------------------
\141\ See, for example, 40 CFR 264.151(a)(2) and 280.103(b)(2).
---------------------------------------------------------------------------
Under the proposed regulations, Schedule A of the trust agreement,
which would identify the facilities covered by the trust agreement and
their EPA Identification Numbers, names, addresses, current owners and
operators, and the current financial responsibility amount, or portions
thereof, for which financial responsibility is being demonstrated by
the trust agreement, would have to be updated within sixty days of a
change in the amount of CERCLA Sec. 108(b) financial responsibility at
a facility covered by the agreement. Maintaining the accuracy of the
information in Schedule A, including the current amount of CERCLA Sec.
108(b) financial responsibility the trust fund is covering at each
facility, would be important to ensure the trustee would have an
accurate accounting of the value of CERCLA Sec. 108(b) financial
responsibility for each facility covered. This amount would serve as an
upper bound for the value of payments made for valid third-party CERCLA
claims associated with any given facility.
c. Payments Into the Trust (Sec. 320.45(c))
Payments by the owner or operator into the trust fund would be
required so that the value of the trust fund would be at least as great
as the required CERCLA Sec. 108(b) financial responsibility amount.
For existing facilities subject to this proposed rule, these payments
would be made by the owner or operator in accordance with
[[Page 3448]]
the compliance schedule for the CERCLA Sec. 108(b) financial
responsibility regulations in proposed Sec. 320.1. The trust fund
would thus need to be fully funded within four years of the owner
operator being subject to the regulations. In addition to payments,
this requirement would also be able to be met by obtaining a letter of
credit that conforms to the requirements of the proposal and is held by
the trust. The four-year implementation window established by the
statute and discussed earlier would thus serve as the trust fund's pay-
in period.
EPA is aware that four years is shorter than the pay-in period
provided by some EPA financial assurance programs. However, under the
proposed regulations owners and operators would be allowed to use a
combination of instruments to demonstrate the required CERCLA Sec.
108(b) financial responsibility amount. Owners and operators would thus
be able to simulate a longer trust fund pay-in period by combining the
trust fund with another appropriate instrument. The trust fund could be
funded over a longer period of time with the unfunded portion of the
trust provided by a separate instrument. EPA believes this would help
relieve any burdens that may be encountered because of the relatively
short pay-in period required by the statute.
For new facilities, owners and operators would also be required to
make payments into the trust fund so that the value of the trust fund
is at least as great as the required CERCLA Sec. 108(b) financial
responsibility amount. However, in these cases there would not be a
pay-in period as is provided for existing facilities by the four-year
implementation period in the statute. For this first CERCLA Sec.
108(b) rule, EPA expects that new hardrock mining facilities would
likely have lower financial responsibility amounts as their footprint
would be smaller initially and then grow over time, obviating the need
for a pay-in period. EPA requests comment on the need for a pay in
period for new facilities. EPA is specifically interested in comments
as to the appropriate length of a pay-in period that could be provided
for new facilities.
d. Language of the Trust Agreement (Sec. 320.50(a))
In developing required trust agreement language for this proposed
rule, EPA first looked to the trust agreement language used in the RCRA
Subtitle C financial assurance program. The basic terms and conditions
of the RCRA Subtitle C trust agreement were defined by EPA in close
consultation with trust experts at the American Banking Association and
legal practitioners in the late 1970s and early 1980s. Additionally,
the trust agreement was published for public comment multiple times.
The required wordings of the RCRA trust agreements have served as
templates adopted by other financial responsibility programs, both
within EPA and across many States. This proposal includes proposed
trust agreement language primarily modified to suit the needs of the
proposed CERCLA Sec. 108(b) financial responsibility program. The most
significant aspects of the proposed trust agreement are discussed in
following sections. Please also see the background document ``Potential
Requirements for Insurance, Surety Bonds, Letters of Credit and Trust
Agreements and Standby Trust Agreements under CERCLA Sec. 108(b)''
that discusses potential instrument specifications and alternatives
considered for more information on the proposed trust agreement
specifications.
e. Specification of Beneficiary of the Trust Agreement
The proposed trust agreement language specifies that the trust fund
is established for the benefit of any and all parties with valid third-
party CERCLA claims against the grantor or other current owners and
operators arising from the operation of the facilities covered by the
agreement. EPA elected to propose such a beneficiary specification as
the Agency believes it provides adequate flexibility to accommodate the
various payment scenarios envisioned by the trust agreement and the
CERCLA Sec. 108(b) regulations. The RCRA Subtitle C closure post-
closure trust agreement specifies EPA as beneficiary. However, due to
the potential for multiple claimants including, but not limited to,
EPA, the Agency considered such an arrangement sub-optimal. In such an
arrangement, EPA would need to review all claims and assess the merits
of the claims and direct payment from the trust fund accordingly. As
discussed earlier in the letter of credit section, there are several
draw backs to EPA administering the claims process. These draw backs
include the redirection of Superfund resources to claims administration
activities and away from cleanups or other programmatic priorities,
frustrating the intent of the direct action provision and the potential
for EPA to be in the awkward position of administering a claims process
in which it is a potential claimant.
As a result, EPA elected a variation of the beneficiary
specification employed in the RCRA Subtitle C third-party liability
program that identifies ``any and all third parties injured or damaged
by [sudden and/or non-sudden] accidental occurrences arising from
operation of the facility(ies) covered by'' the trust agreement as
beneficiaries. EPA believes that the proposed beneficiary specification
provides adequate flexibility in that parties that obtain final court
judgments or have other valid third-party CERCLA claims against one of
the current owners or operators for CERCLA response costs, health
assessment costs, or natural resource damages associated with the
facility could make a claim without having to be specifically named in
the trust agreement (see discussion of claims against the trust fund in
following sections). At the same time, EPA intends that the beneficiary
language combined with the payment instructions in the trust agreement
will provide adequate clarity to trustees as to when to make payment
from the trust fund. The EPA requests comments on the proposed
specification of the beneficiary of the CERCLA Sec. 108(b) trust
agreement.
f. Claims Against the Trust Fund
Claims against the trust fund could be made by parties with valid
third-party claims for CERCLA response costs, health assessment costs,
and/or natural resource damages against one of the current owners or
operators at the facility.
Under the proposed regulations, the trust would be available to
claimants that obtain a final court judgment from a Federal court
against any of the current owners or operators at the facility awarding
CERCLA response costs, health assessment costs, and/or natural resource
damages associated with the facility should payment not occur as
required by the judgment within thirty days. Under the proposed terms
of the trust, the claimant would need to present the valid final court
judgment to the trustee. The judgment would have to be dated at least
thirty days earlier and be accompanied by an additional signed
statement from the claimant certifying that the amounts had not been
recovered or paid from any other source, including, but not limited to,
the owner operator, insurance, judgments, agreements, and other
financial responsibility instruments. The two proposed documentary
requirements are being proposed with the intent of ensuring that a
court has awarded such payment of CERCLA response costs, health
assessment costs, and/or natural resource damages, the owner operator
had thirty days to make
[[Page 3449]]
payment himself and that the claimant is not attempting to be paid
twice for the same claim. Based on discussions with representatives of
trust institutions, EPA believes that a final court judgment would be a
documentary payment condition acceptable to potential trustees. The
representatives expressed comfort in the concept of a court having
ordered payment and a desire for minimal due diligence to be required
on the part of the trustee.
Under the proposed regulations, the trust would also provide for
payment as required in a CERCLA settlement associated with the facility
between a current owner operator and the EPA or another Federal agency
if payment had not been made. In this scenario, to make a claim, the
Administrator or other Federal agency would have to present two
documents: (1) A written signed statement requesting payment from the
trust fund on the grounds that payment had not been made as required by
a CERCLA settlement associated with the facility and with any of the
current owners or operators; and (2) a signed statement certifying that
the amounts had not been recovered or paid from any other source,
including, but not limited to, the owner operator, insurance,
judgments, agreements, and other financial responsibility instruments.
Finally, under the proposed regulations, the trust fund would also
be available to pay into a trust fund established pursuant to a CERCLA
unilateral administrative order issued to a current owner or operator
by EPA or another Federal agency in the event performance at the
facility did not occur as required by the order. The Administrator or
other Federal agency would only make such a claim if the owner or
operator had provided written consent for the financial responsibility
instrument to assure the obligations under the administrative order.
In this scenario, to make a claim, the Administrator or other
Federal agency would have to present two documents: (1) A written
signed statement requesting payment from the trust fund into a trust
fund established pursuant to a CERCLA unilateral administrative order
on the grounds that performance at the facility had not occurred as
required by a CERCLA administrative order issued to a current owner or
operator; and (2) A signed statement certifying that the amounts had
not been recovered or paid from any other source, including, but not
limited to, the owners or operators, insurance, judgments, agreements,
and other financial responsibility instruments.
EPA selected these straightforward certifications as documentary
payment conditions because EPA believes that in the instances when the
potential claimants are limited to Federal government agencies a more
streamlined payment condition is optimal to limit the administrative
burden on the trustee. This is a similar documentary payment condition
to that proposed for the letter of credit issued in favor of any and
all third-party CERCLA claimants and the surety bond. EPA considered
alternative documentary requirements for the claims scenarios limited
to Federal claimants but did not believe they added additional benefit
and may burden the trustee with additional administrative expenses. For
example, the proposed trust agreement could specify the presentation of
the CERCLA settlement itself as a requirement for making a claim but
the benefits of such a requirement were unclear to EPA. EPA believes
that the requirement of signed statements from the Administrator or
another Federal agency acting pursuant to delegated CERCLA authority is
a clear documentary condition and will require minimal due diligence on
the part of trustees. EPA requests comment on the proposed documentary
requirements for making a claim against a CERCLA Sec. 108(b) trust
fund.
g. Direct Action Claims Against the Trust Fund
In addition to the three payment scenarios, like all CERCLA Sec.
108(b) financial responsibility instruments, the direct action
provision in CERCLA Sec. 108(c)(2) could come into play at facilities
where a trust fund is the financial responsibility instrument. EPA is
proposing trust agreement language that acknowledges that cause of
action in the trust agreement itself.
In discussions with representatives of the trust industry,
representatives expressed some concern about the direct action
provision. Specifically, representatives suggested that interpreting
``guarantor'' as defined in CERCLA Sec. Sec. 101(13) and 108(c)(2) to
include a trustee of a CERCLA Sec. 108(b) trust fund would greatly
reduce the willingness of trust institutions to offer such services.
EPA believes that in the CERCLA Sec. 108(b) context, whereby a trust
fund is funded by the owner or operator for the purposes of satisfying
future valid third-party CERCLA claims, such an interpretation would be
inappropriate. The trustee is simply providing administrative and
fiduciary services over the funds set aside by the owner or operator
and is not providing the instrument itself. EPA believes a more
appropriate reading is that the trust fund itself is the guarantor as
it provides for the funds set aside by the owner or operator to be
available to third-parties with valid CERCLA claims.
As a result, the proposed trust agreement language expressly
provides that in the case of a release or threatened release of (a)
hazardous substance(s) from a facility covered by the agreement, any
claim authorized by Sec. Sec. 107 or 111 of CERCLA could be asserted
directly against the trust fund as provided by CERCLA Sec. 108(c)(2)
subject to the limitations in CERCLA Sec. 108(d). The proposed
language of the agreement goes on to state that the trust fund shall be
entitled to all rights and defenses provided to guarantors by CERCLA
Sec. 108(c) and that the trust fund itself is available for paying and
defending claims in those instances.
Further, the proposed trust agreement language further clarifies
the intent of the trust agreement with respect to direct action under
section 3 of the agreement that deals with establishment of the fund.
The relevant proposed wording in section 3 states that ``The Grantor
and Trustee do not intend for the Trustee to qualify as a ``guarantor''
as that term is used in CERCLA Sec. Sec. 101(13) and 108(c)(2), and
therefore intend that the Trustee will not be subject to a direct
action by Trustee's agreement to act as Trustee for the Fund. The
Grantor and Trustee intend for the Fund to qualify as a ``guarantor''
as that term is used in CERCLA Sec. Sec. 101(13) and 108(c)(2), and
therefore intend that only the Fund will be subject to any direct
action brought pursuant to CERCLA Sec. 108(c)(2).''
EPA believes that clearly specifying the Agency's intent that the
trust fund itself, not the trustee, be the subject of any direct
actions is optimal. Such an approach is more consistent with the role
the two entities serve and does not suggest that trust institutions
would be put in the unfamiliar and potentially unwelcome position of
being sued under CERCLA. The downside to this arrangement is that the
trust fund could incur significant legal expenses under a direct action
scenario that may reduce the value of the trust fund available to make
payment for valid third-party CERCLA claims. EPA has proposed to
specify that trust expenses generally be paid by the owner operator
that established the trust fund (the grantor) to reduce the impact of
trustee expenses on the value of the financial responsibility. However,
by its very nature, in a direct action scenario, the owner operator is
unlikely to be available or able to pay such expenses and thus such
expenses may be paid from the trust fund itself. This is a limitation
of the proposed arrangement
[[Page 3450]]
that EPA requests comment on. Specifically, EPA is interested in
provisions that could help effectuate the direct action provision in
CERCLA Sec. 108(c)(2) that may ameliorate the concern of trustee
expenses significantly reducing the value of the trust fund.
h. Payment of CERCLA Claims
The proposed trust agreement language also provides additional
direction to the trustee with respect to when and how claims should be
satisfied from the trust fund. Specifically, the proposed trust
agreement specifies that claims be paid on a first come first serve
basis. Additionally, the proposed trust agreement language also
clarifies that in the event of simultaneous valid claims that exceed
the value of the fund, the trustee would pay the claimants a pro rata
share of their claim determined by the size of each valid claim. This
language was included to reduce the potential uncertainty and ambiguity
a trustee may face in the event multiple claims against the trust fund
occur that exceed the value of the fund. Finally, the proposed language
of the trust agreement specifies that payments for a claim should not
exceed the value of the CERCLA Sec. 108(b) financial responsibility
for that facility provided by the trust fund which would be identified
and updated in schedule A. The language is intended to provide added
clarity that, if the trust agreement covers multiple facilities, claims
against the fund associated with one facility should not exceed the
value of the CERCLA Sec. 108(b) financial responsibility for that
facility provided by the trust fund. EPA believes that such facility-
specific sub-limits are important to the extent multiple facilities are
covered by one trust agreement as other current owners and operators at
the facilities, in addition to the grantor, may have all contributed
funds but may not be owner operators at all the facilities covered by
the agreement.
Ambiguity in instances where a trustee may have to decide how much
and if to make payment was a concern EPA heard from representatives of
the banking community. EPA intends the proposed trust agreement
language to reduce such uncertainty, but requests comment as to other
language or specifications that might provide added clarity and provide
trustees greater certainty.
i. Provisions Authorizing Trustee To Hold and Draw on Letter of Credit
As discussed in the letter of credit section of the preamble, this
proposed trust agreement expressly authorizes and anticipates that a
trustee may hold a CERCLA Sec. 108(b) letter of credit for the
purposes of drawing on the letter of credit to make payments to third-
parties with valid CERCLA claims as provided by the trust agreement.
EPA has included language in whereas clauses, section 4 of the trust
dealing with payment from the fund, section 5 dealing with payments
comprising the fund, section 6 dealing with trustee management, section
8 dealing with the express powers of the trustee, and section 10
dealing with annual valuations providing for and accounting for this
possible role of the trustee. The intent of the language is to ensure
that a trustee will be able to hold, account for, and draw upon, as
necessary, a CERCLA Sec. 108(b) letter of credit issued in favor of
the trustee. As discussed in the letter of credit section, EPA believes
this a worthwhile feature to propose based on input from members of the
banking community that suggested a trustee may be better suited to
manage the CERCLA Sec. 108(b) claims process than an institution
issuing a letter of credit. EPA requests comments on other provisions
that could be included in the trust agreement that may provide further
clarity of the trustee's ability to hold and draw on the letter of
credit as provided for in the terms of the trust agreement.
In addition to the trust providing the trustee the authority to
draw on the letter of credit to satisfy valid third-party CERCLA claims
brought to the trust fund, under the proposed trust agreement, the
trustee would also have the responsibility to draw on the letter of
credit in order to maintain continuity of coverage. Specifically, the
proposed trust agreement language provides that in the event of receipt
of a notice of a decision not to extend the letter of credit from an
institution issuing a letter of credit held by the trust fund, the
trustee shall draw on the letter of credit and deposit any unused
portion of the credit into the trust fund if the Administrator informs
the Trustee that the owner operator did not establish alternate
financial responsibility and obtain written approval of such alternate
financial responsibility from the Administrator within the time frame
provided by the regulations. The trust agreement would specify that
this draw must occur prior to the expiration of the letter of credit.
EPA believes this a necessary provision as in the case of a letter of
credit issued in favor of a CERCLA Sec. 108(b) trust fund trustee, EPA
would not be authorized to draw on the letter of credit. EPA requests
comment on this proposed trust agreement language.
j. Trustee Management
In specifying the trustee's responsibilities with respect to trust
management, EPA looked to the ``prudent investor'' standard which has
become prevalent in trust law and practice. Specifically, the proposed
language of the trust agreement reads as follows: ``In investing,
reinvesting, exchanging, selling, and managing the Fund, the Trustee
shall discharge its duties with respect to the trust fund with
undivided loyalty and solely in the interest of the beneficiaries and
with the reasonable care, skill, and caution of a prudent investor, in
light of the purposes, terms, distribution requirements, and other
circumstances of the trust.'' However, while EPA is proposing the
prudent investor rule form the basis of the instruction to the trustee,
the Agency is proposing a modified prudent investor standard.
Specifically, the proposed trust agreement language would prohibit the
trustee from acquiring or holding securities or other obligations of
the grantor, or any other current owner or operator of the facilities,
or any of their affiliates as defined in the Investment Company Act of
1940, as amended, Title 15 U.S.C. 80a-2(a) unless they are securities
or other obligations of the Federal or a state government. This
provision is similar to language used in other EPA financial assurance
programs including the RCRA Subtitle C Closure Post-closure and third-
party liability programs. The intent of the modification to the prudent
investor rule is to restrict investments in assets whose performance
may be correlated with the financial performance of the owners and
operators at the facility. A further proposed modification to the
prudent investor standard employed in the proposed trust agreement is
an explicit authorization that the trustee may hold and draw upon
standby letters of credit as specified in 40 CFR 320.40. EPA intends
for the trustee management instructions in the trust agreement be
consistent with current trust practice and requests comment on the
proposed trustee management language in the trust agreement.
k. Refunds to the Grantor
The proposed language of the trust agreement also includes a
provision that if notified by the Administrator that the trust fund
contains amounts in excess of the required CERCLA 108(b) financial
responsibility amount, the trustee shall refund to the grantor such
amounts in excess of the CERCLA Sec. 108(b) financial
[[Page 3451]]
responsibility amount covered by the trust fund. A similar provision
was used in the RCRA Subtitle C Closure and Post-Closure trust
agreement. EPA believes this provision is necessary to allow for excess
funds in the trust agreement to be released back to the owner operator.
EPA envisions that such a scenario could arise either due to growth of
the value of the trust fund, the owner operator substituting alternate
financial responsibility for some portion of the trust fund, or as a
result of a downward adjustment in the required amount of CERCLA Sec.
108(b) financial responsibility. EPA believes that providing for the
possibility of a release of funds from the trust fund that did not
necessitate the termination of the trust agreement was advantageous.
l. Termination of the Trust (Sec. 320.45(i))
The Administrator would agree to the termination of the trust when
the owner or operator substituted alternate financial assurance as
specified in the regulations or the Administrator released the owner or
operator from the requirements of these regulations in accordance with
the proposed release provisions. As the proposed trust is irrevocable,
\142\ termination of the trust would necessarily require the approval
of the Administrator. The trust agreement itself specifies that the
trust shall be irrevocable and shall continue until terminated at the
written agreement of the trustee, the grantor, and the Administrator or
by the Trustee and the Administrator, if the Grantor ceases to exist.
The irrevocability of trust agreements is a common requirement in
financial responsibility programs and ensures that the trust fund will
not unilaterally be terminated and will be available to satisfy third-
party CERCLA claims when necessary.
---------------------------------------------------------------------------
\142\ An irrevocable trust agreement may not be revoked or
amended without the agreement of key parties to the instrument.
---------------------------------------------------------------------------
7. Issuer Cancellation Provisions
One similar feature across many of the instruments (surety bond,
insurance, letter of credit and corporate guarantee, if allowed) in
this proposal are cancellation provisions that include the potential
requirement for the instrument provider to fund a standby trust (or in
the case of a corporate guarantor, if a corporate guarantee is
ultimately provided for, obtain alternate financial responsibility in
the name of the owner operator). For the specifics related to
cancellation for each instrument please see the instrument specific
preamble discussions earlier in this preamble.
In each of the scenarios governing insurance, surety bond, letter
of credit and guarantee cancellation, the proposal specifies that the
issuer would be liable for the value of the instrument in the event the
owner or operator failed to obtain alternate financial responsibility
and obtain the Administrator's written approval of the financial
responsibility provided within ninety days after receipt of a notice of
cancellation from the issuer by the relevant parties. In the case of
insurance, letter of credit or surety bond, the issuer would be liable
to fund the accompanying standby trust to the value of the instrument.
In the instance of a guarantee, if allowed, the guarantor would be
required to provide alternate financial responsibility, in accordance
with the regulatory requirements, in the name of the owner or operator.
Such cancellation provisions are very similar to provisions in
other EPA financial assurance programs for letters of credit, surety
bonds and corporate guarantees. EPA is proposing such cancellation
provisions to ensure continuity of financial responsibility coverage
and provide assurance that funds will be available to EPA and other
third party claimants when necessary to pay for CERCLA response costs,
health assessment costs, and natural resource damages incurred by
claimants while limiting the implementation burden on EPA.
EPA acknowledges that such a provision may impact providers'
appetite to issue instruments in particular for insurance, where there
is not past precedent in EPA financial assurance programs of a
requirement for the insurer to fund a standby trust. EPA did consider
alternatives that may reduce the likelihood the instrument provider
would need to make payment and thus may provide greater flexibility
but, for the reasons provided in subsequent preamble discussion,
believes this proposed approach is the best option available.
One possible alternative would be to specify issuer liability to
fund a standby trust only after notice of cancellation by the provider
if the owner or operator does not obtain alternate financial
responsibility and obtain written approval of such alternate financial
responsibility from the Administrator within ninety days after receipt
by both the owner or operator and the Administrator of the notice and
some additional triggering event had occurred. For example, additional
conditions necessary to trigger issuer payment into a trust fund could
include bankruptcy of the owner or operator, abandonment of the
facility, and/or the issuance of a CERCLA notice letter. These are all
indications of potential higher risk at the facility and a potential
more imminent need for the financial responsibility. However, EPA is
concerned that such criteria alone may not provide adequate assurance
funds will be available when necessary to pay valid third-party CERCLA
claims. Facilities owned or operated by non-bankrupt companies and non-
abandoned facilities can present risks and require Superfund actions or
create natural resource damages for which the owner operator may not be
able to pay. Further, EPA was told by potential providers of CERCLA
Sec. 108(b) instruments that the credit profile of the owner or
operator is an important consideration of theirs. If cancellation
occurred when the owner operator was in marked financial decline, the
facility may end up abandoned and the company bankrupt before alternate
financial responsibility could be obtained, highlighting the risk of
allowing cancellation of the financial responsibility instrument in a
wide range of scenarios without a requirement to fund a standby trust.
The inclusion of a CERCLA notice letter as another condition that would
trigger issuer responsibility to fund a standby trust would provide
some added assurance. However, this would potentially require EPA to
perform a preliminary assessment/site investigation to assess the site
which in many cases would not be possible in the 120-day notice of
cancellation period. As EPA is not necessarily the primary regulator or
permitting authority at these facilities, EPA may not have the same
level of understanding of the conditions and risks at the facilities as
it does in other EPA financial assurance programs. Beyond just
practical timing and feasibility concerns, such an approach would raise
serious resource concerns for the Superfund program. Such a provision
may require the Superfund program to shift its resources from its
priority sites to facilities where financial responsibility maintenance
was in question. If EPA did not or could not take action to investigate
the facility's condition to determine whether a notice letter should be
issued, financial responsibility coverage could lapse in a broader
range of circumstances that may ultimately be optimal and financial
responsibility may not be available if a CERCLA action was necessary.
EPA also considered a notification of a release of a hazardous
substance at the facility to the National Response Center as required
under CERCLA Sec. 103(a) as a
[[Page 3452]]
possible additional condition that could be proposed as a trigger for
issuer liability to fund a standby trust in the instances of an issuer
sending notice of cancellation and the owner operator's failure to
obtain replacement financial responsibility. However, such a notice
would be limited to only releases. The proposed CERCLA Sec. 108(b)
financial responsibility program intends to cover CERCLA liabilities as
defined in CERCLA Sec. 107 which is much broader than just costs
associated with responding to releases. For example, response costs may
also be incurred by reacting to a threat of a release which would not
be accounted for in the notice of a release and may almost universally
exist at facilities regulated under CERCLA Sec. 108(b). Further, such
a provision may create a perverse incentive to not report releases in
order to avoid triggering issuer liability and any costs to the owner
operator that may result from payment from the instrument. In light of
these considerations, and with the desire not to skew Superfund
priorities while also providing strong assurance that funds would be
available when necessary to pay valid third-party CERCLA claims, EPA is
not proposing such a nuanced payment requirement into a standby trust.
By proposing that the issuer be liable for the owner operator's
obtaining alternate financial responsibility in all instances, EPA
recognizes that it is erring on the side of caution with the intent of
not creating additional administrative burden on EPA while providing a
high level of assurance that funds would be available when necessary to
pay valid third-party CERCLA claims.
EPA requests comment, however, on any additional criteria (e.g.
bankruptcy, abandonment of the facility), for requiring the issuer to
fund the standby trust beyond the requirements previously discussed--
the owner operator does not obtain alternate financial responsibility;
and obtain written approval of such alternate financial responsibility
from the Administrator within ninety days after receipt by both the
owner or operator and the Administrator of the notice. EPA is
interested in whether such additional criteria may be optimal for
certain instruments, despite reducing the level of assurance provided
that financial responsibility will be available to pay valid third-
party CERCLA claims. Further, EPA is interested in other objective,
readily identifiable supplemental criteria that EPA could include if
such an option was ultimately pursued.
Another option EPA considered to address the potential lapse in
coverage that may result from the issuer of a financial responsibility
instrument cancelling the instrument is to specify non-cancellation
triggering events. Under such an option, cancellation of the instrument
could not occur after notice of cancellation by the provider if: (1)
The owner operator does not obtain alternate financial responsibility
and obtain written approval of such alternate financial responsibility
from the Administrator within ninety days after receipt by both the
owner or operator and the Administrator of the notice of cancellation,
and (2) some additional triggering event had occurred. A further
refinement to such an option would be to also restrict the scenarios in
which cancellation can occur. EPA's RCRA Subtitle C closure and post-
closure insurance regulations offer an example. Those regulations do
not require the establishment of a standby trust alongside insurance.
Rather, the provider is only permitted to cancel the policy in
instances where the owner and operator failed to pay the premium and
the provider gave at least 120 days advance notice. Further,
cancellation, termination or failure to renew the policy may not occur
in the event of one of several ``triggering events.'' Specifically, the
RCRA Subtitle C closure insurance regulations state that cancellation,
termination, or failure to renew may not occur and the policy will
remain in full force and effect in the event that on or before the date
of expiration: (1) The Administrator deems the facility abandoned; (2)
the permit is terminated or revoked or a new permit is denied; (3)
closure is ordered by the Administrator or a U.S. district court or
other Federal court; (4) the owner or operator is named as debtor in a
voluntary or involuntary proceeding under Title 11 U.S.C (Bankruptcy);
or (5) the premium due is paid.\143\
---------------------------------------------------------------------------
\143\ See 40 CFR 264.143(e)(8).
---------------------------------------------------------------------------
Such a series of non-cancellation provision was one alternative to
a requirement to fund a standby trust that EPA considered. Such an
option could potentially be used for all instruments. However, the non-
cancellation triggering events used in the RCRA Subtitle C closure
post-closure would not all be applicable in the instance of the
proposed CERCLA Sec. 108(b) financial responsibility program which
does not compliment a broader permitting program. For example, two of
the triggering events (the termination, revocation or denial of a
permit and the Administrator ordering closure) are not applicable here
as EPA does not have permitting authority over these facilities.
Additional triggering events similar to those identified (e.g.
issuance of a CERCLA notice letter, notification of a release at the
facility) could bolster such a provision to lower the likelihood that
financial responsibility was not available when needed to pay valid
third-party CERCLA claims. However, these supplemental criteria would
present the same limitations, implementation challenges and resource
issues as they would in the option where they would be additional
triggers for issuer liability to fund a trust fund. Moreover, EPA was
also concerned that such an arrangement may lead to scenarios whereby
instruments may need to remain in effect and non-cancellable for many
years. For example, it could take several years before a claimant could
obtain a judgment for CERCLA response costs, health assessment costs,
and/or natural resource damages that may prompt a claim against the
instrument. Based on conversations with instrument providers, EPA
believes multi-year non-cancellation periods would likely be
unpalatable to instrument providers. This concern is substantiated by
past EPA experience. In the development of the RCRA Subtitle C closure
and post-closure financial assurance programs EPA proposed that
instruments would not be able to be terminated when a compliance
procedure was pending. Specifically, after notice of intent to cancel
or terminate an instrument was sent by the issuer, EPA would issue a
compliance order requiring the owner operator to obtain alternate
financial assurance. EPA would have been able to draw on the instrument
to fund a standby trust had the owner operator not complied with the
order. In the interim, the instrument would be non-cancellable as a
result of the pending compliance proceeding and thus a lapse in
financial assurance coverage would have been avoided.\144\ However,
such proposal was met with dissatisfaction from issuers of letters of
credit and surety bonds. Institutions that issue letters of credit
commented that non-cancellation provisions would preclude a defined
date on which the letter of credit could expire--an important feature
of letters of credit. Sureties noted that such an arrangement did not
provide them adequate opportunity to limit their risk. As a result, the
RCRA Subtitle C closure post-closure financial assurance regulations
include a 120 days' notice period of the intent to cancel or fail to
extend a surety bond or
[[Page 3453]]
letter of credit during the last thirty days of which the instrument
provider would be liable if the owner operator did not obtain alternate
financial assurance. Such a provision is what is being proposed today
for surety bonds, letters of credit and insurance.
---------------------------------------------------------------------------
\144\ See 46 FR 2822-2823 January 12, 1981.
---------------------------------------------------------------------------
Nevertheless, EPA requests comments on the option to specify non-
cancellation triggering events and provisions that could eliminate the
need for providers to fund a standby trust after a notice of intent to
cancel the instrument. Specifically, commenters are asked to identify
appropriate non-cancellation triggers, how instrument providers may
react to the prospect of protracted periods of non-cancellation and
whether such an arrangement may be appropriate for some mechanisms but
not others.
EPA also considered an option whereby after the 120-day notice of
cancellation period, issuers would face no potential liability and the
instrument would be terminated regardless of whether the owner or
operator provided alternate financial responsibility and obtained the
Administrator's approval of the financial responsibility. This option
has the advantage of possibly being the most palatable to instrument
providers; however, it was not proposed for a variety of reasons. In
particular, it provides the least assurance that funds would be
available when necessary to pay CERCLA claimants. EPA believes the
incentive to cancel, terminate, fail to renew or extend the coverage
may be greatest in times when the facilities may present the greatest
need for the instrument (e.g. the owner operator is experiencing
financial decline, after a release of hazardous substances) and thus
coverage may be lost precisely when it is most needed. Moreover, this
concern is elevated in the case of CERCLA Sec. 108(b) which may
require the cost recovery process to run its course before a claim
could be made against an instrument.
With all of these considerations in mind, EPA has decided to
propose that the instruments would require a 120 day notice of
cancellation, termination, failure to extend or failure to renew and
that the issuer would become liable for the value of the instrument if
the owner operator does not obtain alternate financial responsibility
and obtain written approval of such alternate financial responsibility
from the Administrator within ninety days after receipt by both the
owner or operator and the Administrator of the notice. The proposed
approach provides strong assurance that funds will be available when
necessary to pay CERCLA claims and limits the extent to which Superfund
resources are shifted from conducting cleanups to administering the
proposed financial responsibility program. This approach also has the
virtue of ensuring a trust fund is available to hold financial
responsibility funds at each facility if necessary after facility
closure or the owner operator no longer exists. EPA recognizes that a
trust fund is unique when compared to third-party mechanisms such as
surety bonds, letters of credit or insurance in that ongoing payments
from the owner or operator are not necessary if funded adequately
upfront. Depending on the duration of risk at a given facility,
financial responsibility may need to remain in place long after the
owner or operator ceases to exist. The proposed arrangement whereby if
the owner or operator does not provide alternate financial
responsibility in instances of cancellation of the instrument a trust
is funded, ensures financial responsibility can remain in place for the
long term.
However, EPA acknowledges that under this construction there would
be instances where issuers would be required to make payment into a
standby trust at facilities where a CERCLA claim may never arise. EPA
requests comments on these provisions of the proposal. Furthermore, EPA
requests comment on whether a hybrid of the options may be most
appropriate whereby for one instrument one option be employed, and for
another instrument a different option might be employed.
8. Use of Multiple Financial Responsibility Instruments (Sec. 320.46)
An owner or operator would be able to satisfy the requirements of
this section by establishing more than one financial instrument per
facility. The instruments would be required to meet the regulatory
specifications applicable to each instrument except that it would be
the combination of instruments, rather than the single instrument,
which would have to demonstrate financial responsibility for an amount
at least equal to the required amount of CERCLA Sec. 108(b) financial
responsibility. If an owner or operator were to use a trust fund in
combination with a surety bond, letter of credit or insurance policy,
including a trust fund holding a letter of credit, the owner or
operator would be able to use the trust fund as the standby trust fund
for the other instruments. Should the owner or operator obtain a letter
of credit issued in the favor of a trust fund trustee in combination
with a surety bond or insurance policy, the owner or operator would be
able to use the trust fund holding the letter of credit as the standby
trust fund for the other mechanisms. A single standby trust fund could
be established for two or more instruments. A claimant would be able to
elect against which instrument used to provide evidence of financial
responsibility to make a claim for CERCLA response costs, health
assessment costs, and/or natural resource damages. In this way, there
would not be `primary' or `excess' instruments where the ability to
draw on one instrument may be predicated on the exhaustion of another.
EPA is electing to provide for multiple instruments in this fashion as
the Agency believes it will be significantly less administratively
cumbersome and will make implementation of the claims process easier.
9. Use of a Financial Instrument for Multiple Facilities (Sec. 320.47)
An owner or operator would be able to use a financial
responsibility instrument specified in this section to meet the
requirements of this section for more than one facility. Evidence of
financial responsibility submitted to the Administrator must include,
for each facility, the EPA Identification Number, name, address, and
the amount of funds for CERCLA Sec. 108(b) financial responsibility
assured by the instrument. If the facilities covered by the instrument
are in more than one Region, identical evidence of financial assurance
would be required to be submitted to and maintained with the regional
delegees of the Administrator, as applicable, of all such Regions. The
amount of funds available through the instrument would be required to
be no less than the sum of funds that would be available if a separate
instrument had been established and maintained for each facility. EPA
is proposing this as it may provide for some administrative ease in the
compliance and implementation process.
This is also provided for in RCRA Subtitle C closure and post-
closure financial assurance program. However, in the proposed CERCLA
Sec. 108(b) financial responsibility program there is a much wider
range of potential parties that may make a claim against an instrument
than in the Subtitle C program. Therefore, the instruments proposed
today are intended to have clear facility-specific sub-limits.
Maintaining the accuracy of the facility-specific sub-limits is
important as the consolidated form provision in CERCLA Sec. 108(b)(4)
provides that multiple owners and operators may obtain an instrument
together while only one may be a common owner or operator at each
facility covered by the instrument.
[[Page 3454]]
Ensuring the accuracy of the amount of coverage an instrument provides
at each facility may occasion additional burden on the regulated
community and on EPA. For example, EPA is proposing that schedule A of
the trust agreement that identifies the facilities and amounts covered
by the trust agreement, be updated within sixty days of a change in the
information, even if the trust is not currently funded. EPA believes
such a provision is necessary as the trust may ultimately be funded
when the grantor of the trust is not around and such information should
be as current as possible. However, EPA believes that such additional
burden will likely be offset by the burden reduction provided by using
one mechanism across facilities.
One final consideration is whether the inclusion of facility
specific sub-limits might affect instrument providers' willingness to
provide instruments. EPA believes that the added clarity and clear
delineation of a provider's potential liability at any given facility
combined with the lower administrative burden of preparing only one
instrument would be a welcome specification. However, EPA could
envision a scenario where a provider found issuing multiple instruments
cleaner and easier than maintaining an accounting of the sub-limits
within an instrument. For example, the proposed wording of the letter
of credit would require the identification of the amount of financial
responsibility at each facility covered by the credit. EPA, in past
Agency rulemakings had proposed including such information in the
letter of credit but was informed by commenters that such information
typically would not be included in a letter of credit. As, in that
case, the information could be included in a separate letter from the
owner operator, EPA decided not to require the inclusion of facility
specific amount in the letter of credit itself (See 47 FR 15042 April
7, 1982). However, as the Administrator will not be directing payments
from CERCLA Sec. 108(b) instruments such information would need to be
included in the instrument were a letter of credit to cover multiple
facilities.
The proposed instruments do not require that multiple facilities be
covered and thus EPA believes and intended that they provide
flexibility for regulated entities and instrument providers to identify
the most efficient arrangement. EPA requests comment on the proposed
allowance for mechanisms to cover multiple facilities. Specifically,
EPA is interested in hearing if there are alternative means of
specifying facility-specific sub-limits that may have certain
advantages.
10. Consolidated Form and Multiple Owners and/or Operators (Sec.
320.48)
EPA had to consider how best to implement the provision for
multiple owners or operators at a facility in CERCLA Sec. 108(b)(4).
The provision provides guidance on how a financial responsibility
instrument could provide financial responsibility for the CERCLA
response costs, health assessment costs, and or natural resource
damages of all the current owners and operators of the facility in
instances where there is not one single owner and operator. Under the
proposal, where a facility is owned and/or operated by more than one
person, evidence of financial responsibility covering the facility may
be established and maintained by one of the owners or operators, or, in
consolidated form, by or on behalf of two or more owners or operators.
In practice, the instruments would follow the same form regardless of
whether one of the owners or operators establishes a single instrument
at the facility, whether multiple owners or operators establish a
single instrument at the facility, or whether multiple owners or
operators establish one or more instruments at the facility. EPA
believes the flexibility in establishing financial responsibility at a
facility when there are multiple owner operators is important as each
arrangement may lend itself best to certain instruments. For example,
EPA understands that sureties and banks issuing letters of credit have
strong preference for one party obtaining the instrument. In
discussions with the surety community, EPA learned that the surety
typically interacts and has a surety relationship with one party at a
facility and thus prefer one principal on the bond. While the bond
would cover the valid CERCLA claims associated with all current owners
and operators at the facility, only one principal need be listed.
Representatives from the banking community also expressed a preference
for one applicant per letter of credit on whom the lending institution
would perform its credit assessment. Similar to the bond, the credit
will cover the CERCLA response costs, health assessment costs, and/or
natural resource damages associated with all current owners and
operators at the facility. On the other hand, EPA understands that with
insurance a multiple insured arrangement is more common and may be
required for the policy to cover claims against all the parties at the
facility. In that case, EPA anticipates additional insureds may be
listed on the policy. In this way, EPA proposes to implement the rule
in a way that is consistent with both CERCLA's liability scheme and
with commercial practice.
When evidence of financial responsibility is established in a
consolidated form, the proportional share of the cost of demonstrating
the financial responsibility for each participant would have to be
shown in a separate letter submitted to the Administrator. This
provision will require the owners and operators to plan out and
apportion the responsibility of obtaining and maintaining the
instrument up front which EPA believes may help reduce the likelihood
of an instrument obtained by multiple parties lapsing due to failure to
pay any premiums or fees required by the instrument provider.
In either scenario, the evidence of financial responsibility would
have to be accompanied by a statement authorizing the owner or operator
submitting the evidence of financial responsibility to act for and on
behalf of each participant in submitting and maintaining the evidence
of financial responsibility. It is worth noting that all of the current
owners and operators at the facility would still be responsible for
ensuring financial responsibility at the facility is obtained and
maintained in accordance with the regulations. EPA would thus retain
enforcement authority for the regulations against all of the current
owners and operators.
E. Subpart H--Requirements Applicable to Hardrock Mining Facilities
1. Universe of Hardrock Mining Facilities Covered by the Rule (Sec.
320.60)
a. Applicability of the Rule
The Agency is proposing that the classes of facilities within the
hardrock mining industry that are identified in Sec. 320.60 be subject
to this rule. The classes of facilities that EPA is proposing for
regulation are the classes of facilities that were identified in the
2009 Priority Notice with the exception of four classes determined by
the Agency to present a lower level of risk of injury than the
remainder of the classes identified in the notice, if they meet certain
conditions. The classes EPA is proposing not to include in the rule
are: (1) Mines conducting only placer mining activities as defined in
Sec. 320.62, (2) mines conducting only exploration activities as
defined in Sec. 320.62, (3) surface mines with a disturbance as
defined in Sec. 320.62 of less than five acres not located within a
mile of mine disturbance that occurred in the prior ten-year period
that do not
[[Page 3455]]
employ hazardous substances in their processes; and (4) mineral
processors as defined in Sec. 320.62 with less than five acres of
surface impoundment and waste pile disturbance. Owners or operators of
facilities that conduct only these limited activities would not be
required to comply with the requirements of Part 320.
b. Universe Development
(1) Identification of Classes of Facilities Within the Hardrock Mining
Universe for Rule Development
In the 2009 Priority Notice, EPA identified classes of facilities
within the hardrock mining industry as those for which the Agency would
first develop CERCLA Sec. 108(b) regulations. EPA stated, for purposes
of the notice, that hardrock mining facilities include those which
extract, beneficiate and process metals (e.g., copper, gold, iron,
lead, magnesium, molybdenum, silver, uranium, zinc) and non-metallic,
non-fuel minerals (e.g., asbestos, phosphate rock, sulfur). The Agency
also noted that it was not identifying non-hardrock mineral mines, such
as sand, gravel, limestone, and stone; oil, oil shale or gas
operations; or the mining and preparation of coal as priority classes
of facilities.\145\ In the 2009 Priority Notice, EPA stated it would
inform its selection of classes based on indicators of risk and the
related effects, and reviewed information contained in a number of
studies, reports, and analyses. This review identified numerous factors
EPA could consider. For example, typical elements in evaluating risk to
human health and the environment include the probability of release,
type and duration of exposure, and toxicity.146 147
---------------------------------------------------------------------------
\145\ EPA excluded several classes of facilities (identified by
commodity sector), that otherwise fell within the broad definition
of ``hardrock mining.'' See memorandum to Jim Berlow, from Stephen
Hoffman and Shahid Mahmud, entitled: Mining Classes Not Included in
Identified Classes of Hardrock Mining, June 2009.
\146\ See Risk Assessment in the Federal Government: Managing
the Process. National Research Council. National Academy Press,
Washington, DC. 1983.
\147\ See U.S. EPA 2004. Nationwide Identification of Hardrock
Mining Sites. Office of Inspector General. Report No. 2004-P-00005.
Available at: https://epa.gov/oig/reports/2004/20040331-2004-p-00005.pdf.
---------------------------------------------------------------------------
Based on the information available at the time, EPA concluded that
hardrock mining facilities present such risk that warranted giving
those classes of facilities priority in the development of financial
responsibility requirements under CERCLA Sec. 108(b).
Throughout the discussion of its data analysis, EPA addresses
several topics that were raised in public comments that EPA received on
its data analysis for the 2009 Priority Notice and in response to EPA's
2010 ANPR relating to other facility classes, where those topics are
relevant to the data analysis for this proposal. It is important to
note, however, that the 2009 Priority Notice was a one-time event,
under which EPA identified the classes for which EPA would first
develop CERCLA Sec. 108(b) requirements. Consistent with this
approach, EPA did not seek public comment on the notice, and nothing in
CERCLA required EPA to issue its 2009 Priority Notice in proposed form,
or required EPA to provide responses to comments received. The 2009
Priority Notice's sole purpose was to identify a set of facilities for
which EPA would begin the process of developing CERCLA Sec. 108(b)
regulations, as provided for in CERCLA Sec. 108(b)(1) (second
sentence), and EPA provided a significant amount of factual information
in support of its conclusions. EPA is not reopening its identification
in the 2009 Priority Notice of hardrock mining as the classes for which
it would first develop CERCLA Sec. 108(b) regulations by this
proposal. EPA requests public comment on its data analysis. However,
EPA is not seeking comment on the 2009 Priority Notice.
