[Federal Register Volume 82, Number 7 (Wednesday, January 11, 2017)]
[Proposed Rules]
[Pages 3388-3512]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30047]



[[Page 3387]]

Vol. 82

Wednesday,

No. 7

January 11, 2017

Part II





Environmental Protection Agency





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40 CFR Part 320





Financial Responsibility Requirements; Proposed Rules

  Federal Register / Vol. 82 , No. 7 / Wednesday, January 11, 2017 / 
Proposed Rules  

[[Page 3388]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 320

[EPA-HQ-SFUND-2015-0781; FRL-9953-75-OLEM]
RIN 2050-AG61


Financial Responsibility Requirements Under CERCLA Sec.  108(b) 
for Classes of Facilities in the Hardrock Mining Industry

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing 
requirements under section 108(b) of the Comprehensive Environmental 
Response, Compensation, and Liability Act (CERCLA) for demonstrating 
financial responsibility. This proposed rule would create a new Part in 
the CERCLA regulations to require financial responsibility under CERCLA 
Sec.  108(b), define requirements for demonstration of financial 
responsibility, define requirements for maintenance of financial 
responsibility instruments, and establish criteria for owners and 
operators to be released from financial responsibility requirements. In 
addition, this proposal would establish specific financial 
responsibility requirements applicable to certain classes of mines and 
associated mineral processing facilities within the hardrock mining 
industry. EPA expects this proposed rule will, when made final, 
increase the likelihood that owners and operators will provide funds 
necessary to address the CERCLA liabilities at their facilities, thus 
preventing owners or operators from shifting the burden of cleanup to 
other parties, including the taxpayer. In addition, EPA expects that by 
adjusting the amount of financial responsibility to account for 
environmentally safer practices, it would provide an incentive for 
implementation of sound practices at hardrock mining facilities and 
thereby decrease the need for future CERCLA actions.

DATES: Comments must be received on or before March 13, 2017. Under the 
Paperwork Reduction Act (PRA), comments on the information collection 
provisions are best assured of consideration if the Office of 
Management and Budget (OMB) receives a copy of your comments on or 
before February 10, 2017.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
SFUND-2015-0781, at http://www.regulations.gov. Follow the online 
instructions for submitting comments. Once submitted, comments cannot 
be edited or removed from Regulations.gov. EPA may publish any comment 
received to its public docket. Do not submit electronically any 
information you consider to be Confidential Business Information (CBI) 
or other information whose disclosure is restricted by statute. 
Multimedia submissions (audio, video, etc.) must be accompanied by a 
written comment. The written comment is considered the official comment 
and should include discussion of all points you wish to make. EPA will 
generally not consider comments or comment contents located outside of 
the primary submission (i.e. on the Web, cloud, or other file sharing 
system). For additional submission methods, the full EPA public comment 
policy, information about CBI or multimedia submissions, and general 
guidance on making effective comments, please visit http://www2.epa.gov/dockets/commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT: For more information contact Barbara 
Foster, Program Implementation and Information Division, Office of 
Resource Conservation and Recovery, Mail Code 5303P, Environmental 
Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460; 
telephone (703) 308-7057; (email) [email protected]; or Michael 
Pease, Program Implementation and Information Division, Office of 
Resource Conservation and Recovery, Mail Code 5303P, Environmental 
Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460; 
telephone (703) 308-0008; or (email) [email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary
    A. Purpose of the Regulatory Action
    B. Summary of the Major Provisions of the Regulatory Action
    C. Costs and Benefits of the Regulatory Action
II. Authority
III. Background Information
    A. Overview of CERCLA Sec.  108(b) and Other CERCLA Provisions
    B. Recent Litigation Under CERCLA Sec.  108(b)
    C. Hardrock Mining 2009 Priority Notice
    D. Additional Classes Advance Notice of Proposed Rulemaking
    E. Market Capacity Study
    F. Approach to Developing This Proposed Rule
IV. Major Issues in the Development of the Proposed Rule
    A. Relationship to Existing Superfund Processes
    B. Liabilities Covered
    C. Universe Covered
    D. Notification Requirement
    E. Determining the Financial Responsibility Amount for Hardrock 
Mining Facilities
    F. Available Instruments
V. Relationship of CERCLA Sec.  108(b) to Other Federal Laws, and to 
State and Tribal Laws.
VI. Section-by-Section Analysis
    A. Subpart A--General Facility Requirements
    1. Purpose and Scope (Sec.  320.1) and Applicability (Sec.  
320.2)
    2. Definitions and Usage (Sec.  320.3)
    3. Availability of Information: Confidential Business 
Information (Sec.  320.4)
    4. Initial Notification Requirement (Sec.  320.5)
    5. Information Submission Requirements (Sec.  320.6)
    6. Requirement for Electronic Submission of Information (Sec.  
320.7)
    7. Recordkeeping Requirements (Sec.  320.8)
    8. Requirements for Public Notice (Sec.  320.9)
    B. Subpart B--General Financial Responsibility Requirements
    1. Applicable Financial Responsibility Amounts and Procedures 
for Establishing Financial Responsibility (Sec.  320.20 and Sec.  
320.21)
    2. Maintenance of Instruments (Sec.  320.22)
    3. Incapacity of Owners or Operators, Guarantors, or Financial 
Institutions; or Instrument Cancellation (Sec.  320.23)
    4. Notification of Claims Brought Against Owners, Operators, or 
Guarantors (Sec.  320.24)
    5. General Provisions for Instrument Payment
    6. Facility Transfer (Sec.  320.25)
    7. Notification of Cessation of Operations (Sec.  320.26)
    8. Release From Financial Responsibility Requirements (Sec.  
320.27)
    C. Subpart C--Available Financial Responsibility Instruments
    1. Letter of Credit (Sec.  320.40)
    2. Surety Bond (Sec.  320.41)
    3. Insurance (Sec.  320.42)
    4. Financial Test (Options) (Sec.  320.43)
    5. Corporate Guarantee (Options) (Sec.  320.44)
    6. Trust Fund (Sec.  320.45)
    7. Issuer Cancellation Provisions (Sec.  320.23)
    8. Use of Multiple Financial Responsibility Instruments (Sec.  
320.46)
    9. Use of a Financial Instrument for Multiple Facilities (Sec.  
320.47)
    10. Consolidated Form and Multiple Owners and/or Operators 
(Sec.  320.48)
    D. Subpart H--Hardrock Mining Facilities
    1. Universe of Hardrock Mining Facilities Covered by the Rule 
(Sec.  320.60)
    2. Timeframes for Compliance (Sec.  320. 61)
    3. Definitions (Sec.  320.62)
    4. Determining the Financial Responsibility Amount (Sec.  
320.63)
    5. Information Submission and Recordkeeping Requirements (Sec.  
320.64)
    6. Third-Party Certification (Sec.  320.65)
    7. Continued Risk at Hardrock Mining Facilities
VII. Statutory and Executive Orders Reviews
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act (PRA)

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    C. Regulatory Flexibility Act (RFA)
    D. Unfunded Mandates Reform Act (UMRA)
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From 
Environmental Health Risks and Safety Risks
    H. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy
    I. National Technology Transfer and Advancement Act (NTTAA)
    J. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations

I. Executive Summary

A. Purpose of the Regulatory Action

    Section 108(b) of the Comprehensive Environmental Response, 
Compensation, and Liability Act (CERCLA), also known as Superfund, 
directs EPA to develop regulations that require classes of facilities 
to establish and maintain evidence of financial responsibility 
consistent with the degree and duration of risk associated with the 
production, transportation, treatment, storage, or disposal of 
hazardous substances. When releases of hazardous substances occur, or 
when a threat of release of hazardous substances must be averted, a 
Superfund response action may be necessary. Since the Superfund tax has 
expired, EPA's Superfund appropriation is increasingly funded by the 
general revenues. Therefore, the costs of such response actions can 
fall to the taxpayer if parties responsible for the release or 
potential release of hazardous substances are unable to assume the 
costs. In addition, the likelihood of a CERCLA response action being 
needed, as well as the costs of such a response action, are likely to 
be higher where protective management practices were not utilized 
during facility operations. This proposed rule is intended to address 
both concerns. By assuring that owners and operators establish 
financial responsibility consistent with the risks associated with the 
production, transportation, treatment, storage, and disposal of 
hazardous substances at their facilities, this proposed rule would 
increase the likelihood that owners and operators will provide funds 
necessary to address the CERCLA liabilities at their facilities, thus 
preventing the burden from shifting to the taxpayer or to other 
parties. In addition, this proposed rule would provide an incentive for 
implementation of sound practices at hardrock mining facilities that 
would decrease the need for future CERCLA actions.

B. Summary of the Major Provisions of the Regulatory Action

    EPA identified hardrock mining as the classes for which it would 
first develop financial responsibility requirements in a Federal 
Register notice dated July 28, 2009 (2009 Priority Notice).\1\ In that 
notice, EPA provided a general definition of ``hardrock mining'' \2\ 
and has refined that general definition for purposes of this proposal. 
This proposed rule would apply to certain classes of facilities that 
engage in the extraction, beneficiation, and processing of metals, 
(e.g., copper, gold, iron, lead, magnesium, molybdenum, silver, 
uranium, and zinc) and non-metallic, non-fuel minerals (e.g., asbestos, 
phosphate rock, and sulfur).\3\
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    \1\ Identification of Priority Classes of Facilities for 
Development of CERCLA Section 108(b) Financial Responsibility 
Requirements, 74 FR 37213, July 27, 2009.
    \2\ Id. at 37213.
    \3\ The details on the facilities that would be subject to this 
proposed rule are provided in Subpart H of this preamble.
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    The proposed rule would require owners and operators subject to the 
rule to demonstrate and to maintain financial responsibility consistent 
with the degree and duration of risk associated with the treatment, 
production, transportation, storage and disposal of hazardous 
substances at their facilities. The Agency is proposing that current 
owners and operators of facilities subject to the rule be required to 
demonstrate financial responsibility to cover the three types of costs 
associated with releases and potential releases of hazardous substances 
from their facilities, including response costs, health assessment 
costs, and natural resource damages. These are the same types of costs 
that CERCLA makes specified parties, including current owners or 
operators, liable for under CERCLA Sec.  107. Thus, by requiring 
current owners or operators of facilities that manage hazardous 
substances to set aside funds for cleanup (or otherwise demonstrate 
their ability to pay for it), EPA expects this proposed rule would 
increase the likelihood that owners or operators subject to the rule 
will be able to pay the costs associated with releases or potential 
releases of hazardous substances from their facilities for which they 
are responsible, in the event a CERCLA cleanup becomes necessary.
    The proposal would establish a process for owners and operators 
subject to the proposed rule to identify a financial responsibility 
amount for their sites, to demonstrate evidence of financial 
responsibility, and to maintain the required amount of financial 
responsibility until the requirement for financial responsibility for 
the site is released by EPA. The proposed rule would promote efficiency 
and accuracy of information collected by requiring electronic 
submission of information. Further, the proposal would encourage public 
participation in the effective implementation of the rule by requiring 
owners or operators to post information related to their compliance 
with the financial responsibility requirements of this rule on their 
company Web sites.
    The proposal includes a formula by which EPA expects facilities to 
calculate an amount of financial responsibility. The formula is also 
structured to allow facilities, upon certain showings, to reduce that 
calculated amount to account for the current conditions of their sites. 
EPA expects that many, if not most, facilities, will be able to adjust 
the amount required based on the calculation. By requiring an amount of 
financial responsibility consistent with the degree and duration of 
risk at the site, while allowing for adjustments as a result of 
environmentally-protective practices, the proposed rule should create 
economic incentives for owners and operators to employ environmentally 
sound practices. In turn, EPA expects that the proposed rule would 
ultimately have the effect of decreasing Superfund liabilities because 
it would create incentives for owners and operators to minimize the 
risk associated with their facilities thereby lowering their financial 
responsibility amounts. This is also consistent with CERCLA's 
overarching goal of encouraging potentially responsible parties to 
increase the level of care with which they manage the hazardous 
substances at their sites. Similarly, the proposed rule would provide 
for the release of the owner and operator's financial responsibility 
requirements when EPA makes a determination that the risks from the 
facility are minimal. This provision would encourage protective and 
responsible closure and cleanup of their facilities.
    The proposed rule also would establish conditions for payment of 
funds from the financial responsibility instruments. Under the proposed 
rule, financial responsibility instruments could be used to pay a party 
that has sought reimbursement through the courts for costs; to pay as 
specified in a settlement with the Federal Government, or to pay into a 
trust fund established by the owner or operator pursuant to a Federal 
Government administrative order under CERCLA Sec.  106(a). EPA has thus 
sought to ensure

[[Page 3390]]

that its proposed CERCLA Sec.  108(b) instruments would complement the 
current Superfund framework for obtaining cleanup and reimbursement 
from those parties responsible for contamination.

C. Costs and Benefits of the Regulatory Action

1. Introduction
    EPA assessed the industrial and social costs as well as benefits of 
the regulatory options of the proposed rule. The details of the 
analysis are presented in the Regulatory Impact Analysis (RIA), which 
can be accessed in the docket supporting this rulemaking (Docket No. 
EPA-HQ-SFUND-2015-0781). This preamble provides an overview of the 
methodology that EPA applied in the RIA and the key results including 
the identification and characterization of the potentially regulated 
universe; the projected economic impacts from industry and society 
standpoints; and potential social welfare benefits of the proposed 
rule. Detailed discussions of the uncertainties and limitations of the 
analysis are provided in the RIA.
2. Characterization of Baseline Affected Entities
    Hardrock mining is the extraction and beneficiation of rock and 
other materials from the earth that contain a target metallic or non-
fuel non-metallic mineral. Mineral processing separates and refines 
mineral concentrates to extract the target material.\4\ In order to 
establish the universe of facilities likely to be subject to this 
proposed rule, EPA primarily relied on July 2015 data from the U.S. 
Mine Safety and Health Administration (MSHA) Mine Data Retrieval System 
(MDRS) accessed on July 2015,\5\ U.S. Energy Information Administration 
(EIA) (2015),\6\ and the 2015 U.S. Geological Survey (USGS) Mineral 
Commodity Summaries (MCSs).\7\
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    \4\ Identification of Priority Classes of Facilities for 
Development of CERCLA Section 108(b) Financial Responsibility 
Requirements. 74 FR 37213, July 28, 2009.
    \5\ MDRS data are available at: http://www.msha.gov/drs/drshome.htm and Mines Data Set, http://www.msha.gov/OpenGovernmentData/OGIMSHA.asp.
    \6\ U.S. Energy Information Administration. 2015. 2014 Domestic 
Uranium Production Report. Washington, DC. April. Available at: 
http://www.eia.gov/uranium/production/annual/pdf/dupr.pdf.
    \7\ MCS can be accessed at http://minerals.usgs.gov/minerals/pubs/mcs.
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    From a list of potentially regulated facilities, EPA excluded 
35,103 coal mining operations. EPA also removed 44,845 mines associated 
with 59 non-fuel hardrock commodities to conform with the scope of 
those classes of facilities identified in the 2009 Priority Notice.\8\ 
Furthermore, EPA removed an additional 4,548 mines classified as 
abandoned (non-currently operating) sites by MHSA. From the remaining 
354 facilities, EPA identified and removed classes of facilities that 
may present a lower level of risk of injury than other facilities 
within the 2009 Priority Notice universe. These facilities are mines 
engaged solely in exploration projects, placer mines that do not use 
hazardous substances to extract ore, and mining operations of less than 
five acres that are not located within a mile of other mining 
activities. In addition, mineral processors with less than five acres 
of disturbed surface impoundment and waste pile disturbed acres would 
not be subject to the proposed rule. Overall, EPA removed 133 
facilities in these classes, leaving 221 facilities in what is referred 
to here as the ``included universe.''
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    \8\ U.S. EPA. 2009. Mining Classes Not Included in Identified 
Hardrock Mining Classes of Facilities. Available online at: http://www.regulations.gov/contentStreamer?documentId=EPA-HQ-SFUND-2009-0265-0033&disposition=attachment&contentType=pdf.
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    EPA believes that 221 facilities (208 active and thirteen 
intermittent or temporarily idled) will currently be subject to this 
rule. The Agency acknowledges that the population of mines and mineral 
processors that are operating at any given point in time can fluctuate 
significantly due to fluctuating commodity prices, other business-
related factors, mining and processing technical operations issues, and 
weather conditions. As such, EPA may not have accurately identified all 
facilities that would be subjected to the rule. Thus, the Agency 
requests comments on the included universe.
    The most common activities at these facilities are surface mining 
(88), underground mining (56), and processing (68).\9\ Geographically, 
the potentially regulated universe spans over 38 states, mostly 
concentrated in the western states. The states with the most 
potentially regulated facilities are Nevada (45), Arizona (21), and 
Minnesota (14). The potentially regulated universe currently mines 33 
commodities, although the scope of the rule is not limited to the 33 
commodities currently mined at the potentially regulated facilities. 
The most common commodities mined in the potentially regulated universe 
are Gold (70), Copper (25), and Iron Ore (17). A wide range of NAICS 
codes (approximately 45 types) are represented by the owners of the 
facilities in the potentially regulated universe, the most common of 
which are 212221: Gold Ore Mining (18), 213114: Supporting Activities 
for Metal Mining (10), and 212234: Copper Ore and Nickel Ore Mining 
(8). However, there were twelve owners for which no NAICS code could be 
identified.
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    \9\ Many of the 184 facilities conduct multiple activities, 
causing the total number of facilities to be less than the summation 
of all activities practiced.
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3. Cost of the Proposed Rule
    This rule includes two proposed Options for use of a financial 
test--the no financial test option (Option 1), and the financial test 
option (Option 2). Option 1 requires all owners and operators to 
acquire third-party financial instruments to demonstrate financial 
responsibilities. Alternatively, under Option 2 the owner or operator 
could qualify to self-insure (or use the corporate guarantee) by 
passing the proposed financial test. Owners or operators unable to 
qualify for the Option 2 financial test must acquire a third-party 
instrument or a trust fund to comply with the rule. EPA's RIA assessed 
the costs associated with obtaining third-party instruments under the 
two options, as well as costs associated with the reporting and 
recordkeeping requirements of the rule. These costs represent the 
primary economic impacts of the proposed rule to the regulated 
industry.
    To assess the cost, EPA developed and implemented a multi-
dimensional analysis that involves: (1) An estimation of the owner or 
operator's financial responsibility obligations under baseline 
scenario; (2) estimation of the price of third-party instruments; and 
(3) assessment of the industrial (i.e., cost imposed on the regulated 
industry), and social costs (i.e., costs from the standpoint of 
society) associated with obtaining financial assurance. In addition, 
EPA's analysis also examined the extent to which the rule shifts the 
burden of financing potential Superfund cleanups and related 
expenditures away from the taxpayer and toward the regulated owners or 
operators. This section provides an overview of the methodology EPA 
used to assess the industrial and social costs, and intra-industry 
transfers (i.e., payment between two industries). This section also 
discusses the transfer of cost from the government (taxpayer) to the 
regulated industry.
a. Industry Compliance Costs
    As described earlier in this preamble, EPA identified 221 
facilities owned by 121 ultimate parent companies that would be subject 
to the rule. To estimate

[[Page 3391]]

the impact of acquiring financial assurance, EPA collected facility-
specific data (e.g., mine site features, acreage, and meteorological 
data) and company-level financial information. However, this effort 
rendered facility-specific data for only 49 facilities, and financial 
information for 21 publically traded firms. Thus, EPA's assessment of 
compliance costs relied on this subset of mining/mineral processing 
facilities and related owner companies for which detailed technical 
data was obtained (herein referred to as the ``modeled universe''). EPA 
extrapolated the results of the analysis of this subset of facilities 
to the full universe of facilities covered by the rule. EPA requests 
comments on using the modeled universe to estimate the overall 
industrial compliance costs.
    The compliance costs of acquiring third-party financial instruments 
depends on the financial responsibility amounts the instrument covers. 
Thus, EPA first estimated the baseline financial responsibility amounts 
for facilities in the modeled universe. EPA used a financial 
responsibility formula that the Agency developed for facilities to 
calculate their financial responsibility amount on a national basis. As 
described in Section VI.D.4. of this preamble, the proposed formula 
consists of three key components that capture the potential costs 
associated with release of hazardous substances at hardrock mining 
facilities. These include the response component; health assessment 
component; and natural resources damages.
    For the response component, EPA estimated the financial 
responsibility amounts for each facility for twelve categories of 
response activities that EPA has undertaken at hardrock mining sites. 
These include categories for types of engineering costs (e.g., capital 
cost to construct source control for an open pit); operation and 
maintenance (O&M) costs (e.g., interim, short-term, and long-term O&M); 
and long-term water treatment costs. EPA aggregated the twelve response 
categories and adjusted the amount to account for other costs related 
to response activities that may be experienced by the Agency including 
mobilization/demobilization; engineering design and redesign; 
contingency; contractor profit and overhead; contractor liability 
insurance; payment and performance bonds; and Agency direct and 
indirect costs. EPA also applied locality adjustment factors to account 
for regional variation in labor and material costs. EPA then combined 
the aggregated financial responsibility estimates for the response 
component with the health assessment and natural resource damages 
components to arrive at the maximum financial responsibility amount for 
each facility. EPA applied a proposed multiplier to obtain the 
financial responsibility amount for natural resource damages and a 
fixed financial responsibility amount for health assessment.\10\
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    \10\ 13.4 percent of the response costs estimated for each site. 
For health assessment costs, EPA estimated a fixed financial 
responsibility amount of $550,000 per facility based upon health 
assessment cost information obtained from the Agency for Toxic 
Substances and Disease Registry (ATSDR).
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    The proposed rule is also structured to provide reductions in the 
financial responsibility amount required at a facility for risk-
reducing practices, including controls established in compliance with 
Federal and state reclamation and closure programs. For the purpose of 
the RIA, EPA adjusted the maximum financial responsibility amount for 
owners and operators, where EPA identified risk-reducing practices in 
enforceable documents backed by financial bonding. In applying the 
reductions, EPA assumed that identified risk-reducing practices would 
fully meet EPA's proposed criteria. As such, for qualified facilities, 
EPA applied full reductions in the financial responsibility amount for 
the relevant response categories. EPA acknowledges this assumption 
simplifies the construct of the proposed rule's requirements for 
reductions.
    Table X-1 presents the adjusted baseline financial responsibility 
estimates for future CERCLA liability of owners and operators in the 
modeled universe. The table also provides the extrapolation of results 
from the modeled universe to the full universe. As shown in the table, 
Column C presents the median financial responsibility amount of the 
modeled universe by facility types. EPA used these median values to 
estimate the financial responsibility amounts of the full universe. 
Column D presents the financial responsibility amount for the full 
universe, which was calculated by multiplying the total number of mines 
in the full universe (Column A) by the median financial responsibility 
amount calculated for modeled universe.

           Table X-1--Extrapolation FR From the Modeled Universe to the Potentially Regulated Universe
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                                                                                                  Potentially
                                                                                              regulated universe
                                     Potentially                           Modeled universe     total FR amount
           Facility type              regulated      Modeled universe        facility FR--    across facilities,
                                       universe           (n=49)             Median ($2015        median-based
                                       (n=221)                                 millions)         extrapolation
                                                                                               ($2015 millions)
                                             (A)  (B)...................                 (C)         (D) = A * C
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Brine Extraction/Processing........            6  (none; assume equal to                  $1                  $8
                                                   ISR).
In-situ recovery...................            8  3.....................                   1                  10
Processor/Refiner..................           33  1.....................                  76               2,496
Surface Mine.......................           62  25....................                  48               2,961
Surface Mine/Processing............           27  13....................                  28                 766
Surface Mine/Processing/Primary                2  (none; assume equal to                  28                  57
 Smelter.                                          surface mine/
                                                   processing).
Surface/Underground mine...........            1  (none; assume equal to                  48                  48
                                                   surface mine).
Underground Mine...................           53  5.....................                   5                 284
Underground Mine/Processing........            6  2.....................                  29                 172
Primary Smelter....................           23  (none; approximated                     11                 263
                                                   separately).
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All Facilities.....................          221  49....................                  37               7,064
----------------------------------------------------------------------------------------------------------------
Note: This exhibit presents extrapolation based on median values of financial responsibility amounts for the
  modeled universe.


[[Page 3392]]

    As shown in the table, the estimated financial responsibility 
amount for the regulated industry is $7.1 billion. EPA assumed this 
amount represents the baseline financial responsibility amount of the 
regulated industry, for which owners and operators must demonstrate 
financial assurance under the proposed rule by procuring third-party 
financial instruments, or through self-insurance (or corporate 
guarantee).
    EPA estimated the compliance costs to industry assuring payment of 
financial responsibility amounts by focusing on the 21 owners and 
operators of 38 mining facilities \11\ in the modeled universe \12\ for 
which detailed financial data is publically available. EPA conducted 
the cost analysis in two primary steps: (1) EPA first subjected the 
modeled universe to the two regulatory options (with or without 
financial test) to identify entities that may be required to acquire 
third-party instruments; and (2) for entities unable to self-insure, 
EPA estimated the compliance cost of obtaining third-party financial 
responsibility instruments.
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    \11\ The identified owner/operator companies of the 49 
facilities in the modeled universe were matched to S&P's financial 
database. This crosswalk identified the owner/operator companies of 
40 facilities in S&P financial database. Two of these facilities 
have entered bankruptcy and therefore did not have the necessary 
recent financial data to be included in the analysis.
    \12\ It is important to distinguish between the mine facilities, 
to which the financial responsibility amount applies, and the owner/
operator company that is obligated to fund, or secure, this 
financial responsibility amount. One owner/operator may have this 
obligation for more than one mine.
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    To determine whether owners and operators pass the financial test, 
EPA compared the relevant financial characteristics of each company to 
the financial test described in Sec.  320.43 of the preamble. 
Consistent with the proposed test, EPA's analysis allowed owners and 
operators to self-insure their entire obligation if they hold at least 
one long-term corporate credit rating equal to or higher than A- as 
issued by S&P or another equivalent rating agency. Furthermore, EPA 
also allowed self-insurance of up to one-half of an owner or operator's 
obligation if it holds at least one long-term credit rating of BBB+ or 
BBB. EPA assumed owners and operators that pass the test would elect to 
self-insure either the full or one-half of their obligations. For these 
facilities, EPA assumed compliance costs associated with acquiring 
third-party instruments would be zero, and that the owner or operator 
would only incur compliance costs associated with the reporting and 
recordkeeping requirements of the proposed rule.
    For owners or operators that did not pass the financial test, and 
for the regulatory option where the financial test is precluded (Option 
1), EPA estimated the costs of obtaining third-party financial 
responsibility instruments. For each facility, EPA modeled separately 
the costs of three representative financial instruments, which included 
letter of credit, trust fund, and insurance.\13\ EPA assumed owners and 
operators would choose the instrument option with the lowest cost. 
Overall, the pricing of the instruments is case-specific, and informed 
by several parameters. Specifically, the factor considered included the 
baseline financial responsibility level determined by the formula, the 
financial health of the owner or operator (credit rating and default 
probability), the corresponding fee structure of the specific financial 
instrument, and the project's risk profile (probability and timing of 
costs associated with the facility's CERCLA liabilities). In estimating 
the cost of the instruments, EPA also assumed that no market capacity 
constraints exist for the issuance of third-party instruments 
sufficient to cover the financial responsibility amounts estimated 
earlier in this discussion.
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    \13\ EPA limited the analysis to three instruments because it 
believed that these reasonably represent the ranges of costs for the 
other instruments allowed by the rule.
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    The actual compliance cost incurred by industry in securing these 
instruments comes from the transactional costs (e.g., the fees and 
commissions paid to financial institutions) and the net cost of 
acquiring capital to fund the purchase of financial instruments. EPA 
did not attempt to predict whether the funds come from internal sources 
or from debt or equity markets. Regardless of the sources of funding, 
EPA assumed the net cost to the owner or operator of acquiring funds is 
the weighted average cost of capital (WACC).\14\ EPA collected firm 
specific WACCs from each company's Web site.
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    \14\ WACC is defined as the average cost of obtaining capital in 
the debt and equity markets.
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    EPA assumed owners and operators would need to acquire funding to 
purchase financial instruments every three years \15\ (as required by 
the rule) until released from their obligations. Thus, EPA annualized 
the compliance cost using a seven percent discount rate over the life 
of the mine. To investigate the sensitivity of results, EPA also 
applied a three percent discount rate. In addition, EPA assumed a 
period of analysis from 2021 to end of mine life (capped at 2055). The 
start date is based on a year before the end of the four-year 
implementation schedule of the rule, which represents the year mines 
will start to incur significant costs. The end date is mainly based on 
the end of mining operations. However, where EPA could not identify the 
end date for mining operations, EPA capped the analysis at 2055, which 
represents the ninetieth percentile of mine lives in the modeled 
universe. Furthermore, EPA also assumed that the owner and operator 
would be released from their financial responsibility obligations when 
the facility ceases its operation. However, under the proposed rule 
owners and operators may not be released of their obligations until EPA 
makes a determination.
---------------------------------------------------------------------------

    \15\ The proposed rule would require facilities to update 
financial responsibility amount calculations every three years, and 
maintain financial assurance consistent with the revised financial 
responsibility amount.
---------------------------------------------------------------------------

    Table X-2 summarizes the average annualized compliance costs for 
the two regulatory options, as a percentage of the financial 
responsibility amounts of owners and operators in the modeled universe. 
The annualized costs are categorized based on the credit worthiness of 
the firms in the modeled universe. Entities with a stronger financial 
profile (Category 1) were simulated to experience an annual cost as low 
as 1.1 percent of the financial responsibility amount. Similarly, 
poorly rated entities (Category 4) would experience annual costs as 
high as four percent. Overall, on a weighted average basis, annualized 
compliance costs as a percentage of the financial responsibility amount 
equal approximately 2.3 to 2.4 percent.

                                     Table X-2--Instrument Pricing Outcomes
----------------------------------------------------------------------------------------------------------------
                                                    Average annualized cost as
               Company category                      percentage of financial          Percent of companies  in
                                                      responsibility amounts                  category
----------------------------------------------------------------------------------------------------------------
BBB...........................................  1.1 to 1.7.......................                          26.3
BB............................................  2.5..............................                          26.3

[[Page 3393]]

 
B.............................................  2.4..............................                          36.8
CCC...........................................  4.0..............................                          10.5
----------------------------------------------------------------------------------------------------------------
Note:
1. Pricing categories based on credit ratings and other financial metrics. Ranges of costs are presented for
  Option 2 (low) and Option 1 (high).
2. This exhibit presents costs discounted using a 7 percent social discount rate. Supplementary results
  discounted using a 3 percent social discount rate are presented in Appendix E of the RIA.

    EPA applied these weighted average percentages to extrapolate 
results to the entire universe. Table X-3 presents the calculation of 
annualized compliance costs for the full universe under the two 
regulatory options. As shown in the table, Column A lists the 
aggregated financial responsibility amount covered by third-party 
instruments by mine type under the proposed financial test regulatory 
option, while Column B lists the financial responsibility amounts under 
the no-test option. Columns C and D calculate the annualized 
acquisition costs for each facility type by multiplying the aggregate 
financial responsibility amounts under each regulatory option with the 
respective weighted average annualized costs generated for the model 
universe, as shown in Table X-3. The extrapolation calculation assumes 
that the full universe of owners and operators would have similar 
financial characteristics as the modeled universe. Similarly, for the 
financial test option, EPA assumed that a similar proportion of owners 
and operators would pass the financial test in both the full universe 
and in the modeled universe. EPA acknowledges that there are 
uncertainties with this supposition, and request comments from the 
public.

                              Table X-3--Calculation of Annualized Compliance Cost
                                                   [$ million]
----------------------------------------------------------------------------------------------------------------
                                              FR amount         FR amount      Annualized cost   Annualized cost
                                             covered by        covered by      of third-party    of third-party
              Facility type                  third party       third party    FR instruments--  FR instruments--
                                             (Option 1)        (Option 2)        Option 1 ($       Option 2 ($
                                          ($2015 millions)  ($2015 millions)      millions)         millions)
                                                       (A)               (B)   (C) = 2.4 * (A)   (D) = 2.3 * (A)
----------------------------------------------------------------------------------------------------------------
Brine Extraction/Processing.............                $8                $5              $0.2              $0.1
In-situ recovery........................                10                 7               0.2               0.2
Processor/Refiner.......................             2,496             1,747                60                39
Surface Mine............................             2,961             2,073                72                47
Surface Mine/Processing.................               766               536                18                12
Surface Mine/Processing/Primary Smelter.                57                40                 1                 1
Surface/Underground Mine................                48                33                 1                 1
Underground Mine........................               284               199                 7                 4
Underground Mine/Processing.............               172               120                 4                 3
Primary Smelter.........................               263               184                 6                 4
                                         -----------------------------------------------------------------------
    All Facilities......................             7,064             4,944               171               111
----------------------------------------------------------------------------------------------------------------
Note: This table presents costs discounted using a 7 percent social discount rate. Supplementary results
  discounted using a 3 percent social discount rate are presented in Appendix E of the RIA.

    As shown in the table, under the baseline scenario, the total 
financial obligation amount for the potentially regulated universe is 
approximately $7.1 billion. Under the financial test, the amount of 
financial obligations covered through third-party instruments is $4.9 
billion, whereas for the no-financial test option, the entire baseline 
financial responsibility amounts would be covered by third-party 
instruments. In addition, the annualized industry compliance costs to 
secure the third-party instruments under the no-financial test option 
is $171 million, whereas annualized costs are $111 million for the 
financial test option. The difference between the two regulatory 
options is approximately 35 percent. These values represent the range 
of potential incremental costs of the proposed rule to industry.
    In addition, EPA's compliance cost estimate also included the 
administrative reporting and recordkeeping costs to industry associated 
with the proposed rule for the potentially regulated universe. These 
costs consist of labor, O&M, and capital costs and include the costs of 
reading the regulations; submitting initial facility information to EPA 
and to the public; calculating financial responsibility amounts; 
choosing a financial responsibility instrument; acquiring and 
maintaining a financial responsibility instrument, recalculating 
financial responsibility amounts to reflect any changes in facility 
operations; and any requirements that apply to the owners and operators 
upon the transfer of a facility, owner or operator default, a CERCLA 
claim against any of the owners and operators, or release of the owners 
and operators from the regulations. The labor costs are estimated on an 
annual basis, as of the first year of compliance. Table X-4 presents 
the annualized administrative cost of the rule under the two options 
using a seven percent social discount rate.

[[Page 3394]]



               Table X-4--Annualized Administrative Costs
------------------------------------------------------------------------
                                                              Option 2
                    Option 1 (No test)                       (Financial
                                                                test)
------------------------------------------------------------------------
$225,302..................................................     $269,038
------------------------------------------------------------------------
Note: This exhibit presents costs discounted using a 7 percent social
  discount rate. Supplementary results discounted using a 3 percent
  social discount rate are presented in Appendix E.

b. Social Cost and Intra-Industry Transfers
    The annualized compliance costs calculated and presented in Table 
X-3 and X-4 represent industry costs, i.e., costs imposed on owners and 
operators. However, much of the costs borne by the owners and operators 
represent a transfer \16\ to financial firms that provide financial 
responsibility instruments. In the context of this rule, the net 
incremental costs of acquiring capital to secure financial instruments 
(i.e., insurance) are treated as a transfer. Table X-5 presents the 
intra-industry transfers of the rule. The RIA estimated the intra-
industry transfer amount by tabulating the net acquisition cost of 
capital excluding transactional costs that are considered social costs.
---------------------------------------------------------------------------

    \16\ Transfer payments are monetary payments from one group to 
another that do not affect total resources available to society.
---------------------------------------------------------------------------

    Some portion of the industry cost is also a social cost,\17\ that 
is, a cost on society as a whole, rather than just the regulated 
entities. These costs reflect the value of the real resources (e.g., 
labor and capital) needed to comply with the rule. These costs include: 
(1) The fees and commissions paid to financial institutions to obtain 
financial instruments; and (2) the administrative costs incurred in 
complying with reporting and recording keeping requirements of the 
proposed rule. Table X-5 presents the social cost of the rule. EPA 
estimated the social costs associated with acquiring instruments by 
taking the difference between the industrial costs less the intra-
industry transfers. The table summarizes the annualized social costs 
and intra-industry transfers using seven percent discount rates.
---------------------------------------------------------------------------

    \17\ The value of real resources--land, labor, energy and so 
forth--needed to comply with the regulations.

                                             Table X-5--Summary of Social Costs and Intra-Industry Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Option 1: No financial test                  Option 2: Proposed financial test
                                                         -----------------------------------------------------------------------------------------------
                                                            Annualized     Transfer from                    Annualized     Transfer from
                         Outcome                          cost of third-      mining        Annualized    cost of third-      mining        Annualized
                                                             party FR      industry  to   social cost ($     party FR      industry  to   social cost ($
                                                          instruments ($     others ($       millions)    instruments ($     others ($       millions)
                                                             millions)       millions)                       millions)       millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Amount.......................................             171             127              44             111              81              30
Administrative Cost to Industry.........................             N/A             N/A            $0.2             N/A             N/A            $0.3
                                                         -----------------------------------------------------------------------------------------------
    Total Social Costs and Transfers....................             N/A            $127             $44             N/A             $81             $30
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: This exhibit presents costs discounted using a 7 percent social discount rate. Supplementary results discounted using a 3 percent social discount
  rate are presented in Appendix E.

    Under proposed Option 1, of the $174 million cost to industry, the 
annualized intra-industry transfer is estimated to be $127 million. 
Thus, the social cost amounts to $44 million. Option 2 engenders 
slightly lower social costs at $30 million. As shown in the table, the 
administrative costs related to the reporting and recordkeeping 
requirements of the rule are approximately $0.3 million under the two 
regulatory options.
c. Government Costs and Risk Transfers
    The primary effect of this proposed rule is to transfer the risk 
associated with CERCLA liabilities from the taxpayer to the private 
sector. Table X-6 presents the estimated magnitude of this shift of 
potential CERCLA liabilities across the baseline and regulatory 
scenario. For the purposes of estimating changes in government burden 
due to the rule, EPA calculated the government burden assuming that 
financial responsibility amounts are representative of costs associated 
with future CERCLA cleanups. In the baseline, the Government is 
burdened with the CERCLA cost if an owner or operator defaults, as no 
third-party instruments will be in place. For the baseline, EPA 
estimated, the government burden rate using the firm exit rate derived 
from the Census Bureau's Business Dynamics Statistics (BDS).\18\ This 
represents a (high-end) estimate that assumes exiting firms fail to 
meet any of their CERCLA obligations. Under proposed Option 2, 
government costs were calculated based on estimated probabilities of 
default for firms in the modeled universe. Under this option, if a 
company passes the financial test but later files for bankruptcy and 
defaults on its financial responsibility obligations, EPA assumed that 
taxpayers would assume these obligations. Under proposed Option 1, 
there are no government costs, as no company may self-insure.
---------------------------------------------------------------------------

    \18\ The BDS provides the number of firms operating and number 
of firm exits each year in the mining sector. Firm exits identify 
when all establishments of a firm cease operations for reasons other 
than reorganization, merger, or acquisition. Because of the 
``corporate veil'' enjoyed by legal subsidiaries, this analysis uses 
a facility-based failure rate to model government costs in the 
baseline due to owner/operator failure. Compared to other measures 
of failure or default, the BDS firm exit rate also captures both 
private and public companies.

                               Exhibit X-6--Summary of Potential Government Costs
----------------------------------------------------------------------------------------------------------------
                                                                                                     Option 2:
                          Cost category                              Baseline      Option 1: No      Proposed
                                                                                  financial test  financial test
----------------------------------------------------------------------------------------------------------------
                                      Industry Liabilities ($2015 Millions)
----------------------------------------------------------------------------------------------------------------
CERCLA FR Amount Insured through Third-Party Instruments........             N/A          $7,064          $4,944

[[Page 3395]]

 
CERCLA FR Amount Self-Insured...................................           7,064               0           2,120
----------------------------------------------------------------------------------------------------------------
                                   Expected Government Costs ($2015 Millions)
----------------------------------------------------------------------------------------------------------------
Government Burden Rate..........................................            7.5%             N/A            0.7%
Government Cost.................................................             527               0              16
----------------------------------------------------------------------------------------------------------------
                             Decrease in Expected Government Costs ($2015 Millions)
----------------------------------------------------------------------------------------------------------------
Expected Transfers from Government to Industry..................                             527             511
----------------------------------------------------------------------------------------------------------------

    As shown in Table X-6, under the baseline scenario, the potential 
liability transfer from private parties to government is $527 million 
over the period of analysis (i.e., 34 years). Under the financial test 
option, the potential burden to taxpayer is reduced to $16 million. For 
the no-financial test option, the potential CERCLA liabilities are 
fully internalized by the regulated community.
4. Economic Impact Analysis
    EPA assessed the economic impacts of the proposed rule in two 
areas: (1) An assessment of the impact of compliance costs on the 
modeled universe, based on the comparison of compliance costs with 
relevant financial characteristics of the owner and operator; and (2) 
an assessment of the potential for employment impacts at the national 
level of the proposed rule. The following sections summarize the 
methods and findings for these analyses.
a. Screening Analysis for Potentially Significant Economic Impacts
    EPA assessed the economic impacts of the proposed regulatory 
options relying on the modeled universe for which detailed financial 
data are available. EPA assessed the impacts using two financial 
characteristics of the owner and operator: (1) A screening-level 
assessment which compares the annualized industrial costs to the firms' 
revenue; and (2) an alternative assessment that utilizes the firms' 
operating cash flow.
    For the 21 firms in the modeled universe, the annual revenues range 
from approximately $300 million to over $60 billion. Their annual cash 
flow from operations (cash flow associated with their primary business 
activity) ranges from $800,000 to over $3 billion. Relative to the 
companies' revenues, the per-company annualized costs of financial 
responsibility range from zero percent to 1.1 percent, with the 
majority of companies (20 of 21) falling between zero and 1 percent. 
Relative to operating cash flow, the range of annualized financial 
responsibility cost percentages is wider: From zero to over 160 percent 
(the latter is for the company whose operating cash flow is under $1 
million). Approximately eighty percent of all companies experience 
impacts that are under one percent of operating cash flow and 
approximately 95 percent of companies experience impacts under ten 
percent.
    Due to limitation in financial data, EPA did not expand the 
screening analysis to the full universe of regulated facilities. EPA 
acknowledges that the results generated based on the modeled universe 
may not be reflective of the impacts on the entire industry.
b. Employment Impact Analysis
    EPA routinely assesses the employment impacts of economically 
significant regulations. Executive Order 13563, ``Improving Regulation 
and Regulatory Review,'' states, ``Our regulatory system must protect 
public health, welfare, safety, and our environment while promoting 
economic growth, innovation, competitiveness, and job creation.'' In 
general, the national employment effects of environmental regulation 
are complex and multi-faceted and very likely involve both negative and 
positive effects. Neoclassical theory of production and factor demand 
provides a constructive framework for understanding and conducting 
employment impacts analysis of environmental regulations. It describes 
how firms adjust their demand for inputs, such as labor, in response to 
changes in economic conditions.\19\ Theory predicts that regulated 
firms will respond to regulation by adjusting input demands and output. 
The theory suggests the direction of the total impact of a regulation 
on the demand for labor in the regulated sector is indeterminate.\20\
---------------------------------------------------------------------------

    \19\ For an overview of textbook discussions of the neoclassical 
theory of production and factor demand, see, for example, Layard and 
Walters, Microeconomic Theory (1978), chapter 9 ``The Derived Demand 
for Factors''.
    \20\ For theoretic frameworks that conceptualize and incorporate 
the impacts of regulation, see Berman and Bui, 2001 or Deschenes, 
2012, 2014).
---------------------------------------------------------------------------

    EPA did not have sufficient data to model and quantify the 
potential changes in mines' employment levels as a result of the 
proposed regulation. Analysis provided by the U.S. Geological Survey 
(USGS) suggests that ``the primary metals industry and the nonmetallic 
minerals products industry are fundamentally cyclical.'' The industries 
are affected both by the domestic business cycle and the global 
economic environment. Composite indices constructed by USGS suggest 
that the industry experienced significantly decreased activity 
surrounding the Great Recession. In 2014, the most recent year analyzed 
by USGS, industry growth rates were positive.\21\
---------------------------------------------------------------------------

    \21\ See: U.S. Geological Survey, Mineral Commodity Summaries, 
2015, pp. 4, 7. The USGS generates composite indexes for primary 
metals and separately for nonmetallic mineral products. Their 
indices are intended to measure economic activity in these 
industries using production, employment, and shipments data.
---------------------------------------------------------------------------

5. Benefits of the Rule
    This section provides an overview of the methodology EPA used to 
assess or identify benefits of the proposal. EPA expects the CERCLA 
Sec.  108(b) financial responsibility provisions to yield social 
welfare benefits because of reductions in overall mining facility 
environmental obligations and an increase in the proportion of those 
obligations borne by the private sector through financial 
responsibility instruments.
    Identified benefits of the proposed rule include a reduction in 
costs the government must bear to fulfill cleanup obligations, improved 
environmental practices at mining sites, avoided impacts to impaired 
waters, and faster cleanups. The reduction in the cost to

[[Page 3396]]

government is the only benefit that can be measured with sufficient 
accuracy to allow for a quantitative assessment. A qualitative benefit 
assessment of the proposed rule was performed utilizing literature on 
related topics, such as the effect of environmental liabilities 
disclosure on financial markets. The benefits of the proposed rule are 
as follows:
a. Reduced Costs to Government
    The establishment of financial responsibility requirements for 
potential CERCLA Sec.  108(b) liabilities will reduce the costs 
incurred by the Government to finance remediation expenditures for 
companies that are unable to meet cleanup obligations. Section 7 of the 
RIA considered government costs associated with potentially responsible 
parties' (PRP) defaults on CERCLA Sec.  108(b) liabilities at mining 
facilities, including response costs, natural resource damages, and 
health assessment costs. Without the rule, EPA estimated that the 
Government would potentially incur a total cost of $527 million (over 
the 34-year period of analysis) for the cost categories described 
earlier. Under the proposed financial test option, the Government would 
incur an estimated $16 million in costs, whereas for the no-test 
option, the taxpayer's burden would be reduced to zero. Thus, the 
analysis concluded that the public, through the Government, would 
experience a cost savings from $511 million to $527 million over 34 
years because of the proposed rule.
b. Improvement in Environmental Performance
    Financial responsibility requirements may provide an incentive for 
regulated entities to minimize future environmental obligations. When 
regulated entities rely on a letter of credit, insurance policy, or 
other third-party instrument to meet financial responsibility 
requirements, the issuer will have an incentive to require sound 
environmental management as a condition for providing access to these 
instruments.
    To the extent that the proposed rule leads to improvements in 
facilities' environmental performance, the rule may reduce acid mine 
drainage and other discharges into waterways caused by mining 
activities. Waterways identified as impaired waters by section 303(d) 
of the Clean Water Act (CWA) and waters identified as wild and scenic 
rivers under the 1968 Wild and Scenic Rivers Act may benefit the most 
from improved environmental performance. Adverse impacts to waterbodies 
may be reduced or avoided in accordance with improvements in the 
environmental performance of mines. To gauge the potential magnitude of 
the benefits associated with avoided environmental impacts, EPA 
identified the number of sites in the potentially regulated universe 
that are located near CWA impaired waters or wild and scenic rivers. Of 
the 221 facilities in the potentially regulated universe, EPA 
identified the status of waterways adjacent to 172 facilities. Overall, 
EPA believes that the magnitude of these benefits in the context of the 
proposed rule is contingent upon changes in behavior among regulated 
entities to reduce the environmental risk.
c. Speed of Site Cleanups
    Under the financial responsibility requirements outlined in the 
proposed rule, the cleanup of sites owned by companies in default could 
begin more rapidly than under the baseline. Because funding for site 
remediation would be secured prior to a firm's insolvency, the 
initiation of cleanup would not be delayed by EPA budget constraints. 
Expedited cleanups would benefit human health and ecosystems as 
exposure to harmful contaminants may decline.

