The Hardrock Mining Financial Assurance Saga Is Far From Over.

In our February 2017 article in this legal column, we reported on the United States Environmental Protection Agency’s (U.S. EPA) proposed rule requiring hardrock mines to provide financial assurance demonstrating they are able to fund the costs associated with the future cleanup of the mines under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the federal statute designed to address releases of hazardous substances and the cleanup of hazardous waste sites nationwide.

The proposed rule, issued a mere 11 days before President Trump took office, would have meant that owners and operators in the hardrock mining industry, which was defined as the extraction, beneficiation, or processing of metals and non-metallic, non-fuel minerals, would have been required to provide proof of financial responsibility for traditional response costs, natural resource damages and health assessment costs. The EPA also proposed a comprehensive electronic registration campaign. The agency received more than 11,000 public comments on the proposed rule as of July 2017.

In December 2017, the EPA had some good news for the hardrock mining industry: in a controversial announcement, the agency stated its intention not to issue the final rule, finding that there was no need for any CERCLA financial assurance mechanism for operating hardrock mines.

The EPA reasoned that the proposed rule ignored the fact that modern management practices and modern environmental regulations reduce the risk of tax-payer funded cleanups; that mines likely to cause catastrophic releases are no longer in operation; and that the majority of CERCLA cleanup costs being incurred in connection with hardrock mining are to address legacy contamination and not releases from currently operating mines.

The agency also found that the proposed rule could result in duplication of other state and federal financial responsibility requirements, that the proposed rule may have preempted existing state financial responsibility requirements, and that the industry may have difficulty obtaining the financial instruments required.

If some wondered whether the EPA’s decision shut the door for good on CERCLA financial responsibility requirements for hardrock mines, that question was promptly answered as several environmental organizations filed suit in the U.S. Court of Appeals for the D.C. Circuit, challenging the EPA’s decision not to issue the rule. A number of state agencies, mining companies and associations intervened in support of the EPA’s decision. In March, the D.C. Circuit heard oral argument in the case of Idaho Conservation League, et al., v. Andrew Wheeler, EPA Administrator, et al., Case no. 18-1141.

There is no clear timeframe by which the court must issue an opinion, but how the court rules may have multi-billion dollar implications, leaving the hardrock mining industry hanging on as the roller coaster continues.

The EPA’s decision not to regulate in this area will open the door to state regulation since the EPA deferred to the states to implement environmental protections for hardrock mining. Many states have no financial assurance requirements for hardrock mines, but that may be changing.

In March, Colorado passed a bill that makes Colorado the first western hardrock mining state to ban the practice of self-bonding, a controversial form of financial assurance where mining companies guarantee they have the cash for mine remediation in the event of closure based solely on their financial health.

The new law also requires hardrock mining owners and operators to demonstrate they can pay to treat polluted water and provide a timeline for that treatment before receiving permits. The bill, when introduced, was backed by the state’s Department of Natural Resources, which is responsible for issuing mining permits, and it enjoyed considerable support in a state still dealing with the environmental impacts of a the 2015 Gold King Mine spill, when 3 million gal. of mining sludge was released into Colorado’s Animas River.

Other states may contemplate similar financial assurance requirements in the near future if the EPA declines to regulate in this area. Stay tuned as this saga continues.

Megan Caldwell is a partner at the Denver office of Husch Blackwell. She specializes in environmental law with experience in energy industries. Caldwell can be reached at [email protected].

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