As previously discussed, CERCLA Sec. 108(b) states that
``[p]riority in the development of such requirements shall be accorded
to those classes of facilities, owners, and operators which the
President determines present the highest level of risk of injury.''
Though the 2009 Priority Notice identified the classes of facilities
within the hardrock mining industry as those for which the Agency will
first develop financial responsibility requirements, it did not provide
criteria to define classes of facilities, or to identify which classes
of facilities within that universe present the highest level of risk of
injury. In developing this proposed rule, EPA thus considered these
issues to determine which facilities within the universe described in
the 2009 Priority Notice would be included in this proposed rule.
The Agency considered how to define classes of mining facilities.
EPA considered two options. EPA first considered identifying classes of
mines based on the commodity mined. This approach had two advantages--
it was consistent with the approach taken in the 2009 Priority Notice
to identify the universe to be considered, and it was consistent with
general industry practice to identify mines (e.g. gold mine, silver
mine, phosphate mine, etc.) so would have been readily understandable
to the regulated community. However, that approach had several
drawbacks. First, the commodity mined is not necessarily the source of
risk of injury at a mine. Numerous hardrock mining facilities mine
multiple ores. Thus, it alone served as a poor basis to compare level
of risk of injury. Second, similar sources of releases exist at
facilities within a range of commodities. Third, minerals are not
located in consistent geologic settings, so the risks associated with a
specific commodity could vary on that basis alone from case to case.
Under the second option considered by EPA, processes that are known to
affect the level of risk of injury at a mine would be identified and
facilities would be grouped based on the presence of those
characteristics and the risk they present. EPA believes this approach
created a more logical link to risk of injury, and the Agency adopted
it in developing this proposed rule. As previously noted, EPA had
identified hardrock mining facilities as those involved in 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, phosphate rock, and
sulfur) but not the specific classes of mining listed in a memorandum
to the record for the 2009 Priority Notice.\148\ Based on the Agency's
analysis of the current universe of hardrock mining and mineral
processing facilities, for illustration purposes the following table
provides examples of commodities that the Agency expects are subject to
the regulations being proposed today. However, it is important to note
that this list is not intended to be an all-inclusive list of the
universe of commodities potentially subject to this rulemaking. This
includes commodities with no currently active or abandoned facilities
that might in the future commence/resume operation, e.g., asbestos,
arsenic, bismuth. Any facility that meets the definition of a hardrock
mining or mineral processing facility (see section VI.D.3. of this
preamble), would also be subject to the requirements in this proposed
rulemaking.
---------------------------------------------------------------------------
\148\ See supra note 130.
[[Page 3456]]
Commodity
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Alumina.............................. Germanium.............. Osmium................. Sulfur
Antimony............................. Gold................... Palladium.............. Talc
Arsenic.............................. Hafnium................ Phosphate.............. Tantalite
Asbestos............................. Huebnerite............. Phosphorus............. Tantalum
Bastnaesite.......................... Ilmenite............... Platinum............... Tellurium
Barite............................... Iridium................ Potash................. Thallium
Bauxite.............................. Iron (including Potassium.............. Thorite
hematite, magnetite,
siderite, taconite).
Beryl................................ Lead................... Psilomelane............ Thorium
Beryllium............................ Limonite............... Pyrolusite............. Tin
Bismuth.............................. Lithium................ Quicksilver............ Titanium
Boron................................ Magnesium.............. Radium................. Trona
Cadmium.............................. Manganese.............. Rare earth metals...... Tungsten
Cerium............................... Manganite.............. Rhenium................ Uranium
Chromite............................. Mercury................ Rhodium................ Vanadium
Chromium............................. Microlite.............. Rhodochrosite.......... Vermiculite
Cinnabar............................. Molybdenite............ Ruthenium.............. Wolframite
Cobalt............................... Molybdenum............. Rutile................. Wulfenite
Columbite............................ Molybdite.............. Scheelite.............. Zinc
Columbium............................ Monazite............... Selenium............... Zinc
Copper............................... Nickel................. Silver................. Zirconium
Fluorspar............................ Niobium................ Strontium.............. .......................
----------------------------------------------------------------------------------------------------------------
EPA has described in the following sections the basis for
determining that exploration mines, placer mines, small surface mines
of less than five acres, and mineral processors with less than five
acres of surface impoundment and waste pile disturbance present a lower
level of risk of injury. These classes, it should be noted, were
identified based on facility characteristics and operations, rather
than on the commodity mined.
EPA solicits comment on whether it would be feasible and
appropriate to identify additional classes of hardrock mining
facilities as presenting a lower level of risk of injury, particularly
classes of mines that differ in their operations and associated risk
from more tradition hardrock mining operations. For consistency with
the approach taken by EPA to identify the lower level of risk of injury
classes proposed in this rule, information to support additional lower
level of risk of injury classes should address facility characteristics
and operations, and should not rely on the commodity mined as a
classification factor. However, EPA further solicits comment on whether
classes of mines identified by commenters as presenting a lower level
of risk of injury based on facility characteristics and operations
could potentially encompass iron ore, phosphate, and uranium mines.
(2) Basis for Determination of Lower Level of Risk of Injury for
Classes Not Included in Proposal
(a) Exploration Mines
EPA has determined that exploration mines present a lower level of
risk of injury and thus propose that owners and operators of facilities
that conduct only exploration activities as defined in Sec. 320.62
would not be required to comply with the CERCLA Sec. 108(b) financial
responsibility requirements. Mineral exploration is a precursor to the
production of ores and associated wastes at hardrock mining and mineral
processing facilities. The primary purpose of mineral exploration is to
locate ore deposits and/or find significant extension of previously
located deposits associated with operating or abandoned
mines.149 150 However, exploration activities do not
typically result in the generation of significant amounts of hazardous
substances or mineral waste.
---------------------------------------------------------------------------
\149\ See Lee-Moreno, J.L. 2011. In SME Mining Engineering
Handbook. Third Edition. Volume 1. Chapter 3.2: Minerals Prospecting
and Exploration. United States: Society for Mining, Metallurgy, and
Exploration, Inc.
\150\ See BLM defines exploration as the creation of non-
negligible surface disturbance to evaluate the type, extent,
quantity, or quality of mineral values present, including sampling,
drilling, or developing surface or underground workings. 43 CFR
Subpart 3809.5
---------------------------------------------------------------------------
Many exploration projects have only minimal surface disturbances or
impacts. Mineral exploration efforts begin with surface explorations
for signs of potential mineral deposits, commonly utilizing initial
field surveys generally involving low-impact techniques, such as aerial
photography and remote sensing.151 152 Additional
geochemical and geophysical survey techniques use either low-volume
surface sampling \153\ or no sampling, relying on sophisticated tools
to determine geologic properties of sites, such as chemical composition
and magnetism. For most commodities, these result in only limited
surface sampling as only a few minerals, such as gold and platinum-
group metals, economically justify deep subsurface exploration.\154\ In
many cases, exploration activities thus present a negligible level of
risk.
---------------------------------------------------------------------------
\151\ See International Council on Mining & Metals (ICMM). Good
Practice Guidance for Mining and Biodiversity. Accessed February 25,
2015 at: https://www.icmm.com/document/13.
\152\ See A. Erickson and J. Padgett. 2011. Chapter 4.1
Geological Data Collection. In SME Mining Engineering Handbook. Ed.
P. Darling. Third Edition. Volume 1.
\153\ For example, a survey conducted over gold-silver vein
mineralization in Canada described the optimal sample depth of 18-24
inches. For most stream sediment surveys, about 1.1 to 2.2 lbs of
material are collected from the near-surface sediment layer. See:
Jaacks, J.A., Closs, L.G., and J. A. Coope. 2011. Chapter 3.4.
Geochemical Prospecting. In SME Mining Engineering Handbook, Ed. P.
Darling. Third Edition. Volume 1.
\154\ See Lee-Moreno, J.L. 2011. Chapter 3.2: Minerals
Prospecting and Exploration. In SME Mining Engineering Handbook.
Third Edition. Volume 1. United States: Society for Mining,
Metallurgy, and Exploration, Inc.
---------------------------------------------------------------------------
Potential impacts of mineral exploration can arise when sub-surface
exploration does occur and include clearing land and potential
contamination from boreholes (narrow shafts penetrating below the
surface). Poor planning and management of drilled holes may cause
aquifer contamination by infiltration of polluted surface water or by
migration of materials in other layers of the earth that previously did
not come in contact with the aquifer. However, due to nature of these
operations where large-scale extraction of resources has not occurred,
the disturbance and impact would be expected to be significantly
smaller. For example, tailings facilities, large open pits, heap and
dump leach operations, and large waste rock deposits, leading sources
of releases of hazardous
[[Page 3457]]
substances at hardrock mining sites historically, would not be expected
to exist at exploration projects. Moreover, hazardous substances would
typically not be employed in the exploration activities further
lowering the risk posed by exploration activities compared to
commercial or larger-scale mining operations. The limitation that
exploration excludes activities where material from the site is
extracted for commercial use or sale limits the construction of large
facilities such as those named earlier.
EPA found no evidence directly linking exploration activities to
releases leading to CERCLA listing. Although CERCLA documents noted the
presence of mineral exploration activities at eight sites, exploration
activities appear to have played little to no direct role in releases
of hazardous contaminants.
For the reasons stated, EPA believes that mineral exploration
presents a lower level of risk. As such, these mineral exploration
activities are not included in today's proposed rule. EPA requests
public comment regarding our determination to not include exploration
mines in today's proposal.
(b) Placer Mines
EPA has determined that placer mines, as defined by EPA in this
proposal (See proposed definition in section 320.62) present a lower
level of risk of injury. EPA recognizes that placer mining would not
typically be considered hardrock mining; however such mining practices
would fall within the definition of hardrock mining used by EPA in
identifying the priority class for regulation in the 2009 Priority
Notice. As a result, and due to the lower level of risk of injury
presented by placer operations, EPA is proposing that placer mines not
be included in the CERCLA 108(b) hardrock mining financial
responsibility regulations.
Placer mining is a method of mining in which the unconsolidated
overburden is removed to expose valuable mineral-bearing gravel
deposits beneath. Placer mines, commonly in alluvial deposits,
typically seek to recover gold, titanium, and rare earths minerals.
Alluvial deposits are commonly non-lithified (non-cemented) sands and
gravels that rarely contain minerals that are more commonly the sources
of contamination in other deposits (e.g. lode deposits). Placer mining
can involve open pit, underground, or dredging operations using
backhoes, bulldozers, or other excavating equipment to extract sand and
gravel; at frozen placer mines, drilling and blasting techniques can be
used to tunnel into the ground. Most commonly, dredges are used to
break apart sand and gravel and remove valuable minerals. Dredge types
vary widely, but generally use either mechanical methods to transport
material on moving buckets or belts, or hydraulic methods to bring raw
materials to the surface using pumps and pipes. Most placer recovery
involves only sizing and separation by physical properties such as
specific gravity, color, or magnetism.\155\ For example, vibrating
screens can separate the ore into particles of different sizes. This
stands in contrast to non-placer mines that may employ chemicals in
their heap leaching processes, a significant source of releases or
threatened releases at hardrock mining facilities. Placer mines may
have tailings, open pits and other features common at other mines.
However, due to the environmentally benign nature of typical alluvial
deposits, such features would not be expected to result in releases of
hazardous substances as such features would not typically contain
minerals (e.g. pyrite) that are more commonly the sources of
contamination in non-placer deposits at other mines.
---------------------------------------------------------------------------
\155\ Chemicals are rarely used for processing. Flotation may be
used in phosphate operations, and hot acid leaching using sulfuric
or hydrochloric acid is sometimes used for zircon sand. In these
operations, effluent treatment involves the addition of neutralizers
and the removal of solids, with effluent water being recycled back
to avoid off-site discharges.
---------------------------------------------------------------------------
Placer mining sediment discharges may diminish the quality of
surrounding environmental resources such as surface water, ground
water, soil, wetlands, and wildlife. Historically, the primary
environmental impact from placer mining has been increases in
sedimentation and heavy metals concentrations downstream from mining
operations. Most current placer mining does not utilize added
chemicals, nor would a placer operation using hazardous substances meet
EPA's definition of placer mine, minimizing the potential for release
of hazardous substances.
Placer mining practices were directly linked to releases leading to
a CERCLA listing at two mining sites stemming from methods not
typically recently employed domestically as a result of enhanced
environmental regulation and law. Evidence revealed that at one of the
sites sediment discharges resulted from hydraulic mining techniques
which disturbed large volumes of sediment. Hydraulic mining, which was
common in California and Alaska through the 1980s, used high-pressure
jets of water to break apart gravel beds, washing mixtures of water,
sand and minerals into a collection area. However, regulatory regimes
that have since emerged greatly restrict hydraulic placer mining \156\
and EPA thus does not expect it to be a common practice at placer mines
in the US going forward. At the other site where placer mining
practices were directly linked to releases leading to a CERCLA listing,
contamination stemmed from mercury amalgamation, which was historically
used for processing gold in placer mining operations. By following this
process, mercury and gold would form an amalgamated substance from
which pure gold could be extracted. The use of amalgamation processes,
however, has fallen precipitously in the US since the 1970s due to its
high cost, inefficiency for larger-scale mines, growing scarcity of
ores for which the technique can be used, and the introduction of
various environmental regulations.\157\ Furthermore, a placer mine that
did employ mercury amalgamation would need to comply with the Part 320
financial responsibility regulations as they would fail to meet the
proposed definition of placer mine which specifies that a placer mine
does not use CERCLA hazardous substances in the concentration or
processing of materials (see definitions at Sec. 320.62).
---------------------------------------------------------------------------
\156\ See Bullock, Richard L et al., Placer Mining and Dredging.
SME Mining Engineering Handbook. 3rd ed. Vol. 2. Society for Mining,
Metallurgy, and Exploration, (SME), 2011. 1062.
\157\ See U.S. Environmental Protection Agency. Gold Placers.
Technical Resource Document: Extraction and Beneficiation of Ores
and Minerals, Volume 6. October 1994.
---------------------------------------------------------------------------
In light of the benign nature of alluvial deposits and the absence
of hazardous substances in the processing operations at placer mines
meeting EPA's proposed definition, EPA believes such placer mines are
unlikely to result in contamination. EPA requests public comment
regarding our determination to not include placer mines in today's
proposal. EPA requests comment on whether the class of placer mines as
defined that is proposed as a lower level of risk of injury classes is
appropriate, or whether that class should be further defined to limit
the placer mines not included under this proposal.
(c) Small Surface Mines of Less Than Five Acres
EPA has determined that small surface mines with a disturbance of
less than five acres not located within a mile of mine disturbance that
occurred in the prior ten-year period that do not employ hazardous
substances in their processes, and are not underground, present a lower
level of risk of injury. While individual small mines may cause
[[Page 3458]]
releases or contamination as a result of certain hazardous substances
or mining practices used, such contamination tends to be more limited
due to their lower volumes of mining. Superfund sites are therefore not
generally associated with small individual surface mining facilities,
except in circumstances where there are major clusters that increase
the potential for cumulative impacts.
Small surface mines tend to extract near-surface higher grade ores
and previously unmined placer deposits. Larger mines are more able to
take advantage of new ultra-mechanized mining; metallurgical techniques
allow them to use lower-grade, large-volume extraction and processing.
Small surface mines likely do not engage in these more modern practices
due to financial factors. As a result, small surface mines will have
much lower volumes of waste and the features from which releases have
historically occurred (e.g. waste rock piles, open pits) will be much
smaller. Furthermore, lower level of risk is further ensured by the
requirement that the small mine also not employ hazardous substances in
their mining practices. As a result, cyanide leaching, one source of
releases or threatened releases, would not be practiced at small mines;
nor would hazardous process chemicals be stored at the facility
lowering the possibility of spills or other mishandling of hazardous
substances. Additionally, it is worth noting that because this
determination of lower risk is being made for small surface mines,
processing operations would not be included in this lower risk class.
As such, practices such as electrowinning, hydrometallurgy, or
pyrometallurgy would not occur at these facilities; nor would tailings
facilities exist. Underground mines are excluded because an underground
mine can expose significant reactive material (e.g. pyrite) in
underground workings, thereby causing contaminated mine drainage, and
still be in an area covering less than 5 acres if the mined material is
hauled off site for processing. Please see a discussion of low risk
mineral processing facilities later in this preamble for more
information on what class of mineral processing facilities EPA has
determined present lower levels of risk of injury.
In current Federal and state regulations, ``small'' mines are also
typically defined by acreage or volume of ore processed. Small mines
are regulated by the BLM, Forest Service and most states based on their
potential impacts and in most cases face reduced permitting and
operation requirements.\158\ In the case of both BLM and the Forest
Service, small mine projects causing a surface disturbance of less than
five acres are eligible for exemptions from certain financial
responsibility requirements. Alaska, Montana, Nevada, and other states
also have reduced requirements for facilities and projects no greater
than five acres in size. BLM, USFS, and most states do not extend non-
major mining exemptions to operations that use toxic process chemicals
or that have the potential to discharge hazardous substances to water
resources.
---------------------------------------------------------------------------
\158\ See Kuipers, J., 2000, Hardrock Reclamation Bonding
Practices in the Western United States, National Wildlife
Federation.
---------------------------------------------------------------------------
The reduced risk presented by small mines is evident by the lack of
small mines individually becoming Superfund sites. Historically,
Superfund sites with smaller-scale mines reflect the combined
environmental impacts of non-major mines in close proximity. One
example consists of numerous abandoned and inactive hardrock mine sites
that produced gold, lead, zinc and copper.159 160 Mining
waste problems impacting the 53-square mile watershed from abandoned
and inactive mine sites led to CERCLA listing. EPA identified 150
individual mine sites within the watershed boundary, of which 70 have
been prioritized for cleanup. Concern over the potential issues that
may arise from the cumulative impact of numerous small mines in close
proximity is the rationale for the proposed additional qualification
for small mines determined to present a lower level of risk as those
not located within a mile of mine disturbance that occurred in the
prior 10-year period.
---------------------------------------------------------------------------
\159\ See https://www2.epa.gov/region8/upper-tenmile-creek-mining-area.
\160\ Additional Superfund sites representing mining districts
with multiple smaller-scale operations include: Copper Basin Mining
District (CERCLIS ID TN0001890839), Oronogo-Duenweg Mining Belt
(CERCLIS ID MOD980686281), Cherokee County (CERCLIS ID
KSD980741862), Washington County Lead District (CERCLIS ID
MON000705027), Basin-Cataract Mining District (CERCLIS ID
MTD982572562), California Gulch (CERCLIS ID COD980717938), and
Carpenter Snow Creek Mining District (CERCLIS ID MT0001096353).
---------------------------------------------------------------------------
EPA believes that small surface mines of less than five acres
present a lower level of risk when such mines are not in close
proximity to another mine and do not use hazardous substances. EPA
requests public comment on the proposal that owners and operators of
such small mines would not be required to comply with the CERCLA Sec.
108(b) hardrock mining financial responsibility regulations.
(d) Mineral Processors With Less Than Five Acres of Surface Impoundment
and Waste Pile Disturbance
EPA is proposing that owners and operators of mineral processing
facilities with less than five acres of surface impoundment and waste
pile disturbance not be required to comply with the financial
responsibility requirements in Part 320. EPA is proposing this because
the Agency believes that releases from surface impoundments and waste
piles present elevated risk at mineral processing facilities. These
features were identified as contamination sources at many superfund
sites historically. For example, surface impoundments which contained
tailings and wastewater were the source of contamination for more than
160 different response actions; slag and heap leach waste piles were
sources of contamination for more than 54 and 17 responses
respectively. Further waste piles and surface impoundments at mineral
processing and combined mining and mineral processing sites have caused
natural resource damages.\161\ Additionally, releases from surface
impoundments have resulted in EPA needing to issue imminent and
substantial endangerment orders and other orders requiring injunctive
relief.\162\ Moreover, in a 1998 EPA study of mineral processing damage
cases, EPA found that many of the cases involved releases from waste
piles and surface impoundments. Additionally, the report noted at least
one additional NPL site (not included in the damage cases reviewed)
where contamination appeared to be from land-based mineral processing
units. The report also noted that land placement of products,
byproducts, in-process materials, and intermediates can result in
environmental problems.\163\ Since 2004, EPA's National Enforcement
Initiative on Mining and Mineral Processing has performed over 100
inspections of mineral processing facilities. These facilities ranged
from small to very large operations and had a wide variety of waste
management practices. However, EPA found that facilities that managed
wastes in large surface impoundments or piles posed higher
environmental risk to human health and the environment
[[Page 3459]]
than facilities with smaller waste management units.\164\
---------------------------------------------------------------------------
\161\ For examples, see Select NRD Cases at Mineral Processing
Facilities, PDF portfolio available in the docket for this proposed
rule.
\162\ For examples, see Select Enforcement Cases at Mineral
Processing Facilities, PDF portfolio available in the docket for
this proposed rule.
\163\ See U.S. EPA. Damage Cases and Environmental Releases from
Mines and Mineral Processing Wastes. April 1998.
\164\ See U.S. EPA. National Enforcement Initiative for Mining
and Mineral Processing Summary of Activities 2005 to 2016. November
15, 2016.
---------------------------------------------------------------------------
Some of the risk of surface impoundments and waste piles stems from
poor environmental practice (e.g. failure to use liners, overtopping,
instability of berms). For example, in 2004, an EPA inspection of a
mineral processing facility in Florida found that storage and disposal
of hazardous waste into unlined ditches and surface impoundments
released hazardous substances off-site. Nearby groundwater and private
drinking water wells were contaminated as a result of these
releases.\165\
---------------------------------------------------------------------------
\165\ For examples see 2004 Coronet compliance evaluation
inspection report file in Select Enforcement Cases at Mineral
Processing Facilities, PDF portfolio available in the docket for
this rulemaking.
---------------------------------------------------------------------------
As the volume of wastes disposed of in a surface impoundment or
pile increase, the units become larger and hydraulic pressure
increases. This results in higher incidents of leaks and structural
failures.\166\ Larger units also have increased pressure due to larger
surface areas exposed to rainfall. Sometimes a surface impoundment may
be located on top of or adjacent to a waste pile. For example, releases
from a large waste pile/surface impoundment (referred to as a
``phosphogypsum stacks'') in Florida, Texas, and Mississippi released
millions of gallons of highly acidic wastewater resulting in fish kills
and impacting other aquatic life and natural resources.\167\
---------------------------------------------------------------------------
\166\ See Select Surface Impoundment Technical Reports PDF
portfolio in the docket.
\167\ See Mosaic, Agrifos, and Piney Mulberry examples in Select
NRD Cases at Mineral Processing Facilities, and Select Enforcement
Cases at Mineral Processing Facilities, PDF portfolios, available in
the docket for this rulemaking.
---------------------------------------------------------------------------
Mineral processing facilities with less than five acres of surface
impoundment and waste pile disturbance generally pose lower risk due to
the lower quantities of hazardous substances present, and less
likelihood of spills and structural instability and the smaller
expected impact of any releases. As such, EPA proposes that owners and
operators of mineral processing facilities with less than five acres of
surface impoundment and waste pile disturbance not be required to
comply with the financial responsibility requirements in Part 320. EPA
requests comment on this proposal. Specifically, EPA is interested in
damage cases that have arisen at mineral processing facilities with
less than five acres of waste pile or surface impoundment disturbance.
2. Timeframes for Compliance (Sec. 320.61)
CERCLA Sec. 108(b)(3) requires a phased-in approach to
implementation of the financial responsibility requirements of this
proposal. That section requires that financial responsibility
requirements be imposed as quickly as can reasonably be achieved but in
no event more than four years after the date of promulgation of the
final rule. The statute further requires that, where possible, the
amount of financial responsibility shall be achieved through
incremental, annual increases. This phased approach provides time for
the financial markets to develop and make available instrument capacity
while, at the same time, has financial responsibility put into place at
facilities subject to the rule quickly.
Under the proposed schedule for implementation of financial
responsibility requirements, owner or operator's would be required to
demonstrate financial responsibility for: (1) Health assessment costs
by twenty four months after promulgation of the final rule, i.e., after
publication of the final rule in the Federal Register; (2) for fifty
percent of the response and natural resource damages amount of
financial responsibility by thirty six months after promulgation of the
final rule; and (3) for full response and natural resource damages
amount by forty eight months after promulgation of the rule.
In developing this proposed schedule for implementation of
financial responsibility requirements, EPA considered the requirement
in the statute that financial responsibility implemented in incremental
annual increases, as well as the need for the financial markets do
develop and make available capacity. EPA also sought to provide the
maximum amount of time for owners or operators to establish a financial
responsibility level for their facilities.
EPA proposed that owners or operators provide the amount of
financial responsibility for the health assessment component of the
formula first as that amount does not require a calculation, and thus
requires no input of information by the facility. This approach
provides three years before the first amount of financial
responsibility that must be calculated is due to EPA. EPA believes that
this is a reasonable approach, and that it balances the needs of the
owner or operator as well as the financial market. Delaying further
significant levels of financial responsibility would have resulted in a
surge in demand on the financial market in year four. Requiring
calculated financial responsibility earlier would have provided less
time for owners or operators to become familiar with the formula,
gather any necessary information, and perform necessary calculations.
EPA believes that this schedule would meet the statutory
requirement for phased implementation, and would provide owners and
operators an adequate time period to identify the necessary financial
responsibility amount for their sites. Further, these phased-in
requirements would help to assure the availability of instruments by
providing extended time for market capacity to build. EPA solicits
comment on this approach to implementation of the financial
responsibility requirements, on the schedule for compliance, and on
whether this approach would help assure availability of instruments.
EPA solicits comment on this approach.
For owners and operators of hardrock mining facilities that come
into operation after the effective date of this rule, the Agency is
proposing a different approach.
Facilities that become subject to the rule after the effective date
of the final rule and on or before the date four years after the
effective date would be comply with the requirements for demonstrating
financial responsibility that are applicable to facilities that were
authorized to operate, or should have been authorized to operate on the
effective date of the final rule. For example, if a facility were to
become subject to the requirements of this rule two years after the
effective date, the owner or operator would be required to demonstrate
financial responsibility for the health assessment amount prior to
beginning operations, and then follow the schedule provided in Sec.
320.61(a).
Finally, facilities that become subject to the rule more than four
years after the effective date of the final rule would be required to
demonstrate financial responsibility for the full amount required under
this rule before beginning operations.
The Agency believes this approach is reasonable in that the
capacity concerns that arise when a newly promulgated rule becomes
effective are not relevant as the Agency does not expect a large number
of newly regulated facilities to enter the market seeking financial
responsibility instruments after the rule initially becomes effective.
The Agency solicits comment on this approach.
3. Definitions (Sec. 320.62)
The Agency is proposing definitions in Sec. 320.62 that are
applicable to this
[[Page 3460]]
Subpart. The Agency solicits comment on these definitions.
4. Determining the Financial Responsibility Amount (Sec. 320.63)
EPA considered options for how to calculate financial
responsibility amounts for classes of facilities under CERCLA Sec.
108(b). The statute provides only very general direction on this
question, and thus confers upon EPA significant discretion in both
methodology and in the ultimate selection of the appropriate amount.
CERCLA Sec. 108(b) establishes a general end-point for the Agency's
financial responsibility requirements, which must be ``consistent
with'' the ``degree and duration of risk associated with the
production, transportation, treatment, storage, or disposal of
hazardous substances'' at the facility. EPA does not interpret this to
require any precise association with a risk calculation. Standard
dictionary definitions of the term ``consistent'' include merely
``being in agreement'' or ``compatible.'' \168\ Moreover, as discussed
earlier, CERCLA Sec. 108(b) amounts are necessarily established in the
absence of any response action, although it is through such response
actions that the precise level of risk associated with a particular
site is ascertained. Thus, EPA believes that Congress intended for the
Agency to set a level of risk that is generally reflective of risk for
each facility class.
---------------------------------------------------------------------------
\168\ 301 Webster's II New Riverside University Dictionary
(1988).
---------------------------------------------------------------------------
The statute also does not specify any particular methodology to
reach that general end-point, specifying simply that the amount of
financial responsibility be established at the level that the EPA
``determines is appropriate.'' The statute does provide a non-exclusive
list of information sources in CERCLA Sec. 108(b)(2) on which it is to
base its decision--the payment experience of the Superfund; courts
settlements and judgments; and voluntary claims satisfaction. Notably,
it does not specify how the information from these sources is to be
used--for example, how the data from each source should be weighted
relative to the other sources. Similarly, the list of sources does not
specify whether EPA is to derive particular values from each category
to be aggregated into one amount that is ``consistent with the degree
and duration of risk,'' or whether EPA is to identify from each
category, particular practices (that is, for example, the types of
activities for which the Fund has paid) the cost of which can form the
basis for an amount. Therefore, EPA has concluded that these provisions
of the statute confer a significant amount of discretion upon the
Agency in how it uses the data it has, to determine the appropriate
amount for which owners and operators must provide evidence of
financial responsibility.
EPA considered four approaches to identify a financial
responsibility amount for a facility--fixed amount, site-specific
amount, parametric approach, and formulaic approach. A description of
each approach follows. This proposed rule uses a combination of these
approaches--specifically, a fixed cost approach for certain costs
(health assessments) and a formulaic approach to identify an amount for
potential response costs consistent with the risks to human health and
the environment based on facility features.
Under a fixed amount approach, the Agency would identify a standard
cost for the class. This method does not rely on site-specific factors
but rather on historical costs associated with similar facilities to
calculate an expected future amount. This approach is best applied
where the costs at issue are fairly uniform, as the wider the
variation, the lower the accuracy of the financial responsibility
amount for that cost. If there is wide variation in the costs
associated with the facilities within the class to which the fixed
amount is applied, the result can be significant over-regulation at
those facilities with lower levels of liabilities, and significant
under-regulation of facilities with higher levels of liabilities. At
the same time, this approach has advantages in that it requires a lower
level of effort on the part of the regulated community and the Agency
to implement because the rule does not require a site-specific
calculation to be developed, submitted, or evaluated. Thus, EPA
believes that in certain circumstances the fixed amount approach may be
the best choice to implement CERCLA Sec. 108(b) requirements.
For example, as discussed in section VI.D.4. of this preamble, the
Agency was able to determine a fixed level for health assessment costs
under this proposed rule, but applied a formulaic approach to determine
financial responsibility amounts for response costs and natural
resource damage costs.
The second method considered by EPA is a site-specific approach.
Under this approach, the owner or operator would calculate the cost of
conducting known activities to address identified problems. This
approach is the most precise of the three approaches considered by EPA.
However, it is also the most resource intensive to implement. It
requires gathering detailed information about the site, including an
assessment of the site conditions, and is most easily implemented where
a release has occurred, a response is necessary, and a remedy
determination has been made. As described earlier, CERCLA Sec. 108(b)
financial responsibility is not based on a remedy determination;
therefore, EPA determined that a site-specific approach was not
appropriate or practical for use under this rule. EPA solicits comment
on how a site-specific approach might be developed for future CERCLA
Sec. 108(b) rulemakings in situations where there has been no remedy
decision.
Having identified reasons that a site-specific approach may not be
appropriate or practical to determine financial responsibility amounts
for response costs and for natural resource damages, EPA sought to
develop an approach that was more accurate than the fixed amount, yet
could be implemented without conducting a full site investigation at
the facility. The Agency's efforts resulted in development of a formula
designed for facilities within the hardrock mining industry.
(a) Information Used To Determine Financial Responsibility Amounts
Under CERCLA Sec. 108(b)
As discussed earlier, CERCLA Sec. 108(b)(2) requires that the
level of financial responsibility must be ``based on the payment
experience of the Fund, commercial insurers, courts settlements and
judgments, and voluntary claims satisfaction.'' Thus, in developing
this proposed rule, EPA considered how to consider those factors. EPA
considered two approaches to basing financial responsibility levels on
the ``payment experience of the Fund.'' Under one approach, the Agency
would consider the cost of past cleanups at similar facilities, and use
those costs as a basis for financial responsibility. For example, EPA
would look to historical cost data and, if a Superfund remedy at
similar facilities averaged $X dollars, EPA would consider that the
appropriate amount of financial responsibility for that class of
facilities and promulgate a regulation requiring that amount at
facilities in the class.
This interpretation would best be applied to the fixed amount
methodology. Thus, if past Superfund actions at a class of facilities
averaged $X dollars, the Agency would identify by rule that amount as
the financial responsibility amount required for that class of
facilities. EPA recognized limitations associated with this approach.
For example, because it looks
[[Page 3461]]
to historical data, it assumes that operations at historical facilities
are similar to current operations, and that costs will be similar. The
Agency recognizes, however, that past operating procedures, before the
advent of environmental laws, were likely in many cases to give rise to
environmental problems that current regulations and modern operating
practices can prevent or minimize. In addition, Superfund cost data
represents only a portion of the expenditures at historical facilities,
especially those with ongoing cleanups or maintenance, and a uniform
set of data that includes all expenditures at facilities is not
available. However, EPA believes this approach is appropriate in some
circumstances--for example, where current costs are available for an
activity that is fairly consistent in cost from facility to facility.
Thus, EPA has proposed adopting this approach to determine the
financial responsibility amount for health assessment costs as
discussed in section VI.D.4. of this preamble.
Under a second approach, EPA would look at components of response
actions taken by Superfund in the past--that is, distinct activities
Superfund paid for--at facilities within the to-be-regulated class, and
determine the cost of those activities today. For example, if a
Superfund remedy involved installing an impermeable cap at a surface
impoundment, the Agency would calculate the cost of installing such a
cap today at the regulated facility with a similar unit to determine
the financial responsibility amount. This second approach to
considering the ``payment experience of the Fund'' was used by EPA in
developing the formula for determining financial responsibility amounts
for response costs and natural resource damages under this proposal.
The Agency solicits comment on these two approaches to basing financial
responsibility under this proposal on the criteria in CERCLA Sec.
108(b)(2).
It should be noted that the Agency's decision to not propose
requirements in this rule based on a site-specific approach to
determining financial responsibility amounts does not mean that the
Agency has concluded that methodology is not appropriate under CERCLA
Sec. 108(b). In fact, following initial implementation of financial
responsibility at facilities subject to this proposed rule, EPA may
identify site-specific conditions that indicate a response action is
needed at the facility, and that the current amount of financial
responsibility implemented under CERCLA Sec. 108(b) is not adequate to
cover the costs associated with the response. In those cases, the
Agency believes it could apply a site-specific methodology at the
facility to determine a more precise amount of financial responsibility
more consistent with the degree and duration of risk at the facility.
EPA would increase the amount of financial responsibility required at
the facility under CERCLA Sec. 108(b) rather than apply CERCLA Sec.
106 authority to require a separate financial responsibility
instrument. The Agency solicits comment on this approach.
(b) Development of the Hardrock Mining Financial Responsibility Formula
EPA developed a financial responsibility formula for owners and
operators of hardrock mining facilities to use to calculate the amount
of financial responsibility that would be required under this proposed
rule. EPA considered how to develop an amount of financial
responsibility that reflected an estimate of funds that might be
required in the event of a release from a regulated facility.
As described in section IV.B of this preamble, EPA is proposing to
make the financial responsibility instruments available for all types
of CERCLA liabilities enumerated in CERCLA Sec. 107. Thus, in
developing the financial responsibility formula, EPA sought to take
into account the same three categories of costs (response costs
(including both removals and remedial actions), natural resource
damages, and health assessment costs) that may be incurred by owners
and operators of facilities subject to the rule. To do so, EPA
separately developed three formula components to estimate financial
responsibility for each of those three categories. These three
components--response costs, natural resource damages, and health
assessment costs--make up the final formula.
EPA collected and analyzed data on both the total funds expended at
CERCLA sites and the types of goods and services on which those funds
were spent. Total funds expended were used to estimate both the health
assessment component and the natural resource damage component, while
the types of goods and services were used to estimate the response
component. For each, this preamble discusses EPA's data collection
efforts, how the Agency developed estimates of costs from that data,
and how it developed the resulting formula.\169\ EPA has followed the
Agency's Peer Review Policy with respect to the underlying formula
supporting this action. Specifically, EPA has conducted a peer review
of the Background Document. Peer review materials, including charge
questions, are available in docket for this proposed rule (Docket No.
EPA-HQ-SFUND-2015-0781).
---------------------------------------------------------------------------
\169\ For a detailed discussion of the development of the
formula, see the CERCLA 108(b) Financial Responsibility for Hardrock
Mining Facilities Background Document--Peer Review Draft (Background
Document), located in the docket for this proposal (Docket No. EPA-
HQ-SFUND-2015-0781).
---------------------------------------------------------------------------
(i) Response Component
EPA collected information on response costs from national
priorities list (NPL) and non-NPL CERCLA response activities. This data
consisted of records of decision (RODs), settlements, actual
expenditures to date by EPA, and estimated expenditures for present and
future work by potentially responsible parties. EPA used these data to
generate a best estimate of total response costs at these hardrock
mining facilities. EPA was able to collect this information for 319
sites.
In addition to the total response cost data, EPA also collected
data on specific activities conducted at 438 operable units at 88 NPL
or Superfund alternative hardrock mining sites. From this data on
activities themselves, EPA could link specific site features to
releases or threatened releases of hazardous substances, and to
remedies that incurred response costs. EPA found that thirteen site
features \170\ \171\ served as the source of release that resulted in
remedies within the following twelve categories: (1) On-site disposal
(excavation, capping, covering, revegetation); (2) off-site disposal;
(3) engineering and/or containment (other); (4) surface water
diversion; (5) water treatment (other); (6) water treatment (lime
addition); (7) no action; (8) alternative drinking water; (9) sediment
dredging/disposal; (10) monitoring (all media and as separate remedy);
(11) monitored natural attenuation/recovery; and (12) deconstruction/
decontamination of buildings. EPA solicits comments on additional
remedies or categories of CERCLA
[[Page 3462]]
response costs that do not appear in this list, as well as the data
supporting the inclusion of those remedies.
---------------------------------------------------------------------------
\170\ The 13 site features include (in order of frequency): (1)
Contaminated soils, (2) tailings (pond, pile), (3) waste rock or
overburden, (4) contaminated sediments, (5) acid mine/rock drainage,
(6) slag, (7) smelter emissions, (8) underground workings, (9)
process areas and buildings, (10) leachate (from failed cap/cover or
similar system), (11) demolition debris, (12) heap leach piles/
leaching waste, and (13) open pits/pit lakes.
\171\ The 13 site features include (in order of frequency): (1)
Contaminated soils, (2) tailing (pond, pile), (3) waste rock or
overburden, (4) contaminated sediments, (5) acid mine/rock drainage,
(6) slag, (7) smelter emissions (8) underground workings, (9)
process areas and buildings, (10) leachate failed cap/cover or
similar system), (11) demolition debris, (12) heap leach piles/
leaching waste, and (13) open pits/pit lakes.
---------------------------------------------------------------------------
(aa) Linking Response Categories to Current Cost Estimates
EPA's prior experience with CERCLA cleanups leads it to expect that
similar types of remedies will continue to be selected for mining sites
in the future. EPA also expects that for eleven of the twelve remedy
categories described earlier (the exception being ``no action''), the
magnitude of that cost will differ with changing site characteristics.
For example, the expected costs of constructing a cap over a unit to
prevent water infiltration can be expected to increase with the acreage
of that cap. Thus, in order to produce more accurate estimations of
costs at a particular facility, it is necessary to consider both
specific response costs and specific response activities. However, EPA
generally found that the response cost data discussed earlier were
available in the form of payments or total expenditures. Since these
payments or expenditures were aggregated across various activities,
they could not be separated into more specific cost amounts (e.g., the
cost to construct a particular cap on a particular tailings
impoundment).
Given this difficulty, EPA considered how to estimate the expected
costs associated with these particular activities. EPA searched for
existing, publicly available engineering cost estimates that contained
costs specific to these activities. EPA found that such engineering
cost data was readily available from cost estimates developed for state
and Federal mining reclamation and closure plans, and associated
documents. These engineering cost data were available for currently
operating facilities potentially regulated under the proposed rule, and
represented similar site features (e.g., tailings facilities, open
pits) as facilities for which prior response actions were taken. Thus,
these data reflect recent engineering cost values appropriate for EPA's
statistical analysis.
In order to monetize the expected costs for eight of the twelve
types of remedies listed earlier, EPA linked these remedy types to
similar tasks identified in the current engineering cost data. The
remaining three CERCLA remedy types, ``No action,'' ``Alternative
drinking water,'' and ``Monitored natural attenuation'' are excluded
from the initial list of twelve remedy types. Since these three remedy
types do not involve engineered controls, EPA was concerned that
including them as part of a nationally-applicable rule could have the
effect of producing an inadequate amount of financial responsibility
for those sites where engineered controls were necessary. Therefore, as
a conservative assumption to help ensure thea adequacy of the amount of
financial responsibility should engineering controls prove necessary,
EPA excluded these three remedy types from further consideration.
Also excluded was ``Sediment dredging/disposal.'' Although this
element has appeared historically as a response category, EPA notes
that it was already incorporated in the natural resource damages
component. For example, the final restoration plan for the Upper
Arkansas River/California Gulch Superfund site (one of the data points
used in developing the natural resource damages multiplier) includes
dredging of contaminated soils as a restoration alternative.\172\ Thus,
EPA believes that since this cost is already represented in the natural
resource damages multiplier, it is inappropriate to duplicate that cost
in the response component of the formula. EPA solicits comment on
whether this activity is more appropriately included in the response
component or the natural resource damages component of the formula.
---------------------------------------------------------------------------
\172\ See Stratus Consulting Inc. (2010). Restoration Plan and
Environmental Assessment for the Upper Arkansas River Watershed.
Available at: https://www.fws.gov/mountain-prairie/nrda/leadvillecolo/californiagulch.htm.
---------------------------------------------------------------------------
``On-site disposal (excavation, capping, covering, revegetation)''
and ``Engineering/containment (other)'' were linked to engineering cost
estimates categorized as backfill, portal closure, earthwork,
revegetation, feature-specific stormwater controls, and source
controls. These first two remaining categories were further linked to
the specific site feature being addressed: Open pit, underground mine,
waste rock, tailings facility, heap/dump leach, process ponds and
reservoirs, and slag piles. Since not all currently operating
facilities have all of these site features, this site-feature linkage
allowed EPA to identify costs for only the features present at a given
mine.
``Off-site disposal'' and ``Deconstruction/decontamination of
buildings'' were linked to engineering cost estimates categorized as
solid waste disposal, hazardous waste disposal, organic solution
removal, building decontamination, contaminated soils disposal, and
haulage and disposal. ``Surface water drainage'' was linked to drainage
controls. ``Water treatment (lime)'' and ``Water treatment (other)''
were linked to engineering cost estimates categorized as site and water
management, process fluid stabilization, neutralization, solution
disposal, reclamation of well-field and disposal wells, seepage
capture, and water treatment. Finally, ``Monitoring (all media and as
separate remedy)'' was linked to engineering cost estimates categorized
as groundwater and surface water monitoring, geotechnical stability
monitoring, erosion and vegetation monitoring, fish and wildlife
monitoring, and other short- and long-term monitoring.
While not specific to any remedy category, multiple remedies'
operations and maintenance activities were linked to the reclamation
and closure plan tasks of road maintenance, stormwater repairs,
revegetation repairs, reclamation of monitoring and pumpback wells,
well maintenance, evaporation pond maintenance, and stormwater,
erosion, and vegetation maintenance. Additionally, all remedies were
linked to reclamation and closure plan tasks necessary to conduct
direct engineering work including mobilization/demobilization,
engineering design/redesign, contingency, contractor profit and
overhead, contractor liability insurance, payment and performance
bonds, agency direct costs, and agency indirect costs. EPA solicits
comment on the accuracy of these linkages, and specific data or
examples that would indicate an alternative linkage should be made.
(bb) Response Component Data Collection
EPA sought through its engineering cost estimate data collection
effort to accumulate as much recent, high quality cost information for
currently-operating hardrock mining facilities as possible and
represent the range of states and commodities produced. EPA obtained
and sorted data from the Mining Safety and Health Administration (MSHA)
and the U.S. Geological Survey (USGS) to generate a combined list of
354 facilities. To derive this group of 354, EPA identified facilities
that would correspond to the scope of the proposed rule. Thus, EPA
excluded from the combined MSHA/USGS data set, those facilities that
were not identified in the 2009 Priority Notice,\173\ as well as closed
or abandoned facilities. Therefore, the data set consisted of active,
intermittent, or temporarily idled mining or mineral processing
facilities. Comprehensive lists of all data sources
[[Page 3463]]
are available in Appendices A through M of the Background Document.
---------------------------------------------------------------------------
\173\ See Identification of Priority Classes of Facilities for
Development of CERCLA Section 108(b) Financial Responsibility
Requirements, 74 FR 37213, July 28, 2009.
