CERCLA Section 108(b) Financial Responsibility. A public webinar hosted by the United States Environmental Protection Agency May 17, 2016

Transcription

1 CERCLA Section 108(b) Financial Responsibility A pblic webinar hosted by the United States Environmental Protection Agency May 17, 2016

2 Presentation Overview Backgrond: CERCLA Section 108(b) Financial Responsibility (FR) CERCLA Section 108(b) Financial Responsibility Proposed Rle Strctre Universe of Facilities to be Reglated Flow of Fnds from the Financial Responsibility Instrment to the CERCLA Cleanp Financial Responsibility Scope and Amont Relationship of Section 108(b) Financial Responsibility to State, Tribal, and Local Government Law Relationship of Section 108(b) Financial Responsibility to Other Federal Law Otreach Activities How to comment on the rle 2

3 Backgrond: CERCLA Section 108(b) Financial Responsibility CERCLA is an acronym for the Comprehensive Environmental Response, Compensation and Liability Act of The law is also called Sperfnd. Dring this webinar we will refer to this law as CERCLA. Section 108(b) of CERCLA directs EPA to develop reqirements that classes of facilities establish and maintain evidence of financial responsibility consistent with the degree and dration of risk associated with the prodction, transportation, treatment, storage, or disposal of hazardos sbstances. A key prpose of this provision is to assre that owners and operators make financial arrangements to address risks from the hazardos sbstances at their sites. EPA also intends for the rle to create financial incentives for improved mining practices that redce financial responsibility costs where existing practices ltimately may also help redce risks and costs to the Sperfnd program. 3

4 Backgrond: CERCLA Section 108(b) Financial Responsibility (cont.) Section 108(b) also reqires that EPA isse a Federal Register notice identifying the classes of facilities for which it will first develop reqirements. EPA issed that Priority Notice on Jly 28, 2009, and identified classes of facilities within the hardrock mining indstry as those for which it wold first develop reqirements. 4

5 Backgrond: CERCLA Section 108(b) Financial Responsibility (cont.) For prposes of the notice, EPA defined hardrock mining as the extraction, beneficiation, or processing of metals (e.g., copper, gold, iron, lead, magnesim, molybdenm, silver, ranim, and zinc) and nonmetallic, nonfel minerals (e.g., asbestos, phosphate rock, and slfr). EPA also identified some classes of facilities that are not inclded in the rlemaking even thogh they fell within the above definition of hardrock mining. (See Memorandm to The Record entitled Mining Classes not Inclded in Identified Hardrock Mining Classes of Facilities, Dated Jne 29, 2009, EPA-HQ-SFUND ). 5

6 Backgrond: CERCLA Section 108(b) Financial Responsibility (cont.) On Janary 29, 2016, the U.S. Cort of Appeals for the District of Colmbia Circit issed an order establishing a schedle for EPA proceedings nder CERCLA 108(b). The order reqires EPA to sign a notice of proposed rlemaking for the hardrock mining indstry by December 1, 2016, and to take final action by December 1, The order also reqires EPA to make a determination on whether the Agency will isse a notice of proposed rlemaking on the (a) chemical manfactring indstry; (b) petrolem and coal prodcts manfactring indstry; and (c) electric power generation, transmission, and distribtion indstry by December 1,

7 CERCLA 108(b) Financial Responsibility Proposed Rle Strctre Reglatory Approach Premises EPA s Section 108(b) rlemaking approach nder consideration proceeds from two premises: CERCLA is a response program that addresses CERCLA Section 107 liabilities - response costs, natral resorce damages (NRD), and health assessments - and is distinct from closre and reclamation reqirements of federal and state permit programs. Section 108(b) rles complement, bt do not change or sbstitte for, existing Sperfnd cost recovery and enforcement procedres. 7