II. Authority

    EPA is issuing these proposed regulations under the authority of 
sections 101, 104, 108 and 115 of the Comprehensive Environmental 
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C 
Sec. Sec.  9601, 9604, 9608 and 9615, and Executive Order 12580. 52 FR 
2923, 3 CFR, 1987 Comp., p. 193.

III. Background Information

A. Overview of CERCLA Sec.  108(b) and other CERCLA Provisions

    CERCLA, as amended by the Superfund Amendments and Reauthorization 
Act of 1986 (SARA), establishes a comprehensive environmental response 
and cleanup program. Generally, CERCLA authorizes EPA \22\ to undertake 
removal or remedial actions in response to any release or threatened 
release into the environment of ``hazardous substances'' or, in some 
circumstances, any other ``pollutant or contaminant.'' As defined in 
CERCLA Sec.  101, removal actions include actions to ``prevent, 
minimize, or mitigate damage to the public health or welfare or to the 
environment,'' and remedial actions are ``actions consistent with [a] 
permanent remedy[.]'' Remedial and removal actions are jointly referred 
to as ``response actions.'' CERCLA Sec.  111 also established the 
Superfund Trust Fund (the Fund) to finance response actions undertaken 
by EPA. In addition, CERCLA Sec.  106 gives EPA \23\ authority to 
compel action by liable parties in response to a release or threatened 
release of a hazardous substance that may pose an ``imminent and 
substantial endangerment'' to public health or welfare or the 
environment.
---------------------------------------------------------------------------

    \22\ Although Congress conferred the authority for administering 
CERCLA on the President, most of that authority has since been 
delegated to EPA. See Exec. Order No. 12580, 52 FR 2923 (Jan. 23, 
1987).
    \23\ 1 CERCLA Sec. Sec.  106 and 122 authority is also delegated 
to other Federal agencies in certain circumstances. See Exec. Order 
No. 13016, 61 FR 45871 (Aug. 28, 1996).
---------------------------------------------------------------------------

    CERCLA Sec.  107 imposes liability for response costs on a variety 
of parties, including certain past owners and operators, current owners 
and operators, and certain transporters of hazardous substances. Such 
parties are liable for any costs of removal or remedial action incurred 
by the Federal Government, so long as the costs incurred are ``not 
inconsistent with the national contingency plan,'' (NCP).\24\ CERCLA 
Sec.  107 also imposes liability for natural resource damages and 
health assessment costs.\25\ In accordance with CERCLA, in 1990 EPA 
issued the current version of the NCP.\26\ These regulations provide 
the organizational structure and procedures for preparing for, and 
responding to, discharges of oil and releases of hazardous substances, 
pollutants, and contaminants. The NCP is codified at 40 CFR part 300. 
Among other provisions, the NCP provides procedures for hazardous 
substance response including site evaluation, removal actions, remedial 
investigation/feasibility studies (RI/FS), remedy selection, remedial 
design/remedial action (RD/RA), and operation and maintenance.\27\ The 
NCP also designates Federal, state, and tribal trustees for natural 
resource damages, and identifies their responsibilities under the 
NCP.\28\
---------------------------------------------------------------------------

    \24\ See CERCLA Sec.  107 (a)(4)(A).
    \25\ See CERCLA Sec.  107 (a)(4)(C)-(D).
    \26\ See 55 FR 8666, March 8, 1990.
    \27\ See 40 CFR 300, Subpart E.
    \28\ See 40 CFR 300, Subpart G.
---------------------------------------------------------------------------

    CERCLA Sec.  108(b) generally requires that EPA develop regulations 
requiring owners and operators of facilities to establish evidence of 
financial responsibility, and provides for publication of a ``Priority 
Notice'' identifying the classes of facilities for which EPA would 
first develop requirements. Paragraph (b)(1) also directs that priority 
in the development of requirements shall be accorded to those classes 
of facilities, owners, and operators that present the highest level of 
risk of injury. This proposed rule for

[[Page 3397]]

hardrock mining facilities prioritizes among the classes of facilities 
in that sector, and proposes financial responsibility requirements for 
those hardrock mining facilities that EPA has identified as presenting 
the highest level of risk of injury. More details on this analysis are 
provided in section VI.D.1.A of this preamble.
    Under CERCLA Sec.  108(b), classes of facilities must establish and 
maintain evidence of financial responsibility ``consistent with the 
degree and duration of risk associated with the production, 
transportation, treatment, storage, or disposal of hazardous 
substances.'' \29\ CERCLA Sec.  108(b)(2) directs that the level of 
financial responsibility shall be initially established, and, when 
necessary, adjusted to protect against the level of risk that EPA in 
its discretion believes is appropriate based on the payment experience 
of the Fund, commercial insurers, courts settlements and judgments, and 
voluntary claims satisfaction. EPA discusses its interpretation of 
these provisions in section VI.D.4. of this preamble.
---------------------------------------------------------------------------

    \29\ Executive Order 12580 delegates the responsibility to 
develop these requirements to the Administrator of EPA for non-
transportation related facilities. 52 FR 2923, 3 CFR, 1987 Comp., p. 
193.
---------------------------------------------------------------------------

    CERCLA Sec.  108(b) also discusses particular instruments for EPA 
to consider in its regulations. Specifically, paragraph (b)(2) states 
that financial responsibility may be established by any one, or any 
combination, of the following: insurance, guarantee, surety bond, 
letter of credit, or qualification as a self-insurer. Paragraph (b)(2) 
further authorizes the President to specify policy or other contractual 
terms, conditions, or defenses that are necessary, or that are 
unacceptable in establishing evidence of financial responsibility. 
Paragraph (b)(2) also requires EPA to cooperate with and seek the 
advice of the commercial insurance industry to the maximum extent 
practicable when developing financial responsibility requirements. 
Paragraph (b)(4) provides direction on how the CERCLA Sec.  108(b) 
instruments are to address multiple owners and operators at a single 
facility. Section VI.C. of this preamble discusses each of these 
financial responsibility instruments in detail.
    CERCLA Sec.  108(b)(3) requires that regulations promulgated under 
CERCLA Sec.  108(b) incrementally impose financial responsibility 
requirements as quickly as can reasonably be achieved, but in no event 
more than four years after the date of promulgation. Section VI.A.1. of 
this preamble discusses how EPA intends to phase in the CERCLA Sec.  
108(b) requirements in accordance with this provision.
    CERCLA Sec.  108(c) also includes a ``direct action'' provision, 
under which CERCLA claims can be brought directly against an insurer or 
other entity issuing an instrument pursuant to the CERCLA Sec.  108(b) 
regulations. CERCLA Sec.  108(c)(2) provides that any claim authorized 
by CERCLA Sec.  107 or Sec.  111 may be asserted directly against any 
guarantor providing evidence of financial responsibility under CERCLA 
Sec.  108(b) if the person liable under CERCLA Sec.  107 is: (1) In 
bankruptcy, reorganization, or arrangement pursuant to the Federal 
Bankruptcy Code, or (2) likely to be solvent at the time of judgment 
but over whom jurisdiction in the Federal courts cannot be reached with 
reasonable diligence. EPA discusses the direct action provision and 
other ways that it envisions the instruments provided pursuant to the 
CERCLA Sec.  108(b) program may pay out and otherwise support cleanup 
efforts in section VI.B.5. of this preamble.
    CERCLA Sec.  114(d) is an express preemption provision addressing 
state, tribal, and local financial responsibility requirements. This 
provision states:

    Except as provided in this subchapter, no owner or operator of a 
. . . facility who establishes and maintains evidence of financial 
responsibility in accordance with this subchapter shall be required 
under any State or local law, rule or regulation to establish or 
maintain any other evidence of financial responsibility in 
connection with liability for the release of a hazardous substance 
from such . . . facility. Evidence of compliance with the financial 
responsibility requirements of this subchapter shall be accepted by 
a State in lieu of any other requirement of financial responsibility 
imposed by such State in connection with liability for the release 
of a hazardous substance from such . . . facility.\30\
---------------------------------------------------------------------------

    \30\ 42 U.S.C. 9614(d).

    Many states already have financial responsibility requirements 
applicable to some of the hardrock mining facilities that would be 
subject to this proposed rule. Thus, in developing this proposal, EPA 
had to carefully consider the effects of its CERCLA Sec.  108(b) rules 
on other programs to avoid any unanticipated consequences. The Agency's 
conclusions regarding the relationship of CERCLA Sec.  108(b) 
requirements to financial responsibility requirements under other laws 
is discussed in Section V. of this preamble.
B. Recent Litigation under CERCLA Sec.  108(b)
    On March 11, 2008, Sierra Club, Great Basin Resource Watch, Amigos 
Bravos, and Idaho Conservation League filed a suit against former EPA 
Administrator Stephen Johnson and former Secretary of the U.S. 
Department of Transportation Mary E. Peters, in the U.S. District Court 
for the Northern District of California. Sierra Club, et al. v. 
Johnson, No. 08- 01409 (N. D. Cal.). On February 25, 2009, that court 
ordered EPA to publish the 2009 Priority Notice required by CERCLA 
Sec.  108(b)(1) later that year. The 2009 Priority Notice is described 
in more detail in section III.C. The court later dismissed the 
remaining claims.
    EPA issued the Advance Notice of Proposed Rulemaking discussed in 
section III.D. in early 2010, and continued to work on this proposed 
rule for the next several years. Dissatisfied with the pace of EPA's 
progress, however, in August 2014, the groups Idaho Conservation 
League, Earthworks, Sierra Club, Amigos Bravos, Great Basin Resource 
Watch, and Communities for a Better Environment filed a new lawsuit in 
the U.S. Court of Appeals for the District of Columbia Circuit, for a 
writ of mandamus requiring issuance of CERCLA Sec.  108(b) financial 
assurance rules for the hardrock mining industry and for three other 
industries--chemical manufacturing; petroleum and coal products 
manufacturing; and electric power generation, transmission, and 
distribution.\31\ Companies and organizations representing business 
interests in the hardrock mining and other sectors also sought to 
intervene in the case.
---------------------------------------------------------------------------

    \31\ See In re: Idaho Conservation League, et al., No. 14-1149.
---------------------------------------------------------------------------

    Following oral argument, the court issued an Order in May 2015 
requiring the parties to submit, among other things, supplemental 
submissions addressing a schedule for further administrative 
proceedings under CERCLA Sec.  108(b). The Court's May 19, 2015 Order 
further encouraged the parties to confer regarding a schedule and, if 
possible, to submit a jointly agreed upon proposal. Petitioners and EPA 
were able to reach agreement on a schedule. The parties requested an 
Order from the court with a schedule calling for the Agency to sign for 
publication in the Federal Register a proposed rule for the hardrock 
mining industry by December 1, 2016, and a final rule by December 1, 
2017.
    On January 29, 2016, the court granted the joint motion and issued 
an Order that mirrored the submitted

[[Page 3398]]

schedule in substance. The court Order can be found in the docket for 
this proposed rule (Docket No. EPA-HQ-SFUND-2015-0781). The signing of 
this proposed rule for publication by December 1, 2016 will satisfy one 
component of the court order.

C. Hardrock Mining 2009 Priority Notice

    As described earlier in this preamble, CERCLA Sec.  108(b)(1) 
requires the President to identify those classes of facilities for 
which requirements will be first developed and to publish notice of 
such identification in the Federal Register. That paragraph also 
directs that priority in the development of such requirements shall be 
accorded to those classes of facilities, owners, and operators that 
present the highest level of risk of injury. As discussed in section 
III.C., EPA published a Federal Register notice entitled 
``Identification of Priority Classes of Facilities for Development of 
Section 108(b) Financial Responsibility Requirements.'' \32\ EPA chose 
to evaluate indicators of risk and its related effects to inform its 
decision on the classes of facilities for which it would first develop 
requirements.\33\ EPA specifically pointed to eight factors that it 
considered,\34\ and stated that its review of those factors and the 
associated information in the docket led the Agency to conclude that 
hardrock mining facilities present the type of risk that, in light of 
its then-current evaluation, justified them being the first for which 
EPA issued CERCLA Sec.  108(b) requirements.\35\ The 2009 Priority 
Notice and supporting documentation have been included in the docket 
for this proposal (Docket No. EPA-HQ-SFUND-2015-0781) .
---------------------------------------------------------------------------

    \32\ See 74 FR 37213 (July 28, 2009)
    \33\ See Id. at 37214
    \34\ These eight factors were: (1) Annual amounts of hazardous 
substances released to the environment; (2) the number of facilities 
in active operation and production; (3) the physical size of the 
operation; (4) the extent of environmental contamination; (5) the 
number of sites on the CERCLA site inventory (including both NPL 
sites and non-NPL sites); (6) government expenditures; (7) projected 
clean-up expenditures; and (8) corporate structure and bankruptcy 
potential (see 74 FR 37214, July 28, 2009).
    \35\ Id.
---------------------------------------------------------------------------

    The 2009 Priority Notice also provided a working definition of 
``hardrock mining,'' namely, ``facilities which extract, beneficiate, 
or process metals . . . and non-metallic, non-fuel minerals.'' \36\ EPA 
generally explained the processes that constitute extraction, 
beneficiation, and processing, and how those processes relate to one 
another and how they differ.\37\ EPA explained that because of their 
interrelationships, EPA was identifying them as a group, yet the 
distinctions between them made it appropriate to consider such 
operations as encompassing multiple ``classes'' of facilities.\38\
---------------------------------------------------------------------------

    \36\ Id.
    \37\ Id. at 37214-15
    \38\ Id. at 37214
---------------------------------------------------------------------------

    It is important to recognize the necessary, but limited, role of 
the 2009 Priority Notice. The 2009 Priority Notice directly satisfied 
the notice requirement in CERCLA Sec.  108(b)(1), by identifying where 
EPA would start in its development of requirements. The 2009 Priority 
Notice did not, however, serve to comprehensively analyze the universe 
of hardrock mining facilities that would necessarily be covered by a 
proposed or final CERCLA Sec.  108(b) rule. As EPA stated in the 
notice, ``[a]dditional research, outreach to stakeholders, proposed 
regulations, review of public comments, and finalization of those 
regulations are needed before hardrock mining facilities are subject to 
any financial assurance requirements.'' \39\ Nor did that notice 
purport to identify which ``classes of facilities, owners and operators 
. . . present the highest level of risk of injury'' as required by 
CERCLA Sec.  108(b) (1). The initial identification of hardrock mining 
facilities provided in the 2009 Priority Notice included classes of 
facilities of varying degrees of risk of injury, and EPA has identified 
in this proposed rule what it believes are the classes of facilities 
that present the highest risk from among the classes of facilities 
identified in the Priority Notice.
---------------------------------------------------------------------------

    \39\ Id. at 37214, n. 5.
---------------------------------------------------------------------------

D. Additional Classes Advance Notice of Proposed Rulemaking

    The 2009 Priority Notice described in section III.C. stated EPA's 
view that classes of facilities outside of the hardrock mining industry 
may warrant the development of financial responsibility 
requirements.\40\ The Agency committed to gather and analyze data on 
additional classes of facilities and consider them for possible 
regulation.
---------------------------------------------------------------------------

    \40\ Id. at 37218.
---------------------------------------------------------------------------

    On January 6, 2010, EPA published an Advanced Notice of Proposed 
Rulemaking (2010 ANPR) \41\, in which the Agency identified three 
additional industrial sectors for the development of a proposed 
regulation--the Chemical Manufacturing industry (NAICS 325), the 
Petroleum and Coal Products Manufacturing industry (NAICS 324), and the 
Electric Power Generation, Transmission, and Distribution industry 
(NAICS 2211). Th 2010 ANPR did not set requirements for any of these 
three sectors. However, for transparency and completeness, this 
preamble includes information on the development of the 2010 ANPR, the 
litigation related to these sectors, and the companion notice on these 
sectors.
---------------------------------------------------------------------------

    \41\ See 75 FR 816.
---------------------------------------------------------------------------

    In the 2010 ANPR, EPA requested public comment on whether to 
propose a regulation under CERCLA Sec.  108(b) for any class or 
classes, or the industry as a whole, including information 
demonstrating why such financial responsibility requirements would not 
be appropriate for those particular classes. In addition, the Agency 
requested information related to the industry categories discussed in 
the notice, including data on facility operations, information on past 
and expected future environmental responses, use of financial 
instruments by the industry categories, existing financial 
responsibility requirements, and other information the Agency might 
consider in setting financial responsibility amounts. Finally, EPA 
requested information from the insurance and the financial sectors 
related to instrument implementation and availability, and potential 
instrument conditions.
    As noted earlier, the In re: Idaho Conservation League case also 
involved EPA's actions on these sectors as well. The same order 
addressing the CERCLA Sec.  108(b) hardrock mining rule also required 
the Agency to sign for publication in the Federal Register a decision 
on whether to issue a notice of proposed rulemaking for these 
additional sectors by December 1, 2016. EPA has developed that notice 
as required by the court order. That notice appears elsewhere in this 
Federal Register.
    EPA received comments on the 2010 ANPR, which can be found in the 
docket for that notice (Docket ID No. EPA-HQ-SFUND-2009-0834). EPA 
considered those comments as part of its decision whether to proceed 
with issuing proposed rules for the additional sectors, as described in 
the companion noticed issued by the Agency. EPA intends the future 
rulemaking processes for these sectors to be the venue through which 
the public can engage with EPA on issues related to those sectors. In 
this proposed rule for hardrock mining, EPA is not seeking, nor will it 
respond to, comments on issues relating only to sectors outside of 
hardrock mining, including its determinations on whether to proceed 
with the rulemakings for those other sectors.

[[Page 3399]]

E. Market Capacity Study

    In accordance with an instruction regarding the CERCLA Sec.  108(b) 
proposed rule in the Conference Committee Report for the Consolidated 
Appropriations Act (2016), EPA conducted a study of the market capacity 
regarding the necessary instruments (surety bonds, letters of credit, 
insurance and trusts) for meeting any new CERCLA Sec.  108(b) financial 
responsibility requirements and post the study on the Agency's website 
ninety days prior to this proposed rulemaking. The Agency also provided 
an explanation of how the CERCLA Sec.  108(b) rule will avoid requiring 
financial responsibility obligations that are duplicative of those 
already required by other Federal agencies as of the time it was 
released to the public. EPA also included the Market Capacity Study in 
the docket for this proposal.
    The Market Capacity Study assessed the likely availability of 
financial responsibility instruments and the capacity of third-party 
markets to underwrite financial responsibility requirements for 
responsible parties subject to CERCLA Sec.  108(b). The study relies on 
a substantial amount of quantitative and qualitative data in the public 
domain from readily referenced industry sources, as well as information 
gained in meetings held during 2015 and 2016 with instrument providers 
regarding factors that may affect instrument availability.
    The Agency's evaluation further focuses on characterizing that 
portion of the commercial insurance and surety markets that 
specifically underwrite environmental liability coverage as a way to 
gauge future capacity. The results of the research suggest that 
sufficient capacity likely will be available to cover the financial 
responsibility obligations called for under CERCLA Sec.  108(b), but 
caution that this capacity will be highly dependent upon the overall 
amount of financial responsibility that the market will need to 
accommodate. Overall capacity may also be influenced by: (1) The 
diversity of instruments allowed, (2) whether the rule allows insurance 
and surety markets to form risk retention groups (RRGs), and (3) 
whether the proposed rule permits the use of a financial test. All such 
features, if included in the rule, could help to relieve pressure on 
third-party surety markets and ensure greater market capacity.
    In consideration of these market issues, the rule as currently 
proposed includes a number of specific features to help ensure that the 
capacity of the market for financial responsibility instruments will be 
sufficient to meet demand subsequent to promulgation. First, 
preliminary results from draft regulatory impact analyses reveal 
estimates of total demand for instruments to be below that of the 
Agency's estimate of overall capacity. The proposal also offers further 
flexibility by permitting owners and operators to use a variety of 
alternative instruments to meet the requirements of the rule. Further, 
RRGs are not prohibited under the proposed provision for insurance, and 
the Agency is taking comment on their potential permissibility for the 
final rule. Lastly, as discussed in detail in VI.C.9 of this preamble, 
EPA has co-proposed options regarding the availability of a financial 
test and corporate guarantee mechanism. Under Option 1 (EPA's preferred 
option), use of a financial test and corporate guarantee would not be 
allowed. However, under Option 2, use of a financial test and corporate 
guarantee would be allowed, thus those instruments would be available 
as well if Option 2 were to be adopted in the final rule.
    Given the number of unknown factors, the ultimate availability of 
CERCLA Sec.  108(b) financial responsibility instruments cannot be 
predicted with certainty until the final rule has been promulgated. At 
that time, the available instruments will be determined, and the market 
will have an opportunity to respond.

F. Approach to Developing This Proposed Rule

    This is the first EPA proposed rule under the authority of CERCLA 
Sec.  108(b). As a result, this proposed rule would establish a 
financial responsibility program under CERCLA Sec.  108(b), in addition 
to imposing requirements specific to the hardrock mining industry. EPA 
anticipates that core financial responsibility program requirements 
established under this proposal, such as procedures for establishing 
financial responsibility, public involvement, recordkeeping and 
reporting, establishing and maintaining instruments, and the wording of 
some of the instruments would apply to hardrock mining facilities 
subject to this rule and to classes of facilities subject to further 
rules promulgated under CERCLA Sec.  108(b) authority. EPA therefore 
solicits comments on these provisions from all interested parties, 
including representatives of industries other than the hardrock mining 
industry.
    Other requirements of this proposed rule would likely apply only to 
the hardrock mining facilities for which they were designed. For 
example, the financial responsibility formula proposed in this rule was 
designed for use by hardrock mining facilities. A method for 
determining financial responsibility amounts would be identified for 
future industry sectors in future proposed rulemakings. EPA intends 
that the provisions of this rule be severable. In the event that any 
individual provision or part of this rule is invalidated, EPA intends 
that this would not render the entire rule invalid, and that any 
individual provisions that can continue to operate will be left in 
place.
    Development of these regulations has proven to be a complex and 
unique task for EPA, and the Agency has explored a number of options 
for key components of the proposed rule. Thus, while the Agency is 
proposing an approach for implementing CERCLA Sec.  108(b), the Agency 
also has attempted to present a broad range of options and is seeking 
comment on a variety of issues throughout the preamble. Because this 
proposed rule represents the initial steps in development of a CERCLA 
Sec.  108(b) program, EPA is particularly interested in receiving 
information from a broad range of parties with suggestions for 
improving EPA's proposed new CERCLA Sec.  108(b) program.

IV. Major Issues in the Development of the Proposed Rule

    This proposed rule is the first to be issued by EPA under the 
authority of CERCLA Sec.  108(b).\42\ In developing this proposal, EPA 
has given significant consideration to a number of issues. In this 
preamble section, EPA discusses those issues and its proposed 
approaches to them. EPA expended considerable effort over several years 
before deciding how to structure this proposal, and the various options 
included throughout reflect varying ways that EPA is considering 
reconciling the policy purposes of the CERCLA Sec.  108(b) rule in 
light of the information before the Agency and the general statutory 
direction. EPA explains these considerations in the more detailed 
discussions of the various provisions in later sections of this 
preamble. In general, however, this proposed rule would establish 
requirements for financial responsibility applicable to certain 
facilities within the hardrock mining industry. Owners and operators of 
facilities subject to this rule would be required to demonstrate 
financial responsibility to cover costs

[[Page 3400]]

associated with liabilities identified in CERCLA Sec.  107, that is, 
for response costs, health assessment costs, and natural resource 
damage costs.
---------------------------------------------------------------------------

    \42\ Regulations were promulgated by the Coast Guard under Sec.  
108(a) (insert cite).
---------------------------------------------------------------------------

A. Relationship to Existing Superfund Processes

    The proposed rule would not establish any regime regulating the 
conduct of hardrock mining and mineral processing activities. Instead, 
EPA intends for CERCLA Sec.  108(b) requirements to apply alongside 
other programs that directly regulate the operation of hardrock mines. 
Nor does the proposed rule modify the existing Superfund enforcement 
authorities, including those to gather information, identify 
responsible parties, effect cleanup (especially through EPA's 
enforcement first policy), assess penalties, or provide for citizen 
suits. Instead, the proposal is designed to complement and support 
those existing processes. The impact of this proposal on existing 
processes would be to increase the likelihood that parties have funds 
to conduct cleanup; increase the likelihood of successful recovery of 
costs under CERCLA, including claims brought under CERCLA Sec. Sec.  
107 or 113(f) from the parties providing the financial responsibility 
instruments, increase the likelihood that funds will be available for 
owners and operators to settle their Superfund liabilities with the 
Federal Government, and provide an instrument that may be used by an 
owner or operator, to assure work required under a CERCLA Sec.  106 
unilateral administrative order by EPA and other Federal agencies.
    Set within the context of CERCLA's response program, CERCLA Sec.  
108(b) establishes a broad authority for EPA to promulgate requirements 
that classes of facilities establish and maintain evidence of financial 
responsibility consistent with the risk associated with various 
hazardous substance management activities. CERCLA as a whole is 
generally designed to ensure that, ultimately, risks to human health 
and the environment are addressed by those responsible for 
contamination in the first instance (commonly called the ``polluter 
pays'' principle). The CERCLA Sec.  108(b) requirements can complement 
this goal in two particular ways. First, the rules should help assure 
that businesses make financial arrangements to address risks from the 
hazardous substances at their sites in the event that a CERCLA cleanup 
ultimately becomes necessary. The rules can thus promote the polluter 
pays principle underlying the CERCLA scheme. Second, CERCLA Sec.  
108(b) rules should serve to create effective incentives for regulated 
entities to manage the hazardous substances present at their facilities 
more carefully and thereby minimize the threats of future releases. 
These sorts of measures directly promote protection of human health and 
the environment by preventing the environmental harm caused by 
releases, and by creating a culture of responsible behavior among the 
regulated community that will minimize the need for future Superfund 
actions.

B. Liabilities Covered

    CERCLA Sec.  108(b) does not provide specific direction on the 
types of liabilities that the regulations for facilities are to cover. 
Paragraph (a)(1) of Sec.  108 requires evidence of financial 
responsibility for vessels explicitly ``to cover the liability 
prescribed under paragraph (1) of section 107(a).'' By contrast, CERCLA 
Sec.  108(b)(1) provides only that classes of facilities establish and 
maintain evidence of financial responsibility ``consistent with the 
degree and duration of risk'' associated with various aspects of 
hazardous substance management. Thus CERCLA Sec.  108(b) does not 
include the same direct cross-reference to the categories of 
liabilities under CERCLA Sec.  107 that it does for vessels. Therefore, 
in developing this proposal EPA considered whether it was appropriate 
to require evidence of financial responsibility for all types of CERCLA 
liabilities, only a subset of those liabilities (for example, only for 
potential response costs), or even extend the instruments beyond the 
categories included in CERCLA Sec.  107 (for example, for personal 
injury costs). EPA is today proposing to make the instruments available 
for all types of CERCLA liabilities enumerated in CERCLA Sec.  107. EPA 
believes that this approach furthers both policy objectives described 
earlier, by helping to ensure adequate funding for all types of 
potential CERCLA liabilities at regulated facilities, and by 
encouraging owners and operators to take into account the full breadth 
of potential CERCLA liability when structuring their operations, 
thereby minimizing those risks in the first instance. Thus, the 
instruments provided under this proposed rule would be available to pay 
costs incurred by a government or private party for response costs, 
natural resource damage costs, and health assessment costs.\43\
---------------------------------------------------------------------------

    \43\ See 42 U.S.C. 9607(a)(4)(A)-(D).
---------------------------------------------------------------------------

    Finally, EPA has not identified a basis for it to exclude any of 
these particular types of costs based upon the data EPA has gathered in 
preparing this proposal. All three types of CERCLA Sec.  107 costs have 
been incurred by hardrock mining facilities as EPA has documented 
elsewhere in this preamble. (see Section VI.F.3.).

C. Universe Covered

    Under this proposal, requirements would apply to owners and 
operators of mining facilities that fall within the classes described 
in the 2009 Priority Notice except for three classes that EPA has 
identified as presenting a lower level of risk of injury--mines 
conducting only placer mining activities, mines conducting only 
exploration activities, and mines with less than five disturbed acres 
that are not located within one mile of another area of mine 
disturbance that occurred in the prior ten year period. In addition, 
requirements under this proposal would apply to owners or operators of 
mineral processing facilities identified in the 2009 Priority Notice 
with less than five disturbed acres of waste pile and surface 
impoundment. Other mineral processing facilities identified in the 2009 
Priority Notice would not be subject to the proposed rule. Further, the 
proposed rule would apply only to facilities that are authorized to 
operate, or should be authorized to operate, on the effective date of 
the rule. The applicability of this rule is described further in 
section VI.A.1. of this preamble.

D. Notification Requirement

    The proposal would require owners and operators subject to the rule 
to notify EPA that they are subject to the rule and intend to comply, 
and to provide basic facility information, within thirty days of the 
effective date of the final rule. Those owners and operators would then 
be required to identify a CERCLA Sec.  108(b) financial responsibility 
amount for their facility, and to submit evidence of financial 
responsibility to EPA.

E. Determining the Financial Responsibility Amount for Hardrock Mining 
Facilities

    The rule proposes a hardrock mining financial responsibility 
formula for determining a financial responsibility amount for response 
costs, health assessment costs, and natural resource damages. The 
formula, and EPA's approach and methodology for developing the formula, 
are described in detail in section VI.D.4. of this preamble. In 
summary, the proposed formula is designed to reflect the relative risk 
to human health and the environment, of facility practices for managing 
hazardous substances, including reductions in risk that may

[[Page 3401]]

result from compliance with other regulatory requirements or other 
facility practices. The formula assigns values for a facility based on 
facility and unit characteristics (e.g., open pits, waste rock, 
tailings, heap leach, process ponds, water management, and operations, 
maintenance, and monitoring). These values correspond to calculated 
cost levels, and the formula then aggregates these cost levels to 
establish the facility-wide financial responsibility amount. The 
formula is not intended to establish any CERCLA liability or define a 
particular remedy for a unit or facility. Rather, the purpose of the 
formula is simply to establish an amount of financial responsibility 
that reflects the costs that might be expected to result, if a 
Superfund action should ultimately be required at the site, based on 
the information EPA has compiled on a national basis in the record for 
this proposal. Any remedy decisions will continue to be developed on a 
site-specific basis through standard CERCLA processes, including the 
processes in the NCP. Because the CERCLA Sec.  108(b) cost estimate is 
necessarily developed in the absence of any site-specific remedy 
selection, EPA cannot ensure that the particular costs the formula 
assigns for a particular feature will necessarily ultimately be 
identical to the actual costs for cleaning up that site feature. 
Therefore, although the formula employs an aggregation of individual 
costs to obtain an overall amount for the facility, the individual cost 
components are not themselves intended to represent any sub-limits 
within the actual financial responsibility instrument. In other words, 
the total amount of funds would be available for any future Superfund 
action anywhere across the facility, and would not be tied to 
particular site features. Moreover, to impose sub-limits based on the 
particular values for the formula subcomponents has the potential to 
result in partial over- and under-funding of unit- and site-specific 
remedies in the future, once a CERCLA remedy is defined and claims are 
made against the instrument. In addition, making those claims would 
potentially require protracted negotiations over which response costs 
are ultimately payable from the instrument. Such a situation would 
hinder, instead of support, CERCLA cleanups.
    Once the amount is ascertained through the formula, owners and 
operators would then be required to obtain an acceptable financial 
responsibility instrument for that amount, submit evidence of the 
instrument to the Agency, and make information about the instrument 
available to the public. EPA is not proposing to require a preliminary 
review and approval of the application of the formula to the facility's 
features, nor prior review and approval of the financial responsibility 
instrument, prior to it becoming effective. The Agency may choose to 
review and verify the adequacy of a financial responsibility amount, or 
the terms of the instrument provided to EPA under CERCLA Sec.  108(b), 
at a facility at any time. If EPA determines the financial 
responsibility amount submitted by the owner or operator to be 
inadequate, EPA may choose to initiate enforcement proceedings.
    The Agency considered an alternative approach to establishing a 
CERCLA Sec.  108(b) cost estimate that more closely resembles more 
traditional financial responsibility programs developed to complement a 
permit-based regulatory program. Financial responsibility requirements 
under many other programs \44\ are typically components of an 
overarching regulatory program, such as a permit program, and are 
designed to assure compliance with the requirements of that program. 
CERCLA Sec.  108(b) requirements in contrast, are freestanding in that 
they are not directly associated with regulatory program requirements 
with which an owner and operator must comply, or with a remedy that has 
been selected that an owner and operator must implement. Under the 
``closure plan'' alternative EPA considered, the Agency would first 
identify a set of technical engineering requirements for a facility 
subject to CERCLA Sec.  108(b) requirements that could be consolidated 
into a complete facility closure, and in turn could be used as the 
basis for calculating an amount that ultimately would need to be 
assured for under CERCLA Sec.  108(b). In effect, the ``closure plan'' 
would have had to include the engineering controls necessary to compete 
a CERCLA-style clean up at a facility where the owner or operator had 
walked away and failed to complete reclamation and closure activities. 
The plan itself would not be intended to be enforceable, but would only 
have served as a method to calculate the amount of financial 
responsibility that would be required under CERCLA Sec.  108(b), using 
site-specific information. Based on the closure plan, EPA would then 
have calculated the amount of financial responsibility necessary under 
CERCLA Sec.  108(b), after taking into account other Federal and/or 
state engineering controls and associated financial responsibility 
requirements. This could integrate CERCLA Sec.  108(b) requirements 
into the existing Federal and state financial responsibility 
requirements applicable at hardrock mining facilities, and allow for 
more consistency among financial responsibility requirements 
nationally, as the CERCLA Sec.  108(b) amount would in concept, fill in 
any gaps EPA identified under other programs.
---------------------------------------------------------------------------

    \44\ See summaries of state financial responsibility programs in 
the docket for this rulemaking (EPA-HQ-SFUND-2015-0781).
---------------------------------------------------------------------------

    However, EPA soon recognized that there may be problems adopting 
such an approach. First, selection of a particular response under 
CERCLA is determined in accordance with the NCP, but after a release or 
threatened release is identified, and on a case-by-case basis. By 
contrast, a permit program has the advantage of identifying the 
appropriate engineering controls for closure before they become 
necessary, through the permit process. EPA was unable to identify a 
basis to specify a site-specific set of engineering controls for a 
site-specific cost estimate, without going through a process similar to 
applying the NCP at each facility. Such an approach would present a 
significant regulatory burden on the Agency. First, it would 
necessitate a case-by-case evaluation of each facility to determine the 
appropriate engineering controls that CERCLA might require, and then 
the Agency would need to compare that set of controls to any applicable 
regulatory requirements, such as state or Federal reclamation 
requirements. Second, it would be difficult for EPA to create a CERCLA 
Sec.  108(b) financial responsibility instrument that would be written 
to cover only the particular ``gaps'' the Agency sought to cover for 
each engineering requirement at a facility without having the 
instrument overlap with other requirements given that some closure 
programs conduct activities that reduce CERCLA risks. This would 
present problems those presented by sub-limits on instruments 
(discussed earlier). EPA has other important concerns with such an 
approach aside from these implementation concerns. EPA has policy 
concerns about overseeing other Federal and state programs' financial 
responsibility requirements for adequacy, given other authorities' 
expertise with mining regulation. Based on these considerations, EPA is 
proposing the formula approach in this rule. EPA solicits comment on 
the proposed approach.
    It should be noted that, as mentioned in section III.F. of this 
preamble, the financial responsibility formula developed for this 
proposed rule is

[[Page 3402]]

specific to the hardrock mining industry, and is not designed for use 
in future rulemakings under CERCLA Sec.  108(b). In future rulemakings 
under CERCLA Sec.  108(b), EPA will evaluate how to determine financial 
responsibility amounts for each particular rule, and will propose an 
appropriate methodology.

F. Available Instruments

    The proposed rule considers the use of all financial responsibility 
instruments identified in CERCLA Sec.  108(b)(2) of the statute, that 
is, insurance, guarantee, surety bond, letter of credit, or 
qualification as a self-insurer. The proposal includes a trust fund as 
an available form of qualifying as a self-insurer. The proposed rule 
would allow owners and operators to demonstrate the financial 
responsibility amount required at a facility using one or a combination 
of these instruments. In addition, the proposed rule would allow the 
owner or operator to demonstrate financial responsibility for multiple 
facilities using a single instrument.
    The Agency is proposing two approaches for qualifying as a self-
insurer through a financial test instrument for self-insurance. Under 
Option 1, EPA would not include a financial test as a form of self-
insurance. EPA prefers this option because it believes the weight of 
the evidence supports more secure forms of financial responsibility. 
With respect to Option 2, EPA would include a stringent credit rating-
based financial test to cover all or partial costs of a facility's 
obligations, depending on the owner or operator's credit rating. Under 
Option 2, the owner or operator could use the financial test itself, or 
the test may be used by a corporate parent, a firm owned by the same 
parent corporation as the owner or operator, or a firm with a 
substantial business relationship with the owner or operator, to 
demonstrate financial responsibility for the owner or operator through 
a corporate guarantee. The proposed approaches are discussed in section 
VI.C.4. of this preamble.
    The proposed rule includes wording for the financial responsibility 
instruments. The instruments would be required to conform to this 
wording. This simplifies administration of the rule. The proposed 
financial responsibility instruments are designed to pay costs under 
CERCLA for which the owner or operator is responsible at the facility. 
Depending on the requirements of the instrument provider, both the 
owner and operator may or may not be named on the financial 
responsibility instrument, but all instruments must be available to pay 
for costs of either party.
    The financial responsibility instruments proposed are designed to 
pay for CERCLA response costs, health assessment costs, and natural 
resource damages under three scenarios in addition to, and independent 
of, the direct action scenario provided in CERCLA Sec.  108(c). First, 
the instruments are designed to pay the party obtaining the judgment 
after a court finding of CERCLA liability against any owner or operator 
covered by the instrument. In this case, the instrument would pay any 
party obtaining a judgment.
    Second, the instruments are designed to pay upon settlement of 
CERCLA liability with the United States, into an account designated 
under the settlement. This could include a CERCLA special account under 
CERCLA Sec.  122, in which those funds can be used for carrying out the 
settlement at the site, or into the Superfund. In situations where a 
facility is in bankruptcy or jurisdiction over the owner or operator is 
not available and a direct action is brought against the instrument 
provider under CERCLA Sec.  108(c), the instrument would be available 
to pay in settlement of the owner or operator's CERCLA liabilities upon 
settlement with the instrument provider, standing in the shoes of the 
owner or operator.
    Finally, the instruments are designed to pay in certain limited 
administrative order situations under CERCLA Sec.  106; that is, where 
the financial responsibility instrument is named in an administrative 
order and a trust fund is established pursuant to the order, the funds 
would be available to be paid into that trust fund if performance at 
the facility as required by the order had not occurred.

V. Relationship of CERCLA Sec.  108(b) to Other Federal Laws, and to 
State and Tribal Laws

    In considering options for this proposed rule, EPA examined how 
CERCLA Sec.  108(b) may relate to other financial responsibility 
authorities currently implemented by EPA and from closure and 
reclamation programs implemented by other Federal agencies and by 
states and tribes. EPA has concluded that CERCLA Sec.  108(b) 
requirements apply in addition to requirements under other Federal law. 
EPA also believes that preemption of state reclamation bonding programs 
is not intended by CERCLA, nor necessary or appropriate. Thus, EPA 
expects CERCLA Sec.  108(b) to effectively complement, not duplicate or 
disrupt, those programs.
CERCLA Sec.  108(b) Applies To Address CERCLA Liabilities at Facilities 
in Addition to Other Federal Financial Responsibility Requirements
    CERCLA authorizes EPA to issue financial assurance requirements to 
cover CERCLA liabilities, whether or not a facility is subject to 
financial responsibility requirements under another Federal law. Thus, 
CERCLA Sec.  108(b) requirements apply even where a hardrock mine or 
mineral processor may be subject to, for example, Federal reclamation 
bonding requirements. This interpretation gives full effect to CERCLA 
Sec.  108(b) and carries out its purpose in ensuring that facilities 
that manage CERCLA hazardous substances make arrangements to cover any 
CERCLA liabilities that may arise.
    This approach is fully consistent with the plain language of the 
statute. CERCLA Sec.  108(b)(1) addresses other Federal law only in a 
very limited way. It states that the requirements under that section 
are to be ``for facilities in addition to those under [RCRA] Subtitle C 
. . . and other federal law.'' The section does not further elaborate 
on what ``in addition to'' means. EPA reads this provision in a most 
straightforward way: Requirements in this proposed rule are quite 
literally ``in addition to'' whatever financial responsibility 
requirements may be imposed under other Federal laws for other 
purposes. EPA does not, for instance, see this reference to other 
Federal law as any limitation on the applicability of the section. 
Indeed, the phrase ``in addition to'' is inconsistent with the notion 
that other Federal law is to be a limitation on the scope of CERCLA 
Sec.  108(b)'s applicability. By contrast, when Congress intended to 
insert limitations based on other Federal law into CERCLA, it clearly 
stated them as such. See, e.g., CERCLA Sec.  101(22)(C) (definition of 
release ``excludes . . . (C) release of source, byproduct, or special 
nuclear material from a nuclear incident, as those terms are defined in 
the Atomic Energy Act of 1954, if such release is subject to 
requirements with respect to financial protection established by the 
Nuclear Regulatory Commission under Sec.  170 of such Act. . . .); 
101(39) (``The term `brownfield site' does not include'' facilities to 
which permits have been issued under RCRA, the Clean Water Act, the 
Toxic Substances Control Act, or the Safe Drinking Water Act; or 
facilities subject to RCRA corrective action, RCRA closure, or TSCA 
clean up obligations). Nor would reading this reference as a limitation 
on the scope of CERCLA Sec.  108(b) make much practical sense, as

[[Page 3403]]

the need for a CERCLA response may arise regardless of whether another 
Federal law already applies.
    EPA's intent in this proposal, consistent with its interpretation 
described earlier, is to apply CERCLA Sec.  108(b) to address potential 
CERCLA risks at a facility, even when that facility is subject to 
regulation and/or financial responsibility requirements under other 
Federal law, such as mine reclamation bonding requirements required by 
Bureau of Land Management (BLM) or the U.S. Forest Service (USFS). As 
explained elsewhere, these proposed regulations are not designed to 
ensure compliance with technical engineering requirements imposed 
through a permit, or to ensure proper closure or reclamation of an 
operating mine. Instead, EPA has structured these rules to address the 
CERCLA liabilities at a regulated facility, and to create incentive for 
practices that will prevent the need for future CERCLA responses.
Provision of a Financial Responsibility Instrument Under CERCLA Sec.  
108(b) Does Not Preempt State Mine Bonding Regulations Under CERCLA 
Sec.  114(d)
    EPA has also considered, in developing the proposed CERCLA Sec.  
108(b) regulations for hardrock mining classes, what effect, if any, 
compliance with the Federal requirements would have under CERCLA Sec.  
114(d), an express preemption provision relating to specific state 
financial responsibility requirements. Many states have mine financial 
responsibility requirements. EPA compiled summaries of all 50 states' 
mine bonding requirements to get a general understanding of the types 
of requirements applicable under other programs. These summaries are 
also available in the docket. EPA's general understanding of state 
mining programs indicates that those programs vary, and that states use 
mine permitting authorities to enforce compliance with state mining 
regulations. Some states may address different risks, or address risks 
in a different manner from those for which EPA's proposed Financial 
Responsibility Formula is designed to account. In developing the 
proposed rule, the Agency sought the input of several states with 
significant mining regulatory programs on the state preemption 
question. EPA received responses from Alaska, Arizona, Colorado, and 
New Mexico. The comment letters also are included in the docket for 
this proposal.
    EPA does not intend its CERCLA Sec.  108(b) regulations to result 
in widespread displacement of those programs, nor does EPA believe that 
such preemption is intended by CERCLA, necessary, or appropriate.
    EPA does not believe that CERCLA Sec.  114(d) \45\ gives a broad 
preemptive effect to EPA's CERCLA Sec.  108(b) financial responsibility 
regulations, over state reclamation bonding requirements generally.\46\ 
This follows from consideration of the structure and language of the 
statute and case law. First, both CERCLA Sec. Sec.  108(b) and 114 are 
expressly focused on hazardous substances, the risks they present, and 
financial responsibility associated with liability stemming from their 
release or threatened release. Consistent with this, as described in 
section V.B. of this preamble, EPA has interpreted the scope of CERCLA 
Sec.  108(b)'s mandate for evidence of financial responsibility to 
reflect the types of costs for which parties may be liable under CERCLA 
Sec.  107 that result from releases or threatened releases of hazardous 
substances. As the state commenters have made clear, many state 
reclamation bonding regimes are not similarly limited to CERCLA 
hazardous substances or their release. For example, the New Mexico 
Environment Department stated that reclamation under the state Mining 
Act is a goal in itself, which may or may not be connected with the 
release of hazardous substances in a particular instance.
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    \45\ CERCLA Sec.  114 states, in relevant part:
    (a) Nothing in this chapter shall be construed or interpreted as 
preempting any State from imposing any additional liability or 
requirements with respect to the release of hazardous substances 
within such State.
     . . .
    (d) Except as provided in this subchapter, no owner or operator 
of a . . . facility who establishes and maintains evidence of 
financial responsibility in accordance with this subchapter shall be 
required under any State or local law, rule, or regulation to 
establish or maintain any other evidence of financial responsibility 
in connection with liability for the release of a hazardous 
substance from such . . . facility. Evidence of compliance with the 
financial responsibility requirements of this subchapter shall be 
accepted by a State in lieu of any other requirement of financial 
responsibility imposed by such State in connection with liability 
for the release of a hazardous substance from such . . . facility.
    \46\ By this discussion, EPA is providing its general views on 
the preemption issue for transparency and to obtain public comment. 
It is the courts that would make any final determinations about the 
preemptive effect of CERCLA 108(b) regulations at any particular 
facility. These determinations would necessarily be based on case-
by-case evaluations.
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    Second, CERCLA Sec.  114 taken as a whole makes clear that states 
are not prohibited from requiring reclamation bonding. The section 
begins with a general disclaimer of preemptive effect in paragraph (a), 
specifically directing that ``nothing in this chapter'' ``be construed 
or interpreted as preempting any State from imposing any additional 
liability or requirements with respect to the release of hazardous 
substances within such State.'' This reflects Congressional intent that 
preemption of state law requirements should be minimized. Moreover, 
CERCLA Sec.  114(d)'s preemptive effect is qualified--``except as 
provided in this subchapter''--a reference that logically encompasses 
the limitations on preemption outlined in paragraph (a). Taken 
together, these references quite naturally preserve state mine bonding 
requirements as ``additional requirements'' to the extent that they may 
also address the release of hazardous substances.
    Third, many state requirements serve significantly different 
purposes from any final CERCLA Sec.  108(b) regulations, and for this 
reason alone those state requirements should not be considered to be 
``in connection with liability for the release of hazardous 
substances'' within the meaning of CERCLA Sec.  114(d). As discussed, 
the CERCLA Sec.  108(b) regulations being proposed today are intended 
to address facilities' potential for releases or threatened releases 
that result in CERCLA liability. By contrast, many mine bonding 
programs are designed to ensure that a facility can comply with 
otherwise-applicable regulatory requirements, that may or may not be 
connected with (or may be only partially connected with) hazardous 
substance releases or threatened releases. See ALASKA STATUTE Sec.  
27.19.040(a), Reclamation Financial Assurance (requiring financial 
responsibility to ensure performance of a reclamation plan); ARIZ. REV. 
STAT. Sec.  27-971(B)(11), Submission and contents of reclamation plan 
(financial responsibility is required to ensure completion of all 
activities in the approved reclamation plan for mining units); CAL. 
PUB. RES. CODE Sec.  2773.1(a), Reclamation of Mined Lands and the 
Conduct of Surface Mining Operations (financial responsibility is 
required to ensure the completion of the lead agency-approved 
reclamation plan); 2 COLO CODE REGS. Sec.  407-1 R. 4.2.1(1), Adequacy 
of Financial Warranties (For mining operations, financial 
responsibility is required to ensure the fulfillment of the 
requirements of the reclamation plan that is attached to the 
reclamation permit application); FLA. ADMIN. CODE ANN. r. 62C-
16.0075(5)(f), Financial Responsibility (required to demonstrate 
financial responsibility in order to cover reclamation through the 
initial revegetation of the reclaimed area); IDAHO ADMIN. CODE 
r.20.03.02.070(01), Reclamation Plan