---------------------------------------------------------------------------
EPA obtained a sample of 63 facilities' reclamation and closure
plan engineering cost data. This 63 facility subset was representative
of the frequency of states and commodities identified in the full
universe of 354 potentially regulated mines. Thus, EPA expected it
would be representative of the larger group of facilities. This dataset
included costs as well as related inputs that drive these cost
components. For example, acreage is an input of the Standardized
Reclamation Cost Estimator model used to conduct several of the
collected engineering cost estimates. One of the highest-dollar
response categories, water treatment, also presented one of the
smallest cost sample sizes with only 15 facilities represented. As a
result, EPA supplemented the closure plan cost data on water treatment
costs with data from the three CERCLA sites contained in EPA's CERCLA
site data set, for which water treatment cost data were readily
available, and could be disaggregated from the sites' full costs. EPA
solicits comment on additional cost estimates, whether historical or
current, that would appropriately represent active hardrock mining
facilities. EPA solicits comment on data generally, and specifically
regarding industrial minerals, slag pile, in-situ leach, and water
flows. EPA solicits comment on expanding the water treatment variable
to capture additional facilities that would necessarily need more
advanced water treatment due to the nature of their leachate.
EPA subject-matter experts believed that other variables could
explain the differences between higher and lower costs at sites based
on their professional experience. First, these experts believed that
water-related factors such as distance to groundwater or surface water,
as well as net precipitation could influence the costs estimated for a
site. Second, these experts believed that the process methods used
could influence costs necessary for a site. These data are not included
in the reclamation plan data collected. Therefore, EPA located and
collected them from Environmental Impact Statements or other publicly
available documents.
Water-balance-related data that were available in these public
documents included precipitation, evaporation, distance to surface
water, and depth to groundwater. EPA solicits comment on the collection
of these water balance data. In particular, six of the hardrock mining
facilities in EPA's data set did not contain depth to groundwater data.
EPA solicits comments on depth to groundwater data for the six hardrock
mining facilities for which data were not collected. These facilities
are: Silver Bell (Arizona), Clear Creek (Colorado), Hibbing Taconite
(Minnesota), SCRAM (Minnesota), Standard (Nevada), and Trenton Canyon
(Nevada).
In addition to water-balance-related data, EPA collected data
related to process methods for the four leaching processes identified
at the 63 sites in EPA's data set. These process method data included
the use of floatation, cyanide, acid, and in-situ leaching processes.
EPA solicits comments on data characterizing the process methods for
these 63 sites as well as how EPA might analyze such data.
For more details about the data collected, see Section 4 of the
Background Document. EPA solicits comment on alternative uses of its
actual cost data from Section 2.2 of the background document. EPA
solicits comment on additional data points that may be more
appropriately apportioned to other site features. EPA solicits comments
on the use of a 62 percent upward adjustment based on Ernst & Young
(2015). The Agency also solicits comment on the proposal to use the
2013 Reclamation and Closure Plan document for Pinto Valley.
(cc) Response Component Regression Analysis
EPA performed statistical analysis on the engineering cost data
collected, for each response category. The purpose of this statistical
analysis was to establish a numerical relationship between a limited
number of a facility's site-specific characteristics and the resulting
associated reclamation and closure plan costs. Once this relationship
was established, it could be used to generate a sub-formula that
results in an expected financial responsibility amount for each
response category, on a nation-wide basis. To ensure the accuracy of
the regressions, EPA solicits comment on whether the reclamation and
closure plan data is accurately described in Appendix G of the Formula
Background Document. Specifically, EPA solicits comment on the accuracy
of the estimated cost figures, acres, and source control tags for the
thirteen response categories, as described in Appendix G.
A number of site-specific engineering-based models generated the
detailed engineering cost estimates collected by EPA. However, certain
parameters appeared to be central to the workings of those
calculations. For instance, capital costs appeared to be affected by
the relevant acreage that these costs were applied. While EPA did not
know the exact suite of variables that might be relevant for any
particular response category, some variables were much more likely to
be statistically significant based on the use of these variables in
reclamation and closure plan cost estimates. As a result, EPA chose to
conduct a bidirectional elimination stepwise regression that started
with variables believed to be most significant and test the addition or
deletion of individual variables. Further details on the regression
methodology, as well as the results of the regressions are available in
Section 5 of the Background Document.
These results generally confirmed the significance of the variables
EPA expected to be predictive. EPA performed an additional 88
robustness tests to demonstrate that the regressions selected by the
stepwise regression process were the best fit possible for the data.
EPA solicits comment on the appropriateness of the bidirectional
elimination stepwise regression used here as well as alternative
methods that may be appropriate and justifications for using those
methods. EPA also solicits comments generally on the steps and criteria
used in the stepwise regression process as applied. In particular, EPA
solicits comment on the retention of the source control variable in the
heap/dump leach regression (including additional data points that would
supplement the two source controls in the dataset) and on the addition
or removal of variables from the starting suite of variables when such
additions or removals were made. EPA solicits comment on influence
points Continental and Chino Mines for the Interim O&M regression, and
Phoenix Copper for Water Treatment regression.
Further, because the formula is trying to monetize potential future
CERCLA liability response costs, in the absence of an actual release/
response to monetize, a potential drawback of this approach of
predicting levels of financial responsibility could be that future
major incidents will not have sufficient assurance to cover the
necessary response costs, and that there could be an associated risk
that the rule will potentially require financial responsibility that
may never be required. EPA solicits comments on this potential drawback
to the chosen approach.
EPA also calculated overhead and oversight costs (OCs) as a percent
of direct engineering costs rather than through regressions on site-
specific characteristics. However, not every facility calculated or
reported every category of oversight costs. Thus, to avoid biasing any
of the oversight cost
[[Page 3464]]
estimates low, EPA calculated each oversight cost separately, and used
only data from facilities which had calculated that oversight cost. EPA
estimated each oversight cost category at each facility as a percent of
engineering costs. This was done by dividing the oversight cost in
question at a facility by that facility's total direct engineering
costs. Once all facility-specific oversight cost percentages were
calculated, EPA averaged these oversight cost percentages for each
category. EPA solicits comment on the approach of a fixed percentage of
direct engineering costs for estimating oversight costs.
(dd) Converting O&M Costs into a Net Present Value
Four of the response cost categories--interim O&M, water treatment,
short-term O&M, and long-term O&M--represent the expected costs for
activities over time. Thus, the regression equations for represent
annualized amounts. These annualized amounts must further be converted
into a single net present value, so that they can be included as part
of the final formula, which represents a facility's total financial
responsibility amount. EPA converted to net present value using the
same equation as that presented in U.S. EPA (2001).\174\
---------------------------------------------------------------------------
\174\ See U.S. EPA (Environmental Protection Agency). 2001.
Groundwater Pump and Treat Systems: Summary of Selected Cost and
Performance Information at Superfund-financed Sites. EPA 542-R-01-
021a. OSWER. Washington, DC 20460. December. Available at: https://www.epa.gov/superfund/cleanup/postconstruction/p1report.pdf.
---------------------------------------------------------------------------
EPA used an O&M period of ten years for converting both the short-
term O&M and interim O&M costs into a net present value. This period
has been discussed and used in guidance documents such as U.S. EPA and
USACE (2000).\175\ O&M after ten years could prove to be unnecessary,
or continue indefinitely. The cost estimation formula uses a perpetual
period of O&M for both water treatment and long-term O&M. EPA
considered using a period of thirty years similar to the default long-
term O&M period of thirty years historically used by EPA for purposes
of cost estimation in the absence of detailed estimates of project
duration (U.S. EPA, 1988).\176\ However, more recent guidance relies
less heavily on this default period and more heavily on the actual
project duration of each alternative considered in the RI/FS process
(U.S. EPA and USACE, 2000).
---------------------------------------------------------------------------
\175\ See U.S. EPA (Environmental Protection Agency) and USACE
(Army Corps of Engineers). 2000. A Guide to Developing and
Documenting Cost Estimates during the Feasibility Study. EPA 540-R-
00-002. OSWER. Washington, DC 20460. July. Available at:
www.epa.gov/superfund/policy/remedy/pdfs/finaldoc.pdf.
\176\ See U.S. EPA (Environmental Protection Agency). 1988.
Guidance for Conducting Remedial Investigations and Feasibility
Studies under CERCLA (Interim Final). EPA/540/G-89/004. OSWER.
Washington, DC 20460. October. Available at: www.epa.gov/superfund/policy/remedy/pdfs/540g-89004-s.pdf.
---------------------------------------------------------------------------
In addition, EPA's CERCLA data from hardrock mining facilities
indicates that perpetual O&M expenditures are common. Specifically, in
U.S. EPA (2004),\177\ EPA's Office of Inspector General collected
survey responses from regional experts regarding expected long-term O&M
durations at 156 hardrock mining facilities. The median response from
that survey was that long-term O&M at hardrock mining facilities would
continue into perpetuity. Therefore, the financial responsibility
formula uses a perpetual period of O&M for both water treatment and
long-term O&M. EPA solicits comment on the timeframes used in the net
present value conversion. Specifically, EPA solicits comment on whether
justifications of alternate timeframes exist for long-term O&M.
---------------------------------------------------------------------------
\177\ See U.S. EPA (Environmental Protection Agency). 2004.
Nationwide Identification of Hardrock Mining Sites. Report No. 2004-
P-00005. OIG. Washington, DC. 20460. March. Available at: https://www.epa.gov/sites/production/files/2015-12/documents/20040331-2004-p-00005.pdf.
---------------------------------------------------------------------------
Finally, annualized O&M costs are converted to a net present value
based on the ten-year short-term and perpetual long-term time horizons
seen in the CERCLA cost data using the rate of return of the Superfund.
Analysis of these real rates of return from the Superfund yielded a
geometric mean of 2.63 percent. This approach is also consistent with
recent EPA guidance on O&M cost estimation processes in the separate
context of CERCLA settlement agreements and unilateral orders (U.S.
EPA, 2015) \178\ which recommends using a discount rate representative
of real investment returns. EPA solicits comments on whether and how
future rates of return should be automatically used to update the 2.63
percent rate of return of the Superfund. The Agency also solicits
comments on the use of net present value of O&M.
---------------------------------------------------------------------------
\178\ See U.S. EPA (Environmental Protection Agency). 2015.
Guidance on Financial Assurance in Superfund Settlement Agreements
and Unilateral Administrative Orders. OECA. Washington, DC 20460.
April 6. Available at: https://www.epa.gov/sites/production/files/2015-04/documents/fa-guide-2015.pdf.
---------------------------------------------------------------------------
(ee) State-Specific Adjustment Factors
On average, the sub-total of overhead costs calculated by EPA was
found to be 35.78 percent of direct engineering costs. However, a
similar sub-total of oversight cost percentages was not estimated due
to the region-specific nature of agency indirect costs. To calculate
these percentages, region-specific indirect cost rates are multiplied
by the national average agency direct cost percentage to estimate the
agency indirect costs as a percentage of direct engineering costs.
Adding agency direct cost percentage to the region-specific indirect
cost percentages yields region-specific agency cost percentages. Total
non-construction costs are estimated by adding the 35.78 percent
overhead cost percentage sub-total to the region-specific total agency
cost percentages. Using this approach, EPA calculated ten region-
specific oversight cost percentages to be applied to the direct
engineering costs estimated in the formula response components. These
percentages can be found in Appendix II of the proposed rule.
Furthermore, the relationships estimated represent only a generic,
nationwide engineering cost of a CERCLA response because the response
category regressions were estimated using reclamation and closure plan
cost data that had been normalized to national values. While this was
necessary to perform regression analysis and develop a nationwide
formula, the same labor and materials can have different prices in
different locations. Hence, the resulting estimates described in
earlier sections would immediately be inaccurate for any given state.
To adjust for these locality differences in prices, the response
component of the formula is multiplied by the most current state cost
adjustment factors in USACE (2015).\179\ These adjustment factors can
be found in Appendix III of the proposed rule.
---------------------------------------------------------------------------
\179\ See U.S. Army Corps of Engineers, ``Civil Works
Construction Cost Index System,'' Manual No. 1110-2-1304 (31 March
2012, revised through September 30, 2015). Available at: https://www.publications.usace.army.mil/Portals/76/Publications/EngineerManuals/EM_1110-2-1304.pdf.
---------------------------------------------------------------------------
(ii) Natural Resource Damage Component
EPA collected data on both natural resource damages and natural
resource damage assessment costs at hardrock mining sites from CERCLA
court settlements and judgments, and voluntary payments. This effort
resulted in data on 64 sites. EPA's data indicate that natural resource
damages and response costs are not independent of each other. Instead,
response actions have regularly been shown to influence natural
resource damages. This is particularly true in the case of sites
receiving technical impracticability
[[Page 3465]]
waivers. When a technical impracticability waiver is issued, previously
projected response costs may be reduced. However, the remaining
contamination may lead to additional natural resource damages.
One example summarized in U.S. EPA (2012) \180\ is the technical
impracticability waiver at the Silver Bow Creek/Butte Area. At that
site, an EPA evaluation concluded that the water quality in an affected
alluvial aquifer could not be improved within a reasonable time frame
even assuming the most extensive and costly alternatives. Thus, EPA
issued a technical impracticability decision that waived cleanup levels
for several constituents in that aquifer. However, when such an aquifer
is left contaminated, trustees may seek natural resource damages for
that aquifer. In the case of the Silver Bow Creek/Butte Area, this same
groundwater appeared in the trustees' final restoration plan.\181\ So
while the technical impracticability waiver reduced response costs, it
increased the natural resource damages. Thus, while the proportion of
total liabilities relating to response costs and natural resource
damages was altered, the overall magnitude was similar.
---------------------------------------------------------------------------
\180\ See U.S. EPA (Environmental Protection Agency). 2012.
Summary of Technical Impracticability Waivers at National Priorities
List Sites. OSWER Directive 9230.2-24. August. Available at: https://nepis.epa.gov/Exe/ZyNET.exe/P100EYIC.TXT?ZyActionD=ZyDocument&Client=EPA&Index=2011+Thru+2015&Docs=&Query=&Time=&EndTime=&SearchMethod=1&TocRestrict=n&Toc=&TocEntry=&QField=&QFieldYear=&QFieldMonth=&QFieldDay=&IntQFieldOp=0&ExtQFieldOp=0&XmlQuery=&File=D%3A%5Czyfiles%5CIndex%20Data%5C11thru15%5CTxt%5C00000005%5CP100EYIC.txt&User=ANONYMOUS&Password=anonymous&SortMethod=h%7C-&MaximumDocuments=1&FuzzyDegree=0&ImageQuality=r75g8/r75g8/x150y150g16/i425&Display=hpfr&DefSeekPage=x&SearchBack=ZyActionL&Back=ZyActionS&BackDesc=Results%20page&MaximumPages=1&ZyEntry=1&SeekPage=x&ZyPURL.
\181\ See Butte Natural Resource Damage Restoration Council
(BNRC) and Montana Natural Resource Damage Program (NRDP). 2012.
Butte Area One: Final Restoration Plan. December. Available at:
https://dojmt.gov/wp-content/uploads/Final-BAO-Restoration-Plan.pdf.
---------------------------------------------------------------------------
EPA notes that although the extent of response actions ultimately
necessary as a result of a release may affect the relative portion of
how much natural resource damages may be in comparison with damages,
the total magnitude of potential liabilities (response costs and
natural resource damages combined) will increase or decrease together.
This is effectively captured by a multiplier. Thus, EPA uses a similar
approach here as to U.S. EPA (2014) \182\ where the Agency estimated
natural resource damages as a percent of cleanup costs where both
future cleanup costs and future natural resource damages were
uncertain. This average percent was used as a multiplier for the
purposes of estimating natural resource damages once potential future
response costs were estimated. As with that previous study, the natural
resource damages and response costs are uncertain, but EPA found that a
similar relationship between damages and costs was presented.
---------------------------------------------------------------------------
\182\ See U.S. EPA (Environmental Protection Agency). 2014.
Regulatory Impact Analysis (RIA) for EPA's 2015 Coal Combustion
Residuals (CCR) Final Rule. OSWER. Washington, DC. December.
Available at: www.regulations.gov Document ID#: EPA-HQ-RCRA-2009-
0640-12034.
---------------------------------------------------------------------------
Within this dataset, EPA had both natural resource damages and
total response costs from the response component data collection for 24
sites. From this subset of 24, EPA divided the average natural resource
damages by the average response costs to generate a hardrock mining-
specific natural resource damages multiplier. This resulted in average
natural resource damages and natural resource damage assessment costs
of 13.4 percent of the response costs to account for natural resource
damages and assessment costs. Thus, EPA included a multiplier of 1.134
in the financial responsibility formula for the natural resource damage
component. EPA solicits comment providing additional natural resource
data. The Agency also solicits comment on the appropriateness of a
fixed multiplier to estimate natural resource damages within the
hardrock mining class of facilities, particularly with respect to the
risk of magnifying any potential bias from the response cost formula.
EPA solicits comment on alternate approach such as the use of a
geometric mean or median instead of the mean for the multiplier
calculation. EPA solicits comment on the feasibility of running the
response component of the model for facilities which EPA has natural
resource damages data for an alternative method, if data is readily
available.
EPA is also considering an alternative approach. Under this
approach, EPA would use the median natural resource damages and natural
resource damage assessment costs of 3.8 percent of the response costs
to account for natural resource damages and assessment costs. Thus, EPA
would include a multiplier of 1.038 in the financial responsibility
formula for the natural resource damage component. EPA solicits comment
on whether the median or average NRD multiplier is more representative
for application to future hardrock mining facilities.
(iii) Health Assessment Component
Under 42 CFR 90.14, by the Agency for Toxic Substances and Disease
Registry (ATSDR) is required to maintain documentation pertaining to
the costs associated with all phases of a Public Health Assessment or a
Health Consultation (HA) performed by the Agency to form the basis for
cost recovery by EPA.\183\ Upon EPA's request, ATSDR provided cost
information for recently completed health assessments. ATSDR limited
the data provided to the minimum, maximum, and average costs of health
assessments conducted over the past 18 months (as of March 2016). ATSDR
did not provide hardrock mining-specific data, and thus non-mining
health assessment costs are included in this dataset.
---------------------------------------------------------------------------
\183\ See 42 CFR 90.14 Documentation and cost recovery: (a)
During all phases of ATSDR health assessments and health effects
studies, documentation shall be completed and maintained to form the
basis for cost recovery, as specified in Sec. 107 of CERCLA; (b)
Where appropriate, the information and reports compiled by ATSDR
pertaining to costs shall be forwarded to the appropriate EPA
regional office for cost recovery purposes.
---------------------------------------------------------------------------
Based on the information available to it, EPA adopted a fixed
amount of $550,000 representing the average health assessment cost
reported by ATSDR as the health assessment component of the proposed
formula. Health assessments often make use of EPA-collected data.
Because this approach avoids potentially costly data collection
activities, a relatively low amount of $550,000 is not unexpected for
an average cost. Furthermore, EPA expects future health assessments to
generally be consistent with this amount since ATSDR has experience
performing the same types of reports routinely. Finally, EPA notes that
this average health assessment cost reported by ATSDR is consistent
with additional second-hand sources of estimates that EPA presents in
Section 7 of the Background Document. EPA solicits comment on the
appropriateness of a fixed health assessment cost for all classes,
including data that would justify any alternate approaches suggested.
(c) Hardrock Mining Financial Responsibility Formula
EPA's proposed rule requires that a facility's financial
responsibility amount be adjusted for inflation to preserve the real
value of the financial responsibility. This inflation adjustment must
be made to the entire financial responsibility amount as calculated in
2014 dollars. The proposed rule uses an inflation
[[Page 3466]]
factor derived from the most recent Implicit Price Deflator for Gross
Domestic Product (GDP) published by the U.S. Department of Commerce in
its Survey of Current Business. The inflation factor is the result of
dividing the latest published annual Deflator by the Deflator for 2014.
EPA selected the Implicit Price Deflator for the GDP as that has become
the Department of Commerce's favored basis for the Implicit Price
Deflators a representation of national output. Furthermore, the data is
readily accessible from the Department of Commerce's Bureau of Economic
Analysis providing for transparent implementation.\184\ The Agency
solicits comment on the appropriateness of the Engineering News-Record
Construction Cost Index as an alternative inflation adjustment.
---------------------------------------------------------------------------
\184\ See Table 1.1.9, Implicit Price Deflators for Gross
Domestic Product. Available at: https://www.bea.gov/iTable/iTableHtml.cfm?reqid=9&step=3&isuri=1&903=13.
---------------------------------------------------------------------------
Additionally, in the absence of a site-specific remedial
investigation/feasibility study (RI/FS) or ROD, EPA cannot
categorically determine that source controls and water treatment
activities would not be necessary to minimize the volume, toxicity, or
mobility of hazardous substances. Therefore, as a conservative
assumption to help ensure the adequacy of the amount of financial
responsibility should source controls and water treatment prove
necessary, EPA assumes that both will be used, and sets the variables
corresponding to the activities equal to one for all hardrock mining
facilities calculating CERCLA Sec. 108(b) financial responsibility
amounts. EPA solicits comment on two alternatives to this approach that
could be used alone or in conjunction. In the first alternative, EPA
solicits comment on whether a weighted average of costs with and
without source controls or water treatment would be appropriate. The
weights for this average would be determined based on historical use of
these responses. EPA also solicits comment on whether a conservative
upper confidence interval such as the 95 percent confidence levels
presented in Appendix J of the background document would be appropriate
to avoid underestimating future financial responsibility needs.
Incorporating the net present value calculations and the
assumptions of source controls and water treatment into the regression
results, the response category equations for the response component
are:
(1) Solid and hazardous waste disposal category = $2,600,000 \185\
---------------------------------------------------------------------------
\185\ No variables were found to predict the variability in
solid and hazardous waste costs. Thus, an average cost was applied
as discussed in Section 5 of the Background Document.
---------------------------------------------------------------------------
(2) Open pit category =
5.07x10[supcaret](4.24+1.08xLog10[Open Pit Disturbed Acres])
(3) Underground mine category = $4,500,000 for an underground mine
with hydraulic head or $200,000 for an underground mine otherwise.
(4) Waste rock category =
1.85x10[supcaret](5.18+0.75xLog10[Waste Rock Disturbed
Acres])
(5) Heap/dump leach category =
2.29x10[supcaret](4.57+1.01xLog10[Heap and Dump Leach
Disturbed Acres])
(6) Tailings category =
1.71x10[supcaret](5.32+0.68xLog10[Tailings Disturbed Acres])
(7) Process pond and reservoir category =
1.64x10[supcaret](4.29+1.03xLog10[Process Pond and Reservoir
Disturbed Acres])
(8) Drainage category =
9.56x10[supcaret](3.42+0.57xLog10[Total Disturbed Acres+1])
(9) Slag pile category = $64,000x[Slag Pile Acres] \186\
---------------------------------------------------------------------------
\186\ Slag piles were represented by only one cost data point,
and therefore were included as a fixed cost of $64,000 per acre
based on that data point.
---------------------------------------------------------------------------
(10) Interim O&M category = {1.46x10[supcaret](6.04+0.01x[Net
Precipitation]+0.34xLog10[Heap and Dump Leach Disturbed
Acres+1]+0.10xLog10[Tailings Impoundment Disturbed
Acres+1]){time} x{1/0.0263{time} x{1-(1/[1.0263[supcaret]10]){time}
(11) Water treatment category =
{1.16x10[supcaret](3.22+1.10xLog10[Flow]+0.70x[In-Situ
Leach]){time} /0.0263
(12) Short-term O&M and monitoring category =
{1.82x10[supcaret](4.01+0.38xLog10[Total Disturbed
Acres+1]){time} x{1/0.0263{time} x{1-(1/[1.0263[supcaret]10]){time}
(13) Long-term O&M and monitoring category =
{1.64x10[supcaret](3.12+0.58xLog10[Total Disturbed
Acres+1]){time} /0.0263
Furthermore, the cost equation for water treatment requires the
input of gallon per minute flows that require treatment. However, as
discussed earlier, EPA calculates the potential costs associated with
the use of source control covers for many site features. Albright
(2015) \187\ provides results of EPA's Alternative Cover Assessment
Program (ACAP). These results indicate that such controls in place will
necessarily reduce the amounts of seepage that may require capture and
treatment prior to discharge. Thus, EPA expects that source controls
would have the effect of reducing the expected volumes of water
requiring treatment. The average infiltration for the ACAP data set was
five percent of precipitation. As a result of these considerations, EPA
has adopted the presumption of 95 percent effectiveness for source
control covers, resulting in a residual five percent infiltration based
on gross precipitation. EPA solicits comment on data demonstrating that
source controls reduce the costs of diversion and/or O&M other than
water treatment.
---------------------------------------------------------------------------
\187\ See Albright, William. 2015. Final Covers for Mine
Tailings. Desert Research Institute Clu-In Seminar. Available at:
https://clu-in.org/conf/tio/mining_052015/slides/Albright_Day_Two.pdf.
---------------------------------------------------------------------------
This results in flows being calculated as 0.05 x Precipitation x
[Total Disturbed Acres] x 0.05166 for all flows except for underground
mine flows and in-situ leach flows which are not assumed to receive the
same types of source controls evaluated in ACAP. The Agency solicits
comment on this approach for calculating the gallons per minute flow at
a facility. EPA also solicits comment providing data demonstrating that
source controls reduce the costs of diversion and/or O&M other than
water treatment. EPA solicits comment on the exercise of validating the
formula by running it for CERCLA sites that have incurred costs across
all site features.
For a hypothetical facility with a single site feature of each type
(e.g., a single heap leach), EPA shows the proposed financial
responsibility formula in Equation 1. EPA solicits comment on the
appropriateness of this draft formula developed in the formula-approach
to determine a reasonable amount for CERCLA Sec. 108(b) financial
responsibility.
[[Page 3467]]
[GRAPHIC] [TIFF OMITTED] TP11JA17.000
Where:
Deflatory = the most recent available GDP Implicit Price Deflator
for year y; and
Deflator 2014 = the GDP Implicit Price Deflator for 2014
i = the ith response category (e.g., water treatment costs);
n = the total number of relevant response categories;
r = EPA region r (e.g., EPA Region 3); and
s = state s (e.g., Montana).
(d) Inputs to the Financial Responsibility Formula
To implement the formula and calculate a financial responsibility
amount for the facility, the owner or operator will have to input
facility information. The Agency anticipates that the information
required by the formula will largely be existing information, and that
most facilities will not have to develop information to implement the
financial responsibility formula. EPA solicits comment on whether the
information required is largely existing at facilities.
The first piece of information required is acreage. For the site
feature-specific calculations, the acreage is the total of all areas
covered by the particular site feature. For example, a facility with
two waste piles would add the acreage of each together and input the
total acreage into the calculation. For site-wide calculations, such as
short-term O&M, the acreage entered would be the entire area covered by
the hardrock mine and/or mineral processor.
Several inputs to the formula are yes/no determinations. These
include the presence of a pressurized bulkhead, in-situ leaching, and
underground mines. If these are not present, the owner or operator
should enter a zero into the formula.
(e) Reductions to the Financial Responsibility Amount
The Agency is proposing under Sec. 320.63(c) to allow (but not
require) owners or operators to reduce the response cost component
under Sec. 320.63(b) by making an adequate demonstration that risk
reducing regulatory requirements are in place. Owners and operators
will have to demonstrate that they meet specific minimum standards for
various formula components, along with a general performance standard,
and other requirements. This approach is specifically designed to
account for reductions in risk at a facility that may result from
compliance with applicable Federal, state, tribal, and local
requirements. The Agency solicits comment on this approach.
In developing these proposed requirements, EPA sought to balance a
number of competing concerns. EPA desires to account for risk-reducing
effects of compliance with other programs, while acknowledging that
requirements for hardrock mining and mineral processing facilities, and
implementation of them, vary substantially across the country. The
CERCLA Sec. 108(b) proposed rules, however, are nationally applicable.
EPA was thus concerned that, should it allow an owner or operator to
invoke other requirements as justification for reducing the amount
otherwise required by the formula, it should do so only to the extent
that reductions can confidently be tied to reductions in risk in a
nationally-applicable rule. Similarly, in order for EPA to allow an
owner or operator to reduce the amount of financial responsibility that
it must obtain under CERCLA Sec. 108(b) based on its compliance with
non-CERCLA regulatory requirements imposing future risk-reducing
controls, EPA must be confident that those non-CERCLA requirements will
have their intended risk-reducing effects, by ensuring the controls
will be implemented when necessary. Lastly, as discussed earlier, EPA
has sought to develop an effective, nationally-applicable formula that
can be readily applied by the regulated community and overseen by EPA.
EPA is accordingly proposing to allow for simple, all-or-nothing
reductions for the formula sub-components, when they can be justified.
In sum, therefore, this proposed rule allows an owner or operator to
rely on other regulatory controls in order to obtain reductions in the
amount of CERCLA financial assurance it must obtain, but includes
several conditions that must first be met by the owner or operator. EPA
intends for this approach to allow for a more tailored amount of
financial responsibility under the nationally-applicable formula, while
still providing assurance that the resultant amount is consistent with
the level of risk.
First, the reductions incorporate a general performance standard in
paragraph 326.63(c). In order to qualify for a reduction, the owners
and operators must be prepared to demonstrate to EPA that any
requirements relied upon under paragraph 320.63(d) also meet the
general standard, that the engineering requirements will result in a
minimum degree and duration of risk associated with the production,
transportation, treatment, storage, or disposal, as applicable, of all
hazardous substances present at that site feature. This general
requirement will provide a benchmark against which the controls can be
measured. In addition, this provision is intended to reflect that if
the general performance standard is met, the proposed approach allows
for a complete reduction from the financial responsibility formula
component. Where the requirements do not result in a minimum level of
risk, EPA cannot be confident that a complete reduction for that cost
component is warranted.
Next, EPA is proposing to require that any of the requirements
relied upon be enforceable against the owner or operator claiming the
reduction, that they have in place adequate financial responsibility to
assure that the requirements will be implemented, and that they certify
that the facility is in compliance with the requirements. These
conditions are intended to ensure that the underlying controls that
form the basis of the risk reduction are highly likely to occur and
thereby achieve their intended risk-reducing effect.
Third, EPA is proposing to require that the owner or operator
certify that the facility is in compliance with the requirements relied
upon in claiming a reduction to the facility's financial responsibility
amount. This condition is intended to ensure that the controls
[[Page 3468]]
upon which the reduction is based are, in fact, currently implemented
at the facility.
Fourth, the proposed rule also includes a general requirement that
the owner and operator provide the information necessary for EPA to
evaluate the claimed reductions. Specifically, Sec. 320.63(c)(2)
provides that information submitted must provide sufficient and
detailed supporting information adequate to allow EPA to evaluate the
adequacy of the financial assurance and of the underlying requirements
for meeting the reduction.
Finally, EPA is proposing specific minimum standards for the
various categories of reductions.\188\ These are specified in Sec.
320.63(d)(3). This portion of the proposed rule provides the criteria
that owners or operators must meet for particular reductions. The
performance standards in paragraph (c) describe objectives for reducing
risk at facilities and include future engineering controls and
practices that reduce the risk associated with the hazardous substances
at the site. That paragraph provides reduction criteria for each
component of the maximum financial responsibility formula--capital
costs, interim O&M, short-term O&M, long-term O&M, water treatment,
hazardous materials management, and surface water drainage. For capital
costs, the paragraph provides reductions for each site-feature
category--open pits, underground mines, waste rock, heap and dump
leach, tailings impoundments and stacks, process ponds and reservoirs,
and slag piles. Owners and operators that meet the criteria for a
formula component reduction would not have to calculate financial
responsibility for that component. Because the natural resource damage
component is calculated by a multiplier, this component would produce a
correspondingly smaller amount, as the reductions are claimed.
---------------------------------------------------------------------------
\188\ See U.S. EPA, Office of Land and Emergency Management,
Reductions Technical Support Document: Financial Responsibility
Requirements under CERCLA Sec. 108(b) for Classes of Facilities in
the Hardrock Mining Industry Proposed Rule, November 30, 2016 for
discussion of the development of the reduction criteria.
---------------------------------------------------------------------------
EPA solicits comment on the proposed reductions to the financial
responsibility amount. EPA solicits comment specifically on whether the
Agency has identified the appropriate criteria for the reductions, and
whether the reduction criteria will provide incentives for owners or
operators to implement more protective practices at their facilities to
lower their financial responsibility amounts. EPA solicits comment on
whether the criteria for the reductions are described in sufficient
detail to allow for effective implementation and, if not, how they
might be modified. EPA solicits comment on whether the reduction
criteria are likely to be complied with and/or enforced such that, at
the applicable time, risk at the facility will, in fact, be reduced.
EPA solicits comment on whether alternate or more flexible
engineering standards can substitute for some or all of the numeric
engineering standards in the proposed reduction criteria (e.g. planning
for a 200-year storm event, reduction of net precipitation by 95
percent). In addition, EPA requests comment on whether the proposed
reduction criteria would limit flexibility necessary for innovative or
different site-specific approaches and, if so, how those might be
preserved under the proposed rule. EPA also invites comment on a
possible role for third-party certifiers or other regulatory
authorities in identifying alternative, protective site-specific
controls as a basis for financial responsibility reductions. EPA also
requests comment on whether other regulatory programs already impose
the requirements that would satisfy the reduction criteria. Finally,
EPA solicits comment on allowing reductions to the financial
responsibility amount for other risk-reducing practices and/or controls
(e.g., voluntary practices) that are implemented at hardrock mining
facilities that should be accounted for in the reductions, and on how,
if reductions were allowed for such practices and/or controls, EPA
could assure that those controls would remain in place and be effective
over time where there is no regulatory program overseeing their
maintenance and operation.
As discussed above, EPA is seeking to develop reduction criteria
standards that are appropriate in the context of a nationally
applicable rule. The Agency requests comment on whether any particular
reduction criteria in paragraph 320.63(c) might be inappropriate under
particular facility conditions that could still be defined in the
context of a national rule. Specifically, EPA requests that commenters
identify particular facility conditions where a nationally applicable
standard different from the reduction criteria proposed should be
applied. EPA requests that commenters identify both those alternative
facility conditions and any appropriate reduction criteria with
particularity. EPA is particularly interested in objective criteria
that define facility conditions that could be verified by a certified
professional.
Program Deferral Approach
As described above, EPA is proposing to allow reductions to the
financial responsibility amount for the response component of the
financial responsibility formula. Those reductions are based on
criteria established in the rule for each of the thirteen response
categories that together determine the response component amount. EPA
is proposing that eligibility for the reductions be determined by
owners and operators on a site-specific basis, subject to EPA review.
EPA has also considered whether reductions to the financial
responsibility amount could be made by EPA, on a broader basis, to
avoid expenditure of facility resources to determine eligibility for
reductions, and reduce the burden on EPA to review each facility's
claimed reductions individually. EPA is therefore also soliciting
comment on whether the rule should also allow for EPA to conduct a
programmatic review of other regulatory requirements and their
implementation, with the objective of determining whether the reduction
criteria are met across the program in question. Such a program
deferral approach would provide for programmatic-based reductions in
situations where the program meets the requirements for deferral of
CERCLA Sec. 108(b) requirements for the full response component of the
financial responsibility formula--that is, for all facilities and all
response categories.
Under this approach, owners and operators of facilities would not
be required to comply with the requirements to calculate a financial
responsibility amount and to obtain a financial responsibility
instrument under EPA's CERCLA 108(b) regulations after EPA determines
that a state or federal program meets certain criteria. The remainder
of the requirements of Part 320 would remain applicable at the facility
(e.g., notification to EPA, public notice requirements). Facilities
would remain subject to these other requirements in order for EPA to
monitor the regulated universe and ensure the continuing validity of
any deferral determination. EPA would be able to withdraw its
determination and impose all CERCLA Sec. 108(b) requirements if the
requirements for deferral are no longer met.
The criteria for deferral would be designed to assure that EPA
would be able to make a program-wide determination that facilities
regulated
[[Page 3469]]
by a particular program would be subject to, and in compliance with,
requirements that will result in a minimum degree and duration of risk
associated with the production, transportation, treatment, storage, or
disposal of all hazardous substances present. This would involve EPA
making a determination that: (1) The federal or state program has
authority to impose all of the requirements necessary for the
reductions described in proposed 320.63(d); (2) the program would
impose those requirements on the same regulated universe subject to the
proposed rule; (3) the program ensures that each facility obtains
adequate financial assurance to ensure the other requirements will be
implemented; and (4) the requirements will be enforced to assure
compliance.
EPA recognizes potential advantages to this approach. First,
deferral of these requirements would minimize the implementation of the
CERCLA Sec. 108(b) rule at facilities that are already subject to
programmatic requirements that, if implemented and enforced, can be
determined to result in a minimum level of risk, thereby focusing
implementation resources on the remaining universe of facilities with
less protective practices. This approach would also reduce costs for
owners and operators subject to programs that qualify for deferral of
CERCLA Sec. 108(b) requirements, as they would not have to submit
information to support the calculation of a financial responsibility
amount, or the reductions to that amount. Finally, providing for
deferral provides an incentive for programs to adopt the necessary
requirements to comply with the reduction criteria.
At the same time, EPA recognizes several disadvantages to the
programmatic deferral approach. First, EPA is concerned that it may be
difficult for the Agency to ensure that facilities remain in compliance
with the underlying requirements, and thus ensure that the facilities
continue to present a minimum degree and duration of risk over time.
Potential problems could include the necessity for EPA to monitor
changes to permitting regimes and substantive technical requirements.
EPA is also concerned about how it could ensure that the financial
assurance actually provided by every facility under a given regulatory
regime is sufficient to ensure that the reduction criteria would be met
in practice. Without such an assurance, EPA may find it difficult to
conclude that the regulatory program requirements relied upon for the
deferral determination will result in minimum risk. This concern is
presented particularly where the determination of the amount of
financial assurance is subject to the discretion of the regulator,
instead of being identified with particularity in the terms of the
regulations. In this case, EPA is unsure how it could make a broad-
based determination that financial assurance requirements will be
sufficient, if they have potential for varying stringency in practice.
Finally, EPA is concerned that as a practical matter it may be
difficult for the Agency to withdraw a programmatic deferral once
granted, even where there is evidence that the criteria for
programmatic deferral are no longer met. Thus, EPA expects that any
deferral option would necessitate an oversight mechanism short of full
withdrawal. EPA also expects that a dispute resolution process to
resolve differences that arise among implementers would be an important
component of a programmatic deferral approach.
It should be noted, however, that in taking this approach, EPA
would not expect to review Federal and state closure and reclamation
programs for adequacy, or to judge the quality or efficacy of those
programs. EPA's concern would be whether requirements meeting the
reduction criteria, designed for purposes of CERCLA Sec. 108(b), are
imposed and enforced at facilities, and secured with financial
assurance adequate to assure their implementation. Those questions are
separate from the question of whether the Federal or state closure
program is adequate for its intended purpose or whether the financial
assurance required is adequate financial responsibility for the purpose
of that program.
EPA solicits comment on the programmatic deferral approach. EPA
particularly solicits comment on whether regulators would be interested
in seeking an EPA determination of programmatic deferral, whether
existing programs would qualify for programmatic deferral based on the
proposed reduction criteria, whether commenters believe EPA could
assure compliance with the proposed reduction criteria if a
programmatic deferral was implemented, how a conflict resolution
process might be developed and implemented, and how a programmatic
deferral approach might be improved.
Partial Program Deferral Approach
EPA also solicits comment on whether to consider partial deferral
from the response component of the formula where a federal or state
program met the criteria for deferral for some but not all of the
thirteen response categories. This would result in a requirement to
calculate a financial responsibility amount and to obtain a CERCLA
Sec. 108(b) instrument, for a lower overall amount. This would not,
however, otherwise change the operation of the rule in practice. As was
discussed in section IV.D of this preamble, because the formula employs
an aggregation of individual costs to obtain an overall amount for the
facility, the individual cost components are not themselves intended to
represent any sub-limits within the actual financial responsibility
instrument--in other words, the total amount of funds would be
available for any future Superfund action anywhere across the facility,
and would not be tied to particular site features. This would remain
the case in any partial deferral approach. For example, a program might
include requirements that would satisfy the reduction criteria for the
waste pile response category but not for the open pit category. In that
situation, under this approach, owners or operators would not have to
calculate an amount for waste pile areas at their facilities, or make
the demonstrations necessary to qualify for reductions to that amount.
Those facilities would still have to calculate a financial
responsibility amount for open pit areas at their facilities, and any
other portions of the formula not subject to an EPA partial deferral
determination. The total amount of funds would be available for any
future Superfund action
EPA sees a potential advantage to the regulated community from such
an approach, because of the timing requirements of the statute. As was
discussed in section VI.D.2 of this preamble, CERCLA Sec. 108(b)(3)
includes a statutory phasing provision that requires financial
responsibility requirements to be imposed as quickly as can reasonably
be achieved but in no event more than four years after the date of
promulgation of the final rule. Thus, EPA has included provisions in
the proposed rule reflecting this provision (Sec. 320.61). Owners and
operators will need to comply with the requirement to calculate a
financial responsibility amount and obtain a CERCLA Sec. 108(b)
instrument in accordance with the phase-in provisions of the proposed
rule, until EPA makes a final determination on deferral. EPA's ability
to make any deferral decisions (partial or complete) quickly, may in
turn depend upon the actions of another regulator to make changes to
its regulations, and/or the resources available to the Agency to
undertake the necessary reviews. A partial program
[[Page 3470]]
deferral approach, even if adopted on a temporary basis, may allow EPA
to make more rapid determinations on deferral requests, while federal
and state mining programs make any necessary modifications to qualify
for programmatic deferral. On the other hand, a partial deferral
approach may increase the burden on EPA to undertake multiple reviews
of many different programs.
EPA solicits comment on this approach. EPA requests comment on any
drawbacks to allowing for partial deferral and, if the Agency were to
adopt this approach, whether this approach should be a long-term
component of the CERCLA Sec. 108(b) requirements, or whether it should
be a temporary mechanism to allow time for program modifications
necessary to comply with the reduction criteria.
Partial Reductions Within Formula Sub-Components
Finally, EPA is also soliciting comment on whether partial
reductions should be allowed within the formula sub-components, and how
partial reductions might be structured. As was explained above, EPA is
proposing to allow for all-or-nothing reductions when all reduction
criteria are met, and when the general performance standard (and other
requirements) are met. As also explained above, one key consideration
is how to ensure that the reductions can confidently be tied to
reductions in risk in a nationally-applicable rule. Accordingly, EPA
does not expect that allowing partial reductions for a response
category amount based on partial compliance with the reduction criteria
would be appropriate, as the reduction criteria are not intended to
reflect proportional reductions in risk--rather, EPA's intent is to
establish a combined system of requirements that together, would result
in a set of conditions that result in a minimum degree and duration of
risk. Nonetheless, EPA solicits comment on whether partial reductions
should be allowed for response categories. EPA requests information
regarding how the amount of a partial reduction could be determined,
and the basis upon which EPA could apportion the reduction in risk
among the reduction criteria to assign a corresponding decrease in the
financial responsibility, while still providing assurance that the
resultant financial responsibility amount will be consistent with the
level of risk.
5. Information Submission and Recordkeeping Requirements (Sec. 320.64)
Owners or operators are required under Sec. 320.66 to submit
information to support the calculation of financial responsibility at
their facility, and to maintain that information for a period of three
years. The information submitted must be in sufficient detail to enable
EPA to review the cost estimate and determine its adequacy.
The Agency anticipates that the type of information can be found in
existing documents such as the owners or operator's plan of operations,
reclamation and/or closure plans, and permits. EPA solicits comment on
these reporting and recordkeeping requirements.
6. Third-party Certification (Sec. 320.65)
EPA is proposing that elements of the calculation of the financial
responsibility amount submitted to EPA be certified by an independent
qualified professional engineer. EPA believes that this requirement
would improve the accuracy of submissions, and would thereby facilitate
implementation of the rule by requiring less review by EPA of financial
responsibility amount submissions.
The requirements to determine a financial responsibility amount
that are proposed in Sec. 320.63 include a formula in Sec. 320.63(b)
and criteria for reducing the financial responsibility amount in Sec.
320.63(c). EPA solicits comment on the use of professional
certifications in the implementation of those requirements. EPA is
particularly interested in which elements of the formula would be best
suited to certification by an independent professional engineer, what
other independent professional certifications might be appropriate, and
whether independent professional certifications are beneficial.
