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Environmental Groups’ Push to Impose Additional Financial Assurance Requirements on the Hardrock Mining Industry Rejected by the D.C. Circuit

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by Michael C. Ford

A decade of lingering uncertainty for the mining industry regarding potentially billions of dollars in new regulatory compliance costs is now over (at least for now) as a result of the United States Court of Appeals for the D.C. Circuit’s recent decision in Idaho Conservation League v. Wheeler (No. 18-1141).

EPA has long held but never exercised authority under CERLCA section 108(b) to impose financial assurance requirements on industry.  Section 108(b) instructs EPA to identify and prioritize industries for development of financial assurance requirements by 1983, but EPA declined to develop any priorities until 2009, after being sued by environmental groups.  At that point, EPA announced that the hard rock mining industry would be amongst its priorities.  On January 11, 2017, in the waning days of the Obama Administration, and after more legal prodding from environmental groups, EPA finally proposed financial assurance requirements for hard rock mining facilities.

EPA received voluminous critical comments on its proposal, including from the mining industry, and, somewhat ironically, other federal agencies (Bureau of Land Management, and Forest Service) as well as numerous state agencies, and other industries.  The key arguments against the proposal included that EPA failed to recognize the impacts the federal and state mining regulatory programs have had on reducing the risks associated with modern hard rock mining operations since the advent of CERCLA, and that additional financial assurance requirements were unnecessary because they would be duplicative of the array of existing financial responsibility requirements required by state and other federal agencies.

After considering the comments, Trump’s EPA announced on February 21, 2018, that it had decided to reverse course and not issue the proposed financial assurance regulations after all.  EPA supported its decision by focusing primarily on the risk of federal funds (aka the Superfund) being required to clean up operating mine sites, and agreed that modern mining regulatory programs coupled with existing financial assurance requirements already required of ongoing mining operations, reduced the financial risk to the taxpayers to the point the proposed financial assurance requirements could not be justified.

The environmental groups’ petition for review of the EPA decision before the D.C. Circuit was met with amicus briefs from virtually every western mining state and mining industry group, as well as several other states and industry organizations.  On July 19, 2019, the United States Court of Appeals for the District of Columbia Circuit upheld EPA’s decision.  The D.C. Circuit deferred to EPA’s decision to focus on the financial risks to be addressed by its proposed action, as opposed to the risks to the environment, and concluded that EPA’s decision not to impose further regulations was within its authority, and not arbitrary and capricious.  The decision represents a significant victory for the mining industry (and potentially others on EPA’s radar) as the financial burden would have been significant, potentially triggering mine closures and divestment.  The environmental groups have until September 2, 2019 to file a petition for rehearing at the DC Circuit.