[[Page 3404]]

Approval Required and IDAHO ADMIN. CODE r.20.03.02.071(01), Permanent 
Closure Plan Approval Required (Financial responsibility is required to 
ensure that all reclamation activities included in an approved 
reclamation plan and that all closure activities in an approved 
permanent closure plan are completed for surface mining operations and 
cyanidation facilities, respectively); MINN. R. 6130.6000 Subp. 1-Subp. 
2, Performance Bonds (Financial responsibility also may be required to 
cover the estimated cost of ``satisfactorily accomplishing reclamation 
of all lands disturbed and unreclaimed up to the date of annual 
[financial responsibility] review.''); NEV. ADMIN. CODE ch. 
519A.350(1), General requirements (Financial responsibility is required 
to ensure that reclamation activities in the approved reclamation plan 
will be completed); N.M. STAT Sec.  69-36-11, Existing mining 
operations; closeout plan required (Financial responsibility under NMMA 
is required to assure reclamation or ``closeout.''); UT CODE ANN. 40-8-
4(13)(a), Definitions (Financial responsibility is required to assure 
reclamation of affected lands); WASH. REV. CODE Sec.  78.44.087(1)(a), 
Performance security required (Financial responsibility is required for 
reclamation of affected surface mining lands).
    Fourth, it makes sound policy sense for CERCLA Sec.  114(d) to be 
read to allow these programs to apply in tandem. EPA cannot write its 
national CERCLA Sec.  108(b) requirements to simultaneously correspond 
to 50 different states' reclamation requirements. These requirements 
can vary substantially, and particular requirements may have only a 
limited relationship to liability for the release of hazardous 
substances.\47\
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    \47\ EPA also notes that concerns about duplication are 
separately addressed in CERCLA's prohibition on double recovery in 
CERCLA Sec.  114(b). That section allows for harmonizing recoveries 
where claims could also be brought under other state causes of 
action. This helps provide assurance, for example, that reclamation 
requirements that may otherwise be similar to CERCLA response 
actions and compensable through a CERCLA 108(b) financial 
responsibility instrument would not be unfairly paid twice.
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VI. Section-by-Section Analysis

A. Subpart A--General Facility Requirements

1. Purpose and Scope (Sec.  320.1) and Applicability (Sec.  320.2)
    This proposed rule would establish financial responsibility 
requirements under CERCLA applicable to current owners and operators of 
hardrock mining facilities that are authorized to operate or should be 
authorized to operate, that is, owners and operators that are required 
to obtain authorization to operate and have done so, as well as those 
who are required to obtain authorization to operate and have failed to 
do so. The proposed rule would not apply to owners or operators of past 
hardrock mining facilities, such as abandoned mines, nor would it apply 
to former owners or operators of mines that are covered by the rule. 
The financial responsibility requirements for those current owners or 
operators would extend to all potential CERCLA liabilities at the 
facility, based on current conditions at the site. This approach 
balances the dual goals of providing funds to address CERCLA 
liabilities at their sites, and of creating incentives for sound 
practices that will minimize the likelihood of a need for a future 
CERCLA response.
    In developing this proposed rule, EPA considered whether to propose 
conditions applicable to all owners and operators, past and present, of 
facilities covered by the rule, or whether to limit the rule to current 
owners and operators. EPA also considered whether CERCLA Sec.  108(b) 
requirements could be applied to abandoned facilities. Although CERCLA 
Sec.  108(b) could potentially be interpreted to cover such owners, 
operators and facilities, EPA is proposing requirements applicable only 
to current owners and operators of currently authorized to operate 
facilities for a number of reasons.
    The plain language of CERCLA Sec.  108(b) is ambiguous on the 
owners, operators and facilities to which it is intended to apply. The 
section uses the terms ``owner'' and ``operator'' and ``facility'' 
repeatedly, but says nothing about whether these terms could include 
past owners and operators, or owners or operators of former facilities.
    Looking at the statute more broadly, however, indicates that it is 
appropriate to adopt a narrower interpretation than the bare terms in 
CERCLA Sec.  108(b) would suggest. First, reading CERCLA Sec.  108(b) 
as applying to current owners and operators of currently-active or -
idled facilities comports with CERCLA Sec.  108 when read as a whole. 
CERCLA Sec.  108 requires evidence of financial responsibility for 
three different types of facilities: vessels under CERCLA Sec.  108(a), 
motor carriers under CERCLA Sec.  108(b)(5), and other facilities under 
CERCLA Sec.  108(b). The provisions applicable to vessels and motor 
carriers logically apply to current owners and operators of existing 
vessels and motor carriers. For example, CERCLA Sec.  108(a) refers, as 
does CERCLA Sec.  108(b), to ``owners'' and ``operators'' of 
``vessels'' without qualification. However, logically only current 
owners and operators of existing vessels are able to ``use[] any port 
or place within the United States'' as required by CERCLA Sec.  108(a), 
and only those entities and vessels would be subject to the remedies 
available to the Secretaries of the Treasury and Transportation in 
CERCLA Sec. Sec.  108(a)(2) and (3). Indeed, the U.S. Coast Guard's 
CERCLA Sec.  108(a) regulations apply only to current owners and 
operators of vessels used or capable of being used as a means of 
transportation on the water. See 33 CFR Sec. Sec.  138.12 and 138.20. 
DOT's motor carrier financial responsibility requirements also only 
apply prospectively.
    Current owners and operators are the primary actors at facilities 
and as such would be able to evaluate the applicability of the rules 
and apply the formula to the features present. EPA anticipates that 
requiring entities that may no longer have the legal rights to access a 
facility to evaluate it for purposes of determining whether they are 
subject to the rule and if so, the appropriate amount of financial 
responsibility, would be difficult in many cases. Thus EPA intends for 
this proposal to be focused upon an easily-identified, particular 
subset of parties that has control over and are thus in the best 
position to control and address hazardous substance management 
activities. Such incentives would not exist in the case of owners and 
operators that no longer have activities at the site. Nor does EPA 
expect that applying the rules to such former owners would further a 
primary goal of financial responsibility, that is, to develop 
incentives for good practices.
    Similar reasoning leads EPA to propose applying the CERCLA Sec.  
108(b) requirements only to currently-active or currently-idled 
facilities. These facilities are readily identifiable and because they 
are ongoing concerns, are more likely to be able to obtain the kind of 
financial responsibility necessary under the regulation, and to further 
the dual goals of CERCLA Sec.  108(b) regulations. By contrast, EPA is 
concerned that a rule applicable to facilities that are not currently 
active or currently idled would be very difficult to implement, and has 
the potential to divert significant resources from existing Superfund 
priorities with minimal benefit to the program. Therefore, EPA believes 
that attempting to regulate and oversee CERCLA Sec.  108(b) 
requirements for this vast universe of facilities would impose a 
tremendous administrative burden on the Superfund program, with the 
likelihood of very little return. EPA

[[Page 3405]]

believes that the Superfund and existing enforcement processes are 
significantly better suited for use at sites that are not currently 
active or currently idled to effect cleanup directly. Thus, EPA expects 
that the approach in this proposed rule would maximize the 
effectiveness of CERCLA Sec.  108(b) requirements.
    EPA has sought to complement CERCLA's liability provisions by 
requiring owners and operators subject to the rule, to provide 
assurance against all potential risks associated with hazardous 
substance management at their facility. In this way EPA's proposed 
approach thus also is intended to support CERCLA's broad remedial 
purposes, while accounting for the differences between CERCLA Sec.  
108(b)'s regulatory program and CERCLA's liability and enforcement 
provisions.
    As discussed in further detail in following sections of this 
preamble, requirements for financial responsibility under CERCLA Sec.  
108(b) do not affect the liability of any parties potentially 
responsible for CERCLA costs. This would include that of any former 
owners and operators. The existing CERCLA processes for enforcement, 
contribution, cost recovery, and assignment of liability are unaffected 
by CERCLA Sec.  108(b) financial responsibility requirements, and are 
available to ensure that responsible parties pay the costs associated 
with releases or threatened releases of hazardous substances. In fact, 
while not required by the proposed rule itself, EPA believes that 
requiring current owners and operators to demonstrate CERCLA Sec.  
108(b) financial responsibility may have the salutatory effect of 
inducing those subject to the rule to seek out any other parties who 
may be liable for contamination at their facility in order to obtain 
their assistance with cleanup. The result could be a potential 
reduction in threats to human health and the environment at the site 
which could in turn result in a reduced CERCLA Sec.  108(b) financial 
responsibility amount. Given the practical difficulties of imposing 
CERCLA Sec.  108(b) financial responsibility requirements upon past 
owners and operators, EPA expects that those existing processes are the 
appropriate means for parties to divide liabilities amongst themselves.
Exemption for States and the Federal Government
    The proposed rule at Sec.  320.1(c) would exempt states and the 
Federal Government from the requirements of part 320. This provision is 
modeled on a similar, long-standing exemption in EPA's regulations for 
RCRA Subtitle C hazardous waste treatment, storage, and disposal 
facilities.\48\ In EPA's view, the Federal and state governments have 
adequate resources and taxing authority to ensure that they will be 
able to pay for any CERCLA Sec.  107 costs that may arise at facilities 
where they are owners or operators. Local governments, however, are not 
exempt. As EPA explained in 1980, local governments can and do become 
insolvent, and if small enough, may not be able to cover their 
liabilities. EPA requests comment on this exemption.
---------------------------------------------------------------------------

    \48\ See 45 FR 33198-99 (May 19, 1980); 45 FR 33262 (May 19, 
1980).
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Non-Transportation-Related Facilities
    E.O. 12580 delegates the responsibility for developing regulations 
under CERCLA Sec.  108(b) for non-transportation-related facilities to 
EPA. Responsibility for developing regulations for transportation-
related facilities is delegated to the Department of Transportation. 
Thus, transportation-related facilities at hardrock mining sites would 
not be subject to requirements under this proposed rule. The Agency 
anticipates that jurisdictional issues between EPA and the Department 
of Transportation will be worked out in implementation. EPA solicits 
comment on this approach.
2. Definitions (Sec.  320.2)
    The Agency is proposing the following definitions for use in Part 
320:
    Hardrock Mining Facility means a hardrock mine, as defined in 
subpart H of part 320, and/or a mineral processor, as defined in 
subpart H part 320.
    Administrator means the EPA Administrator, or designee thereof.
3. Availability of Information; Confidential Business Information 
(Sec.  320.4)
    Section 2.203(b) of this chapter provides procedures through which 
any person submitting information to EPA in accordance with this Part 
may assert a claim of business confidentiality covering part or all of 
that information. Information covered by such a claim will be disclosed 
by EPA only to the extent, and by means of the procedures, set forth in 
Part 2, Subpart B, of this chapter. However, if no such claim 
accompanies the information when it is received by EPA, it may be made 
available to the public without further notice to the person submitting 
it.
    This rule proposes an option to require owners or operators to post 
on their company website all information submitted to EPA that is not 
identified as confidential business information (CBI). EPA anticipates 
that owners or operators will claim some of the information submissions 
required under this rule as CBI. However, the Agency believes that 
there are categories of information required that will not be CBI 
including, but not limited to, identification of the type of financial 
responsibility instrument used, the amount of financial responsibility 
required at a facility, the facility contact information, failure of 
instrument providers, an owner or operator entering bankruptcy, claims 
made against the owner or operator, or an owner or operator's request 
for release from financial responsibility requirements. To facilitate 
implementation of this proposed rule, the Agency is considering making 
Class Determinations for certain types of CBI information. EPA solicits 
comment on the types of information that owners or operators anticipate 
would be CBI, and on the value of CBI Class Determinations.
4. Initial Notification Requirement (Sec.  320.5)
    EPA is proposing to require owners or operators subject to the 
requirements of this rule to submit a notification form to EPA. Owners 
or operators authorized to operate on the promulgation date of this 
rule would be required to submit the initial notification form within 
thirty days of the effective date of the final rule. Owners or 
operators that become authorized to operate after the effective date of 
the final rule would be required to submit the notification form and 
comply with the requirements of this proposed rule prior to beginning 
operations
    The notification form is specified in proposed Sec.  320.5. Owners 
or operators would be required to provide, at a minimum, the following 
information: (1) The name, mailing address, and location of the 
facility, (2) the facility's EPA ID number, if one has been previously 
issued, (3) the name and contact information for a contact person for 
financial responsibility issues, (4) the land type on which the 
facility is located, (5) owner and operator information, (6) and 
information about the activities conducted at the facility.
    Within thirty days of receiving the notification form, EPA would 
issue an EPA identification number to the facility, if the facility has 
not yet received one.
    The requirement for this notification form would serve several 
purposes important to the implementation of financial responsibility 
requirements under this proposed rule. First, it would

[[Page 3406]]

allow EPA to identify the universe of facilities subject to the rule. 
In addition, it would assure that all facilities subject to the rule 
receive an EPA identification number, which will allow EPA to track 
financial responsibility implementation information. Finally, it would 
provide EPA information about the facility that EPA anticipates will be 
important for effective rule implementation. The Agency solicits 
comment on this proposed notification requirement, on the proposed 
notification form, and on the timeframe for notification.
5. Information Submission Requirements (Sec.  320.6)
    This proposed rule would require that owners or operators of 
facilities subject to the rule submit information to EPA. The Agency 
believes that submission of the information proposed in this rule would 
be needed for effective implementation of CERCLA Sec.  108(b) 
requirements. By requiring the owner or operator to submit information 
about the facility to EPA, these requirements would better enable the 
Agency to ensure full compliance with the requirements for financial 
responsibility throughout the time the facility is subject to those 
requirements.
    Under Sec.  320.5, owners and operators would be required to submit 
an initial notification form. The form would provide EPA basic 
information about the facility. The form can be found in Appendix A of 
Part 320. EPA solicits comment on the information required in the form.
    Owners or operators would further be required to submit evidence of 
financial responsibility. The precise submittal requirements for each 
financial instrument are described in subpart C. Generally, owners or 
operators demonstrating financial responsibility using a surety bond 
would be required to submit the surety bond to EPA. Owners or operators 
using a letter of credit would be required to submit the letter of 
credit to EPA unless it is held by a trustee, as provided in Sec.  
320.40, in which case they would be required to submit a certified 
copy. Owners or operators using insurance would be required to submit 
the endorsement. Owners or operators using a trust agreement (either a 
stand-alone trust or a stand-by trust established for use with another 
instrument) would be required to provide a duplicate original. If the 
final rule allows for the use of a financial test and corporate 
guarantee, owners or operators using the corporate guarantee would be 
required to submit a signed corporate guarantee, as well as a letter 
from the Chief Financial Officer (CFO letter), audited financial 
statements, and agreed upon procedures report, as required in Sec.  
320.44. Finally, owners or operators using the financial test, if 
allowed in the final rule, would be required to submit the CFO letter, 
audited financial statements, and agreed upon procedures report, as 
required in Sec.  320.43. In the case of the corporate guarantee and 
the financial test, the CFO letter, auditors report, and agreed upon 
procedures report would be required to be updated annually.
    This proposal also requires information submission to assure proper 
maintenance of financial responsibility. The precise submittal 
requirements for each of the following are described in Sec.  320.65. 
These requirements include a requirement to update financial 
responsibility amount calculations every three years, at a minimum, and 
to notify EPA of changes in the information on the facility's initial 
notification form, facility transfer, claims filed against the 
instrument or owner or operator, intent to close the facility, failure 
of an instrument provider, instrument provider intent to cancel, and 
owner or operator bankruptcy.
    Owners or operators are also required to submit information that 
may vary according to facility class. These requirements will be 
specified in the relevant Subparts to 40 CFR part 320, but for clarity, 
those submission requirements are also incorporated into the general 
information submission requirement in proposed Sec.  320.6. Thus, for 
example, owners and operators of hardrock mining facilities must 
calculate a financial responsibility amount for their facilities using 
the formula in Sec.  320.66, and Sec.  320.67 requires submission of 
information to support that calculation, including data inputs to the 
proposed formula to determine a financial responsibility amount, and 
documentation supporting all data inputs and assumptions. Under 
proposed Sec.  320.6, this information must be submitted to EPA.
    The Agency solicits comment on these information submission 
requirements including comments on the need for these requirements and 
suggestions for additional information that should be required under 
this rule.
6. Requirement for Electronic Submission of Information (Sec.  320.7)
    This proposed rule includes information submission requirements 
throughout the financial responsibility process. These information 
submission requirements include: (1) Initial notification, (2) 
demonstration of financial responsibility, (3) notifications pursuant 
to financial responsibility maintenance, (4) submission of a financial 
responsibility amount and support for the amount, and (5) request for 
release from financial responsibility. The Agency is proposing to 
require that the submissions under this rule be in electronic format.
a. Benefits of Electronic Reporting
    Adopting electronic information submission across its programs will 
benefit the Agency, owners and operators, and the general public. 
Electronic information submission will save Agency resources and 
improve data quality by reducing the need for manual data entry, and 
will help the Agency manage environmental programs more efficiently and 
effectively. EPA also expects electronic information submission to 
promote public participation by facilitating EPA's ability to make 
information submitted more readily accessible to interested parties. In 
this respect, electronic reporting can work in concert with another 
requirement in the proposed rule--that owners and operators have a 
publicly-accessible Web site (see Section VI.A.8. of this preamble). In 
addition, electronic information submission will reduce the time needed 
for owners and operators to submit information by eliminating the need 
to print or mail forms, eliminate mailing or courier fees, and allow 
members of the regulated community to obtain information about the 
status of their submissions without requesting such information from 
EPA by phone or mail.
    Use of electronic forms should also facilitate the effective 
submission of required information. Owners and operators may benefit 
through integration of data entry error prevention and compliance 
assistance into the reporting tool. Namely, electronic systems can 
provide automatic data quality checks, such as for improperly formatted 
addresses, math errors, or significant changes in cost estimates, and 
flag these for correction, if needed, before submission. A system can 
also provide automated reminders and prompts (e.g., when annual updates 
are due) to owners and operators, and pre-populate forms with 
information from prior reports. EPA does not expect that these or other 
tools that could be built into such a system would guarantee compliance 
or be a substitute for an owner or operator's own compliance 
assessment, since they cannot account for every site-specific 
situation, but EPA expects that such tools will make it easier for 
owners and operators to comply with the rules. It can also facilitate 
communication between EPA, owners and operators,

[[Page 3407]]

and instrument providers to immediately address data quality issues and 
to provide compliance assistance or take other action when potential 
problems are identified. Finally, the system may also provide a way for 
entities to maintain records supporting financial responsibility 
compliance, such as cost estimate documents.
    This approach is also consistent with the Agency's 2013 E-Reporting 
Policy Statement for EPA Regulations, which reflects that, in 
developing new regulations, EPA will assume that reporting will be 
electronic and not paper-based.\49\ As described by this policy, e-
reporting is not simply a regulated entity e-mailing an electronic copy 
of a document (e.g., a PDF file) to the government, but a system in 
which an electronic tool guides the regulated entity through the 
reporting process, often with built-in compliance assistance and data 
quality checks. This policy embraces the Digital Government Strategy 
issued by the White House on May 23, 2012,\50\ which calls for EPA to 
continue evolving its reporting systems to take advantage of new 
technology and improve transparency for all of its stakeholders.
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    \49\ See E-Reporting Policy Statement for EPA Regulations 
(September 30, 2013), http://www.epa.gov/sites/production/files/2016-03/documents/epa-ereporting-policy-statement-2013-09-30.pdf.
    \50\ http://www.whitehouse.gov/sites/default/files/omb/egov/digital-govemment/digital-govemment-strategy.pdf.
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    Electronic reporting also is a key component of the Next Generation 
Compliance Strategy.\51\ EPA's Next Generation Compliance Strategy is 
an integrated strategy to improve regulations with new monitoring and 
information technology and expanded transparency.\52\ It is designed to 
motivate the regulated community to increase compliance, inform the 
public about performance, and help ensure the public has access to 
information about their communities that allows them to more fully 
engage in environmental protection efforts.
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    \51\ See http://www.epa.gov/compliance/next-generation-compliance-strategic-plan-2014-2017.
    \52\ See http://www2.epa.gov/compliance/next-generation-compliance.
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b. Financial Responsibility Portal
    To realize these benefits, EPA is considering development of a 
Financial Responsibility Portal to collect information relevant to the 
rule and to serve as an electronic tool that guides owners and 
operators through the reporting and submission processes with built-in 
compliance assistance and data quality checks. EPA envisions that this 
system would be a component of EPA's Central Data Exchange,\53\ or an 
equivalent technical architecture. If the Financial Assurance Portal is 
created using Central Data Exchange, owners and operators will be 
required to establish an account with Central Data Exchange in order to 
use the system. Any electronic reporting system will comply with 
subpart D of EPA's Cross-Media Electronic Reporting Regulation 
(CROMERR).\54\ CROMERR sets performance-based, technology-neutral 
standards for receiving electronic reports from facilities regulated 
under EPA programs to protect users and their data.
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    \53\ CDX is EPA's electronic system for environmental data 
exchange to the Agency. CDX also provides the capability for 
submitters to access their data through the use of Web services. CDX 
enables EPA to work with stakeholders, including governments, 
regulated industries, and the public, to enable streamlined, 
electronic submission of data via the Internet. For more information 
about CDX, go to http://epa.gov/cdx.
    \54\ see 40 CFR part 3.
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    EPA envisions that users would access the portal through a Web form 
based on Extensible Mark-up Language (XML). EPA expects that XML 
schemas and stylesheets, when combined with XML enabled browsers, data 
bases, and other applications are currently the method of choice for 
conducting data exchange using the Internet to transfer and manipulate 
data.\55\ The Agency is seeking comment on using an XML format, or if 
another type of electronic format, such as an Electronic Data 
Interchange (EDI) would be preferable. EPA also requests comment on the 
estimated burden reduction if EPA developed an option to submit 
information electronically using a system-to-system based approach 
using Extensible Mark-up Language (XML) through EPA's Central Data 
Exchange.
---------------------------------------------------------------------------

    \55\ EPA states a similar expectation in the Final Rule for 
Hazardous Waste Manifest Revisions--Standards and Procedures for 
Electronic Manifests (79 FR 7517, Aug. 6, 2004).
---------------------------------------------------------------------------

    Once the Financial Assurance Portal is developed, EPA is proposing 
to require that regulated facilities electronically submit the 
following categories of information through the portal: (1) Initial 
notification form required under Sec.  320.5, (2) submission of URL 
where CERCLA Sec.  108(b) information will be available, (3) financial 
responsibility formula data (upload documentation), (4) financial 
responsibility instrument evidence, (5) notification of change in 
financial responsibility amount, (6) notification of change in 
instrument, (7) notification of claim filed against the instrument or 
owner or operator, (8) notification of closure, (9) request for release 
from financial responsibility; and (10) notice of owner or operator 
bankruptcy. In addition, EPA is proposing to provide for both paper and 
electronic submission of the following notices from instrument 
providers: (1) Notice of cancellation (by provider), and (2) notice of 
provider incapacity. Within these categories, EPA expects that certain 
types of information will need to be submitted using different types of 
electronic means, which are discussed in detail in later sections.
    In order to gain the full benefits of electronic reporting, 
obtaining as much information as possible in an electronic format is 
preferable. At the same time, the Agency is considering whether some of 
the information submission requirements of this proposed rule may not 
be appropriate for electronic information submission. For example, some 
of the information submission requirements proposed in this rule will 
result in more frequent submissions to EPA than will others. An example 
of submissions that EPA expects to occur more frequently relate to 
facility conditions--every facility will have to notify the Agency, and 
the notification form will have to be updated to reflect changed 
facility conditions. On the other hand, other requirements may be less 
frequent. For example, EPA's analysis of instrument providers 
(conducted for purposes of evaluating provider qualifications) 
indicates that failures are relatively uncommon. Thus, it is possible 
that few owners or operators will have to submit notification of 
instrument provider failure. Where infrequent submissions are likely, 
EPA expects that developing an electronic form for that submission may 
not have significant benefits. In addition, there may be specific types 
of documents (e.g., cost estimate data, certain types of financial 
responsibility instruments that may require wet ink signatures) that 
cannot be submitted electronically. The Agency solicits comment on 
types of information that are inappropriate for electronic submission, 
including the reason they may not be appropriate, and the burden to the 
regulated community if electronic submission of such information were 
to be required. EPA also asks for comment on which types of information 
commenters believe should be highest priority for EPA development of 
electronic submission tools.
    As EPA develops its data system, it is considering technical issues 
associated with its development as described later in this section. EPA 
solicits comment on how an electronic submission system can be 
constructed to appropriately capture submission of the categories of 
information that EPA proposes to

[[Page 3408]]

require. Specifically, EPA requests comment on whether specific 
technical requirements are called for to support data submission of the 
following categories of information: (1) The development of a financial 
responsibility amount, (2) evidence of financial responsibility, (3) 
updates to the facility's financial responsibility information, (4) 
notice of closure of the facility, and (5) submission of instruments 
and cancellations, including how to account for the acceptance of 
originally signed financial responsibility documents. EPA is also 
seeking comment on the feasibility and utility of developing tools 
within the system that would assist users in complying with reporting 
requirements, such as the use of decision-trees to determine if an 
entity is regulated, checklists to ensure the proper form/documents are 
submitted, or reminders when reports or updated documents are due.
c. Anticipated Format of Submissions
    The electronic system envisioned by EPA would have both mandatory 
and optional data entry fields. Submissions will not be processed until 
each of the mandatory fields have data entered, ensuring complete data 
entry before final submission. Data entry fields are expected to be a 
variety of drop down lists, number fields, calendars, and open test 
fields depending on the information that is required. For example, the 
type of activities occurring at the facility could be chosen from a 
drop down list, and the date of a facility's last financial 
responsibility amount calculation or financial test submission could be 
chosen from a calendar.
    EPA expects these types of controls on data input can result in 
reduced errors. In turn this should provide efficiencies by 
substantially decreasing the time needed for EPA to review and process 
the submissions, and the time needed for the submitter to correct 
deficiencies. As discussed earlier, EPA is considering the ability to 
duplicate previous submissions when seeking to update or renew 
information. This will simplify future submissions to only those fields 
that require updates. To address the issue of CBI (described in Sec.  
320.4) the Agency envisions establishing a database that tags 
information as public or confidential upon receipt. This would allow 
the system to then auto-populate an EPA webpage to provide information 
not identified as CBI to the public. EPA solicits comment on this 
approach.
    As discussed earlier, EPA would like to make it possible for users 
to enter some types of information through electronic forms available 
in the Portal. For example, EPA intends that the following information 
would be entered into the Financial Assurance Portal using smart forms 
with data-entry boxes that specify the exact information needed: (1) 
Initial notification; (2) website URL; (3) amount of financial 
responsibility required; (4) amount of financial responsibility 
secured; (5) type of instrument; and, if the financial test is used, 
credit rating, tangible net worth, and assets in the United States; and 
(6) instrument provider information (e.g., name, address, etc.).
    EPA intends other submissions to be accomplished through forms with 
electronic signatures and verification: (1) Financial responsibility 
instruments, (2) certain information demonstrating passage of the 
financial test, (3) notice of a change in financial status if using the 
financial test, (4) notice of cancellation of a financial assurance 
instrument, (5) notice of a claim against the instrument, (6) notice of 
bankruptcy; (7) notice of a change in instrument, (8) notification of 
change in the amount of financial responsibility required, and (9) 
notice of incapacity of the instrument provider. Where an electronic 
signature is required, the proposal requires that the signature be a 
legally valid and enforceable signature under applicable EPA and other 
Federal requirements pertaining to electronic signatures.
    EPA also expects that the user will need to upload other 
information from outside the system. EPA expects that this information 
will need to meet certain document requirements (e.g., downloadable, 
not encrypted, printable, searchable, etc.). For this category of 
documents, owners and operators would be required to produce duplicate 
originals of certain electronic filings upon request by EPA. EPA 
expects that the following information, if applicable, may fall into 
this category: (1) Information supporting the financial responsibility 
amount determination, (2) information to support a financial test 
showing, for example financial statements; the CFO letter; a CPA audit 
of financial information; and an agreed-upon procedures document; (3) 
annual updates on trust properties and (4) evidence of financial 
responsibility; and (5) PDF copies of instruments that cannot be 
submitted electronically.
    The Agency solicits comment on these expectations for information 
submission format.
d. Access to the System
    EPA envisions that owners or operators will receive a password and/
or user identification number to access the portal when they notify EPA 
that they are a regulated entity. The system will then assist owners or 
operators in obtaining a unique user identification number, similar to 
the electronic interface that EPA has recently made available for 
states and the regulated community to use to electronically submit RCRA 
Site Identification (Site ID) forms, which are used by facilities to 
notify regulators that they are involved in RCRA waste activities. EPA 
intends to establish an electronic notification form for owners or 
operators to comply with proposed Sec.  320.5. EPA solicits comment on 
whether instrument providers should be given access to the Financial 
Assurance Portal in order to submit notices to EPA and to owners and 
operators as required under this rule (e.g., notice of cancellation). 
EPA solicits comment from instrument providers specifically, on whether 
they would use the electronic system described to file their notices 
electronically.
e. Beginning Electronic Reporting Once Portal Developed
    Because the Agency anticipates that the Financial Assurance Portal 
will not be available to receive submissions when this rule is made 
final, the Agency is proposing that owners or operators be required to 
initially submit information in paper format until the electronic 
capability is available. Thus, EPA is proposing to identify an 
electronic filing compliance date in Sec.  320.7(a). Because that date 
is not currently known, EPA is proposing to announce that date in the 
Federal Registerat least sixty days in advance. The Agency is further 
proposing that after that compliance date, owners or operators would be 
required to submit information electronically unless they apply for and 
receive a waiver from electronic reporting requirements under Sec.  
320.7(d). This waiver provision is discussed in more detail later in 
this section. The Agency solicits comment on this approach.
    EPA is considering an alternative approach under which electronic 
reporting would be phased in over the four-year compliance timeframe. 
EPA would require the initial notification to be submitted 
electronically, but would roll out other electronic forms as parts of 
the rule become effective or required (e.g., the full amount of 
financial responsibility is not required until four years after the 
rule is promulgated). This will give EPA time to complete and fully 
test a number of the electronic documents prior to requiring their use. 
The disadvantage of this option is the increased burden to industry of 
having to print and mail paper documents,

[[Page 3409]]

along with the Agency's burden of manually entering data into its data 
system. EPA is considering whether such phasing may help ensure the 
system is working effectively and efficiently. Under this option, EPA 
would similarly identify an electronic filing compliance date for each 
phase in future Federal Register notices in a similar manner as 
described in the proposed option described earlier. Also similarly to 
the proposed option, the facility would be required to submit 
information in paper format until electronic submittals are possible 
for submission of the facility's information, and electronic filing 
would be subject to waiver.
f. Proposed Waivers
    As part of the proposal for mandatory electronic reporting, the 
proposed rule would provide two options through which the Administrator 
could waive the requirement for electronic submission. EPA recognizes 
that there may be some circumstances where it may be necessary to 
provide for paper reporting of information otherwise required 
electronically, e.g., in areas that lack sufficient broadband access, 
during large-scale national disasters (e.g., hurricanes) or prolonged 
electronic reporting system outages, or to accommodate the religious 
practices of individuals that choose not to use certain technologies 
(e.g., computers, electricity) in accordance with their religion. The 
Agency solicits comment on situations where flexibility might be 
required, and on what types of waivers should be provided under this 
rule.
    EPA has included both a general waiver provision and an emergency 
waiver provision in the proposed rule. A general waiver could be 
granted to owners or operators that cannot comply with the requirement 
for electronic submission. The owner or operator would be required to 
submit a request for a general waiver to the Administrator at least 
thirty days in advance of the date the information is due to EPA. The 
Administrator could grant a general waiver upon a finding that: (1) The 
owner or operator is unable to gain access to a system allowing 
electronic reporting because it is located in an area with insufficient 
broadband access, or (2) religious practices of the owner or operator 
prohibit the use of necessary technologies. A general waiver could be 
granted for one year, and the owner or operator would be able to 
reapply annually.
    In addition, the Administrator could grant a waiver of the 
requirements for electronic submission in emergency situations. To 
obtain an emergency waiver, the owner or operator would be required to 
submit a request within ten days of the date the information is due to 
EPA. The request for an emergency waiver must describe the conditions 
that prevent electronic submission of information and must be 
accompanied by a paper copy of the information due. The Administrator 
may grant an emergency waiver upon a finding that the owner or operator 
was unable to comply with the requirement for electronic information 
submission due to: (1) A large-scale national disaster (e.g., 
hurricane), (2) a prolonged electronic reporting system outage, or (3) 
a prolonged outage of the owner's and operator's computer system. The 
Agency solicits comment on the adequacy of these waiver provisions.
7. Recordkeeping Requirements (Sec.  320.8)
    EPA is proposing that owners or operators be required to develop 
and maintain a facility record that includes information documenting 
compliance with the financial responsibility requirements of this 
proposed rule. The facility record must include at least all 
information required to be submitted to EPA under this Part, comments 
received from the public, and all notifications received from EPA 
related to the financial responsibility obligations of the facility. 
The rule would require owners or operators to maintain this information 
until three years after the Agency releases the owner or operator from 
the requirement for financial responsibility. EPA solicits comment on 
these recordkeeping requirements.
8. Requirements for Public Notice (Sec.  320.9)
    EPA is proposing requirements for public notice for owners and 
operators subject to CERCLA Sec.  108(b) requirements. This approach 
will add the benefit of transparency to implementation of CERCLA Sec.  
108(b) requirements. In addition, these proposed requirements are 
consistent with EPA's commitment to assuring that the public is aware 
of EPA's Superfund activities at sites, even when there may not be an 
active Superfund action underway.\56\ EPA believes that the proposed 
requirements for public notice would enhance the implementation of the 
proposed rule in two respects.
---------------------------------------------------------------------------

    \56\ See Superfund Community Involvement Handbook, 2005 page 5.
---------------------------------------------------------------------------

    First, such public notice would help to ensure that the financial 
responsibility formula is applied as intended, so that the resulting 
financial responsibility level reflects the degree and duration of risk 
at the facility. As discussed in the financial responsibility formula 
section of this preamble, Sec.  320.63, the financial responsibility 
formula is intended to be implemented by owners or operators, rather 
than by EPA. While EPA expects that in the vast majority of cases the 
financial responsibility formula will be applied accurately, EPA 
believes that providing information to the public can enhance the 
incentives for owners and operators to fully comply with regulatory 
requirements. The reliance on public notice as an incentive for 
compliance under this proposal is consistent with the 2010 guidance 
issued by the Office of Management and Budget (OMB), where that office 
recognized that the public disclosure of information is an increasingly 
common and important regulatory tool.\57\
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    \57\ See United States Office of Management and Budget. Sharing 
Data While Protecting Privacy. Memorandum from Jeffrey D. Zeints and 
Cass R. Sunstein. November 3, 2010. Available at: https://www.whitehouse.gov/sites/default/files/omb/memoranda/2011/m11-02.pdf
---------------------------------------------------------------------------

    Second, the proposed rules are structured to support CERCLA 
responses undertaken by the Federal Government, states, and private 
parties--a structure that is consistent with the CERCLA scheme. EPA is 
proposing to require owners and operators to make readily available to 
the public information about the levels of financial responsibility, 
information on claims made, and information that may relate to the 
continued validity of the instruments--for example, any notices of 
instrument cancellation by providers. EPA believes that ready access to 
this information will help ensure that parties with CERCLA claims, and 
parties potentially impacted by the CERCLA claims of others, will have 
the opportunity to monitor changes in the facility's financial 
responsibility.
    EPA is today proposing two approaches for public notice procedures. 
Under the first approach, the owner or operator would be required to 
maintain a web site to convey information regarding its compliance with 
the requirements of proposed part 320. Under the second, EPA would 
provide information to the public on the Agency's Web site.
    Under the first approach, owners and operators would be required to 
post information on a Web site created and maintained by the owner and 
operator. EPA is considering this approach because, as those generating 
the information, owners and operators are in the best position to track 
information about their facilities. In addition,

[[Page 3410]]

requiring owners and operators to update information related to their 
financial responsibility requirements would eliminate lag times between 
when the information is submitted to EPA and when EPA can make that 
information publicly available. Thus, EPA expects that requiring owners 
and operators to create and maintain their own Web sites may be an 
efficient way to ensure timely dissemination of information related to 
CERCLA Sec.  108(b) financial responsibility.
    The owner or operator would be required to establish a Web site 
titled ``CERCLA Sec.  108(b) Financial Responsibility Information'' 
within sixty days of the date it first becomes subject to CERCLA Sec.  
108(b) requirements to and provide EPA with the URL of the location on 
its company Web site where it will make information available to the 
public about the implementation of financial responsibility 
requirements at the facility.
    EPA would be required, within thirty days of receiving the URL, to 
post on its Web site the facility name, company EPA identification 
number, and the URL where information will be made available to the 
public by the owner or operator.
    The proposed rule would then require the owner or operator to 
provide information on its company Web site beginning ninety days after 
the date it becomes subject to requirements under CERCLA Sec.  108(b). 
The initial posting of information must include the name and contact 
information for a person that can provide the public information about 
the facility's CERCLA Sec.  108(b) requirements. In addition to this 
information, the rule would require the owner or operator to make 
public at least the following information: (1) Any information that the 
owner or operator is required to submit to EPA under this proposed 
rule, and (2) notifications from EPA to the owner or operator .
    This approach would also establish conditions for maintenance of 
the information on the company Web site. For example, Sec.  320.9(e) 
would require that the information be posted in a location where a 
visitor to the Web site would reasonably expect to see announcement of 
issues related to compliance with requirements of CERCLA. In addition, 
that section would require that the owner or operator assure freely 
available access to the information, and that the access not be 
obstructed by complex access processes or passwords. The Agency 
believes these requirements are necessary to assure meaningful access 
to information.
    To assure that current information is made available to the public, 
this approach would require the owner or operator to post all 
information submitted to EPA within thirty days of its submission. 
Thus, for example, the rule would require the owner or operator to 
submit to EPA the Initial Notification Form required under Sec.  320.5 
within thirty days of the promulgation date of this rule, and to post 
that form on the company's Web site within thirty days of submitting it 
to EPA. By requiring that the owner or operator post information 
submitted to EPA, the proposed rule will require that the Web site 
information be updated at key financial responsibility implementation 
points including: (1) When the level of financial responsibility 
required at the facility is initially determined and when it changes, 
(2) upon application for release from financial responsibility 
requirements, (3) when a claim is made on the instrument, (4) upon 
receiving notification of cancellation of an instrument, (5) upon 
transfer of ownership of the facility, and (6) upon submitting notice 
to a regulator of closure of the facility. The Agency believes that 
this approach will allow the public or claimants the opportunity to 
follow the implementation of financial responsibility requirements and 
the facility and be aware of changes that occur.
    Under the second approach proposed in this rule, the owner or 
operator would not be required to post information on a Web site; 
rather, EPA would make the required information available to the public 
on the Agency's Web site.
    EPA solicits comment on these approaches to providing notice to the 
public regarding the CERCLA Sec.  108(b) financial responsibility at a 
facility. EPA particularly solicits comment on whether the owner or 
operator should be required to post information, what information would 
be of most benefit to the public in the implementation of CERCLA Sec.  
108(b) financial responsibility, and how the information would be used 
for that purpose.
Class Determinations for Confidential Business Information
    As discussed in section VI.A.3. of this preamble, some information 
that owners and operators would be required to submit under this 
proposed rule may be claimed as CBI. This proposal would not require or 
allow posting of CBI. However, the Agency expects that much of the 
information submitted to EPA under the proposal would not be CBI, and 
could be made available. EPA is considering issuing a Class 
Determination under 40 CFR 2.207 notifying parties how it intends to 
treat information submitted under this rule. The purpose of a 
Determination is to state the Agency's position regarding the manner in 
which information within a class will be treated when information 
received by the Agency shares characteristics and necessarily results 
in identical treatment of the information. EPA expects that a Class 
Determination would clarify the Agency position on what does and does 
not constitute CBI under this rule. The Agency solicits comment on this 
approach. In particular, the Agency requests information regarding what 
the information that would be required under this proposed rule might 
owners or operators consider to be CBI.
    Finally, EPA notes that it is planning to develop a Financial 
Responsibility Portal to receive and track financial responsibility 
information. Ultimately, when developed and populated, the goal is for 
that system to auto-populate an Agency public database and make 
available to the public information submitted under this rule. EPA 
solicits comment on whether, when the EPA public database becomes 
available, the requirement for the owner or operator to maintain a Web 
site should continue if that requirement is adopted in the final rule.

B. Subpart B--General Financial Responsibility Requirements

    This proposed rule is designed to set up a regulatory program for 
multiple classes of facilities. Thus, the proposed rule includes 
several basic provisions that are intended to be used in conjunction 
with the class-specific requirements in Subparts D-Z.
    These requirements are intended to guide the regulated community 
through the general requirements to establish the required evidence of 
financial responsibility, and also provide requirements that EPA 
anticipates will be applicable to multiple facility classes.
1. Applicable Financial Responsibility Amounts and Procedures for 
Establishing Financial Responsibility (Sec.  320.20 and Sec.  320.21)
    EPA has included a general requirement that owners and operators 
calculate a current amount of financial responsibility at their 
facilities in accordance with this part. Because this proposed rule 
also includes requirements for hardrock mining classes, proposed Sec.  
320.20 includes a cross reference to Table A-1 in Sec.  320.2, which 
identifies the class-specific

[[Page 3411]]

requirements applicable to hardrock mining facilities. Those class-
specific requirements are found in subpart H, where the Financial 
Responsibility Formula developed for those facilities is proposed. Upon 
addition of future classes to the CERCLA Sec.  108(b) program, EPA 
anticipates that additional cross references will be added to Table A-
1.
    Each instrument included in the proposed rule has its own 
particular supporting information. The specific instruments proposed in 
this rule are further discussed in section VI.C.1. of this preamble.
2. Maintenance of Instruments (Sec.  320.22)
    The proposed rule would require the owner or operator to 
recalculate the financial responsibility level three years after the 
date the facility is required to provide the full amount of financial 
responsibility at its facility under Sec.  320.61, every three years 
thereafter, and within sixty days after every successful claim against 
a CERCLA Sec.  108(b) financial responsibility instrument. The 
recalculation must use the most current facility information available. 
The owner or operator must submit the revised financial responsibility 
amount to EPA, along with supporting documentation.
    Whenever the required financial responsibility amount changes, the 
owner or operator would be required to compare the new amount with the 
value of the financial responsibility instrument(s). If the resulting 
amount of financial responsibility required is greater than the amount 
of financial responsibility provided by the current CERCLA Sec.  108(b) 
financial responsibility instrument(s), the owner or operator, within 
sixty days after the change in the required financial responsibility 
amount, would be required to increase the value of the instrument(s), 
or obtain a new instrument(s), in accordance with Subpart C, so that 
the value of the instrument(s) is at least equal to the newly required 
financial responsibility amount. This proposed provision ensures that 
adjustments to the required level are made promptly.
    Conversely, if the resulting amount of financial responsibility 
required is less than the amount of financial responsibility provided 
by the current CERCLA Sec.  108(b) financial responsibility 
instrument(s), the owner or operator may send a written request to the 
Regional Administrator to lower the required financial responsibility 
amount at the facility. The request must include updated information to 
support the revised financial responsibility amount as required in 
Sec.  320.22. The amount of financial responsibility required at the 
facility would be reduced to the recalculated amount only with written 
approval by the Administrator.
    This provision would ensure that the owner or operator first 
receive approval from EPA that the financial responsibility may be 
lowered, which provides a check against improper implementation of the 
requirements. Furthermore, under the proposed wording of the trust 
agreement, EPA would need to provide notification to the trustee that 
funds may be released (see Sec.  320.50(a)).
    This proposed requirement is intended to ensure that the amount of 
financial responsibility at the facility continues to reflect the level 
of risk at the facility. EPA recognizes that facility conditions and 
operations may change over time, or that new information may be 
available that may affect the amount of financial responsibility 
required. EPA thus is proposing a three-year periodic recalculation of 
the required financial responsibility amount to ensure the amount 
reflects the current risk at the facility. EPA expects that three years 
was a frequent enough requirement to provide current information while 
not overly burdening owners, operators and EPA with a more frequent 
implementation of the recalculation requirements. EPA requests comment 
on requiring recalculation of the amount of financial responsibility 
every three years.
    Furthermore, EPA recognized that claims against the instrument may 
be successfully made that would correspondingly reduce the amount of 
financial responsibility at the facility. In some cases, the claims may 
be the result of responses that lower the risk at the facility. 
However, this is not expected to always be the case. Accordingly, EPA 
believes it is necessary for owners and operators to recalculate the 
required amount of financial responsibility after successful claims 
against the CERCLA Sec.  108(b) financial responsibility instruments in 
order to compare the new required amount to the remaining financial 
responsibility at the facility.
3. Incapacity of Owners or Operators, Guarantors, or Financial 
Institutions; or Instrument Cancellation (Sec.  320.23)
    Under this proposed rule, an owner or operator would be required to 
notify the Administrator by certified mail of the commencement of a 
voluntary or involuntary proceeding under Title 11 U.S.C. (Bankruptcy), 
naming the owner or operator as debtor, within ten days after 
commencement of the proceeding. [Option 2 only: A guarantor of a 
corporate guarantee would be required to make such a notification if he 
is named as debtor, as required under the terms of the corporate 
guarantee. Those requirements are discussed in section VI.C.5. of this 
preamble.]
    This provision is modeled after a similar requirement in the 
requirements for hazardous waste treatment, storage, and disposal 
facilities at 40 CFR part 264 and 265. EPA believes it is important for 
EPA to be made aware of the owner or operator entering bankruptcy, as 
that event may have implications for the owner's or operator's ability 
to meet financial obligations under CERCLA. Likewise, EPA believes it 
is important for the Agency to be aware of situations where a guarantor 
of a corporate guarantee is entering bankruptcy as it may have 
implications for the guarantor's ability to meet financial obligations 
under the guarantee.
    An owner or operator who demonstrates CERCLA Sec.  108(b) financial 
responsibility for CERCLA liabilities by obtaining a trust fund, surety 
bond, letter of credit, or insurance policy would be deemed to be 
without the required financial responsibility in the event of 
bankruptcy of the trustee or issuing institution, or a suspension or 
revocation of the authority of the trustee institution to act as 
trustee or of the institution issuing the surety bond, letter of 
credit, or insurance policy to issue such instruments. The owner or 
operator would be required to provide other evidence of financial 
responsibility within sixty days after such an event. This provision is 
also modeled on existing RCRA Subtitle C requirements. As with those 
regulations, EPA expects that this requirement will make clear what 
must be done by the owner or operator when the institution providing 
trustee services or issuing a bond, letter of credit, or insurance 
policy goes bankrupt or loses its authority to act as a trustee or 
issue such instruments.
4. Notification of Claims Brought Against Owners, Operators, or 
Guarantors (Sec.  320.24)
    The owner or operator would be required to notify the Regional 
Administrator by certified mail, within ten days of a CERCLA claim 
being filed against the owner or operator or financial responsibility 
guarantor. The proposed rule also requires that this notification 
include certain key information: a copy of any papers filed by the 
claimant with a court, or other information allowing the Regional 
Administrator to identify the court, case

[[Page 3412]]

name and number, and parties. This notification requirement would apply 
to owners or operators regardless of the instrument they have elected 
to use. This proposed notification requirement is important because EPA 
will not, in many cases, be involved in the claims process against a 
financial responsibility instrument. It is appropriate for EPA to 
monitor potential claims because claims made may affect the adequacy of 
the instrument provided under the regulations, because those claims may 
reduce the amount available to below that which is required for that 
facility class. In addition, EPA is also proposing these requirements 
to apprise the Agency of potential issues at a site that could 
ultimately lead to EPA or another governmental agency having to take a 
response at the facility. This provision thus helps the CERCLA Sec.  
108(b) requirements support the broader CERCLA response program.
5. General Provisions on Instrument Payment
    In this section of the preamble EPA discusses generally the key 
payment methods that are associated with each instrument. Proposed 
Subpart B does not contain corresponding language. Instead, this is 
contained in Subpart C of the proposed regulations, in the required 
wording of each instrument. Instead of addressing these considerations 
multiple times, however, EPA is presenting its approach to these common 
provisions once in this section of this preamble.
    Under this proposed rule, the funds from all types of financial 
responsibility instruments except the financial test would be available 
under three circumstances and also under direct action scenarios. In 
essence, EPA has sought to allow for maximum flexibility in how the 
instruments pay out through the payment terms. EPA believes this 
approach will help integrate the operation of the CERCLA Sec.  108(b) 
instruments into the various CERCLA enforcement and cleanup processes 
and therefore will efficiently support the goal of ensuring that funds 
be made available for the payment of CERCLA response costs, health 
assessment costs, and natural resource damages.
    It is EPA's intent that each payment term as well as direct action 
be available independently of one another, and claimants may use any or 
any combination of the terms as the circumstances dictate. Similarly, 
use of one payment term by a particular claimant would not prevent its 
reuse or use of another payment term by another claimant. Again, this 
is to maximize flexibility in the manner in which the instruments can 
be payable, to promote the goal of ensuring cleanup while avoiding 
unnecessary litigation over whether the instruments are in fact 
payable. EPA seeks comment on these proposed payment terms.
a. Payment of an Unsatisfied CERCLA Judgment
    Under this proposed rule, the financial responsibility instruments 
would be available to pay a final judgment from a Federal court 
awarding CERCLA response costs, health assessment costs, and/or natural 
resource damages associated with the facility against any of the 
current owner or operators for which payment as required by the 
judgment has not otherwise been made within thirty days. This is 
intended to cover all types of CERCLA actions, including those under 
CERCLA Sec. Sec.  107 or 113(f). This is also intended to cover 
judgments in favor of both governmental claimants (e.g., EPA or another 
Federal agency, a state, or an Indian tribe) as well as private 
claimants. EPA solicits comments on this approach.
    EPA is requiring that the claim be reduced to a final judgment 
under this payment term for two reasons. First, this provision provides 
court oversight to ensure the validity of the claims. This is important 
because EPA or another regulatory agency may not be directly involved 
in a particular cleanup. Second, the requirement to present a valid 
final court judgment may help alleviate concerns of potential 
instrument providers about instruments that could pay to multiple 
potential claimants. In discussions with representatives of the 
financial industry, certain representatives expressed concern that the 
availability of the instruments to multiple claimants would either: (1) 
Raise the risk to the instrument provider of fraudulent claims, or (2) 
increase the potential claims management and investigation costs of 
determining which claims are valid. While the preferred option of 
several representatives of the financial community was to have EPA 
specified as the beneficiary of the instrument, EPA had concerns with 
such an option in the context of CERCLA Sec.  108(b) (see, for example, 
discussion in Section VI.C.1. of this preamble in the section titled 
``two letter of credit constructions''). Representatives did, however, 
express greater comfort at a court having first ordered payment as that 
would limit the prospect for fraudulent or specious claims against the 
instruments. Further, having an objective documentary payment trigger 
limits the amount of due diligence required on the part of the 
instrument provider.
    This payment provision also requires that the party may only make a 
claim if they have not recovered or been paid the funds from any other 
source. This is intended to provide further assurance to providers and 
current owners and operators that the claims are valid and that the 
claimant is not being paid twice for the same costs or damages.
    It should be noted that EPA does not intend for this provision to 
displace the standard manner in which CERCLA claims are brought and 
resolved outside of the CERCLA Sec.  108(b) instrument. Claims can 
continue to be asserted against the owner and/or operator in the first 
instance, and EPA expects that in most instances, the owner or operator 
would pay the claim itself, without resort to the instrument.\58\ 
Indeed, EPA expects owners and operators to continue to do so to the 
extent they are able, in order to avoid the costs incurred in drawing 
upon the instrument which in many cases would result in the provider 
seeking to recoup those costs from the owner or operator. For example, 
were a successful third-party CERCLA claimant to make a draw on a 
CERCLA Sec.  108(b) letter of credit, the owner or operator would be 
obligated to pay the financial institution that issued the letter of 
credit for the amount paid under the instrument. Owners or operators 
also have an obligation to reimburse the issuer of a surety bond for 
payment made in accordance with the terms of the bond. The surety bond 
issuer's right to reimbursement helps to ensure that it is the owner or 
operator rather than the issuer of the surety bond that ultimately 
bears the cost of fulfilling the CERCLA obligations owed to the 
claimant. However, should the owner or operator fail to satisfy the 
final judgment, the instruments are structured to become available to 
the claimant within thirty days. EPA identified this time period based 
upon current EPA settlement practice which typically provides thirty 
days for performance to occur. EPA believes it provides adequate time 
for payment to occur while not providing more time than under a 
settlement scenario which may create a disincentive to settle. In this 
role, the financial responsibility instruments serve as a backstop to 
help assure that recovery will be successful.
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    \58\ Similarly, provision of financial responsibility under 
CERCLA Sec.  108(b) by an owner or operator would not affect a 
party's ability to make CERCLA claims against other potentially 
responsible parties at a site.

