EARTHWORKS

Financial Assurance, Bonding and CERCLA 108b

Congress enacted the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, in 1980 with the intent of responding to and preventing environmental and health risks caused by industrial pollution.

“If financial assurance requirements have been established and required by law, we would not now be faced with an $800 million liability at the CMI Questa mine. It is time for industry to be accountable for their own toxic mess. The public and the environment have paid the price for too long.” --Rachel Conn, Project Director, Amigos Bravos

Under Section 108b of CERCLA, EPA is directed to require that industrial polluters have adequate funds in place for clean-up, so that industry, not taxpayers, bear the cost of clean-up. But EPA has failed to issue rules to implement  financial assurance for more than thirty years.

After an order from a federal district court in 2009, EPA found that financial assurance rules were warranted for the hardrock mining industry. Despite the explicit directive from the court and EPA’s own findings, they have failed to issue such rules, and respond to a very serious problem within a reasonable time.

Earthworks and other environmental organizations are petitioning the Court of Appeals for a Writ of Mandamus that would require the EPA to issue rules ensuring that industries that handle hazardous substances are able to clean them up. The petition requests a finding that EPA has unreasonably delayed issuing financial assurance rules and seeks an order for the EPA to finalize such rules by Jan, 1, 2016.

CERCLA & The High Cost of Hardrock Mining

The funding mechanism of CERCLA, known as the “Superfund,” is a public trust fund that helps with the cleanup costs of abandoned mines and other industrial waste sites. This fund has been dwindling since the Superfund corporate tax expired but the number of sites requiring cleanup has not. The need for financial assurance rules for industries like hardrock mining is all the more pressing.

Hardrock mining is the nations largest toxic polluter:

• Metal mining accounted for 40% of the 1.9 billion pounds of toxics released into air, water and land in 2011. The list of toxins includes arsenic, mercury, cadmium, lead, and selenium, according to the 2012 EPA Toxic Release Inventory.
• The EPA has identified 156 hardrock mining sites nationwide that have the potential to cost between $7 billion and $24 billion total to clean up (at a maximum total cost to EPA of approximately $15 billion). This is over 19 times EPA’s total annual superfund budget of about $775 million for 2013.
• 59% of mining sites are estimated to need 40 years of cleanup and mines with acid mine drainage are likely to require water treatment in perpetuity.
• Gaps in financial assurance requirements, corporate bankruptcy and the cyclical nature of commodities prices within the hardrock mining industry increase the likelihood of uncontrolled releases of hazardous substances being left unmanaged.

Funding Shortfalls                     

2010 GAO Report says that insufficient EPA funding has led to “increase [in] the length of time it takes to clean up a site; the total cost of cleanup; and, in some cases, the length of time populations are exposed to contaminants.” EPA and taxpayers will foot the bill for escalating cleanup costs unless financial assurance requirements are strengthened.  

Non-partisan government reports have recommended better financial assurance mechanisms to protect taxpayers and the environment from mining impacts.  Financial assurance mechanisms are based on the polluter pays principle that makes liable parties pay for cleanup costs. Ultimately, this protects taxpayers from a multi-billion dollar tax liability for cleanup. The EPA could better ensure that companies at high risk of incurring environmental liabilities meet their cleanup obligations by implementing CERCLA 108b authority and requiring financial assurance.

Financial Assurance Pays

Financial assurance is a financial guarantee, usually paid before mining begins, that regulators use to fund reclamation and cleanup in the event that the company is not capable or not willing to pay for cleanup. Financial assurances usually take the form of:

• Cash like trust funds and government bonds. Cash guarantees are safe and come the closest to covering the full cost of reclamation and cleanup.
• Surety bonds that are guarantees from insurance companies to perform post-closure work or contract-out the cleanup.

Financial assurance rules would be especially helpful to mining activities on non-federal land that are not covered by the financial assurance requirements of other federal agencies.

Financial assurance not only ensures that responsible parties can cover the cost of cleanup but it also prevents contamination in the first place. Financial assurance, which puts the onus on polluters to pay for hazardous releases, plays a preventative role that can save money for businesses and taxpayers while protecting human and environmental health.

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For more information:

• Earthworks: Groups Sue EPA for Letting Polluters Pass Bill for their Spills to the Public
• Earthworks: CERCLA 108b Bonding Authority Fact Sheet
• Jim Kuipers, Putting a Price on Pollution: Financial Assurance for Mine Reclamation and Closure, MPC Issue Paper No. 4, Mineral Policy Center (2003)
• GAO Environmental Liabilities: Hardrock Mining Cleanup Obligations, GAO-06-884T (2006)
• 2012 EPA Toxic Release Inventory

Tagged with: mining, financial assurance, cercla 108b, cercla, bonding