Proposed Sec. 320.65 includes the requirement that the qualified
professional engineer that certifies the financial responsibility
amount be ``independent.'' EPA is considering whether the requirement
for independence would help strengthen the certifications under this
proposal, and whether that extra level of protection is necessary in
this rule where EPA is not the permitting authority and will therefore
have less familiarity with the facility than it would in other
circumstances (e.g., RCRA closure requirements under 40 CFR part 264
and Part 265). EPA solicits comment on the proposed requirement for
independence of the qualified professional engineer, on whether a
requirement that a qualified professional engineer be independent would
strengthen the certification requirement, and on whether such a
requirement is appropriate under this proposed rule. EPA wants to
ensure that the definition of ``independent'' contribute to the
objectivity of the certifier. Thus, EPA solicits comment on criteria to
define ``independent,'' including criteria related to personal,
professional, and economic relationships between the owner or operator
and the certifier.
Finally, EPA solicits comment on whether certification by other
professionals other than professional engineers could be incorporated
into this proposed rule to facilitate implementation. For example, EPA
has heard from states that they are using third parties to review site
features, bonding requirements, and financial documents. EPA request
comment on the experience of implementers and the regulated community
on the use of professional certifications in regulatory programs,
including the benefits and disadvantages of such an approach.
7. Continued Risk at Hardrock Mining Facilities
Since issuing the 2009 Priority Notice, EPA has continued to gather
data and information on hardrock mines, practices, and risks associated
with classes of facilities within the industry. EPA's review of
available data indicates abundant evidence that hardrock mining
facilities continue to pose risks associated with the management of
hazardous substances at their sites. EPA reached this determination
after further identifying and analyzing various sources of data,
including: (1) CERCLA site data to better understand the types and
sources of releases that occurred at National Priority List (NPL) and
NPL-equivalent cleanups, (2) Toxics Release Inventory (TRI) and
Resource Conservation and Recovery Act (RCRA) Hazardous Waste Biennial
Report (BR) data to determine which facilities reported CERCLA
hazardous substances/hazardous wastes, (3) Emergency Response
Notification System (ERNS) to learn about the types and causes of
releases reported, and (4) numerous existing reports that evaluated
releases that occurred at hardrock mining and processing
facilities.\189\ Each of these are further discussed later in this
preamble.
---------------------------------------------------------------------------
\189\ These databases are all available on the EPA Web site--
www.epa.gov.
---------------------------------------------------------------------------
In developing this proposed rule, EPA also documented examples of
releases and threatened releases of hazardous substances from recent
and current mining operations. The documents developed by EPA can be
found in the docket for this rulemaking, and are discussed below.
[[Page 3471]]
a. Releases from Mining and Mineral Processing Facilities \190\
---------------------------------------------------------------------------
\190\ See U.S. EPA, Office of Land and Emergency Management,
Memorandum to the Record: Releases from Hardrock Mining Facilities,
November 2016.
---------------------------------------------------------------------------
This document discusses sources of releases at approximately thirty
recently or currently operating mines and mineral processing facilities
that had no previous significant legacy mining issues. These releases
to the environment from mining and mineral processing activities,
including tailings impoundments, waste rock piles, open pits, and leach
pads were subsequently mitigated using CERCLA or CERCLA like actions
under Federal and/or state statutory authority. Mines that have
predicted future discharges to the environment and have proposed either
preventative actions or CERCLA like mitigations also are discussed.
Examples of releases at currently operating facilities discussed in
this document include:
Smoky Canyon Mine/Pole Canyon Overburden Disposal Area (ODA): At
the Smoky Canyon Mine in Idaho, phosphate ore is extracted from a
series of open pits, located on the eastern slope of the Webster Range
between Smoky Canyon and South Fork Sage Creek. To extract the ore, JR
Simplot removes and disposes the overburden nearby; the Pole Canyon
Overburden Disposal Area (ODA). The Pole Canyon ODA is an external
disposal area that covers approximately 120 acres. Downstream of the
ODA, selenium concentrations in groundwater and surface water emanating
from the toe of the ODA exceed risk-based screening-level benchmarks
for human receptors (surface water and groundwater) and ecological
receptors (surface water). Removal and remedial actions are currently
ongoing at the site.
Buckhorn Mine: The Buckhorn gold mine owned by Kinross Corp.
located in Washington has been in operation since 2007. The site is an
underground mine that includes waste rock. Water management during
spring snow melt has been a well-documented problem at the mine. In
2011 and 2012, the Buckhorn Mountain mine's groundwater capture zone
failed to contain spring rains and snow melt, resulting in contaminated
water reaching Gold Bowl Creek. Water generated in the underground mine
can carry high concentrations of heavy metals such as copper, lead and
zinc that must be captured and processed before being discharged at
approved outfalls. Violations in 2011 include allowing water discharges
causing slope instability and erosion, and for discharging water at an
unauthorized point. The mine is required to capture contaminated
groundwater from around mine excavations and tunnels and under surface
stockpiles, and pump it to a treatment plant. Since operations began at
the mine in 2007, the Washington Dept of Ecology has issued $62,000 in
penalties, six notices of violation and six administrative orders
directing the company to control stormwater, rectify groundwater
capture zone inadequacies, prevent slope failures, and comply with
permit limits for nitrates, sulfate, acidity, copper, lead, zinc and
solids from stormwater ponds.
Florida Canyon Mine: The Florida Canyon gold and silver open pit
mine with cyanide heap leach operation, located in Nevada, has been in
operation since 1986. A groundwater plume consisting of weak acid
dissociable (WAD) cyanide, mercury and nitrate was identified on the
west side of the mine's leach pad and appeared to be related to process
solution leakage. As a result of continued contamination of groundwater
the Nevada Division of Environmental Protection (NDEP) issued a Finding
of Alleged Violation and Order in August 2012. BLM also placed the mine
in non-compliance in August 2012. The facility has identified and
mitigated groundwater contaminant sources, as well as operated and
optimized the groundwater plume pump-back system and evaluates on a
quarterly basis to verify that the plume migration has been halted, and
that groundwater cleanup is occurring.
Jerritt Canyon: The Jerritt Canyon mine located in Nevada has been
in operation since 1981. The gold and silver mine is an open pit and
underground cyanide vat leach operation that also processes refractory
ores using both roasting and chlorination processes. Seepage from the
Tailings Storage Facility 1 (TSF-1) was detected in the alluvium in
1987. In an effort to address the seepage issue nine trench drains were
constructed along the embankment toes in 1988 to intercept and collect
seepage from the impoundment. As of January 2015, a ring of ninety
monitoring wells surrounded TSF-1, of which 76 are operational. The
facility is required to operate, maintain and monitor the Seepage
Remediation System at all times to ensure the capture of affected
groundwater, to preclude further migration, and to ensure contraction
of the overall extent of the TSF-1 seepage groundwater contaminant
plume. Contamination from TSF-1 leakage has degraded groundwater in the
immediate vicinity, including in some cases with antimony, arsenic,
cadmium, magnesium, manganese, mercury, selenium, and WAD cyanide.
Authorization by NDEP to impound tailings slurry into another tailings
storage facility (TSF-2) was granted in July 2013 and almost
immediately, the 150 gpd permitted leak detection rate was exceeded.
The facility believed that the specific cause of the exceedance was
unknown but it was assumed to be puncture(s) in the primary liner
system and/or residual meteoric waters that entered the system during
liner repairs before operation began. After several unsuccessful
attempts at addressing the leakage, the facility opted to manage TSF-2
as a single-lined facility and agreed to install vadose zone wells
outside the periphery of TSF-2.
b. Overview of Practices at Hardrock Mining and Mineral Processing
Facilities and Related Releases \191\
---------------------------------------------------------------------------
\191\ See U.S. Environmental Protection Agency, Draft
Comprehensive Report: An Overview of Practices at Hardrock Mining
and Mineral Processing Facilities and Related Releases of CERCLA
Hazardous Substances, November 2016.
---------------------------------------------------------------------------
EPA also gathered information on current mining and mineral
processing practices to better understand the extent to which present
day practices might have changed, determine whether currently operating
hardrock mining and processing facilities continue to release CERCLA
hazardous substances, and evaluate the present and future concerns
regarding these releases. Initial research efforts focused on
characterizing practices within each commodity sector. However,
hardrock mining encompasses multiple commodities that represent a broad
range of activities and marketable products. Through initial research
and consultation with mining experts, EPA concluded that, for the most
part, many of the mining, mineral processing, and waste management
practices that are in widespread use within the current U.S. hardrock
mining industry have a common thread regardless of the commodity. EPA
therefore concluded that rather than evaluate releases on a commodity
by commodity basis, a better approach was to focus on commonly employed
practices and, when necessary, also evaluate commodity-specific issues
and processes. EPA thus identified the following thirteen hardrock
mining, mineral processing, and associated waste management practices
for detailed evaluation: (1) Surface and underground mining; (2) non-
entry (in-situ leaching or solution) mining; (3) physical, gravity, and
magnetic processing; (4) flotation; (5)
[[Page 3472]]
cyanidation; (6) acid leach, solvent extraction, and electrowinning;
(7) pyrometallurgical processes; (8) Bayer process for refining
alumina; (9) ion exchange in uranium and phosphoric acid processing;
(10) mine-influenced water; (11) waste rock piles; (12) tailings
management; and (13) mining processes leaks and spills.
For each practice, EPA gathered information including literature
reviews of technical references, academic sources, and government
publications. EPA also consulted with United States Geological Survey
(USGS) staff and mining experts. EPA focused this research and
discussions on the following topics for each practice listed earlier:
(1) Historical and current use, (2) technical description, (3)
potential sources and releases of CERCLA hazardous substances and
management practices to address those potential sources and releases,
and (4) documented releases at historical sites and currently operating
facilities.192 193 194 195
---------------------------------------------------------------------------
\192\ See U.S. Environmental Protection Agency Region 10, EPA
and Hardrock Mining: A Source Book for Industry in the Northwest and
Alaska (Washington, DC: U.S. Government Publishing Office, 2003).
\193\ See U.S. Environmental Protection Agency, Damage Cases and
Environmental Releases from Mines and Mineral Processing Sites,
March, 2007.
\194\ See Mining Sites on Superfund's National Priorities List--
Past and Current Mining Practices, Van E. Housman and Stephen
Hoffman, U.S. Environmental Protection Agency, Washington, D.C.,
Published in: Proceedings, Chapter 6, Risk Assessment/Management
Issues in the Environmental Planning of Mines, Society for Mining,
Metallurgy and Exploration (SME) (September 1992), Proceedings,
Second International Conference on Environmental Issues and
Management of Waste in Energy and Mineral Production, University of
Calgary (1992).
\195\ See U.S. EPA, Office of Land and Emergency Management,
Memorandum to the Record: Releases from Hardrock Mining Facilities,
November 2016.
---------------------------------------------------------------------------
EPA developed a profile of historical and contemporary practices
and the environmental releases of CERCLA hazardous substances
associated with each practice. Information about historical sites was
gathered largely from Record of Decision (ROD) and Remedial
Investigation/Feasibility Study (RI/FS) documents. Information about
currently operating sites came from various EPA databases, Emergency
Response Notification System (ERNS) incident notifications, Mine Safety
and Health Administration (MSHA) records, Federal and state permit
documents, and general research.
EPA selected a sample of the 102 historical CERCLA sites (including
both NPL and non-NPL sites at which removal actions occurred),
involving hardrock mining and primary mineral processing sites, for
additional data collection to characterize the practices and releases
of hazardous substances. Some findings of the study follow.
Underground and surface mining create large amounts of excavated
material, with surface mining tending to generate greater amounts of
waste rock. Large-scale surface (open-pit) mining techniques generally
create a greater surface impact than underground or non-entry (e.g., in
situ leaching) mining methods. Surface mines generate dust, large piles
of waste rock, and large, usually permanent holes in the earth's
surface. The corresponding amount of waste rock and tailings being
mined and deposited is increasing as a result of large-scale mining
operations. The scale of these mining operations poses formidable
obstacles to effectively and efficiently addressing releases. Such
large scale mining operations cause a significant increase in exposure
of ore constituents to precipitation, resulting in the leaching of
hazardous substances to ground and surface waters, and to the wind,
resulting in air emissions. The Rio Tinto Kennecott Bingham Canyon
site, an open-pit copper, gold, silver, and molybdenum mine located
near Salt Lake City, Utah provides an example of the problems posed by
such large scale mining operations. As part of its operations,
Kennecott had deposited waste rock on the slopes of the nearby Oquirrh
Mountains. The waste rock dumps leached metals-rich acidic water first
through an unlined reservoir and then into a groundwater plume that
extended 72 square miles. The State of Utah took legal action against
Kennecott as a result of the contamination in 1986; as a result of a
consent decree reached in 2007, Kennecott agreed to treat the
contaminated groundwater for the next forty years.\196\
---------------------------------------------------------------------------
\196\ See Earthworks Factsheet: Problems with Bingham Canyon
Mine, Earthworks, published 2011. Accessed December 29, 2015, at:
https://www.earthworksaction.org/files/publications/FS_Problems_BinghamCanyon_2011_low.pdf; and U.S. EPA Region 8 and
Utah Department of Environmental Quality, Five-Year Review Report:
Kennecott North Zone Superfund Site, Salt Lake County and Tooele
County, Utah (Washington, DC: U.S. Government Printing Office,
2014).
---------------------------------------------------------------------------
Similar to practices at some mines that became NPL sites, mining is
currently performed in open pits and underground mines, both of which
may discharge acidic waters, referred to as acid mine drainage that can
result when stormwater, surface water or ground water comes in contact
with sulfur bearing minerals, creating acidic water which dissolves and
leaches toxic metals into the environment. The Formosa Mine, a former
copper, zinc and thorium mine in southwest Oregon, provides an example
of the risk posed by releases from underground mines. In this case,
storm water-driven contaminant releases from the mine have led to an
annual discharge of approximately five million gallons of acid rock
drainage, containing up to 30,000 pounds of dissolved copper and zinc,
along with other metals. One of the primary sources of these metals is
underground mine workings; low pH shallow ground water and adit
drainage to surface water, both laden with high concentrations of
metals. According to the State of Oregon, the mine has contaminated 18
miles of the Oregon's Umpqua watershed (Middle Creek and South Fork of
Middle Creek and Cow Creek)--eliminating prime habitat for the
threatened Oregon coast Coho salmon and steelhead.\197\
---------------------------------------------------------------------------
\197\ Also see: Earthworks, Modern Mining Needs a Modern Mining
Law. Available at: https://www.earthworksaction.org/library/detail/modern_mining#.V-QlSk37VD8.
---------------------------------------------------------------------------
Dust and waste rock, produced during both open-pit and underground
mining, can release trace elements and other toxic substances. Waste
rock and overburden piles are typically stored on-site and remain an
important consideration for the environmental performance of currently
operating mines. Disposal typically involves depositing the waste rock
in dedicated dumps or piles, or in some cases using it as mine
backfill. Waste rock can also be co-disposed with filtered tailings, or
in a slurry pond. Further, releases from waste rock disposals can arise
years after operations have ceased, through discharges of mine
influenced water, and pile deformation or collapse. Thus, waste rock
disposals are often the focus of reclamation and closure plans and
require consistent and long-term maintenance, monitoring, and
potentially treatment.
As with acid mine drainage, other mine influenced water can also be
of concern. Mine influenced water encompasses any water whose chemical
composition has been affected by mining or mineral processing. This
includes not only acid mine drainage but also drainage that is neutral
or alkaline. In addition to environmental concerns posed by acidity or
alkalinity, mine influenced water often contains elevated
concentrations of mobilized contaminants, suspended solids, or sulfate
or arsenate content. There are many potential sources of mine
influenced water, because it includes any natural waters that come into
contact with mining operations. Common sources include groundwater
affected by pits or underground workings, surface water that has
entered
[[Page 3473]]
surface excavations, or any precipitation that comes into contact with
pit faces, leach piles, waste rock piles, or tailings piles.
The risk for contamination from hazardous substances originating in
waste rock depends on the mineralogy and geochemical composition of the
waste rock and its level of exposure to air and water at the disposal
site. For example, sulfide rock can generate acids that dissolve trace
elements that, without long-term containment, collection, and
treatment, pose a significant concern long after initial disposal.
Discharges can take years to develop, and pose a long-term risk of
hazardous releases at the site. Environmental issues resulting from
mine influenced water vary depending on commodity, climate, type of
mine or mineral processing facility, and mine phase. A key
characteristic for most mine influenced water (whether acidic, neutral,
or alkaline drainage) is an elevated concentration of trace elements
that have leached from surrounding solids such as waste rock, tailings,
or mine surfaces. These acidic and metal-contaminated fluids are
frequently a serious problem at mines and may be acutely or chronically
toxic and may have harmful effects on humans, fish, animals, and
plants.
An example of such a situation is the Barite Hill/Nevada Goldfields
facility. The Barite Hill gold/silver mine located in South Carolina
was previously owned by Nevada Goldfields, Inc., who operated an open
pit cyanide heap leach operation on the property from 1989 until 1994.
Nevada Goldfields conducted mine reclamation activities from 1995 until
1999 when they went bankrupt and subsequently abandoned the property.
After the mine closed, the 10-acre Main Pit began to fill with water.
At its highest, the Main Pit contained approximately sixty million
gallons of highly acidic water with high dissolved metals content. The
main mine pit, ponds, sediment, surface water and soil are contaminated
with arsenic, cadmium, chromium, copper, lead, mercury, nickel,
selenium, silver, zinc, and cyanide. Contamination affected surface
water and sediment in Hawe Creek and its tributaries, posing a threat
to people who eat fish from the Hawe Creek fishery as well as a nearby
drinking water reservoir. When acid mine drainage occurs, it is
extremely difficult and often very expensive to control, and also often
requires costly long-term management measures.
Mineral processing practices likewise raise significant release
issues. For example, flotation processes generate tailings that consist
of a mixture of waste material and the remaining liquid, which consists
mostly of water and any remaining reagents. These are generally pumped
to a tailings impoundment, where solids are settled out of the
solution. In some cases, reagents have the potential for environmental
harm. Although most of these reagents are consumed during flotation and
only small residual quantities make it into the tailings, facilities
might dispose of wastes from various processes in the same waste
management units, with the resulting mixture containing more hazardous
constituents than tailings from flotation alone.
The use of cyanide in gold mining operations creates additional
risks, including the potential release of cyanide into soil,
groundwater, and/or surface waters, which has resulted in catastrophic
cyanide spills. Cyanide leaching has occurred since the mid 1900's.
While the use of acid to leach copper dumps, the use of cyanide to
leach gold in heaps, and the spread of solvent extraction techniques
have changed some aspects of mining, the basic operation of removing
ore from the ground and concentrating it through beneficiation has
remained fundamentally the same as when most of the non-active NPL
sites were in operation. In the case of heap and dump leaching, the
metals and other compounds in the ores have become more mobile due to
the increased use of efficient lixiviants. In addition to the release
of cyanide, discharges from cyanidation processes both during
operations and after closure can also contain potentially toxic
elements including lead, cadmium, copper, arsenic, and mercury.
Leaching tanks, leach pads, piping and storage facilities (e.g.,
process solution ponds and facilities associated with leaching) can
release sulfuric acid and mobilized contaminants into the environment.
These leaching solutions can pose significant environmental and human
health risks if they are not contained successfully. Information on
documented releases reveals that acid leach operations have caused
contamination of both surface and ground waters in addition to injuring
habitat and wildlife. Releases due to equipment failures, chronic
seepage, or weather-related overflows seem to be the most common
problems; acid leach operations need to ensure proper reclamation of
spent dump or heap leach piles, maintenance of equipment, and
preparation of systems for severe weather in order to minimize
environmental impacts. Cyanide leaching processes create wastes that
can present risks of releases of hazardous substances such as cyanide,
cyanide-metal complexes, and metals via groundwater and surface water
routes. In addition, sulfuric acid can leach metals from other mining
wastes and containment areas, transporting other contaminants to
surface and groundwater systems. While leaching solutions are generally
recycled back to the process, failure to contain them properly can
result in releases. After leaching has been discontinued, the abandoned
leach site can be a source of acidic effluents, hazardous trace
elements, and total dissolved solids if it is not properly monitored
and managed. Mine influenced water (e.g., acid, alkaline, or neutral
mine drainage), i.e., runoff originating from exposed heap leach piles
or tailings, is also a distinct risk associated with this practice.
The Beal Mountain Mine, a gold and silver mine in Montana, used
cyanidation to extract precious metals until it was closed in 1997 when
Pegasus gold went bankrupt. Although the mine is no longer operating,
it has continued to pollute neighboring streams with cyanide, selenium
and copper. Ongoing issues include the geotechnical stability of the
pit high wall and leach pad dike, infiltration of precipitation and
groundwater into the leach pad, and treatment and disposal of excess
solution accumulating on the heap leach pad.\198\ This mine also
demonstrates the limitations of predicting environmental impacts of
these facilities -when this mine was permitted, the Environmental
Analysis concluded that the operation of the mine would have no impacts
to water quality, because there will be no discharge of mine or process
water to surface waters.\199\
---------------------------------------------------------------------------
\198\ See USDA-FS, Preliminary Leach Pad Investigation Beal
Mountain Mine, February 2010. Available at: https://www.fs.usda.gov/detail/bdnf/landmanagement/projects/?cid=stelprdb5076989.
\199\ See False Promises: Water Quality Predictions Gone Wrong--
Large Mines and Water Pollution, 2012. Available at: https://wman-info.org/wp-content/uploads/2012/08/FalsePromisesWater.pdf.
---------------------------------------------------------------------------
Zortman and Landusky Mines, in Montana, likewise used cyanidation
to extract precious metals and also underwent bankruptcy and left
significant pollution at their respective sites. In addition to a heap
leach pad leak, the Zortman and Landusky facility experienced cyanide
releases from a leach pad pipe, a solution pond liner leak, and a
process pond liner leak.\200\
[[Page 3474]]
According to BLM, ``modern'' open pit heap leach operations began in
1977.\201\ The BLM, as the lead Federal agency, conducted removal
actions under its CERCLA authority. In response to the numerous issues
associated with cyanide leaching in Montana, the state, in 1998,
enacted a referendum banning the development of new open pits that use
cyanide leaching.
---------------------------------------------------------------------------
\200\ See U.S. Bureau of Land Management, Final Engineering
Evaluation/Cost Analysis (EE/CA) For Water Management at the Zortman
and Landusky Mines, Phillips County Montana, prepared by Spectrum
Engineering (Washington, DC: U.S. Government Printing Office, 2006).
Accessed August 28, 2015 at: https://www.blm.gov/style/medialib/blm/mt/field_offices/lewistown/zortman.Par.62509.File.dat/finaleeac.pdf.
\201\ See Zortman and Landusky Mines--Project History, February
2006. Available at: https://www.blm.gov/style/medialib/blm/mt/field_offices/lewistown/zortman.Par.32256.File.dat/ZLbackground.pdf.
---------------------------------------------------------------------------
Releases also have occurred from other leach pad operations,
including the Barrick Goldstrike mine in Nevada, where there was a
release of 159,000 gallons of cyanide in 2003 and 21,625 gallons of
sodium cyanide in 1995. Also, the Florida Canyon mine in Nevada
released 52,500 gallons of sodium cyanide (30 percent solution) in
1996. The groundwater contamination that resulted from releases from
this facility's leach pad operation was previously discussed.
Similar to historical releases, tailings management played a role
in roughly half of the publicly documented releases. Tailings are the
waste material created when valuable minerals or metals have been
extracted from ore. Depending on the commodity and the mineral
processing method, tailings may contain chemical residues inherent to
processing. For example, milling operations that practice flotation or
leaching may produce tailings containing reagents such as lime or
glycol ether and lixiviants including acids and cyanide. The Robinson
Nevada Mining Company operates the Robinson Operation surface mine in
White Pine County, Nevada. This facility produces gold and copper using
flotation processes. The facility released copper flotation tailings
five times in 1996, leading to violations of its water pollution
control permit.
Tailings usually take the form of a slurry (e.g., wet tailings),
but may also undergo dewatering and disposal as paste or filtered
tailings. Depending on the commodity and the beneficiation process,
tailings may contain a variety of hazardous materials, originating from
geologic components of the ore or chemicals introduced during
processing. Therefore, they require proper disposal and storage.
In addition to the previously discussed releases from the tailings
storage units at the Jerritt Canyon mine, there have been releases at
other tailings storage units, including: ArcelorMittal Minorca is an
iron mining and processing facility located in Virginia, Minnesota.
Three failures in the tailings and waste rock pipe and tailings dike at
the site occurred in 2013 and 2014, discharging 8,500 cubic yards of
tailings and waste rock and affecting 15.3 acres of wetlands,
potentially destroying the area's ability to function as a natural
aquatic habitat and filtration system.\202\
---------------------------------------------------------------------------
\202\ See Pipeline, Storage Basin Failures Send Ore Tailings and
Road Aggregate into Wetlands, Minnesota Pollution Control Agency,
June 24, 2015.
---------------------------------------------------------------------------
The U.S. Silver Galena mine is a silver-lead and silver-copper
underground mine located near Wallace, Idaho, and operated by the U.S.
Silver Corporation since 2007. In 2014, U.S. Silver Corporation signed
a Consent Agreement and Final Order with EPA Region 10 admitting to
discharging wastewater from the Osburn tailings pond into Lake Creek
and the Coeur d'Alene River that carried excessive concentrations of
mercury and copper in 2012 and 2013. The discharge was the result of a
failure to monitor treated water normally discharged to water system.
U.S. Silver also admitted that on March 14, 2014, it discharged
tailings slurry directly into Lake Creek.\203\
---------------------------------------------------------------------------
\203\ See U.S. Environmental Protection Agency, Consent Agree
and Final Order In the Matter of U.S. Silver--Idaho Inc., Coeur and
Galena Mines and Mills, Wallace, Idaho, effective 16 September 2014.
---------------------------------------------------------------------------
The Golden Sunlight mine located in Montana is a gold and silver
open pit mine and underground cyanide vat leach operation. This
facility's original tailing disposal facility operated from 1983 to
1995. Seepage was detected from Tailing Impoundment No. 1 in 1983. To
control effluent from the impoundment, the bentonite cut-off wall was
immediately repaired. An extensive system of monitoring wells has been
installed over the years, and several hydrogeologic investigations have
been undertaken to continue to monitor, evaluate, and control leakage
from the impoundment.
Tailings management presents significant environmental challenges
to current mining operations. Because acid may not be generated for
many years and most tailings ponds are designed to allow infiltration
of water through the pond, the potential of acid generation and mobile
metals are of such concern that many mines construct complex monitoring
and water management systems for their tailings ponds. It is likely
that some constituents of concern (i.e., arsenic, sulfates, etc.) have
become more mobile due to crushing the ore to a smaller particle size.
Although operators now generally attempt to contain these waste
management features, proper long-term management is required to
safeguard against leaks, runoff, and catastrophic failure. Because
reclamation and closure are yet to occur at currently operating
facilities, the available data do not capture information
characterizing the scope and efficacy of these practices. Based on the
experience of currently closed sites, the environmental impacts of
releases to groundwater and runoff from tailings impoundments and waste
rock piles will continue to be of concern at these facilities long
after closure.
Fugitive dust emissions from tailings storage units also can be a
concern. For example, Hecla Greens Creek is a lead, zinc, silver, and
gold underground mine located near Juneau, Alaska, and operated by the
Hecla Greens Creek Mining Company. The mill produces 650,000 tons of
tailings annually. In 2013, elevated concentrations of metals were
detected in the snow and lichens adjacent to the tailings disposal
facility. The USFS, who installed the lichen to act as a biomonitor of
the recently expanded tailings facility, concluded the contamination
was the result of fugitive dust emissions from the tailings.\204\
---------------------------------------------------------------------------
\204\ See United States Department of Agriculture, Forest
Service, Greens Creek Mine Tailings Disposal Facility Expansion:
Final Environmental Impact Statement and Record of Decision
(Washington, DC: U.S. Government Printing Office, 2013), Volume 1.
---------------------------------------------------------------------------
EPA recognizes various environmental regulatory programs may affect
releases of CERCLA hazardous substances at hardrock mining and mineral
processing facilities. Examples of the regulations include requirements
under: (1) The Clean Water Act (CWA), (2) the Uranium Mill Tailings
Radiation Control Act (UMTRCA), and (3) reclamation requirements such
as the BLM's 3809 regulations. However, EPA has found that significant
issues involving noncompliance with regulatory requirements resulting
in releases of hazardous substances persist. EPA's ongoing concern with
reducing the risk of mining waste contamination of drinking water,
rivers, and streams, and work to cleanup mining and mineral processing
facilities has been an enforcement priority for almost ten years, as
reflected in the Agency's National Enforcement Initiative (NEI):
Reducing Pollution from Mineral Processing Operations reflects the
Agency's concerted effort to reduce the risk of mining waste
contamination of drinking water, rivers, and streams, and work to
cleanup mining and mineral
[[Page 3475]]
processing facilities.\205\ The Agency's FY 2011-2013 National
Enforcement Initiatives states `At some sites, EPA's inspections have
found significant non-compliance with hazardous waste and other
environmental laws.' EPA's National Enforcement and Compliance Strategy
for Mineral Processing FY2008-2010 states `Environmental impacts caused
by the mineral processing and mining sectors are significant. The
mineral processing and mining sectors generate more wastes that are
corrosive or contain toxic metals than any other industrial sector.
Over the past decade, we have found that many of the facilities that
manage these wastes, due either to noncompliance with state or Federal
environmental requirements or legally permissible waste management
practices, have created groundwater, surface water, and soil
contamination.'
---------------------------------------------------------------------------
\205\ See U.S. EPA Office of Enforcement and Compliance
Assurance, National Program Manager Guidance, April 2015. Available
at: https://www.epa.gov/sites/production/files/2015-02/documents/oecas_draft_fy_2016-2017_national_program_manager_guidance_february_19_2.pdf.
---------------------------------------------------------------------------
EPA believes the results of this relatively recent effort to
further document the state of current mining practices substantiates
the findings from the other documents described herein and further
reinforces the Agency's belief that currently operating hardrock mining
and mineral processing facilities subject to this proposal continue to
present risks of release of hazardous substances.
c. Evidence of CERCLA Hazardous Substances and Potential Exposures at
CERCLA Sec. 108(b) Mining and Mineral Processing Sites \206\
---------------------------------------------------------------------------
\206\ See U.S. EPA, Office of Land and Emergency Management,
Memorandum to the Record: Releases from Hardrock Mining Facilities,
November 2016.
---------------------------------------------------------------------------
The document ``Evidence of CERCLA Hazardous Substances and
Potential Exposures at CERCLA Sec. 108(b) Mining and Mineral
Processing Sites'' reports EPA preliminary efforts from 2009-2012 to
examine CERCLA site-specific documents for estimated exposures of human
and ecological receptors to CERCLA hazardous substances from mining and
mineral processing sites cleaned up under Superfund in the past. The
report also collects available information on potential exposures of
human and ecological receptors to CERCLA hazardous substances from
mining and mineral processing sites that were operational in 2009 (the
most current available data at the time the evaluation took place).
EPA concluded the following: (1) Some of the sites operational in
2009 are already on Superfund's National Priority List (NPL) requiring
cleanup; (2) mining and mineral processing practices at sites cleaned
up under Superfund in the past continue to be used at sites operational
in 2009, especially when comparing sites that mine or process the same
range of commodities; (3) there are similarities between the
Contaminants of Concern \207\ at sites cleaned up under Superfund in
the past, and the CERCLA hazardous substances present at sites
operational in 2009; (4) human and ecological receptors at sites
cleaned up under Superfund in the past have parallel potential
receptors at sites operational in 2009; and (5) environmental settings
and exposure pathways at sites cleaned up under Superfund in the past
have corresponding environmental settings and potential exposure
pathways at sites operational in 2009.
---------------------------------------------------------------------------
\207\ A CERCLA hazardous substance found at a concentration that
a Superfund risk assessment has determined poses an unacceptable
risk to human health or the environment.
---------------------------------------------------------------------------
Overall, the compiled information demonstrates that sites requiring
cleaned up under Superfund in the past, and sites operational in 2009
share characteristics related to the potential release of CERCLA
hazardous substances and the exposure of human and ecological
receptors, and illustrates the applicability of EPA's CERCLA experience
to evaluating currently operating mines and processors.
d. Previous Studies About Releases From Hardrock Mining and Mineral
Processing Facilities
EPA has also identified numerous documents showing recent releases
of CERCLA hazardous substances at hardrock mining and processing
facilities and thus continuing risks of release or threatened release
of CERCLA hazardous substances associated with those activities. These
documents are available in the docket for this proposed rule and
include:
Damage Cases and Environmental Releases from Mines and Mineral
Processing Sites \208\
This document, published in 1997, presents summaries about mining
and mineral processing damage cases that occurred since 1990. Many of
the damage cases included in this document involved mining and mineral
processing of commodities covered by this proposed rule. The release
incidents occurred from the production, treatment, storage or disposal
of hazardous substances involving extraction and beneficiation
operations, including inadequate containment of tailings, clay ponds,
waste rock, process water, process solution (e.g., cyanide),
wastewater, acid mine drainage, and stormwater. Many of the releases
occurred through spills resulting from equipment failure, and operator
error while others resulted from unusually heavy rains and,
consequently, the generation of high stormwater volumes. The typical
management practices used for storage or disposal of mineral processing
secondary materials and wastes were found to have created or
exacerbated ground water contamination in the immediate area. In some
cases, a combination of feedstock, in-process materials, secondary
materials, and wastes contributed to ground water, surface water, or
soil contamination. EPA believes that this document presents a
relatively accurate description of current mining and processing
practices and the potential releases associated with these practices.
---------------------------------------------------------------------------
\208\ See U.S. EPA 1997. Damage Cases and Environmental Releases
from Mines and Mineral Processing Sites.
---------------------------------------------------------------------------
Mining Sites on Superfund's National Priorities List--Past and Current
Mining Practices \209\
---------------------------------------------------------------------------
\209\ See Van E. Housman and Stephen Hoffman U.S. Environmental
Protection Agency Washington D.C. Published in: Proceedings, Chapter
6, Risk Assessment/Management Issues in the Environmental Planning
of Mines, Society for Mining, Metallurgy and Exploration (SME)
(September 1992), and in: Proceedings, Second International
Conference on Environmental Issues and Management of Waste in Energy
and Mineral Production, University of Calgary (1992).
---------------------------------------------------------------------------
This document provides an overview of the types of releases of
hazardous substances associated with the production, storage, and
disposal of hazardous substances and the associated impacts, including
NPL cleanups. It also documents that `although some mining waste
management practices have changed over time, the basic technology for
extraction and beneficiation of mineral ores have remained fairly
constant over the last fifty years.'
This document states that mining activities at many NPL sites
resulted in the generation of tailings, acid drainage, waste dumps, and
waste rock and that these are the same types of wastes generated by
current mines. It further reports that tailings, mine water, and waste
rock are the highest volume wastes generated by all past and current
mining operations. In the case of tailings, it is likely that some
constituents (i.e., arsenic, sulfates, etc.) have become more mobile
due to crushing the ore to a smaller particle size. In the case of heap
and dump leaching, the metals and other compounds in the ores have
become more mobile due to the increased use of
[[Page 3476]]
efficient lixiviants (i.e., the solution used in hydrometallurgy to
assist in extracting the desired metal from ore in heap leaching, dump
leaching, and in situ leaching).
The document also states that `many current mining operations are
extracting sulfide ores, having exhausted the less acidic oxide ores.
Therefore, the potential for environmental damage from acid mine
drainage at existing mines is possible, if favorable geologic and
climatic factors exist. There are dozens of current mining operations
with open pits or that have extensive underground tunnels are, similar
to NPL sites, located in high sulfide environments.' These current
operations continuously pump and treat groundwater that enters the pit
or mined tunnels as part of the overall mine water management system.
Some of the larger currently operating mines are not only pumping and
chemically treating mine water, they are using other control methods
such as intercepting aquifers to control water flow into the mine and
diverting entire surface streams. In many cases, once the decision is
made to divert streams and intercept aquifers, active water management
will have to continue indefinitely, long after the mine is closed.
Finally, the document states that current mining practice is to
impound tailings behind engineered dams and attempt to control and
treat discharges to surface water and groundwater. Current design
rarely includes lining the ponds. Unlined tailings ponds are
specifically designed either to introduce water directly to groundwater
or direct it to leachate collection systems that flow into surface
ponds at the base of a dam (toe ponds). Tailings management presents
significant environmental challenges to current mining operations.
Because acid may not be generated for many years and most tailings
ponds are designed to allow infiltration of water through the pond, the
potential for acid generation and mobile metals are of such concern
that many mines construct complex monitoring and water management
systems for their tailings ponds.
Although this document was published almost 25 years ago, EPA has
concluded that it still presents a relatively accurate description of
current mining and mineral processing practices and the potential
releases associated with these practices, as identified in the more
recent documents previously described.210 211
---------------------------------------------------------------------------
\210\ See U.S. EPA, Draft Comprehensive Report: An Overview of
Practices at Hardrock Mining and Mineral Processing Facilities and
Related Releases of CERCLA Hazardous Substances, November 2016.
\211\ See U.S. EPA, Draft Report--Discharges from Recently or
Currently Operating Mines and Mineral Processing Facilities.
September 2016.
---------------------------------------------------------------------------
Human Health and Environmental Damages from Mining and Mineral
Processing Wastes \212\
---------------------------------------------------------------------------
\212\ See U.S. EPA December 1995. Technical Background Document
Supporting the Supplemental Proposed Rule Applying Phase IV Land
Disposal Restrictions to Newly Identified Mineral Processing Wastes.
Damage cases used for this document were derived from previous
studies by EPA identifying human health and environmental damages
caused by mining and mineral processing waste management activities,
including: Report to Congress on Special Wastes from Mineral
Processing, July 1990; Mining Waste Release and Environmental
Effects Summaries, Draft, March 1994; Mining Sites on the National
Priorities List: NPL Site Summary Report, June 21, 1991; and Mining
Sites on the NPL, August 1995.
---------------------------------------------------------------------------
EPA developed this document to illustrate the human health and
environmental damages caused by management of wastes from mining (i.e.,
extraction and beneficiation) and mineral processing, particularly
damages caused by placement of mining and mineral processing wastes in
land-based units, including piles, surface impoundments, and ponds as
part of its ``Phase IV'' Land Disposal Restrictions rulemaking under
the RCRA Subtitle C program. This document presents 66 mining and
mineral processing damage cases, including mining and mineral
processing of commodities covered by this proposed rule. The damage
cases demonstrate that land-based management practices for mining and
mineral processing wastes are responsible for considerable damages to
human health and the environment. These damages commonly arise from
land placement of wastes in unlined units having minimally engineered
release controls. These units include piles of slags, dusts, refractory
bricks, sludges, waste rock and overburden, and spent ore; surface
impoundments containing mill tailings and/or process wastewaters; and
heap leaching solution ponds. In addition, many, if not most of the
damage case facilities have caused human health or environmental
damages through leaks or spills, such as releases from lined management
units, valves, and pipes.
The damage cases illustrate the wide variety of human health and
environmental impacts caused by wastes from mining and mineral
processing operations, including groundwater, surface water, and soil
contamination; human health damages or risks; and damages to
vegetation, wildlife, and other biota. As noted earlier, in more recent
documents prepared by EPA, many of the damage cases cited in this
document involved releases that EPA has concluded are still indicative
of current mining and mineral processing practices and the potential
releases associated with these practices.
e. Data Concerning Releases, Generation, and Management of CERCLA
Hazardous Substances
EPA evaluated several databases, as follows:
(1) Releases Reported Under the Emergency Response Notification System
(ERNS)
EPA also looked at releases of CERCLA hazardous substances reported
under the Emergency Response Notification System (ERNS). EPA considered
these data because of the potential insights the data offered on an
annual basis over a prolonged period of time--providing a means by
which to show the extent of and reasons for reported releases of CERCLA
hazardous substances by hardrock mining and mineral processing
facilities.
ERNS primarily contains initial accounts of releases reported to
the National Response Center, made during or immediately after a
release occurs. The National Response Center receives all reports of
releases involving hazardous substances and oil that trigger Federal
notification requirements under several laws. It also should be noted
that the National Response Center is strictly an initial report-taking
agency and does not participate in the investigation or incident
response. The National Response Center receives initial reporting
information only and notifies Federal and state On-Scene Coordinators
for response.
From the National Response Center Web site (https://www.nrc.uscg.mil/), EPA downloaded, by year, the details for each call
reporting a release--from 1990 through 2014. Although releases have
been reported to the National Response Center since 1982, the data from
1982-1989 are difficult to use because of inconsistent formats, and
missing and/or inconsistent data fields, among other problems. A more
uniform and consistent format for documenting calls was put into place
in 1990, so EPA examined National Response Center data from 1990
through 2014. For the purpose of this rulemaking, EPA only focused on
reported releases that involved CERCLA hazardous substances.\213\ The
ERNS data contains information about the material and the
[[Page 3477]]
quantity released, where and when the release occurred, and information
about property damage, injuries, and deaths occurring due to the
release. The ERNS data include a general Incident Type and Incident
Cause. Analyzing information from the Incident Description for each
reported release, EPA developed and assigned a more detailed
description of the incident type and cause.
---------------------------------------------------------------------------
\213\ See U.S. EPA, Extracting Useable Data from ERNS Incidents
Applicable to HRM Facilities, December 2015.
---------------------------------------------------------------------------
EPA's analyses show that, since 1990, more than 950 reported
releases of CERCLA hazardous substances were associated with currently
operating facilities in the hardrock mining industry.\214\ Looking at
the more recent data, approximately 435 of the releases were reported
since 2000, for an average of about thirty reported releases per year
since 2000. These ERNS data provide yet another indicator of ongoing
reported releases of CECLA hazardous substances at hardrock mining and
mineral processing facilities. Many of the reported releases were due
to: (1) Damage to/overflow of pond/impoundment/pile/landfill due to
storms, (2) breaks or leaks of piping/hoses, (3) accidents/operator
error, and (4) failure or overflow of process units and storage/
treatment tanks/sumps.
---------------------------------------------------------------------------
\214\ See U.S. EPA, Analyses of ERNS Data Applicable to HRM
Facilities, December 2015.
---------------------------------------------------------------------------
EPA also reviewed a report that substantially relied on ERNS data
to show pipeline, seepage control and tailings impoundment failures at
operating copper porphyry mines in the U.S., and the associated water
quality impacts.\215\ This document states that `copper porphyry mines
are often associated with water pollution associated with acid mine
drainage, metals leaching and/or accidental releases of toxic
materials.'
---------------------------------------------------------------------------
\215\ See Bonnie Gestring, U.S. Copper Porphyry Mines Report:
The Track Record of Water Quality Impacts Resulting from Pipeline
Spills, Tailings Failures, and Water Collection and Treatment
Failures (Washington, DC: Earthworks, July 2012). Available at:
https://www.fxsp0;earthworkfxsp0;saction.fxsp0;org/files/
publications/Porphyry_Copper_Mines_Track_Record&lowbar-_8-
2012.pdf.
---------------------------------------------------------------------------
(2) Analysis of Toxics Release Inventory (TRI) Data
The Toxics Release Inventory (TRI) includes data on chemicals
(including numerous CERCLA hazardous substances) that are released,
recycled, treated, or used for energy recovery. Under TRI, releases
include air emissions, surface water discharges, underground injection
wells, and placement to land, including RCRA hazardous waste landfills
and other landfills. TRI data also show quantities transferred to
publicly owned treatment works (POTWs) and to off-site facilities. In
developing this proposal, EPA examined recent TRI data \216\ in order
to identify the types, amounts, and methods of hazardous substance
management at facilities potentially subject to the rule. EPA's 2010
through 2013 Toxic Release Inventory (TRI) data indicates that the
metal mining industry (e.g., gold ore mining, lead ore and zinc ore
mining, and copper ore and nickel ore mining) reported quantities of
onsite releases of hazardous substances, averaging nearly 1.7 billion
pounds per year. In 2013, the metal mining sector reported the largest
quantity of total disposal or other releases, accounting for 47 percent
of the releases for all industries. It also represents almost three
quarters (71 percent) of the on-site land disposal for all sectors in
2013. (See: https://www.epa.gov/toxics-release-inventory-tri-program/2013-tri-national-analysis-metal-mining.) The preliminary 2014 TRI data
likewise show nearly 1.8 billion pounds of onsite releases. Specific
hazardous substances of concern that are released into the environment
by mining facilities include: Ammonia, benzene, chlorine, hydrogen
cyanide, hydrogen fluoride, toluene, and xylene, as well as heavy
metals and their compounds (e.g., antimony, arsenic, cadmium, chromium,
cobalt, copper, lead, manganese, mercury, nickel, selenium, vanadium
and zinc).
---------------------------------------------------------------------------
\216\ TRI is a publicly available EPA database that contains
information on a list of 581 individually listed chemicals and
thirty chemical categories that are being used, manufactured,
treated, transported, released into the environment, or recycled.
Facilities (certain regulated industries and federal facilities) are
required to annually report to TRI under the Emergency Planning and
Community Right to Know Act (EPCRA Sec. 313).