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[[Page 3413]]

b. Payment for a CERCLA Settlement With the Federal Government
    Under this proposal, the financial responsibility instruments also 
would be available to pay for a CERCLA settlement with agencies of the 
Federal Government, including but not limited to administrative 
settlements and consent decrees. Specifically, the instruments provide 
for payment to the Administrator or another authorized Federal agency 
if payment has not been made as required by a CERCLA settlement 
associated with the facility with a current owner or operator. EPA's 
current CERCLA model settlements often include a financial 
responsibility component to ensure that funds are available, should the 
respondent fail to perform. EPA expects that future settlements could 
rely on an owner or operator's CERCLA Sec.  108(b) instrument for this 
purpose if the settling parties agreed to employ the instrument in this 
manner. EPA expects to review and, if necessary, modify its existing 
models to account for the possibility that CERCLA Sec.  108(b) 
instruments could be used to assure the work required by future 
settlements. Additionally, some settlements are structured on a ``cash 
out'' basis, where the respondent is not doing work, but is instead 
resolving liability as a lump-sum payment to the United States. EPA's 
intent is for this payment term to function in any of these settlement 
scenarios. Such payments, in the case of settlements with EPA, would be 
expected to be made into the Superfund and/or a CERCLA special 
account.\59\ For settlements with other Federal government agencies 
acting pursuant to delegated CERCLA authority, such as the Bureau of 
Land Management, the payments would be made pursuant to the terms of 
the settlement.
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    \59\ EPA retains money received through settlements with 
potentially responsible parties in site-specific ``special 
accounts'' to conduct planned future cleanup work at a site based on 
the terms of a settlement agreement. These special accounts are sub-
accounts within the Superfund.
---------------------------------------------------------------------------

    Again, EPA does not intend for this provision to displace the 
standard manner in which CERCLA claims are brought and resolved outside 
of the CERCLA Sec.  108(b) instrument. Federal agency claims may 
continue to be asserted against the owner and/or operator, where 
appropriate, and the parties would remain free to settle those claims 
as they determine appropriate under the circumstances. EPA expects that 
in most instances, the owner or operator would make the payment 
required in the settlement directly, in order to avoid the costs 
incurred in drawing upon the instrument which may result in the owner 
or operator incurring costs as discussed earlier. However, should the 
owner or operator fail to make payment as provided in a settlement, the 
instruments are structured to become available for payment to (an) 
authorized Federal government agency(ies).
    EPA is proposing including this term for several reasons. First, 
the Agency intends to make express provision for settlement 
accomplished under direct Federal oversight to assure that any 
necessary response actions are completed in a manner that protects 
human health and the environment. Such a provision would provide the 
flexibility for payment into special accounts under CERCLA Sec.  
122(b)(3), when appropriate as determined in the particular settlement, 
in order to provide an avenue for settlement funds to be used at a 
particular site. This provision also would allow for money recovered by 
the Federal Government to be deposited back into the Superfund Trust 
Fund under 26 U.S.C. 9507(b). EPA expects that this payment term would 
therefore provide a further incentive for owners and operators to 
undertake necessary CERCLA response actions at their sites or otherwise 
settle their liabilities without protracted litigation, even where 
their ability to pay for such a settlement would otherwise be limited. 
In this role, the instruments would help promote the goal of CERCLA 
Sec.  108(b) to support CERCLA's ``polluter pays'' principle.
    As noted earlier, this payment term is independent of other payment 
terms. Thus for example, in the absence of any settlement, the 
instruments could be made available upon obtaining a CERCLA judgment. 
Similarly, this would not affect settlements between non-Federal 
parties and owners and operators. Such settlements could also proceed 
under the payment term discussed in the previous subsection, but would 
require court approval and reduction to a CERCLA judgment for costs. 
EPA solicits comment on this approach.
c. Payment Into a Trust Fund Established Under a Unilateral 
Administrative Order
    This proposal would also allow the financial responsibility 
instruments to pay into a trust fund established pursuant to a 
unilateral administrative order under CERCLA Sec.  106(a) under certain 
circumstances. Specifically, under the proposal, the Administrator or 
another Federal agency may make a claim against the instrument 
requesting payment into a trust fund established pursuant to a CERCLA 
unilateral administrative order issued to a current owner or operator 
if performance at the facility as required by the order had not 
occurred. The proposed rules also provide that the Administrator or 
another Federal agency may only make the claim against the instrument 
if the owner or operator has provided a written statement that the 
instrument may be used to assure the performance of the work required 
in the order.
    These provisions of the proposed rule are intended to complement 
existing EPA model orders. Under EPA's existing models, EPA requires 
recipients to provide evidence of financial responsibility to ensure 
that funds will be available to complete the work, should the recipient 
fail to perform as required under the unilateral administrative order. 
In essence, the owner or operator chooses the instrument to comply with 
the financial responsibility provisions of the order. EPA expects to 
review and, if necessary, modify its existing model administrative 
orders to account for the possibility that CERCLA Sec.  108(b) 
instruments could be used to assure the work required by future 
unilateral administrative orders. EPA believes that this approach would 
provide owners and operators the maximum amount of flexibility to use 
the CERCLA Sec.  108(b) instrument, should they become subject to a 
unilateral administrative order.
d. Payment Through the Direct Action Provision
    Finally, CERCLA Sec.  108(c)(2) contains a ``direct action'' 
provision, under which claims can be brought against the guarantor, 
instead of against the owner or operator, as in the case of the other 
payment triggers discussed earlier. CERCLA Sec.  108(c)(2) generally 
provides that any claim authorized by CERCLA Sec. Sec.  107 or 111 may 
be asserted directly against the provider of the financial 
responsibility instrument in situations where the owner or operator is 
in bankruptcy or is unavailable. In addition, CERCLA Sec.  108(d)(1) 
generally provides that the total liability of any guarantor in a 
direct action suit is limited to the aggregate amount of the monetary 
limits of the policy of insurance, guarantee, surety bond, letter of 
credit, or similar instrument obtained from the guarantor by the person 
subject to liability.
    The proposed CERCLA Sec.  108(b) instruments are intended to 
account for direct actions authorized by these provisions. Where an 
owner or operator is bankrupt or unavailable, there is uncertainty 
around a claimant's ability to obtain a judgment. Thus, the ability

[[Page 3414]]

to take direct action against the financial responsibility instrument 
may be critical for assuring that funds will be made available for 
necessary cleanup.
    The direct action provisions of the statute received attention 
during meetings EPA held with representatives of financial institutions 
that provide financial instruments or services being considered for use 
in the proposed rule. Information on these meetings is available in the 
docket for this proposed rule (Docket No. EPA-HQ-SFUND-2015-0781). 
Specifically, EPA asked representatives how the direct action provision 
may affect their willingness to provide instruments for the CERCLA 
Sec.  108(b) rule. Financial industry representatives indicated that 
providers' willingness to issue instruments was impacted by the 
availability of direct action and the potential scope of claimants, 
although to varying degrees across the instruments. With the exception 
of insurance providers, financial instrument providers expressed some 
degree of aversion to the direct action provision.
    Representatives of the insurance industry informed the Agency that 
the industry is familiar with direct action because it is required 
under some state insurance laws. Insurance providers indicated that 
direct action would not generally have an effect on market 
participation.
    Representatives from the surety industry had a mixed reception to 
the direct action provision. Sureties typically have some ability to 
step into the shoes of the owner or operator to perform or fulfill the 
obligation insured by the bond. Sureties have experience stepping into 
the shoes of an owner or operator and thus had some level of comfort in 
assuming the owner or operator's responsibilities in negotiating a 
settlement for CERCLA response costs, health assessment costs, and 
natural resource damages on behalf of the facility. However, surety 
representatives were concerned about the risk of direct action 
attracting class action suits and suits from environmental groups who 
did not have valid claims. The representatives also communicated 
concern over legal fees incurred in responding to numerous invalid 
suits.
    Members of the banking community who issue or are expert in letters 
of credit or serve as trustees expressed great concern about the direct 
action provision. Letter of credit specialists asserted that direct 
action would be out of the realm of the typical responsibilities of a 
bank providing letters of credit. In fact, EPA was told that banks in 
their role as issuers of letters of credit can only be subject to suit 
if they do not complete the obligation to pay according to the 
specifications of the letter of credit.
    Banking institutions that serve as trustees expressed that trust 
institutions would not participate in a program where the institution 
can be subject to any liability. Trustees also communicated that there 
is a distinction between a trust and the trustee--the trust itself 
holds the financial assurance, whereas the trustee executes the trust 
agreement in order to manage the instrument. Following this argument 
trustees suggested that the trust itself might qualify as a CERCLA 
``guarantor'' and therefore direct action could be applied against the 
trust itself. Trustees stated that the possibility of liability on the 
trust institution would greatly and negatively impact their 
participation in providing trustee services to facilities subject to 
the proposed rule.
    While the ability to bring a direct action against a guarantor is 
created by the statute itself, EPA has nonetheless sought to address 
the major issues raised by the financial community to the extent 
possible, in development of the proposed rules. EPA has included 
language in the instruments that mirror the terms of the direct action 
provision, specifically referring to claims authorized by CERCLA 
Sec. Sec.  107 or 111.
    EPA has also sought to lessen the perceived barriers for 
participation of banks issuing letters of credit and trustee 
institutions acting as guarantors. Specifically, EPA is proposing two 
structures for use of a letter of credit--first a letter of credit 
payable directly to claimants, and second a letter of credit held and 
managed by a trust fund. The owner or operator could choose either 
option. In the second arrangement the trustee would have direct access 
to draw on the letter of credit to satisfy the claims. EPA intends for 
this arrangement to address concerns about direct action claims for 
letters of credit, because claimants would bring those claims to the 
trust fund holding the letter of credit, instead of the letter of 
credit provider. In addition, EPA has structured the trust fund 
instrument with the express intent that direct action would be taken 
against the trust fund itself, not the trustee. This is intended to 
address concerns about potential trustee liability from their role as 
trustee under the trust agreement. Section 3 of the proposed trust 
agreement states explicitly that the trust Grantor and Trustee do not 
intend for the Trustee to qualify as a ``guarantor'' as that term is 
used in CERCLA Sec. Sec.  101(13) and 108(c)(2), and therefore intend 
that the Trustee will not be subject to a direct action by Trustee's 
agreement to act as Trustee for the trust fund. The proposed trust 
agreement further states that the Grantor and Trustee intend for the 
trust fund to qualify as a ``guarantor'' as that term is used in CERCLA 
Sec. Sec.  101(13) and 108(c)(2), and therefore intend that only the 
trust fund will be subject to any direct action brought pursuant to 
CERCLA Sec.  108(c)(2). The trust agreement provides further that any 
claim authorized by Sec. Sec.  107 or 111 of CERCLA may be asserted 
directly against the trust fund as provided by CERCLA Sec.  108(c)(2) 
subject to the limitations in CERCLA Sec.  108(d). Stand-alone, funded 
trusts are structured similarly. The proposed structure of the trust 
fund is discussed in more detail in VI.C.6 of this preamble. EPA seeks 
comment on the effectiveness of this structure for the proposed trust 
and letter of credit to increase the likelihood that a bank or trustee 
institution will issue letters of credit or agree to be a trustee under 
the proposed regulations.
    EPA recognizes that the direct action provision is an important and 
potentially unfamiliar feature to potential instrument providers, and 
the Agency requests comment on how its function in practice may affect 
the availability of instruments.
6. Facility Transfer (Sec.  320.25)
    This proposed rule would require that the owner or operator subject 
to the rule maintain financial responsibility in accordance with part 
320 upon transfer of ownership, in whole or in part, to a new owner, or 
upon transfer of operations to a new operator, until the Administrator 
releases the previous owner or operator. EPA would provide a release to 
the former owner or operator upon the new owner or operator's 
demonstration of financial responsibility in accordance with this 
proposed rule.
    These requirements assure continuity of financial responsibility 
coverage and prevent circumvention of the requirements by changes in 
facility ownership or operation. The Administrator's release of the old 
owner and operator would not affect the old owner's and operator's 
liability under CERCLA, only their responsibility to maintain financial 
responsibility for the facility under Part 320. EPA solicits comment on 
these requirements.
7. Notification of Cessation of Operations (Sec.  320.26)
    Section 320.26 requires a facility owner or operator to notify the 
Administrator thirty days prior to either the date the facility will no 
longer be authorized to operate or the date the owner or operator is 
required under

[[Page 3415]]

another applicable regulatory program to notify the relevant regulatory 
authority that the facility is ceasing operations, whichever is 
earlier. This requirement provides EPA notice of upcoming changes at 
the facility that will likely affect the level of required financial 
responsibility under CERCLA Sec.  108(b). EPA solicits comment on this 
requirement.
    The proposed rule provides that CERCLA Sec.  108(b) requirements 
continue until EPA releases the owner or operator from such 
obligations. Thus, closure of a facility would not, in and of itself, 
trigger release from requirements under proposed part 320. Owners or 
operators of closed facilities would be required to maintain financial 
responsibility instruments until CERCLA Sec.  108(b) obligations are 
released by EPA. In developing this proposed rule, the Agency has 
considered whether some financial responsibility instruments might be 
better suited than others where the owner or operator no longer is 
operating the facility. For example, EPA has considered whether owners 
or operators should be able to continue to use a financial test to 
provide financial responsibility where they are no longer operating the 
facility, or whether financial responsibility should be converted to a 
trust instrument at facilities where obligations continue after the 
facility ceases operation. EPA has not identified any reasons to 
restrict the options for instruments, and is therefore proposing that 
the same instruments available to owners and operators of operating 
facilities would continue to be available to owners and operators of 
facilities that cease operation. However, EPA solicits comment on the 
reliability of instruments where an owner or operator is no longer 
operating a site.
8. Release From Financial Responsibility Requirements (Sec.  320.27)
    Under this proposed rule, owners or operators and operators subject 
to CERCLA Sec.  108(b) requirements under part 320 would remain subject 
to those requirements until released by EPA. Thus, those obligations 
would continue regardless of the operating status of the facility.
    Proposed Sec.  320.25 discussed earlier provides for release of the 
owner or operator from its obligations under part 320 upon transfer of 
ownership of the facility, or transfer of operations of the facility, 
where the new owner or operator provides evidence of financial 
responsibility that satisfies the requirements of this proposed rule. 
Where release from the regulations is not accompanied by a transfer of 
the regulatory obligation to maintain CERCLA Sec.  108(b) financial 
responsibility, EPA is proposing a different process that reflects the 
final nature of the determination. EPA also explains the importance of 
this determination in its discussion of the public involvement 
requirements in proposed Sec.  320.9.
    Proposed Sec.  320.27 provides that the owner or operator may 
petition to be released from its CERCLA Sec.  108(b) obligations by 
submitting a request to the Administrator. The request must include 
evidence demonstrating that the degree and duration of risk associated 
with the production, transportation, treatment, storage and disposal of 
hazardous substances is minimal. The opportunity provided in Sec.  
320.27 is not intended to provide for adjustments of financial 
responsibility levels, but is intended to be limited to decisions to 
release the owner or operator from CERCLA Sec.  108(b) requirements. 
Thus, owners or operators that cannot demonstrate minimal levels of 
risk at the facility would not be eligible to petition the Agency under 
this provision. A demonstration of minimal levels of risk at the 
facility is important because following the owner's and operator's 
release from the CERCLA Sec.  108(b) requirements financial 
responsibility would not be available if needed at a later date. Upon 
receiving such request, proposed Sec.  320.27 provides that the 
Administrator would evaluate facility information, including the 
information submitted by the owner or operator, regarding the degree 
and duration of risk associated with the production, transportation, 
treatment, storage, and disposal of hazardous substances at the 
facility, and make a determination regarding the owner or operator's 
request.\60\
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    \60\ Note that the proposed rule does not limit the ability of 
the Administrator to take other measures (for example, under the 
authority of CERCLA Sec.  104) if appropriate, to obtain relevant 
information.
---------------------------------------------------------------------------

    If the Administrator determines that the degree and duration of 
risk associated with the production, transportation, treatment, 
storage, and disposal of hazardous substances at the facility is 
minimal, and that the facility should therefore be released from CERCLA 
Sec.  108(b) requirements, the Administrator would follow the 
procedures described in Sec.  320.9 to involve the public in the 
decision. Under those procedures, EPA would post the draft decision on 
the Agency's Web site, provide the public opportunity to comment on the 
decision, and post the Agency's final decision, and response to 
comments received, on the EPA Web site.\61\
---------------------------------------------------------------------------

    \61\ It should be noted that any release from CERCRA Sec.  
108(b) obligations does not affect the ability of the Federal 
Government to make a CERCLA claim.
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    If, on the other hand, the Administrator determines that the degree 
and duration of risk associated with the production, transportation, 
treatment, storage, and disposal of hazardous substances is not 
minimal, the Administrator would not release the owner or operator from 
the requirement to maintain financial responsibility in accordance with 
this part. Section 320.9 provides that upon a finding that the owner or 
operator should not be released from financial responsibility 
requirements, the Administrator would provide notice of the Agency's 
final decision, and response to comments received, and will provide the 
owner or operator with written notice of its decision. EPA is 
considering whether to make these available through EPA's Web site, or 
alternatively through traditional Federal Register notices. EPA 
solicits comment on this approach, and method of public notice.
    The Agency is proposing not to initiate a public involvement 
process in cases where the Agency decides to deny the request of the 
owner or operator to release its financial responsibility obligation. 
In these cases, the obligation to maintain financial responsibility 
continues, and thus continues to be available should CERCLA liabilities 
arise. Thus, EPA does not see any benefit for public comment in these 
situations. EPA solicits comment on this approach.
    EPA is proposing a site-by-site evaluation of facility risk for 
decisions to release an owner or operator from CERCLA Sec.  108(b) 
requirements for a number of reasons. First and foremost, EPA has not 
identified a set of circumstances that if followed, would allow it to 
determine on a national basis that every facility across the country 
would demonstrate a minimal degree and duration of risk. Moreover, EPA 
has substantial experience making individualized determinations of site 
risk, as this practice is consistent with EPA's practice under the 
Superfund program, for example, in selecting remedies under the NCP. 
EPA solicits comment on the proposed approach to releasing owners or 
operators from CERCLA Sec.  108(b) financial responsibility 
requirements.
    The proposed rule also provides that owners or operators may 
petition the Administrator for a renewed determination regarding its 
continued

[[Page 3416]]

requirement to maintain financial responsibility. The Administrator 
will consider a petition for a renewed determination only when it 
presents new and relevant information not previously considered by the 
Administrator.
    While beyond the scope of this rulemaking, EPA notes in the 
interest of transparency that EPA and the owner or operator might, in 
some cases, elect to enter into a CERCLA settlement regarding the 
facility. The work provided for in such a settlement, depending upon 
its scope, may provide the basis for a renewed determination by the 
agency that results in a release from part 320.
    Finally, EPA recognizes that in some instances, facilities may be 
located in locations under the jurisdiction, custody or control of 
another Federal agency. In that instance, EPA will work with the other 
agencies to gather the necessary information for it to make a 
determination on whether to release an owner or operator from the 
requirements of part 320.

C. Subpart C--Available Financial Responsibility Instruments

    Under this proposed rule, an owner or operator would have to 
establish financial responsibility by obtaining one or a combination of 
mechanisms as specified in proposed subpart C. CERCLA Sec.  108(b)(2) 
states that ``financial responsibility may be established by any one, 
or any combination, of the following: Insurance, guarantee, surety 
bond, letter of credit, or qualification as a self-insurer. In 
promulgating requirements [under CERCLA Sec.  108(b)], EPA is 
authorized to specify policy or other contractual terms, conditions, or 
defenses which are necessary, or which are unacceptable, in 
establishing such evidence of financial responsibility in order to 
effectuate the purposes of [CERCLA].''
    EPA is proposing to establish required wording for all of the 
instruments (including the financial test and corporate guarantee) for 
several reasons. By specifying the instrument terms, EPA reduces the 
administrative burden to the Agency of reviewing the wide range of 
potential instrument wording that may otherwise be employed. EPA does 
not wish to create a situation where resources that otherwise would 
have been devoted to cleanups would be expended reviewing the myriad 
possible instrument constructions. EPA is also specifying the terms of 
the instruments so that they operate in a manner that integrates the 
CERCLA Sec.  108(b) instruments into the overall CERCLA scheme and are 
uniformly enforceable by the Agency or other parties seeking 
compensation for costs and damages. Third, EPA's RCRA Subtitle C, 
subpart H financial assurance requirements (see 40 CFR 264.151) 
similarly specify the required wording of the instruments and EPA has 
found this to be a beneficial feature. Fourth, EPA has received comment 
as it developed this proposal from stakeholders that the RCRA Subtitle 
C instruments are well-understood by regulated entities and the 
financial industry. Without nationally-consistent provisions, EPA does 
not expect that a similar familiarity with the CERCLA Sec.  108(b) 
regulations would be as likely to develop.
    Those same commenters suggested that EPA use the RCRA Subtitle C 
regulations as the basis for its proposed CERCLA Sec.  108(b) 
instruments because those instruments are well-developed and understood 
by regulators, the regulated community, and the financial-services 
industry. This proposal does in fact use the instruments specified in 
the RCRA Subtitle C, subpart H regulations as the model from which EPA 
developed its proposed CERCLA Sec.  108(b) instruments, in part, for 
that reason.\62\ EPA discusses particular provisions adapted from these 
RCRA regulations in its discussions of individual instruments later in 
this preamble, as well as new aspects necessitated by the CERCLA 108(b) 
rule structure. In addition, this proposal reflects some of the lessons 
EPA has learned in administering the RCRA Subtitle C financial 
assurance program. For example, to ease administration EPA is proposing 
that contact information for key parties (e.g., the EPA, the 
representative of the financial institution) be identified in the 
instruments to facilitate the notification requirements and other 
necessary communication. More information on the required wording of 
the instruments and the rationale for such wording is in the background 
document entitled ``Potential Requirements for Insurance, Surety Bonds, 
Letters of Credit, and Trust Agreements and Standby Trust Agreements 
under CERCLA Section 108(b),'' which is in the docket for this proposal 
(Docket No. EPA-HQ-SFUND-2015-0781). EPA requests comment on the 
proposed wording of the financial responsibility instruments including 
the proposed required documentary conditions required to make a claim 
under several of the instruments.
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    \62\ EPA is not, however, reopening the RCRA Subtitle C, Subpart 
H regulations by this proposal, nor will EPA respond to comments 
related only to those regulations.
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1. Letter of Credit (Sec.  320.40)
    An owner or operator would be able to satisfy the requirements of 
this section by obtaining an irrevocable standby letter of credit in 
accordance with the proposed requirements of Sec.  320.40 and the 
proposed wording of Sec.  320.50(b). A letter of credit is an 
independent agreement by the issuer (e.g., a bank) to pay up to a 
specified amount to parties upon the presentation of certain documents 
on behalf of its customer. Through a letter of credit, the bank 
provides assurance that the CERCLA response costs, health assessment 
costs, and natural resource damages for which the owners and operators 
are responsible would be paid. The financial strength of the bank would 
backstop that of the owner and operator, reducing the credit risk to 
potential claimants. EPA requests comment on the required wording and 
specification of the letter of credit in this proposed rule.
Issuer Eligibility (Sec.  320.40(a))
    The issuing institution would be required to be an entity that has 
the authority to issue letters of credit and whose letter of credit 
operations are regulated and examined by a Federal or state agency. 
These proposed requirements ensure that the letter of credit operations 
are overseen by a regulator, a requirement that EPA intends to help 
protect against failure of the issuing institution by ensuring that the 
operations are regularly examined (e.g., lending limits are being 
observed). This requirement is the same as that in the RCRA Subtitle C 
financial assurance requirements for closure and post-closure care,\63\ 
which EPA believes has worked well, and would be familiar to the 
regulated community and to the Agency. EPA considered additional 
qualifications for banks providing letters of credit but is today 
proposing the same qualifications as are required in the Subtitle C 
regulations. Some of the alternative criteria considered were minimum 
ratings from a rating agency or differentiating between state or 
nationally chartered institutions. Additional information on the 
consideration of alternative provider qualifications is in the 
background document titled ``Potential Issuer Eligibility Requirements 
for Insurance, Surety Bonds, Letters of Credit, and Trust Agreements 
and Standby Trust Agreements under CERCLA Sec.  108(b).'' EPA is 
proposing a standard similar to

[[Page 3417]]

the Subtitle C standard so as to not unduly constrain supply because 
additional requirements beyond the existing framework of Federal and 
state examination and regulation would limit the pool of available 
providers and also to avoid the administrative burden on EPA of 
verifying additional qualifications.
---------------------------------------------------------------------------

    \63\ See 46 FR 2826, January 12, 1981
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    The Institute of International Banking Law and Practice (IIBLP) 
suggested to EPA that the minimum issuer qualifications may be improved 
by specifying that the institution must be one that ``regularly issues 
standby letters of credit.'' IIBLP's stated intent of the recommended 
specification was to align the EPA requirement with the Uniform 
Commercial Code \64\ (UCC) Sec.  5-108(e) that obligates issuers to 
observe the standard practice of ``financial institutions that 
regularly issue letters of credit''. However, such a provision would 
require EPA to determine what constitutes regularly issuing letters of 
credit and would increase the administrative burden of implementation. 
Because the UCC would apply in the background as state law the Agency 
does not expect it is necessary to include such a requirement in the 
proposed regulations, and so is not proposing such a requirement.
---------------------------------------------------------------------------

    \64\ The Uniform Commercial Code (UCC) is a comprehensive code 
of law addressing commercial transactions in the United States 
created to serve as a model for state adoption. Use of standby 
letters of credit is governed by state laws that track Article 5 of 
the UCC.
---------------------------------------------------------------------------

Required Standardized Wording (Sec.  320.40(b))
    EPA is proposing required wording of the letter of credit. The 
proposal would require that instruments be worded identically to the 
language proposed in Sec.  320.50(b) of this proposed rule, except that 
the instructions in brackets would be replaced with the relevant 
information and the brackets deleted. The IIBLP also suggested that EPA 
should allow for greater flexibility to accommodate confirmations, 
other parties obtaining the letter of credit or state variations. 
Specifically, IIBLP recommended that the letter of credit wording be 
``substantially in accordance with'' the specified instrument language. 
While flexibility may help accommodate a wider range of circumstances, 
EPA has found in its financial assurance programs that standardized 
wording is generally acceptable to providers, and provides significant 
benefits. Most significantly, standardized wording saves EPA staff from 
having to review and assess the myriad variations in instrument wording 
that may arise, which the Agency may not have the technical expertise 
to readily undertake. However, EPA requests comment on whether specific 
additional aspects of the proposed wording could benefit from 
additional flexibility. Specifically, EPA requests comments on 
additional variations that should explicitly be provided for in 
brackets that may improve the effectiveness of the proposed letter of 
credit specifications.
Two Letter of Credit Constructions (Sec.  320.40(b)-(d))
    The proposed required wording provides for two separate letter of 
credit constructs--one in which the letter would be issued in favor of 
any and all third-party CERCLA claimants and one in which the letter of 
credit would be issued in favor of the trustee of a trust fund 
established by an agreement worded identically to the language for the 
proposed trust fund. EPA is proposing to allow for two possible letter 
of credit constructions based on feedback the Agency received during 
discussions with the banking community. Providing both options enhances 
flexibility and is consistent with the RCRA third-party liability 
program where a similar letter of credit arrangement is employed.\65\
---------------------------------------------------------------------------

    \65\ See 40 CFR 264.151(k)
---------------------------------------------------------------------------

    The first option for a letter of credit is for it to be issued in 
favor of any and all third-party CERCLA claimants. Under this 
arrangement, parties seeking payment from the letter of credit for 
CERCLA claims against the current owners or operators of the facility 
would be able to make claims by presenting the necessary documents 
directly to the issuing institution. This would provide a streamlined 
approach for paying claims and may entail lower fees and expenses than 
the second option. EPA intends for the CERCLA 108(b) instruments to be 
available to any potential CERCLA claimant. Given that the identity of 
potential claimants is both difficult to ascertain at a given point and 
because they may change over time, EPA is concerned that attempting to 
name particular beneficiaries would be unworkable. For example, EPA 
would be unable to determine in many cases what claims made by what 
parties would arise. In addition, EPA wishes to avoid a claims 
administration role that could result if EPA were the named 
beneficiary. EPA is concerned about the resources that would be 
necessary to assess the merits of and make all CERCLA claims that may 
be made against the instruments nationwide. Such a role would have the 
potential to redirect Superfund programmatic resources away from 
cleanups and other high priority activities to assessing claims at 
facilities where EPA may not otherwise have been involved or considered 
a priority. Further, in instances where EPA is involved, EPA may be a 
claimant. EPA was concerned that the Agency may be placed in the 
awkward position of administering and prioritizing claims in that 
situation. Finally, EPA is concerned that specifying EPA as the 
beneficiary of the instruments may be inconsistent with the direct 
action provision and preclude other claimants from taking direct 
actions against the instruments as provided by 108(c)(2).
    At the same time, several industry representatives expressed their 
concerns about the possibility of such a wide range of potential 
claimants who could not possibly be ascertained at the time the letter 
of credit is established. Instead, these representatives indicated a 
strong preference for a named beneficiary.
    In light of this feedback, and because EPA does not intend to 
restrict options such that institutions may be unwilling to issue 
letters of credit, EPA is also proposing letter of credit language that 
would provide the option for the letter of credit to be issued in favor 
of a single named beneficiary, specifically the trustee of a trust fund 
that would be established pursuant to the proposed trust fund 
regulations. In this case, the letter of credit would authorize the 
trustee to make draws on the letter of credit to administer the claims 
process for CERCLA response costs, health assessment costs, and natural 
resource damages in accordance with the terms of the trust agreement. 
Parties seeking payment from the letter of credit for CERCLA claims 
against the current owners or operators of the facility would be able 
to present claims against the trust fund in accordance with the 
proposed trust agreement language. The trustee would, upon receipt and 
review of the required documents, accordingly make a draw on the letter 
of credit and provide the claimant with payment.
    This latter option also appears to provide other advantages. First, 
letter of credit issuers indicated to EPA that this option is more 
consistent with commercial practice. Second, representatives of trustee 
institutions expressed a high level of comfort and willingness to 
provide such administrative services over a letter of credit. Third, 
the trust fund itself could be the subject of any direct actions 
authorized by CERCLA Sec.  108(c). Accordingly, in this proposal, the 
language acknowledging that direct action claims may be brought against

[[Page 3418]]

the issuing institution is required only for letters of credit issued 
in favor of any and all third-party CERCLA claimants, and is not 
required for those letters of credit issued in favor of a trustee. 
Considerations regarding the direct action provisions are discussed in 
more detail in section IV.B.5. of this preamble.
    Even with these advantages, EPA expects that the principal 
disadvantage in having the trustee hold the letter of credit and 
channel claims through the trust fund is that it will result in higher 
trustee expenses and fees in comparison with the letter of credit 
issued in favor of any and all third-party CERCLA claimants. This is 
because the trustee would need to hold the letter of credit and review 
the documents presented as part of the claims process to determine 
whether payment was merited under the terms of the trust. EPA is 
proposing nevertheless to offer such an arrangement in order to provide 
additional flexibility in compliance options for the owners and 
operators subject to the rule as well as offer an option that the 
Agency has been told is more consistent with commercial practice.
    EPA considered a third possible letter of credit option. Under this 
option, EPA would be the named beneficiary of the letter of credit and 
would administer the claims process but would require that the letter 
of credit provide for assignment of proceeds to other parties as 
identified by EPA. EPA recognized that this approach may provide the 
familiarity of a named beneficiary for issuers of letters of credit and 
may reduce trustee expenses because they would not need to provide a 
custodial service over the standby letter of credit. However, as 
discussed earlier in this preamble section, EPA's concerns about 
administering the claims process has led EPA not to include provisions 
for this option in this proposal. However, EPA solicits comment on this 
option.
    Finally, the proposed rule also includes specific information 
submission requirements in proposed Sec.  320.40(c) and (d). Where the 
beneficiary is a trustee, the original letter of credit would be held 
by the trustee as part of the trust fund property. A certified copy of 
the letter of credit would be required to be submitted to the 
Administrator. In addition, the owner or operator would be required to 
submit the original letter to the trustee authorized to make draws on 
the letter of credit, and then submit to the Administrator an 
acknowledgment of receipt of the letter of credit by the trustee. 
Submission of this information to EPA is intended to assist the Agency 
in monitoring compliance as part of its program oversight role.
    If the letter of credit is issued in the favor of any and all 
third-party CERCLA claimants, under proposed Sec.  320.40(d) the 
original letter of credit would be submitted to EPA, also to assist the 
Agency to monitor compliance.
Requirement To Establish a Trust Fund, Automatic Extension and 
Irrevocability Provisions of the Letter of Credit (Sec. Sec.  320.40(e) 
Through (f) and (k) Through (l))
    Standby letters of credit are typically issued for specific, finite 
periods of time although they may automatically extend provided the 
issuer has the right to allow the credit to expire. In developing this 
proposal, one consideration for EPA was how to assure funds would be 
available when necessary. One consideration with the letter of credit 
was that the issuer may wish not to extend the letter of credit at some 
point potentially leaving the owner or operator without the required 
evidence of financial responsibility. EPA was concerned that the 
decision not to extend a letter of credit may occur at a time when the 
owner's or operator's finances were in decline at which point the 
ability of the owner or operator to obtain alternate financial 
responsibility may be constrained. To ensure continuity of financial 
responsibility coverage EPA is proposing a suite of regulatory 
provisions intended to provide strong assurance that funds would be 
available when necessary.
    First, an owner or operator who uses a letter of credit to satisfy 
the requirements of this regulation would also be required to establish 
a trust fund and update Schedule A of the trust agreement within sixty 
days after a change in the amount of CERCLA Sec.  108(b) financial 
responsibility. The requirement to establish a trust fund is included 
regardless of whether the letter of credit is issued in favor of all 
third-party CERCLA claimants, or in favor of the trustee of a trust 
fund. EPA is proposing to require that a trust fund either hold the 
letter of credit or be established alongside the letter of credit to 
provide a repository for funds drawn from the letter of credit in 
instances where the issuing institution declines to extend the letter 
of credit and the owner or operator fails to obtain replacement 
financial responsibility.
    This standby trust fund would be worded identically to the proposed 
trust fund language (see Sec.  320.50(a) for the proposed wording of 
the trust agreement) and would meet the same requirements specified for 
the trust funds (see Sec.  320.45 for proposed trust fund regulations) 
with two exceptions. The first is that an originally signed duplicate 
of the trust agreement would be submitted to the Administrator with the 
original or the certified copy of the letter of credit. The second is 
that, unless the standby trust fund was funded pursuant to the 
requirements of this part including holding a letter of credit as 
specified in Sec.  320.40 and described earlier, the following would 
not be required: (1) Payments into the trust fund as specified in Sec.  
320.45; (2) annual valuations as required by the trust agreement; and 
(3) notices of payment as required by the trust agreement.
    Second, EPA is proposing that the letter of credit must be 
irrevocable and issued for a period of at least one year. Without this 
provision the letter of credit could potentially be withdrawn or 
modified for any reason and at any time by the issuer unilaterally, 
without notification to the current owner or operator. With this 
provision, the owner or operator, third-party CERCLA claimants, and EPA 
are assured of at least one year of coverage.
    Further, EPA is proposing that the letter of credit must provide 
that the expiration date would automatically be extended for a period 
of at least one year unless, at least 120 days before the current 
expiration date, the issuing institution notifies the owner or 
operator, the trust fund trustee (if the letter of credit is held by 
the trustee) and the Administrator by certified mail of a decision not 
to extend the expiration date. Under the terms of the letter of credit, 
the 120 days would begin on the date when the owner or operator, the 
trust fund trustee (if the letter is issued in favor of the trustee), 
and the Administrator have received the notice, as evidenced by the 
return receipts. This proposed automatic extension provision would help 
to ensure that coverage continues. Combined with the irrevocability 
provision, the owner and operator, EPA and other third-party CERCLA 
claimants can be assured of continuous coverage unless notified by the 
issuing institution.
    As a final proposed provision to ensure continuity of coverage, the 
proposed rule would provide for the possibility for the letter of 
credit to fund the trust fund in one of two ways if the letter of 
credit were not extended. The first way would apply when the letter of 
credit is issued in favor of any and all third-party CERCLA claimants. 
In that scenario, if the owner or operator did not establish alternate 
financial responsibility as specified in this proposed rule and obtain 
written

[[Page 3419]]

approval of such alternate financial responsibility from the 
Administrator within ninety days after receipt of a non-extension 
notice by the owner or operator and the Administrator, the 
Administrator would draw on the letter of credit if the letter of 
credit is issued in favor of any and all third party CERCLA claimants. 
The issuing institution would then deposit the unused portion of the 
credit into the standby trust. The second way would apply when the 
letter of credit is issued in favor of the trust fund trustee. In such 
scenarios, if the owner or operator did not obtain alternate financial 
responsibility and obtain written approval of such alternate financial 
responsibility from the Administrator within ninety days after receipt 
of a non-extension notice by the owner or operator, the Administrator 
and the trustee, the Administrator would inform the trustee that the 
owner or operator had not established alternate financial 
responsibility. This would prompt the trustee to draw on the letter of 
credit and deposit any unused portion of the credit into the trust 
fund.
    The Administrator would be able to delay the drawing of funds or 
the notification to the trustee of the trust fund that the owner or 
operator had not established alternate financial responsibility, if the 
issuing institution grants an extension of the term of the credit. 
During the last thirty days of any such extension, if the owner or 
operator has failed to provide alternate financial responsibility as 
specified in this section and obtain written approval of such financial 
responsibility from the Administrator, the Administrator would draw on 
the letter of credit or notify the trustee of the trust fund that the 
owner or operator had not established alternate financial 
responsibility and obtained written approval of such alternate 
financial responsibility. Under the terms of the letter of credit, all 
amounts paid pursuant to a draft by the Administrator or the trust fund 
trustee in the circumstances described in this paragraph would be 
deposited by the issuing institution directly into the trust fund.
    A similar arrangement is required under the RCRA Subtitle C closure 
post closure financial assurance regulations and the Agency has found 
it to be a valuable feature. The accompanying trust fund and the 
automatic extension provisions for letters of credit are an important 
feature of this proposal because letters of credit might otherwise not 
be extended after a release of hazardous substances or after marked 
financial decline of the owner or operator. Absent the ability for the 
trustee or the Administrator to make a draw on the letter of credit in 
instances of issuer notice of non-extension and the owner's or 
operator's failure to obtain replacement financial responsibility, 
financial responsibility may not be available when necessary. After 
notice of non-extension, a CERCLA claim may not necessarily be possible 
for some time because the CERCLA processes leading to a claim may be 
lengthy. In such an instance, the letter of credit may expire, leaving 
no financial responsibility instrument available. The proposed 
arrangement would ensure that funds are still available to pay the 
valid CERCLA claims. This provision, and the similar provisions for 
other proposed instruments, as well as alternatives are discussed in 
more depth in section VI.C.7 of this preamble.
    IIPLP also provided comments to EPA on these proposed automatic 
extension and non-extension notification requirements. With respect to 
the non-extension notification, the IIBLP suggested that the wording of 
the letter of credit should not explicitly require notification to the 
owner or operator of the decision not to extend the credit as discussed 
earlier. Rather, IIBLP noted that the means of how issuers and their 
applicants communicate is typically left to a separate agreement from 
the letter of credit itself. However, EPA believes that specifying such 
a notification term in the letter of credit itself, including notice to 
the owner or operator, is preferable because timely receipt of such 
notice by both EPA and the owner or operator is important as it would 
establish the timeframe in which the owner or operator must obtain 
alternate financial responsibility. Further, the provision helps 
prevent expiration from taking place without the knowledge of EPA and 
the owner or operator, or a draw being necessitated due to pending 
expiration without the knowledge of the owner or operator. Finally, 
while it may be unusual as a general matter of commercial practice, 
such a provision is a common feature of government financial 
responsibility programs. For example, similar notification requirements 
are required in the RCRA Subtitle C closure and post closure letter of 
credit which has been broadly used as a financial assurance instrument 
by regulated entities in that program.
    With respect to the automatic extension provisions, the IIBLP 
stated that a date should be identified beyond which extension should 
not be able to occur. However, such a provision would be inconsistent 
with other EPA financial assurance programs and necessitate more 
frequent re-establishment of financial responsibility on the part of 
the owner or operator or draws on the letter of credit prompted by 
pending expiration. Further, given that the time horizon over which an 
owner and operator must maintain financial responsibility under CERCLA 
Sec.  108(b) may vary on a case-by-case basis, EPA could not identify a 
nationally-uniform date beyond which the letter of credit should be 
allowed to expire.
Claims Against a Letter of Credit Issued in Favor of Any and All Third-
Party CERCLA Claimants (Sec. Sec.  320.40(j) and 320.50(b))
    Under the proposed letter of credit language (Sec.  320.50(b)) and 
regulations (Sec.  320.40(j)), when the letter of credit is issued in 
favor of any and all third-party CERCLA claimants, it would provide 
payment to third-party CERCLA claimants under three scenarios provided 
that the claimant provides the necessary documentation, in addition to 
authorizing direct action claims against the issuing institution 
itself. Under the proposed regulations the following claims would be 
authorized against the letter of credit when issued in favor of any and 
all third-party CERCLA claimants:
    (1) Any party that obtained a final court judgment from a Federal 
court awarding CERCLA response costs, health assessment costs, and/or 
natural resource damages associated with the facility against any of 
the current owners or operators to whom payment as required by the 
judgment had not been made within thirty days would be able to make a 
claim against the letter of credit. However, the party would only be 
able to make a claim if it had not recovered or been paid the funds 
from any other source.
    (2) The Administrator or another authorized Federal agency would be 
able to make a claim against the letter of credit requesting payment if 
payment had not been made as required by a CERCLA settlement associated 
with the facility between a current owner or operator and EPA or 
another Federal agency.
    (3) The Administrator or another authorized Federal agency would be 
able to make a claim against the letter of credit requesting payment 
into a trust fund established pursuant to a CERCLA unilateral 
administrative order issued to a current owner or operator if 
performance at the facility as required by the order had not occurred. 
The Administrator or other Federal agency would be able to make the 
claim against the letter of credit only if the owner or operator had 
provided a written statement that the letter of credit may be

