Hard Rock Dollars: DC Circuit Arguments on Superfund Financial Assurance Rules

Although most basic questions under the federal “Superfund” law have long since been addressed in detail by the federal EPA and the federal courts, Section 108 -- Superfund’s “financial assurance provision” -- is only now coming into legal focus as the U.S. Court of Appeals for the D.C. Circuit considers challenges to EPA’s regulatory decisions under that provision of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).  

On Wednesday, March 13, 2019, the D.C. Circuit heard oral argument in a case styled Idaho Conservation League, et al., v. Andrew Wheeler, EPA Administrator, et al., USCA Case # 18-1141. A link to a recording of that argument can be found here. The panel consisted of Judges Thomas B. Griffith, Karen LeCraft Henderson, and David B. Sentelle, appointed respectively by Presidents George W. Bush, George H. W. Bush, and Ronald Reagan. The court gave the parties a total of thirty minutes to argue their positions.

The court’s resolution of this pending challenge has potential multi-billion dollar implications for a number of industries, including hard rock mining, chemicals, petroleum, and electric power. Section 108(b) is a sweeping mandate to EPA to require “that classes of facilities establish and maintain evidence of financial responsibility consistent with the degree and duration of risk associated with the production, transportation, treatment, storage or disposal of hazardous substances.” These requirements were intended to address facilities beyond those required under other federal law – primarily the Resource Conservation and Recovery Act (RCRA) – to post bonds and other financial instruments to provide for the cleanup and closure of treatment, storage and disposal facilities (TSDFs) for hazardous wastes.  

EPA was supposed to have established these requirements by December 1985, nearly 35 years ago. Perhaps because of the daunting breadth and complexity of the requirements, EPA failed to do so for any industry sector.  Finally, in the 2000s, environmental groups sought to compel EPA to act, and EPA agreed in an earlier D.C. Circuit proceeding to issue a schedule for industry sectors it would regulate, beginning with hard rock (non-fuel) mining due for proposal in December 2016. EPA acted pursuant to the consent order approved by the Court of Appeals in In re Idaho Conservation League, 811 F.3d 502 (D.C. Cir. 2016). EPA’s schedule provided that it would subsequently address the chemical, petroleum and electric power industries.

In December 2016, EPA proposed to implement Section 108(b) with respect to hard rock mining, by establishing financial responsibility requirements estimated to cost between $111 and $171 million per year. [1] In a controversial December 2017 decision, EPA reversed itself and announced that no rule was necessary. [2] The EPA noted that mine reclamation and bonding regulation by the states and other federal agencies had significantly improved since the enactment of CERCLA, so there was far less risk that such mining operations would leave EPA with unfunded cleanup obligations.

The Idaho Conservation League and several more environmental groups challenged EPA’s decision in the D.C. Circuit, and a number of state agencies, mining companies and associations intervened in support of EPA’s decision not to impose such financial assurance requirements.

The judges questioned both sides intensively about whether the statutory language compelled EPA to issue a regulation or whether that statutory language provided sufficient discretion to EPA to decide NOT to promulgate regulations in this case.  

Judge Griffith, in questioning Amanda Goodlin, counsel for the Idaho Conservation League, noting the Chevron line of cases [3], asked where in the statutory language of Section 108 had Congress explicitly required EPA to issue regulations because of the environmental risk rather than the financial risks. In response, Ms. Goodlin stated that both environmental and financial risks had to be considered, and EPA ignored the environmental risks and the need to prevent environmental damage, not just to assure against financial risks to the Superfund.  

Judge Sentelle asked what language required EPA to issue the regulations, and Ms. Goodlin pointed to the use of the term “shall” to issue regulations in Section 108(b)(1).

Judge Sentelle further asked why the court should not defer to EPA’s judgment about the degree of risk under the Chevron line of cases, since despite the use of the term “shall” at the beginning of subsection (b)(1), EPA had to make a number of judgments as required by subsequent language in that subsection.

Ms. Goodlin responded in part that EPA’s exclusive focus on taxpayer costs allowed the financial language subsection (b)(2) to swallow up the language of (b)(1) about risks, which was broader than just financial risk, contrary to the statute.

The government emphasized that while there was mandatory language regarding the issuance of regulations, that language did not mandate regulations in any particular industry sector.  

In questioning Jeffrey Clark, the government counsel, Judge Griffith expressed concern that in nearly forty years, EPA had not regulated any industry sector under Section 108, noting “that’s a long, long time,” particularly where Congress had used mandatory language saying to do something in this area.  

Judge Griffith: What’s going on?  Why is that the case? . . . Congress said do something but nothing has been done.  . . . In the last forty years, [EPA] has looked at this carefully and they have decided everything’s fine?

The government emphasized the factors EPA had to consider, their complexity, the references to discretion, and the need to defer to EPA under Chevron.

A later exchange between Judge Sentelle and Mr. Clark captured the tension between these two competing views, i.e. the statute’s mandatory language requiring the issuance of a regulation versus the statutory language requiring EPA to make judgments about a number of complicated issues for an industry.

Mr. Clark: The only [mandatory] language my opponent can point to is “shall” at the beginning of section (b)(1).

Judge Sentelle: Often that’s good enough.

The industry intervenors began by noting that the statute does not mandate regulation of any specific industry sector, including hard rock mining. Intervenors’ counsel, Brian Burgess, made the further point that EPA’s selection of which industries to review was not a decision subject to notice and comment rulemaking. Intervenors argued in essence that if EPA had taken such comments that it would not have regulated the mining industry because the adoption in the 1990s of comprehensive regulations (requiring permits, standards and bonds) by the states, the Bureau of Land Management, and the Forest Service provided adequate protection.

The case was well presented by both sides, although the limitation of argument to a total of thirty minutes may not have served the court well when considering a statutory decision of this complexity, the large potential financial impact to the mining industry, significant implications for many other industry sectors, and obvious environmental concerns.

There is no express time limit by which the court must decide the case, but it would be reasonable to expect a decision by the fall.  

This blog was written by Russell Randle at Miles & Stockbridge.

[1] CERCLA 108(b) Hard Rock Mining Financial Assurance Proposed Rule, 82 Fed. Reg. 3388 (Jan. 11, 2017).
[2] EPA’s Financial Responsibility Requirements Under CERCLA Section 108(b) For Classes of Facilities in the Hardrock Mining Industry, Envtl. Prot. Agency, 83 Fed. Reg. 7556 (Feb. 21, 2018).
[3] The Chevron line of cases refers to Chevron U.S.A., Inc. v. Natural Resources Defense Council et al., Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984), and subsequent cases, in which Courts defer to EPA’s or an administrative agency’s interpretation when construing a statute, if the statue is silent or ambiguous with respect to a specific issue.  

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.