8 CERCLA 108(b) Financial Responsibility Proposed Rle Strctre (cont.) The reglatory approach nder consideration is based on five fondational components: Universe of facilities to be reglated; Flow of fnds from the financial responsibility instrment to the CERCLA cleanp; Financial responsibility scope and amont; Relationship of Section 108(b) financial responsibility to state, tribal, and local government law; and Relationship of Section 108(b) financial responsibility to other federal law. 8

9 A Preliminary Clarification: What the Rle Does Not Do EPA s proposed section 108(b) reglations will be stand-alone financial responsibility reqirements. There are significant differences between these reqirements and other existing reqirements for hardrock mining facilities. In particlar: the proposed rle does not inclde technical reqirements reglating the operation, closre, or reclamation of hardrock mining facilities; and the proposed rle does not provide financial responsibility to ensre closre or reclamation reqirements made applicable to hardrock mining facilities throgh a permit In addition: By promlgating and implementing this reglation, EPA is not determining that a CERCLA response is reqired at a reglated facility. CERCLA liability is naffected by an owner or operator providing evidence of financial responsibility nder EPA s CERCLA 108(b) reglations. 9

10 Universe of Facilities to be Reglated EPA has examined the mining facilities identified in the Jly 28, 2009 Priority Notice to identify classes for financial responsibility reglation. EPA is considering an approach that wold identify classes of hardrock mines that the Agency believes present a lower level of risk of injry and wold not, therefore, be inclded in the rlemaking. Classes the agency is considering not inclding in the rlemaking are: placer mines that do not se hazardos sbstances; exploration mines; and small mines (less than five acres). Under this approach, the remainder of the hardrock mines identified in the Priority Notice wold be inclded in the rlemaking. EPA wold also inclde in the proposed rle primary processing activities located at or near the mine site that are nder the same operational control as a reglated mine. 10

11 Flow of Fnds from the Financial Responsibility Instrment to the CERCLA Cleanp EPA evalated how the Section 108(b) financial responsibility wold spplement existing CERCLA sorces of fnding to address releases and potential releases of hazardos sbstances. Under the approach EPA is considering: Instrments that cold be sed to pay into a special accont for a CERCLA settlement, into a trst fnd established prsant to an administrative order, or after a cort finding of CERCLA liability. EPA wold se existing Sperfnd enforcement processes first (settlements, orders, and cost recovery actions against potentially responsible parties) to effect clean p. Other parties (i.e., other federal agencies, the states, tribes, the pblic) cold also make claims against the owner or operator nder Section 107, payable from the instrments. Under CERCLA Section 108(c), parties (inclding EPA) cold also bring a direct action claim against the instrment provider. 11

12 Financial Responsibility Scope and Amont EPA considered what Sperfnd costs shold be covered by the financial responsibility instrments, and how the amont of financial responsibility shold be determined. EPA is considering an approach nder which owners and operators wold be reqired to establish and maintain financial responsibility instrments to cover all Section 107 liabilities response costs, natral resorce damages, and covered health assessment costs - at their facilities. 12

13 Financial Responsibility Scope and Amont (cont.) To determine the amont of financial responsibility reqired for response costs, the Agency is developing a formla that wold identify an amont of financial responsibility to reflect the primary site conditions and characteristics that wold affect the costs of removal or remedial action. The formla wold assign dollar vales for a facility based on facility and nit characteristics (e.g., open pits; waste rock; tailings; heap leach; process ponds; water management; and, operations, maintenance, and monitoring). Dollar vales wold be smmed to establish the facility s level of financial responsibility. 13

14 Financial Responsibility Scope and Amont (cont.) EPA intends the formla to reflect the relative risk of facility practices in managing hazardos sbstances, inclding redctions in risk that may reslt from compliance with other reglatory reqirements. The Agency is considering a fixed amont of financial responsibility for health assessment costs and a fixed percent for natral resorce damages, that wold be reqired at all facilities. The total amont of fnds wold be available for any ftre response action, natral resorce damages, or health assessment. Availability wold not be tied to particlar site featres and wold not in any way be driven by components of the formla. 14