[[Page 3420]]

used to assure the performance of the work required in the order.
    In order to make a draw on the letter of credit under these three 
scenarios, claimants would need to present one of two sets of 
documents. The first set of documents would consist of a demand for 
payment bearing reference to the letter of credit by number, a final 
court judgment dated at least thirty days earlier from a Federal court, 
in favor of the claimant, awarding CERCLA response costs, health 
assessment costs, and/or natural resource damages associated with the 
facility against any of the current owners or operators, and a 
certification from the claimant that reads as follows: ``I hereby 
certify that the amount of the demand is payable pursuant to 
regulations issued under the Comprehensive Environmental Response, 
Compensation and Liability Act of 1980 as amended.''
    Because a claimant seeking satisfaction of a final court judgment 
awarding CERCLA response costs, health assessment costs, and/or natural 
resource damages may be any of a wide range of potential parties 
including Federal and state government officials, natural resource 
trustees, or private parties, EPA was told by several representatives 
of the financial industry that the potential for inappropriate claims 
in this scenario may be higher than in typical financial assurance 
programs where a particular regulator is the only named beneficiary. 
(The RCRA Subtitle C closure and post-closure letter of credit at 40 
CFR 264.151(d) is an example of a single-beneficiary letter of credit). 
EPA was informed by one bank representative that documentary payment 
conditions requiring presentation of a court judgment would help ease 
concerns in this regard. Specifically, the representative suggested 
that the risk of fraud would be reduced if the rules required 
production of a court judgment in addition to a demand and 
certification. EPA does not expect that such a requirement would 
present a significant burden to legitimate claimants, and wishes to 
lower any perceived barriers to issuing the necessary instruments under 
this proposed rule. Thus, EPA is proposing that the language of the 
letter of credit issued in favor of any and all third-party CERCLA 
claimants require not just a demand for payment and a certification 
from the claimant but the presentation of the final court judgment as 
well.
    As discussed in the general payment provisions section of the 
preamble, the proposed regulatory text in Sec.  320.40(j) regarding 
letters of credit includes other requirements for making draws on the 
letter of credit. EPA's proposed letter of credit certification 
requirement is intended to encompass these requirements and thereby to 
help ensure that those supplemental criteria have been met. These 
requirements are designed to foster fairness for both potential 
claimants as well as to the owners or operators who provide the CERCLA 
Sec.  108(b) financial responsibility. These requirements are (1) that 
a claim for satisfaction of a final court judgment may only be made 
against a CERCLA Sec.  108(b) financial responsibility instrument if 
the judgment has been obtained against a current owner or operator at 
the facility and if the owner or operator has failed to make payment on 
the judgment within thirty days; and (2) that the claimant may only 
make such a claim if they have not recovered or been paid the funds 
from any other source. EPA is aware that letters of credit are designed 
to be an independent undertaking that would preclude the issuing 
institution from considering non-documentary conditions such as whether 
the previously-mentioned supplemental criteria had been met. EPA is 
thus requiring that claimants certify that the funds are payable 
pursuant to regulations issued under the Comprehensive Environmental 
Response, Compensation and Liability Act of 1980 as amended. EPA 
believes this additional documentary condition helps curb the potential 
for inappropriate draws when the letter of credit is issued in favor of 
any and all third party claimants.
    The second set of documents that could be presented in order for 
EPA or another authorized Federal agency to make a draw when the letter 
of credit is issued in favor of any and all third-party CERCLA 
claimants is a demand for payment bearing reference to the letter of 
credit by number and a certification from the Administrator or another 
Federal agency that reads as follows: ``I hereby certify that the 
amount of the demand is payable pursuant to regulations issued under 
the Comprehensive Environmental Response, Compensation and Liability 
Act of 1980 as amended.'' EPA intends for this second set of documents 
to be presented by EPA or another authorized Federal agency in order to 
obtain payment for a CERCLA settlement or into a trust fund established 
pursuant to a CERCLA Sec.  106 unilateral administrative order in 
instances where either (1) payment was not made as required by a CERCLA 
settlement associated with the facility with a current owner or 
operator, or (2) performance at the facility had not occurred as 
required by a CERCLA Sec.  106 unilateral administrative order issued 
to a current owner or operator.
    Because these payment scenarios are explicitly provided for in the 
proposed rules at 320.40(j)(2) and (3), and because those scenarios are 
limited to Federal agencies acting pursuant to CERCLA, EPA sees no 
reason to require any additional documentation beyond the demand for 
payment and the certification. A similar documentary payment condition 
is employed in the RCRA Subtitle C closure and post-closure letter of 
credit. See 40 CFR 264.143(d)(8); 264.151(d). Requiring only a 
certification and a demand for payment also streamlines the claims 
process in these scenarios and imposes a lower administrative burden on 
the claimants and on the issuing institutions because fewer documents 
would require review.
    Other supplementary documentary requirements EPA considered were 
the presentation of the CERCLA settlement agreement or CERCLA 
unilateral administrative order themselves. However, EPA did not 
believe these additional requirements provided significant value beyond 
the certification from the Administrator or other authorized Federal 
agency. In discussions with representatives of the banking community, 
participants suggested a high degree of comfort with a certification 
from a Federal government agency as a documentary payment requirement, 
provided it was specified in the letter of credit. Thus, to avoid 
unnecessary documentary provisions, EPA is proposing that the required 
wording of the letter of credit issued in favor of any and all third-
party CERCLA claimants not include a requirement to produce the 
underlying settlement or unilateral administrative order, in the 
scenarios limited to Federal government claimants.
    Further, EPA is today also proposing letter of credit wording that 
does not require that the original letter of credit itself be presented 
by claimants requesting a draw. EPA's financial assurance programs 
under RCRA Subtitle C (closure/post-closure letters of credit and 
liability coverage letters of credit) similarly do not require 
presentation of the original letter of credit itself. Such a 
requirement would entail a greater level of administrative burden on 
both EPA and claimants, in particular due to the wide range of 
potential claimants and the need to coordinate between EPA and 
potential claimants. In discussions with representatives of the banking 
community, EPA was told that banks are likely to prefer that the 
presentation of

[[Page 3421]]

the original letter of credit not be a requirement and that such a 
requirement is a relic of the past. However, this does not mean there 
could be no value in such a requirement. The issuing institution may 
have noted on the letter of credit any prior payments that may help 
keep EPA informed of the remaining balance; however, EPA should be able 
to remain apprised of the value of the letter of credit based on claims 
and payment notification requirements included elsewhere in the 
proposal (see for example Sec.  320.24). On balance, EPA is proposing 
to forgo such a requirement to be more consistent with current 
commercial practice and reduce the administrative burden entailed in 
the claims process. However, EPA solicits comment on whether such a 
requirement would be useful.
Draws on the Letter of Credit When Held by a Trust Fund Trustee 
(Sec. Sec.  320.40(i) and 320.50(b))
    If the letter of credit is issued in favor of the trust fund 
trustee, parties would be able to make claims against the trust fund in 
accordance with the terms of the trust agreement in order to receive 
payment from the letter of credit. Accordingly, the proposed language 
of the letter of credit (Sec.  320.50(b)) would require only a demand 
for payment from the trust fund trustee bearing reference to the letter 
of credit by number. This is similar to the required documentary 
provisions in the RCRA Subtitle C third-party liability letter of 
credit when it is issued in favor of a trustee. Other documentary 
requirements appear unnecessary under this construction because the 
third-party CERCLA claimants would be making claims against the trust 
fund instead of the letter of credit and would therefore need to meet 
the documentary conditions laid out in the trust agreement or 
successfully make a direct action claim against the trust fund itself. 
(Payments from the trust fund are discussed further in the trust fund 
section of the preamble.) This arrangement provides for a very 
streamlined process for the trustee to draw on the letter of credit 
when necessary to make payments to the successful claimants. EPA did 
not intend to burden this process with extra documentary conditions as 
that would only occasion greater fees and expenses on the part of the 
trustee and provide no clear benefit beyond the documentary review 
already performed by the trustee.
    Such a documentary requirement would also provide the trustee of 
the trust fund the ability to make draws on the letter of credit when 
necessary to cover trustee expenses. While the proposed required 
wording of the trust agreement specifies that fees and expenses would 
be first paid by the grantor of the trust agreement, the proposed 
language also provides that all expenses not paid directly by the 
grantor shall be paid from the corpus of the trust fund which may 
require a draw on a letter of credit held by the trust fund. This 
allowance is important to allow trust expenses to be covered in 
instances where the grantor may cease to exist or is otherwise 
unavailable.
    EPA recognizes that, when a letter of credit is issued in favor of 
a trustee of a trust fund, the trustee may incur significant fees and 
expenses in determining whether or not payment should be made from the 
trust fund, particularly in instances of a direct action against the 
trust fund. These expenses would likely reduce the value of the trust 
fund (and by extension potentially the value of the letter of credit 
held by the trust fund). However, given the apparent reluctance of 
institutions that issue letters of credit to provide letters of credit 
that could pay to a wide range of unnamed beneficiaries and 
institutions' expressed concerns regarding the institution itself being 
potentially subject to direct action suit from CERCLA claimants, EPA is 
proposing this compliance option. EPA requests comment on both options: 
(1) Where the letter of credit may pay to CERCLA claimants directly 
(i.e. be issued in favor of any and all third-party CERCLA claimants) 
or (2) where the letter of credit may pay to the trustee of a trust 
fund issued in accordance with the proposed trust fund regulations who 
would then pay valid claims (i.e. be issued in favor of the trustee). 
EPA is also interested in provisions or specifications that may allow 
for lower expenses or fees or that would protect the value of the trust 
fund (and thus the letter of credit) from expenses and fees when the 
letter of credit is issued in favor of the trust fund trustee.
Direct Action Language in the Letter of Credit (Sec.  320.50(b))
    Under the proposed regulations, the issuing institution would be 
subject to direct action claims only when the letter of credit is 
issued in favor of any and all third-party CERCLA claimants. Because 
direct action is authorized by the statute, the possibility of a direct 
action suit should be clearly acknowledged by issuing institutions. 
Thus EPA has included required language acknowledging that direct 
action suits may be brought against the issuing institution for letters 
of credit issued in favor of any and all third-party CERCLA claimants 
and that the issuing institution consents to suit in those 
circumstances. The language further acknowledges that the liability of 
the issuing institution is limited by CERCLA Sec.  108(d) and that the 
institution is entitled to the rights and defenses provided to 
guarantors in CERCLA Sec.  108(c). The reader should note that this 
language is not required for those letters of credit issued in favor of 
a trustee. In the latter case, EPA intends the trust fund itself would 
be the subject of direct action suits. However, under the proposed 
regulations, the issuing institution would be subject to direct action 
claims when the letter of credit is issued in favor of any and all 
third-party CERCLA claimants.
    Also included in the direct action language in the letter of credit 
is a provision that the issuing institution will provide notice of any 
such claims and payments resulting from a direct action to the 
Administrator. EPA has included a similar provision applicable to the 
owner and operator in proposed Sec.  320.24, under which they are 
obligated to provide notice to EPA of claims made. However, EPA is 
including this proposed term as part of the letter of credit, because 
it expects that the owner or operator may not be able to provide such a 
notice of payment in a direct action scenario. Providing a mechanism 
for EPA to remain informed of claims against the instrument and of the 
value of the letter of credit in case of a direct action, is 
appropriate for similar reasons as described in proposed Sec.  320.24.
Identification of Facility Information in Letter of Credit (Sec.  
320.50(b))
    The proposed language of the letter of credit would require the 
identification of the facilities covered, and the amount of financial 
responsibility provided by the letter of credit. EPA is today proposing 
language that allows (but does not require) a single letter of credit 
to cover multiple facilities if that is determined to be optimal by the 
owner and operator and their letter of credit provider. EPA anticipates 
that allowing coverage of multiple facilities simultaneously may have 
administrative efficiency benefits. As discussed in section VI.3.9. of 
this preamble, providing for one instrument to cover multiple 
facilities may provide for some administrative ease in the compliance 
and implementation process and is a common feature of EPA financial 
assurance programs.\66\
---------------------------------------------------------------------------

    \66\ See for example, 40 CFR 264.143(h).
---------------------------------------------------------------------------

    Thus, EPA has made provision in the letter of credit language for 
facility-specific sub-limits (i.e. the identification

[[Page 3422]]

of an amount available for claims associated with each facility covered 
by the letter of credit beyond which the issuer would have no 
obligation to pay claims associated with that facility) when a letter 
of credit is covering multiple facilities. The proposed letter of 
credit would require the EPA identification number(s), name(s), 
address(es) and CERCLA Sec.  108(b) financial responsibility amount(s) 
covered by the letter of credit for facility(ies) that would be covered 
by the instrument.
    EPA recognizes that such information may not typically be included 
in letters of credit, where the preference is typically for the 
simplest and briefest language possible. However, this approach allows 
the letter of credit to reflect the site-by-site amounts of financial 
responsibility required, and at the same time, it will assist all 
parties (e.g. the issuing institution, third-party CERCLA claimants) in 
knowing the amount of financial responsibility available for claims 
associated with any of the facilities.
    EPA is also considering whether to limit each letter of credit to 
coverage of a single facility. The additional information about other 
facilities and facility-specific sub-limits would not need to be 
included. In this way the letter of credit could be drafted in a 
simpler manner. However, as the EPA is not proposing to require that 
multiple facilities must be covered by one letter of credit, EPA 
believes the proposed language provides the flexibility to draft a 
relatively simple letter of credit. As such, EPA is today proposing 
language that allows the letter of credit to cover multiple facilities 
if that is determined to be optimal. EPA requests comment on this 
proposed provision and the alternative option of requiring only one 
facility per letter of credit.
2. Surety Bond (Sec.  320.41)
    An owner or operator would be able to satisfy the proposed CERCLA 
Sec.  108(b) financial responsibility requirements by obtaining a 
surety bond in accordance with the proposed requirements including the 
proposed required wording and submitting the originally signed bond to 
the Administrator. Through a surety bond, the Surety would guarantee 
that it will pay third-party CERCLA claims for response costs, health 
assessment costs, and natural resource damages associated with the 
facility against any of the current owners and operators, even if not 
listed as the principal on the bond, under certain circumstances in the 
event the claims are not satisfied by the owners or operators, up to 
the bond limits.
Issuer Eligibility (Sec.  320.41(b))
    The surety company issuing the bond would be required to, at a 
minimum, be among those listed as acceptable sureties on Federal bonds 
in Circular 570 of the U.S. Department of the Treasury. This 
requirement for providers of surety bonds is the same as that in the 
RCRA Subtitle C financial assurance regulations which EPA believes has 
worked well and will provide familiarity for implementing staff and the 
regulated community. In selecting this eligibility criteria EPA is also 
taking advantage of a pre-existing Federal examination and 
authorization process designed specifically for sureties. EPA 
recognizes that a Federal government agency will not be listed as the 
obligee of CERCLA Sec.  108(b) surety bonds under the proposed language 
and thus Circular 570 listing may not be strictly necessary to comply 
with Treasury regulations. However, EPA and other Federal government 
agencies are likely to be claimants under the proposed CERCLA Sec.  
108(b) construct and thus EPA believes a similar level of oversight of 
the solvency of a surety providing a bond is merited. Further, upon 
examination of eleven years of data EPA did not identify any instances 
of default of a surety listed on Circular 570 suggesting the criterion 
is robust. EPA considered additional qualifications for surety 
companies but is today proposing the same qualifications as are 
required in the RCRA Subtitle C regulations. This decision was based 
largely on the desire to not unduly constrain supply, a desire to 
leverage the pre-existing robust criterion for sureties already well 
established, and to avoid the administrative burden on EPA of verifying 
additional qualifications. For more information on the consideration of 
alternative provider qualifications, please see the background document 
on instrument provider qualifications titled ``Potential Issuer 
Eligibility Requirements for Insurance, Surety Bonds, Letters of 
Credit, and Trust Agreements and Standby Trust Agreements under CERCLA 
Sec.  108(b).''
Requirements To Ensure Continuity of Financial Responsibility Coverage 
(Sec. Sec.  320.41(f), (g)(4) and (k))
    EPA is proposing a suite of regulatory provisions in order to 
ensure continuity of CERCLA 108(b) financial responsibility coverage. 
First, an owner or operator that elected to use a surety bond to 
satisfy the requirements of this section would also be required to 
establish a standby trust fund and update Schedule A of the trust 
agreement within sixty days after a change in the amount of CERCLA 
Sec.  108(b) financial responsibility. This standby trust fund would 
have to be worded identically to the proposed trust fund language in 
Sec.  320.50(a) and meet the same requirements specified for the trust 
funds, except that: (1) an originally signed duplicate of the trust 
agreement would be submitted to the Administrator with the surety bond; 
and (2) until the standby trust fund is funded pursuant to the 
requirements of this section, the following would not be required by 
the proposed regulations: (1) payments into the trust fund as specified 
in Sec.  320.45, (2) annual valuations as required by the trust 
agreement; and (3) notices of payment as required by the trust 
agreement.
    The second proposed provision designed to ensure continuity of the 
CERCLA Sec.  108(b) financial responsibility is the cancellation 
provision in the bond. EPA is proposing that, under the terms of the 
bond, the surety would be able to cancel the bond by sending notice of 
cancellation by certified mail to the owner or operator and to the 
Administrator. Cancellation would not occur, however, during the 120 
days beginning on the date of receipt of the notice of cancellation by 
both the owner or operator and the Administrator, as evidenced by the 
return receipts.
    Finally, EPA is proposing that, under the terms of the bond, the 
surety would become liable up to the penal sum \67\ of the bond in the 
event the owners or operators failed to provide alternate financial 
responsibility and obtain the Administrator's written approval of the 
financial responsibility provided, within ninety days after receipt by 
both the owner or operator and the Administrator of a notice of 
cancellation of the bond from the surety. Under the proposal, payment 
from the bond into the standby trust would then occur.
---------------------------------------------------------------------------

    \67\ The penal sum represents the maximum amount the surety will 
pay for CERCLA response costs health assessment costs and/or natural 
resource damages under the bond.
---------------------------------------------------------------------------

    A similar arrangement is required under the RCRA Subtitle C 
hazardous waste financial assurance regulations for closure and post 
closure care and the Agency believes it has been a valuable feature. 
EPA believes the standby trust and cancellation provisions are an 
important feature of this proposal as bonds could otherwise be 
cancelled after a release of hazardous substances from the facility or 
after marked financial decline of the owner operator. A CERCLA claim 
for payment from the bond would not necessarily be mature

[[Page 3423]]

for some time and thus financial responsibility may not be available 
when necessary. EPA believes the proposed arrangement however will 
ensure that funds are still available to pay the CERCLA response costs, 
health assessment costs, and natural resource damage claims of third 
parties. This provision, and the similar provisions for other proposed 
instruments, as well as alternatives are discussed in more depth in the 
preamble section headed `issuer cancellation provisions.'
Claims Against the Surety Bond (Sec. Sec.  320.41(g) and 320.50(c))
    In addition to guaranteeing that replacement financial 
responsibility will be obtained in the event the surety provides notice 
of cancellation of the bond, the bond would also guarantee payment of 
CERCLA response costs, health assessment costs, and natural resource 
damages to third-parties. Under the proposed terms of the bond, the 
bond would guarantee that the owner or operator would make payments for 
or ensure payments are made for CERCLA response costs, health 
assessment costs, and/or natural resource damages associated with a 
facility covered by the bond as required in a final court judgment from 
a Federal court awarding such costs against any of the owners or 
operators within thirty days to the parties obtaining the judgment. In 
these circumstances a claimant would present the unsatisfied final 
court judgment dated at least thirty days earlier from a Federal court, 
in favor of the claimant, awarding CERCLA response costs, health 
assessment costs, and/or natural resource damages associated with the 
facility against any of the current owners or operators at the facility 
to the surety directly. Additionally, the claimant would be required to 
provide a signed statement from the claimant certifying that the 
amounts sought had not been recovered or paid from any other source, 
including, but not limited to, the owner or operator, insurance, 
judgments, agreements, and other financial responsibility instruments.
    Upon receipt of these documents the surety would then make payment 
in accordance with the instructions of the successful claimant. These 
documentary payment requirements were selected as it removes EPA from 
the claims administration process but ensures that a court has 
determined that payment is due to the party making the claim under 
CERCLA and that the party has not already recovered or been paid the 
funds from another source. Further, by relying on objective documentary 
submissions the Surety should be able to determine whether payment 
should occur under the terms of the bond with only minimal due 
diligence.
    Additionally, the bond would guarantee the owner or operator would 
make payments or ensure payments were made as required in a CERCLA 
settlement associated with the facility between any of the current 
owners and operators at the facility and EPA or another authorized 
Federal agency. The Administrator or the other Federal agency, in these 
situations, would present a written signed statement to the surety 
requesting payment from the surety on the grounds that payment had not 
been made as required by a CERCLA settlement associated with the 
facility and with any of the current owners or operators. Additionally, 
the Administrator or the Federal agency would need to present a signed 
statement certifying that the funds sought had not been recovered or 
paid from any other source, including, but not limited to, the owner or 
operator, insurance, judgments, agreements, and other financial 
responsibility instruments.
    EPA believes that, similar to EPA's thinking on the documentary 
payment conditions for the letter of credit issued in favor of any and 
all third-party CERCLA claimants (discussed in section VI.C.1. of this 
preamble), in the instances when the potential claimants are limited to 
Federal government agencies a more streamlined payment condition is 
optimal. EPA believes that the requirement of a signed statement from 
the Administrator or another Federal agency is a clear documentary 
condition and will require minimal due diligence on the part of 
sureties.
    Finally, the bond would guarantee that the owner or operator 
performs or ensures the performance of the work at the facility as 
required by a CERCLA unilateral administrative order issued to any of 
the current owners or operators by EPA or another Federal agency for 
which the owner or operator has provided a written statement allowing 
for the bond to assure performance of the work. Payments would be made 
at the request of EPA or another Federal agency into a standby trust 
established pursuant to the administrative order if the work was not 
performed in accordance with the order.
    In this scenario, to make a claim against the surety bond the 
Administrator or the other Federal agency would present a written 
signed statement requesting payment from the surety into a trust fund 
established pursuant to a CERCLA unilateral administrative order on the 
grounds that performance at the facility had not occurred as required 
by a CERCLA administrative order issued to a current owner or operator. 
Additionally, the EPA Regional Administrator or the Federal agency 
would need to present a signed statement certifying that the funds 
sought had not been recovered or paid from any other source, including, 
but not limited to, the owners or operators, insurance, judgments, 
agreements, or other financial responsibility instruments.
    As discussed earlier, in the two payment scenarios limited to 
Federal government claimants EPA is attempting to limit the complexity 
of the documentary requirements. EPA believes the relatively simple 
requirements of signed statements from EPA or another Federal agency 
will streamline the claims process and reduce uncertainty on the part 
of the surety as to whether or not payment should be made.
    EPA requests comment on the proposed documentary requirements for 
payment from the surety bond. In particular, EPA is interested in 
hearing if there are other documentary payment requirements that could 
further limit the discretion required on the part of the surety and yet 
still provide assurance against inappropriate claims being paid.
    EPA recognizes that the payment mechanics of the surety bond 
involve multiple parties that will not be listed explicitly on the 
surety bond. In discussions with representatives of the surety bond 
industry, EPA learned that such a construction may likely be less 
palatable to potential providers of surety bonds than a construction 
with one designated claimant. Similarly, the Surety and Fidelity 
Association of America (SFAA) recommended that EPA be the only claimant 
on the bond. SFAA stated that multiple claimants enlarges the surety's 
exposure to claims and possibly dilutes the protection to EPA as the 
Agency may have less assurance of the proper use of the funds by third-
parties other than EPA. However, EPA is not proposing to list EPA as 
the sole obligee on the bond for several reasons. First, non U.S. 
Government claimants would need a final court judgment from a Federal 
court awarding payment for CERCLA response costs, health assessment 
costs, and/or natural resource damages ensuring that a court had 
reviewed the merits of the claim (e.g. the consistency of the action 
with the national contingency plan) and found the claim to be valid. As 
a result, EPA does not share the concern that payment of funds to 
parties other than EPA will compromise the protection of human health 
and the environment. EPA

[[Page 3424]]

believes that, given the nature of CERCLA where any number of parties 
may have claims under CERCLA Sec.  107, it is necessary to provide 
payment from the bond to a range of third-party CERCLA claimants.
    EPA considered an option whereby EPA would be listed as the obligee 
and administer the claims process however, as discussed in the letter 
of credit Sec.  320.40 of the preamble. EPA is not proposing this 
option for several reasons. First, EPA would not necessarily be 
involved in all CERCLA actions at facilities and did not wish to 
redirect its programmatic resources away from high priority sites to 
administer the claims process for CERCLA Sec.  108(b). Moreover, EPA 
may not be able to assess the merits of all CERCLA claims which include 
natural resource damages and health assessments that are primarily the 
responsibility of other entities. Finally, it may create a perception 
of partiality were EPA to administer the claims process in scenarios 
where the Agency was one of the claimants. EPA believes that the 
proposed construction best achieves the need of providing payment to 
the full range of potential CERCLA claimants while simultaneously 
protecting against improper claims and preventing the sub-optimal 
redirection of Superfund resources away from high-priority sites.
Surety Liability (Sec.  320.41(h))
    Under the terms of the bond, the surety would become liable on the 
bond obligation when the owner or operator fails to perform as 
guaranteed by the bond. EPA believes that this is an additional 
advantage of the proposed instrument payment terms. In discussions with 
representatives of the surety industry, representatives stressed to EPA 
that the surety company should be secondary to the owners and operators 
and claimants should first look to the owner or operators for 
satisfaction. EPA hopes that this feature of the proposed CERCLA Sec.  
108(b) surety bond's consistency with that aspect of surety practice 
will encourage participation on the part of surety companies in the 
CERCLA Sec.  108(b) program.
    The liability of the surety would be limited to the penal sum \68\ 
of the bond plus the amount of any investigation or legal defense fees 
incurred by the surety. EPA, to the greatest extent possible, wishes to 
preserve the value of the financial responsibility to pay CERCLA 
claimants. EPA is thus proposing that any legal or investigation fees 
incurred by the surety remain outside the penal sum of the bond and not 
erode the value of the financial responsibility. A similar provision is 
also being proposed for insurance and the corporate guarantee. EPA 
requests comment on these proposed provisions.
---------------------------------------------------------------------------

    \68\ The penal sum of a bond is the specified maximum amount 
that the surety will be required to pay and is a required input in 
the proposed surety bond language.
---------------------------------------------------------------------------

Direct Action Language in the Surety Bond (Sec.  320.50(c))
    In addition to the payment triggers described earlier, the proposed 
language of the CERCLA Sec.  108(b) surety bond would also include 
language that the surety acknowledges that direct action suits may be 
brought against the surety. The direct action provision would allow for 
parties with CERCLA Sec.  107 or Sec.  111 claims, in certain instances 
identified in CERCLA Sec.  108(c)(2), to take actions directly against 
the surety. It is a cause of action authorized by the statute and EPA 
expects it would operate independently of the three previously-
described payment scenarios. In these instances, as described in the 
proposed bond language, the surety would have the rights and defenses 
identified in CERCLA Sec.  108(c) and the liability protections in 
CERCLA Sec.  108(d).
    Similar to the corporate guarantee, insurance and letter of credit 
issued in favor of any and all third-party CERCLA claimants, EPA is 
proposing that the required wording of the bond include a provision 
that the surety notify EPA of any claims and payments made as a result 
of a direct action. EPA believes this notification requirement is 
valuable as the owner or operator may not be available to provide such 
a notice of claims and payments in a direct action scenario yet EPA 
wishes to remain informed of claims against the instrument and the 
value of the financial responsibility.
    The SFAA also expressed concern that the direct action provision in 
a CERCLA Sec.  108(b) surety bond may expose the sureties to too many 
claims. Specifically, SFAA stated that a surety bond is a conditional 
obligation under which the surety's obligation is triggered when the 
principal defaults. SFAA stated that bankruptcy (one of the 
preconditions for a direct action identified in CERCLA Sec.  108(c)) is 
too broad as, in many cases, an owner or operator may still be able to 
fulfill its responsibilities even though bankrupt. EPA agrees that the 
owner or operator could still potentially fulfill its obligations even 
though bankrupt. Claimants could still pursue the potentially 
responsible party directly without implicating CERCLA Sec.  108(b) 
instruments. EPA believes including the direct action provision is 
important as in some cases it may not be possible for EPA, or another 
third-party CERCLA claimant to obtain satisfaction from or obtain a 
court judgment against the party liable under CERCLA Sec.  107 (or 
other necessary documents to make a claim against the bond) and thus 
recognizes the need for the surety, as guarantor, to stand in the 
owner's or operator's shoes
Multiple Sureties (Sec. Sec.  320.41(e) and 320.50(c))
    The surety bond would be able to be issued by multiple sureties 
provided that each is liable for its individual vertical percentage 
share of the total penal sum of the bond. (Sec.  320.41(e)) EPA is 
proposing surety bond language that would provide the option for owners 
and operators to obtain surety bonds from multiple issuers in the 
required amount of financial responsibility. EPA expects the required 
amounts of CERCLA Sec.  108(b) financial responsibility may be 
relatively large at some facilities and wishes to provide this 
flexibility. The proposed arrangement for allowing multiple sureties to 
cover a single facility is consistent with the approaches employed by 
all of the financial responsibility programs EPA reviewed. All 
financial responsibility programs reviewed, including the Coast Guard 
CERCLA Sec.  108(a), RCRA Subtitle C liability coverage, RCRA Subtitle 
C closure/post-closure, and RCRA Subtitle I Underground Storage Tanks, 
require sureties to bind themselves jointly and severally for purposes 
of allowing a joint action(s) against the issuers of the surety bond, 
but allow for payment based on pre-determined proportions of the penal 
sum (several liability).
    In the proposed CERCLA Sec.  108(b) surety bond language, 
individual sureties would identify percentage limits of their liability 
in the surety bond for which they would each be liable while these 
individual surety limits would sum to the total penal sum of the bond. 
EPA believes that such an arrangement may increase surety bond issuers' 
capacity to collectively cover greater amounts of financial 
responsibility because the surety's level of coverage would not be 
impacted by the potential risk for non-payment by other sureties.
    When multiple sureties issue a single bond, the proposed 
regulations would require that each surety be liable for their 
individual vertical percentage share of the total penal sum of the 
bond. EPA is proposing that the sureties' individual amounts of 
liability be

[[Page 3425]]

specified in the bond as a percentage of the penal sum of the bond. The 
proposed specification would create a vertical relationship whereby a 
surety's liability is not affected by other co-sureties' abilities to 
pay their shares. EPA believes this provides greater protection against 
the insolvency of one of the participating sureties. This approach also 
simplifies the claims process as the exhaustion of one surety's 
liability does not need to be determined before payment can be received 
from another surety. An additional advantage of this proposed structure 
is that sureties would be binding themselves jointly and severally for 
purposes of allowing a joint action(s) against the issuers of the 
surety bond. This would allow for a simpler claims process for 
claimants.
    An alternative EPA considered was proposing that multiple sureties 
could form a tower of coverage comprised of horizontal layers. In such 
an arrangement each surety in the horizontal tower would be agreeing to 
cover its layer of the tower, not a percentage of the total. Those 
sureties higher up the horizontal tower become responsible on a layer-
by-layer basis as the limits of each underlying surety's obligation 
become exhausted. However, EPA is not proposing such an arrangement due 
to several concerns with such an arrangement. First, a horizontal 
arrangement presents the opportunity for sureties covering higher 
coverage layers to avoid liability if a surety on a lower level becomes 
insolvent and cannot cover the liability within its layer. This was a 
concern also identified by the U.S. Coast Guard in development of its 
CERCLA Sec.  108(a) regulations (see 59 FR 34220 (July 1, 1994)). 
Secondly, such an option would raise the administrative burden on EPA 
because EPA would need to ensure that each layer of coverage fits with 
the layers above and below and EPA would also need to ensure that the 
layers contained exhaustion provisions.
    EPA requests comment on the proposed arrangement for allowing 
multiple sureties to execute one bond by identifying their vertical 
percentage share of the penal sum. Specifically, EPA is interested in 
other potential arrangements that may encourage surety participation in 
the program and provide for relatively high amounts of financial 
responsibility coverage yet not overly complicate implementation of the 
claims process.
Written Statements From Attorneys General and Insurance Commissioners 
(Sec.  320.41(d))
    EPA believes a bond written as required under this proposal may 
implicate state insurance law and thus the validity of any such bond 
may depend on state law. This issue has come up in other EPA 
rulemakings including the financial responsibility requirements for 
underground storage tanks containing petroleum (see, for example, 52 FR 
12786, April 17, 1987) and the RCRA Subtitle C third party liability 
requirements (see, for example, 53 FR 33941, September 1, 1988). State 
insurance regulation and law is by and large the purview of the states 
and thus the Agency does not believe it can state with certainty 
whether any particular bond would subject the issuer to state insurance 
law, and whether it would be valid with respect to such law. Similar to 
the way the issue was handled in those programs, EPA is proposing that 
a surety bond may be used to satisfy the requirements of this section 
only if the Attorneys General or Insurance Commissioners of (i) the 
state in which the surety is incorporated, and (ii) each state in which 
a facility covered by the surety bond is located have submitted a 
written statement to EPA that a surety bond executed as described in 
the regulations is a legally valid and enforceable obligation in that 
state. EPA believes that the surety bond would be an important 
compliance option and welcomes comments from state Attorneys Generals 
and Insurance Commissioners on this issue.
Termination of the Bond by the Owner or Operator (Sec. Sec.  320.41(l) 
and 320.50(c))
    The owner or operator would be able to terminate the bond if the 
Administrator has given prior written consent based on his receipt of 
evidence of alternate financial responsibility as specified in Part 320 
or if the Administrator releases the owner and operator from the 
financial responsibility requirements of that part. To assist in 
implementing this requirement the proposed wording of the surety bond 
includes a provision governing the principal's (i.e. the owner's or 
operator's) termination of the bond. The proposed bond language states 
that the principal may terminate the bond by sending written notice to 
the surety(ies), provided however, that no such notice shall become 
effective until the surety(ies) receive(s) written authorization for 
termination of the bond by the Administrator. In this way, the owner or 
operator would not be able to unilaterally terminate the bond without 
the authorization of EPA.

Performance Bond

    In meetings with potential providers EPA was told that sureties 
typically prefer having an option of either performing or paying under 
a bond. EPA considered providing such an option as the Agency believed 
it may encourage greater participation from sureties in the CERCLA 
Sec.  108(b) program as well as potentially allow sureties to conduct 
work in certain cases, which may be more economical than EPA or another 
Federal agency conducting the work itself. Specifically, EPA thought 
that the option of performance could be advantageous in some 
situations, for example, when the surety became liable because an owner 
or operator either did not perform as required by a CERCLA unilateral 
administrative order or failed to perform work as required by a CERCLA 
settlement.
    However, EPA could not determine how to specify a workable 
performance option into the CERCLA Sec.  108(b) surety bond in light of 
some of the features of the rule's framework. Unlike typical 
reclamation and closure programs, CERCLA Sec.  108(b) does not include 
a series of defined and costed-out activities (e.g. closure) which the 
surety guarantees will be completed. In such programs, if the principal 
defaults and the surety elects to perform, the surety is typically 
liable until the defined tasks are all completed. CERCLA Sec.  108(b) 
does not include any pre-defined obligations. Rather, a CERCLA Sec.  
108(b) financial responsibility instrument could be subject to multiple 
claims by a variety of claimants under the various payment scenarios 
over the life of the instrument. Therefore, a very accurate accounting 
of the liability of the surety is necessary with respect to the claims 
paid and the penal sum of the bond. Such accounting would be difficult 
if claims were satisfied by performance as it is not clear how the 
performance should be valued absent a pre-existing accounting of the 
activities to be conducted. Therefore, surety performance would leave 
questions about the remaining value of the bond which would create 
uncertainty around future claims and the availability of financial 
responsibility. Further, as CERCLA Sec.  108(b) financial 
responsibility amounts may be relatively large, EPA anticipates that 
multiple sureties may issue single bonds. This would create even 
greater complexity around coordinating performance and determining the 
remaining value of the bond. In light of these considerations, EPA is 
today

[[Page 3426]]

proposing surety bond language that provides only for payment, not 
performance. EPA requests comment on how EPA could specify a 
performance option in the CERCLA Sec.  108(b) surety bond in light of 
the considerations discussed.
3. Insurance (Sec.  320.42)
    An owner or operator would be able to satisfy the CERCLA Sec.  
108(b) financial responsibility requirements by obtaining insurance for 
CERCLA response costs, health assessment costs, and natural resource 
damages which conforms to the requirements of the regulations. Through 
the policy the insurer agrees to pay for the CERCLA response costs, 
health assessment costs, and natural resource damages associated with 
the facility of the current owners and operators under certain 
circumstances should the current owners or operators fail to do so. 
Each insurance policy would be required to be amended by the attachment 
of a CERCLA Sec.  108(b) insurance endorsement as worded in Sec.  
320.50(d).
Issuer Eligibility (Sec.  320.42(b))
    At a minimum, the insurer would be required to be licensed to 
transact the business of insurance, or eligible to provide insurance as 
an excess or surplus lines insurer, in one or more states. These 
proposed minimum criteria for an insurer providing insurance under the 
regulations are the same as those used under the RCRA Subtitle C 
financial assurance program, which EPA believes have worked well. 
Additionally, these requirements would be familiar to the regulated 
community and implementing EPA staff. EPA believes that such standards 
help assure the integrity of the insurers whose policies are being used 
by owners or operators to meet the financial responsibility 
requirements. EPA believes these qualifications will assure that 
insurers are subject to some regulatory oversight by state insurance 
departments but will still permit broad participation in providing the 
insurance. EPA considered alternative qualifications for providers of 
insurance but is proposing that providers of insurance policies meet 
the requirements described in this section. In making this decision EPA 
attempted to balance the benefit of potentially lower default rates by 
insurers providing insurance under the proposed regulations on the one 
hand, and the potential impact on the supply of instruments and the 
administrative burden on the Agency entailed in verifying providers met 
additional qualifications of these alternatives on the other. For more 
information on alternatives considered, please see the background 
document that addresses instrument provider qualifications.
    EPA also requests comment on allowing owners and operators to 
obtain insurance policies from captive insurers and/or risk retention 
groups. A captive insurer is an insurance company that provides 
insurance primarily or exclusively to its owner(s). A pure captive is 
defined as having only one owner and providing insurance coverage to 
only one corporate entity, whereas a group captive is defined as having 
more than one owner and providing insurance coverage only to members of 
the group. A risk retention group (RRG) is a liability insurance 
company owned by its members (policy holders) and organized under the 
Federal Liability Risk Retention Act.
    EPA is aware that some observers have noted concerns with such 
forms of insurance suggesting that captive insurance and risk retention 
groups may present a higher level of risk than commercial insurance. 
EPA is particularly concerned about the risk that captive insurers may 
present. Specifically, the EPA Inspector General in its 2001 and 2005 
reports on the RCRA financial assurance program has pointed to the 
limited financial independence between the insurer and the owner or 
operator as one source of risk. The OIG, in the 2005 report, explained 
that the financial health of the captive insurer is tied to the parent 
company. Most captive insurance companies are wholly owned 
subsidiaries, so there is a lack of independence between the captive 
and the parent company. If the parent company has financial 
difficulties, then the captive insurer may not have the funds to cover 
the assured costs. (see Office of Inspector General, Audit Report: RCRA 
Financial Assurance for Closure and Post-Closure, Report No. 2001-P-007 
March 30, 2001; and Office of the Inspector General, Continued EPA 
Leadership Will Support State Needs for Information and Guidance on 
RCRA Financial Assurance, Report No. 2005-P-00026, September 26, 2005). 
EPA has concerns that pure captive insurers in particular may offer 
insufficient assurance in the context of CERCLA Sec.  108(b) financial 
responsibility. Pure captive insurance has a limited ability to fulfill 
a basic purpose of insurance: To spread the risks of potential losses 
among multiple parties. In their 2007 report on captive insurance the 
Environmental Financial Advisory Board (EFAB) noted that the greatest 
risk to the solvency of a captive insurer is an infrequent, large 
insurance claim. (See Environmental Financial Advisory Board. The Use 
of Captive Insurance as a Financial Assurance Tool in Office of Solid 
Waste and Emergency Response Programs. March 2007.) This may be the 
very nature of claims for CERCLA response costs, health assessment 
costs, and natural resource damages associated with hardrock mining 
facilities, which can be quite large and difficult to predict with 
certainty, for which the 108(b) financial responsibility instruments 
would be intended to pay.
    EPA believes that risk retention groups may also carry potentially 
higher risk than commercial insurance but may be better suited to 
provide insurance under CERCLA 108(b) than pure captive insurers due to 
their greater ability to spread risk across multiple insureds. Risk 
retention groups were the subject of a 2005 GAO report that identified 
some concerns with risk retention groups. One of the primary concerns 
identified by the GAO was the `patchwork' nature of state regulation 
and oversight of risk retention groups. (See Government Accountability 
Office, Risk Retention Groups: Common Regulatory Standards and Greater 
Member Protections Are Needed, GAO-05-536. August 2005.) Such a 
patchwork regime of state regulation and oversight may allow some risk 
retention groups to operate with limited oversight, including solvency 
regulation.
    EPA also recognizes that allowing insurance policies written by 
captive insurers and risks retention groups may add potential insurance 
capacity. EPA believes insurance is an important financial 
responsibility instrument under CERCLA Sec.  108(b). EPA also 
understands from its discussions with representatives of the commercial 
insurance industry as it developed this proposal that environmental 
insurance policies commonly issued may be narrower in scope than the 
proposed CERCLA Sec.  108(b) requirements. The Agency was also told 
that the scope of the insurance coverage the Agency is proposing to 
require today would likely be viewed as a hybrid between a closure and 
risk transfer policy.\69\ EPA recognizes that a market for this type of 
hybrid coverage thus may not currently exist and may need some time to 
fully develop. EPA believes one benefit of allowing owners and 
operators to purchase policies written by captive insurers and risk 
retention groups may be, at least initially, a deeper market for

[[Page 3427]]

insurance policies to meet the CERCLA Sec.  108(b) regulations. EPA's 
expectations in this respect are strongest for risk retention groups, 
and are informed by the 2005 GAO report, which noted that many 
insurance regulators have commented that risk retention groups have 
filled voids where commercial insurers may not have had a strong 
interest. The report identified medical malpractice insurance as an 
area where risk retention groups were able to provide coverage where 
the availability of affordable commercial insurance was limited. 
Furthermore, EPA's evaluation of markets for financial responsibility 
instruments suggested that risk retention groups may present an 
opportunity for creation of additional capacity to serve the financial 
service needs of the hardrock mining industry. Specifically, the report 
stated RRGs have been able to offer additional capacity to the 
insurance markets to cover volatile, capital-intensive risks like those 
associated with hardrock mining.
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    \69\ A closure policy would assure the performance or 
satisfaction of certain known or foreseeable obligations. A risk 
transfer policy, on the other hand, addresses losses arising from 
fortuitous events (e.g. releases) that may or may not occur.
---------------------------------------------------------------------------

    In light of these tradeoffs between potentially higher risk to 
third-party claimants and taxpayers presented by captive insurers and 
risk retention groups and the possible additional capacity they may 
provide, EPA requests comment on allowing policies written by these 
types of insurers. Specifically, EPA requests comments on allowing 
policies issued by captives or risk retention groups provided the 
issuer had a minimum financial strength rating from A.M. Best or a 
comparable rating from another Nationally Recognized Statistical 
Ratings Organization (NRSRO). EPA believes requiring, at a minimum, 
that captives and risk retention groups have a minimum financial 
strength rating may address some of the concerns associated with these 
types of policies. First, recognizing the limited financial 
independence between the owner or operator and the insurer and that 
captive insurance in particular has some similarities to self-
insurance, a financial strength rating would help to demonstrate that 
the insurer has the financial wherewithal to pay claims on behalf of 
the owner or operator. Secondly, the financial strength rating provides 
an independent and common assessment of the financial strength of the 
insurer and thus may alleviate the concerns of the state-by-state 
variation in oversight and solvency examination the GAO noted with 
respect to risk retention groups. Such a provision would also be 
consistent with one of the findings in the 2007 EFAB report that the 
use of independent credit analysis (i.e., credit ratings) is a cost-
effective mechanism for demonstrating the financial strength of a 
captive insurer and that these ratings help address the limited 
capacity of state regulatory bodies to undertake extensive credit 
analysis.
    The value of a potential rating requirement for a captive insurer 
or risk retention group can also be illustrated by lower historical 
default rates for higher rated insurers. In 2015 AM Best reported \70\ 
that US life/health and property/casualty insurers rated by AM Best 
over the period 1977-2014 with secure ratings had a cumulative three-
year impairment rate of 1.05 percent. The same impairment rate for 
life/health and property/casualty insurers rated by AM Best with 
vulnerable ratings over that time period was 10.45 percent suggesting 
that ratings requirement could meaningfully reduce the impairment risk 
of a risk retention group or captive insurer.
---------------------------------------------------------------------------

    \70\ A.M. Best. Best's Impairment Rate and Rating Transition 
Study-1977-2014. U.S. Property/Casualty & Life/Health. Exhibit 2. Pg 
5. (August 21, 2015)
---------------------------------------------------------------------------

    EFAB also recommended to EPA in its 2007 report on captive 
insurance that in addition to the captive insurer having a minimum 
rating, the financially responsible affiliate (e.g. the owner or 
operator demonstrating financial responsibility with insurance from a 
captive) should also hold a minimum credit rating. EPA requests 
comments on this additional potential requirement for captive insurance 
should captive insurance be allowed in the final rule. EPA believes 
that such a requirement would address some of the concern associated 
with the similarities between pure captive insurance and a financial 
test but would increase the administrative burden on the Agency.
    EPA recognizes, however, that a requirement for a financial 
strength rating would not address all concerns with these instruments. 
These remaining concerns would include: (1) A concern that state 
insurance regulation of captives and risk retention groups may not be 
as uniform as that for commercial insurance and may be limited to only 
the state in which the insurer is chartered; \71\ (2) a concern that 
captives and risk retention groups may not be able to spread risk 
across many insureds given the limitations inherent in for whom they 
can write policies. EPA is therefore seeking comment on these issues, 
and on suggested approaches to address these remaining concerns.
---------------------------------------------------------------------------

    \71\ This concern is one of the concerns identified in the 2005 
GAO report but may not be unique to captive or risk retention groups 
in the context of environmental insurance. Similar to captive 
insurers and risk retention groups, an excess or surplus lines 
insurer must be licensed in the state that serves as its domicile 
and must meet the solvency requirements of that state alone. Excess 
or surplus lines insurers cover difficult to standardize risks which 
often includes environmental insurance and, the Agency anticipates, 
may include CERCLA 108(b) coverage initially due to the relatively 
high dollar limits of liability and high risk facility classes.
---------------------------------------------------------------------------

    For example, EPA requests comment on the concept of allowing 
policies issued by risk retention groups or group captives that met a 
certain minimum rating, but not allowing pure captive insurers to meet 
the CERCLA Sec.  108(b) financial responsibility requirements. The 
rationale for such a distinction would be that risk retention groups 
and group captives may be able to spread risk across a larger pool of 
financially and legally independent policy holders than a pure captive 
insurer that may be restricted to spreading risk amongst its own 
financially-related affiliates. As such, accepting insurance policies 
from risk retention groups or group captives, but not pure captives, 
may address the second concern identified. EPA also requests comment on 
whether insurance policies provided by risk retention groups and group 
captive insurers more generally should be treated equivalently.
    EPA recognizes that a financial strength rating would not 
necessarily be available in the near term as some captive insurers or 
risk retention groups, were they to ultimately be considered acceptable 
issuers, may be newly created in response to these regulations. EPA is 
thus accepting comment on whether, if EPA ultimately allows policies 
written by captives and/or risk retention groups, to phase in the 
ratings requirement. A phased ratings requirement could operate by 
requiring that owners and operators provide evidence of the requisite 
financial strength of a captive insurer or risk retention group 
beginning five years after the effective date of the rule. In this way, 
a rating agency would be able to review a multi-year track record of 
the insurer's performance which may be necessary in order to accurately 
rate the insurer.
Submission of Endorsement (Sec.  320.42(c))
    Typically, financial responsibility regulations require submission 
of either a certificate of insurance or an endorsement as evidence of 
the required insurance coverage. A certificate of insurance is a form 
that typically is completed by an insurance broker or agent at the 
request of an insurance

