JusticeOn July 19, 2019, the D.C. Circuit issued its decision in Idaho Conservation League v. Wheeler, upholding US EPA’s decision not to issue financial responsibility requirements for the hardrock mining industry under Section 108(b) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The requirements, if adopted, would have cost the hardrock mining industry an estimated $111 to 171 million per year.

CERCLA Section 108(b) mandates that EPA require certain classes of facilities identified by EPA to “establish and maintain evidence of financial responsibility” by obtaining, inter alia, insurance, surety bonds or letters of credit. CERCLA instructed EPA to “identify those classes [of facilities] for which [financial responsibility] requirements will be first developed,” prioritizing “those classes of facilities, owners, and operators which the [EPA] determines present the highest level of risk of injury.”

Pursuant to this mandate, in 2009, EPA announced its list of priority classes of facilities for development of Section 108(b) financial responsibility requirements, which included the hardrock mining industry. On January 11, 2017, EPA then published its Proposed Rule for setting financial responsibility requirements for the hardrock mining industry. In response, the US Bureau of Land Management, US Forest Service, several state agencies, and industry representatives all submitted comments opposing EPA’s proposal as unnecessary and duplicative due to existing federal and state programs and modern mining practices. EPA ultimately agreed with the comments and announced in its Final Action in February 2018 that it decided not to issue financial responsibility requirements for the hardrock mining industry under Section 108(b) of CERCLA.

Following EPA’s Final Action, several environmental organizations petitioned the D.C. Circuit for review, arguing that EPA’s decision was contrary to CERCLA, arbitrary and capricious, and procedurally defective.

To start, the environmental organizations asserted two statutory interpretation challenges. First, they argued that EPA wrongly interpreted the term “risk” in the operative provisions of Section 108(b) as limited to the risk of taxpayer funded response actions. Second, they contended that, regardless of the meaning of “risk,” CERCLA required EPA to promulgate at least some financial responsibility requirements for the hardrock mining industry. The court rejected both arguments. The court found that the statute’s use of the term “risk” was ambiguous, but that EPA’s interpretation that it should set financial responsibility regulations based on financial risks, not risks to health and the environment, was reasonable and should not be disturbed. Further, the court upheld EPA’s decision not to regulate, finding that “nothing in CERCLA mandates EPA to promulgate financial responsibility requirements for the hardrock mining industry.”

Next, the court was “unpersuaded” by the environmental organizations’ claims that EPA’s Final Action was arbitrary and capricious under the Administrative Procedures Act. The court found that the record—including comments submitted by industry—provided ample support for EPA’s reasoning that existing federal and state programs and modern mining practices have obviated the need for new financial responsibility requirements for the hardrock mining industry. The court recognized that EPA’s analysis “makes clear, existing federal and state programs impose significant financial responsibility requirements on the hardrock mining industry.” The court also rejected the environmental organizations’ contentions that EPA failed to consider the costs of natural resource damages resulting from hazardous sustenance spills and the consequences of bankruptcies within the hardrock mining industry. Lastly, the court found no error in EPA’s economic analysis used to support its Final Action.

Finally, the court rejected the environmental organizations’ procedural claim that the Final Action should be vacated because it is not a “logical outgrowth” of the Proposed Rule, as required by the Administrative Procedures Act. The court found that EPA’s decision not to adopt financial responsibility requirements for the hardrock mining industry has “always been a foreseeable possibility” and constitutes a logical outgrowth of the Proposed Rule because “[o]ne logical outgrowth of a proposal is surely . . . to refrain from taking the proposed step.”

The hardrock mining industry has, unsurprisingly, hailed the D.C Circuit’s decision not to impose financial responsibility requirements under CERCLA Section 108(b), which the industry described as “unnecessary” and “duplicative” of existing federal and state financial assurance programs.

Squire Patton Boggs attorneys, Carolyn McIntosh and Keith Bradley, represented industry intervenors before the D.C. Circuit. Squire Patton Boggs will continue to monitor developments in this area and provide updates.