15 Financial Responsibility Scope and Amont HRM Financial Responsibility Formla Under the approach EPA is considering, facility-specific inpts wold be sed to generate a baseline level of financial responsibility. The baseline cold then be redced throgh demonstrating that crrent controls at the facility are in place. EPA anticipates that the formla will need to be reapplied periodically to accont for changed facility conditions. 15

16 HRM Financial Responsibility Formla: Categories EPA has identified several categories it is crrently analyzing to obtain statistically-derived factors for se in the formla, inclding components: Associated with particlar sorces and controls Incldes open pits, ndergrond mines, waste rock piles, heap/dmp leaches, tailings facilities, process ponds and reservoirs, and slag piles Associated with site-wide sorces and controls Drainage constrction Solid and hazardos waste disposal Associated with operations and maintenance (O&M) Interim water management and long-term water treatment Site-wide O&M and monitoring 16

17 HRM Financial Responsibility Formla: Examples of Expected Formla Inpts EPA is looking at crrent site featres as the basis for inpts which an owner or operator will enter to calclate the baseline amont The site featres are both readily identifiable by the facility owner or operator, and readily verifiable by the EPA Acreage of site featres (e.g., waste rock acreage) Presence of an ndergrond mine Hydralic head in the ndergrond mine Distance to srface water Net precipitation (i.e., precipitation evaporation) Use of in-sit leaching Site-wide water flows in gallons per minte 17

18 HRM Financial Responsibility Formla: Examples of Expected Formla Redctions EPA is looking at crrent engineering controls as the basis for redctions to the baseline amont Controls may already be present becase of other reglatory programs, or ndertaken volntarily. This approach will both redce the amont of financial responsibility where strong reglatory controls are already present, and also provide an incentive for sond mining practices that will redce financial responsibility costs for owners and operators. EPA intends to allow redctions from the baseline amont for controls sch as those which reslt in redctions in volme, toxicity, and mobility of hazardos sbstances. Categories of redctions may inclde: Featre-specific sorce control capital cost redctions Site-wide drainage capital cost redctions Capital and O&M redctions for water treatment Short- and long-term O&M and monitoring redctions 18

19 Financial Responsibility Instrments EPA anticipates consideration of at least the following financial responsibility instrments: Letter of Credit Insrance Trst Fnd Srety bond Credit rating-based financial test/ corporate garantee 19

20 Financial Responsibility Instrments (cont.) EPA has met with representatives of the insrance, srety, and banking commnities who are experienced in providing instrments for other financial responsibility programs. Becase the CERCLA 108(b) rle differs in operation from other existing programs, aspects of how the instrments wold operate are novel. Novel criteria inclde the payot of the instrment nder the direct action provision, the scope of coverage, and the payot to mltiple claimants. Instrment providers will have to consider how to address these differences. EPA is considering the financial indstry s feedback as it develops the instrments. 20

21 Potential Costs to Comply with the Rle EPA anticipates that the cost for a facility to comply with the proposed rle wold largely stem from a limited nmber of reqirements associated with the establishment and maintenance of the financial instrment, inclding: Establishing a financial responsibility amont for the facility Obtaining a financial responsibility instrment for that amont Recordkeeping and reporting The cost to demonstrate evidence of financial responsibility will depend on site specific factors inclding: the financial responsibility level established for the facility; the choice of instrment; and other factors that instrment providers might consider. 21