[[Page 3428]]

policyholder, which evidences the fact that an insurance policy has 
been written. An endorsement to an insurance policy is a valid and 
binding part of the contract considered to be part of the insurance 
contract. EPA is today proposing that an endorsement be submitted as 
evidence of financial responsibility by owners and operator that choose 
to obtain insurance coverage as the means of complying with the CERCLA 
Sec.  108(b) insurance requirements. Specifically, the owner or 
operator would be required to submit a signed duplicate original of the 
CERCLA Sec.  108(b) financial responsibility endorsement to the 
Administrator, or to regional delegees of the Administrator, if 
applicable, if the endorsement covers facilities located in multiple 
regions. For more information on the required wording of the 
endorsement and alternatives considered please see the discussions 
later in this preamble, and the background document ``Potential 
Requirements for Insurance, Surety Bonds, Letters of Credit and Trust 
Agreements and Standby Trust Agreements under CERCLA Sec.  108(b)'' 
regarding instrument specifications.
    In discussions with representatives of the insurance industry, EPA 
was told by the participating representatives that they were 
indifferent between a certificate of insurance and an endorsement as 
the form of the evidence of financial responsibility. EPA did not want 
to require the whole policy be submitted in all cases and is thus today 
proposing that an endorsement be submitted as evidence of financial 
responsibility. Other financial responsibility programs specify either 
certificates, endorsement or both. In order to reduce the complexity of 
the proposed regulations and provide a narrower range of documents EPA 
would need to review during implementation, the Agency is proposing an 
endorsement be submitted. Further, because an endorsement is part of 
the insurance contract itself, it may provide greater certainty with 
respect to the insurance coverage provided by the policy than a 
certificate of insurance.
Requirements To Ensure Continuity of Financial Responsibility Coverage 
(Sec. Sec.  320.42(f)(k) and (l))
    An owner or operator using insurance to satisfy the requirements of 
this section would also be required to establish a standby trust and 
update Schedule A of the trust agreement within sixty days of a change 
in the amount of CERCLA Sec.  108(b) financial responsibility. Similar 
to the requirements for the letter of credit and surety bond, the 
standby trust is being required alongside the insurance instrument to 
ensure continued coverage, in conjunction with the automatic renewal 
provision of the policy and the potential liability of the insurer if 
the owner or operator does not obtain replacement financial 
responsibility. EPA's concern is that an insurance policy might be 
cancelled, not renewed or otherwise terminated leaving no financial 
responsibility in place for the payment of valid third-party CERCLA 
claims. EPA is especially concerned that policies may be cancelled, 
terminated or otherwise not renewed following the issuance of a notice 
letter of potential liability for the release of hazardous substances 
or marked financial decline of the owner or operator, and financial 
responsibility may not be in place when a claim is made. Amplifying 
these concerns is the recognition that the CERCLA processes leading to 
a claim (e.g. cost recovery) may be lengthy, which may make it 
particularly difficult to ensure continuity of CERCLA Sec.  108(b) 
insurance coverage without these requirements.
    As a result, in addition to the requirement to establish a standby 
trust, EPA is proposing an automatic renewal provision. Specifically, 
EPA is proposing that the endorsement provide that cancellation, 
failure to renew, or any other termination of the insurance by the 
insurer will be effective only upon written notice to the owner and 
operator and the Administrator by certified mail and only after the 
expiration of 120 days beginning with the date of receipt of the notice 
by both the Administrator and the owner or operator, as evidenced by 
the return receipts. Such an automatic renewal provision in the policy 
would be required to provide the insured with the option of renewal at 
the face amount of the expiring policy. In this way, insurance coverage 
could only lapse after 120 days' notice providing the owner and 
operator an opportunity to obtain replacement financial responsibility.
    The cancellation and termination language in the endorsement 
proposed today was intended to closely follow the language used in the 
RCRA Subtitle I insurance endorsement for underground storage tank 
financial responsibility. A 2004 court decision held that those 
regulations preclude rescission as a remedy for misrepresentation and 
provide only for prospective cancellation of the insurance.\72\ EPA is 
concerned that at the time a claim was made against a CERCLA Sec.  
108(b) insurance policy, rescission (retrospective cancellation) of the 
policy due to misrepresentation of the insured, would result in the 
financial responsibility being unavailable and leave valid claims 
unsatisfied. EPA recognizes the public policy merits of protections to 
insurers in the event of misrepresentation. However, in the CERCLA 
Sec.  108(b) context, EPA would not have access to the owner or 
operator's application for insurance and any investigations into 
misrepresentations or omissions would potentially be burdensome to the 
Agency and redirect resources away from cleanups and other programmatic 
priorities. EPA believes that the insurer is in the best position to 
conduct investigations as to the accuracy of the information provided 
in the application for insurance and thus should retain the risk from 
misrepresentation rather than any CERCLA claimants. EPA's intent today 
is to preclude rescission of the insurance coverage as a remedy for 
misrepresentation and instead provide that prospective cancellation, 
non-renewal or other termination of the insurance are the sole 
remedies. EPA requests comment on this proposed provision and 
endorsement language.
---------------------------------------------------------------------------

    \72\ See: Zurich Am. Ins. Co. v. Whittier Props., Inc., 356 F.3d 
1132 (9th Cir. 2004).
---------------------------------------------------------------------------

    Finally, the endorsement would be required to specify that in 
instances where the owner or operator fails to obtain alternate 
financial responsibility and obtain written approval of such alternate 
financial responsibility from the Administrator within ninety days 
after receipt by both the owner or operator and the Administrator of a 
notice from the insurer that it has decided to cancel, not renew or 
otherwise terminate the insurance policy, the insurer would be liable 
up to the face value of the policy for payment into the standby trust 
in accordance with the terms of the endorsement. EPA believes the 
combination of the requirements for a standby trust, a notice of 
cancellation, failure to renew or other termination of the policy and 
the insurers potential liability if the owner or operator did not 
obtain alternate financial responsibility would provide assurance to 
EPA and other claimants that funds will be available to make payment 
for CERCLA response costs, health assessment costs, and natural 
resource damages as required under the proposal. This requirement would 
be similar to those for owners and operators using letters of credit or 
surety bonds. This arrangement, and the similar provisions for other 
proposed instruments, as well as alternatives are

[[Page 3429]]

discussed in more depth in the preamble section headed `issuer 
cancellation provisions.'
    A notable feature of the issuer cancellation provision proposed 
today for insurance is how failure to pay the premium would be treated. 
Under this proposed rule, if failure to pay the premium was the 
rationale for the insurer's decision to cancel, not renew, or otherwise 
terminate the policy, the insurer would be liable on the policy to fund 
a standby trust if the owner or operator failed to obtain alternate 
financial responsibility and obtain written approval of such alternate 
financial responsibility from the Administrator within ninety days 
after receipt by both the owner or operator and the Administrator of 
the notice of the insurers intent to cancel, not renew, or otherwise 
terminate the policy. EPA believes that this is the appropriate 
treatment of the insured's failure to pay the premium. EPA believes 
that the instances in which the owner or operator is unable to pay the 
premium are likely instances where financial responsibility coverage is 
most needed as the owner's or operator's ability to satisfy valid 
third-party CERCLA claims is likely limited. EPA believes one of the 
benefits of CERCLA Sec.  108(b) is that the credit risk of the owners 
and operators of facilities managing hazardous substances can be 
transferred from the taxpayer and other third-party CERCLA claimants to 
the insurance and financial responsibility providers better able to 
manage, assess and make arrangements for such credit risks.
    One alternative option would be to allow cancellation in the event 
of the insured's failure to pay the premium, without potential insurer 
liability. While, for the reasons discussed earlier, EPA is not 
proposing such an arrangement, the Agency requests comments on this 
alternative and the proposed treatment of failure to pay the premium on 
the part of the insured.
Payment for Third-Party CERCLA Claims From the Insurance (Sec. Sec.  
320.42(h) Through (j) and (l) and Sec.  320.50(d))
    Under the proposed regulations the insurance would provide for 
payment to third-party CERCLA claims with three payment triggers in 
addition to providing for direct action as provided by CERCLA. EPA 
anticipates these four payment scenarios would operate independently of 
each other. These payment scenarios are the same as for the other 
instruments and are discussed more fully in section VI.B.5. of this 
preamble.
    The policy would be required to provide for the payment awarded in 
final court judgments from a Federal court against any of the current 
owners and operators awarding CERCLA response costs, health assessment 
costs, and/or natural resource damages associated with the facility to 
the party obtaining the judgment should such payment not be made within 
thirty days.
    The policy would be required to provide for payment as required by 
a CERCLA settlement associated with the facility between any of the 
current owners or operators at the facility and EPA or another Federal 
government agency should the payment as required by the settlement not 
be made.
    The policy would also be required to provide for payment into a 
trust fund established pursuant to a CERCLA unilateral administrative 
order issued to any of the current owners or operators at the facility 
by EPA or another Federal agency in instances where performance at the 
facility as required by the order does not occur. The owner or operator 
must have provided a written statement allowing the insurance policy be 
used to assure performance of the work required in the order.
    In addition to the three proposed payment scenarios identified for 
which EPA intends to provide insurance coverage, the proposed CERCLA 
Sec.  108(b) insurance would also be required to provide for direct 
action against the insurer in instances identified in CERCLA Sec.  
108(c)(2). Specifically, the proposed required wording of the CERCLA 
Sec.  108(b) insurance endorsement includes language stating that in 
the case of a release or threatened release of (a) hazardous 
substance(s) from a facility covered by the policy, the insurer 
acknowledges that any claim authorized by CERCLA Sec. Sec.  107 or 111 
may be asserted directly against the insurer as provided by CERCLA 
Sec.  108(c)(2). The endorsement would also state that the insurer 
consents to suit with respect to these claims subject to the 
limitations in CERCLA Sec.  108(d), and that the insurer will be 
entitled to all rights and defenses provided to guarantors by CERCLA 
Sec.  108(c). Further, under the proposed terms of the endorsement the 
insurer would provide notice of any such resulting claims and payments 
to the Administrator. EPA believes this notification requirement is 
valuable as the owner and operator may not be available to provide such 
a notice of payments or claims in a direct action scenario yet EPA 
wishes to remain informed of claims against the instrument and the 
value of the financial responsibility.
General Performance Clause (Sec.  320.50(d))
    The proposed insurance endorsement language includes a general or 
blanket performance clause as a means to address the myriad number of 
ways the scope of insurance coverage provided by an insurance policy 
may be limited. EPA recognizes that the ability to tailor insurance 
coverage to the specific needs of the insured is one of the virtues of 
insurance contracts; however, the Agency believes that in the context 
of statutorily required financial responsibility such limiting 
provisions of the policy may conflict with the intended scope of the 
financial responsibility coverage and may frustrate the realization of 
the public policy goals. Environmental insurance policies can be long, 
complex contracts that operate as a whole to define and restrict the 
coverage provided.
    EPA believes it is necessary to propose a performance clause in the 
language of the endorsement that would amend any terms of the policy 
inconsistent with the regulatory requirements for CERCLA Sec.  108(b) 
insurance or the terms specified in the endorsement. Similar 
performance clauses are employed in the certificate of insurance 
required as evidence of financial assurance for closure and post-
closure care of hazardous waste facilities in the RCRA Subtitle C 
program (see 40 CFR 264.151(e)) and in the required wording of the 
endorsement used in the RCRA Subtitle C third-party liability program 
(see 40 CFR 264.151(i)). EPA believes that the proposed performance 
clause in the endorsement will provide EPA evidence of financial 
responsibility submitted by owners and operators electing to use 
insurance without necessitating EPA review of the entire insurance 
policy. Without such a provision, the administrative burden involved 
with reviewing insurance submissions would be significantly higher and 
may require expertise not readily available within EPA.
    The proposed performance clause states that the insurance afforded 
with respect to the covered facilities is subject to all of the terms 
and conditions of the policy; provided, however, that any provision, 
exclusion, definition, condition, retroactive date, clause, defense, or 
other term of the policy inconsistent with 40 CFR 320.42 or certain 
identified required specifications in the endorsement are hereby 
amended to conform with 40 CFR 320.42 and the required specifications 
in the endorsement. EPA intends for the performance clause to

[[Page 3430]]

help ensure that financial responsibility coverage will continue and 
that the insurer will satisfy valid third-party CERCLA claims as 
intended by the proposed regulations. In light of the fact that 
insurance policies are often long, complex documents that may include 
numerous exclusions, definitions, conditions, or other terms that may 
undercut the intended coverage, EPA requests comment on the proposed 
performance clause in the CERCLA Sec.  108(b) insurance endorsement. 
Furthermore, EPA is interested in comments as to whether or not the 
proposed insurance specifications, including the performance clause, 
will reliably provide for the intended coverage (e.g. payment under the 
scenarios described in IV B 5 ``General Provisions for Instrument 
Payment'' of the preamble).
Retroactive Dates (Sec.  320.50(d))
    The most notable aspect of the proposed performance clause may be 
the specification that any retroactive date \73\ contained in the 
policy inconsistent with the intended scope of CERCLA Sec.  108(b) 
financial responsibility coverage is amended to conform with the 
regulatory specifications and the terms of the endorsement. EPA 
believes that such a specification is necessary to effectuate the 
purpose of CERCLA Sec.  108(b) and has public policy merits. CERCLA 
Sec.  108(c)(2) provides a cause of action against insurers providing 
CERCLA Sec.  108(b) coverage in certain instances for any claim 
authorized by CERCLA Sec. Sec.  107 or 111. CERCLA's liability scheme 
is established in CERCLA Sec.  107 and is retroactive and includes 
costs incurred addressing the threat of a release. EPA believes a 
retroactive date would be inconsistent with the intended scope of 
CERCLA Sec.  108(b) financial responsibility which is intended to cover 
the full suite of potential CERCLA liabilities including threatened 
releases, which could be a significant driver of costs and risk and may 
exist at many facilities subject to CERCLA Sec.  108(b) financial 
responsibility requirements.
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    \73\ The ``retroactive date'' or ``continuity date'' 
(terminology varies) establishes the foregoing temporal limits of 
insurance policies: Pollution conditions commencing before the 
specified date are not covered, even if a claim about such a 
pollution condition is first made during the policy term.
---------------------------------------------------------------------------

    This issue relates to the concept of CERCLA Sec.  108(b) presenting 
a hybrid risk from the viewpoint of insurers mentioned earlier. In 
discussions with representatives of the insurance community, EPA was 
informed that the scope of a CERCLA response cost is broad and has 
elements suited to risk transfer policies that commonly have 
retroactive dates (e.g. costs incurred responding to fortuitous 
releases) and closure insurance that typically would not have a 
retroactive date (e.g. costs incurred responding to the threat of 
release). EPA recognizes that for this reason, the CERCLA Sec.  108(b) 
financial responsibility scope of coverage may, at least initially, be 
perceived as an unfamiliar or hybrid risk by insurers yet believes that 
allowing retroactive dates inconsistent with intended scope of coverage 
could result in many valid third-party CERCLA claims being unsatisfied 
on the basis that the pollution condition pre-dated the retroactive 
date of the policy. EPA requests comment on the performance clause and 
in particular the proposed language amending any retroactive dates 
inconsistent with the scope of coverage prescribed by the regulations.
    One possible arrangement that representatives from the insurance 
community offered was to separate the financial responsibility 
requirements into two separate obligations. Such an arrangement for 
CERCLA Sec.  108(b) would allow EPA to specify an appropriate 
retroactive date for the fortuitous risks and not have one for the more 
``known'' CERCLA response and health assessment costs. In the RCRA 
Subtitle C financial assurance program EPA was able to specify separate 
instruments for known costs (e.g. closure) and third-party liability 
financial assurance which is more fortuitous in nature. However, such a 
construct is not possible in the case of CERCLA Sec.  108(b) financial 
responsibility. Because CERCLA Sec.  108(b) financial responsibility 
does not support a permitting program EPA cannot establish, by 
regulation, performance requirements for owners and operators subject 
to the rule (e.g. closure requirements that might address a threat of 
release) which would be the basis for a separate amount of financial 
responsibility. Further it is important to recognize that the 
determination of a CERCLA Sec.  108(b) financial responsibility amount 
does not constitute a determination of CERCLA liability for regulated 
entities or establish any presumptive remedy which could be the basis 
of an amount for costs amenable to a closure policy. This is one of the 
reasons why CERCLA Sec.  108(b) financial responsibility is inherently 
different from financial responsibility that complements reclamation 
and closure programs. Given the uncertainty around what Superfund 
actions may ultimately be required at a facility, EPA believes it 
unwise to establish different pots of money. Such an approach would 
only be optimal in instances where there is established certainty that 
particular actions will need to take place at a facility (e.g. in a 
program with regulatory requirements for closure or post-closure).
Multiple Insurers (320.42(d))
    EPA is proposing that up to four insurers would be able to provide 
the required amount of CERCLA Sec.  108(b) financial responsibility at 
a single facility. EPA expects the required amounts of CERCLA Sec.  
108(b) financial responsibility may be relatively large and wishes to 
provide this flexibility. The proposed endorsement language would 
require that the participating insurers identify their percentage share 
of the coverage at facilities covered by the policy and the 
corresponding dollar value of that percentage share.
    The proposed arrangement for allowing multiple insurers to cover a 
single facility is consistent with the proposed arrangement for 
multiple sureties with a few exceptions. As described in the surety 
bond section of the preamble, the proposed language of the surety bond 
requires sureties to bind themselves jointly and severally for purposes 
of allowing a joint action(s) against the issuers of the surety bond, 
but allow for payment based on pre-determined proportions of the penal 
sum (several liability). Unlike in the case of surety bonds where such 
a provision has a great deal of precedent, such a provision for 
insurers participating in vertical towers of coverage is less common in 
the financial assurance programs EPA reviewed. As a result, EPA is 
proposing that participation by multiple insurers be limited to four 
insurers to ensure a manageable claims process. The U.S. Coast Guard 
included the same cap on the number of participating insurers (59 FR 
34220 (July 1, 1994)). EPA does not want to create a scenario whereby 
claimants need to take action against many insurers which would 
complicate the claims process and create a protracted process for the 
satisfaction of valid claims. EPA requests comment on this limitation. 
Specifically, EPA is interested in comments as to whether, in instances 
where multiple insurers provide coverage at a single facility, 
requiring participating insurers to bind themselves jointly and 
severally for the purposes of allowing a joint action(s) against the 
group of insurers would be possible and how such a provision might best 
be specified.
    When multiple insurers do provide coverage at a single facility, 
the

[[Page 3431]]

proposed regulations would require that each insurer be liable for 
their individual vertical percentage share of the total CERCLA Sec.  
108(b) financial responsibility amount. The proposed specification 
would create a vertical relationship whereby an insurer's liability is 
not affected by the other insurers' abilities to pay their shares. EPA 
believes this provides greater protection against the insolvency of one 
of the participating insurers. The U.S. Coast Guard also restricted 
multiple insurers to only providing vertical towers of coverage.\74\ 
This approach also simplifies the claims process as the exhaustion of 
one insurer's liability does not need to be determined before payment 
can be received from another insurer.
---------------------------------------------------------------------------

    \74\ See 33 CFR 138.80(c)(1)(i).
---------------------------------------------------------------------------

    An alternative EPA considered was proposing that multiple insurers 
could form a tower of coverage comprised of horizontal layers. In such 
an arrangement each insurer in the horizontal tower would be agreeing 
to cover its layer of the tower, not a percentage of the total. Those 
insurers higher up the horizontal tower become responsible on a layer-
by-layer basis as the limits of each underlying policy become 
exhausted. However, EPA is not proposing such an arrangement due to 
several concerns. First, a horizontal arrangement presents the 
opportunity for insurers covering higher coverage layers to avoid 
liability if an insurer on a lower level becomes insolvent and cannot 
cover the liability within its layer. This is a concern also identified 
by the U.S. Coast Guard when it developed its CERCLA Sec.  108(a) 
regulations.\75\ Secondly, such an option would raise the 
administrative burden on EPA because the Agency would need to ensure 
that each layer of coverage fits with the layers above and below by 
ensuring the insurance included the necessary ``follow form'' 
provisions.\76\ Further, EPA would also need to ensure that the layers 
contained ``drop down'' provisions to address exhaustion issues that 
might arise as a result of insolvency of an underlying insurer.\77\
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    \75\ See 59 FR 34220 (July 1, 1994).
    \76\ A ``follow form'' provision means that the excess insurer 
agrees to abide by the terms of the primary or underlying 
policy(ies) to the extent that the excess policy does not contain a 
conflicting parallel term. The intent of an EPA requirement for such 
a provision would be to eliminate coverage gaps that may arise when 
excess policies do not ``follow form'' of underlying policies. For 
example, a gap may arise when the primary policy covers gradual 
pollution but the excess policy does not.
    \77\ An exhaustion provision states that an excess layer of 
coverage cannot be triggered until all primary and underlying layers 
have been exhausted. Problems in accessing excess layers can arise 
when either the insured or an underlying insurer cannot pay due to 
insolvency. A ``drop down'' specification can address the situation 
of insolvency on the part of an underlying insurer, although other 
terms and conditions in the excess policy will affect whether the 
coverage will drop down.
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    EPA requests comment on the proposed regulatory provision allowing 
up to four insurers to provide coverage at one facility by identifying 
their vertical percentage share of the total CERCLA Sec.  108(b) 
financial responsibility amount in the submitted endorsement. 
Specifically, EPA is interested in other potential arrangements that 
may encourage insurer participation in the program and provide for 
relatively high amounts of financial responsibility coverage yet not 
overly complicate implementation or the claims process.
Termination of Insurance Coverage by the Owner or Operator (Sec.  
320.42(n) and (p))
    The owner or operator would be required to maintain the insurance 
in full force and effect until the Administrator consents to 
termination of the insurance by the owner or operator. The 
Administrator would give written consent to the owner or operator that 
he or she may terminate the endorsement when: (1) An owner or operator 
substitutes alternate financial responsibility as specified in this 
section; or (2) the Administrator releases the owner or operator from 
the requirements of this section in accordance with Sec.  320. 26. This 
provision is intended to ensure that the coverage of the financial 
responsibility does not cease, and that funds remain available when 
needed, until the release provisions are met or alternate financial 
responsibility is provided.
4. Financial Test (Sec.  320.43)
a. Overview and Introduction
    CERCLA Sec.  108(b) (2) provides that financial responsibility may 
be established by any one, or any combination of, the instruments 
listed in that paragraph, including ``qualification for self-
insurance.'' A financial test is a financial responsibility instrument 
that allows an owner or operator to qualify for self-insurance by 
demonstrating that it has sufficient financial strength to meet its 
environmental obligations. When allowing the use of a financial test, 
the Government accepts the facility's demonstration of financial 
strength as the only assurance that the owner or operator will meet its 
environmental obligations, and does not require that it establish a 
trust fund or obtain additional security in the form of a third-party 
financial instrument, such as insurance, a surety bond, or letter of 
credit.
    The Agency is co-proposing two separate regulatory approaches in 
the form of options regarding the use of a financial test to assure 
that this important issue is thoroughly considered before the Agency 
makes a decision in the final rule. The Agency is proposing, under 
Option 1, not to allow the use of a financial test or corporate 
guarantee, and is proposing under Option 2 allowing the use of a credit 
rating-based financial test and corporate guarantee. At this time, EPA 
prefers Option 1. However, the Agency is proposing both options to 
fully evaluate this issue, and to gather as much information as 
possible to inform its ultimate decision on whether the financial test 
and corporate guarantee mechanisms are appropriate for use by hardrock 
mining facilities under CERCLA Sec.  108(b). EPA has identified, and 
presented in this preamble discussion, a number of factors that the 
Agency will consider in making its final decision, and seeks public 
comment on these factors, as well as additional information from the 
public that could inform the Agency's final decision.
    By replacing the requirement to obtain a third-party instrument 
with a demonstration of financial strength, the financial test results 
in significant cost savings to eligible owners or operators, from not 
having to purchase a third-party financial responsibility instrument. 
However, by allowing a financial test, EPA would accept the risk that, 
if the company's financial situation deteriorates and it cannot obtain 
a third-party instrument or fund a trust fund to meet its environmental 
obligations, the costs of addressing the environmental risk at the 
facility could fall to the public. With the added layer of a third-
party financial responsibility instrument, however, the risk of default 
to the public would be lessened by the financial strength of the 
instrument provider. Nonetheless, EPA recognizes that the risk of 
default exists regardless of the type of financial responsibility 
instrument. For example, even in the case of secured financial 
responsibility instruments, the possibility remains that the banks and 
insurance companies underwriting these instruments could also fail. 
Regardless of the scenario, with or without a financial test, EPA and 
the public are not without some risk of having to cover such 
obligations.
    EPA also is carefully considering the elements of the financial 
test. Financial tests can vary in approach and in sensitivity. The 
combination of terms

[[Page 3432]]

and conditions impacts the balance of cost savings to the regulated 
community and the risk to the public, as well as a test's efficacy. 
Thus for example, bond ratings and financial ratios are commonly used 
measures of financial strength in financial tests. For bond-rating-
based tests, establishing a lower minimum rating(s) requirement for 
self-insurance, can expand the availability of the test to the 
regulated community. At the same time, such entities with lower credit 
ratings also possess a higher likelihood of defaulting on their 
obligations. Thereby, permitting less credit worthy companies the 
ability to use the financial test increases the chance that an 
obligation may go unpaid and be borne by the public.
    Further, the financial strength of an owner or operator as measured 
by a financial test represents a snapshot in time. Thus, for a 
financial test to be effective, the owner or operator must provide 
periodic evidence that it continues to pass the financial test and that 
it can meet the costs associated with its facility over time. For a 
financial test to be effective: (1) The financial test must accurately 
reflect the financial strength of the owner or operator; (2) the Agency 
and/or owners and operators must identify when the owner or operator no 
longer qualifies for self-insurance under the financial test; (3) the 
owners or operators that no longer qualify for the financial test must 
be able to quickly obtain an alternate instrument(s) to cover their 
obligations instead of self-insuring; and (4) the requisite instruments 
must in turn be available to such owners and operators who no longer 
are able to self-insure. The Agency is concerned, however, that third-
party financial instruments may not be available to a company that is 
experiencing a period of financial hardship. While, in general, such an 
issue has not been a widespread problem in other EPA financial 
responsibility programs, the Agency is concerned that the highly 
cyclical, capital-intensive nature of the mining industry may present 
unique challenges under a CERCLA Sec.  108(b) rule for hardrock mines.
    There are several other broader considerations with respect to the 
adoption of a financial test. First, EPA has concerns regarding the 
extent to which sufficient resources and expertise will be available to 
implement a financial test under CERCLA Sec.  108(b). Second, EPA has 
policy concerns about: (1) Whether offering a financial test would 
adversely affect the incentives created by the rule for better 
practices; (2) the potential inequity of offering a test due to the 
advantage that the test may create for larger versus smaller owners and 
operators; and (3) whether, given the potentially significant costs 
associated with Superfund liabilities, should the financial test fail 
as an instrument, these costs may not be paid or may fall to the 
taxpayer to pay. All of these considerations are discussed elsewhere in 
the preamble. The Agency remains extremely concerned regarding the boom 
and bust nature inherent to the hardrock mining industry and recent 
volatility in commodity prices and global markets. History suggests 
that the increased risk of default for these companies makes this 
sector particularly problematic from the perspective of allowing them 
to self-insure through a financial test. Finally, many hardrock mining 
facilities require long-term care, such as long-term water treatment of 
acid mine drainage. Allowing owners or operators to self-insure where 
such long-term liabilities are anticipated may be ill-advised given 
that some sites require treatment into perpetuity. It should be noted 
that, although EPA currently allows the use of a financial test under 
various agency programs,\78\ other agencies have chosen not to allow 
the use of a financial test for owners and operators in the mining 
sector.79 80 81 EPA discusses all of these factors in the 
following sections of this preamble.
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    \78\ The financial test is an allowable instrument under RCRA 
Subtitle C, Subtitle D, and Subtitle I regulations, as well as under 
the Underground Injection Control (UIC) program.
    \79\ See 43 CFR Sec.  3809.570(a) through (c) related to self-
insurance and pre-existing self-bonds under BLM regulation.
    \80\ See U.S. Forest Service, Forest Service Manual Sec. Sec.  
2817.24; 6562 (2008).
    \81\ For example, the Federal agency that regulates surface 
mining of coal recently advised states to not allow self-insurance 
by mining companies and also announced that it was changing the 
federal rules regarding self-insurance under the Surface Mining 
Control and Reclamation Act (SMCRA).
    See: http://www.eenews.net/eenewspm/stories/1060041689
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b. Option 1--No Financial Test (Preferred Option)
    Under this option, which EPA prefers, the Agency is proposing an 
approach under which a financial test would not be available for use by 
hardrock mining facilities subject to this rule. Under this approach, 
owners or operators could demonstrate financial responsibility only by 
using a trust fund, insurance, a letter of credit, or a surety bond, or 
a combination of those instruments. A corporate guarantee, which is 
based on the financial test, would not be available. EPA is proposing 
this option as a preferred option based on a number of factors. Covered 
initially are four broader factors of concern regarding the 
appropriateness of financial tests under CERCLA Sec.  108(b). Further 
discussion follows that also outlines factors for why the use of any 
financial test would be particularly problematic for the hardrock 
mining industry. (1) Concerns regarding the use of a financial test 
under CERCLA Sec.  108(b).
    The Agency considered several concerns regarding the use of a 
financial test under this proposed rule. The Agency first considered 
the work involved in overseeing a financial test in the context of 
CERCLA Sec.  108(b). EPA is particularly concerned about the 
administrative burden of a test under CERCLA Sec.  108(b) given the 
freestanding nature of the CERCLA Sec.  108(b) obligation that would 
not be buttressed by a permitting program. Observers, more generally, 
have commented that the financial test poses additional administrative 
burden. For example, in a 2001 audit of the RCRA Subtitle C financial 
assurance program, the Agency's OIG reported that financial tests pose 
unique administrative complexities that raise their implementation 
burden.\82\ In 2005, when GAO was tasked with identifying obstacles to 
full realization of the ``polluter pays'' principle, GAO observed that 
financial tests and corporate guarantees are among the instruments that 
pose the greatest financial risk to the Government and are an 
administrative burden since they require specialized expertise to 
oversee.\83\ The Agency is considering whether the unique 
characteristics of the CERCLA Sec.  108(b) financial responsibility 
program and of the hardrock mining industry may increase the 
administrative burden of implementing a financial test, and make the 
use of a financial test less appropriate under this proposed rule than 
under other Agency programs. EPA solicits comment on this issue.
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    \82\ See EPA Office of Inspector General. RCRA Financial 
Assurance for Closure and Post-Closure. March 30, 2001. 2001-P-007.
    \83\ See Government Accountability Office. Environmental 
Liabilities: EPA Should Do More to Ensure That Liable Parties Meet 
Their Cleanup Obligations. August 2005. GAO-05-658.
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    As discussed earlier, successful use of a financial test requires 
adequate oversight by the regulatory agency to assure that financial 
submissions are accurate and adequate, and that when owners or 
operators no longer meet the requirements of the financial test they 
secure an alternative financial responsibility instrument in a timely 
manner. Generally, where a financial responsibility requirement is tied 
to a permit, EPA has ongoing oversight of the owners or operators of 
the facility,

[[Page 3433]]

which supports implementation of a financial test at that facility. For 
example, under EPA's RCRA Subtitle C regulations for permitted 
hazardous waste treatment, storage, or disposal facilities, EPA 
receives extensive information about the facility in its permit 
application under 40 CFR part 270, and conducts regular and detailed 
inspections of the facility, including both the physical operations and 
financial assurance information required under the permit. As described 
earlier, however, CERCLA Sec.  108(b) is an independent financial 
responsibility requirement that is not associated with a permit 
program, so the Agency may have less immediate access to information 
regarding the current status of the facility.
    The Agency has attempted to address some of these concerns by 
structuring the proposed financial test to reduce implementation 
concerns, for example, by including reliance on credit rating. (This 
issue is discussed in section VI.C.4. of this preamble). However, even 
with the proposed financial test, the Agency would still be required 
to, at a minimum, verify the credit ratings, and to annually review 
financial submissions to assess whether the company meets other test 
requirements, such as coverage multiple requirements \84\ related to a 
company's tangible net-worth and the value of their U.S. Assets. This 
review is potentially complex and may require a level of financial 
expertise not readily available in all ten EPA Regional Offices. For 
example, the data in the Chief Financial Officer (CFO) letter \85\ may 
vary from the latest annual financial statements. Professional judgment 
may be needed to evaluate deviations between the CFO letter and audited 
statements, which increases the administrative burden and the demand 
for technical expertise to implement the financial test.
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    \84\ In this proposal, an owner or operator eligible to use this 
financial test for any portion of its CERCLA Sec.  108(b) 
obligations also would be subject to a coverage multiple requiring 
them to have both a tangible net worth and U.S. Assets each 
equivalent to at least six times the amount of environmental 
obligations covered by a financial test. The U.S. Asset requirements 
could also be met by demonstrating that at least ninety percent of 
total assets are located in the United States.
    \85\ To demonstrate passage of the financial test, owners or 
operators would be required to annually submit a standardized letter 
to the Administrator signed by its CFO.
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    In addition, the efficacy of the financial test proposed under 
Option 2 depends on the accurate and accessible accounting of covered 
environmental obligations company-wide to meet the U.S. assets and 
tangible net worth coverage multiple requirements. These requirements 
will be implemented by EPA Regional offices, but the co-proposed 
financial test includes nationwide obligations as part of the 
calculation, to ensure effectiveness of the test. This may necessitate 
verification of information located in another region or held by 
another agency or state entity, which could be a very timely and costly 
process.
    The Agency has found implementation of a financial test under other 
Agency financial responsibility programs to present challenges. EPA is 
concerned that under CERCLA Sec.  108(b), without the structure of a 
permit program and the level of interaction and knowledge of site 
conditions that it provides, it may be even more challenging to 
successfully oversee and implement.
    Second, EPA is concerned that the use of a financial test may limit 
the realization of one of the potential benefits of this rule--the 
development of better mining practices. EPA believes that this is an 
important impact of this proposed rule. As explained in the discussion 
of the financial responsibility formula, EPA has built such incentives 
into that aspect of the rule. Those incentives are reinforced by the 
effect that an owner or operator adopting sound practices can be 
expected to be able to purchase an instrument from a third party, for a 
reduced amount of coverage and at a reduced cost. Similarly, some 
third-party providers may encourage owners and operators to adopt safer 
practices as well. However, with a financial test, so long as the owner 
or operator can meet the test requirements and avoid the need to obtain 
third party coverage, the cost savings incentive to implement improved 
practices may be lost, along with the associated risk reductions they 
would afford. Therefore, the Agency believes that providing a financial 
test under this proposed rule could reduce salutary effects of the 
rule. Further, because financial tests are available to the owners or 
operators that are best able to bear the costs, this reduced incentive 
affects the owners or operators in the best position to invest in 
improved practices.
    Third, the Agency is further concerned that because of the 
potentially high costs associated with Superfund liabilities, 
particularly from hardrock mining facilities, and the potential for 
such costs falling to the taxpayer should the financial test fail, it 
might not be an appropriate instrument for use under CERCLA Sec.  
108(b). Under the proposed rule, owners or operators would be required 
to establish and maintain financial responsibility to cover all CERCLA 
Sec.  107 liabilities at their facilities--response costs, natural 
resource damages, and health assessment costs.\86\ In many Superfund 
cases, and particularly in the case of hardrock mining facilities, 
these costs can be quite high. Thus as noted in the introductory 
discussion, use of a financial test for such large amounts presents a 
larger risk to the public should cases arise where the financial test 
fails to be effective.
---------------------------------------------------------------------------

    \86\ Facilities with obligations under other statutes will be 
separately responsible for meeting the financial assurance 
requirements, such as those under RCRA Subtitle C and Underground 
Injection Controls (UIC) programs.
---------------------------------------------------------------------------

    Finally, because the financial test co-proposed in this rule is by 
design only available to the owners or operators best able to bear the 
costs, the Agency recognizes that allowing the use of a financial test 
in this rule would provide an economic advantage (in the form of a cost 
savings) to the economically strongest owners or operators, and 
potentially create an economic and competitive disadvantage for others.
    The Agency solicits comment on the concerns identified by EPA 
regarding the use of a financial test under CERCLA Sec.  108(b).
(2) Concerns Regarding Use of a Financial Test by the Hardrock Mining 
Industry
    Beyond concerns related to the use of a financial test under CERCLA 
Sec.  108(b), EPA considered issues specific to the use of a financial 
test for the hardrock mining industry under 108(b). First, there are 
significant concerns that owners or operators that are no longer able 
to meet the requirements of a financial test may become less able than 
owners or operators in other industries to secure an alternative 
financial responsibility instrument. One reason is because frequent 
fluctuations in commodity prices within the hardrock mining industry 
may result in sharp declines in production and accelerated mine 
closures. This scenario is currently playing out in the case of the 
coal mining industry.\87\
---------------------------------------------------------------------------

    \87\ In recent years, the banking industry has been stepping 
back from providing loans to the coal industry:
     In 2015, Bank of America cut off its financing for coal 
extraction projects to reduce its exposure. (Kate Sheppard, Bank of 
America Backs Away from Funding Coal Mining, Huffington Post. May 6, 
2015.)
     In 2015, Citi Group and Goldman Sachs Group sold its 
investments in mining and reduced its financing of coal mining 
operations faced with large environmental obligations. (Jeanne 
Dugan, Timothy Puko, Goldman Sachs Sells Colombian Coal Mines to 
Murray Energy, The Wall Street Journal. April 13, 2015; Kadhim 
Shubber, Citi Promises to Cut Lending to Coal Miners, Financial 
Times. October 5, 2015.)
     In 2016, JPMorgan announced it would be no longer 
finance new coal-fired plants in the U.S. (Michael Corkery, As 
Coal's Future Grows Murkier, Banks Pull Financing, New York Times. 
March 20, 2016.)

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[[Page 3434]]

    Many mineral resource extraction firms are not able to absorb 
market fluctuations because they lack diversified lines of business. 
This may make it harder to ensure that owners or operators who do fail 
the test obtain a replacement instrument.\88\ Furthermore, requiring a 
company to purchase a more expensive means of financial assurance once 
it begins to experience liquidity problems may only serve to aggravate 
its financial difficulties. This effect also makes it harder for EPA to 
oversee the use of the financial test. For example, rapid fluctuations 
in financial status may necessitate more frequent reporting to the 
Agency, resulting in increased oversight burden, as discussed earlier. 
Thus, it may be more important in the case of mining than in other 
industries to require an owner or operator to secure a third-party 
financial responsibility instrument or fund a trust fund when it is 
financially able to do so.
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    \88\ These concerns were noted in the 2005 report from the 
Government Accountability Office, EPA Should Do More to Ensure that 
Liable Parties Meet Their Cleanup Obligations, at p. 42. Available 
at http://www.gao.gov/products/GAO-05-658.
---------------------------------------------------------------------------

    Second, numerous troublesome cases have occurred involving hardrock 
mining facilities that have gone through bankruptcy, while leaving 
extremely significant environmental impacts in their wake. Remedial 
work can be stopped or slowed in situations where the owner or 
operator's cash flow and revenue is reduced or they go bankrupt. Such 
impacts have occurred in the past when owners or operators of mines 
engaged in CERCLA cleanups have had to negotiate changes to the scope 
of work due to drops in metal prices. EPA experienced this problem when 
a major mining company slowed work at sites and then filed for 
bankruptcy in 2005. The company was using a financial test (which was a 
less sensitive financial test than the test proposed under Option 2) 
under a CERCLA Consent Decree with EPA at a smelter site in the 
northwest part of the U.S. EPA discovered that the company was having 
financial struggles, despite having recently submitted information that 
it met the necessary financial test requirements. In response, EPA 
requested that the company obtain a liquid financial responsibility 
instrument under the provisions of a consent decree, but the company 
was unable to do so, given its declining financial condition.
    Third, given the relative market volatility observed within the 
hardrock mining industry, some have argued that there are no 
circumstances under which owners or operators of hardrock mining 
companies should be allowed to self-insure through a financial test. 
Analysis has shown that mining companies can be more likely to default 
on their financial obligations than other types of companies.\89\ For 
example, the recent downturn in metals prices has led to a default rate 
in the metals and mining sector which is nearly three times the 
economy-wide corporate default rate.\90\ Moreover, financial analysts 
have predicted that mining sector default rates are likely to rise.\91\ 
Mining companies also tend to default more quickly than other types of 
companies,\92\ and may have multiple mining operations, meaning that a 
single failure could have broader impacts.
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    \89\ See Standard & Poor's 2014 Global Corporate Default Study 
at p. 11. Available at: https://www.nact.org/resources/2014_SP_Global_Corporate_Default_Study.pdf. (While the total number 
of defaults in 2014 declined from previous years, the default rate 
in the energy and natural resources industry rose to 25 percent. 
Eight of the 15 companies that defaulted were metals, mining, and 
steel companies.)
    \90\ See Energy, Mining Companies Lead Debt Default Rates 
Higher,'' 24/7 Wall St. (Aug. 14, 2015). Available at: http://247wallst.com/banking-finance/2015/08/14/energy-mining-companies-lead-debt-default-rates-higher/ (Overall corporate default rate for 
the twelve months trailing July 2015 was 2.5 percent, while the 
trailing rate for exploration and production companies was 5 
percent, and the rate for metals and mining companies was 7.1 
percent).
    \91\ See Why Bankruptcy Might be the Mining Industry's Last Best 
Hope, Bloomberg Business (Dec. 2, 2015), http://www.bloomberg.com/news/articles/2015-12-03/why-bankruptcy-might-be-the-mining-industry-s-last-best-hope (warning that falling commodities prices 
and an oversupplied market will trigger more bankruptcies in the 
mining sector); Warning of another string of mining bankruptcies in 
2016, (Mar. 1, 2016), http://www.mining.com/warning-of-another-string-of-mining-bankruptcies-in-2016/ (noting dramatic credit 
deterioration in the oil & gas, and metals and mining sectors, 
``with no other sectors even in the same ballpark,'' and with credit 
conditions expected to worsen in 2016).
    \92\ See Standard & Poor's 2014 Global Corporate Default Study 
at p. 44. The time to default from original credit rating for energy 
and mining companies is 3.9 years versus 5.7 years for the economy 
overall. The time to default from ``post-original rating'' for the 
energy & resources sector is even shorter, at an average of just 2.1 
years.
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    EPA is concerned that close linkage between the hardrock mining 
industry and global commodity prices means that companies that are 
invested in the same minerals are likely to fail or experience 
financial hardship at the same time, when the prices of these minerals 
decline.\93\ If so, additional strain would be placed on EPA's ability 
to administer the test and ensure compliance across multiple companies 
at multiple sites simultaneously.
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    \93\ See Moody's Investors Service, ``Moody's places energy and 
metals & mining issuers on review for downgrade,'' (Jan. 22, 2016), 
https://www.moodys.com/research/Moodys-places-energy-and-metals-mining-issuers-on-review-for-PR_342773 (announcing placement of 55 
metals and mining companies on review for downgrade); Moody's 
Investors Service, Moody's places 11 mining companies in the U.S. on 
review for downgrade (Jan. 21, 2016), https://www.moodys.com/research/Moodys-places-11-mining-companies-rated-in-the-US-on-PR_342543 (warning of an ``unprecedented shift'' in the mining 
industry and advising that ``deteriorating industry fundamentals 
require a recalibration of the global mining portfolio rated by 
Moody's'').
---------------------------------------------------------------------------

    Congress and the states have expressed concern over the volatility 
in the mining industry and the potential inability of a financial test 
to account for rapidly changing market conditions, asking the 
Comptroller General for a review of self-insurance 
practices.94 95
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    \94\ Self-bonding may be otherwise understood to mean self-
insurance.
    \95\ A recent letter from Senators Maria Cantwell of Washington 
and Richard Durbin of Illinois to the Comptroller General requested 
an investigation by GAO into the use of self-bonding across federal 
programs governing resource extraction, and a performance audit of 
self-bonding under the Surface Mining Control and Reclamation Act. 
The letter, dated Mar. 8, 2016, is available at http://www.energy.senate.gov/public/index.cfm/files/serve?File_id=47C14E0B-8A9D-457F-A1DE-0B7135144E1B.
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    EPA has information that decisions in the mining industry to expand 
or open new facilities are generally made over a longer period of time 
than some other industries (on for example, a ten-year, twenty-year, or 
longer amortization and investment basis).\96\ Such investment 
decisions often don't always correspond to the demand cycle for the 
commodity.\97\ Moreover, mining assets generally are immobile, making 
it difficult to transfer equipment and facilities to other productive 
uses during periods of low demand.
---------------------------------------------------------------------------

    \96\ Investments within the hardrock mining sector tend to be 
longer term given the lifetime of typical mines and the extreme 
amount of capital that must be invested up-front. Such investments 
and assets must therefore be amortized or written-off over a longer 
period of use. Firms will utilize amortization for spreading out of 
capital expenses for intangible assets over a specific period of 
time (usually over the asset's useful life) for accounting and tax 
purposes. Amortization is similar to depreciation, which is used for 
tangible assets, and to depletion, which is used with natural 
resources.
    \97\ See J.T. Bradbury, International Movements and Crises in 
Resource Oriented Companies: The Case of Inco in the Nickel Sector, 
Economic Geography, Vol. 61, No. 2, 1985.
---------------------------------------------------------------------------

    Mining companies generally attempt to manage cyclical patterns by 
balancing new investment with projected sales of minerals.\98\ Metal 
prices, however, can

[[Page 3435]]

unfortunately experience substantial increases or decreases over a 
relatively short time period. The speed of these price changes results 
in swings in market volatility rendering it difficult for a capital-
intensive industry like mining to adjust quickly. Analysis of price 
cycles from composite metals indices for certain metals, over the past 
thirty years, reveal that there have been between three and five price 
cycles lasting between five and eight years, depending on the metal. 
Typically, the peak price occurs during the first half of the cycle, 
often exactly halfway between the two trough prices. Price fluctuations 
tend to happen rapidly with prices increasing by more than 75 percent 
in one month, or decreasing by more than thirty percent over the course 
of a month.\99\
---------------------------------------------------------------------------

    \98\ See Philip Maxwell, Was there a Nickel Shakeout?, Minerals 
and Energy, Vol 21, No. 3-4, 2006. J.T. Bradbury, International 
Movements and Crises in Resource Oriented Companies: The Case of 
Inco in the Nickel Sector, Economic Geography, Vol. 61, No. 2, 1985.
    \99\ See Background Document for Financial Test Analyses, 
Industrial Economics, Inc. (IEc). 2016.
---------------------------------------------------------------------------

    ``Mining companies have volatile earnings, coming from 
macroeconomic factors that are not in their control. As the economy 
weakens and strengthens, mining companies see their earnings and cash 
flows track with the commodity price.'' \100\ And the stability of 
earnings and cash flow of mining companies is significantly less than 
the average of other industries.\101\ Significant income fluctuations 
are also compounded by the fact that many mines use debt financing to 
support the large infrastructure investments needed to get a mine 
started and to expand operations.\102\ This leads to high volatility in 
equity values and debt ratios for mining companies.\103\
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    \100\ See Valuation of Metals and Mining Companies, Svetlana 
Baurens, p. 56 (July 11, 2010). Available at: http://www.basinvest.ch/upload/pdf/Valuation_of_Metals_and_Mining_Companies.pdf.
    \101\ See Rating Companies in the Mining Industry, p.7 (June 
2011). Available at: http://www.dbrs.com/research/240365/rating-companies-in-the-mining-industry.pdf.
    \102\ See Valuation of Metals and Mining Companies, Svetlana 
Baurens, p. 13 (July 11, 2010). Available at: http://www.basinvest.ch/upload/pdf/Valuation_of_Metals_and_Mining_Companies.pdf.
    \103\ Ibid.
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    Mining profits are also generally tied to revenue rather than 
operating costs because operating costs tend to be highly fixed in the 
industry.\104\ ``Commodity price is a principal determinant of revenue, 
but it is also the factor with which the greatest level of financial 
risk is associated.'' \105\ Today, many mines cannot survive these 
price fluctuations.\106\ During low price periods, the mining industry 
tends to contract since they are losing revenue with increased periods 
of bankruptcy and company consolidation. Over the past 25 years, the 
rate of mining bankruptcies has spiked during sharp price declines and 
sustained periods of low prices. Between 1981 and 2010, there were 
approximately 43 mining company bankruptcies, not counting smaller 
mining operations that may undergo personal, rather than corporate, 
bankruptcy.
---------------------------------------------------------------------------

