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Hardrock Mining Financial Assurances – Feasible?

| 2 min read
Former Partner
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By Stephen W. Smithson

The EPA is slowly moving toward requiring the hardrock mining industry to provide financial assurances, pursuant to CERCLA 108(b). Although first required in 1980, these would be the first financial assurance requirements proposed by EPA. EPA recently announced that draft regulations are expected in 2016, with a final rule expected in 2019.

A key issue is, what will the EPA accept to satisfy the financial assurance requirement? CERCLA 108(b)(2) specifies that “any one, or any combination” of a list of financial assurances qualify: “insurance, guarantee, surety bond, letter of credit, or qualification as a self-insurer.” EPA, however, has strongly suggested that it will not accept self-insurance, or perhaps that it will find that hardrock mining does not qualify for self-insurance.

This potential lack of self-insurance is a major issue for the hardrock mining industry. At any reasonably large mine site, commercially-available financial assurances might cost $10-$30 million per year. Especially for large, multi-national mining companies, who have both the financial backing to properly close mines and the reputational need to do so, this would simply be a waste of money. That money could more usefully be put aside for future closure costs, or be put back into the business for maintenance or growth.

Moreover, it is not clear that commercial financial assurances will be available. When CERCLA 108(b) was enacted in 1980, Congress believed that commercial insurers would readily provide products to meet this need. That has not been the case. Thus, if EPA will not accept self-insurance, and there are no commercially-available products for financial assurances, is EPA moving towards a regulation that cannot be implemented?