---------------------------------------------------------------------------
More than 99 percent of these onsite releases involved surface
impoundments (e.g., tailings) and other land placement (e.g., waste
piles) not subject to RCRA Subtitle C permits.\217\ In addition to the
placement of these quantities of CERCLA hazardous substances on the
land, for the period covering 2010-2013, metal mining facilities also
reported an average of three million pounds of air releases and over
800,000 pounds of surface water discharges. Over the time period of
2010-2012, releases of hazardous substances (ranging between 425,000
pounds and 978,000 pounds) also were reported due to catastrophic or
one-time events; in 2013, nearly 194 million pounds of such releases
were reported.
---------------------------------------------------------------------------
\217\ Many of the wastes generated by mining and processing
operations, i.e., those processes that remove, concentrate, and/or
enhance values contained in ores and minerals or beneficiated ores
and minerals, have been excluded from regulation under RCRA Subtitle
C per the Bevill Amendment.
---------------------------------------------------------------------------
In the 2009 Priority Notice, EPA used Toxics Release Inventory
(TRI) data to provide an indication of the quantities of hazardous
substances that were associated with facilities in the hardrock mining
industry. Commenters objected to EPA's use of these data. Commenters
noted that releases reported to TRI encompass releases that may be
permitted under the Clean Air Act, Clean Water Act, Safe Drinking Water
Act, and RCRA Subtitle C. Thus, these commenters argued that these
releases should not be used to predict the risk of releases and
exposures to hazardous substances associated with potential
mismanagement of hazardous substances.
EPA considered these objections to the use of these data, in
developing its data for this proposal. The Agency recognizes that a
significant portion of the TRI releases reported as air emissions and
surface water discharges are likely permitted by Federal/state
regulatory authorities. EPA also recognizes that some of the surface
impoundments, landfills, and waste piles used to manage wastes
containing these large volumes of hazardous substances might be
designed and operated to mitigate releases into the environment.
These data provide some perspective about the number of currently
operating facilities and offer insights on the types, amounts, and
management of hazardous substances at hardrock mining and mineral
processing facilities potentially subject to this proposed rule. The
presence of such significant amount of hazardous substances, even if
subject to regulatory controls, provides some indication of the
potential for risks to result if improperly managed. In addition, EPA
previously has discussed the evidence of non-compliance with regulatory
standards. Thus, the TRI data provide relevant information on the risks
associated with hardrock mining facilities.
(3) Analysis of RCRA Hazardous Waste Biennial Report (BR) Data
The RCRA Hazardous Waste Biennial Report (BR) contains data
reported by hazardous waste handlers and must be submitted by large
quantity hazardous waste generators and treatment, storage, and
disposal facilities every two years. Because RCRA hazardous wastes, by
statute, are designated CERCLA hazardous substances, EPA analyzed the
BR data for the 2009, 2011, and 2013 reporting cycles. These data show
the quantities of RCRA hazardous waste streams generated and how the
waste
[[Page 3478]]
was managed. It is important for the reader to note that many wastes
generated by mining and mineral processing operations are excluded from
RCRA Subtitle C hazardous waste regulation under the Bevill Amendment.)
EPA found a wide variation in the quantity of hazardous waste
generated by facilities in the hardrock mining industry, including
nearly 3,000 tons in 2009, nearly 25,000 tons in 2011, and more than
13,000 tons in 2013. These generated quantities, for the most part, do
not represent actual releases to the environment but instead represent
amounts of hazardous substances produced and managed at the reporting
facilities. The sources and types of hazardous wastes generated by
these facilities are numerous and varied, including: (1) Contaminated
soil from remediation and/or past contamination; (2) contaminated soil
and debris from spills and accidental releases; (3) filters, solid
adsorbents, ion exchange resins and spent carbon from air pollution
control devices; (4) sludges, liquids, solids from cleanout of process
equipment; (5) laboratory analytical wastes; (6) spent process liquids
or catalysts, (7) removal of tank sludge, sediments, or slag; and (8)
discarding off-specification or out-of-date chemicals or products.
To a large extent, facilities in the hardrock mining industry
ultimately transfer their RCRA hazardous wastes to offsite treatment
and disposal facilities. However, for those facilities that do treat
and dispose of hazardous wastes onsite, the potential co-mingling of
hazardous wastes with Bevill excluded wastes or non-hazardous wastes is
a concern to EPA. Indeed, EPA has determined that some facilities place
mixtures of exempt wastes (e.g. tailings) and non-exempt wastes in an
on-site waste management unit.\218\ Recently, EPA and the U.S.
Department of Justice announced a settlement with Mosaic Fertilizer,
LLC that will ensure the proper treatment, storage, and disposal of an
estimated sixty billion pounds of hazardous waste at Mosaic's
facilities in Bartow, Lithia, Mulberry and Riverview in Florida and St.
James and Uncle Sam in Louisiana. At these facilities, sulfuric acid is
used to extract phosphorus from mined phosphate rock, which produces
large quantities of a solid material called phosphogypsum and
wastewater that contains high levels of acid. EPA inspections revealed
that Mosaic was mixing certain types of highly-corrosive substances
from its fertilizer operations, which qualify as hazardous waste, with
the phosphogypsum and wastewater from mineral processing (Bevill
wastes), which is a violation of Federal and state hazardous waste
laws. The phosphogypsum piles can contain several billion gallons of
highly acidic wastewater, which can threaten human health and cause
severe environmental damage if it reaches groundwater or local
waterways. In August 2016, one of these facilities (the New Wales in
Mulberry) experienced a sinkhole, leaking 215 million gallons of
contaminated water into the Floridian aquifer.
---------------------------------------------------------------------------
\218\ See U.S. EPA, Mineral Processing Facilities Placing
Mixtures of Exempt and Non-Exempt Wastes in On-Site Waste Management
Units, Technical Background Document Supporting the Supplemental
Proposed Rule Applying Phase IV Land Disposal Restrictions to Newly
Identified Mineral Processing Wastes, December 1995. (Note: See
EPA's Supplemental Phase IV LDR Final Rule [63 F.R. 28595-97 (May
26, 1998), which included discussion of mineral processing secondary
materials and Bevill Exclusion issues.
---------------------------------------------------------------------------
In the 2009 Priority Notice, EPA also used BR data to show the
quantities of hazardous wastes that were associated with facilities in
the hardrock mining universe. Commenters objected to EPA's use of these
data to justify the need for financial responsibility requirements.
Specifically, commenters stated: (1) That the BR data simply show the
quantities of RCRA hazardous wastes that are generated and managed in
accordance with the RCRA Subtitle regulations. They argued that thus
these data are not an indicator of mismanagement and provide no
information concerning the degree and duration of risk associated with
the production, transportation, treatment, storage, or disposal of
hazardous substances; (2) that EPA did not discuss whether, or how
often, the generation of hazardous waste corresponds to on-site
discharges of hazardous substances, or to costly cleanups; and (3) that
the volume of hazardous waste reported on the RCRA BR may not be a
realistic indicator of risk for CERCLA Sec. 108(b) purposes. High
volume waste streams often are highly dilute aqueous wastes that are
managed in Clean Water Act wastewater treatment facilities.
EPA recognizes that the BR data concerning volume of hazardous
waste generated and managed onsite, when considered alone, does not
provide a direct indicator of risk of release or of mismanagement of
wastes. Notwithstanding the issues pointed out by commenters, EPA
believes these data do offer insights on the types, amounts, and
management of RCRA hazardous wastes (by definition, CERCLA hazardous
substances) at hardrock mining and mineral processing facilities
potentially subject to this proposed rule.
e. Government Expenditures--Historical CERCLA Costs
EPA conducted analysis of historical response costs at 319 hardrock
mining and processing sites on the National Priorities List (NPL) and
at non-NPL CERCLA sites. EPA used this information to help further
identify the magnitude of continuing risks from hardrock mining
facilities potentially subject to the rule. Such costs also serve as a
measure of the severity of consequences impacting human health and the
environment as a result of releases of and exposure to hazardous
substances. Specifically, the past and estimated future costs
associated with protecting public health and the environment through
what is often extensive and long-term reclamation and remediation
efforts can be substantial.
The Agency developed a database for purposes of analysis that uses
the ``Expenditures'', ``ROD Costs'', and ``Settlements'' data derived
from CERCLIS, Integrated Financial Management System (IFMS), and Office
of Enforcement and Compliance Assurance (OECA) information resources.
These data sources for response costs included: (1) Fund expenditures
incurred at each site to date, the type of expenditure (broadly
speaking, construction versus non-construction) and the source of funds
(whether the Fund was reimbursed by the potentially responsible party
(PRP) through a ``special account''); and (2) Records of Decision
(RODs) at each site. A ROD is a document that provides the
justification for the remedial action (treatment) chosen at a Superfund
site. It also contains information concerning site history, site
description, and site characteristics. The ROD Costs database provides
a dollar estimate for each remedial action chosen at a site. Last,
information was compiled about settlements with PRPs, including ``cash
out'' funds accrued and deposits into special accounts associated with
settlements at each site.
Following a review of the discussed data sources, EPA developed a
tailored approach that attempts to characterize the total (i.e., past
and future) response cost at each of the historical sites identified,
taking advantage of all available data sources and site
characteristics. EPA then verified and adjusted the response costs
using reports from the U.S. Government Accountability Office (GAO) and
from the Office of the Inspector General
[[Page 3479]]
(OIG)) that investigated past and future costs at NPL
sites.219 220
---------------------------------------------------------------------------
\219\ See U.S. Government Accountability Office, Superfund:
EPA's Estimated Costs to Remediate Existing Sites Exceed Current
Funding Levels, and More Sites Are Expected to Be Added to the
National Priorities List. Report No. GAO-10-380. May 2010 (the GAO
Report).
\220\ See Office of Inspector General, Nationwide Identification
of Hardrock Mining Sites. Report No. 2004-P-00005. March 31, 2004
(the OIG Report).
---------------------------------------------------------------------------
In considering the total remediation and other expenditures
experienced at these sites (including both past and projected future
expenditures necessary to complete cleanup), EPA estimates that the
historical response costs total $12.9 billion at 243 hardrock mining
and minerals processing facilities evaluated for which data were
available at the time of the analyses. The estimate of response costs
for just 117 NPL sites from the sample totals more than $12 billion, or
an average of more than $103 million per site. Federal expenditures to
date total roughly one-third of the total (or $4 billion), paid for
through EPA's Superfund program. Such significant cleanup costs may be
considered as an indication of the relative risks present at these
sites, and the potential magnitude of environmental liabilities
associated with this industry overall. It should be noted that this
data does not capture funds spend cleaning up hardrock mining
facilities outside of the Superfund program (e.g., by a state cleanup
authority).
Costs associated with ATSDR Health Assessments and Natural Resource
Damages further increase the liabilities attributable to the hardrock
mining and mineral processing sectors. EPA identified documented
natural resource damages settlements at 64 sites within this sector.
This statistic alone suggests that as many as 25 percent of CERCLA
sites in this sector have also been the source for associated damages
to natural resources. Based on the natural resource damages cases
identified, the values of the damages average more than $16 million
across all of the cases, with individual settlements ranging from
$32,000 to over $400 million.
f. EPA's Conclusions Regarding Risks Posed by Facilities in the
Hardrock Mining Universe
Information available to EPA indicates strongly that the hardrock
mining industry continues to present risks associated with the
production, transportation, treatment, storage, and disposal of
hazardous substances. Mining activities at many NPL sites resulted in
the generation of tailings, acid drainage, waste dumps, and waste rock;
these are the same types of wastes generated by current mines. In many
cases, releases were largely due to the direct discharge of wastes into
the local environment or minimal containment efforts. For example, the
P4/Monsanto-South Rasmussen facility, operating near Soda Springs in
southeast Idaho, discharged wastewater containing high concentrations
of selenium and heavy metals from a waste rock dump at the mine without
a required permit. Further, P4's unpermitted discharges, which
contained selenium levels far above Idaho's state water quality
standards, polluted a nearby wetland and an unnamed tributary of Sheep
Creek, as well as downstream waters that drain to the Snake River. P4
agreed to pay a $1.4 million civil penalty for alleged Clean Water Act
violations and to continue collecting selenium-contaminated leachate
from the waste rock pile and to prevent leachate from entering nearby
creeks and wetlands until such time as the company either obtains a
National Pollution Discharge Elimination System permit, or it
undertakes a restoration of the waste rock dump under another state or
Federal order.
Additionally, many releases described in publicly available
information occurred after closure of the mine or mineral processing
site, suggesting that the potential for releases and adequate
monitoring remains a long-term concern after closure of the mining or
mineral processing operation.
While some mining waste management practices have changed over
time, the basic technologies for extracting and processing of mineral
ores have remained fairly constant over approximately the last 50
years. Mining technology has become more efficient over time in
recovering mineral values--allowing lower grade ores to be mined which
produce more waste. At the same time, a combination of economic and
technological factors have increased the scale of surface disturbance
and waste generation. Mining and mineral processing facilities generate
more toxic and hazardous waste than any other industrial sector.
Underground and surface mining create large amounts of excavated
material. Disposal typically involves depositing the waste rock in
dedicated dumps or piles, or in some cases using it as mine backfill.
Waste rock can also be co-disposed with paste or filtered tailings, or
in a slurry pond. Waste rock and overburden piles are typically stored
on-site, which may result in acidic or other mine-influenced water.
Common sources include groundwater affected by pits or underground
workings, surface water that has entered surface excavations, or any
precipitation that contacts pit faces, leach piles, waste rock piles,
or tailings piles. Sulfide rock can generate acids that dissolve trace
elements which, without long-term containment, collection, and
treatment, pose a significant concern long after initial disposal.
Further, releases from waste rock disposal can arise years after
operations have ceased, through discharges of mine influenced water,
and pile deformation or collapse. Most mines require ongoing management
for acidic drainage. Evidence has shown that such problems continue to
be a problem even at sites that have been inactive for more than a
century. Thus, discharges can take years to develop, and pose a long-
term risk of hazardous releases at the site.
EPA's research indicates that all processing of ore, including
physical and magnetic processing, can result in spills of intermediate
material and waste. This is because transport within the facility of
the many different commodities and process chemicals used in hardrock
mining activities is required between subsequent processing steps, thus
resulting in risk of release. In addition, where operators use toxic
process chemicals, the potential for harm associated with these spills
is increased. Similarly, ore must be transported from the extraction
site to the mineral processing facility. Process water and solutions
are often stored in ponds on site for use and recycling. Slurries are
piped from mill facilities to storage facilities (which can include
waste management features such as tailings ponds) by pipeline, truck,
or conveyor. The slurry, containing ore and process chemicals, can
contain mobilized contaminants and other hazardous substances. EPA has
documented that leaks also often occur due to liner failures,
containment failures during transport or at exchange points (e.g.,
conveyor drop points or truck offloads), and defects in pipe seams. EPA
has also documented that operator error, such as mishandling of
solutions (e.g., over-fills) or equipment, and severe weather events
that overwhelm containment systems can contribute to these types of
releases.
Finally, information available to EPA indicates that potential
risks posed by hardrock mining and mineral processing facilities can
affect all environmental media. Air, land, and water contamination may
result when waste rock dumps, tailings disposal facilities and open
pits are not maintained properly and release hazardous
[[Page 3480]]
substances to the environment.\221\ EPA has also documented that
releases of CERCLA hazardous substances have occurred and continue to
occur, including ongoing releases that have not yet been detected and/
or mitigated.
---------------------------------------------------------------------------
\221\ See U.S. EPA. 2004. Cleaning Up the Nation's Waste Sites:
Markets and Technology Trends. EPA 542-R-04-015. Accessed at: https://www.epa.gov/tio/pubisd.htm.
---------------------------------------------------------------------------
VII. Statutory and Executive Orders Reviews
A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review
This action is an economically significant regulatory action that
was submitted to the Office of Management and Budget (OMB) for review.
Any changes made in response to OMB recommendations have been
documented in the docket. The EPA prepared an analysis of the potential
costs and benefits associated with this action. This analysis,
Regulatory Impact Analysis, is available in the docket. Section I.C. of
this preamble summarizes the results of the RIA. As discussed in that
section of the preamble, on annualized basis, the estimated regulatory
costs to private entities for the two options in the proposed action
are $171 million (without a financial test), and $111 million (with a
financial test). EPA also segregated the costs borne by private
entities into social cost (borne by society) and intra-industry
transfers. The majority of the industry costs represent a transfer from
the regulated industry to the financial industry, and hence the
quantified annualized net social costs are estimated at $30 million to
$44 million. Similarly, the Agency conducted a qualitative analysis of
the benefits of the rule; however, the results were not monetized. As
such, the net benefit-cost analysis of the two options may have an
annual effect on the economic near $100 million or more. Accordingly,
EPA submitted this action to the OMB for review under Executive Order
12866, and plans to incorporate changes in response to OMB
recommendations on the proposal rule.
B. Paperwork Reduction Act (PRA)
The information collection activities in this proposed rule have
been submitted for approval to the OMB under the PRA. The ICR document
that the EPA prepared has been assigned EPA ICR number 2554.01. You can
find a copy of the ICR in the docket for this rule, and it is briefly
summarized here.
The proposed rule would require that owners or operators of
facilities subject to the rule submit information to EPA. This ICR
addresses the following proposed information requirements that are part
of the rule: (1) Submit an initial Notification Form to EPA within
thirty days of the effective date of the regulation; (2) make relevant
information available to the public on the company's website; (3)
calculate financial responsibility amount and submit information to
support the calculation to EPA; (4) submit evidence that support the
establishment of financial responsibility; (5) update financial
responsibility amount at minimum every three years and submit evidence
of proper maintenance of financial responsibility; (6) notify EPA when
the owner or operator and the issuer of financial instruments enter
Chapter 11 bankruptcy proceedings; (7) notify EPA of any claim pursuant
to CERCLA naming the owner, operator, or guarantor as defendant; (8)
notify EPA when the facility is no longer authorized to operate or the
date by which the owner or operator must provide notification that the
facility is ceasing operations under another regulatory program; and
(9) maintain a record of all of the information related to financial
responsibility requirements and retain those records for three years
after the owner or operator released from financial responsibility
requirements.
EPA believes that submission of the information would be needed for
effective implementation of CERCLA Sec. 108(b) requirements. By
requiring the owner or operator to submit information about the
facility to EPA, these requirements would better enable the Agency to
assure full compliance with the requirements for financial
responsibility throughout the time the facility is subject to those
requirements.
As discussed in section VI.A.3. of this preamble, some element of
the information required for submission under this proposed rule may be
claimed as proprietary business information or trade secrets. As
described in that section, the proposal would not require or provide
for posting of this sensitive information. However, the Agency expects
that much of the information submitted to EPA under the proposal could
be made available.
Respondents/affected entities: Hardrock Mining Industry.
Respondent's obligation to respond: Mandatory, pursuant to CERCLA
Sec. Sec. 104, 108, and 115, 42 U.S.C. Sec. Sec. 9604, 9608, 9615.
Estimated number of respondents: 221.
Frequency of response: One to three times (the first three years).
Total estimated burden: 7,057 hours (per year). Burden is defined
at 5 CFR 1320.3(b).
Total estimated cost: $490,504 (per year), includes $12,532
annualized capital or operation & maintenance costs.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for the
EPA's regulations in 40 CFR are listed in 40 CFR part 9.
Submit your comments on the Agency's need for this information, the
accuracy of the provided burden estimates, and any suggested methods
for minimizing respondent burden to EPA. This information should be
submitted to the docket for tis proposed rule (Docket No. EPA-HQ-SFUND-
2015-0781). You may also send your ICR-related comments to OMB's Office
of Information and Regulatory Affairs via email to
OIRA_submission@omb.eop.gov, Attention: Desk Officer for EPA. Since OMB
is required to make a decision concerning the ICR between thirty and
sixty days after receipt, OMB must receive comments no later than
February 10, 2017. EPA will respond to any ICR-related comments in the
final rule.
C. Regulatory Flexibility Act (RFA)
Pursuant to section 603 of the RFA, EPA prepared an initial
regulatory flexibility analysis (IRFA) that examines the impact of the
proposed rule on small entities along with regulatory alternative that
could minimize that impact. The complete IRFA is available for review
in the docket and is summarized here.
1. Why EPA is Considering This Action
A series of studies and reviews conducted by the EPA Office of
Inspector General (OIG) and the Government Accountability Office (GAO)
from 2004 through 2008 demonstrated that the hardrock mining industry
presented a risk to EPA and taxpayers with respect to the amount of
cleanup costs for which they would be responsible. Information
available to EPA indicates strongly that the hardrock mining industry
continues to present risks associated with the production,
transportation, treatment, storage, and disposal of hazardous
substances. In accordance with CERCLA Sec. 108(b) and in response to
these concerns, EPA is publishing the proposed rule that would create a
financial responsibility program in CERCLA.
[[Page 3481]]
2. Objectives of, and Legal Basis for, the Proposed Rule
The proposed rule endeavors to increase the likelihood that owners
and operators will provide funds necessary to address the CERCLA
liabilities at their facilities, thus preventing the burden from
shifting to the taxpayer. In addition, the rule would provide an
incentive for implementation of sound practices at hardrock mining
facilities that would decrease the need for future CERCLA actions.
3. Estimate of the Number of Small Entities To Which the Proposed Rule
Would Apply
For purposes of assessing the impacts of this regulation on small
entities, a small entity is defined as: (1) A small business as defined
by the Small Business Administration's (SBA) regulations at 13 CFR part
121.201; (2) a small governmental jurisdiction that is a government of
a city, county, town, school district or special district with a
population of less than 50,000; and (3) a small organization that is
any not-for-profit enterprise which is independently owned and operated
and is not dominant in its field.
For the purposes of this analysis, EPA identified approximately 221
mines/processing facilities in the potentially regulated universe; of
these, 53 facilities are estimated to have a small owner (including
joint ventures), corresponding to 43 firms. Twelve additional mines
have owners of unknown size (due to lack of available company data).
Most (38) of these 53 facilities engage in mining/extraction; 15
facilities engage in processing/refining only.
Depending on the specific NAICS code of the owner, the
determination of ``small entity'' status depends on either the revenue
or the number of employees of the firm. The minimum threshold for
revenue in the relevant NAICS codes ranges from $11 million to $36.5
million. The employment qualifications ranges from 100 employees to
1,500 employees. Table C-1 lists summary information on the small
entity universe.
[[Page 3482]]
Table C-1--Summary of Small Business Statistics (Company Revenues)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
SBA small business size
standard (as of February Number of small firms Number of small firms
2016) Average annual Average number of facing annual facing annual
NAICS code Industry -------------------------- Number of small firms revenues of small employees of small compliance costs >1% compliance costs >3%
Revenues firms ($Millions) firms (Median)* (Median)*
($millions) Employees
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
211111................. Crude Petroleum and ........... 1250 1...................... $61................... 194................... 1..................... 0-1.
Natural Gas
Extraction.
212210................. Iron Ore Mining..... ........... 750 1...................... 100................... 475................... 1..................... 0-1.
212221................. Gold Ore Mining..... ........... 1500 10..................... 96.................... 261................... 6-7................... 5-6.
212234................. Copper Ore and ........... 1500 5...................... 22.................... 80.................... 5..................... 4.
Nickel Ore Mining.
212291................. Uranium[dash]Radium[ ........... 250 2...................... 15.................... 48.................... 1..................... 0-1.
dash]Vanadium Ore
Mining.
212392................. Phosphate Rock ........... 1000 <1..................... <1.................... 6..................... 1..................... 1.
Mining.
212393................. Other Chemical and ........... 500 1...................... <1.................... 3..................... 1..................... 1.
Fertilizer Mineral
Mining.
212399................. All Other ........... 500 3...................... 329................... 173................... 2..................... 2.
Nonmetallic Mineral
Mining.
213114................. Support Activities 20.5 ........... 2...................... <1.................... 7..................... 2..................... 2.
for Metal Mining.
213115................. Support Activities 7.5 ........... 1...................... <1.................... 2..................... 1..................... 1.
for Nonmetallic
Minerals (except
Fuels).
236115................. New Single-family 36.5 ........... 1...................... 8..................... 10.................... 1..................... 0.
Housing
Construction
(Except For-Sale
Builders).
238910................. Site Preparation 15 ........... 2...................... 2..................... 100................... 2..................... 1.
Contractors.
325180................. Other Basic ........... 1000 2...................... 168................... 295................... 0-1................... 0.
Inorganic Chemical
Manufacturing.
325312................. Phosphatic ........... 750 1...................... 47.................... 315................... 1..................... 0-1.
Fertilizer
Manufacturing.
327992................. Ground or Treated ........... 500 2...................... 32.................... 111................... 2..................... 1.
Mineral and Earth
Manufacturing.
331313................. Alumina Refining and ........... 1000 1...................... 2..................... 550................... 1..................... 1.
Primary Aluminum
Production.
331410................. Nonferrous Metal ........... 1000 1...................... 13.................... 83.................... 1..................... 0.
(except Aluminum)
Smelting and
Refining.
331491................. Nonferrous Metal ........... 750 1...................... 34.................... 500................... 1..................... 1.
(except Copper and
Aluminum) Rolling,
Drawing and
Extruding.
423520................. Coal and Other ........... 100 1...................... 15.................... 54.................... 0..................... 0.
Mineral and Ore
Merchant
Wholesalers.
522390................. Other Activities 20.5 ........... 1...................... <1.................... 1..................... 1..................... 1.
Related to Credit
Intermediation.
551112................. Offices of Other 20.5 ........... 2...................... <1.................... 2..................... 2..................... 2.
Holding Companies.
561499................. All Other Business 15 ........... 1...................... <1.................... 1..................... 1..................... 1.
Support Services.
561990................. All Other Support 11 ........... 1...................... <1.................... 2..................... 1..................... 1.
Services.
Unknown................ Unknown............. ........... ........... Up to 12 additional.... Unknown............... Unknown............... Up to 12 additional Up to 12 additional
firms. firms.
-------------------------------------------------------------------------------------------------------------------------------------
TOTAL.............. .................... ........... ........... 44 to 56 firms......... ...................... ...................... 35 to 49 firms........ 25 to 42 firms.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 3483]]
As required by section 609(b) of the RFA, EPA convened a Small
Business Advocacy Review (SBAR) Panel to obtain advice and
recommendations from small entity representatives that potentially
would be subject to the rule's requirements. The SBAR Panel evaluated
the assembled materials and small-entity comments on issues related to
elements of an IRFA. A copy of the full SBAR Panel Report is available
in the rulemaking docket.
The SBAR Panel recommended that EPA:
(1) Solicit comment on whether to provide for programmatic-based
deferral of the requirement for owners and operators of facilities to
calculate an individual financial responsibility amount and to obtain a
financial responsibility instrument in situations where all facilities
regulated by a particular Federal or state mining program could qualify
for reductions for the full response component of the financial
responsibility formula--that is, for all response categories, and at
all facilities.
(2) propose to allow reductions to the financial responsibility
amount applicable at facility for future requirements that are
enforceable against the owner and operator, that are supported by
adequate financial assurance, and with which the owner and operator are
in compliance, and solicit comment on allowing reductions to the
financial responsibility amount for other risk-reducing practices and/
or controls (e.g., voluntary practices) that are implemented at
hardrock mining facilities that should be accounted for in the
reductions, and on how, if reductions were allowed for such practices
and/or controls, EPA could assure that those controls would remain in
place and be effective over time where there is no regulatory program
overseeing their maintenance and operation.
(3) provide in the rule discussion and solicitation of comment on
the impact of the financial test on small businesses. The discussion
and solicitation of comment should consider whether making a financial
test available would increase the available capacity for third-party
instruments in the marketplace and increase the availability of such
instruments to owners or operators of small businesses and/or whether
it would create a competitive disadvantage for small business, and
solicit comment on those concerns.
(4) solicit comment on all aspects of the proposed financial
responsibility formula, including comment on specific elements of the
formula such as the robustness of the regression analyses,
identification and treatment of influential data points (i.e. potential
outliers), the use and calculation of the individual smear factors, and
the assumption of source controls.
(5) solicit comment on the criteria used to identify lower-level of
risk of injury classes in the proposed rule, and whether it would be
feasible and appropriate to identify additional classes as presenting a
lower level of risk of injury, particularly classes of mines that
differ in their operations and associated risks from more traditional
hardrock mines, and on whether such classes of mines, defined based on
facility characteristics, could potentially encompass iron ore,
phosphate, and uranium mines.
(6) request comment on whether more alternate or more flexible
engineering standards can substitute for some or all of the numeric
engineering standards in the proposed reduction criteria (e.g. planning
for a 200-year storm event, reduction of net precipitation by 95
percent), on whether the proposed reduction criteria would limit
flexibility necessary for innovative or different site-specific
approaches and, if so, how those might be preserved, and on whether
other regulatory programs already impose the requirements that would
satisfy the reduction criteria.
EPA revised the rule to include in Sec. 320.63 a proposal to allow
reductions to the financial responsibility amount applicable at
facility for future requirements that are enforceable against the owner
and operator, that are supported by adequate financial assurance, and
with which the owner and operator are incompliance. These reductions
are described in section VI.D.4. of this preamble. EPA also solicited
comment on most of the areas recommended by the Panel.
4. Projected Reporting, Recordkeeping, and Other Compliance
Requirements of the Proposed Rule
EPA estimates industry costs for the owner/operator companies that
are unable to utilize a self-insurance option under the proposed rule
as the resources expended and/or foregone to obtain a third-party
financial responsibility instrument. Additional administrative and
recordkeeping costs to industry include reading the regulations,
submitting initial facility information to EPA and the public,
calculating financial responsibility amounts, choosing a financial
responsibility instrument, acquiring and maintaining a financial
responsibility instrument, recalculating financial responsibility
amounts to reflect any changes in facility operations, and any
functions the rule requires of owners and operators upon the transfer
of a facility, owner or operator default, a CERCLA claim against the
owner or operator, and release from financial responsibility.
As described earlier, EPA began its assessment of the impact of
regulatory options on small entities by first estimating the number of
small entities owning hardrock mining facilities that would be subject
to the proposed rule. EPA then assessed whether these small entities
would be expected to incur costs that constitute a significant impact;
and whether the number of those small entities estimated to incur a
significant impact represent a substantial number of small entities.
To assess whether small entities' compliance costs might constitute
a significant impact, EPA averaged the annualized compliance costs as a
percentage of entity revenue (cost-to-revenue test). EPA compared the
resulting percentages to impacts criteria of one percent and three
percent of revenue. Small entities estimated to incur compliance costs
exceeding one or more of the one percent and three percent impact
thresholds were identified as potentially incurring a significant
impact.
Table C-1 shows that 35 to 49 small entities may face an average
annual compliance cost of greater than the one percent of revenues.
Similarly, 25 to 42 small entities may experience impact on revenues
above three percent. The results of the impacts analysis do not vary
significantly between the two regulatory options. However, impacts are
generally lower under Option 2 due to the lower compliance costs when a
financial test is available.
These results may suggest that a significant number of small
entities expected to incur annualized cost of more than the three
percent of the revenue thresholds. However, because of data
limitations, the screening level analysis relied upon estimated
financial responsibility amounts for each facility based on facility
type, rather than actual size and nature of operations. Further,
reliable and current revenues information for small, private firms was
not readily available. As a result, these results are not suggestive of
impacts for any specific company or entity.
5. Related Federal Rules
These are the only financial responsibility requirements for non-
transportation related facilities pursuant to CERCLA.
[[Page 3484]]
6. Description of Alternatives to the Proposed Rule
The Agency considered alternatives to provisions of this rule.
Those alternatives are discussed in section VII.K. of this preamble.
D. Unfunded Mandates Reform Act (UMRA)
This action contains a Federal mandate under UMRA, 2 U.S.C. 1531-
1538, that may result in expenditures of $100 million or more for
state, local and tribal governments, in the aggregate, or the private
sector in any one year. Accordingly, EPA has prepared a written
statement required under section 202 of UMRA. The statement is included
in the docket for this action and briefly summarized here.
The RIA estimates the rule may affect 221 hardrock mining and
processing facilities. EPA estimates that the regulation will have
aggregate annual compliance costs ranging from $111 million to $171
million to the private sector. A detailed assessment of the anticipated
costs and benefits (presented qualitatively) of the Federal mandate is
provided in the RIA.
In accordance with UMRA Sec. 205, EPA is proposing a range of
regulatory options. The options can be summarized as: (1) A financial
responsibility regulation that allows for a financial test, and (2) a
financial responsibility regulation that does not allow for a financial
test. These options are all considered to be technologically feasible
and economically achievable.
This action is not subject to the requirements of Sec. 203 of UMRA
because it contains no regulatory requirements that might significantly
or uniquely affect small governments.
E. Executive Order 13132: Federalism
EPA believes that this action will not have federalism implications
as defined by agency policy for implementing Executive Order 13132,
entitled ``Federalism.''
Earlier in the development of this proposed rule, EPA projected
that the CERCLA Sec. 108(b) rules would have federalism implications
under the terms of Executive Order 13132, and EPA planned certain
outreach activities accordingly. As discussed in Section IV of this
preamble, EPA spent significant time and effort gathering and
evaluating information on regulated entities and considering various
approaches to structuring the proposed rule. EPA also considered as
part of this the potential relevance of CERCLA Sec. 114(d). In light
of further development of the proposed rule and its resultant analysis
of the question of federalism implications as explained below, EPA has
come to expect that this action does not, in fact, have federalism
implications. Regardless of this determination on the applicability of
the Executive Order, EPA nonetheless engaged its intergovernmental
partners in the same pre-proposal outreach activities expected under
the Executive Order.
As part of the regulatory impact analysis, EPA analyzed the CERCLA
Sec. 108(b) proposed rule's potential for federalism implications as
defined in the Executive Order to include regulations that have
``substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government.'' EPA
typically considers a policy or regulation to have federalism
implications if it results in the expenditure by State and/or local
governments in the aggregate of $25 million or more nationally in any
one year, or if the policy or regulation results in preemption, whether
by intent or effect, of State of local government law. The proposed
CERCLA Sec. 108(b) rule does not impose requirements on, nor is
expected to result in significant expenditure by, state and/or local
governments. Further, as discussed in Section V of the preamble, EPA
does not believe that CERCLA Sec. 114(d) gives a preemptive effect to
EPA's CERCLA Sec. 108(b) financial responsibility regulations over
state reclamation bonding requirements.
In any case, this proposed rule is of significant interest to state
and/or local governments. Therefore, consistent with the EPA's policy
to promote intergovernmental communication and cooperation, and in
response to the considerable interest shown by states prior to and
during the development of this action, EPA engaged in extensive pre-
proposal consultation, under the auspices of Executive Order 13132, to
ensure that our state and local partners would have the opportunity to
provide meaningful and timely input into its development. EPA also
anticipates additional state and local government input in response to
the proposed rule. In this regard, EPA is interested in receiving
information on any state hazardous substance response program(s) that
require demonstrations of financial responsibility for claims made and
that states believe could be preempted by this proposal. EPA is
committed to continued interactions with the states before promulgating
any final rule.
F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments
This action does not have tribal implications as specified in
Executive Order 13175 (Executive Order 13175). Executive Order 13175,
Consultation and Coordination with Indian Tribal Governments,\222\
requires EPA to develop an accountable process to ensure ``meaningful
and timely input by tribal officials in the development of regulatory
policies that have tribal implications.'' EPA believes that any tribal
impacts from this regulation will be limited, because no tribal
governments own or operate facilities in the potentially regulated
universe.
---------------------------------------------------------------------------
\222\ See 65 FR 67249, November 9, 2000.
---------------------------------------------------------------------------
Earlier in the development of this proposed rule, EPA projected
that the CERCLA 108(b) rules would have tribal implications and EPA
planned certain outreach activities accordingly. As discussed in
Section IV of this preamble, EPA spent significant time and effort
gathering and evaluating information on regulated entities and
considering various approaches to structuring the proposed rule. In
light of further development of the proposed rule and its resultant
analysis of the question of tribal implications as explained below, EPA
has come to expect that this action does not, in fact, have tribal
impacts. Regardless, EPA held early engagement with tribal governments
as guided by EPA Policy on Consultation and Coordination with Indian
Tribes.
To assess the impact on tribal governments, EPA identified tribal
lands and associated tribes that overlap with the ``included'' universe
of currently operating facilities potentially subject to the CERCLA
Sec. 108(b) rulemaking. Relevant tribal lands were identified through
a GIS dataset available from the U.S. Census Bureau.\223\ This dataset
included the following legal and statistical entities: Federally
recognized American Indian reservations and off-reservation trust land
areas; \224\ State-recognized
[[Page 3485]]
American Indian reservations; Hawaiian home lands (HHLs); Alaska Native
village statistical areas (ANVSAs); Oklahoma tribal statistical areas
(OTSAs); Tribal designated statistical areas (TDSAs); and State
designated tribal statistical areas (SDTSAs).
---------------------------------------------------------------------------
\223\ See U.S. Census Bureau. (2014). ``TIGER/Line Shapefile,
2014, Series Information File for the Current American Indian/Alaska
Native/Native Hawaiian Areas National (AIANNH) National Shapefile.''
Accessed at: https://catalog.data.gov/dataset/tiger-line-shapefile-2014-series-information-file-for-the-current-american-indian-ala.
\224\ The Census Bureau defines off-reservation trust land as
``areas for which the United States holds title in trust for the
benefit of a tribe (tribal trust land) or for an individual American
Indian (individual trust land). Trust lands can be alienated or
encumbered only by the owner with the approval of the Secretary of
the Interior or his/her authorized representative. Trust lands may
be located on or off a reservation; however, the Census Bureau
tabulates data only for off-reservation trust lands with the off-
reservation trust lands always associated with a specific federally
recognized reservation and/or tribal government.''
See U.S. Census Bureau. ``Geographic Terms and Concepts--
American Indian, Alaska Native, and Native Hawaiian Areas.''
Accessed August 21, 2015 at: https://www.census.gov/geo/reference/gtc/gtc_aiannha.html.
---------------------------------------------------------------------------
To estimate the physical extent of the facilities, buffers of
varying sizes were projected around these coordinates in ArcGIS. Half
mile, one-mile, and ten-mile buffers were projected around each set of
coordinates. The number of facilities overlapping tribal lands varied
considerably depending on the size of the buffer used: with the half-
mile buffer, four facilities overlapped three tribal land areas; with
the one-mile buffer, six facilities overlapped four tribal land areas;
and with the ten-mile buffer, 35 facilities overlapped 38 tribal land
areas. A complete list of the facilities and tribes that fall within
these buffers is presented in the RIA.
EPA has concluded that this action will have limited tribal
implications to the extent that the facilities in its regulated
universe are located close to tribal lands. As no tribal governments
own or operate any of the regulated facilities, and therefore will not
incur any direct compliance costs as a result of the proposed rule,
Executive Order 13175 does not apply to this rule.
Although Executive Order 13175 does not apply, the EPA consulted
with tribal officials during the development phase of the proposed
rule, consistent with the EPA Policy on Consultation and Coordination
with Indian Tribes. In early June 2016, EPA sent letters to all
federally recognized Indian tribes, notifying them of the opportunity
to provide input to the proposed rule during the consultation and
coordination period. EPA conducted tribal outreach activities including
a tribal webinar on June 22, 2016, and conference calls with the
National Tribal Caucus on August 3, 2016, and the Great Lakes Fish and
Wildlife Commission on August 8, 2016. EPA also participated in the
Tribal Lands and Environment Forum from August 15-18, 2016, where
several tribal leaders expressed interest in the proposed rulemaking.
The EPA also intends to hold a second round of consultation and
coordination with tribal officials aligned with the public comment
period for the proposed rule. EPA also intends to summarize comments
and input received from both consultation and coordination periods with
the final action.
G. Executive Order 13045: Protection of Children From Environmental
Health and Safety Risks
This action is not subject to Executive Order 13045 because EPA
does not expect the environmental health risks or safety risks
addressed by this action present a disproportionate risk to children.
EPA expects that by adjusting the amount of financial responsibility to
account for environmentally safer practices, the proposed rule would
provide an incentive for implementation of sound practices at hardrock
mining facilities and thereby decrease the need for future CERCLA
actions. To the extent that environmental conditions surrounding mine
sites improve following this rule, the children living in close
proximity to mining facilities are likely to benefit. To assess the
proportional distribution of the benefits of the proposed rule, EPA
prepared an analysis of the demographic characteristics of populations
surrounding hardrock mining site to identify the number and proportion
of children living in close proximity to these sites. This analysis is
presented in the Regulatory Impact Analysis (RIA), which is available
in the docket.
As discussed in the RIA, of the 775,000 people living within one
mile of regulated facilities, approximately 188,000 or 24.3 percent,
are under the age of 18. Nationwide, approximately 23.5 percent of the
population is under the age of 18. To the extent that environmental
conditions surrounding mine and mineral processor sites improve
following this rule, the children living in close proximity to mining
facilities are likely to benefit.
H. Executive Order 13211: Actions That Significantly Affect Energy
Supply, Distribution, or Use
This action is not a ``significant energy action'' because it is
not likely to have a significant adverse effect on the supply,
distribution or use of energy. This proposed rule would establish
financial responsibility requirements under CERCLA designed to assure
that owners and operators of facilities provide funds to address CERCLA
liabilities at their sites, and to create incentives for sound
practices that will minimize the likelihood of a need for a future
CERCLA response. The proposed rule is not expected to impact energy
production, distribution, or consumption.
I. National Technology Transfer and Advancement Act (NTTAA)
This rulemaking does not involve technical standards.
J. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations
EPA believes that this action does not have disproportionately high
and adverse human health or environmental effects on minority
populations, low-income populations and/or indigenous peoples, as
specified in Executive Order 12898 (59 FR 7629, February 16, 1994).
The documentation for this decision is contained in the Regulatory
Impact Analysis (RIA). A copy of the RIA can be found in the docket for
this rule. As discussed in Section 8 of the RIA, EPA examined whether
the actions being proposed under the proposed rules present
environmental justice concerns for communities surrounding mining
facilities.
EPA conducted an analysis of demographic characteristics of
populations near hardrock mining and mineral processing facilities to
determine whether the benefits of the proposed rule are differentially
distributed. For this analysis, the agency analyzed national census
population data within one-mile, five-mile, 15-mile, and 25-mile radii
from mining facilities, and compared them with the demographic
characteristics of states and national levels. Of the 221 hardrock
mining/mineral processing facilities in the RIA universe, the total
population within one mile of these sites is approximately 775,000
people, of which 260,000 (34 percent), belong to a minority group. In
addition, 157,000 (21 percent) live below the Federal Poverty Level.
Both of these proportions are roughly comparable to nationwide
benchmarks. Nationally, 37 percent of the population belongs to a
minority group, and 16 percent of the population lives below the
Federal Poverty Level. The analysis also compared the concentrations of
minority groups and people living in poverty to state averages. The
results show that within one-mile radius, 230 (36 percent) census block
groups exceeded the statewide minority average, and 356 (56 percent)
census block groups exceeded their respective statewide poverty levels.
EPA expects this proposed rule will, when made final, increase the
likelihood that owners and operators will provide funds necessary to
address the CERCLA liabilities at their facilities, thus preventing
owners or operators from shifting the burden of cleanup to
[[Page 3486]]
other parties, including the taxpayer. In addition, EPA expects that by
adjusting the amount of financial responsibility to account for
environmentally safer practices, the proposed rule would provide an
incentive for implementation of sound practices at hardrock mining
facilities and thereby decrease the need for future CERCLA actions.
Groups within the proximity of hardrock mining sites are expected to
benefit from the environmental performance improvements, and other
benefits of the rule. This analysis shows that the percentage of
minority and low-income populations in and near hardrock mining sites
are proportionally represented (in some case higher) compared to
national and state averages. This analysis indicates that minority and
low-income communities are expected to benefit as much as any other
group under the proposed rule.
List of Subjects in 40 CFR Part 320
Environmental protection, Financial responsibility, Hardrock
mining, Hazardous substances.
Dated: December 1, 2016.
Gina McCarthy,
Administrator.
For the reasons set forth in the preamble, title 40, chapter I of
the Code of Federal Regulations is proposed to be amended by adding
part 320 to read as follows:
PART 320--FINANCIAL RESPONSIBILITY REQUIREMENTS FOR CERCLA
LIABILITIES
Subpart A--General Facility Requirements
Sec.
320.1 Purpose, scope.
320.2 Applicability.
320.3 Definitions and usage.
320.4 Availability of information; confidential business
information.
320.5 Notification requirement.
320.6 General information submission requirements.
320.7 Requirement for electronic submission of information.
320.8 Recordkeeping requirements.
320.9 Requirements for public notice.
Subpart B--General Financial Responsibility Requirements
320.20 Applicable financial responsibility amounts.
320.21 Procedures for establishing financial responsibility.
320.22 Maintenance of instruments.
320.23 Incapacity of owners or operators, corporate guarantors, or
financial institutions.