    \104\ Ibid.
    \105\ See Valuation of Metals and Mining Companies, Svetlana 
Baurens, p. 36, July 11, 2010. Available at: http://www.basinvest.ch/upload/pdf/Valuation_of_Metals_and_Mining_Companies.pdf.
    \106\ See Background Document for Financial Test Analyses, 
Industrial Economics, Inc. (IEc). 2016.
---------------------------------------------------------------------------

    During the recent economic recession (characterized by the stock 
market drop in September 2008) for example, copper, nickel, tin, and 
zinc prices fell more than twenty percent between September and October 
2008.\107\ Notwithstanding periods of market volatility, on average, 
metal prices also generally experience a three to seven percent 
increase or decrease on a monthly basis. This further substantiates 
that the mining industry must operate under a great deal of 
uncertainty, often facing greater and more frequent changes in expected 
market return than other sectors.
---------------------------------------------------------------------------

    \107\ Gold responded differently. For ten years the price of 
gold rose quickly, aided especially by the stock market meltdown of 
2009. After hitting its high in August 2011, gold saw a gradual 
decline, even as the stock market rose into record territory. Then 
gold plummeted 25 percent in mid-April 2013, seeing its biggest one-
day decline in more than thirty years on April 15, 2013.
---------------------------------------------------------------------------

    Such volatility impacts the effective use of a financial test by 
hardrock mining facilities. The cyclical nature of the industry and the 
rapid fluctuations in commodity prices may result in corresponding 
fluctuations in the financial health of hardrock mining companies. 
Whereas a mining company may accumulate substantial amounts of cash 
flow from operating activities during a period of peak prices, a price 
trough likely would result in decreased revenues, and corresponding 
decreased cash flow.
    However, because of falling revenues and potentially compromised 
cash flow stemming from commodity price swings, EPA is concerned that 
companies may have insufficient tangible assets (financial reserves) to 
establish alternate financial instruments in years where they are 
unable to pass the financial test.\108\
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    \108\ As stated by the U.S. General Accountability Office, ``If 
a company that passed the test later files for bankruptcy or becomes 
insolvent, the company in essence is no longer providing financial 
assurance because it may no longer have the financial capacity to 
meet its obligations. Such financial deterioration can occur 
quickly. While companies no longer meeting the financial test are to 
obtain other financial assurance, they may not be able to obtain or 
afford to purchase it.'' GAO. EPA Should Do More to Ensure That 
Liable Parties Meet their Cleanup Obligations (2005). Available at: 
http://www.gao.gov/products/GAO-05-658.
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    In 2000, the BLM identified similar concerns when it decided to 
prohibit new corporate guarantees for future reclamation work to 
restore lands when hardrock mining operations cease.\109\ Commenters at 
the time noted that because the value of the ore fluctuates over time 
and may lose value as it is mined, that the soundness of the guarantee 
might be most questionable at the time it is most needed.\110\ In 
making the decision to eliminate self-insurance from its hardrock 
mining regulations, BLM cited both the Bureau's lack of expertise to 
perform the periodic reviews of companies' assets, liabilities, and net 
worth that would be necessary to oversee guarantees, as well as the 
fact that even with annual reviews by skilled staff, a default risk 
would remain. BLM therefore decided to shift the financial risk to the 
businesses they regulate who have to purchase financial assurances from 
independent third parties, such as banks. In a 2005 report, GAO 
identified examples of BLM's inability to collect funds for reclamation 
when operators of hardrock mines using corporate guarantees filed for 
bankruptcy.\111\ The inability of companies to be able to afford 
alternate financial assurance when failing the financial test could be 
exacerbated in the CERCLA Sec.  108(b) context by the potentially high 
costs associated with Superfund liabilities, particularly from hardrock 
mining facilities. Owners or operators would need to secure a third-
party financial responsibility instrument or fund a trust fund for a 
high dollar amount in a time when their financial health may be 
compromised, which may be difficult or impossible. The Agency solicits 
comment on these concerns.
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    \109\ See 65 FR 69998, at 70074, November. 21, 2000, stating: 
``We agree that a corporate guarantee is less secure than other 
forms of financial guarantees, especially in light of fluctuating 
commodity prices. Recent bankruptcies added to the concern that 
corporate guarantees don't provide adequate protection. We believe 
the number of new mines that might have wanted to rely on corporate 
guarantees is relatively small, and we also believe, given the 
economics of the industry, that companies that would have been 
eligible to hold a corporate guarantee should not have a significant 
problem finding a third-party surety, or posting the requisite 
assets.''
    \110\ Id., at 70073.
    \111\ See GAO. Hardrock Mining: BLM Needs to Better Manage 
Financial Assurances to Guarantee Coverage of Reclamation Costs, 
GAO-05-377 (Washington, D.C.: June 20, 2005). Available at: http://www.gao.gov/products/GAO-05-377.
---------------------------------------------------------------------------

    As a fourth and distinct concern, when a mine is reaching the end 
of its life and is bringing in less revenue, the owner or operator may 
not be able to secure a financial responsibility instrument for CERCLA 
liabilities that may continue to be required after the

[[Page 3436]]

mine closes. If a company fails the financial test after its mining 
facility closes, it may thus not be able to obtain alternate financial 
responsibility that may be required after the facility closes. EPA 
solicits comment on the likelihood of this scenario.
    As a fifth concern, allowing a financial test under this proposed 
rule for hardrock mining would be inconsistent with the approach taken 
by some other Federal regulators that have experience and expertise in 
the regulation of the hardrock mining facilities. After having formerly 
allowed a financial test, BLM modified its regulations at 43 CFR part 
3809 and removed the financial test as an available financial 
responsibility instrument; \112\ the U.S. Forest Service regulations 
governing financial responsibility requirements applicable to locatable 
minerals operations also do not allow the use of a financial test; 
\113\ and the Nuclear Regulatory Commission, explicitly prohibits the 
use of self-insurance for uranium mills.\114\ EPA is concerned that 
allowing the use of a financial test under this proposed rule would be 
inconsistent with the approach to hardrock mining financial 
responsibility that has developed through these other Federal programs. 
Further, not allowing a financial test would reflect the experience and 
expertise of these regulators, all of which have determined that a 
financial test is not appropriate for hardrock mining facilities. The 
Agency solicits comment on these concerns.
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    \112\ See Mining Claims under the General Mining Laws; Surface 
Management 65 FR 69998 @70073-70074, November 21, 2000. BLM cited 
the necessity to review submissions annually as well as its limited 
capacity to do so, as contributing factors in its decision not to 
allow additional use of a financial test. Further justifying its 
decision, BLM stated that even if it had the expertise to perform 
reviews on a periodic basis, the risk of default remains.
    \113\ See 36 CFR 228.13 (allowing a bond, blanket bond, or 
cash).
    \114\ See 10 CFR 40 Appendix A criteria 9,
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    Finally, as noted earlier, the Agency is concerned that a financial 
test for the hardrock mining industry may not fully reflect the 
financial health of the owner or operator. Based on experience from 
requiring financial responsibility for CERCLA consent decrees, EPA has 
learned that mining companies often do not list ``contingent'' 
liabilities, such as the potential need for long-term operation and 
maintenance (``O&M'') on their corporate balance sheets, at least not 
during the early exploration and start-up phases of a mine. As such, a 
balance sheet can show that a given company has sufficient assets to 
meet the requirements of the financial test, despite the fact that all 
or a portion the recorded assets may be zeroed out by unrecorded 
``contingent'' liabilities. The Agency solicits comment on this 
concern. Specifically, EPA is concerned that the six times multiples 
for tangible net worth and U.S. assets that have worked well in the 
RCRA Subtitle C program would not be effective for a mining industry 
with the potential for large contingent liabilities.
    For these reasons, the Agency is proposing, as its preferred 
option, not to allow the use of a financial test under this proposed 
rule. The Agency solicits comment on this proposal.
c. Option 2--Financial Test
    Although the Agency's preferred option is to not allow a financial 
test under the proposed rule (see Option 1), EPA is proposing a second 
option--that is, to make a financial test available for use by hardrock 
mining facilities subject to this proposed rule. The Agency is 
proposing this option because it recognizes that allowance of a 
financial test under this proposed rule could result in significant 
savings to those members of the regulated community that could use it 
and qualify to self-insure.
    Under the option that would allow a financial test, EPA is 
proposing the use of a credit rating--based financial test, developed 
specifically for this proposed rule. In developing the proposed 
financial test, the Agency attempted to address as many of the concerns 
discussed in Option 1 as possible, though the Agency recognizes that it 
cannot eliminate all of the concerns identified. EPA analyzed several 
financial test options and selected one for proposal that carries with 
it a relatively low risk to the Government that firms will pass the 
financial test and still default on their obligations. EPA requests 
comments on the extent to which its proposed financial test addresses 
the concerns outlined in Option 1.
(1) Financial Test Overview
    EPA is proposing the use of a financial test based on the long-term 
corporate credit rating of the owner or operator. Under the terms of 
the proposed financial test, an owner or operator could assure its 
entire financial responsibility obligation by submitting annual 
verification that it holds at least one long-term corporate credit 
rating equal to or higher than A- as issued by Standard & Poor's (S&P) 
or its equivalent by another NRSRO. In addition, for some owners and 
operators with lower credit ratings, the proposed test would further 
allow an owner or operator to alternatively assure one half of its 
obligation by submitting annual verification that it holds at least one 
long-term corporate credit rating of BBB+ or BBB from S&P or the 
equivalent from another NRSRO.
    In addition, an owner or operator electing to use the financial 
test would be required to have: (1) a tangible net worth of at least 
six times the amount of environmental obligations, including 
guarantees, covered by a financial test or guarantee, including this 
financial test and the corporate guarantee proposed in this rule; and 
(2) U.S. assets equal to or greater than ninety percent of its total 
assets, or six times the amount of environmental obligations covered by 
a financial test or guarantee, including this financial test and the 
corporate guarantee proposed in this rule.\115\ EPA discusses each of 
these components in the sections that follow.
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    \115\ Tangible Net Worth and U.S. Asset thresholds have been 
developed and historically utilized in financial responsibility 
regulations for the purpose of controlling for the possibility of a 
company that may have multiple obligations (both within the U.S., 
and/or abroad). Such scenarios could further limit the company's 
ability to self-insure the totality of its obligations. Cases where 
multiple obligations exist become very difficult for regulators to 
readily identify, and having tangible net worth and U.S. Asset 
thresholds already embedded within the financial test requirements 
helps to temper this concern.
---------------------------------------------------------------------------

(2) Financial Test Components
(a) Credit Rating Thresholds
    The proposed test would allow the owner or operator to self-insure 
its entire obligation by submitting annual verification that the owner 
or operator holds at least one long-term corporate credit rating equal 
to or higher than A- as issued by S&P or its equivalent by another 
NRSRO. Credit rating-based thresholds are widely relied upon as a 
central feature of many financial tests. For example, this proposed 
rating threshold is the same as that used in the NRC's financial test 
for self-insurance of the decommissioning costs associated with 
byproduct materials licensees (per 10 CFR 30 Appendix C). The Agency 
chose this long-term corporate credit rating threshold based on 
expected default rates over a three year horizon.\116\ Based on the 
NRSROs'

[[Page 3437]]

extensive default data, EPA can expect three-year default rates below 
0.4 percent for owners or operators meeting this ratings criteria.\117\ 
Because the probability of default is projected to be well below one 
percent for hardrock mining companies thought to be capable of meeting 
the requirements of the proposed financial test, the probability that 
companies who pass the test will enter into bankruptcy is substantially 
reduced. This in turn reduces the risk of defaults and lowers potential 
costs for the public, when compared to less stringent tests.
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    \116\ Bankruptcy data from S&P are available for one, three, and 
five-year periods, and it is the three-year horizon that is most 
widely accepted for use in the projection of default rates for 
purposes of financial assurance analyses. The three-year time 
horizon was for example used in the analyses that were conducted 
when the Agency's RCRA C financial test were originally promulgated. 
The reason for this is that the one-year data would be 
unrepresentative since this wouldn't allow sufficient time for the 
government to respond to such bankruptcies. Conversely, the five-
year data results reflect an excessive period of time needed by the 
government to identify and respond to a bankruptcy, while also 
reflecting projected probabilities of default that are unnecessarily 
high.
    \117\ See: Default, Transition, and Recovery: 2013 Annual Global 
Corporate Default Study and Rating Transitions. Standard and Poor's. 
March 19, 2014 Table 26 p. 58; Corporate Default and Recovery Rates, 
1920-2013. Moody's Investors Service. Special Comment. February 
2014. Exhibit 35, p. 35; Fitch Ratings Global Corporate Finance 2013 
Transition and Default Study. Fitch Ratings, March 17, 2014. 
Appendix 1, p. 13.
---------------------------------------------------------------------------

    The proposed test would further allow for coverage of up to one 
half of an owner's or operator's obligation by submitting annual 
verification that the owner or operator holds at least one long-term 
corporate credit rating of BBB+ or BBB from S&P or the equivalents from 
another NRSRO. This long-term corporate credit rating threshold was 
also chosen based on expected default rates over a three-year horizon. 
The Agency's analysis indicates that the risk of default roughly 
doubles for these rating tiers compared to A-rated long-term issuer 
credit ratings\118\ and thus EPA proposes to proportionately scale back 
the coverage of the test for companies in these ratings tranches.
---------------------------------------------------------------------------

    \118\ See: Default, Transition, and Recovery: 2013 Annual Global 
Corporate Default Study and Rating Transitions. Standard and Poor's. 
March 19, 2014 Table 26 p. 58; Corporate Default and Recovery Rates, 
1920-2013. Moody's Investors Service. Special Comment. February 
2014. Exhibit 35, p. 35; Fitch Ratings Global Corporate Finance 2013 
Transition and Default Study. Fitch Ratings, March 17, 2014. 
Appendix 1, p. 13.
---------------------------------------------------------------------------

    Finally, under the proposed test EPA would not allow those 
companies at the lowest tier of investment grade ratings (BBB- in S&P's 
notation and the equivalent rating from other NRSROs) from using a 
financial test. EPA determined that, based on the three-year horizon 
default history for firms with the lowest tier investment grade 
ratings, the risk of default was significantly higher than for firms 
with investment grade ratings one tier higher. For example, the risk of 
default for firms rated BBB- by S&P is roughly twice that of firms 
rated BBB by the same rating agency.\119\
---------------------------------------------------------------------------

    \119\ See Default, Transition, and Recovery: 2013 Annual Global 
Corporate Default Study and Rating Transitions. Standard and Poor's. 
March 19, 2014 Table 26 p. 58.
---------------------------------------------------------------------------

    EPA is aware that this demarcation differs from the normal split 
between investment grade and speculative grade ratings, and that often 
investors distinguish on the basis of whether a particular issuer 
carries an investment versus speculative grade rating. However, because 
of the significantly higher default rates for the very bottom of 
investment grade found in its analysis, the Agency proposes to 
eliminate the very bottom notch of investment grade from being allowed 
to self-insure under the proposed financial test.
    EPA solicits comment on the credit-rating thresholds the Agency is 
proposing for use in the proposed financial test under Option 2.
(b) Tangible Net Worth Requirement
    In this proposal, an owner or operator eligible to use this 
financial test for any portion of its CERCLA Sec.  108(b) liabilities 
would also be subject to a coverage multiple requiring them to have a 
tangible net worth of at least six times the amount of environmental 
obligations, including guarantees, covered by a financial test or 
guarantee, including this financial test and the corporate guarantee 
proposed in this rule. This is an important additional component of the 
proposed financial test as it would provide for a common check across 
EPA financial responsibility programs that a firm is not assuming too 
great a level of future costs that they might unduly strain the firm's 
ability to pay for them.
    EPA financial tests typically account for only cost estimates and 
obligations covered by an EPA financial test. However, because of the 
numerous regulatory agencies that regulate hardrock mines, EPA expects 
that an owner or operator subject to this rule may have many of its 
financial test demonstrations under other Federal or state programs. To 
assure that a company is not using the same assets to self-insure 
multiple obligations, EPA believes it is necessary to account for all 
environmental obligations covered by a financial test or guarantee, and 
not just EPA financial assurance obligations covered by a financial 
test or guarantee.
(c) U.S. Asset Requirement
    Owners or operators would also be subject to an additional coverage 
multiple, requiring them to submit proof that the company either has 
assets located in the United States amounting to at least ninety 
percent of total assets or has U.S. assets totaling at least six times 
the amount of environmental obligations covered by a financial test or 
guarantee, including this financial test and the corporate guarantee 
proposed in this rule. This would serve as an additional precautionary 
measure to help ensure that U.S. assets would be available for 
claimants to proceed against, in the event of a bankruptcy or other 
default.
    This proposed requirement would be very similar to that used for 
U.S. assets in past financial tests the Agency has created. For 
example, the RCRA Subtitle C closure and post-closure financial test 
requires assets located in the U.S. amounting to at least ninety 
percent of total assets or at least six times the sum of current 
closure and post-closure cost estimates and the current plugging and 
abandonment cost estimates.\120\ Similar financial test components are 
also used in the Underground Injection Controls (UIC) financial 
responsibility programs and in the CERCLA model financial test 
instrument used to support financial responsibility under CERCLA orders 
and settlements. Using a similar ninety percent or six times multiplier 
allows for more effective financial responsibility across EPA programs.
---------------------------------------------------------------------------

    \120\ See 40 CFR 264.143(f)(1)(i)(D) and (ii)(D).
---------------------------------------------------------------------------

    For those firms without assets in the United States amounting to 
ninety percent or more of total assets, the firms would be required to 
demonstrate that they have U.S. assets greater than six times the sum 
of all financial responsibility obligations covered by a financial 
test. This six-times ratio is consistent with Alternative I of a recent 
RCRA consent decree that EPA entered into with several phosphoric acid 
mining companies, and is similar to other requirements in EPA's UIC 
Class VI well regulations and the RCRA Subtitle C regulations. The six 
times multiplier is intended to address the possibility that, in the 
event of a bankruptcy, funds required to meet other environmental 
obligations assured through other financial tests would reduce an owner 
or operator's ability to satisfy any CERCLA claims.
(d) Reporting Requirements for Passage of the Financial Test
    The proposed option that would allow a financial test would also 
require reporting of information necessary to implement the financial 
test. To demonstrate passage of the financial test, owners or operators 
would be required to submit the following information annually:

[[Page 3438]]

    Chief Financial Officer Letter (CFO Letter): A letter to the 
Administrator signed by its chief financial officer (CFO) as worded in 
Sec.  320.50. The CFO Letter confirms that the entity satisfies the 
financial criteria required under the financial test that makes the 
entity eligible to utilize the financial test as financial 
responsibility under this regulation.
    The Agency is proposing to require standardized the language in the 
CFO Letter from the owner or operator. Such an approach is consistent 
with other Agency rules such as the RCRA Subtitle C or the Standardized 
Permit Rule and carries with it several benefits to the Agency. First, 
a standard CFO Letter will provide for relatively quick Agency review 
of financial test submissions and lowers the chances of administrative 
error in the review of submissions. Administrative burden, once again, 
is a key concern to the Agency as it wishes to preserve the resources 
for conducting cleanups. The Agency believes a standardized CFO Letter 
offers the additional potential advantage of improving the consistency 
and completeness of submissions, thereby limiting delays caused by 
human error and omissions.
    (2) Annual Financial Statements: A copy of the owner's or 
operator's most recent independently audited annual financial 
statements prepared in accordance with U.S. Generally Accepted 
Accounting Principles (U.S. GAAP). At present, EPA expects that firms 
seeking to self-insure through the use of a financial test will do so 
based on financial statements that are audited in accordance with U.S. 
GAAP. The Agency recognizes that foreign firms might prepare audited 
financial statements in accordance with either GAAP or International 
Financial Reporting Standards (IFRS), and that IFRS and U.S. GAAP may 
converge into a global set of accounting standards at some point in the 
future. Until such time as a unified set of accounting standards is 
established, the Agency is proposing to accept only audited financial 
statements in accordance with U.S. GAAP for purposes of compliance with 
the financial test criteria. However, EPA accepts comment on an 
alternative whereby the acceptable accounting standards are linked to 
those accepted by the Securities Exchange Commission (SEC) in order to 
potentially lower the reporting burden for certain firms seeking to use 
the financial test. Presently, such an option would allow foreign firms 
that file with the SEC to be able to submit annual financial statements 
prepared in accordance with IFRS or GAAP while domestic firms would 
submit statements prepared in accordance with GAAP. However, the 
underlying fundamentals of IFRS and GAAP differ with respect to the 
accounting of liabilities and assets. As such, to accept both IFRS and 
GAAP financial statements in support of the financial test would yield 
a potentially disproportionate playing field wherein some companies 
using IFRS may pass the test where they might otherwise fail under 
GAAP, and vice versa. EPA would thus be accepting potentially divergent 
levels of assurance.
    (3) Special Audit Report: A special report of procedures and 
findings of an audit conducted by a licensed, third-party, independent 
certified public accountant (CPA) resulting from an agreed-upon 
procedures (AUP) engagement in accordance with applicable Federal laws 
governing independence and AUP engagements, or standards set by the 
American Institute of Certified Public Accountants, Inc. (AICPA), to 
supplement Federal laws or when Federal laws are not applicable. The 
report would be required to describe the procedures performed and 
related findings as to whether or not there were differences or 
discrepancies identified between the financial information in the 
owner's or operator's CFO Letter and the owner's or operator's most 
recent audited annual financial statements. Where differences or 
discrepancies were found in the comparison of the owner's or operator's 
CFO Letter and the owner's or operator's most recent audited annual 
financial statements, the report of procedures and findings would 
reconcile any differences or discrepancies.
    There are advantages to third-party auditing requirements, 
particularly with strong auditor competence and independence criteria. 
According to the Center for Chemical Process Safety (CCPS), ``Third-
party auditors . . . potentially provide the highest degree of 
objectivity,'' \121\ A leading scholar on regulatory third-party 
programs also found that a well-designed and implemented ``third-party 
verification [program] could furnish more and better data about 
regulatory compliance'' while providing additional compliance and 
resources savings benefits.\122\ Studies show that auditors are more 
likely to provide lenient or biased audit reports that can fail to 
accurately identify problems or violations when there are insufficient 
safeguards to ensure auditor independence.\123\
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    \121\ See CCPS. March 2007 Guidelines for Risk Based Process 
Safety. Available at: http://www.aiche.org/ccps/resources/publications/books/guidelines-risk-based-process-safety.
    \122\ See Regulation by Third-Party Verification, Lesley K. 
McAllister. January 2012. 53 B.C. L. Rev. 1, 21-26. Available at: 
http://lawdigitalcommons.bc.edu/bclr/vol53/iss1/1/.
    \123\ See, e.g., Truth-Telling By Third-Party Auditors and the 
Response of Polluting Firms: Experimental Evidence From India, 
Esther Duflo et al., 128 Q. J. of Econ. 4 at pp. 1499-1545, 2013.
---------------------------------------------------------------------------

    In audit engagements, CPAs are required by professional standards 
and Federal and State laws to maintain independence (both in fact and 
in appearance) from the entity for which they are conducting an 
attestation (audit and review) engagement. However, the Public 
Certified Accounting Oversight Board (PCAOB) found evidence that many, 
if not most, of some types of financial audits are flawed due to 
insufficient auditor competence, independence and/or lack of public 
transparency. Third-party auditing is a cornerstone of financial 
reporting, but the PCAOB found audit deficiencies in portions of 
seventy of the ninety audits they reviewed in its third annual report 
on audits of broker-dealers registered with the SEC. Independence 
problems were found in 21 of the ninety audits where, contrary to SEC 
rules, firms helped with the bookkeeping or preparation of the 
financial statements they audited.\124\
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    \124\ See Third Progress Report on PCAOB Inspections of Broker 
and Dealer Auditors Shows Continued High Number of Findings. PCAOB. 
Aug. 18, 2014. Available at: http://pcaobus.org/Inspections/Documents/BD_Interim_Inspection_Program_2014.pdf.
---------------------------------------------------------------------------

    Therefore, EPA is proposing to require that a CPA performing the 
audit required under this proposal be licensed. This requirement is 
designed to ensure the auditor has the requisite education and 
experience to perform the audit. Each state has its own licensing 
board. The proposal would also require that auditors be independent, 
follow the independence rules and standards established by the AICPA's 
Audit Standards Board (ASB), have passed the Uniform Certified Public 
Accountant Examination, be licensed as a CPA, and be current with all 
continuing professional education requirements.
    The Agency also is proposing to require that the AUP engagement be 
conducted in accordance with the AICPA Statement on Standards for 
Attestation Engagement (SSAE) and related attestation interpretations, 
AT Section 201--Agreed Upon Procedures Engagements, or any future 
superseding standards set by AICPA or any superseding body. This 
provides further assurance that the CPA's review was done in accordance 
with accepted accounting industry standards. The Agency recognizes that 
the AICPA may update its standards, and thus the

[[Page 3439]]

Agency is proposing a flexible standard for the CERCLA Sec.  108(b) 
regulations that relies upon the method(s) currently accepted, instead 
of specifying a particular standard that may need to be updated in the 
future. EPA solicits comment on whether, in addition to those set by 
the AICPA, applying SEC and/or PCAOB rules and standards would provide 
appreciable additional assurances of independence. In this regard, EPA 
further believes that some owners and operators who seek to use the 
financial test, if available, may already be SEC registrants and 
issuers. As such cases, the application of more stringent SEC/PCAOB 
independency standards should result in little added burden for owners 
and operators already subject to such standards.
    The audited annual financial statements, the CFO Letter, and an AUP 
engagement report signed and certified by an independent, licensed CPA 
would be submitted annually, within ninety days of the close of the 
owner's or operator's fiscal year. In so doing, the Agency receives up-
to-date financial information to ensure the company still meets the 
standards of the test. In general, financial reports made directly to 
the SEC are completed within ninety days of the company's fiscal year 
end. Most small and medium-sized businesses, who are not filing with 
the SEC, track their fiscal year end to a calendar-year end. These 
companies tend to complete their annual financial reports in support of 
tax filings to the Internal Revenue Service, and generally do so within 
ninety days of the calendar year end. In either instance, most 
companies already prepare annual financial statements, and therefore 
the financial reporting requirements of the financial test should not 
present too significant of a reporting challenge. The annual reporting 
requirement is essential to ensure firms using the financial test 
maintain the requisite financial strength and do not pose an undue 
risk.
    EPA believes, together, these reporting requirements will foster 
accountability, improve compliance, and ensure EPA is receiving an 
accurate portrayal of a company's financial ability to meet its 
environmental obligations. Thus, if the use of a financial test were to 
be allowed in the final rule, this would reduce the risk that the 
taxpayer would have to finance cleanup in the future. EPA believes that 
third-party reviews will help assist in rule compliance and oversight. 
Independence is important to preserve the integrity and objectivity of 
these audits, thereby providing reliable compliance information to 
EPA.\125\
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    \125\ See The Integrity of Private Third-party Compliance 
Monitoring. Short, Jodi L., and Michael W. Toffel. Harvard Kennedy 
School Regulatory Policy Program Working Paper, No. RPP-2015-20, 
November 2015. (Revised December 2015.)
---------------------------------------------------------------------------

    The Agency believes that requiring an AUP engagement would also 
further ease the implementation burden associated with reviewing 
financial test submissions, and reduce the prospect for errors. Third-
party, independent audits will also promote cost-effective EPA 
prioritization of Superfund resources, and provide benefits to 
communities near facilities by assuring that secure financial 
responsibility is in place. The AUP would give EPA an independent 
third-party expert's opinion and attestation as to whether or not the 
financial information provided in the CFO Letter is consistent with 
that in the most recent audited financial statements and thus with U.S. 
generally accepted accounting practices. EPA believes independent, 
licensed CPAs are better suited to review such data and make such 
determinations, as EPA is not primarily a financial regulator.
    EPA is asking for comment on these reporting requirements. 
Specifically, the public should comment on what other requirements, if 
any, should be required to ensure the completeness, reliability, and 
accuracy of the information submitted to determine that facilities have 
the funds necessary to meet their environmental obligations, thereby 
preserving taxpayer money. EPA is also accepting comments on the 
application of these laws and standards, whether or not these 
requirements are sufficient to ensure compliance with the financial 
test, provide EPA with the necessary information to implement the 
financial test, or preserve independence in performing under an AUP 
engagement, and the ability of the requirements to help EPA respond to 
deficiencies in financial test submissions or changes in financial 
situations.
(e) Self-Reporting Requirements for Owners or Operators No Longer Able 
To Pass the Financial Test
    Additionally, owners or operators would be required to notify the 
Administrator in the event of a change in their long-term issuer credit 
rating or financial position that would disqualify them from using the 
financial test. This requirement also exists in other EPA financial 
tests including the RCRA Subtitle C test for hazardous waste 
facilities. Such notification is designed to be independent from the 
annual reporting requirements associated with the financial test. 
Owners or operators would be required to notify the Administrator upon 
verifying that a change in their financial status has resulted in their 
becoming disqualified from using the financial test. In such 
circumstances, owners or operators will be required to send notice to 
the Administrator within thirty days, documenting their intent to 
establish an alternate financial responsibility instrument to cover the 
portion of their obligations for which they can no longer use the 
financial test. As such, owners and operators that currently qualify 
for self-insurance under the financial test will be responsible for 
continually self-monitoring their qualification status whenever they 
experience a change in their long-term issuer credit rating, tangible 
net worth, or value of U.S. assets. The Agency is proposing this 
reporting requirement to allow EPA to respond as quickly as possible to 
negative changes in a company's financial position. In the event the 
owner or operator no longer passes the financial test, the owner or 
operator would have 120 days from the date the owner or operator no 
longer qualifies to obtain a replacement instrument for that portion of 
its CERCLA Sec.  108(b) financial responsibility requirement previously 
covered by the test.
(f) Provisions for Administrator's Discretion
    The proposed regulations would allow the Administrator to request 
reports of financial condition at any time from the owner or operator 
in addition to those specified in Sec.  320.43(b) in the event that the 
Administrator has reason to believe the owner or operator may no longer 
meet the financial test requirements. This is similar to a provision in 
the RCRA Subtitle C financial test found at 40 CFR 264.143(f)(7), for 
example. The Agency has found this provision very helpful in evaluating 
compliance with the regulations and proposes to include a similar 
provision in these regulations.
    The Administrator would also have the discretion to disallow use of 
this test on the basis of qualifications of opinion given in the 
independent certified public accountant's report in the AUP engagement 
or the audited financial statements. An adverse opinion or disclaimer 
of opinion in either report will result in disallowance of the test. 
The Administrator will evaluate other qualifications on an individual 
basis. An adverse opinion suggests that the financial statements do not 
present fairly the financial condition of the firm. A disclaimer of 
opinion states that the auditor does not express an opinion on the 
financial statements. In both cases,

[[Page 3440]]

the Agency believes there is inadequate assurance that the information 
presented in the financial statements can be relied upon to evaluate 
the credit risk of the firm.
    The owner or operator would be released from the proposed 
requirements of demonstrating financial responsibility with the 
financial test when: (1) An owner or operator substitutes alternate 
financial responsibility as specified in this section; or (2) The 
Administrator releases the owner or operator from the requirements of 
this section in accordance with Sec.  320 27.
(3) Discussion
    The Option 2 proposed financial test was developed by EPA for use 
by hardrock mining facilities under CERCLA Sec.  108(b). The Agency 
believes that it is more suited for use by hardrock mining facilities 
to demonstrate financial responsibility under CERCLA Sec.  108(b) than 
are other financial tests currently implemented by EPA. As discussed 
earlier, EPA has also attempted to address to the extent possible, many 
of the concerns raised about the use of a financial test for hardrock 
mining facilities under proposed Option 1.
    The proposed financial test utilizes long-term corporate credit 
ratings, rather than a series of ratios derived from a company's 
financial statements, as other tests do. The Agency took this approach, 
in part, to ease potential implementation challenges. A test based on 
long-term corporate credit ratings is relatively easy to verify and 
carries with it the lowest administrative burden of the financial test 
options considered. Moreover, the use of long-term corporate credit 
ratings is further substantiated by the robust data underpinning the 
measures of risk associated with each rating level. For example, 
default rate studies are often backed by large samples spanning many 
years. The ratings agencies themselves have done extensive studies 
demonstrating the efficacy of credit ratings as an indicator of credit 
risk.\126\
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    \126\ See for example: Default, Transition, and Recovery: 2013 
Annual Global Corporate Default Study and Rating Transitions. 
Standard and Poor's. March 19, 2014; Corporate Default and Recovery 
Rates, 1920-2013. Moody's Investors Service. Special Comment. 
February 2014; Fitch Ratings Global Corporate Finance 2013 
Transition and Default Study. Fitch Ratings, March 17, 2014.
---------------------------------------------------------------------------

    The Agency's decision to propose a credit rating-based test also 
reflects the EFAB's statements, made in its reporting on the financial 
test and corporate guarantee under the RCRA programs, that independent 
credit analysis, i.e. credit ratings, can be a cost effective mechanism 
for demonstrating financial responsibility.\127\ The use of long-term 
corporate credit ratings leverages the expertise of a third party, 
relieving the Agency of the primary burden of performing credit 
analysis.
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    \127\ See EFAB Initial Findings Concerning use of the Financial 
Test and Corporate Guarantees to Meet Financial Assurance 
Requirements under the RCRA programs. Environmental Financial 
Advisory Board. January 11, 2006, p. 5.
---------------------------------------------------------------------------

    EPA has used different systems of ratings in other financial tests. 
This includes using the rating on the most recent bond issuance in the 
RCRA Subtitle C financial test, for example, found in 40 CFR 
264.143(f). The use of long-term issuer credit ratings is included in 
this proposal as the Agency believes they most accurately reflect a 
firm's ability to meet the entirety of its financial obligations over 
the long term as opposed to the obligations related to a single debt 
issuance (e.g. a bond rating), which is narrower in scope. This view is 
based on EPA's review of the credit rating agencies' literature 
performed for this proposal.\128\ An additional benefit of using a 
credit rating is that a firm does not need to issue bonds or any other 
debt instrument to be issued a credit rating, which may increase the 
availability on instruments. While this approach allows the Agency to 
rely on the evaluation of an outside party, rather than on in-house 
financial expertise, this approach is not without concerns. For 
example, there is continued criticism that the credit-rating agencies 
themselves may not truly be independent from the entities they 
rate.\129\ The Agency solicits comment on the use of a credit-rating-
based financial test.
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    \128\ See Guide to Credit Rating Essentials: What are Credit 
Ratings and How Do They Work? Standard and Poor's (2010), pp. 11-12; 
Moody's Rating Symbols & Definitions. Moody's Investors Service. New 
York, NY (2009), p. 11; and Definitions of Ratings and Other Forms 
of Opinion. Fitch Ratings (2011) pg 9.
    \129\ See for example, CFR.org Staff, The Credit Rating 
Controversy, Council on Foreign Relations, updated February 19, 
2015. Available at: http://www.cfr.org/financial-crises/credit-rating-controversy/p22328.
---------------------------------------------------------------------------

    The proposed financial test includes a high credit rating threshold 
so an owner or operator with declining financial health will still have 
a relatively high credit status when it initially becomes ineligible to 
use the financial test. EPA expects that this will help to assure that 
owners or operators that no longer qualify for the test will still be 
sufficiently viable to obtain an alternate instrument. This is so, 
because evidence from agency analyses of past bankruptcies in this 
sector suggest that it usually takes many years for a company to enter 
bankruptcy after its credit rating drops below BBB.\130\ In addition, 
this is also the case given that the proposed financial test has two 
tiers of credit rating thresholds. As such, should an owner's or 
operator's credit rating drop below A-, the amount that they may self-
insurance for drops from 100 percent to 50 percent of the obligations, 
provided that they still retain an investment grade credit rating. The 
impact on a company may be more gradual when the owner or operator 
experiences a decline in their credit rating. The Agency solicits 
comment on the validity of this approach.
---------------------------------------------------------------------------

    \130\ See Draft Background Document for Financial Test Analyses, 
Industrial Economics, Inc. (IEc), November 2016.
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    The financial responsibility instruments proposed in this rule are 
new and unique and the market's appetite for providing these 
instruments is yet to be determined. The Agency expects that allowing a 
financial test could potentially help to address market capacity 
issues, should they arise.\131\ If there is limited capacity when this 
rule becomes final, the availability of a financial test could help to 
address that issue. The Agency solicits comment on whether the 
financial test could help to address market capacity issues.
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    \131\ Under a no financial test option, limited market capacity 
may be burdened by a need for all hardrock mining companies to 
obtain third-party financial responsibility instruments. However, 
under a financial test option, some companies would be able to self-
insure, possibly freeing up market capacity for companies unable to 
do so.
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    Making a financial test available to owners or operators of 
hardrock mining facilities under this proposed rule would be consistent 
with EPA's approach in other programs. It would not, however, be 
consistent with approaches taken by some other Federal agencies.
    According to the CERCLA Sec.  108(b) Regulatory Impact Analysis 
(RIA), the estimated annualized compliance cost to industry without a 
financial test is $171 million. However, by allowing financial test, 
the cost to industry goes down to $111 million, which represents a 35 
percent in cost saving to industry.
    With respect to the impacts on government, without the financial 
test, the industry would internalize in approximately $527 million in 
potential CERCLA liabilities that would otherwise assumed by the 
Government (in instances of owner or operator failure) in the baseline 
(without the rule). However, by allowing the financial test, the cost 
internalized by the industry goes down to approximately $511 million. 
Therefore, the increased risks to the Government from unforeseen

[[Page 3441]]

defaults of owners and operator allowed to self-insure is $16 million, 
which is about three percent of the total potential liability, relative 
to the baseline.
    Finally, EPA solicits comment on the potential impacts on small 
businesses of allowing a financial test under the proposed CERCLA Sec.  
108(b) rule. As noted earlier, concerns exist regarding the potential 
inequity of offering a test due to the advantages that it may create 
for larger versus smaller owners and operators. This is in part because 
the proposed financial test was designed to be highly stringent. As 
proposed, only those owners and operators with strong long-term credit 
ratings, plus substantial tangible net worth and U.S. assets would pass 
the test. Designing the test in this manner greatly lowers the risk of 
default by owners and operators that pass the test. Analyses conducted 
by EPA of the financial test options considered offers evidence, 
however, that fewer small businesses are likely to possess the credit 
ratings and net worth necessary to qualify for self-insurance. EPA, 
therefore, solicits comment on whether the availability of a financial 
test would thus create a competitive disadvantage for small businesses.
    EPA also solicits comment on how allowance of a financial test 
under the CERCLA Sec.  108(b) rule could affect the potential 
availability of third-party instruments to small businesses. EPA 
anticipates that the impact would depend in part on the willingness of 
instrument providers to provide instruments to small businesses. If 
instrument providers are willing to provide instruments to small 
businesses, allowing a financial test could make instruments more 
available to small businesses by freeing up overall capacity of such 
instruments in the open market. On the other hand, if instrument 
providers prove less willing to provide instruments to small 
businesses, the capacity freed by allowing the financial test may not 
increase the availability of the instruments to those entities. EPA 
therefore solicits comment on the likely impact on small businesses of 
making a financial test available in the rule, both in terms of 
potential disadvantages, and in terms of the availability of the 
instruments themselves.
    (4) EPA's Data Analysis: In this section, EPA discusses the data 
analysis it performed in connection with developing financial test 
options generally for the CERCLA Sec.  108(b) proposed rule, and in 
connection with the particular test selected for proposal. 
Specifically, EPA conducted several basic analyses to understand the 
impacts of the rule and tradeoffs associated both with and without a 
financial test. This is discussed in the following section (a). In 
section (b), EPA discusses its data analysis of the expected cost 
savings and potential costs to the public of alternative financial 
tests considered for proposal under Option 2. In section (c), EPA 
discusses its analysis of the ability of the alternative tests to 
screen out bankruptcies.
(a) Analysis of Rule With and Without a Financial Test Option
    For this proposal, EPA sought to estimate the overall cost to the 
public from potential industry defaults that could occur absent the 
rule, versus the potential cost to industry under a rule without any 
financial test provisions (Option 1). All quantitative analyses 
conducted in relation to financial tests are more thoroughly described 
within the ``Background Information Document for Financial Test Options 
Analysis for Hardrock Mining Industry under CERCLA Sec.  108(b).''
    For purposes of analysis EPA adopted several assumptions. At the 
time of these analyses, estimates were not yet available regarding the 
amounts of the financial responsibility that individual companies would 
be obligated to cover under this rule. Therefore, in order to 
facilitate necessary analyses of options for a financial test, EPA 
assumed an across-the-board obligation amount for all companies (both 
at $50 million, as well as $200 million respectively).\132\ EPA also 
assumed there would essentially be full recovery of instruments under 
the rule, plus negligible recovery from bankruptcy proceedings.
---------------------------------------------------------------------------

    \132\ While this assumption allows for comparison of a company's 
cost accrual relative to other financial tests, it does not 
correctly scale the obligation amount to the size of the company's 
operations. To the extent that this amount overstates actual 
obligations, specifically for smaller companies, the $50 million 
coverage requirement may affect cost effectiveness determinations if 
there is a systematic relationship between company size and 
financial test passing rates.
---------------------------------------------------------------------------

    The Agency's analyses puts the annualized response costs for public 
taxpayers from bankruptcies and defaults at $1.22 billion in the 
absence of any CERCLA Sec.  108(b) rule for the hardrock mining 
industry. EPA also calculated that in order to eliminate such costs 
borne by the public to the maximum extent possible, requiring financial 
responsibility (absent a financial test) would result in additional 
annualized costs to industry of approximately $488 million.
(b) Analytical Basis for the Proposed Financial Test
    EPA evaluated the No Test and a range of alternative Financial Test 
options, incorporating a variety of financial metrics, to assess the 
ability of these tests and metrics to predict the likelihood of 
bankruptcy and ensure that sufficient funds are available to meet a 
company's ongoing environmental commitments. The Agency evaluated all 
candidate hardrock mining firms for which financial information was 
available against a variety of financial test options, including tests 
promulgated under other Federal statutes such as RCRA, and two ratings-
based options designed by EPA (referred to as the Investment Grade and 
Higher-than-Investment-Grade Rating Tests).
    The least sensitive of the options considered looked at using a 
test based solely on Investment Grade credit ratings. Under this test 
option, all companies with a rating of BBB- or better qualify to self-
insure 100 percent of their financial responsibility obligations under 
the rule.\133\ Similar, but somewhat more sensitive, is the option of 
using the same test as that which is used under RCRA Subtitle C. The 
RCRA Subtitle C Financial Test contains two alternative avenues by 
which a company may successfully qualify for self-insurance (one with, 
and one without a ratings-based threshold). To pass the test under RCRA 
Subtitle C a company must either possess an investment grade rating on 
its most recent bond issuance from Standard and Poor's or Moody's, or 
must otherwise demonstrate that their financial status (including that 
of total liabilities, net worth, net income, total assets, current 
assets, and current liabilities) all meet certain minimum standards. In 
order for companies to self-insure under either of these alternatives, 
their tangible net worth must exceed their financial responsibility 
obligations by a factor of six at a minimum (and not be less than $10 
million), while their U.S. Assets must equal at least ninety percent of 
their total assets (or be at least six times that of the financial 
responsibility obligations).
---------------------------------------------------------------------------

    \133\ While this section refers to ratings according to the 
notation used by S&P, the financial test option considers ratings 
from S&P or an equivalent NRSRO for the purposes of assessing a 
company's ability to meet the financial test requirements.
---------------------------------------------------------------------------

    EPA also developed a more sensitive ratings-based financial test 
(the Higher-than-Investment-Grade Rating Test), which further limits 
qualification for self-insurance to only those companies with a BBB or 
better rating. Unlike the

[[Page 3442]]

other tests considered, companies with ratings of BBB- would not 
qualify for any self-insurance under this test. Furthermore, this test 
establishes a hybrid hierarchy whereby only companies with ratings of 
A- or higher qualify at 100 percent, while those with ratings of BBB or 
BBB+ qualify to self-insure no more than fifty percent of their 
financial responsibility obligation. Lastly, because tangible net worth 
and U.S. Asset requirements are frequently included as an important 
feature of financial responsibility regulations, tangible net worth and 
U.S. Asset limitations (similar to those stipulated under RCRA Subtitle 
C) were added as a further component of the Higher-than-Investment-
Grade Rating Test.
(c) Analysis of Financial Test Options Considered
    EPA first assessed the relative costs borne by industry to maintain 
a financial test, or in lieu of doing so, to obtain a third-party 
instrument (industry's expected cost). EPA also assessed the costs that 
may be borne by the public in the event a company defaults on its 
obligations (public's expected default cost).
    Results of these analyses indicated that the estimated costs to 
industry consistently increase, as the conditions of the alternative 
financial tests become more sensitive and fewer companies qualify to 
self-insure. As fewer companies are able to pass the test, they are 
required to pay for third party financial responsibility instruments on 
the open market, which comes at a cost. Conversely, as alternative 
financial tests become more sensitive and fewer companies qualify to 
self-insure, the potential for defaults decreases along with the 
potential costs to the public associated with such potential defaults.
    Under the Investment Grade Ratings Test, EPA's analysis estimates 
the annualized cost savings to industry at approximately $112.5 
million. As a result of allowing the test, the public would in turn 
experience potential costs in annualized dollars of approximately $19.6 
million due to the possibility of a company defaulting in spite of 
having passed the test. Similarly, estimates for the RCRA Subtitle C 
Test, reveal marginally lower annualized cost savings to industry of 
roughly $110.2 million, with the public bearing potential costs from 
defaults valued at an annualized cost of $16.4 million.
    Under a Higher-than-Investment-Grade Rating Test (with and without 
tangible net worth and U.S. Asset requirements), annualized cost 
savings to industry range from $75.2 to $90.8 million, respectively. 
Annualized costs to the public from potential defaults is further 
diminished to between $10.4 and $12.0 million respectively. By creating 
a stricter set of requirements, the Higher-than-Investment-Grade Rating 
Test (with tangible net worth and U.S. Asset provisions) makes it more 
difficult for companies with border-line investment grade ratings or 
insufficient assets to qualify for self-insurance. In so doing, this 
test further reduces the chance of defaults and potential costs to the 
public precipitated by such defaults, as compared to the other 
financial tests considered.
    The Higher-than-Investment-Grade Rating Test is also the only 
option designed to carry with it a provision allowing a company to 
cover only a portion of its obligations depending on its current 
rating. Companies with lower relative ratings (BBB and BBB+) may only 
self-insure for up to 50 percent of their financial responsibility 
obligation. Such lower rated companies are not only at greater risk of 
default, but may also enter into default at a faster pace than 
companies rated at A or better, based on probability of default 
estimates for companies in different ratings tranches as seen in 
historical default studies done by NRSROs. Consequently, this tailored 
feature of the Higher-than-Investment-Grade Rating Test helps to 
further diminish the potential costs to the public relative to other 
financial tests, while still allowing some level of self-insurance in 
recognition of the creditworthiness of companies with investment grade 
ratings of BBB or higher.
(d) Analysis of Bankruptcy and Predictiveness of Alternative Tests
    The Agency endeavored to craft a test that would be able to predict 
bankruptcy in the hardrock mining industry. To assess both the no test 
proposal and that of the financial test options in this respect, the 
Agency collected as much financial information as possible for each of 
3 years proceeding identified bankruptcies that had historically 
occurred among hardrock mining companies. This data was matched with 
bankruptcies in the industry identified over a 35-year period spanning 
1980 to 2015, resulting in a sample of 25 unique occurrences of 
bankruptcies in this industry for which data is available. The 
financial data for each of these bankruptcies were then used to assess 
whether any of these companies would have been capable of passing any 
of the alternative tests, in each of the 3 years before entering 
bankruptcy. Of the tests considered, it was the Higher-than-Investment-
Grade Rating Test (with Tangible Net Worth and U.S. Asset thresholds) 
that performed best in disqualifying companies from passing the test 
during the three-year period before they ultimately went bankrupt.
    Indeed, the Agency's analysis shows that of the 25 hardrock mining 
bankruptcies for which data were available, the proposed test would 
have completely screened out 24 of the 25 companies at least three 
years in advance of bankruptcy. However, even in the case of the one 
company that the test did not screen out, the Higher-than-Investment-
Grade Rating Test succeeded in restricting the level of self-insurance 
for which they qualified to just fifty percent of its financial 
responsibility obligations (instead of 100 percent). This resulted from 
the hybrid feature of the proposed Higher-than-Investment-Grade Rating 
Test. This offers evidence of the effectiveness of the hybrid approach 
included in the proposed test in meeting its objective of reducing the 
exposure to unfunded costs (by fifty percent) for the subset of 
companies with higher expected bankruptcy rates and ratings below that 
of an A rating.
    Further, since a BBB rating forms the minimum basis for whether a 
company can qualify for any self-insurance of their financial 
responsibility obligation, EPA conducted further analyses to evaluate 
this ratings threshold more specifically. In particular, the Agency 
sought to assess fluctuations in BBB ratings in relation to previous 
bankruptcies in the hardrock mining industry. By looking at the 
historical record of rating shifts below the BBB threshold, the Agency 
sought to obtain perspective on how often BBB-rated companies 
experienced ratings downgrades, how susceptible companies were to 
receiving speculative-grade ratings after previously having been rated 
BBB, and how quickly they may have entered bankruptcy subsequent to 
their ratings having dropped to below BBB.
    To assess these questions, EPA collected data on 102 hardrock 
mining companies that were rated by S&P at least once between 1984 and 
2010. These companies reflected both hardrock mining companies 
(targets), and parents of hardrock mining companies (parents) who might 
ultimately be in a position to provide a corporate guarantee for their 
subsidiaries' obligations. The inclusion of parent companies within the 
scope of these analyses furthermore supplemented the Agency's analysis 
where hardrock mining target company data were unavailable.
    Based on the data available from the 26-year sample period, the 
Agency's