22 Financial Responsibility Mine Example The following example highlights the key inpts sed to develop FR amont and instrment pricing. Commodity, Revene, # employees Site Featres Engineered Controls/ Best Practices Best Practices Credit Redction FR Total ($millions) Gold $500m-$1b <1,500 employees Open Pit ~200 ac Waste Rock ~700 ac Tailings Facility ~400 ac 0-25 Net Evaporation Water Treatment Rate ~500 gpm Open Pit Alkaline Amendments Waste Rock Segregation Storm Water Diversion ~ 42% ~ $75 Parent company financial characteristics primarily drive instrment pricing (e.g., risk profile, cost of capital) Annalized Instrment Costs to obtain $75 Million in FR ($millions) Instrment Type Credit Rating BBB- CCC+ Insrance Policy $4m $19m Trst Fnd $5m $26m Letter of Credit $6m $28m 22

23 Potential Costs to Comply with the Rle Commodity, Credit Engineered Controls/ FR Total Revene, Site Featres Redction for Best Practices ($millions) # employees Best Practices Open Pit Alkaline Open Pit ~200 ac Gold Amendments Waste Rock ~700 ac $500m-$1b Waste Rock Tailings Facility ~400 ac ~ 42% ~ $75 <1500 Segregation 0-25 Net Evaporation employees Storm Water Water Treatment Rate ~500 gpm Diversion Credit Rating/ Least Cost Instrment BBB- Insrance Policy Annalized Cost of Instrment ($million) ~$4m Tailings Facility Precios metals Undergrond Mine Alkaline Amendments $500m-$1b Tailings Facility ~100 ac Paste or Filtered > Net Evaporation Tailings Deposition employees Water Treatment Rate ~100 gpm Storm Water Diversion ~ 80% ~ $25 B+ Insrance Policy ~$1m Copper +$1b >1500 employees Open Pit ~1000 ac Waste Rock ~2000 ac Storm Water Tailings Facility ~700 ac ~ 24% Diversion Net Evaporation Water Treatment Rate ~1,000 gpm ~ $ BB Trst Fnd ~$19m

24 Pblic Participation EPA is committed to ensring transparency and to providing opportnities for pblic participation in its programs, inclding CERCLA. Pblic participation promotes greater awareness of the federal reglatory reqirements. EPA nderstands that the pblic can play an important role in ensring that the reglation achieves its goals. EPA is considering how to incorporate transparency and pblic participation into the HRM rle. 24

25 Process to Comply with the Rle Initial Notification Determine the Reqired Level of Financial Responsibility for the Facility Obtain Financial Responsibility Instrment Make Information Available Maintain Financial Responsibility Release from Financial ResponsibilityR eqirements Following promlgation of the CERCLA 108(b) rle for hardrock mining, reglated facilities wold be reqired to notify EPA, to provide basic information abot the facility, and to obtain an EPA ID (if not previosly issed to the facility). Facility owners or operators wold be reqired to calclate the level of reqired financial responsibility by entering sitespecific information abot site featres into the HRM financial responsibility formla. Facilities wold be reqired to sbmit the calclated FR level, the formla inpts, and spporting information to EPA. Facilities wold be reqired to obtain a financial responsibility instrment for the reqired level of financial responsibility, and to sbmit evidence of financial responsibility to EPA. This reqirement wold be phased in, over a maximm period of for years after promlgation of the rle. The facility wold be reqired to maintain information abot the facility and the financial responsibility reqirement, and to make that information available to the pblic. The owner and operator wold be reqired to maintain evidence of financial responsibility throghot the facility life, pdate the level of financial responsibility as necessary bt at least every three years, and notify EPA of certain changed conditions. At the end of the facility life, the owner or operator cold apply for release of, or adjstment of, the level of financial responsibility. EPA wold evalate the facility and the need for contined financial responsibility, and wold adjst the level of financial responsibility reqired, or release the owner or operator from the reqirement to obtain financial responsibility. 25