320.24 Notification of claims brought against owners, operators, or
guarantors.
320.25 Facility transfer.
320.26 Notification of cessation of operations.
320.27 Release from financial responsibility requirements.
Subpart C--Available Financial Responsibility Instruments.
320.40 Letter of credit.
320.41 Surety bond.
320.42 Insurance.
320.43 [Reserved] (Option 1--Preferred Option).
320.43 Financial test (Option 2).
320.44 [Reserved] (Option 1--Preferred Option).
320.44 Corporate guarantee (Option 2).
320.45 Trust fund.
320.46 Use of multiple financial responsibility instruments.
320.47 Use of a financial instrument for multiple facilities.
320.48 Consolidated form and multiple owners and/or operators.
320.49 [Reserved]
320.50 Wording of the Instruments.
Subpart D--G [Reserved]
Subpart H--Hardrock Mining Facilities
320.60 Applicability
320.61 Timeframes for Compliance
320.62 Definitions
320.63 Determining the Financial Responsibility Amount
320.64 Information Submission and Recordkeeping Requirements
320.65 Third-party Certification.
Subpart A--General Facility Requirements
Sec. 320.1 Purpose and Scope.
(a) The purpose of this part is to establish requirements under
Sec. 108(b) of the Comprehensive Environmental Response, Compensation,
and Liability Act (CERCLA), 42, U.S.C. 9601, et seq., for current
owners and operators of non-transportation-related facilities to
establish and maintain evidence of financial responsibility.
(b) The amount of financial responsibility under this part must be
consistent with the degree and duration of risk associated with the
production, transportation, treatment, storage, or disposal of
hazardous substances at their facilities, and must be available to pay
for the response costs, health assessment costs, and natural resource
damages under CERCLA for which the owner and operator are responsible.
Sec. 320.2 Applicability.
(a) The regulations of this part apply to current owners and
operators of facilities that are authorized to operate, or should be
authorized to operate, on or after the effective date of the rule under
which they become subject to this part. The Federal Government and
States are exempt from the requirements of this part.
(b) Owners and operators of all facilities within the classes
identified in Table A-1 must comply with the applicable requirements of
subparts A through C of this part.
(c) Owners and operators of facilities identified in Table A-1 of
this section must also comply with the applicable class-specific
requirements as specified in Table A-1 of this section.
(d) The requirements of this part apply until EPA releases the
owner and operator from the obligation to maintain financial
responsibility for its facility in accordance with Sec. 300.25 or
Sec. 300.27.
Table A-1
----------------------------------------------------------------------------------------------------------------
Facility class(es) Effective date Applicable class-specific requirements
----------------------------------------------------------------------------------------------------------------
Owners and operators of hardrock [Date 30 days after date of Subpart H.
mining facilities identified in publication of Final Rule].
Sec. 320.60(a).
----------------------------------------------------------------------------------------------------------------
Sec. 320.3 Definitions and usage.
(a) As used in this part, words in the singular include the plural;
words in the plural include the singular; and words in the masculine
gender also include the feminine and neuter genders as the case may
require.
(b) When used in this part, the following terms have the meanings
given in this paragraph. Terms not defined in this part have the
meaning given by CERCLA or the national Oil and Hazardous Substances
Pollution Contingency Plan, 40 CFR part 300.
Administrator means the EPA Administrator, or designee thereof.
Authoriz(-ed)(-ation) to operate means the owner or operator has
obtained permission through a permit, license, or other legally
applicable form of permission to conduct the activities under Federal,
state, or local law, and is irrespective of the level of activity at
the facility that causes the owner and operator to be subject to this
part.
Current Sec. 108(b) financial responsibility amount means the most
[[Page 3487]]
recent amount required to be prepared under Sec. 320.20 of this part.
Electronic financial responsibility reporting compliance date means
the date that EPA announces in the Federal Register, on or after which
owners and operators are required to file submissions required by this
part in an EPA electronic system, or its successor system.
Enforceable Document means a document issued under a Federal,
state, tribal, or local governmental authority, to which the owner or
operator is currently subject, and the requirements of which can be
enforced against the owner or operator by the issuing authority. An
enforceable document can be a permit, a settlement, an order, or any
other document that meets the above criteria.
Parent Corporation means a corporation that directly owns at least
50 percent of the voting stock of the corporation which is the facility
owner or operator; latter corporation is deemed a subsidiary of the
parent corporation.
Substantial Business Relationship means the extent of a business
relationship necessary under applicable State law to make a guarantee
contract issued incident to that relationship valid and enforceable. A
``substantial business relationship'' must arise from a pattern of
recent or ongoing business transactions, in addition to the guarantee
itself, such that a currently existing business relationship between
the guarantor and the owner or operator is demonstrated to the
satisfaction of the Administrator.
Sec. 320.4 Availability of information; confidential business
information.
(a) Any information provided to EPA under this part, or required to
be provided to the public by the owner or operator under this part,
will be made available to the public to the extent and in the manner
authorized by the Freedom of Information Act, 5 USC 552, section 104 of
CERCLA, and EPA regulations implementing the Freedom of Information Act
and section 104 of CERCLA, as applicable.
(b) Any person who submits information to EPA in accordance with
this part, or who is required to provide information to the public
under this part, may assert a claim of business confidentiality
covering part or all of that information by following the procedures
set forth in Sec. 2.203(b). Information covered by such a claim will
be disclosed by EPA, or will be required to be released by the owner or
operator only to the extent, and by means of the procedures, set forth
in part 2, subpart B, of this chapter. However, if no such claim
accompanies the information when it is received by EPA, it may be made
available to the public without further notice to the person submitting
it.
(c) Assertions of claims of business confidentiality will not be
considered by EPA if the information is covered by a Class
Determination of non-confidentiality.
Sec. 320.5 Notification requirement.
(a) (1) Each owner and operator that is authorized to operate or
should be authorized to operate on the effective date of the final rule
under which the facility becomes subject to the requirements of this
part must complete the Notification Form in Appendix A of this part,
providing all information requested, and submit it to the Administrator
within thirty days of the effective date of that regulation.
(2) Owners or operators that become authorized to operate after the
effective date of the final rule that makes their facility subject to
the requirements of this part must submit the notification form
required in paragraph (a)(1) of this section prior to beginning
operations.
(b) Within thirty days of receiving notification EPA will:
(1) Provide the owner or operator acknowledgement of receipt of the
notification, and
(2) If the facility has not received one, assign and provide an EPA
Identification number to the facility.
(c) Owners and operators must notify EPA of changes at their
facilities by updating their Notification Form, and/or other documents
required under the applicable class-specific subpart, and resubmitting
it to EPA within thirty days of the change.
Sec. 320.6 General information submission requirements.
Owners and operators must submit information as required by this
part to support financial responsibility requirements including:
(a) The notification form required in Sec. 320.5;
(b) Information required under the public involvement requirements
of Sec. 320.9;
(c) Notifications required under subpart B of this part;
(d) Demonstration of financial responsibility as required under
subpart C of this part; and
(e) Information required under class-specific requirements
identified in Table 1 of Sec. 320.1(f) as applicable to the facility.
Sec. 320.7 Requirement for electronic submission of information.
(a) Information submitted to the Administrator under the
requirements of this part must be submitted in paper format until the
electronic reporting compliance date, defined in Sec. 320.3.
(b) Electronic submissions that are obtained, completed, and
transmitted in accordance with this section, and used in accordance
with this section, are the legal equivalent of paper submissions
bearing handwritten signatures, and satisfy for all purposes any
requirement in these regulations to obtain, complete, sign, provide,
use, or retain such information.
(c) Where an electronic signature is required, such signature must
be a legally valid and enforceable signature under applicable EPA and
other Federal requirements pertaining to electronic signatures.
(d) The Administrator may waive the requirement for electronic
submission under the following conditions:
(1) General waiver. The Administrator may grant a general waiver
for a renewable period of one year to owners or operators that cannot
comply with the requirement for electronic submission. The owner or
operator must submit a written request for a general waiver to the
Administrator at least thirty days in advance of the date the first
submission that would be subject to the requested general waiver is due
to EPA or, for a renewal, thirty days in advance of the expiration of
the waiver. The request for a general waiver must describe the
conditions(s) in paragraphs (i) through (iv) that prevent electronic
submission of information. The Administrator may grant a general waiver
upon a finding that:
(i) The owner or operator is unable to gain access to a system
allowing electronic reporting because the owner or operator is located
in an area with insufficient broadband access;
(ii) Obtaining a system to support electronic submission would
impose an undue cost burden on the owner or operator,
(iii) The owner or operator's electronic system is incompatible
with the Agency's, or
(iv) Religious practices of the owner or operator prohibit the use
of necessary technologies.
(2) Emergency waiver. The Administrator may grant a non-renewable
emergency waiver for an individual submission required under this part
to an owner or operator that would not is unable to comply with the
requirement for electronic submission. The owner or operator must
submit a written request for an emergency waiver
[[Page 3488]]
within ten days of the date the submission was due to EPA. The request
for an emergency waiver must describe the condition(s) in paragraphs
(i) through (iii) that prevented the electronic submission of
information and must be accompanied by a paper copy of the information
due. The Administrator may grant an emergency waiver upon a finding
that one of the following events occurred that prevented the electronic
submission of information by the owner or operator:
(i) A large-scale national disaster (e.g., hurricane);
(ii) A prolonged electronic reporting system outage; or
(iii) A prolonged failure of the owner's and operator's computer
system.
Sec. 320.8 Recordkeeping requirements.
(a) The owner or operator must develop a facility record that
contains information related to its compliance with the financial
responsibility requirements under this part.
(b) The facility record must include, at a minimum, the information
that must be submitted to EPA under Sec. 320.6(a), as applicable, and
all notifications received from EPA related to the financial
responsibility obligations of the facility.
Sec. 320.9 Requirements for public notice.
[PROPOSED REGULATORY TEXT FOR APPROACH 1]
(a) Within sixty days of the date it becomes subject to the
requirements of this part, the owner or operator must establish and
maintain a website titled ``CERCLA Section 108(b) Financial
Responsibility Information' and submit to EPA the URL of a location on
its company Web site where it will make information available to the
public.
(b) Within thirty days of receiving the URL, EPA will post on its
website notice to the public that the facility is subject to Sec.
108(b) requirements, and provide the public the facility name, EPA ID,
and the URL.
(c) Beginning ninety days after the effective date of the final
rule under which the facility becomes subject to the requirements of
this part, the owner or operator must make information available to the
public on its company website at the URL provided to EPA. The initial
posting must include at least the information required under paragraph
(d)(1).
(d) The information on the website must include, at a minimum:
(1) The current name and contact information for a person that will
provide the public information about the facility's financial
responsibility requirement under CERCLA Sec. 108(b);
(2) Information the owner or operator is required to submit, or has
submitted, to EPA under this part so long as that information is not
successfully claimed as Confidential Business Information under 40 CFR
2.203(b).
(3) Notifications from EPA to the owner or operator.
(e) The owner or operator must assure that the information is
readily available to the public by placing it in a prominent position
on the company's website, and by assuring that public access is not
obstructed by complex or overly burdensome access processes, passwords,
or other information requirements.
(f) The owner or operator must update the website with new
information including information submitted to EPA in compliance with
this part. Information submitted to EPA must be posted on the owner or
operator's website within thirty days of submitting it to EPA.
[PROPOSED REGULATORY TEXT FOR APPROACH 2]
(a) EPA will provide the public information related to facilities
subject to financial responsibility requirements under this part. That
information may include, at a minimum:
(1) The current name and contact information for a person that can
provide the public information about the facility's financial
responsibility requirement under this part;
(2) Information the owner or operator is required to submit, or has
submitted, to EPA under this part so long as that information is not
successfully claimed as Confidential Business Information under 40 CFR
2.203(b).
(3) Notifications from EPA to the owner or operator.
Subpart B--General Financial Responsibility Requirements
Sec. 320.20 Applicable financial responsibility amounts.
Owners and operators must calculate a current amount of financial
responsibility at their facilities in accordance with the requirements
of this section, and in accordance with applicable class-specific
subparts identified in Sec. 320.1(f) Table 1.
Sec. 320.21 Procedures for establishing financial responsibility.
Owners and operators must submit evidence of financial
responsibility and supporting information to EPA in accordance with the
requirements of this section, and in accordance with applicable class-
specific subparts identified in Sec. 320.2 Table 1.
Sec. 320.22 Maintenance of instruments.
(a) An owner or operator must recalculate the financial
responsibility level three years after the date the owner or operator
is first required to submit the full amount of financial responsibility
under Sec. 320.61, every three years thereafter, and within sixty days
after every successful claim against a CERCLA Sec. 108(b) financial
responsibility instrument. The recalculation must use the most current
facility information available. The owner or operator must submit the
revised financial responsibility amount to EPA, along with supporting
documentation.
(b) If the resulting amount of financial responsibility required is
greater than the amount of financial responsibility provided by the
current CERCLA Sec. 108(b) financial responsibility instrument(s), the
owner or operator must submit evidence of the increased value of the
instrument(s) within sixty days of the recalculation.
(c) If the resulting amount of financial responsibility required is
less than the amount of financial responsibility provided by the
current CERCLA Sec. 108(b) financial responsibility instrument(s), the
owner and operator may submit a written request to the Administrator to
lower the required financial responsibility amount at the facility. The
request must include updated information to support the revised
financial responsibility amount. The amount of financial responsibility
required at the facility may be reduced to the recalculated amount only
with written approval by the Administrator.
Sec. 320.23 Incapacity of owners or operators, corporate guarantors,
or financial institutions.
[PROPOSED REGULATORY TEXT FOR OPTION 1 (Preferred Option)]
(a) An owner or operator must notify the Regional Administrator by
certified mail of the commencement of a voluntary or involuntary
proceeding under Title 11 (Bankruptcy), U.S. Code, naming the owner or
operator as debtor, within ten days after commencement of the
proceeding.
(b) An owner or operator who demonstrates financial responsibility
under this part by obtaining a trust fund, surety bond, letter of
credit, or insurance policy will be deemed to be without the required
financial responsibility in the event of bankruptcy of the trustee or
issuing institution, or a suspension or revocation of the authority of
the trustee
[[Page 3489]]
institution to act as trustee or of the institution issuing the surety
bond, letter of credit, or insurance policy to issue such instruments.
The owner or operator must provide other evidence of financial
responsibility within sixty days after such an event.
[PROPOSED REGULATORY TEXT FOR OPTION 2]
(a) An owner or operator must notify the Administrator by certified
mail of the commencement of a voluntary or involuntary proceeding under
Title 11 (Bankruptcy), U.S. Code, naming the owner or operator as
debtor, within ten days after commencement of the proceeding. A
corporate guarantor of a corporate guarantee as specified in Sec.
320.44, if named as a debtor, must make such a notification, as
required under the terms of the corporate guarantee (Sec. 320.50(f)).
(b) An owner or operator who demonstrates financial responsibility
under this part by obtaining a trust fund, surety bond, letter of
credit, or insurance policy will be deemed to be without the required
financial responsibility in the event of bankruptcy of the trustee or
issuing institution, or a suspension or revocation of the authority of
the trustee institution to act as trustee or of the institution issuing
the surety bond, letter of credit, or insurance policy to issue such
instruments. The owner or operator must provide other evidence of
financial responsibility within sixty days after such an event.
Sec. 320.24 Notification of claims brought against owners, operators,
or guarantors.
An owner or operator subject to this part must notify the
Administrator by certified mail of the filing of any claim pursuant to
CERCLA naming the owner or operator or the owner or operator's
guarantor, as defendant, within ten days after commencement of the
proceeding. Such notification shall include a copy of any papers filed
by the claimant with a court, or other information allowing the
Administrator to identify the court, case name and number, and parties.
Sec. 320.25 Facility transfer.
(a) If a facility, or a portion of a facility, subject to the
requirements of this part is sold or otherwise transferred to another
owner, or if the operation of a facility is transferred to another
operator, the previous owner or operator must maintain financial
responsibility for the facility, or transferred portion of the
facility, in accordance with this part, until the Administrator
releases the previous owner or operator from the obligation to maintain
financial responsibility under paragraph (b) of this section.
(b) Any new owner or operator of a facility must provide evidence
of financial responsibility as required in this part for the facility
or portion of the facility prior to assuming ownership or operation.
Upon the new owner or operator's demonstration of financial
responsibility in accordance with this part, the Administrator will
provide notice to the prior owner and operator that they are no longer
required to provide evidence of financial responsibility in accordance
with this part.
Sec. 320.26 Notification of cessation of operations.
The owner or operator must notify the Administrator thirty days
prior to:
(1) The date the facility is no longer authorized to operate, or
(2) The date the owner or operator is required under another
applicable regulatory program to notify the relevant regulatory
authority that the facility is ceasing operations, whichever is
earlier.
Sec. 320.27 Release from financial responsibility requirements.
(a) The owner or operator may petition to be released from its
obligations under this part by submitting a request to the
Administrator, which must include evidence demonstrating that the
degree and duration of risk associated with the production,
transportation, treatment, storage and disposal of hazardous substances
is minimal. Upon receiving such request, the Administrator will
evaluate facility information, including the information submitted by
the owner or operator, regarding the degree and duration of risk
associated with the production, transportation, treatment, storage, and
disposal of hazardous substances at the facility, and make a
determination regarding the owner's or operator's request.
(1) If the Administrator determines that the degree and duration of
risk associated with the production, transportation, treatment,
storage, and disposal of hazardous substances at the facility is
minimal, and that the facility should therefore be released from the
requirements of this part, the Administrator will post the draft
decision on the EPA website, provide the public opportunity to comment
on the decision, and post the Agency's final decision, and response to
comments received, on the EPA website.
(2) If the Administrator determines (either initially or following
consideration of public comment during the procedures described in
paragraph (a)(1) of this section), that the degree and duration of risk
associated with the production, transportation, treatment, storage, and
disposal of hazardous substances is not minimal, the Administrator will
not release the owner or operator from the requirement to maintain
financial responsibility in accordance with this part. The
Administrator will provide notice of the Agency's final decision, and
response to comments received, and will provide the owner or operator a
detailed written statement explaining the decision.
(3) An owner or operator that petitions the Administrator under the
procedures in this section and does not obtain a release from
requirements under this part may submit a petition for a renewed
determination under this section only if the owner or operator can
provide additional, relevant information, not previously considered by
the Administrator, demonstrating that there is minimal risk associated
with the production, transportation, treatment, storage, and disposal
of hazardous substances at the facility.
(b) [Reserved].
Subpart C--Available Financial Responsibility Instruments
[PROPOSED REGULATORY TEXT FOR OPTION 1 (Preferred Option)]
Owners and operators may demonstrate financial responsibility using
one or a combination of the financial responsibility instruments
provide in Sec. Sec. 320.40 through 320.43.
[PROPOSED REGULATORY TEXT FOR OPTION 2]
Owners and operators may demonstrate financial responsibility using
one or a combination of the financial responsibility instruments
provide in Sec. Sec. 320.40 through 320.45.
Sec. 320.40 Letter of Credit.
(a) An owner or operator may satisfy the requirements of this part
by obtaining an irrevocable standby letter of credit which conforms to
the requirements of this section and is issued by an institution which
has the authority to issue letters of credit and whose letter of credit
operations are regulated and examined by a Federal or state agency.
(b) The wording of the letter of credit must be identical to the
wording specified in Sec. 320.50(b). The letter of credit must either
be issued in favor of:
(1) The trustee of a trust fund established by an agreement worded
identical to the language in Sec. 320.50(a) and must authorize the
trustee to make draws on the letter of credit to
[[Page 3490]]
administer the claims process for CERCLA response costs, health
assessment costs, and natural resource damages in accordance with the
terms of the trust agreement; or
(2) Any and all third-party CERCLA claimants and must provide for
payment directly to claimants for CERCLA response costs, health
assessment costs, and natural resource damages.
(c) If the letter of credit is issued in favor of the trustee of a
trust fund, the owner or operator must submit a certified copy of the
letter of credit to the Administrator and submit the original letter of
credit to the trustee authorized to make draws on the letter of credit.
An acknowledgment of the receipt of the letter of credit from the
trustee must be submitted by the owner or operator to the
Administrator.
(d) If the letter of credit is issued in the favor of any and all
third-party CERCLA claimants, the owner or operator must submit the
originally signed letter of credit to the Administrator.
(e) An owner or operator who uses a letter of credit to satisfy the
requirements of this part must also establish a trust fund and update
Schedule A of the trust agreement within sixty days after a change in
the amount of CERCLA Sec. 108(b) financial responsibility. This trust
fund must meet the requirements of the trust fund specified in Sec.
320.45, except that:
(1) An originally signed duplicate of the trust agreement must be
submitted to the Administrator with the original or the certified copy
of the letter of credit; and
(2) Unless the trust fund is funded pursuant to the requirements of
this part, including by holding the letter of credit as specified in
this section, the following are not required by these regulations:
(i) Payments into the trust fund as specified in Sec. 320.45;
(ii) Annual valuations as required by the trust agreement; and
(iii) Notices of payment as required by the trust agreement.
(f) The letter of credit must be irrevocable and issued for a
period of at least one year. The letter of credit must provide that the
expiration date will be automatically extended for a period of at least
one year unless, at least 120 days before the current expiration date,
the issuing institution notifies both the owner or operator, the trust
fund trustee (if the letter is issued in favor of the trustee), and the
Administrator by certified mail of a decision not to extend the
expiration date. Under the terms of the letter of credit, the 120 days
will begin on the date when the owner or operator, the trust fund
trustee (if applicable), and the Administrator have received the
notice, as evidenced by the return receipts. If the issuing institution
timely notifies the owner or operator, the trustee, and the
Administrator, and the owner or operator fails to submit and obtain the
Administrator's approval of alternate financial responsibility within
ninety days of the receipt of such notice, the Administrator is
authorized to draw on the letter of credit as specified in paragraphs
(k) and (l) of this section.
(g) The letter of credit must be issued in an amount at least equal
to the current required CERCLA Sec. 108(b) financial responsibility
amount, except as provided in Sec. 320.46.
(h) Whenever the required amount of CERCLA Sec. 108(b) financial
responsibility increases to an amount greater than the credit, the
owner or operator, within sixty days after the increase, must either
cause the credit to be increased to an amount at least equal to the
CERCLA Sec. 108(b) financial responsibility amount and submit evidence
of such increase to the Administrator and the trust fund trustee (if
the letter is issued in favor of the trustee), or obtain other
financial responsibility as specified in this part to cover the
increase. Whenever the required amount of CERCLA Sec. 108(b) financial
responsibility decreases, the credit may be reduced to the amount of
the current required CERCLA Sec. 108(b) financial responsibility
amount following written approval by the Administrator.
(i) If the letter of credit is issued in favor of the trust fund
trustee, parties may make claims against the trust fund in accordance
with the terms of the trust agreement in order to receive payment from
the letter of credit.
(j) If the letter of credit provides for direct payment, claimants
may make claims as follows:
(1) Any party that obtains a final judgment from a Federal court
awarding CERCLA response costs, health assessment costs, and/or natural
resource damages associated with the facility against any of the
current owners or operators may make a claim against the letter of
credit. The party may only make a claim after the thirtieth day after
the judgement and if they have not recovered or been paid the funds
from any other source.
(2) The Administrator or other authorized Federal agency may make a
claim against the letter of credit for payment if payment has not been
made as required by a CERCLA settlement associated with the facility
between a current owner or operator and EPA or another Federal agency.
(3) The Administrator or another authorized Federal agency may make
a claim against the letter of credit requesting payment into a trust
fund established pursuant to a CERCLA unilateral administrative order
issued to a current owner or operator if performance at the facility as
required by the order has not occurred. The Administrator or another
Federal agency may only make the claim against the letter of credit if
the owner or operator has provided a written statement that the letter
of credit may be used to assure the performance of the work required in
the order.
(k) If the owner or operator does not establish alternate financial
responsibility as specified in this part and obtain written approval of
such alternate financial responsibility from the Administrator within
ninety days after receipt by the owner or operator, the trust fund
trustee (if the letter is issued in favor of the trustee), and the
Administrator of a notice from the issuing institution that it has
decided not to extend the letter of credit beyond the current
expiration date:
(1) The Administrator will draw on the letter of credit if the
letter of credit is issued in favor of any and all third party CERCLA
claimants; or
(2) If the letter of credit is issued in favor of the trust fund
trustee, the Administrator will inform the trustee of the trust fund
that the owner or operator did not establish alternate financial
responsibility and obtain written approval of such alternate financial
responsibility within ninety days. In accordance with the terms of the
trust agreement, this notice will prompt the trustee to draw on the
letter of credit and deposit any unused portion of the letter of credit
into the trust fund.
(l) The Administrator may delay the drawing or the notification to
the trustee of the trust fund that the owner or operator did not
establish alternate financial responsibility and obtain written
approval of such alternate financial responsibility within ninety days
if the issuing institution grants an extension of the term of the
credit. During the last thirty days of any such extension the
Administrator will draw on the letter of credit or notify the trustee
of the trust fund that the owner or operator did not establish
alternate financial responsibility and obtain written approval of such
alternate financial responsibility if the owner or operator has still
failed to provide alternate financial responsibility as specified in
this section and obtain
[[Page 3491]]
written approval of such financial responsibility from the
Administrator.
(m) The Administrator will return the letter of credit to the
issuing institution for termination or agree to the termination of the
trust holding the letter of credit when:
(1) An owner or operator substitutes alternate financial assurance
as specified in this part; or,
(2) The Administrator releases the owner or operator from the
requirements of this part in accordance with Sec. 320.27.
Sec. 320.41 Surety bond.
(a) An owner or operator may satisfy the requirements of this part
by obtaining a surety bond which conforms to the requirements of this
paragraph and submitting the originally signed bond to the
Administrator.
(b) The surety company issuing the bond must, at a minimum, be
among those listed as acceptable sureties on Federal bonds in Circular
570 of the U.S. Department of the Treasury.
(c) The wording of the surety bond must be identical to the wording
specified in Sec. 320.50(c).
(d) A surety bond may be used to satisfy the requirements of this
section only if the Attorneys General or Insurance Commissioners of:
(1) The state in which the surety is incorporated, and
(2) Each state in which a facility covered by the surety bond is
located have submitted a written statement to EPA that a surety bond
executed as described in this section and Sec. 320.50(c) of this part
is a legally valid and enforceable obligation in that state.
(e) The surety bond may be issued by multiple sureties provided
that each is liable for its individual vertical percentage share of the
total penal sum of the bond.
(f) An owner or operator who uses a surety bond to satisfy the
requirements of this part must also establish a standby trust fund and
update Schedule A of the trust agreement within sixty days after a
change in the amount of CERCLA Sec. 108(b) financial responsibility.
This standby trust fund must meet the requirements specified in Sec.
320.45, except that:
(1) An originally signed duplicate of the trust agreement must be
submitted to the Administrator with the surety bond; and
(2) Until the standby trust fund is funded pursuant to the
requirements of this section, the following are not required by these
regulations:
(i) Payments into the trust fund as specified in Sec. 320.45;
(ii) Annual valuations as required by the trust agreement; and
(iii) Notices of nonpayment as required by the trust agreement.
(g) The surety bond must guarantee that the owner or operator will:
(1) Make payments or ensure that payments are made for CERCLA
response costs, health assessment costs, and/or natural resource
damages associated with the facility as required in a final court
judgment from a Federal court against any current owner or operator
within thirty days to the party or parties obtaining the judgment;
(2) Make payments or ensure payments are made as required in a
CERCLA settlement associated with the facility between any of the
current owners and operators at the facility and EPA or another Federal
agency;
(3) Perform or ensure the performance of the work required at the
facility by a CERCLA unilateral administrative order issued to any of
the current owners or operators by EPA or by another Federal agency for
which the owner or operator provides a written statement allowing for
the bond to assure performance of the work; and
(4) Provide alternate financial responsibility as specified in this
part or ensure that alternate financial responsibility as specified in
this part is provided for facilities covered by the bond, and obtain
the Administrator's written approval or ensure the Administrator's
written approval is obtained of the financial responsibility provided,
within ninety days after receipt by both the owner or operator and the
Administrator of a notice of cancellation of the bond from the surety.
(h) Under the terms of the surety bond, the surety will become
liable on the bond obligation when the owner or operator fails to
perform as guaranteed by the bond and must make payment in accordance
with the direction of the claimant and the terms of the bond. Provided,
however, the liability of the surety will be limited to the penal sum
of the bond plus the amount of any investigation or legal defense fees
incurred by the surety.
(i) The penal sum of the bond must be in an amount at least equal
to the required current CERCLA Sec. 108(b) financial responsibility
amount, except as provided in Sec. 320.46.
(j) Whenever the required amount of CERCLA Sec. 108(b) financial
responsibility increases to an amount greater than the penal sum, the
owner or operator, within sixty days after the increase, must either
cause the penal sum to be increased to an amount at least equal to the
CERCLA Sec. 108(b) financial responsibility amount and submit evidence
of such increase to the Administrator, or obtain other financial
assurance as specified in this section to cover the increase. Whenever
the required amount of CERCLA Sec. 108(b) financial responsibility
decreases, the penal sum may be reduced to the amount of the current
required CERCLA Sec. 108(b) financial responsibility amount following
written approval by the Administrator.
(k) Under the terms of the bond, the surety may cancel the bond by
sending notice of cancellation by certified mail to the owner or
operator and to the Administrator. Cancellation may not occur, however,
during the 120 days beginning on the date of receipt of the notice of
cancellation by both the owner or operator and the Administrator, as
evidenced by the return receipts.
(l) The owner or operator may terminate the bond if the
Administrator has given prior written authorization based on his
receipt of evidence of alternate financial responsibility as specified
in this part or the Administrator releases the owner or operator from
the requirements of this part in accordance with Sec. 320.27.
Sec. 320.42 Insurance.
(a) An owner or operator may satisfy the requirements of this part
by obtaining insurance for CERCLA response costs, health assessment
costs, and natural resource damages that conforms to the requirements
of this section. Each insurance policy must be amended by the
attachment of a CERCLA Sec. 108(b) endorsement as worded in Sec.
320.50(d).
(b) At a minimum, the insurer must be licensed to transact the
business of insurance, or eligible to provide insurance as an excess or
surplus lines insurer, in one or more states.
(c) The owner or operator must submit a signed duplicate original
of the CERCLA Sec. 108(b) financial responsibility endorsement to the
Administrator, or regional delegees of the Administrator as applicable
if the endorsement covers facilities located in multiple regions. The
endorsement must provide coverage effective when required by the
compliance schedule in Sec. 320.2.
(d) The owner or operator may obtain insurance from up to four
insurers to demonstrate CERCLA Sec. 108(b) financial responsibility.
If the owner operator obtained insurance from multiple insurers, an
endorsement from each insurer must be submitted and must provide that a
claimant may make a claim against each of the insurers providing
evidence of financial responsibility for the insurer's proportional
share of the CERCLA
[[Page 3492]]
Sec. 108(b) financial responsibility up to the face value of the
policy.
(e) The insurance policy must provide coverage for third-party
CERCLA claims against all current owners and operators at the facility
as required by this part.
(f) An owner or operator who uses insurance to satisfy the
requirements of this part must also establish a standby trust fund and
update Schedule A of the trust agreement within sixty days after a
change in the amount of CERCLA Sec. 108(b) financial responsibility.
This standby trust fund must meet the requirements of the trust fund
specified in Sec. 320.45, except that:
(1) An originally signed duplicate of the trust agreement must be
submitted to the Administrator with the endorsement; and
(2) Unless the standby trust fund is funded pursuant to the
requirements of this part, the following are not required by these
regulations:
(i) Payments into the trust fund as specified in Sec. 320.45;
(ii) Annual valuations as required by the trust agreement; and
(ii) Notices of payment as required by the trust agreement.
(g) The insurance must provide first dollar coverage irrespective
of any deductibles or self-insured retention both of which must be paid
by the insurer with a right of reimbursement from the insured. The
policy must be issued for a face amount at least equal to the required
current CERCLA Sec. 108(b) financial responsibility amount, except as
provided in Sec. 320.46, Sec. 320.1(g)(1) and paragraph (d) of this
section. The term ``face amount'' means the total amount the insurer is
obligated to pay under the policy as required by this section, without
sub-limits except for those that specify facility specific amounts of
coverage, exclusive of legal defense and investigation costs, and must
be segregated and independent from other coverage provided for by the
policy that is outside the scope of paragraphs (h), (i), (j), and (l)
of this section. Actual payments by the insurer will not change the
face amount, although the insurer's future liability will be lowered by
the amount of the payments.
(h) The policy must provide for the payment awarded in final court
judgments from a Federal court against any of the current owners and
operators for CERCLA response costs, health assessment costs, and/or
natural resource damages associated with the facility to the party
obtaining the judgment should such payment not be made within thirty
days.
(i) The policy must provide for payment as required by a CERCLA
settlement associated with the facility between any of the current
owners or operators at the facility and EPA or another Federal
government agency should payment as required by the settlement not be
made.
(j) The policy must also provide for payment into a trust fund
established pursuant to a CERCLA unilateral administrative order issued
to any of the current owners or operators at the facility by EPA or
another Federal agency in instances where performance at the facility
as required by the order does not occur. The owner or operator must
have provided a written statement allowing the insurance policy be used
to assure performance of the work required in the order.
(k) The endorsement must provide that cancellation, failure to
renew, or any other termination of the insurance by the insurer will be
effective only upon written notice to the owner operator and the
Administrator by certified mail and only after the expiration of 120
days beginning with the date of receipt of the notice by both the
Administrator and the owner or operator, as evidenced by the return
receipts. Such automatic renewal of the policy must, at a minimum,
provide the insured with the option of renewal at the face amount of
the expiring policy.
(l) The endorsement must specify that in instances where the owner
or operator fails to obtain alternate financial responsibility and
obtain written approval of such alternate financial responsibility from
the Administrator within ninety days after receipt by both the owner or
operator and the Administrator of a notice from the insurer that it has
decided to cancel, not renew or otherwise terminate the insurance
policy the insurer will be liable up to the face value of the policy
for payment into the standby trust following notification by the
Administrator.
(m) The endorsement must also provide that in the case of a release
or threatened release of (a) hazardous substance(s) from a facility
covered by the policy, the insurer acknowledges that any claim
authorized by section 107 or section 111 of CERCLA may be asserted
directly against the insurer as provided by CERCLA Sec. 108(c)(2).
Further, the endorsement must state that the insurer consents to suit
with respect to these claims subject to the limitations in section
108(d) of CERCLA.
(n) The owner or operator must maintain the insurance in full force
and effect until the Administrator consents to termination of the
insurance by the owner or operator as specified in paragraph (p) of
this section.
(o) Whenever the required CERCLA Sec. 108(b) financial
responsibility amount increases to an amount greater than the face
amount of the policy, the owner or operator, within sixty days after
the increase, must either cause the face amount of the policy to be
increased to an amount at least equal to the required amount and submit
evidence of such increase to the Administrator, or obtain other
financial responsibility as specified in this section to cover the
increase. Whenever the amount of required CERCLA Sec. 108(b) financial
responsibility decreases, the face amount may be reduced to the amount
of the current required CERCLA Sec. 108(b) amount following written
approval by the Administrator.
(p) The Administrator will give written consent to the owner or
operator that he or she may terminate the insurance policy when:
(1) An owner or operator substitutes alternate financial
responsibility as specified in this part; or
(2) The Administrator releases the owner or operator from the
requirements of this section in accordance with Sec. 320.27.
[PROPOSED REGULATORY TEXT FOR Sec. 320.43 OPTION 1 (Preferred Option)]
Sec. 320.43 [Reserved]
[PROPOSED REGULATORY TEXT FOR Sec. 320.43 OPTION 2]
Sec. 320.43 Financial Test.
(a) An owner or operator may satisfy the requirements of this
section, up to the amount specified in this section, by demonstrating
that it passes a financial test.
(1) To cover up to the full amount of financial responsibility
required at its facility, the owner or operator must have:
(i) At least one-long term credit rating of AAA, AA+, AA, AA-, A+,
A or A- as issued by Standard and Poor's (S&P), or an equivalent as
issued by another Nationally Recognized Statistical Rating Organization
(NRSRO);
(ii) Tangible net worth at least six times the amount of
environmental obligations, including guarantees, covered by a financial
test or guarantee, including this financial test and the corporate
guarantee in Sec. 320.44; and
(ii) Assets located in the United States amounting to either at
least ninety percent of total assets; or at least six times the amount
of financial responsibility obligations covered by a financial test or
guarantee, including this financial test and the corporate guarantee in
Sec. 320.44; and
(2) To cover up to one half of the value of the financial
responsibility
[[Page 3493]]
amount specified in this section, the owner or operator must have:
(i) At least one-long term credit rating of BBB+ or BBB as issued
by S&P, or the equivalents as issued by another NRSRO;
(ii) Tangible net worth at least six times the financial
responsibility obligations covered by a financial test or guarantee,
including this financial test and the corporate guarantee in Sec.
320.44; and
(ii) Assets located in the United States amounting to either at
least ninety percent of the firm's total assets or at least six times
the amount of financial responsibility obligations covered by a
financial test or guarantee, including this financial test and the
corporate guarantee in Sec. 320.44.
(b) To demonstrate that it satisfies this financial test, an owner
or operator must post on its website, include in its facility record,
and annually submit all of the following:
(1) A letter to the Administrator signed by its chief financial
officer (CFO) as worded in Sec. 320.50(e).
(2) A special report of procedures and findings from an independent
certified public accountant (CPA) resulting from an agreed-upon
procedures engagement in accordance with the American Institute of
Certified Public Accountants' (AICPA) Statement on Standards for
Attestation Engagements (SSAE) and Related Attestation Interpretations,
AT section 201--Agreed Upon Procedures Engagements, or any future
superseding standards set by AICPA or any superseding body. The report
would be required to describe the procedures performed and related
findings as to whether or not there were differences or discrepancies
identified between the financial information in the owner's or
operator's CFO's letter and the owner's or operator's most recent
audited annual financial statements. Where differences or discrepancies
were found in the comparison of the owner's or operator's CFO's letter
and the owner's or operator's most recent audited annual financial
statements, the report of procedures and findings would reconcile any
differences or discrepancies.
(3) A copy of the owner's or operators' most recent independently
audited annual financial statements prepared in accordance with an
accounting standard deemed acceptable by the SEC.
(c) An owner or operator of a facility must submit the three items
specified in paragraph (b) of this section to the Administrator within
sixty days of the date on which the CERCLA financial responsibility
amount is first established.
(d) After the initial submission of the items specified in
paragraph (b) of this section, the owner or operator must send annually
updated information to the Administrator within sixty days after the
close of each succeeding fiscal year. This information must consist of
the three items specified in paragraph (b) of this section.
(e) An owner or operator who no longer meets the requirements of
paragraph (a) of this section for any portion of his CERCLA financial
responsibility requirement must send notice of the intent to establish
an alternate financial responsibility instrument as specified in this
section to the Administrator to cover the portion of the obligations
that can no longer be covered by the financial test. This notice must
be sent by certified mail within thirty days. The owner operator must
then obtain alternate financial responsibility for the entire amount of
required coverage as specified in paragraph (a) of this section. The
owner or operator must submit evidence of coverage to the Administrator
within 120 days of no longer meeting the requirements.
(f) The Administrator may, based on a reasonable belief that the
owner or operator may no longer meet the requirements of paragraph (a)
of this section for any portion of the CERCLA financial responsibility
obligation, require reports of financial condition at any time from the
owner or operator in addition to those specified in paragraph (b) of
this section. If the Administrator finds, on the basis of such reports
or other information, that the owner or operator no longer meets the
requirements of paragraph (a) of this section for any portion of the
CERCLA liability financial responsibility obligation, the owner or
operator must provide alternate financial responsibility as specified
in this section within thirty days after notification of such a
finding.
(g) The Administrator may disallow use of this test on the basis of
qualifications of opinion given in the independent certified public
accountant's report in the agreed upon procedures engagement or the
audited financial statements. An adverse opinion or disclaimer of
opinion in either report will result in disallowance of the test. The
Administrator will evaluate other qualifications on an individual
basis. The owner or operator must provide alternate evidence of
financial responsibility within thirty days after notification of the
disallowance.
(h) The owner or operator is no longer required to submit the items
specified in paragraph (b) of this section when:
(1) An owner or operator substitutes alternate financial
responsibility as specified in this section; or
(2) The Administrator releases the owner or operator from the
requirements of this section in accordance with Sec. 320.27.
[PROPOSED REGULATORY TEXT FOR Sec. 320.44 OPTION 1 (Preferred Option)]
Sec. 320.44 [Reserved]
[PROPOSED REGULATORY TEXT FOR Sec. 320.44 OPTION 2]
Sec. 320.44 Corporate guarantee.
(a) An owner or operator may meet the requirements of this part by
obtaining a written guarantee, hereinafter referred to as
``guarantee.''
(b) The guarantor must be the direct or higher-tier parent
corporation of the owner or operator, a firm whose parent corporation
is also the parent corporation of the owner or operator, or a firm with
a ``substantial business relationship'' with the owner or operator. The
guarantor must meet the requirements for owners or operators in Sec.
320.43 (a) through (g) and must comply with the terms of the guarantee.
(c) The wording of the guarantee must be identical to the wording
specified in the Corporate Guarantee at Sec. 320.50(f) of this part. A
certified copy of the guarantee must accompany the items sent to the
Administrator as specified in Sec. 320.43(b). One of these items must
be the letter from the guarantor's chief financial officer. If the
guarantor's parent corporation is also the parent corporation of the
owner or operator, this letter must describe the value received in
consideration of the guarantee. If the guarantor is a firm with a
``substantial business relationship'' with the owner or operator, this
letter must describe this ``substantial business relationship'' and the
value received in consideration of the guarantee.
(d) The terms of the guarantee must provide that:
(1) In the event that payment for CERCLA response costs, health
assessment costs, and/or natural resource damages associated with the
facility required in a final court judgment from a Federal court
against one of the current owners or operators is not made within
thirty days, the guarantor shall do so;
(2) In the event payment is not made as required in a CERCLA
settlement associated with the facility between a current owner or
operator and EPA or another Federal government agency, the guarantor
shall do so;
[[Page 3494]]
(3) In the event that performance at a facility covered by the
guarantee does not occur as required under a CERCLA unilateral
administrative order issued to a current owner or operator by EPA or
another Federal agency and for which the owner or operator provides a
written statement allowing the guarantee to serve as financial
responsibility assuring the work in the order, the guarantor shall make
payment into a trust fund established pursuant to the order;
(4) The corporate guarantee will remain in force unless the
guarantor sends notice of termination by certified mail to the owner or
operator and to the Administrator. Termination may not occur, however,
unless and until the owner or operator obtains, and the Administrator
approves alternate financial responsibility complying with the
requirements of this part; and
(5) If the owner or operator fails to provide alternate financial
responsibility as specified in this part and obtain the written
approval of such alternate financial responsibility from the
Administrator within ninety days after receipt by both the owner or
operator and the Administrator of a notice of termination of the
corporate guarantee from the guarantor, the guarantor will provide such
alternative financial responsibility, in accordance with the
requirements of this part, in the name of the owner or operator.
(e) The guarantee must provide for payment as described in this
section up to the required amount of the CERCLA Sec. 108(b) financial
responsibility covered by the guarantee.
(f) In the case of a corporation incorporated in the United States,
a guarantee may be used to satisfy the requirements of this part only
if the Attorneys General or Insurance Commissioners of:
(1) The state in which the guarantor is incorporated, and
(2) Each state in which a facility covered by the guarantee is
located have submitted a written statement to EPA that a guarantee
executed as described in this section and Sec. 320.50(f) is a legally
valid and enforceable obligation in that state.
(g) In the case of a guarantee provided by a corporation
incorporated outside the United States, a guarantee may be used to
satisfy the requirements of this part only if:
(1) The non-U.S. corporation has identified a registered agent for
service of process in each state in which a facility covered by the
guarantee is located and in the state in which it has its principal
place of business; and
(2) The Attorney General or Insurance commissioner of each state in
which a facility covered by this guarantee is located and the state in
which the guarantor corporation has its principal place of business has
submitted a written statement to EPA that a guarantee executed as
described in this section and Sec. 320.50(f) is a legally valid and
enforceable obligation in that state.
Sec. 320.45 Trust fund.
(a) An owner operator may satisfy the requirements of this section
by establishing a trust fund that conforms to the requirements of this
paragraph, and submitting an originally signed duplicate of the trust
agreement to the Administrator. The trustee must be an entity which has
the authority to act as a trustee and whose trust operations are
regulated and examined by a Federal or state agency.
(b) The wording of the trust agreement must be identical to the
wording specified in Sec. 320.50(a)(1), and the trust agreement must
be accompanied by a formal certification of acknowledgment (for
example, see Sec. 320.50(a)(2)). Schedule A of the trust agreement
must be updated within sixty days after a change in the amount of Sec.
108(b) financial responsibility.
(c) Payments into the trust fund must be made so that the value of
the trust fund is at least as great as the required CERCLA Sec. 108(b)
financial responsibility amount required under Sec. 320.20. The trust
must be fully funded within four years of the owner operator being
subject to the regulations. This funding amount may include the value
of any letters of credit held by the trust in accordance with Sec.
320.40. Receipt from the trustee for these payments must be submitted
by the owner or operator to the Administrator.
(d) Whenever the required financial responsibility amount
increases, the owner operator must compare the new amount with the
trustee's most recent annual valuation of the trust fund. If the value
of the fund is less than the new amount, the owner or operator, within
sixty days after the change in the required Sec. 108(b) financial
responsibility amount, must either deposit an amount into the fund so
that its value after this deposit at least equals the required Sec.
108(b) financial responsibility amount, or obtain other financial
assurance as specified in this section to cover the increase.
(e) If the value of the trust fund is greater than the required
financial responsibility amount, the owner or operator may submit a
written request to the Administrator for release of the amount of in
excess of the required CERCLA Sec. 108(b) financial responsibility
amount.
(f) If the owner or operator substitutes other financial
responsibility as specified in this section for all or part of the
trust fund, it may submit a written request to the Administrator for
release of the amount in excess of the required amount of CERCLA Sec.
108(b) financial responsibility.
(g) Within sixty days after receiving a request from the owner
operator for release of funds as specified in paragraph (e) or
paragraph (f) of this section, the Administrator will notify the
trustee that the trust fund contains amounts in excess of the required
amount. Following this notification, the trustee may release the excess
funds in accordance with the terms of the trust agreement.
(h) The trust, up to the value of funds held including letters of
credit held in accordance with Sec. 320.40, is required to provide for
payment:
(1) To parties that obtain a final court judgment from a Federal
court against any of the current owners or operators at the facility
for awarding CERCLA response costs, health assessment costs, and/or
natural resource damages associated with a facility covered by the
trust agreement should payment not occur as required by the judgment
within thirty days.
(2) As required in a CERCLA settlement associated with the facility
between a current owner or operator and EPA or another Federal agency
if payment is not otherwise made.
(3) Into a trust fund established pursuant to a CERCLA unilateral
administrative order issued to one of the current owners or operators
by EPA or another Federal agency in the event the work is not performed
at the facility as required by the order. The Administrator or other
Federal agency shall only make such a claim if the owner or operator
provides written consent for the financial responsibility instrument to
assure the obligations under the unilateral administrative order.
(i) The Administrator will agree to the termination of the trust
when:
(1) The owner operator substitutes alternate financial assurance as
specified in this section; or
(2) The Administrator releases the owner or operator from the
requirements of this section in accordance with Sec. 320.27.
Sec. 320.46 Use of multiple financial responsibility instruments.
(a) An owner or operator may satisfy the requirements of this part
by establishing more than one financial instrument per facility.
[[Page 3495]]
(b) The instruments must be as specified in Sec. Sec. 320.40
through 320.45, respectively, except that it is the combination of
instruments, rather than the single instrument, which must demonstrate
financial responsibility for an amount at least equal to the required
CERCLA Sec. 108(b) financial responsibility amount.
(c) An owner or operator using a trust fund in combination with a
surety bond, letter of credit or insurance policy, including a trust
fund holding a letter of credit, may use the trust fund as the standby
trust fund for the other instruments.
(d) A single standby trust fund may be established for two or more
instruments. A claimant may make a claim against any of the instruments
used to provide evidence of financial responsibility.
Sec. 320.47 Use of a financial instrument for multiple facilities.
(a) An owner or operator may use a financial responsibility
instrument specified in this part to meet the requirements of this
section for more than one facility.
(b) Evidence of financial responsibility submitted to the
Administrator must include for each facility, the EPA Identification
Number, name, address, and the amount of funds for Sec. 108(b)
financial responsibility assured by the instrument.
(c) If the facilities covered by the instrument are in more than
one Region, identical evidence of financial responsibility must be
submitted to and maintained with the regional delegees of the
Administrator, as applicable, of all such Regions.
(d) The amount of funds available through the instrument must be no
less than the sum of funds that would be available if a separate
instrument had been established and maintained for each facility.
Sec. 320.48 Consolidated form and multiple owners and/or operators.
(a) Where a facility is owned or operated by more than one person,
evidence of financial responsibility covering the facility may be
established and maintained by one of the owners or operators, or, in
consolidated form, by or on behalf of two or more owners or operators.
(b) When evidence of financial responsibility is established in a
consolidated form, the proportional share of the cost of demonstrating
the financial responsibility for each participant shall be shown in a
separate letter to the Administrator.
(c) The evidence shall be accompanied by a statement authorizing
the owner or operator submitting the evidence of financial
responsibility to act for and on behalf of each participant in
submitting and maintaining the evidence of financial responsibility.
Sec. 320.49 [Reserved]
Sec. 320.50 Wording of the instruments.
(a)(1) A trust agreement for a trust fund, as specified 40 CFR
320.45 must be worded as follows, except that instructions in brackets
are to be replaced with the relevant information and the brackets
deleted.
TRUST AGREEMENT
EPA contact information:
[Insert Name, Phone Number, Mailing Address of EPA and Point of
Contact(s)]
Account Number: [insert account number]
Trust Agreement (the ``Agreement'') is entered into as of [insert
date] by and between [insert name of owner(s)/operator(s)], a business
[insert relevant entity (corporation, partnership, association,
proprietorship, etc.)], (the ``Grantor'') and [insert name of corporate
trustee], [insert ``incorporated in the state of [name of state]'' or
``a national bank''] (the ``Trustee'').
Whereas, the United States Environmental Protection Agency
(``EPA'') has established regulations applicable to the Grantor
requiring that an owner or operator of a facility subject to the
regulations demonstrate financial responsibility as proof that funds
will be available when needed for payment of CERCLA response costs,
health assessment costs, and natural resource damages at the facility.
Whereas, the Grantor has elected to establish a trust to provide
all or part of such financial responsibility and/or to receive the
proceeds from a letter of credit to assure all or part of such
financial responsibility for the facilities identified herein.
Whereas, the Grantor, acting through its duly authorized officers,
has selected the Trustee to be the trustee under this agreement, and
the Trustee is willing to act as trustee,
Now, therefore, the Grantor and the Trustee agree as follows:
Section 1. Definitions as used in this Agreement.
a) ``Grantor'' means the owner or operator who enters into this
Agreement and any successors or assigns of the Grantor.
b) ``Trustee'' means the Trustee who enters into this Agreement and
any successor Trustee.
Section 2. Identification of Facilities and Financial
Responsibility Amounts. This Agreement pertains to the facilities and
CERCLA 108(b) financial responsibility amounts identified on attached
Schedule A [on Schedule A, for each facility list the EPA
Identification Number, name, address, current owners and operators, and
the current financial responsibility amount, and portions thereof, for
which financial responsibility is being demonstrated by this
Agreement.]
Section 3. Establishment of Fund. The Grantor and the Trustee
hereby establish a trust fund (the ``Fund'') for the benefit of any and
all parties with valid third-party CERCLA claims against the Grantor or
other current owners and operators arising from the operation of the
facilities covered by this Agreement. The Grantor and Trustee do not
intend for the Trustee to qualify as a ``guarantor'' as that term is
used in CERCLA sections 101(13) and 108(c)(2), and therefore intend
that the Trustee will not be subject to a direct action by Trustee's
agreement to act as Trustee for the Fund. The Grantor and Trustee
intend for the Fund to qualify as a ``guarantor'' as that term is used
in CERCLA sections 101(13) and 108(c)(2), and therefore intend that
only the Fund will be subject to any direct action brought pursuant to
CERCLA section 108(c)(2). The Fund is established initially as
consisting of property, which are acceptable to the Trustee, described
in Schedule B attached hereto. Such property, along with any other
monies and/or property subsequently transferred to the Trustee,
together with all earnings and profits thereon, less any payments or
distributions made by the Trustee pursuant to this Agreement, are
referred to herein collectively as the Fund. The Fund shall be held by
the Trustee, IN TRUST, as hereinafter provided. The Trustee shall not
be responsible nor shall it undertake any responsibility for the amount
or adequacy of, nor any duty to collect from the Grantor, any payments
necessary to discharge any liabilities of the Grantor under CERCLA.
Section 4. Payments from the Fund. The Trustee shall make payments
from the Fund to parties with valid CERCLA claims against the Grantor
or other current owners or operators at the facility(-ies). To make
these payments, the Trustee shall draw on any letters of credit
described in Schedule B and/or make payments from the funds held by the
Fund described in Schedule B. The Trustee shall make payment from the
Fund for valid third-party CERCLA claims only up to the lesser of: (1)
The value of the valid third-party CERCLA claim; or (2) the amount of
CERCLA 108(b) financial responsibility provided
[[Page 3496]]
for the facility(ies) associated with the claim provided by the Fund as
identified in Schedule A.
The Trustee shall satisfy valid unpaid CERCLA claims by making
payments on a first come first served basis from the Fund only upon
receipt of one or more of the following documents and only in amounts
up to the values specified in the document(s):
(i) A final court judgment dated at least 30 days earlier from a
Federal court, in favor of the claimant, awarding CERCLA response
costs, health assessment costs, and/or natural resource damages
associated with a facility covered by this Agreement against the
Grantor or any of the current owners or operators at a facility covered
by this agreement;
(ii) A written signed statement from the EPA Administrator or
another Federal government agency requesting payment from the Fund on
the grounds that payment has not been made as required by a CERCLA
settlement associated with a facility covered by this Agreement and
with any of the current owners or operators; or
(iii) A written signed statement from the EPA Administrator or
other Federal government agency requesting payment from the Fund into a
trust fund established pursuant to a CERCLA unilateral administrative
order on the grounds that performance at a facility covered by this
Agreement has not occurred as required by a CERCLA unilateral
administrative order issued to a current owner or operator that
references this trust agreement.
In addition to one of the documents listed above, all claimants
must also present the following:
A signed statement from the claimant certifying that these amounts
have not been recovered or paid from any other source, including, but
not limited to, the owners or operators, insurance, judgments,
agreements, and other financial responsibility instruments.
In the event of simultaneous valid claims that exceed the value of
the Fund, the Trustee shall pay the claimants a pro rata share of their
claim determined by the size of each valid claim.
In addition to the payment instructions above, in the case of a
release or threatened release from a facility covered by the Agreement,
any claim authorized by section 107 or 111 of CERCLA may be asserted
directly against the Fund as provided by CERCLA section 108(c)(2)
subject to the limitations in CERCLA section 108(d). The Fund shall be
entitled to all rights and defenses provided to guarantors by CERCLA
section 108(c). The Fund is available for paying and defending claims
in these instances.
In addition, if notified by the EPA Administrator that the trust
fund contains amounts in excess of the required CERCLA 108(b) financial
responsibility amount, the Trustee shall refund to the Grantor such
amounts in excess of the required CERCLA 108(b) financial
responsibility amount.
Section 5. Payments Comprising the Fund. Payments made to the
Trustee for the Fund shall consist of cash or securities acceptable to
the Trustee and/or a standby letter of credit as specified in 40 CFR
320.50(b). In the event of receipt of a notice of a decision not to
extend the expiration date of a letter of credit from an institution
issuing a letter of credit held by the Fund, the Trustee shall draw on
the letter of credit prior to expiration occurring and deposit any
unused portion of the credit into the Fund if the EPA Administrator
informs the Trustee that the owner operator did not establish alternate
financial responsibility and obtain written approval of such alternate
financial responsibility from the EPA Administrator within the time
frame provided by 40 CFR 320.40(k) and (l).
Section 6. Trustee Management. The Trustee shall invest and
reinvest the principal and income of the Fund and keep the Fund
invested as a single fund, without distinction between principal and
income, in accordance with the Grantor's disclosures communicated in
writing to the Trustee from time to time of the names of all current
owners and operators and their affiliates including issuers of
securities or other obligations, subject, however, to the provisions of
this Section. In investing, reinvesting, exchanging, selling, and
managing the Fund, the Trustee shall discharge its duties with respect
to the trust fund with undivided loyalty and solely in the interest of
the beneficiaries and with the reasonable care, skill, and caution of a
prudent investor, in light of the purposes, terms, distribution
requirements, and other circumstances of the trust; except that:
(i) Securities or other obligations of the Grantor, or any other
current owner or operator of the facilities, or any of their affiliates
as defined in the Investment Company Act of 1940, as amended, 15 U.S.C.
80a-2(a), shall not be acquired or held, unless they are securities or
other obligations of the Federal or a state government;
(ii) The Trustee is authorized to invest the Fund in time or demand
deposits of the Trustee, to the extent insured by an agency of the
Federal or state government;
(iii) The Trustee is authorized to hold and draw upon standby
letters of credit specified as in 40 CFR 320.50(b); and
(iv) The Trustee is authorized to hold cash awaiting investment or
distribution un-invested for a reasonable time and without liability
for the payment of interest thereon.
Section 7. Common and Collective Investment Practices. The Trustee
is expressly authorized in its discretion:
(a) To transfer from time to time any or all of the assets of the
Fund to any common or collective trust fund created by the Trustee in
which the Fund is eligible to participate, subject to all of the
provisions thereof, to be jointly invested with the assets of other
trusts participating therein; and
(b) To purchase shares in any investment company registered under
the Investment Company Act of 1940, 15 U.S.C. 80a-1 et seq., including
one which may be created, managed, underwritten, or to which investment
advice is rendered or the shares of which are sold by the Trustee. The
Trustee may vote such shares in its discretion.
Section 8. Express Powers of Trustee. Without in any way limiting
the powers and discretions conferred upon the Trustee by the other
provisions of this Agreement or by law, the Trustee is expressly
authorized and empowered:
(a) To sell, exchange, convey, transfer, or otherwise dispose of
any property held by it, by public or private sale. No person dealing
with the Trustee shall be bound to see to the application of the
purchase money or to inquire into the validity or expediency of any
such sale or other disposition;
(b) To hold and draw upon standby letters of credit that are worded
as specified in 40 CFR 320.50(b);
(c) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers herein
granted;
(d) To register any securities held in the Fund in its own name or
in the name of a nominee and to hold any security in bearer form or in
book entry, or to combine certificates representing such securities
with certificates of the same issue held by the Trustee in other
fiduciary capacities, or to deposit or arrange for the deposit of such
securities in a qualified central depositary even though, when so
deposited, such securities may be merged and held in bulk in the name
of the nominee of such depositary with other securities deposited
therein by another person, or to deposit or arrange for the deposit of
any securities issued by the United
[[Page 3497]]
States Government, or any agency or instrumentality thereof, with a
Federal Reserve bank, but the books and records of the Trustee shall at
all times show that all such securities are part of the Fund;
(e) To deposit any cash in the Fund in interest-bearing accounts
maintained or savings certificates issued by the Trustee, in its
separate corporate capacity, or in any other banking institution
affiliated with the Trustee, to the extent insured by an agency of the
Federal or state government;
(f) To compromise or otherwise adjust all claims in favor of or
against the Fund.
Section 9. Taxes and Expenses. All taxes of any kind that may be
assessed or levied against or in respect of the Fund and all brokerage
commissions incurred by the Fund shall be paid from the Fund. All other
expenses shall be paid directly by the Grantor. All other expenses
incurred by the Trustee in connection with the administration of this
Trust including fees for legal services rendered to the Trustee, the
compensation of the Trustee, and all other proper charges and
disbursements of the Trustee not paid directly by the Grantor shall be
paid from the Fund.
Section 10. Annual Valuation. The Trustee shall annually, at least
30 days prior to the anniversary date of establishment of the Fund,
furnish to the Grantor and to the appropriate EPA Administrator a
statement confirming the value of the Trust including the value of any
funds held by the Trust and of any letters of credit held by the Trust.
Any letters of credit shall be valued at the face amount less the value
of any draws. Any securities in the Fund shall be valued at market
value as of no more than sixty days prior to the anniversary date of
establishment of the Fund. The failure of the Grantor to object in
writing to the Trustee within 90 days after the statement has been
furnished to the Grantor and the EPA Administrator shall constitute a
conclusively binding assent by the Grantor barring the Grantor from
asserting any claim or liability against the Trustee with respect to
matters disclosed in the statement.
Section 11. Advice of Counsel. The Trustee may from time to time
consult with counsel, who may be counsel to the Grantor, with respect
to any question arising as to the construction of this Agreement or any
action to be taken hereunder. The Trustee shall be fully protected, to
the extent permitted by law, in acting upon the advice of counsel.
Section 12. Trustee Compensation. The Trustee shall be entitled to
reasonable compensation for its services as agreed upon in writing from
time to time with the Grantor.
Section 13. Successor Trustee. The Trustee may resign or the
Grantor may replace the Trustee, but such resignation or replacement
shall not be effective until the Grantor has appointed a successor
trustee and this successor accepts the appointment. The successor
trustee shall have the same powers and duties as those conferred upon
the Trustee hereunder. Upon the successor trustee's acceptance of the
appointment, the Trustee shall assign, transfer, and pay over to the
successor trustee the funds and properties then constituting the Fund.
If for any reason the Grantor cannot or does not act in the event of
the resignation of the Trustee, the Trustee may apply to a court of
competent jurisdiction for the appointment of a successor trustee or
for instructions. The successor trustee shall specify the date on which
it assumes administration of the trust in a writing sent to the
Grantor, the EPA Administrator, and the present Trustee by certified
mail 10 days before such change becomes effective. Any expenses
incurred by the Trustee as a result of any of the acts contemplated by
this Section shall be paid as provided in Section 9.
Section 14. Instructions to the Trustee. All orders, requests, and
instructions to the Trustee shall be in writing, signed by such persons
as are designated in the attached Exhibit A or such other designees as
the Grantor may designate by amendment to Exhibit A. The Trustee shall
be fully protected in acting without inquiry in accordance with the
Grantor's orders, requests, and instructions. All orders, requests, and
instructions by the EPA Administrator to the Trustee shall be in
writing, signed by the EPA Administrator, or designee thereof, and the
Trustee shall act and shall be fully protected in acting in accordance
with such orders, requests, and instructions. The Trustee shall have
the right to assume, in the absence of written notice to the contrary,
that no event constituting a change or a termination of the authority
of any person to act on behalf of the Grantor or EPA hereunder has
occurred. The Trustee shall have no duty to act in the absence of such
orders, requests, and instructions from the Grantor and/or EPA, except
as provided for herein.
Section 15. Notices of Payment. If a payment for CERCLA response
costs, health assessment costs, and/or natural resource damages is made
under Section 4 of this trust, the Trustee shall notify the Grantor of
such payments and the amounts thereof within five (5) working days. If
the Grantor ceases to exist, such notice shall be provided to the EPA
Administrator. Further, the Trustee shall notify the EPA Administrator
of all claims against the Fund resulting from a direct action under
CERCLA section 108(c).
Section 16. Amendment of Agreement. This Agreement may be amended
by an instrument in writing executed by the Grantor, the Trustee, and
the EPA Administrator, or by the Trustee and the EPA Administrator if
the Grantor ceases to exist.
Section 17. Irrevocability and Termination. Subject to the right of
the parties to amend this Agreement as provided in Section 16, this
Trust shall be irrevocable and shall continue until terminated at the
written agreement of the Grantor, the Trustee, and the EPA
Administrator, or by the Trustee and the EPA Administrator, if the
Grantor ceases to exist. Upon termination of the Trust, all remaining
trust property, less final trust administration expenses, shall be paid
to the Grantor.
Section 18. Immunity and Indemnification. The Trustee shall not
incur personal liability of any nature in connection with any act or
omission, made in good faith, in the administration of this Trust, or
in carrying out any directions by the Grantor or the EPA Administrator
issued in accordance with this Agreement. The Trustee shall be
indemnified and saved harmless by the Grantor or from the Trust Fund,
or both, from and against any personal liability to which the Trustee
may be subjected by reason of any act or conduct in its official
capacity, including all expenses reasonably incurred in its defense in
the event the Grantor fails to provide such defense. EPA does not
indemnify either the Grantor or the Trustee due to the restrictions
imposed by the Anti-Deficiency Act, 31 U.S.C. 1341.
Section 19. Choice of Law. This Agreement shall be administered,
construed, and enforced according to the laws of the state of [enter
name of state].
Section 20. Interpretation. As used in this Agreement, words in the
singular include the plural and words in the plural include the
singular. The descriptive headings for each section of this Agreement
shall not affect the interpretation or the legal efficacy of this
Agreement.
In Witness Whereof the parties have caused this Agreement to be
executed by their respective officers duly authorized and their
corporate seals to be hereunto affixed and attested as of the date
first above written. The parties below certify that the wording of this
Agreement is identical to the wording
[[Page 3498]]
specified in 40 CFR 320.50(a) as such regulations were constituted on
the date first above written.
-----------------------------------------------------------------------
[Signature of Grantor
-----------------------------------------------------------------------
[Printed Name of Grantor]
[Title]
Attest:
[Title]
[Seal]
-----------------------------------------------------------------------
[Signature of Trustee]
-----------------------------------------------------------------------
[Printed Name of Trustee Official]
-----------------------------------------------------------------------
[Mailing Address, Telephone Number, Email of Trustee Official]
Attest:
[Title]
[Seal]
(2) The following is an example of the certification of
acknowledgement which must accompany the trust agreement for a trust
fund as specified in 40 CFR 320.45 of this chapter. State requirements
may differ on the proper content of this acknowledgement.
State of---------------------------------------------------------------
County of--------------------------------------------------------------
On this [date], before me personally came [owner or operator] to me
known, who, being by me duly sworn, did depose and say that she/he
resides at [address], that she/he is [title] of [corporation], the
corporation described in and which executed the above instrument; that
she/he knows the seal of said corporation; that the seal affixed to
such instrument is such corporate seal; that it was so affixed by order
of the Board of Directors of said corporation, and that she/he signed
her/his name thereto by like order.
[Signature of Notary Public]-------------------------------------------
(b) A letter of credit, as specified in 40 CFR 320.40 of this
chapter, must be worded as follows, except that instructions in
brackets are to be replaced with the relevant information and the
brackets deleted:
Irrevocable Standby Letter of Credit
IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: [insert number]
ISSUER: [insert name and address of issuing institution]
ISSUANCE DATE: [insert date]
MAXIMUM AMOUNT: $[insert dollar amount]
APPLICANT:
[Insert name of Owner or Operator of Facility]
[Insert contact person(s), title(s), and contact information (address,
phone, email, etc.)]
FACILITY:
[Insert EPA Identification number(s), name(s), address(es) and CERCLA
108(b) financial responsibility amount(s) covered by the letter of
credit for facility(ies) to be covered by this instrument]
TO:
[If the letter of credit is established in favor of any and all third-
party CERCLA claimants insert: ``Administrator(s)
Region(s) [region numbers]
U.S. Environmental Protection Agency (EPA)
[Insert name and mailing address of Administrator or designee(s)]''
Or,
If letter of credit is established in favor of a trust fund trustee
insert the name and mailing address of trustee]
Dear Sir or Madam:
We hereby establish our Irrevocable Standby Letter of Credit No.
[insert number] in the favor of [insert either ``any and all third-
party CERCLA claimants'' or the name of trustee of the trust fund that
will hold the letter of credit], at the request and for the account of
[insert name of Owner or Operator of Facility] (the ``Applicant''), in
the amount of $[insert amount] (the ``Maximum Amount'') for the [insert
name(s) and address(es) of the facility(ies) to be covered by this
instrument] (the ``Facility''). The letter of credit is established to
assure payment for the current owners or operators' CERCLA response
costs, health assessment costs, and/or natural resource damages
associated with the facilities covered by this letter. Payment shall be
made up to amounts provided above for each facility and not to exceed
in total the Maximum Amount, upon presentation of:
[If letter of credit is established in favor of a trust fund
trustee insert: ``A demand for payment from [name of trust fund
trustee] bearing reference to this letter of credit number No. [insert
number]
If letter of credit is issued in favor of any and all third-party
CERCLA claimants insert: ``A demand for payment bearing reference to
this letter of credit number No. [insert number]; and
A final court judgment dated at least 30 days earlier from a
Federal court, in favor of the claimant, awarding CERCLA response
costs, health assessment costs, and/or natural resource damages
associated with a facility covered by the letter of credit against any
of the current owners or operators at a facility covered by the letter
of credit accompanied by a certification from the claimant that reads
as follows: `I hereby certify that the amount of the demand is payable
pursuant to regulations issued under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended.'; or
A certification from the EPA Administrator or another Federal
agency that reads as follows: `I hereby certify that the amount of the
demand is payable pursuant to regulations issued under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 as amended.''']
This letter of credit is effective as of [date] and shall expire on
[date at least one year later], but such expiration date shall be
automatically extended for a period of [at least one year] on [date at
least one year later as specified above] and on each successive
expiration date, unless, at least 120 days before the current
expiration date, we notify [If letter of credit is issued in favor of a
trust fund trustee insert: ``[name of trustee],'' ] the EPA
Administrator and the Applicant by certified mail that we have decided
not to extend this letter of credit beyond the current expiration date.
In the event of such notification, any unused portion of the credit
shall be paid into the accompanying trust fund issued by [insert name
of issuing institution of trust fund] with account number [insert
account number of the trust fund] upon presentation by [If issued in
favor of any and all third-party CERCLA claimants enter ``the EPA
Administrator''; if issued in favor of a trust fund trustee insert name
of trustee] of a demand for payment compliant with the terms above
within 120 days after the date of receipt of such notification by both
you and [owner's or operator's name], as shown on the signed return
receipts.
Whenever this letter of credit is drawn on under and in compliance
with the terms of this credit, we shall duly honor such demand upon
presentation to us and shall pay as directed by claimant or the
trustee.
[Insert if letter of credit is issued in favor of any and all
third-party CERCLA claimants: ``In the case of a release or threatened
release of (a) hazardous substance(s) from a facility covered by the
letter of credit, we acknowledge that any claim authorized by section
107 or 111 of CERCLA may be asserted directly against us as provided by
CERCLA section 108(c)(2). We consent to suit with respect to these
claims subject to the limitations in CERCLA section 108(d). We
acknowledge that we are entitled to all rights and defenses provided to
guarantors by CERCLA section 108(c). We will provide notice of
[[Page 3499]]
any such resulting claims and payments to the EPA Administrator.'']
This credit is subject to [insert the most recent edition of either
the Uniform Customs and Practice for Documentary Credits or
International Standby Practices published and copyrighted by the
International Chamber of Commerce.]
We certify that the wording of this letter of credit is identical
to the wording specified in 40 CFR 320.50(b) as such regulations were
constituted on the date shown immediately below. [Signature(s) and
title(s) of official(s) of issuing institution] [Date].
(c) A surety bond, as specified in 40 CFR 320.41 of this chapter,
must be worded as follows, except that instructions in brackets are to
be replaced with the relevant information and the brackets deleted:
EPA contact information:
U.S. Environmental Protection Agency
[Insert Name, Phone Number, Mailing Address of the Administrator and
Points of Contact]
-----------------------------------------------------------------------
Surety Bond No. [Insert number]
Date bond executed: [Insert date]
Parties [Insert name and address of owner or operator], Principal,
incorporated in [Insert state of incorporation] of [Insert city and
state of principal place of business] and [Insert name and address of
surety company(ies)], Surety Company(ies), of [Insert surety(ies) place
of business].
EPA Identification Number, name, address, and CERCLA 108(b) financial
responsibility amount, specifying the portion covered by this bond, for
each facility guaranteed by this bond:
-----------------------------------------------------------------------
Total penal sum of bond:-----------------------------------------------
Purpose: This is an agreement between the Surety(ies) and the
Principal under which the Principal and Surety(ies) hereto are firmly
bound to any and all third-party CERCLA claimants , in the above penal
sum plus the amount of any investigation or legal defense fees incurred
by Surety(ies) for the payment of which we bind ourselves, our heirs,
executors, administrators, successors and assigns jointly and
severally; provided that, where the Surety(ies) are corporations acting
as co-sureties, we, the Sureties, bind ourselves in such sum ``jointly
and severally'' only for the purpose of allowing a joint action or
actions against any or all of us, and for all other purposes each
Surety binds itself, jointly and severally with the Principal, for the
payment of such percentage of the total penal sum only as is set forth
opposite the name of each Surety plus the amount of any investigation
or legal defense fees incurred by Surety, but if no limit of liability
is indicated, the limit of liability shall be the total penal sum of
the bond plus the amount of any investigation or legal defense fees
incurred by Surety. We agree to be responsible for the following:
(1) the satisfaction of valid third-party CERCLA claims against the
Principal or the other current owners and operators for CERCLA response
costs, health assessment costs, and natural resource damages associated
with the facility(ies) covered by this bond in the sums prescribed
herein; and
(2) the guarantee that the Principal or other current owners and
operators shall obtain alternate financial responsibility as specified
in subpart C of 40 CFR 320 for the facility(ies) covered by this bond
and obtain written approval of that financial responsibility provided
within 90 days of receipt by the EPA Administrator and the Principal of
a notice of cancellation of the bond from the Surety(ies).
The aforementioned responsibilities are subject to the governing
provisions and the following conditions. Any provision in this bond
conflicting with the following governing provisions or conditions shall
be deemed deleted herefrom and provisions conforming to such governing
provisions or condition shall be deemed incorporated herein.
Governing Provisions:
(1) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
(2) Rules and regulations of the U.S. Environmental Protection
Agency (EPA), particularly 40 CFR part 320.
Conditions:
(1) The Principal and all the current owners and operators at the
facility(ies) covered by this bond are subject to the applicable
governing provisions that require the Principal and all the current
owners and operators to have and maintain CERCLA Sec. 108(b) financial
responsibility to cover CERCLA response costs, health assessment costs,
and natural resource damage claims.
(2) This bond assures that the Principal will ensure that at
facilities covered by this bond: (a) payments will be made as required
by final court judgments from a Federal court against a current owner
or operator for CERCLA response costs, health assessment costs, and/or
natural resource damages within 30 days; (b) payments will be made when
required by a CERCLA settlement with a current owner or operator; (c)
work will be performed as required in CERCLA unilateral administrative
orders issued to a current owner or operator for which the owner or
operator has provided a written statement allowing the bond to assure
the performance of the work in the order; and (d) CERCLA 108(b)
financial responsibility coverage will be maintained as described in
condition 1.
(3) If the Principal fails to perform as described above the
Surety(ies) becomes liable on this bond obligation.
(4) The Surety(ies) shall satisfy a valid claim for CERCLA response
costs, health assessment costs, and/or natural resource damages only
upon the receipt of one of the following documents plus the additional
signed statement specified below:
(a) A final court judgment dated at least 30 days earlier from a
Federal court, in favor of the claimant, awarding CERCLA response
costs, health assessment costs, and/or natural resource damages
associated with a facility covered by this bond against the Principal
or any of the current owners or operators at a facility covered by this
bond;
(b) A written signed statement from the EPA Administrator or
another Federal government agency requesting payment from the
Surety(ies) on the grounds that payment has not been made as required
by a CERCLA settlement associated with a facility covered by this bond
and with any of the current owners or operators; or
(c) A written signed statement from the EPA Administrator or other
Federal government agency requesting payment from the Surety(ies) into
a trust fund established pursuant to a CERCLA unilateral administrative
order on the grounds that performance at a facility covered by this
bond has not occurred as required by a CERCLA unilateral administrative
order issued to a current owner or operator.
AND
A signed statement from the claimant certifying that these amounts
have not been recovered or paid from any other source, including, but
not limited to, the owner operator, insurance, judgments, agreements,
and other financial responsibility instruments.
(5) In addition to condition 4, in the case of a release or
threatened release of (a) hazardous substance(s) from a facility
covered by the bond, the Surety(ies) acknowledge that any claim
authorized by section 107 or 111 of CERCLA may be asserted directly
against the Surety(ies) as provided by CERCLA section 108(c)(2). The
Surety(ies) consent(s) to suit with respect to these claims subject to
the limitations in CERCLA section 108(d). The Surety(ies) shall be
entitled to all
[[Page 3500]]
rights and defenses provided to guarantors by CERLCA section 108(c).
The Surety(ies) will provide notice of any such resulting claims and
payments to the EPA Administrator.
(6) If upon notice of cancellation by the Surety(ies) the Principal
fails to obtain replacement CERCLA financial responsibility consistent
with subpart C of 40 CFR 320 and written approval of the EPA
Administrator of that replacement financial responsibility within 90
days of receipt of said notice by the EPA Administrator and the
Principal the Surety(ies) shall become liable on this bond and shall
make payment into the standby trust fund as directed by the EPA
Administrator.
(7) The liability of the Surety(ies) shall not be discharged by any
payment or succession of payments hereunder, unless and until such
payment or payments shall amount in the aggregate to the penal sum of
the bond. In no event shall the obligation of the Surety(ies) hereunder
exceed the amount of said penal sum plus the amount of any
investigation or legal defense fees.
(8) The Surety(ies) may cancel the bond by sending notice of
cancellation by certified mail to the Principal and the EPA
Administrator, provided, however, that cancellation shall not occur
during the 120 days beginning on the date of receipt of the notice of
cancellation by the Principal and the EPA Administrator, as evidenced
by the return receipt.
(9) The Principal may terminate this bond by sending written notice
to the Surety(ies), provided however, that no such notice shall become
effective until the Surety(ies) receive(s) written authorization for
termination of the bond by the EPA Administrator.
(10) The Surety(ies) hereby waive(s) notification of amendments to
applicable laws, statutes, rules and regulations and agree(s) that no
such amendment shall in any way alleviate its (their) obligation on
this bond.
(11) This bond is effective from [insert date] (12:01 a.m.,
standard time, at the address of the Principal as stated herein) and
shall continue in force until cancelled or terminated as described
above.
In Witness Whereof, the Principal and Surety(ies) have executed
this Bond and have affixed their seals on the date set forth above.
The persons whose signatures appear below hereby certify that they
are authorized to execute this surety bond on behalf of the Principal
and Surety(ies) and that the wording of this surety bond is identical
to the wording specified in 40 CFR 320.50(c), as such regulations were
constituted on the date this bond was executed.
PRINCIPAL
[Signature(s)]
[Name(s)]
[Name, Telephone Number, Email of Representative]
[Title(s)]
[Corporate Seal]
CORPORATE SURETY[IES]
[Name and address]
State of incorporation:___
Liability Limit: %___
[Signature(s)]
[Name(s) and title(s)]
[Corporate seal]
[For every co-surety, provide signature(s), corporate seal, liability
limit and other information in the same manner as for Surety above.]
Bond premium: $___
(d) A CERCLA Sec. 108(b) insurance endorsement as required in 40
CFR 320.42 must be worded as follows, except that instructions in
brackets are to be replaced with the relevant information and the
brackets deleted:
CERCLA Sec. 108(b) Financial Responsibility Endorsement
EPA contact information:
[Insert Name, Phone Number, Mailing Address of EPA Administrator and
Points of Contact]
1. This endorsement certifies that the policy to which the
endorsement is attached provides liability insurance covering CERCLA
response costs, health assessment costs, and natural resource damages
in connection with the insured's obligation to demonstrate financial
responsibility under 40 CFR 320. The coverage applies at [list EPA
Identification Number, name, address, total CERCLA 108(b) financial
responsibility amount for each facility] for CERCLA response costs,
health assessment costs, and natural resource damages at a covered
facility. The limits of liability are [insert the dollar amount(s) of
the limits and the percentage share of the Insurer's liability for each
covered facility], exclusive of legal defense and investigation costs.
2. The insurance afforded with respect to such facilities is
subject to all of the terms and conditions of the policy; provided,
however, that any provision, exclusion, definition, condition,
retroactive date, clause, defense, or other term of the policy
inconsistent with 40 CFR 320.42, or subsections (a) through (f) of this
Paragraph 2 are hereby amended to conform with 40 CFR 320.42 and
subsections (a) through (f) below:
(a) The Insurer will make payment only for third-party CERCLA
claims as defined in section 101 of CERCLA; the insurance coverage is
not available for payments to the insured. The Insurer will make:
i. payments awarded in final court judgments from a Federal court
against any of the current owners and operators for CERCLA response
costs, health assessment costs, and/or natural resource damages
associated with a facility covered by the policy to the party obtaining
the judgment should such payments not otherwise be made within 30 days.
ii. payments as required by a CERCLA settlement associated with a
facility covered by the policy between EPA or another Federal
government agency and any of the current owners and operators should
such payments not occur.
iii. payments in instances where performance does not occur at a
facility covered by the policy as required by a CERCLA unilateral
administrative order issued by EPA or another Federal agency for which
the owner or operator has provided a written statement that the policy
be used to assure performance of the work required in the order.
iv. payment into a standby trust in instances where the owner or
operator fails to obtain alternate financial responsibility and obtain
written approval of such alternate financial responsibility from the
EPA Administrator within 90 days after receipt by both the insured and
the EPA Administrator of a notice from the insurer that it has decided
to cancel, terminate or fail to renew the insurance policy beyond the
current expiration date as provided for in paragraph (f) below.
(b) In addition to the payment condition in subsection (a), in the
case of a release or threatened release of (a) hazardous substance(s)
from a facility covered by the policy, the insurer acknowledges that
any claim authorized by section 107 or section 111 of CERCLA may be
asserted directly against the insurer as provided by section 108(c)(2)
of CERCLA. Insurer consents to suit with respect to these claims
subject to the limitations in section 108(d) of CERCLA. The Insurer
will be entitled to all rights and defenses provided to guarantors by
section 108(c) of CERCLA. Insurer will provide notice of any such
resulting claims and payments to the EPA Administrator.
(c) Bankruptcy or insolvency of the insured shall not relieve the
Insurer of its obligations under the policy to which this endorsement
is attached.
(d) The Insurer is liable for the payment of amounts within any
[[Page 3501]]
deductible or self-insured retention applicable to the policy, with a
right of reimbursement by the insured for any such payment made by the
Insurer.
(e) Whenever requested by the Administrator of the U.S.
Environmental Protection Agency (EPA), the Insurer agrees to furnish to
the EPA Administrator a signed duplicate original of the policy and all
endorsements.
(f) Cancellation, failure to renew or any other termination of the
insurance by the insurer will be effective only upon written notice to
the owner operator and the EPA Administrator by certified mail and only
after the expiration of 120 days beginning with the date of receipt of
the notice by both the Administrator and the owner or operator, as
evidenced by the return receipts.
Attached to and forming part of policy No. __ issued by [name of
Insurer], herein called the Insurer, of [address of Insurer] to [name
of insured] of [address] this___ day of___, 20__. The effective date of
said policy is___ day of ___, 20__.
I hereby certify that the wording of this endorsement is identical
to the wording specified in 40 CFR 320.50(d) as such regulation was
constituted on the date first above written, and that the Insurer is
licensed to transact the business of insurance, or eligible to provide
insurance as an excess or surplus lines insurer, in one or more states.
[Signature of Authorized Representative of Insurer]
[Type name]
[Title], Authorized Representative of [name of Insurer]
[Address, Phone Number, Email of Representative]
[PROPOSED REGULATORY TEXT FOR PARAGRAPHS (e) and (f)--Option 2 only]
(e) A letter from the chief financial officer, as specified in
Sec. 320.43, must be worded as follows, except that instructions in
brackets are to be replaced with the relevant information and the
brackets deleted:
FINANCIAL TEST
Letter from Chief Financial Officer
[Address to EPA Administrator or Regional delegees for every Region
in which facilities for which financial responsibility is to be
demonstrated through the corporate financial test are located.]
I am the Chief Financial Officer (``CFO'') of [insert name and
address of firm] (``firm''). This letter is in support of this firm's
use of the financial test to demonstrate Financial Responsibility for
CERCLA 108(b) as specified in 40 CFR part 320.43.
[Fill out paragraphs 1-4, below, and provide supporting
documentation, when required as specified below. If your firm has no
facilities that belong in a particular paragraph, write ``None'' in the
space indicated.]
1. This firm is the owner or operator of the facilities, listed
below, for which Financial Responsibility is demonstrated through the
financial test specified in 40 CFR part 320.43. The current CERCLA
Sec. 108(b) Financial Responsibility amount and the amount covered by
the financial test are provided for each listed facility:
[For each facility, identify: Facility name; Address; EPA
Identification Number; CERCLA Sec. 108(b) financial responsibility
amount; and amount covered by financial test]
2. This firm guarantees, through the guarantee specified in 40 CFR
part 320.44, financial responsibility of the following facilities owned
or operated by the guaranteed party. The current CERCLA Sec. 108(b)
financial responsibility amount so guaranteed are shown for each listed
facility:
[For each facility, identify: Facility name; Address; EPA
Identification Number; CERCLA Sec. 108(b) financial responsibility
amount; and amount covered by financial test]
The firm identified above is: [insert one or more: (1) The direct
or higher-tier parent corporation of the owner or operator; (2) owned
by the same parent corporation as the parent corporation of the owner
or operator, and receiving the following value in consideration of this
guarantee ___ [insert description of value received] ; or (3) engaged
in the following substantial business relationship with the owner or
operator ___ [insert characterization of relationship] , and receiving
the following value in consideration of this guarantee___ [insert
description of value received]].
[Attach a written description of the business relationship or a
copy of the contract establishing such relationship to this letter].
3. The firm, as owner or operator or guarantor, is using a
financial test to secure the environmental obligations of the
facilities listed below for which financial responsibility is required.
These obligations include, but are not limited to: current cost
estimates for corrective action, closure, post-closure care, and
amounts required for third-party liability for hazardous waste
treatment, storage and disposal facilities under 40 CFR 264.101,
264.142, 264.144, 264.147, 265.142, 265.144 and 265.147 and as required
by order under section 3008(h) of RCRA, 42 U.S.C. 6928(h); cost
estimates for municipal solid waste landfill units under 40 CFR 258.71,
258.72 and 258.73; current plugging and abandonment cost estimates for
underground injection control facilities under 40 CFR 144.62; cost
estimates for underground storage tanks under 40 CFR 280.93; cost
estimates for facilities storing polychlorinated biphenyls under 40 CFR
761.65; cost estimates for underground injection control class VI
facilities for corrective action under 40 CFR 146.84, for injection
well plugging under 40 CFR 146.92, for post injection facility care and
facility closure under 40 CFR 146.93, and emergency and remedial
response under 40 CFR 146.94; any financial responsibility required
under any CERCLA settlement or order; and any other environmental
obligation assured through a financial test or guarantee, excluding
those costs represented in paragraphs 1 and 2 listed above. The cost
estimates by obligation are provided for each listed facility:
[For each facility, identify: Facility name; Address; EPA
Identification Number (if any); and amount covered by financial test]
4. The total of all such environmental obligations the firm is
covering with a financial test or for which it issued a corporate
guarantee for the listed facilities in paragraphs 1-3 above [sum of the
portion covered by the financial test in paragraph 1 plus the sums in
paragraphs 2 and 3] is $ [insert amount], as of___ [insert date].
5. The firm [insert ``is required'' or ``is not required''] to file
a Form 10-K or 20-F with the Securities Exchange Commission (SEC) for
the latest fiscal year.
6. The fiscal year of the firm ends on [month, day]. The figures
for the following items marked with asterisk are derived from this
firm's independently audited, year-end financial statements for the
latest completed fiscal year, ended [date].
7. The firm has received a qualified or adverse accountant's
opinion for the latest completed fiscal year ended [insert date] ___
(Yes/ No) ___
8. The firm represents that as of the latest completed fiscal year-
end [insert date] ___, the Assets located in the United States in the
amount of $___ amount to at least 90% of the firm's total assets. (Yes/
No) ___
Test Worksheet:
1. The total of all environmental obligations the firm is covering
with a financial test or for which it issued a
[[Page 3502]]
corporate guarantee [enter the sum from paragraph 4 above] ___.
2. The firm represents that it holds the following long term credit
ratings: [list all ratings and their dates that apply including but not
limited to Long-Term Issuer Credit Ratings from Standard and Poor's,
Long-Term Corporate Family Ratings from Moody's Investor Services,
Long-Term Issuer Default Ratings from Fitch Ratings, and any other
long-term credit rating from a Nationally Recognized Statistical Rating
Organization (NRSRO)]
*3. Tangible Net Worth $___
4. Is line 3 at least 6 times line 1? (Yes/No) ___
*5. Total assets in U.S. [required only if the answer in paragraph
8 above is ``No''] $___
6. Is line 5 at least 6 times line 1? (Yes/No) ___
I hereby certify that the information included in this letter,
including all attachments and exhibits, is true and accurate. I further
certify that the wording of this letter is identical to the wording
specified in 40 CFR 320.50(e) as such regulations were constituted on
the date shown immediately below.