26 Relationship of Section 108(b) Financial Responsibility to State, Tribal, and Local Government Law EPA s crrent view is that evidence of financial responsibility nder Section 108(b) was not intended to preempt state or local mining reclamation and closre reqirements. In particlar, Section 108(b) financial responsibility is designed to assre that fnds are available to pay for CERCLA liabilities, whereas EPA s review of state law financial responsibility reqirements to date indicates that many are designed to assre compliance with state reglatory reqirements and ths are not in connection with liability for the release of a hazardos sbstance nder CERCLA Section 114(d). Similarly, EPA's crrent view is that evidence of financial responsibility nder section 108(b) was not intended to preempt financial responsibility reqirements that are designed to assre compliance with tribal mining reclamation and closre reqirements. EPA plans to address this isse in the preamble of the proposed rle. 26

27 Relationship of Section 108(b) Financial Responsibility to Other Federal Law EPA has evalated the applicability of Section 108(b) reqirements at facilities where other federal financial responsibility reqirements apply. EPA believes that Section 108(b) reqirements, established to address CERCLA liabilities, are distinct from federal closre and reclamation bonding reqirements imposed nder other stattes. It is important to note that EPA intends the Section 108(b) financial responsibility amont to accont for environmentally protective practices already in place, inclding those reqired by other reglations. 27

28 Market Stdy EPA is condcting a stdy to assess the capacity of third party markets to nderwrite financial responsibility instrments reqired by the 108(b) rlemaking. The draft stdy examines both the crrent state and ftre otlook of the markets for financial responsibility instrments based on pblically available and attribtable data (from the US Treasry, GAO, Standard & Poor s, indstry, and non-profit instittions). The draft stdy report is crrently ndergoing internal review. EPA expects to make the report available before it isses the proposed hard rock mining rle. 28

29 Otreach Activities The next several slides describe specific otreach activities EPA will ndertake in the coming months, concrrent with development of the proposed rle. EPA will perform any additional pblic otreach throgh the EPA s Sperfnd financial responsibility website. 29

30 Federalism Consltation Prsant to Exective Order 13132, "Federalism," EPA will conslt with state and local government officials. The Order reqires that Federal agencies conslt with elected state and local government officials, or their representative national organizations, when developing reglations that have Federalism Implications. EPA is aware that representatives of the states have expressed concerns regarding CERCLA s express preemption provision in section 114(d). Therefore, the Agency is holding this consltation as part of ongoing efforts to involve its intergovernmental partners in the development of this proposed rle. The consltation provides the opportnity to discss the approach to the proposed rle and hear concerns from state and local government officials. 30

31 Tribal Consltation EPA will conslt with the federally recognized Indian tribes. Each tribe will be notified in writing of or CERCLA Section 108(b) rlemaking and will have the opportnity to reqest government-to-government consltation. Or goal is to ensre that tribal officials have sfficient information to be able to provide informed inpt on this rlemaking to EPA. EPA has already identified tribes that have their own financial responsibility reqirements for hardrock mining. If more tribes have sch reqirements, we are interested in that information. 31

32 SBREFA The Reglatory Flexibility Act, as amended by the Small Bsiness Reglatory Enforcement Fairness Act (SBREFA), reqires EPA to convene a Small Bsiness Advocacy Review (SBAR) Panel, consisting of representatives from three federal agencies, for proposed rles that will have a significant economic impact on a sbstantial nmber of small entities. Small entities are small bsinesses, small governments, and small organizations inclding appropriate trade associations. Small entity representatives have the opportnity to offer individal advice and recommendations to the SBAR Panel to ensre that we careflly consider small entity concerns. The SBREFA process for the CERCLA Section 108(b) rlemaking has already begn. We expect it to conclde with a SBAR Panel report listing recommendations to EPA. 32

33 How/When to Comment on the Proposed Rle The CERCLA 108(b) Financial Responsibility Reqirements for Facilities in the Hard Rock Mining Indstry; Proposed Rle, is de to be signed by December 1, The Proposed Rle will be pblished in the Federal Register and available for pblic review. The proposed rle will provide instrction on how to comment and the dration of the pblic comment period. We will consider pblic comments received dring the comment period and EPA will provide responses at the time a Final Rle is issed. 33

34 Thank yo!