[Signature]------------------------------------------------------------
[Name]-----------------------------------------------------------------
[Title]----------------------------------------------------------------
[Date]-----------------------------------------------------------------
(f) A corporate guarantee, as specified in Sec. 320.44 must be
worded as follows, except that instructions in brackets are to be
replaced with the relevant information and the brackets deleted:
Corporate Guarantee for CERCLA 108(b) Financial Responsibility
Guarantee made this [date] by [name of guaranteeing entity], a
business corporation organized under the laws of [if incorporated
within the United States insert ``the State of ___'' and insert name of
state; if incorporated outside the United States insert the name of the
country in which incorporated, the principal place of business within
the United States, and the name and address of the registered agent in
the state of the principal place of business], herein referred to as
guarantor. This guarantee is made on behalf of the [owner or operator]
of [business address], which is [one of the following: ``our
subsidiary''; ``a subsidiary of [name and address of common parent
corporation], of which guarantor is a subsidiary''; or ``an entity with
which guarantor has a substantial business relationship, as defined in
40 CFR 320.3'' to any and all third-party CERCLA claimants.
Recitals
1. Guarantor meets or exceeds the financial test criteria and
agrees to comply with the reporting requirements for guarantors as
specified in 40 CFR 320.44 and will report the full amount of CERCLA
108(b) financial responsibility for which it is eligible to cover as
determined by the financial test criteria at 40 CFR 320.43 for each
facility covered by the guarantee in the letter from its chief
financial officer.
2. [Owner or operator] owns or operates the following facilities
subject to CERCLA 108(b) financial responsibility requirements covered
by this guarantee: [List for each facility: EPA Identification Number,
name, address and if guarantor is incorporated outside the United
States list the name and address of the guarantor's registered agent in
each state.]
3. For value received from [owner or operator], and up to the most
current Sec. 108(b) financial responsibility amount required at each
facility covered by the guarantee as identified in paragraph 2 of the
guarantor's most recent CFO letter submission required under 40 CFR
320.44, and exclusive of any legal defense costs incurred by the
guarantor, guarantor guarantees to any and all third-party CERCLA
claimants that:
a) in the event that payment for CERCLA response costs, health
assessment costs, and/or natural resource damages associated with a
facility identified above as required in a final court judgment from a
Federal court against one of the current owners or operators is not
made within 30 days, the guarantor shall do so;
b) in the event payment is not made as required in a CERCLA
settlement associated with a facility identified above between a
current owner or operator and EPA or another Federal government agency,
the guarantor shall do so; and
c) in the event that performance at a facility covered by the
guarantee does not occur as required under a CERCLA unilateral
administrative order issued to a current owner or operator by EPA or
another Federal agency and for which the owner or operator provides a
written statement allowing the guarantee to serve as financial
responsibility assuring the work in the order, the guarantor shall make
payment into a trust fund established pursuant to the order.
4. The guarantor shall satisfy a third-party CERCLA claim only on
receipt of one of the following documents plus the additional signed
statement specified below:
(a) A final court judgment dated at least 30 days earlier from a
Federal court, in favor of the claimant, awarding CERCLA response
costs, health assessment costs, and/or natural resource damages
associated with a facility covered by this guarantee against any of the
current owners or operators at a facility covered by this guarantee;
(b) A written signed statement from an EPA Administrator or another
Federal government agency requesting payment from the Guarantor on the
grounds that payment has not been made as required by a CERCLA
settlement associated with a facility covered by this guarantee and
with any of the current owners or operators; or
(c) A written signed statement from the EPA Administrator or other
Federal government agency requesting payment from the Guarantor into a
trust fund established pursuant to a CERCLA unilateral administrative
order on the grounds that performance at a facility covered by this
guarantee has not occurred as required by a CERCLA administrative order
issued to a current owner or operator.
AND
A signed statement from the claimant certifying that these amounts
have not been recovered or paid from any other source, including, but
not limited to, the owner operator, insurance, judgments, agreements,
and other financial responsibility instruments.
5. In addition to the payment provisions in paragraph 4 of this
agreement, in the case of a release or threatened release of (a)
hazardous substance(s) from a facility covered by the guarantee,
guarantor acknowledges that any claim authorized by section 107 or 111
of CERCLA may be asserted directly against the guarantor as provided by
CERCLA section 108(c). Guarantor consents to suit with respect to these
claims subject to the limitations in CERCLA section 108(d). Guarantor
will be entitled to all defenses provided to guarantors by CERCLA
section 108(c). Guarantor agrees to provide notice of any such
resulting claims and payments to the EPA Administrator.
6. The guarantor agrees that if, at any time before the termination
of this guarantee, the guarantor fails to meet the financial test
criteria, guarantor shall send within 90 days, by certified mail,
notice to the EPA Administrator and to [owner or operator] of its
intent to provide alternate financial responsibility as specified in
subpart C of 40 CFR part 320 in the name of [owner or operator]. Within
120 days after the guarantor fails to meet the financial test criteria,
the guarantor shall establish such financial responsibility unless
[owner or operator] has done so.
[[Page 3503]]
7. The guarantor agrees to notify the EPA Administrator by
certified mail, of a voluntary or involuntary proceeding under Title 11
(Bankruptcy), U.S. Code, naming guarantor as debtor, within 10 days
after commencement of the proceeding.
8. Guarantor agrees that within 30 days after being notified by an
EPA Administrator of a determination that guarantor no longer meets the
financial test criteria or that he is disallowed from continuing as a
guarantor, he shall establish alternate financial responsibility as
specified in subpart C of 40 CFR part 320, as applicable, in the name
of [owner or operator] unless [owner or operator] has done so.
9. Guarantor agrees to remain bound under this guarantee
notwithstanding any or all of the following: enforcement action taken
under CERCLA at a covered facility, or any modification or alteration
of an obligation of owner or operator pursuant to 40 CFR part 320, or
the bankruptcy of an owner or operator at a facility covered by the
agreement.
10. Guarantor agrees to remain bound under this guarantee for as
long as [owner or operator] must comply with the applicable financial
assurance requirements of subpart C of 40 CFR part 320 for the above-
listed facilities, except as provided in paragraph 11 of this
agreement.
11. Guarantor may terminate this guarantee by sending notice by
certified mail to the EPA Administrator and to [owner or operator],
provided that this guarantee may not be terminated unless and until
[the owner or operator] obtains, and the EPA Administrator approves,
alternate financial responsibility complying with subpart C of 40 CFR
part 320.
12. Guarantor agrees that if [owner or operator] fails to provide
alternate financial assurance as specified in subpart C of 40 CFR part
320 and obtain written approval of such assurance from the EPA
Administrator within 90 days after a notice of cancellation by the
guarantor is received by the EPA Administrator from guarantor,
guarantor shall provide such alternate financial assurance in the name
of [owner or operator].
13. Guarantor expressly waives notice of acceptance of this
guarantee by the EPA or by [owner or operator]. Guarantor also
expressly waives notice of any modification or alteration of an
obligation of owner or operator pursuant to 40 CFR part 320.
I hereby certify that the wording of this guarantee is identical to
the wording specified in 40 CFR part 320.50(f) as such regulations were
constituted on the date first above written.
Effective date:--------------------------------------------------------
[Name of guarantor]----------------------------------------------------
[Authorized signature for guarantor]-----------------------------------
[Name of person signing]-----------------------------------------------
[Title of person signing]----------------------------------------------
Signature of witness or notary:----------------------------------------
Subpart D--G [Reserved]
Subpart H--Hardrock Mining Facilities
Sec. 320.60 Applicability
(a)(1) The requirements of this subpart apply to owners or
operators of hardrock mining facilities within the classes identified
in the Federal Register notice issued by EPA at 74 FR 37213 (July 28,
2009) that are authorized to operate, or should be authorized to
operate, on [Date 30 days after publication of Final Rule], or who
become authorized to operate, or should become authorized to operate,
after [Date 30 days after publication of Final Rule] except for the
classes identified in paragraph (b) of this section.
(2) The requirements of this subpart do not apply to owners or
operators of the following classes of hardrock mining facilities
identified in the Federal Register notice referred to in paragraph (a)
of this section:
(i) Mines conducting only placer mining activities
(ii) Mines conducting only exploration activities
(iii) Mines with less than five disturbed acres that are not
located within one mile of another area of mine disturbance that
occurred in the prior ten-year period, and that do not employ hazardous
substances in their processes, and
(iv) Processors with less than five disturbed acres of waste pile
and surface impoundment
Sec. 320.61 Timeframes for compliance.
(a) Owners and operators of hardrock mining facilities that are
authorized to operate, or should be authorized to operate, on [Date 30
days after publication of Final Rule] must demonstrate financial
responsibility according to the following schedule:
(1) For the amount of the health assessment cost component
identified in this subpart by [Date 24 months after promulgation of the
final rule];
(2) For fifty percent of the response and natural resource damages
cost components amount identified in this subpart by [Date 36 months
after promulgation of the final rule]; and
(3) For the full response and natural resource damages component
amount identified in this subpart by [Date 48 months after promulgation
of the Final Rule].
(b) Owners and operators of hardrock mining facilities that are
authorized to operate, or should be authorized to operate, between
[Date of publication of final rule] and [Date four years after
publication of the final rule] must be incompliance with the schedule
in paragraph (a) and continue to comply with that schedule after
beginning operations.
(c) Owners or operators of hardrock mining facilities that become
authorized to operate, or should become authorized to operate, after
[Date four years after the effective date of this rule] must
demonstrate financial responsibility for the full financial
responsibility amount required under this subpart before beginning or
resuming operations.
Sec. 320.62 Definitions.
When used in this subpart, the following terms are defined as
follows:
Critical structure means a feature where a significant or high
hazard potential is determined to exist. A significant hazard potential
exists where failure or mis-operation is unlikely to cause loss of
human life but is could cause economic loss, environmental damage, or
other concerns; a high hazard potential exists where failure or mis-
operation is likely to cause loss of human life.
Disturbed acreage/acres means the area of land or surface water
that has been altered for purposes of accommodating mining and/or
processing activities. The term includes the area from which the
overburden, tailings, waste materials, ore, or targeted minerals have
been removed or placed, and areas where tailings ponds, waste dumps,
roads, conveyor systems, load-out facilities, heap leach, dump leach,
ponds and impoundments, slag and other mineral processing waste, and
all similar excavations or placements that result from the operation
are located.
Dump leach means ore or mineralized material that has been stacked
without a liner and has been leached, is currently being leached, or
has been placed in a pile for the purpose of being leached.
Exploration means activities conducted to ascertain the existence,
location, extent and/or quality of a deposit of ore or other mineral
and does not include activities where 1000 tons or more of presumed ore
have been removed for testing or where development or production has
occurred. Exploration does not include activities where material is
extracted for commercial use or sale.
[[Page 3504]]
Extraction means the sequence of activities intended to physically
gain access to and remove ore or a mineral body.
Feature means open pit, underground mine, waste rock pile, tailings
impoundment, tailings stack, heap leach pile, dump leach pile, process
pond, impoundment, reservoir, slag pile, in-situ leach facility, or
other area or feature used for mining or processing activities.
Heap leach means ore or mineralized material that has been stacked
on a lined leach pad and has been leached, is currently being leached,
or has been placed in a pile for the purpose of being leached.
Heap/dump leach means both heap and valley leach facilities, which
are used for gold and sometimes copper processing, or run-of-mine
copper leach dumps (or piles), that may have originally been intended
for leaching, or originally were waste rock that was later leached in
place.
In-situ Leaching means the removal of targeted materials by
injection and extraction of an acidic or alkaline solvent solution.
Mine means all areas and equipment used for mining, including but
not limited to injection and extraction wells used for in-situ mining
or the extraction of mineral-bearing groundwater brines; surface
excavations, pits, slopes, and spoil; underground passageways, shafts,
stopes, tunnels, adits and workings; waste rock, slag and tailings;
piles, ponds, impoundments and reservoirs; retention dams; dump, heap,
or other leach facilities; mills, smelters, structures, tanks,
equipment, machines, tools, and process components; private roads,
ports, transmission lines, pipelines, or any other means of access
owned or maintained by the operator; and any other ancillary areas or
activities owned or used by the operator and resulting from the work of
extracting minerals from their natural deposits. Adjacent and/or
noncontiguous properties located within close proximity of the
extraction site are part of the mine if those properties are managed
under a unified operational control (e.g., under the same owner or
operator and with oversight by a unified managerial staff and budget)
provided those adjacent and/or noncontiguous properties are engaged in
any of the above activities as part of the sequential management of
ore, beneficiated ore, mineral concentrate, waste rock or tailings.
Mineral processing means the sequence of activities following
extraction of metallic or non-fuel non-metallic minerals to: (1)
Separate and concentrate a target metallic or non-fuel non-metallic
mineral from the ore, and/or (2) to refine ores or mineral concentrates
to extract a target metallic or non-fuel non-metallic material. Mineral
processing includes the mechanical, thermal, and/or chemical treatment
of naturally occurring earthen materials, either solid or liquid (e.g.,
rock, ore, mineral or extracted subsurface brine) to recover, purify or
create a final mineral product (e.g., dimension stone, expanded
vermiculite, or refractory clay) or a feedstock of sufficient purity
that it can then be used in further industrial or manufacturing
operations.
Mineral processor means all areas and equipment used for mineral
processing.
Mining means the extraction of rock and other materials that
contain a target ore or mineral deposit from the earth. Mining
includes, but is not limited to, in-situ solution mining, extraction of
mineral-bearing groundwater brines, and surface or underground
excavation of solid earthen materials.
Net precipitation means annual precipitation minus annual pan
evaporation, or gross precipitation minus pan evaporation loss. Net
precipitation is in inches.
Open pit means any open pits, cuts, or other surface features from
which ore was extracted. It does not include borrow pits, sand boxes,
or other surface features used for extracting soil, gravel, or sand for
any purposes other than ore extraction.
Pile is as defined in 40 CFR 260.10
Placer mining is the extraction or prospecting of materials in
unconsolidated deposits using water to excavate, transport, concentrate
and recover heavy minerals using beneficiation methods such as
screening, hand-panning, sluicing or dredging provided they are
otherwise in compliance with applicable state and Federal regulations
and do not use CERCLA hazardous substances (e.g., mercury, cyanide) in
the concentration or processing of materials.
Pressurized hydraulic head means a discharge from underground mine
workings at greater than 100 kPa.
Process pond/reservoir means process ponds, reservoirs,
impoundments, ditches, channels or other wet acreage that were used in
heap leach, dump leach, metals or minerals processing and other
activities that have resulted in deposits of sludge and other
potentially toxic and/or hazardous materials within those features.
Qualified professional engineer means an individual who is licensed
by a state as a Professional Engineer to practice one or more
disciplines of engineering and who is qualified by education, technical
knowledge, and experience to make the specific technical certifications
required under this subpart. Professional engineers making these
certifications must be currently licensed in the state where the
hardrock mining facility is located.
Slag pile means the storage location of glass-like particles
generated when molten materials produced by a smelter are quenched.
Surface impoundment is as defined in 40 CFR 260.10.
Surface mine means the open pits, adits, general workings, and
other features associated with surface extraction of ore.
Tailings means the remaining waste material following the removal
of valuable minerals from ore.
Tailings facility means ponds, dams, and other facilities including
spillways and associated features used for the deposition of process/
beneficiation waste or tailings from either pulp or vat leaching,
flotation, or gravity processing facilities. This also includes paste
and dry stacks.
Underground mine means adits, portals, shafts, raises, drifts, and
general workings (stopes, rooms or caving areas), vents and other
features associated with underground extraction of ore.
Waste rock means waste rock and overburden piles, dumps, and other
features associated with run-of-mine disposal of waste on the surface
whether from open pit or underground mines.
Sec. 320.63 Determining the financial responsibility amount.
(a) Owners and operators subject to the requirements of this
subpart must calculate the financial responsibility amount for their
facilities in accordance with this section.
[[Page 3505]]
[GRAPHIC] [TIFF OMITTED] TP11JA17.001
Where:
Deflatory = the most recent available GDP Implicit Price Deflator
for year y; and
Deflator2014 = the GDP Implicit Price Deflator for 2014
i = the ith response category (e.g., water treatment costs);
n = the total number of relevant response categories;
r = EPA region r (e.g., EPA Region 3); and
s = state s (e.g., Montana).
(b)(1) Response component--
[GRAPHIC] [TIFF OMITTED] TP11JA17.002
Determine the response component of the financial responsibility
amount for the facility by totaling the response category amounts in
paragraphs (i) through (xii) for all applicable response categories.
Include in the calculation all site features that are authorized to
operate, or should have been authorized to operate on [Effective Date
of the Final Rule], or on the date the facility first becomes subject
to requirements of this part, and have not been released from financial
responsibility obligations under Sec. 320.27.
(i) Open pit category. The open pit category amount equals: 5.07 x
10[caret] (4.24 + 1.08 x Log10[Open Pit Disturbed Acres])
(ii) Underground mine category. The underground mine category
amount for an underground mine with a hydraulic head is $4,500,000. The
amount for an underground mine without a hydraulic head is $200,000.
(iii) Waste rock category. The waste rock category amount equals:
1.85 x 10[caret] (5.18 + .75 x Log10[Waste Rock Disturbed
Acres])
(iv) Heap and dump leach category. The heap and dump leach category
amount equals: 2.29 x 10[caret] (4.57 + 1.01 x Log10[Heap
and Dump Leach Disturbed Acres])
(v) Tailings category. The tailings category amount equals: 1.71 x
10[caret] (5.32 + .68 x Log10[Tailings Disturbed Acres])
(vi) Process pond and reservoir category. The process pond and
reservoir category amount equals: 1.64 x 10[caret] (4.29 + 1.03 x
Log10[Process Pond and Reservoir Disturbed Acres])
(vii) Slag pile category. The slag pile category amount equals:
$64,000 x [Slag Pile Disturbed Acres].
(viii) Solid and hazardous waste disposal category. The solid and
hazardous waste disposal category amount is $2,600,000.
(ix) Drainage category. The drainage category amount equals: 9.56 x
10[caret] (3.42 + .57 x Log10(Total Disturbed Acres + 1)
(x) Short-term O&M and monitoring category. The short-term O&M and
monitoring category amount equals: {1.82 x 10[caret] (4.01 + 0.38 x
Log10[Total Disturbed Acres + 1]){time} x {1/0.0263{time}
x {1 - (1/[1.0263[caret]10]){time}
(xi) Interim O&M category. The interim O&M category amount equals:
{1.46 x 10[caret] (6.04 + 0.01 x [Net Precipitation] + 0.34 x
Log10[Heap and Dump Leach Disturbed Acres + 1] + 0.10 x
Log10[Tailings Impoundment Disturbed Acres + 1]){time} x
{1/0.0263{time} x {1 -(1/[1.0263[caret] 10]){time}
(xii) Long-term O&M category. The long-term O&M amount equals:
{1.64 x 10[caret] (3.12 + 0.58 x Log10[Total Disturbed Acres
+ 1]){time} /0.0263
(xiii) Water treatment category. The water treatment category
amount is: {1.16 x 10[caret] ( 3.22 + 1.10 x Log10[flow] +
.70 x [In-Situ leach]){time} /.0263
Where:
Flow = flow in gallons/minute through in-situ leach features + flow
in gallons/minute through underground mine features + 0.05 x
Precipitation x [Total Disturbed Acres] x 0.05166.
In-situ leach = 1 if present; 0 if not present.
(2) Multiply the response cost amount calculated under paragraph
(b)(1) of this section by the following:
(i) Overhead and oversight percentage ([1 + OverheadOversightr])
The applicable OverheadOversightr value is the value in
Appendix II for the Region in which the largest disturbed acreage of
the facility is located.
(ii) State adjustment factor ( StateAdjustmentFactors).The
applicable state adjustment factor is the factor in Appendix III for
the state in which the largest disturbed acreage at the facility is
located.
(iii) Natural resource damage component. The financial
responsibility amount for natural resource damages at a facility is
13.4 percent of the total response component.
(3) Add the health assessment component to the amount calculated
under paragraph (b)(2) of this section. The financial responsibility
amount for the health assessment component is $550,000.
(c) Owners and operators may satisfy requirements of paragraph
(b)(i) through (xiii), in whole or in part, by demonstrating that they
are subject to, and in compliance with, requirements that will result
in a minimum degree and duration of risk associated with the
production, transportation, treatment, storage, or disposal, as
applicable, of all hazardous substances present at that site feature. A
demonstration under this paragraph will reduce the amount of financial
responsibility that an owner and operator must demonstrate under this
part.
(1) The demonstration must be made individually for each site
feature that must be included in the calculation as required by
paragraph (b)(1) of this section, and must include, at a minimum:
(i) Evidence that the owner or operator is subject to the
requirements described in paragraph (d) of this section,
(ii) Evidence that the owner's or operator's obligation to
implement such requirements are imposed in an enforceable document as
defined in Sec. 320.61,
(iii) Evidence that the owner or operator has demonstrated, and is
required to demonstrate, adequate financial responsibility to assure
implementation of the required activities, and
(iv) Certification by the owner or operator that the facility is in
[[Page 3506]]
compliance with the requirements described in paragraph (d) of this
section.
(2) Information provided to make the demonstration in paragraph
(c)(1) of this section must provide sufficient and detailed supporting
information adequate to allow EPA to evaluate the adequacy of the
financial responsibility and the underlying requirements.
(3) In the event that an owner or operator that reduces the maximum
financial responsibility at its facility based on a reduction under
paragraph (d) of this section becomes ineligible for that reduction
because the facility no longer meets the requirements in paragraph
(c)(1)(i) through (iii) of this section, it must recalculate the
financial responsibility level at its facility and submit evidence of
financial responsibility for the increased amount within thirty days of
the date it no longer is eligible. The requirement to recalculate a
financial responsibility level and submit evidence of financial
responsibility under this paragraph does not affect the owner's or
operator's obligations for instrument maintenance under Sec. 320.22.
(d) Reductions to the response component amount.
(1) To satisfy the open pit category component in paragraph
(b)(1)(i) of this section:
(i) A plan to address safety by prevention of public access by
means of security fencing, or other effective methods.
(ii) Where ponding will occur, a plan that requires:
(A) regrading the bottom surface during closure to a stable
configuration that prevents ponding and promotes the conveyance of
surface water off the unit
(B) closure of all open pits where public access is not restricted
(C) structures that are considered to be critical structures to be
designed for a long-term static factor of safety of 1.5 or greater
(D) structures that are considered to be non-critical structures to
be designed for a long-term static factor of safety of 1.3 or greater
(E) units being closed be designed for a factor of safety of 1.1 or
greater under pseudostatic analysis, and
(F) a stability analysis to be conducted for the unit and include
evaluation for static and seismic induced liquefaction.
(iii) A plan for the management of all stormwater and sediment
generated during reclamation and following closure that includes
permanent stormwater conveyances, ditches, channels, and diversions, as
necessary, designed to convey the peak flow and ponds and other
collection devices, and that provides for controls designed to store
the volume generated during a 24-hour period by a 200-year return
interval storm event.
(iv) Where conditions at the open pit may allow a pit lake to form,
or where meteoric water may percolate through the pit rock into
groundwater below, and pit lake or any discharges may not meet water
quality standards, a plan for the minimization, prevention, or
collection and treatment of water in the pit lakes, discharges, and/or
seepage, that factors in information on site hydrology, water quality
characterization information, and pit lake ecological risk assessment
information. The plan must address and provide for capture and
treatment at closure consisting of a capture and treatment system that
meets a minimum 200-yr life design criteria, and that is designed to
either prevent pit lake formation or groundwater contamination
exceeding applicable water quality standards to achieve at least a 95
percent capture efficiency of the affected groundwater, and to meet
applicable water quality standards.
(v) If prevention/avoidance is relied on, a management plan that
demonstrates geochemically active materials will effectively be
avoided, and that includes provisions for sampling and monitoring
documentation.
(vi) Requirements for concurrent or sequential reclamation of mined
areas as they become available prior to final cessation of operations
and closure.
(2) To satisfy the underground mine category component in paragraph
(b)(1)(ii) of this section:
(i) A plan to address public safety by prevention of public access
by means of security fencing, or other effective methods.
(ii) A plan for the minimization, prevention or collection and
treatment of discharges and or seepage based on site hydrology and
water quality characterization information that provides for necessary
additional source controls and/or capture and treatment at closure, all
of which meet a minimum 200-year life design criteria, and includes:
(A) If seepage and/or discharge water quality is not expected to
meet applicable water quality standards, requirements for a capture and
treatment system designed to achieve at least a 95 percent capture
efficiency and to meet applicable water quality standards, and
(B) If there will be a pressurized plug as a permanent feature
controlling a discharge from underground mine workings at moderate to
high heads (100-1,000+ kPa), a requirement to maintain the plug as a
permanent feature.
(iii) If prevention/avoidance is relied on, a management plan that
demonstrates geochemically active materials will effectively be
avoided, and that includes provisions for sampling and monitoring
documentation.
(iv) Requirements for concurrent or sequential reclamation of mined
areas as they become available prior to final cessation of operations
and closure.
(3) To satisfy the waste rock category component in paragraph
(b)(1)(iii) of this section:
(i) A plan to address public safety by prevention of public access
by means of security fencing, or other effective methods.
(ii) If prevention/avoidance is relied on, a management plan that
demonstrates geochemically active materials will effectively be
avoided, and that includes provisions for sampling and monitoring
documentation.
(iii) Requirements for concurrent or sequential reclamation of
mined areas as they become available prior to final cessation of
operations and closure.
(iv) Requirements to regrade the surface during closure to a stable
configuration that prevents ponding and promotes the conveyance of
surface water off the unit, that requires closure of all waste rock
piles considered to be critical structures to be designed for a long-
term static factor of safety of 1.5 or greater, that requires all non-
critical structures to be designed for a long-term static factor of
safety of 1.3 or greater; and that requires that the units being closed
be designed for a factor of safety of 1.1 or greater under pseudostatic
analysis.
(v) Requirements to provide for a stability analysis to be
conducted for the unit as part of the original design, and as part of
mine modifications during the active life of the mine.
(vi) A plan for the management of all stormwater and sediment
generated during operations and during and following closure. For
existing units, the plan must provide for permanent stormwater
conveyances, ditches, channels and diversions designed to convey the
peak flow and ponds and other collection devices designed to store the
volume generated during a 24-hour period by a 100-year return interval
storm event. For unit that become authorized to operate after [Date of
the Final Rule], the plan must provide for controls designed to store
the volume generated during a 24-hour
[[Page 3507]]
period by a 200-year return interval storm event.
(vii) A plan for the minimization, prevention, or collection and
treatment of discharges and/or seepage, based on site hydrology and
water quality characterization information, that provides for a cover
system of, at a minimum, a store and release earthen cover system with
a thickness of at least twelve inches and, if necessary, additional
source controls or capture and treatment at closure, all of which meet
a minimum 200-year life design criteria. If seepage water quality is
not expected to meet applicable Federal and state groundwater and
surface water quality standards at the point of compliance, the plan
must provide for:
(A) Implementation of a containment system that immobilizes
hazardous substances to meet applicable water quality standards (e.g.,
an engineered cover system designed to achieve, at a minimum, a 95
percent reduction in annual net-percolation based on the long-term
average to reduce seepage discharges to meet applicable water quality
standards;
(B) A capture and treatment system designed to achieve at least a
95 percent capture efficiency and meet applicable water quality
standards; or a combination of an engineered cover system and a capture
and treatment system to achieve at least a 95 percent reduction in
discharged load and meet applicable water quality standards at the
point of compliance, or
(C) A solution containment system to assure seepage flows are
collected, contained, conveyed, and treated to achieve at least a 95
percent reduction to meet applicable water quality standards.
(4) To satisfy the heap and dump leach category component in
paragraph (b)(1)(v) of this section:
(i) A plan to address public safety by prevention of public access
by means of security fencing, or other effective methods.
(ii) A plan to regrade surface during closure to a stable
configuration that prevents ponding and promotes the conveyance of
surface water off the unit, and that requires closure of all heap leach
and dump leach piles considered to be critical structures to be
designed for a long-term static factor of safety of 1.5 or greater and
all non-critical structures to be designed for a long-term static
factor of safety of 1.3 or greater; and requires that the units being
closed be designed for a factor of safety of 1.1 or greater under
pseudostatic analysis. The plan must also provide for a stability
analysis to be conducted for the unit and include evaluation for static
and seismic induced liquefaction.
(iii) A plan for the management of all stormwater and sediment
generated during operations and during and following closure. For
existing units, the plan must provide for permanent stormwater
conveyances, ditches, channels and diversions designed to convey the
peak flow and ponds and other collection devices designed to store the
volume generated during a 24-hour period by a 100-year return interval
storm event. For unit that become authorized to operate after [Date of
the Final Rule], the plan must provide for controls designed to store
the volume generated during a 24-hour period by a 200-year return
interval storm event.
(iv) A plan for the minimization, prevention, or collection and
treatment of discharges and/or seepage, based on site hydrology and
water quality characterization information, that provides for a cover
system of, at a minimum, a store and release earthen cover system with
a thickness of at least twelve inches and, if necessary, additional
source controls or capture and treatment at closure, all of which meet
a minimum 200-year life design criteria. If seepage water quality is
not expected to meet applicable water quality standards, the plan must
provide for:
(A) Implementation of an engineered cover system designed to
achieve at least a 95 percent reduction in annual net-percolation based
on the long-term average and reduce seepage discharges to meet
applicable water quality standards;
(B) A capture and treatment system designed to achieve at least a
95 percent capture efficiency and meet applicable water quality
standards; or combination of an engineered cover system and a capture
and treatment system to achieve at least a 95 percent reduction in
discharged load and meet applicable water quality standards; or
(C) A solution containment system to assure seepage flows are
collected, contained, conveyed, and treated to achieve at least a
percent reduction to meet applicable water quality standards.
(v) (For heap leach) A liner designed to minimize/eliminate
releases from the unit based on site specific conditions.
(vi) Requirements for concurrent or sequential reclamation of mined
areas as they become available prior to final cessation of operations
and closure.
(5) To satisfy the tailings category component in paragraph
(b)(1)(v) of this section:
(i) A plan to address public safety by prevention of public access
by means of security fencing, or other effective methods.
(ii) A plan to regrade surface during closure to a stable
configuration that prevents ponding and promotes the conveyance of
surface water off the unit, and that requires closure of all tailings
impoundments and stacks considered to be critical structures to be
designed for a long-term static factor of safety of 1.5 or greater and
all non-critical structures to be designed for a long-term static
factor of safety of 1.3 or greater; and requires that the units being
closed be designed for a factor of safety of 1.1 or greater under
pseudostatic analysis. The plan must also provide for a stability
analysis to be conducted for the unit and include evaluation for static
and seismic induced liquefaction.
(iii) A plan for the management of all stormwater and sediment
generated during operations and during and following closure. For
existing units, the plan must provide for permanent stormwater
conveyances, ditches, channels and diversions designed to convey the
peak flow and ponds and other collection devices designed to store the
volume generated during a 24-hour period by a 100-year return interval
storm event. For unit that become authorized to operate after [Date of
the Final Rule], the plan must provide for controls designed to store
the volume generated during a 24-hour period by a 200-year return
interval storm event.
(iv) A plan for the minimization, prevention, or collection and
treatment of discharges and/or seepage, based on site hydrology and
water quality characterization information, that provides for a cover
system of, at a minimum, a store and release earthen cover system with
a thickness of at least twelve inches and, if necessary, additional
source controls or capture and treatment at closure, all of which meet
a minimum 200-year life design criteria. If seepage water quality is
not expected to meet applicable water quality standards, the plan must
provide for:
(A) Implementation of an engineered cover system designed to
achieve at least a 95 percent reduction in annual net-percolation based
on the long-term average and reduce seepage discharges to meet
applicable water quality standards;
(B) A capture and treatment system designed to achieve at least a
95 percent capture efficiency and meet applicable water quality
standards; or combination of an engineered cover system and a capture
and treatment system to achieve at least a 95 percent reduction in
[[Page 3508]]
discharged load and meet applicable water quality standards, or
(C) A solution containment system to assure seepage flows are
collected, contained, conveyed, and treated to achieve at least a
percent reduction to meet applicable water quality standards.
(v) A liner designed to minimize/eliminate releases from the unit
based on site specific conditions.
(vi) If prevention/avoidance is relied on, a management plan that
demonstrates geochemically active materials will effectively be
avoided, and that includes provisions for sampling and monitoring
documentation.
(vii) If a wet tailings impoundment is present:
(A) A requirement to develop and implement a Tailings Operations,
Maintenance and Surveillance (TOMS) manual, or similar plan, that
defines and describes roles and responsibilities of personnel assigned
to the facility; procedures and processes for managing change; the key
components of the facility; procedures required to operate, monitor the
performance of, and maintain a facility to ensure that it functions in
accordance with its design, meets regulatory and corporate policy
obligations, and links to emergency planning and response; downstream
notification; and, requirements for analysis and documentation of the
performance of the facility.
(B) Annual tailings inspection reports by a qualified engineer, and
an inspection report by an independent qualified engineer at least
every five years.
(viii) Requirements for concurrent or sequential reclamation of
mined areas as they become available prior to final cessation of
operations and closure.
(6) To satisfy the process pond and reservoir category component in
paragraph (b)(1)(vi) of this section:
(i) A plan to address public safety by prevention of public access
by means of security fencing, or other effective methods.
(ii) A plan for the design and operation of such ponds and
reservoirs to ensure they have adequate freeboard and are designed to
prevent discharges of hazardous substances.
(iii) A liner and collection system designed to minimize/eliminate
releases from the unit based on site specific conditions.
(iv) A requirement that sludge and the sub-base below the liner be
sampled and addressed in a manner that is protective of human health
and the environment as part of closure.
(v) Requirements for concurrent or sequential reclamation of mined
areas as they become available prior to final cessation of operations
and closure.
(vi) A plan for the management of all stormwater and sediment
generated during operations and during and following closure. For
existing units, the plan must provide for permanent stormwater
conveyances, ditches, channels and diversions designed to convey the
peak flow and ponds and other collection devices designed to store the
volume generated during a 24-hour period by a 100-year return interval
storm event. For unit that become authorized to operate after [Date of
the Final Rule], the plan must provide for controls designed to store
the volume generated during a 24-hour period by a 200-year return
interval storm event.
(7) To satisfy the slag pile category component in paragraph
(b)(1)(iv) of this section:
(i) A plan to address public safety by prevention of public access
by means of security fencing, or other effective methods.
(ii) If prevention/avoidance is relied on, a management plan that
demonstrates geochemically active materials will effectively be
avoided, and that includes provisions for sampling and monitoring
documentation.
(iii) Requirements for concurrent or sequential reclamation of
mined areas as they become available prior to final cessation of
operations and closure.
(iv) Requirements to regrade surface during closure to a stable
configuration that prevents ponding and promotes the conveyance of
surface water off the unit, and that requires closure of all waste rock
piles considered to be critical structures to be designed for a long-
term static factor of safety of 1.5 or greater and all non-critical
structures to be designed for a long-term static factor of safety of
1.3 or greater; and requires that the units being closed be designed
for a factor of safety of 1.1 or greater under pseudostatic analysis.
(v) Requirements to provide for a stability analysis to be
conducted for the unit as part of the original design, and as part of
mine modifications during the active life of the mine.
(vi) A plan for the management of all stormwater and sediment
generated during operations and during and following closure. For
existing units, the plan must provide for permanent stormwater
conveyances, ditches, channels and diversions designed to convey the
peak flow and ponds and other collection devices designed to store the
volume generated during a 24-hour period by a 100-year return interval
storm event. For unit that become authorized to operate after [Date of
the Final Rule], the plan must provide for controls designed to store
the volume generated during a 24-hour period by a 200-year return
interval storm event.
(vii) A plan for the minimization, prevention, or collection and
treatment of discharges and/or seepage, based on site hydrology and
water quality characterization information, that provides for a cover
system of, at a minimum, a store and release earthen cover system with
a thickness of at least twelve inches and, if necessary, additional
source controls or capture and treatment at closure, all of which meet
a minimum 200-year life design criteria. If seepage water quality is
not expected to meet applicable Federal and state groundwater and
surface water quality standards at the point of compliance, the plan
must provide for:
(A) Implementation of a containment system that immobilizes
hazardous substances to meet applicable water quality standards (e.g.,
an engineered cover system designed to achieve, at a minimum, a 95
percent reduction in annual net-percolation based on the long-term
average to reduce seepage discharges to meet applicable water quality
standards;
(B) A capture and treatment system designed to achieve at least a
95 percent capture efficiency and meet applicable water quality
standards; or combination of an engineered cover system and a capture
and treatment system to achieve at least a 95 percent reduction in
discharged load and meet applicable water quality standards at the
point of compliance, or
(C) A solution containment system to assure seepage flows are
collected, contained, conveyed, and treated to achieve at least a 95
percent reduction to meet applicable water quality standards.
(8) To satisfy the solid and hazardous waste disposal component in
paragraph (b)(1)(viii):
(i) Requirements for disposal of all solid and hazardous wastes in
a manner that is protective of human health and the environment and
that is compliance with all applicable Federal, state, and local
requirements.
(ii) Requirements for contaminated soil disposal in a manner that
is protective of human health and the environment and that is in
compliance with all applicable Federal, state, and local requirements.
(iii) Requirements to decontaminate buildings and structures to
remove and safely dispose of hazardous substances.
(9) To satisfy the drainage category component in paragraph
(b)(1)(ix) of
[[Page 3509]]
this section, a plan for the management of all stormwater and sediment
generated during operations and during and following closure. For
existing units, the plan must provide for permanent stormwater
conveyances, ditches, channels and diversions designed to convey the
peak flow and ponds and other collection devices designed to store the
volume generated during a 24-hour period by a 100-year return interval
storm event. For unit that become authorized to operate after [Date of
the Final Rule], the plan must provide for controls designed to store
the volume generated during a 24-hour period by a 200-year return
interval storm event.
(10) To satisfy the short-term O&M category component in paragraph
(b)(1)(x) of this section:
(i) A plan for groundwater and surface water monitoring to assure
that monitoring wells are located to detect an exceedance(s) or trends
towards exceedance(s) of the applicable standards, and are detected at
the earliest possible occurrence, so that investigation of the extent
of contamination and actions to address the source of contamination may
be implemented as soon as possible. The plan must be currently in
effect and must cover a period of at least five years.
(ii) A plan for inspection and monitoring of erosion and
revegetation to ensure reclamation success.
(iii) A plan for routine maintenance and repairs to roads,
stormwater conveyances and collection devices and revegetation
maintenance (e.g. weed controls) and repairs (e.g. areas of
revegetation failure).
(11) To satisfy the interim O&M category component in paragraph
(b)(1)(xi) of this section:
(i) A plan for the purpose of interim emergency water management to
provide information on how process water systems, interceptor wells,
seepage collection systems and storm water management systems are
operated and maintained to prevent discharges in the event the
regulator assumes management of the mine facility. The plan must
include process water flow charts showing electrical system
requirements, pump operations, seepage collection and interceptor well
operations and applicable operation and maintenance requirements. The
plan must be updated as major process water system changes occur that
would affect the interim emergency water management plan.
(ii) A conceptual engineering document that describes the processes
and methods that are expected to be used to reduce the quantities of
process water in storage and circulation inventory at the end of mine
production until all process solutions are eliminated and steady-state
discharge is reached, in preparation for long-term water management or
treatment. The document must include:
(A) A description and list of the current or proposed process water
management units and inventories of process water;
(B) A description of the modifications to the process water
management system required to create an efficient process water
reduction system;
(C) The operation and maintenance requirements for the system with
material take-offs of sufficient detail to prepare an engineering-level
cost estimate; and
(D) An estimate of the required water reduction period based on the
water reduction calculations provided in the plan to be used for
planning and operation and maintenance cost calculations.
(12) To satisfy the long-term O&M category component in paragraph
(b)(1)(xii) of this section:
(i) A plan for groundwater and surface water monitoring to assure
that additional monitoring wells are located to detect an exceedance(s)
or trends towards exceedance(s) of the applicable standards and that
they are detected at the earliest possible occurrence, so that
investigation of the extent of contamination and actions to address the
source of contamination may be implemented as soon as possible. The
plan must be currently in effect, and must cover a period of at least
200 years.
(ii) A plan for inspection and monitoring of mass stability,
erosion and revegetation certified by a professional engineer to ensure
reclamation success.
(iii) A plan for routine maintenance and repairs to roads,
stormwater conveyances and collection devices, cover systems, and
revegetation maintenance (e.g. weed controls) and repairs (e.g. areas
of revegetation failure) and monitoring wells.
(13) To satisfy the water treatment category component in paragraph
(b)(1)(xiii) of this section:
(i) A plan for closure water management and water treatment
consisting of a conceptual engineering document that describes the
processes and methods that are expected to be used for long-term
management or treatment of seepage and includes an analysis of the
expected operational life of each long-term water management or water
treatment system, including collection/interceptor systems, until each
system is no longer needed to protect water quality and applicable
standards are met. The plan must describe whether active or passive
treatment is proposed and include all operations and maintenance
activities required to support all collection and treatment systems.
The plan must describe the long-term water management and water
treatment systems with sufficient detail, including locations of key
components, expected operational life, material take-offs, and capital,
operational and maintenance costs to prepare an engineering-level cost
estimate. The plan must be currently in effect and must cover a period
of at least 200 years.
(ii) A plan for disposal of wastes produced from water treatment
that is protective of human health and the environment and meets
applicable Federal, state, and local requirements.
Sec. 320.64 Information submission and recordkeeping requirements
(a) Owners or operators must submit to EPA information that
supports the cost calculation including the maximum financial
responsibility amount, final financial responsibility amount,
information to support all inputs to the formula, and information to
support reductions to the maximum financial responsibility amount in
accordance with paragraph (c), including necessary components of
applicable enforceable documents. Such information must provide
sufficient detail about facility conditions to allow the Administrator
to review the formula calculation and determine if the inputs to the
formula were accurate, and should include site characterization
information and evaluations that support the enforceable documents
provided to support reductions.
(b) Owners or operators must retain the calculation of the
financial responsibility amount and the information supporting it for a
period of three years following submission to EPA.
Sec. 320.65 Third-Party Certification
The financial responsibility amount submitted by owners or
operators in compliance with Sec. 320.63 must be certified by an
independent qualified professional engineer as defined in Sec. 320.62.
BILLING CODE 6560-50-P
[[Page 3510]]
Appendix I
[GRAPHIC] [TIFF OMITTED] TP11JA17.003
[[Page 3511]]
[GRAPHIC] [TIFF OMITTED] TP11JA17.004
[[Page 3512]]
[GRAPHIC] [TIFF OMITTED] TP11JA17.005
BILLING CODE 6560-50-C
Appendix II
Region-Specific Overhead and Oversight Percentages
------------------------------------------------------------------------
Total OC
Region percentage
------------------------------------------------------------------------
1....................................................... 48.64
2....................................................... 47.60
3....................................................... 51.42
4....................................................... 49.57
5....................................................... 50.13
6....................................................... 48.66
7....................................................... 47.63
8....................................................... 48.19
9....................................................... 48.73
10...................................................... 48.14
------------------------------------------------------------------------
Appendix III
State Adjustment Factors
------------------------------------------------------------------------
State
State adjustment
factor
------------------------------------------------------------------------
AK...................................................... 1.19
AL...................................................... 0.91
AR...................................................... 0.87
AZ...................................................... 0.96
CA...................................................... 1.17
CO...................................................... 0.97
CT...................................................... 1.18
DE...................................................... 1.10
FL...................................................... 0.92
GA...................................................... 0.89
HI...................................................... 1.19
IA...................................................... 0.98
ID...................................................... 0.97
IL...................................................... 1.15
IN...................................................... 1.00
KS...................................................... 0.94
KY...................................................... 0.99
LA...................................................... 0.89
MA...................................................... 1.20
MD...................................................... 0.99
ME...................................................... 1.03
MI...................................................... 1.04
MN...................................................... 1.12
MO...................................................... 1.04
MS...................................................... 0.89
MT...................................................... 0.97
NC...................................................... 0.87
ND...................................................... 0.92
NE...................................................... 0.97
NH...................................................... 1.06
NJ...................................................... 1.20
NM...................................................... 0.92
NV...................................................... 1.08
NY...................................................... 1.17
OH...................................................... 1.02
OK...................................................... 0.88
OR...................................................... 1.06
PA...................................................... 1.09
RI...................................................... 1.16
SC...................................................... 0.87
SD...................................................... 0.87
TN...................................................... 0.91
TX...................................................... 0.89
UT...................................................... 0.95
VA...................................................... 0.94
VT...................................................... 1.01
WA...................................................... 1.05
WI...................................................... 1.06
WV...................................................... 1.04
WY...................................................... 0.92
------------------------------------------------------------------------
[FR Doc. 2016-30047 Filed 1-10-17; 8:45 am]
BILLING CODE 6560-50-P