[[Page 3443]]

analyses identified only four bankruptcies of companies (out of 36) 
that had ever historically been rated at the BBB level.\134\ In the 
case of these bankruptcies, only one of these mining companies entered 
bankruptcy within one year following a drop in its BBB rating. While 
the company had retained BBB or better ratings presumably due to their 
strength and longevity, they ultimately succumbed to multimillion-
dollar asbestos claims over a very short period. Of the other three 
companies entering bankruptcy within the sample period, two did so 
within three years of a downgrade, and the other entered bankruptcy 17 
years later.
---------------------------------------------------------------------------

    \134\ One additional bankruptcy occurred by a company who had 
never been rated BBB, but had been previously downgraded from BBB+ 
to BB-.
---------------------------------------------------------------------------

    What these results suggest are that relatively few bankruptcies 
were shown to have occurred for companies rated at BBB. The results 
also suggest that while ratings fluctuations do occur, such 
fluctuations generally do not signal an unfailing decline towards 
bankruptcy. Thirdly, they suggest that when a company that has been 
rated at investment grade does experience a ratings decline and 
ultimately defaults, this process is likely to take one or more years 
for such relatively solid enterprises to enter into bankruptcy. In such 
instances, the proposed annual Higher-than-Investment Grade Rating Test 
(combined with RA notification requirements when a company's 
qualification for the financial test ceases) will alert regulators as 
to the company's inability to pass the Higher-than-Investment-Grade 
Rating Test. Therefore, it appears that establishing the cutoff for 
passing the proposed test at a rating of BBB or above is well 
justified. Setting the ratings threshold at BBB, prevents companies 
with ratings of BBB- or below from passing the Higher-than-Investment-
Grade Rating Test. This is designed to help ensure that there is 
sufficient time for the Agency to intercede and enforce the test 
requirements should a company's rating begin to decline.
Summary
    EPA is proposing two options--to not allow a financial test (Option 
1--preferred option), and to allow a ``Higher-than-Investment-Grade 
Rating Test'' (Option 2). EPA believes that not allowing a financial 
test would best avoid undue costs to the Government and to the public 
from unsecured environmental obligations that companies may be unable 
to cover when they go into default or bankruptcy, and that it would 
eliminate administrative burden upon the Agency associated with the 
review and verification of financial statements and attestations from 
financial test submissions.
    Alternatively, the ``Higher-than-Investment-Grade Rating Test'' is 
being proposed, as it was the best financial test, from among those 
considered, at providing cost savings to industry while limiting the 
risks to the Government and the public. The Higher-than-Investment-
Grade Rating Test was selected as the least risky option for the co-
proposal, relative to the other tests considered, because it results in 
the lowest expected potential costs that may be borne by the 
Government, while offering significant cost savings to industry. In 
addition, the Higher-than-Investment-Grade Rating Test performed better 
than the other tests at predicting which owners or operators may have a 
higher potential for defaulting on their obligations. Finally, the 
Higher-than-Investment-Grade Rating Test also takes advantage of 
publically available credit analyses conducted by independent ratings 
agencies as a way to help lower administrative burdens on both industry 
and the Government.
    EPA solicits comment on both proposed options.
5. Corporate Guarantee (Sec.  320.44) (Option 2 Only)
    Under proposed Option 2, which would allow a financial test, EPA 
also is proposing to allow owners and operators to demonstrate 
financial responsibility by obtaining a written corporate guarantee 
from another firm that meets the financial test requirements. The 
corporate guarantee serves as a contract through which a related firm 
guarantees to third-party CERCLA claimants that it will make payment 
for CERCLA response costs, health assessment costs, and/or natural 
resource damages as provided in the guarantee.
a. Issuer Eligibility (Sec.  320.44(b) and (c))
    The Agency would allow guarantees from the direct or higher-tier 
parent corporation of the owner or operator, a firm owned by the same 
parent corporation as the owner or operator, or a firm with a 
substantial business relationship with the owner or operator. These 
potential guarantors are the same as those allowed to provide 
guarantees under the RCRA Subtitle C Closure and Post-closure financial 
assurance and third-party liability regulations.
    Initially, under the RCRA Subtitle C financial assurance 
requirements for closure and post-closure care, EPA allowed for 
guarantees provided only by immediate corporate parents believing that 
that relationship between the owner operator and the guarantor would 
aid in the enforceability of the guarantee and its strength. Further, 
EPA adopted a definition of ``parent corporation'' to ensure the 
relationship was close and direct.\135\ EPA is proposing the same 
definition of parent corporation as employed in the RCRA Subtitle C 
financial assurance program. EPA believes that the definition will be 
familiar to the regulated community and EPA implementers which should 
ease implementation efforts. Furthermore, because the definition 
ensures that the connection between the parent and the subsidiary is 
close and direct, the parent will likely have a strong interest in the 
financial and environmental performance of the subsidiary and the 
facility which the Agency believes strengthens the guarantee. The 
proposed definition of parent corporation is ``a corporation that which 
directly owns at least fifty percent of the voting stock of the 
corporation which is the facility owner or operator; the latter 
corporation is deemed a `subsidiary' of the parent corporation.''
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    \135\ See Standards Applicable to Owners and Operators of 
Hazardous Waste Treatment, Storage, and Disposal Facilities; 
Financial Assurance Requirements, 47 FR 15037 April 7, 1982; and See 
Standards Applicable to Owners and Operators of Hazardous Waste 
Treatment, Storage, and Disposal Facilities; Financial Assurance 
Requirements; Liability Coverage, 51 FR 25350 @253511 July 11, 1986.
---------------------------------------------------------------------------

    However, EPA received several comments on the July 11, 1986 interim 
final rule that urged EPA to allow non-parent firms to provide 
guarantees. EPA analyzed the validity and enforceability of guarantee 
contracts by non-parent firms and decided to authorize the guarantees 
provided by ``sibling'' firms (firm whose parent corporation is also 
the parent corporation of the owner or operator) and firms with a 
substantial business relationship with the owner or operator in the 
third party liability regulations provided they were able to provide 
certain additional information.\136\ EPA later authorized non-parent 
guarantors in the closure and post-closure regulations as well.\137\ 
EPA has determined that guarantees issued by non-parent corporations 
can be valid and enforceable when they are issued in accordance with 
the regulations and thus EPA proposes this same suite of potential 
guarantors in this proposal provided they supply the same necessary 
information to make the guarantee enforceable as required under the 
RCRA Subtitle C regulations. Specifically, if the guarantor's parent 
corporation is also the parent

[[Page 3444]]

corporation of the owner or operator, the letter from the guarantor's 
CFO would have to describe the value received in consideration of the 
guarantee. If the guarantor is a firm with a ``substantial business 
relationship'' with the owner or operator, this letter would be 
required to describe this ``substantial business relationship'' and the 
value received in consideration of the guarantee. These proposed 
descriptions were determined by EPA to be important in ensuring the 
ultimate validity and enforceability of the guarantee contract in past 
Agency financial responsibility rulemakings. Under fundamental 
principles of contract law, contracts must be supported by 
``consideration.'' Consideration is generally defined as a legal 
detriment that has been bargained for and exchanged for the promise. 
The general principle underlying the concept of consideration is that 
the law will not enforce gratuitous promises.
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    \136\ See 53 FR 33941, September 1, 1988.
    \137\ See 57 FR 42833, September 16, 1992.
---------------------------------------------------------------------------

    For the demonstration of sufficient consideration for the contract 
if the guarantor has a substantial business relationship with the owner 
or operator, the guarantor must describe the substantial business 
relationship in a way that would meet the proposed definition. EPA is 
proposing the same definition of substantial business relationship as 
used in the RCRA Subtitle C financial assurance program which 
recognizes that no single legal definition exists of what constitutes a 
business relationship between two firms that would justify upholding a 
guarantee between them and that such a determination would depend upon 
the application of the laws of the States of the involved parties. The 
proposed definition of substantial business relationship is ``the 
extent of a business relationship necessary under applicable State law 
to make a guarantee contract issued incident to that relationship valid 
and enforceable. A ``substantial business relationship'' must arise 
from a pattern of recent or ongoing business transactions, in addition 
to the guarantee itself, such that a currently existing business 
relationship between the guarantor and the owner or operator is 
demonstrated to the satisfaction of the Administrator.''
    In addition, if the guarantor's parent corporation is also the 
parent corporation of the owner or operator or if the guarantor is a 
firm with a ``substantial business relationship'' with the owner or 
operator the letter from the guarantor's CFO would have to describe the 
value received in consideration of the guarantee. In some cases, 
preexisting business relationships, no matter how substantial, will be 
insufficient by themselves to demonstrate consideration because they 
will not have been bargained for to induce the promise in the guarantee 
contract. For this reason, these guarantors must also describe the 
consideration for the contract in the letter from their chief financial 
officer. As mentioned earlier, these requirements are the same as under 
the RCRA Subtitle C financial assurance closure post-closure and third-
party liability financial assurance programs. These requirements would 
be familiar to the regulated community and the regulators familiar with 
RCRA financial assurance and were based on analysis to ensure the 
enforceability of the contract.
    Furthermore, EPA would allow a guarantee from a non-U.S. guarantor 
that meets the financial test requirements outlined in the proposed 
regulations provided the guarantor also has identified a registered 
agent for service of process in the state in which the facility covered 
by the guarantee is located and in the state in which it has its 
principal place of business. This requirement is identical to that 
required in the RCRA third party liability regulations and was required 
to ensure a non-US guarantor be subject to enforcement proceedings in 
the U.S. The function of the agents is to accept service of process for 
the guarantor corporation for legal actions in a given state.\138\ In 
addition, and as described earlier, all guarantors would have to pass 
the financial test requirements including a U.S. assets requirement. 
The Agency has included U.S. Assets requirements to ensure assets are 
available in the United States to be levied against if a judgment is 
entered against the guarantor.\139\ EPA believes this situation is 
similar and wants similar assurance that there are assets available in 
the U.S. should claimants need to recover funds from the guarantor.
---------------------------------------------------------------------------

    \138\ See 52 FR 44317, November 18, 1987.
    \139\ See 52 FR 44317, November 18, 1987
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    The guarantor would be required to provide the same evidence and 
supporting documentation that the guarantor passes the financial test. 
In addition, the guarantor would be required to submit a signed copy of 
the guarantee and comply with the terms in the guarantee. The wording 
in the guarantee would have to be identical to that specified in Sec.  
320.50(f).
b. Wording of the Corporate Guarantee (Sec.  320.50(f))
    In developing the proposed corporate guarantee language EPA looked 
to the guarantee language used in the RCRA Subtitle C program. Those 
guarantees were the product of iterative proposals, responses to 
comment and EPA analysis.
    In the proposed CERCLA Sec.  108(b) guarantee, the guarantor would 
guarantee payment up to the most current CERCLA Sec.  108(b) financial 
responsibility amount required at each facility covered by the 
guarantee exclusive of any legal defense costs incurred by the 
guarantor in the same three scenarios for which the other instruments 
intend to provide financial responsibility (discussed later in this 
preamble). The value of the guarantee thus is designed to adjust with 
the value of the CERCLA Sec.  108(b) financial responsibility amount. 
As evidence that the guarantor passes the financial test, the guarantor 
would be required to submit the letter from its CFO that identifies, 
for all the facilities for which it is providing a corporate guarantee, 
the amount of CERCLA Sec.  108(b) financial responsibility covered by 
the guarantee. This would occur annually or as required by a change in 
the CERCLA Sec.  108(b) financial responsibility amount. The CERCLA 
Sec.  108(b) financial responsibility amounts covered by the guarantee 
identified in the CFO letter at each facility would serve as the basis 
for the value of the guarantee under the proposed guarantee language.
    A similar arrangement is used in the RCRA Subtitle C closure post-
closure guarantee whereby the value of the guarantee is linked to the 
current closure and post-closure cost estimates. The RCRA Subtitle C 
closure and post closure guarantee provides that, if the owner or 
operator fails to perform closure or post closure care of the 
facilities covered by the guarantee in accordance with the closure or 
post-closure plans and other permit or interim status requirements 
whenever required to do so, ``the guarantor shall do so or establish a 
trust fund as specified in subpart H of 40 CFR part 264 or 265, as 
applicable, in the name of [owner or operator] in the amount of the 
current closure or post-closure cost estimates as specified in subpart 
H of 40 CFR parts 264 and 265. In this way the value of the guarantee 
adjusts without required amendments or modifications to the guarantee. 
EPA is proposing that the value of the guarantee similarly adjust to 
the current CERCLA Sec.  108(b) financial responsibility amount.
    To help effectuate this intent, the proposed language of the 
corporate guarantee would require the guarantor to agree to comply with 
the reporting requirements for guarantors and to report the full amount 
of CERCLA Sec.  108(b) financial responsibility for

[[Page 3445]]

which it is eligible to cover as determined by the financial test 
criteria for each facility covered by the guarantee in the letter from 
its CFO. EPA believes it is necessary for the guarantor to report the 
full amount of CERCLA Sec.  108(b) financial responsibility for which 
it is eligible to cover as determined by the financial test criteria 
for each facility covered by the guarantee in the letter from its CFO 
as those amounts would form the basis of the guarantor's potential 
liability under the guarantee. If the guarantor was able to report an 
amount lower than the maximum amount for which the guarantor is allowed 
to cover under the financial test criteria, the guarantor could 
unilaterally adjust the ``value'' of the guarantee downwards by 
reporting some percentage of the maximum amount. Such a provision is 
not necessary in the RCRA Subtitle C closure post-closure guarantee as 
the owner operator is responsible for preparing the cost estimates and 
thus the guarantor could not unilaterally change the ``value'' of the 
guarantee.
    An alternative approach would be to include specific dollar values 
for each facility in the guarantee itself as the basis of the 
guarantor's liability. Under this option, the guarantee would have to 
be amended or modified regularly as the amounts of CERCLA Sec.  108(b) 
financial responsibility changed and create additional reporting 
burdens. Further, EPA anticipates that potential guarantors will 
typically seek to provide a guarantee for the maximum amount allowable 
under the regulations to realize the maximum cost savings. 
Nevertheless, EPA requests comment on the proposed arrangement whereby 
the guarantor's liability is linked to the current CERCLA Sec.  108(b) 
financial responsibility amount and does not require regular amendment 
of the guarantee as well as the alternative whereby the guarantee would 
specify specific dollar amount and would require routine amendment.
c. Payment for CERCLA Response Costs, Health Assessment Costs, and/or 
Natural Resource Damages From the Guarantee
    The proposed language of the corporate guarantee would allow 
claimants to make claims against the guarantor under three scenarios in 
addition to the direct action scenario. First, in the event that 
payment was not made for CERCLA response costs, health assessment 
costs, and/or natural resource damages associated with the facility as 
required in a final court judgment from a Federal court against one of 
the current owners or operators within thirty days, the guarantor would 
do so. Secondly, in the event that payment is not made as required in a 
CERCLA settlement associated with the facility between a current owner 
or operator and EPA or another Federal government agency, the guarantor 
would do so. Third, in the event that performance does not occur as 
required at the facility under a CERCLA unilateral administrative order 
issued to a current owner or operator by EPA or another Federal agency 
and for which the owner or operator provided a written statement 
allowing the guarantee to serve as financial responsibility assuring 
the work in the order, the guarantor would make payment into a trust 
fund established pursuant to the order.
    The payment scenarios in the proposed guarantee are analogous to 
those in the other instruments proposed today. Similar documentary 
requirements are also required for a claimant to receive payment under 
these three scenarios in the proposed guarantee. Specifically, under 
the terms of the proposed guarantee, the guarantor would satisfy a 
third-party CERCLA claim on receipt of specific documents. Claimants 
seeking satisfaction of a valid final court judgment from a Federal 
court awarding payment for CERCLA response costs, health assessment 
costs, and/or natural resource damages associated with the facility 
against any of the current owners or operators at the facility that had 
not been satisfied within thirty days would need to submit the final 
court judgment itself. In addition, the claimant would need to submit a 
signed statement from the claimant certifying that the amounts had not 
been recovered or paid from any other source, including, but not 
limited to, the owner operator, insurance, judgments, agreements, and 
other financial responsibility instruments. These documentary payment 
requirements were selected as it removes EPA from the claims 
administration process but ensures that a court has determined that 
payment is due to the party making the claim under CERCLA and that the 
party has not already recovered or been paid the funds from another 
source. EPA believes that guarantors will be able to review such 
objective documentary submissions and determine whether payment should 
occur under the terms of the guarantee. A similar provision requiring 
the submission of a valid final court order is required in the RCRA 
third party liability guarantee (see 40 CFR 264.151(h)(2)).
    In the payment scenario where payment was not made as required in a 
CERCLA settlement associated with the facility between a current owner 
or operator and EPA or another Federal government agency, Administrator 
or another Federal agency may make a claim by presenting two documents 
to the guarantor for payment. The first document would be a written 
signed statement from the Administrator or another Federal government 
agency requesting payment from the guarantor on the grounds that 
payment had not been made as required by a CERCLA settlement associated 
with the facility and with any of the current owners or operators. The 
second document is the signed statement from the claimant certifying 
that these amounts have not been recovered or paid from any other 
source, including, but not limited to, the owner operator, insurance, 
judgments, agreements, and other financial responsibility instruments.
    In the payment scenario where performance at the facility does not 
occur as required under a CERCLA unilateral administrative order issued 
to a current owner or operator, the Administrator or another Federal 
agency may make a claim by presenting a similar set of two documents as 
described earlier in the settlement scenario to the guarantor for 
payment. Specifically, the first document required to make a claim in 
this scenario under the terms of the proposed guarantee would be a 
written signed statement from the Administrator or other Federal 
government agency requesting payment from the Guarantor into a trust 
fund established pursuant to a CERCLA unilateral administrative order 
on the grounds that performance at the facility had not occurred as 
required by a CERCLA administrative order issued to a current owner or 
operator. The second document that would be required to make a claim 
under this scenario would be a signed statement from the claimant 
certifying that these amounts have not been recovered or paid from any 
other source, including, but not limited to, the owner operator, 
insurance, judgments, agreements, and other financial responsibility 
instruments.
    EPA believes, similar to the case of the letter of credit issued in 
favor of any and all third-party CERCLA claimants, the trust fund and 
the surety bond, that in instances where the claimant is a Federal 
government agency acting pursuant to delegated CERCLA authority a 
simpler set of documentary requirements are appropriate. EPA believes 
the relatively simple requirements of signed statements from EPA or 
another Federal agency acting pursuant to delegated CERCLA authority 
will streamline the claims

[[Page 3446]]

process and reduce uncertainty as to whether or not payment should be 
made under the terms of the guarantee. EPA requests comment on the 
proposed documentary requirements for payment from the guarantee.
    In addition to the three defined payment scenarios, the guarantor 
could also be subject to direct action under CERCLA Sec.  108(c)(2). 
Specifically, the proposed terms of the guarantee include an explicit 
acknowledgement that in the case of a release or threatened release of 
(a) hazardous substance(s) from a facility covered by the guarantee, 
any claim authorized by Sec.  107 or Sec.  111 of CERCLA may be 
asserted directly against the guarantor as provided by CERCLA Sec.  
108(c). Further, the proposed terms of the guarantee require that the 
guarantor consents to suit with respect to these claims subject to the 
limitations in CERCLA Sec.  108(d) and acknowledge that the guarantor 
would be entitled to the rights and defenses provided to guarantors by 
the statute in Sec.  108(c). Finally, under the proposed language of 
the guarantee, the guarantor would agree to provide notice of any 
claims and payments resulting from a direct action to the 
Administrator. EPA believes this notification requirement is valuable 
as the owner operator may not be around to provide such a notice of 
claims and payments in a direct action scenario yet EPA wishes to 
remain informed of claims against the instrument and of the value of 
the financial responsibility.
    The proposed language of the guarantee would also explicitly 
specify that the limit of the guarantor's liability under the guarantee 
would be exclusive of legal defense costs incurred by the guarantor. A 
similar provision is being proposed for insurer and surety liability 
today. To the maximum extent possible, EPA would like the value of the 
financial responsibility be preserved for the payment of valid third-
party CERCLA claims. EPA requests comment on this proposed provision.
d. Notification Requirements in the Guarantee
    The proposed language of the CERCLA Sec.  108(b) corporate 
guarantee also includes several other notification requirements. First, 
under the proposed language, the guarantor would agree that if, at any 
time before the termination of the guarantee, the guarantor fails to 
meet the financial test criteria, guarantor shall send within ninety 
days, by certified mail, notice to the Administrator and to the owner 
or operator that he intends to provide alternate financial 
responsibility as specified in Subpart C of 40 CFR part 320 in the name 
of the owner or operator. A similar provision is also employed in the 
RCRA Subtitle C closure post closure and third-party liability 
guarantee. The provision would provide EPA notice that the guarantee no 
longer passes the financial test and an acknowledgment from the 
guarantor that he intends to provide alternate financial responsibility 
as required under the terms of the guarantee should the owner or 
operator fail to do so. EPA believes it is important for the Agency to 
receive prompt notice of the guarantor's inability to continue to pass 
the financial test as the guarantor's financial strength is 
foundational to the efficacy of the guarantee. Further, EPA believes 
that it is not just consistent with past precedent but important that 
the guarantor be responsible for obtaining alternate financial 
responsibility in these instances. The proposed provision helps limit 
the risk that, in instances when a guarantor no longer passes the 
financial test, the facility will be left without alternate financial 
responsibility.
    Likewise, the proposed terms of the guarantee would require the 
guarantor to agree that within thirty days after being notified by the 
Administrator of a determination that the guarantor no longer meets the 
financial test criteria or that he is disallowed from continuing as a 
guarantor, the owner or operator would be required to establish 
alternate financial responsibility as specified in Subpart C of 40 CFR 
part 320, as applicable, in the name of the owner or operator unless 
the owner or operator had done so. This provision serves the same 
intent as the provision described earlier--that the guarantor be 
responsible for obtaining alternate financial responsibility in an 
instance where the guarantor notices EPA that it no longer passes the 
financial test. The provision helps limit the risk that, in instances 
when a guarantor no longer passes the financial test, the facility will 
be left without alternate financial responsibility. This would be a 
very similar requirement to those used in the RCRA Subtitle C corporate 
guarantees so the regulated community should be familiar with the 
provision.
    Under the proposed terms of the guarantee the guarantor would also 
be required to notify the Administrator by certified mail, of a 
voluntary or involuntary proceeding under Title 11 U.S.C. (Bankruptcy), 
naming the guarantor as debtor, within ten days after commencement of 
the proceeding. This provision is also required in both the RCRA 
Subtitle C closure post closure and third-party liability guarantees. 
EPA recognizes the value of this notification provision and proposes 
its inclusion to the CERCLA Sec.  108(b) guarantee in order for EPA to 
be promptly notified of such indicators of the guarantor's financial 
distress.
    Finally, under the proposed terms of the guarantee, the guarantor 
would need to send a notice by certified mail to the Administrator and 
to the owner operator of its intent to terminate the guarantee. The 
intent of this provision is to provide notice to the Administrator and 
the owner operator that the guarantor wishes to cease providing a 
guarantee on behalf of the owner operator. Such a provision helps 
ensure continuity of financial responsibility coverage.
e. Provisions in the Guarantee Ensuring Continuity of Coverage
    As described earlier, under the proposed terms of the guarantee, 
the guarantor would need to send a notice by certified mail to the 
Administrator and to the owner operator of its intent to terminate the 
guarantee. The corporate guarantee would remain in force and may not be 
terminated unless and until the owner or operator obtains, and the 
Administrator approves alternate financial responsibility. If the owner 
or operator failed to provide alternate financial responsibility as 
specified in the regulations and obtain the written approval of such 
alternate financial responsibility from the Administrator within ninety 
days after receipt by both the owner or operator and the Administrator 
of a notice of termination of the corporate guarantee from the 
guarantor, the guarantor would be required, under the terms of the 
guarantee, to provide such alternative financial responsibility in the 
name of the owner or operator. This provision would ensure the 
continuity of financial responsibility and is similar to that required 
for the other instruments. However, in the case of the guarantee, 
unlike the other instruments, the guarantor would not necessarily need 
to fund a trust fund. The guarantor could choose from the range of 
acceptable financial responsibility instruments when obtaining a 
financial responsibility mechanism on behalf of the owner or operator. 
This provision, and the similar provisions for other proposed 
instruments, as well as alternatives are discussed in more depth in the 
preamble section headed `issuer cancellation provisions.'
f. Requirements for Attorneys General or Insurance Commissioners 
written statements (Sec. Sec.  320.44(f) and (g))
    In the case of corporations incorporated in the United States, a 
guarantee would only be able to be used

[[Page 3447]]

to satisfy the CERCLA Sec.  108(b) financial responsibility 
requirements if the Attorneys General or Insurance Commissioners of the 
State in which the guarantor is incorporated, and each State in which a 
facility covered by the guarantee is located have submitted a written 
statement to EPA that a guarantee executed as described in the 
regulations at Sec. Sec.  320.44 and 320.50(f) is a legally valid and 
enforceable obligation in that State.
    For non-US corporate guarantors a guarantee would be able to be 
used to satisfy the CERCLA Sec.  108(b) financial responsibility 
requirements only if the Attorney General or Insurance commissioner of 
each state in which a facility covered by this guarantee is located and 
the state in which the guarantor corporation has its principal place of 
business has submitted a written statement to EPA that a guarantee 
executed as described in the regulations and Sec. Sec.  320.44 and 
320.50(f) is a legally valid and enforceable obligation in that State.
    These requirements for written statements from state Attorneys 
General and Insurance Commissioners are similarly used in the RCRA 
Subtitle I Underground Storage Tank financial responsibility 
regulations and the RCRA Subtitle C third-party liability regulations. 
The reason for the requirements is that EPA is concerned that 
guarantors may be subject to states insurance laws.\140\ State 
insurance regulation and law are by and large the purview of the states 
and thus the Agency does not believe it can state with certainty 
whether any particular guarantee would subject the guarantor to state 
insurance law, and whether it would be valid with respect to such law. 
Therefore, the Agency is today proposing that the responsibility would 
rest with the owner or operator to obtain the written statement from 
the relevant state Attorneys General and Insurance Commissioners 
stating that a guarantee as described and worded in the regulations 
would be valid and enforceable. EPA invites comments as to whether or 
not this requirement would be necessary or on alternative means by 
which the owner or operator could provide assurances to the Agency that 
the guarantee would be valid and enforceable.
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    \140\ See, for example, Liability Requirements for Hazardous 
Waste Facilities; Corporate Guarantee, 52 FR 44314 @ 44316-44317; 
and Standards Applicable to Owners and Operators of Hazardous Waste 
Treatment, Storage, and Disposal Facilities; Liability Coverage 53 
FR 33938 @ 33942, September 1, 1988.
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6. Trust Fund (Sec.  320.45)
    An owner or operator would be able to satisfy the proposed CERCLA 
Sec.  108(b) financial responsibility requirements by establishing a 
trust fund in accordance with the proposed requirements including the 
proposed required wording. Funds transferred to the trust fund by the 
owners and operators or any letters of credit held by the trust would 
be held in the trust for the purpose of paying valid third-party CERCLA 
claims in certain circumstances identified in the trust agreement. In 
this way, the trust fund acts as a means of self-insurance whereby the 
owner and operator set aside funds to pay future claims which otherwise 
may not be satisfied at such a future date.
a. Submission of Trust Agreement and Trustee Eligibility (Sec.  
320.45(a))
    The owner or operator would be required to submit an originally 
signed duplicate of the trust agreement to the Administrator. This is a 
similar reporting requirement to those under EPA's RCRA Subtitle C 
financial assurance regulations and aids in the evaluation of 
compliance. The Agency does not anticipate this to be a significant 
burden to owners and operators. The trustee would be required to be an 
entity that has the authority to act as a trustee and whose trust 
operations are regulated and examined by a Federal or state agency. 
This requirement is the same as that under the RCRA Subtitle C 
financial assurance program, which EPA required in order to establish a 
minimal level of reliability and security for trustee institutions 
managing trust funds under the Agency's financial assurance regulations 
(see 46 FR 2824, January 12, 1981). EPA considered alternative 
qualifications for trust providers but is proposing to utilize those 
that EPA has found to work well under the RCRA Subtitle C program. In 
making this decision, EPA considered the impact on the potential number 
of trustees and the administrative burden on EPA of reviewing 
additional qualifications. For more information on the consideration of 
alternative provider qualifications, please see the background document 
on instrument provider qualifications.
b. Required Wording and Updates to Schedule A of Trust Agreement (Sec.  
320.45(b))
    The wording of the trust agreement would be required to be 
identical to the wording specified in Sec.  320.50(a)(1), and the trust 
agreement would be required to be accompanied by a formal certification 
of acknowledgment (for example, see Sec.  320.50(a)(2)). As discussed 
in the introduction to Subpart C of the preamble ``Available Financial 
Responsibility Instruments'' EPA believes there are significant 
benefits to standardized wording. Namely, a standardized trust 
agreement reduces the administrative burden of reviewing the wide range 
of possible trust agreement wording that may otherwise be employed and 
ensures uniform integration with the Superfund program and enforcement 
of the CERCLA Sec.  108(b) instruments nationwide. The trust agreement 
would be required to be accompanied by a formal certificate of 
acknowledgment. The language of the acknowledgment would be expected to 
vary by state to accommodate individual state requirements but the 
intent would be to ensure the validity and authenticity of the 
signatures on the trust agreement. This requirement exists for trust 
agreements in other EPA financial responsibility programs,\141\ and 
adds to the legal standing and enforceability of the instrument.
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    \141\ See, for example, 40 CFR 264.151(a)(2) and 280.103(b)(2).
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    Under the proposed regulations, Schedule A of the trust agreement, 
which would identify the facilities covered by the trust agreement and 
their EPA Identification Numbers, names, addresses, current owners and 
operators, and the current financial responsibility amount, or portions 
thereof, for which financial responsibility is being demonstrated by 
the trust agreement, would have to be updated within sixty days of a 
change in the amount of CERCLA Sec.  108(b) financial responsibility at 
a facility covered by the agreement. Maintaining the accuracy of the 
information in Schedule A, including the current amount of CERCLA Sec.  
108(b) financial responsibility the trust fund is covering at each 
facility, would be important to ensure the trustee would have an 
accurate accounting of the value of CERCLA Sec.  108(b) financial 
responsibility for each facility covered. This amount would serve as an 
upper bound for the value of payments made for valid third-party CERCLA 
claims associated with any given facility.
c. Payments Into the Trust (Sec.  320.45(c))
    Payments by the owner or operator into the trust fund would be 
required so that the value of the trust fund would be at least as great 
as the required CERCLA Sec.  108(b) financial responsibility amount. 
For existing facilities subject to this proposed rule, these payments 
would be made by the owner or operator in accordance with

[[Page 3448]]

the compliance schedule for the CERCLA Sec.  108(b) financial 
responsibility regulations in proposed Sec.  320.1. The trust fund 
would thus need to be fully funded within four years of the owner 
operator being subject to the regulations. In addition to payments, 
this requirement would also be able to be met by obtaining a letter of 
credit that conforms to the requirements of the proposal and is held by 
the trust. The four-year implementation window established by the 
statute and discussed earlier would thus serve as the trust fund's pay-
in period.
    EPA is aware that four years is shorter than the pay-in period 
provided by some EPA financial assurance programs. However, under the 
proposed regulations owners and operators would be allowed to use a 
combination of instruments to demonstrate the required CERCLA Sec.  
108(b) financial responsibility amount. Owners and operators would thus 
be able to simulate a longer trust fund pay-in period by combining the 
trust fund with another appropriate instrument. The trust fund could be 
funded over a longer period of time with the unfunded portion of the 
trust provided by a separate instrument. EPA believes this would help 
relieve any burdens that may be encountered because of the relatively 
short pay-in period required by the statute.
    For new facilities, owners and operators would also be required to 
make payments into the trust fund so that the value of the trust fund 
is at least as great as the required CERCLA Sec.  108(b) financial 
responsibility amount. However, in these cases there would not be a 
pay-in period as is provided for existing facilities by the four-year 
implementation period in the statute. For this first CERCLA Sec.  
108(b) rule, EPA expects that new hardrock mining facilities would 
likely have lower financial responsibility amounts as their footprint 
would be smaller initially and then grow over time, obviating the need 
for a pay-in period. EPA requests comment on the need for a pay in 
period for new facilities. EPA is specifically interested in comments 
as to the appropriate length of a pay-in period that could be provided 
for new facilities.
d. Language of the Trust Agreement (Sec.  320.50(a))
    In developing required trust agreement language for this proposed 
rule, EPA first looked to the trust agreement language used in the RCRA 
Subtitle C financial assurance program. The basic terms and conditions 
of the RCRA Subtitle C trust agreement were defined by EPA in close 
consultation with trust experts at the American Banking Association and 
legal practitioners in the late 1970s and early 1980s. Additionally, 
the trust agreement was published for public comment multiple times. 
The required wordings of the RCRA trust agreements have served as 
templates adopted by other financial responsibility programs, both 
within EPA and across many States. This proposal includes proposed 
trust agreement language primarily modified to suit the needs of the 
proposed CERCLA Sec.  108(b) financial responsibility program. The most 
significant aspects of the proposed trust agreement are discussed in 
following sections. Please also see the background document ``Potential 
Requirements for Insurance, Surety Bonds, Letters of Credit and Trust 
Agreements and Standby Trust Agreements under CERCLA Sec.  108(b)'' 
that discusses potential instrument specifications and alternatives 
considered for more information on the proposed trust agreement 
specifications.
e. Specification of Beneficiary of the Trust Agreement
    The proposed trust agreement language specifies that the trust fund 
is established for the benefit of any and all parties with valid third-
party CERCLA claims against the grantor or other current owners and 
operators arising from the operation of the facilities covered by the 
agreement. EPA elected to propose such a beneficiary specification as 
the Agency believes it provides adequate flexibility to accommodate the 
various payment scenarios envisioned by the trust agreement and the 
CERCLA Sec.  108(b) regulations. The RCRA Subtitle C closure post-
closure trust agreement specifies EPA as beneficiary. However, due to 
the potential for multiple claimants including, but not limited to, 
EPA, the Agency considered such an arrangement sub-optimal. In such an 
arrangement, EPA would need to review all claims and assess the merits 
of the claims and direct payment from the trust fund accordingly. As 
discussed earlier in the letter of credit section, there are several 
draw backs to EPA administering the claims process. These draw backs 
include the redirection of Superfund resources to claims administration 
activities and away from cleanups or other programmatic priorities, 
frustrating the intent of the direct action provision and the potential 
for EPA to be in the awkward position of administering a claims process 
in which it is a potential claimant.
    As a result, EPA elected a variation of the beneficiary 
specification employed in the RCRA Subtitle C third-party liability 
program that identifies ``any and all third parties injured or damaged 
by [sudden and/or non-sudden] accidental occurrences arising from 
operation of the facility(ies) covered by'' the trust agreement as 
beneficiaries. EPA believes that the proposed beneficiary specification 
provides adequate flexibility in that parties that obtain final court 
judgments or have other valid third-party CERCLA claims against one of 
the current owners or operators for CERCLA response costs, health 
assessment costs, or natural resource damages associated with the 
facility could make a claim without having to be specifically named in 
the trust agreement (see discussion of claims against the trust fund in 
following sections). At the same time, EPA intends that the beneficiary 
language combined with the payment instructions in the trust agreement 
will provide adequate clarity to trustees as to when to make payment 
from the trust fund. The EPA requests comments on the proposed 
specification of the beneficiary of the CERCLA Sec.  108(b) trust 
agreement.
f. Claims Against the Trust Fund
    Claims against the trust fund could be made by parties with valid 
third-party claims for CERCLA response costs, health assessment costs, 
and/or natural resource damages against one of the current owners or 
operators at the facility.
    Under the proposed regulations, the trust would be available to 
claimants that obtain a final court judgment from a Federal court 
against any of the current owners or operators at the facility awarding 
CERCLA response costs, health assessment costs, and/or natural resource 
damages associated with the facility should payment not occur as 
required by the judgment within thirty days. Under the proposed terms 
of the trust, the claimant would need to present the valid final court 
judgment to the trustee. The judgment would have to be dated at least 
thirty days earlier and be accompanied by an additional signed 
statement from the claimant certifying that the amounts had not been 
recovered or paid from any other source, including, but not limited to, 
the owner operator, insurance, judgments, agreements, and other 
financial responsibility instruments. The two proposed documentary 
requirements are being proposed with the intent of ensuring that a 
court has awarded such payment of CERCLA response costs, health 
assessment costs, and/or natural resource damages, the owner operator 
had thirty days to make

[[Page 3449]]

payment himself and that the claimant is not attempting to be paid 
twice for the same claim. Based on discussions with representatives of 
trust institutions, EPA believes that a final court judgment would be a 
documentary payment condition acceptable to potential trustees. The 
representatives expressed comfort in the concept of a court having 
ordered payment and a desire for minimal due diligence to be required 
on the part of the trustee.
    Under the proposed regulations, the trust would also provide for 
payment as required in a CERCLA settlement associated with the facility 
between a current owner operator and the EPA or another Federal agency 
if payment had not been made. In this scenario, to make a claim, the 
Administrator or other Federal agency would have to present two 
documents: (1) A written signed statement requesting payment from the 
trust fund on the grounds that payment had not been made as required by 
a CERCLA settlement associated with the facility and with any of the 
current owners or operators; and (2) a signed statement certifying that 
the amounts had not been recovered or paid from any other source, 
including, but not limited to, the owner operator, insurance, 
judgments, agreements, and other financial responsibility instruments.
    Finally, under the proposed regulations, the trust fund would also 
be available to pay into a trust fund established pursuant to a CERCLA 
unilateral administrative order issued to a current owner or operator 
by EPA or another Federal agency in the event performance at the 
facility did not occur as required by the order. The Administrator or 
other Federal agency would only make such a claim if the owner or 
operator had provided written consent for the financial responsibility 
instrument to assure the obligations under the administrative order.
    In this scenario, to make a claim, the Administrator or other 
Federal agency would have to present two documents: (1) A written 
signed statement requesting payment from the trust fund into a trust 
fund established pursuant to a CERCLA unilateral administrative order 
on the grounds that performance at the facility had not occurred as 
required by a CERCLA administrative order issued to a current owner or 
operator; and (2) A signed statement certifying that the amounts had 
not been recovered or paid from any other source, including, but not 
limited to, the owners or operators, insurance, judgments, agreements, 
and other financial responsibility instruments.
    EPA selected these straightforward certifications as documentary 
payment conditions because EPA believes that in the instances when the 
potential claimants are limited to Federal government agencies a more 
streamlined payment condition is optimal to limit the administrative 
burden on the trustee. This is a similar documentary payment condition 
to that proposed for the letter of credit issued in favor of any and 
all third-party CERCLA claimants and the surety bond. EPA considered 
alternative documentary requirements for the claims scenarios limited 
to Federal claimants but did not believe they added additional benefit 
and may burden the trustee with additional administrative expenses. For 
example, the proposed trust agreement could specify the presentation of 
the CERCLA settlement itself as a requirement for making a claim but 
the benefits of such a requirement were unclear to EPA. EPA believes 
that the requirement of signed statements from the Administrator or 
another Federal agency acting pursuant to delegated CERCLA authority is 
a clear documentary condition and will require minimal due diligence on 
the part of trustees. EPA requests comment on the proposed documentary 
requirements for making a claim against a CERCLA Sec.  108(b) trust 
fund.
g. Direct Action Claims Against the Trust Fund
    In addition to the three payment scenarios, like all CERCLA Sec.  
108(b) financial responsibility instruments, the direct action 
provision in CERCLA Sec.  108(c)(2) could come into play at facilities 
where a trust fund is the financial responsibility instrument. EPA is 
proposing trust agreement language that acknowledges that cause of 
action in the trust agreement itself.
    In discussions with representatives of the trust industry, 
representatives expressed some concern about the direct action 
provision. Specifically, representatives suggested that interpreting 
``guarantor'' as defined in CERCLA Sec. Sec.  101(13) and 108(c)(2) to 
include a trustee of a CERCLA Sec.  108(b) trust fund would greatly 
reduce the willingness of trust institutions to offer such services. 
EPA believes that in the CERCLA Sec.  108(b) context, whereby a trust 
fund is funded by the owner or operator for the purposes of satisfying 
future valid third-party CERCLA claims, such an interpretation would be 
inappropriate. The trustee is simply providing administrative and 
fiduciary services over the funds set aside by the owner or operator 
and is not providing the instrument itself. EPA believes a more 
appropriate reading is that the trust fund itself is the guarantor as 
it provides for the funds set aside by the owner or operator to be 
available to third-parties with valid CERCLA claims.
    As a result, the proposed trust agreement language expressly 
provides that in the case of a release or threatened release of (a) 
hazardous substance(s) from a facility covered by the agreement, any 
claim authorized by Sec. Sec.  107 or 111 of CERCLA could be asserted 
directly against the trust fund as provided by CERCLA Sec.  108(c)(2) 
subject to the limitations in CERCLA Sec.  108(d). The proposed 
language of the agreement goes on to state that the trust fund shall be 
entitled to all rights and defenses provided to guarantors by CERCLA 
Sec.  108(c) and that the trust fund itself is available for paying and 
defending claims in those instances.
    Further, the proposed trust agreement language further clarifies 
the intent of the trust agreement with respect to direct action under 
section 3 of the agreement that deals with establishment of the fund. 
The relevant proposed wording in section 3 states that ``The Grantor 
and Trustee do not intend for the Trustee to qualify as a ``guarantor'' 
as that term is used in CERCLA Sec. Sec.  101(13) and 108(c)(2), and 
therefore intend that the Trustee will not be subject to a direct 
action by Trustee's agreement to act as Trustee for the Fund. The 
Grantor and Trustee intend for the Fund to qualify as a ``guarantor'' 
as that term is used in CERCLA Sec. Sec.  101(13) and 108(c)(2), and 
therefore intend that only the Fund will be subject to any direct 
action brought pursuant to CERCLA Sec.  108(c)(2).''
    EPA believes that clearly specifying the Agency's intent that the 
trust fund itself, not the trustee, be the subject of any direct 
actions is optimal. Such an approach is more consistent with the role 
the two entities serve and does not suggest that trust institutions 
would be put in the unfamiliar and potentially unwelcome position of 
being sued under CERCLA. The downside to this arrangement is that the 
trust fund could incur significant legal expenses under a direct action 
scenario that may reduce the value of the trust fund available to make 
payment for valid third-party CERCLA claims. EPA has proposed to 
specify that trust expenses generally be paid by the owner operator 
that established the trust fund (the grantor) to reduce the impact of 
trustee expenses on the value of the financial responsibility. However, 
by its very nature, in a direct action scenario, the owner operator is 
unlikely to be available or able to pay such expenses and thus such 
expenses may be paid from the trust fund itself. This is a limitation 
of the proposed arrangement

[[Page 3450]]

that EPA requests comment on. Specifically, EPA is interested in 
provisions that could help effectuate the direct action provision in 
CERCLA Sec.  108(c)(2) that may ameliorate the concern of trustee 
expenses significantly reducing the value of the trust fund.
h. Payment of CERCLA Claims
    The proposed trust agreement language also provides additional 
direction to the trustee with respect to when and how claims should be 
satisfied from the trust fund. Specifically, the proposed trust 
agreement specifies that claims be paid on a first come first serve 
basis. Additionally, the proposed trust agreement language also 
clarifies that in the event of simultaneous valid claims that exceed 
the value of the fund, the trustee would pay the claimants a pro rata 
share of their claim determined by the size of each valid claim. This 
language was included to reduce the potential uncertainty and ambiguity 
a trustee may face in the event multiple claims against the trust fund 
occur that exceed the value of the fund. Finally, the proposed language 
of the trust agreement specifies that payments for a claim should not 
exceed the value of the CERCLA Sec.  108(b) financial responsibility 
for that facility provided by the trust fund which would be identified 
and updated in schedule A. The language is intended to provide added 
clarity that, if the trust agreement covers multiple facilities, claims 
against the fund associated with one facility should not exceed the 
value of the CERCLA Sec.  108(b) financial responsibility for that 
facility provided by the trust fund. EPA believes that such facility-
specific sub-limits are important to the extent multiple facilities are 
covered by one trust agreement as other current owners and operators at 
the facilities, in addition to the grantor, may have all contributed 
funds but may not be owner operators at all the facilities covered by 
the agreement.
    Ambiguity in instances where a trustee may have to decide how much 
and if to make payment was a concern EPA heard from representatives of 
the banking community. EPA intends the proposed trust agreement 
language to reduce such uncertainty, but requests comment as to other 
language or specifications that might provide added clarity and provide 
trustees greater certainty.
i. Provisions Authorizing Trustee To Hold and Draw on Letter of Credit
    As discussed in the letter of credit section of the preamble, this 
proposed trust agreement expressly authorizes and anticipates that a 
trustee may hold a CERCLA Sec.  108(b) letter of credit for the 
purposes of drawing on the letter of credit to make payments to third-
parties with valid CERCLA claims as provided by the trust agreement. 
EPA has included language in whereas clauses, section 4 of the trust 
dealing with payment from the fund, section 5 dealing with payments 
comprising the fund, section 6 dealing with trustee management, section 
8 dealing with the express powers of the trustee, and section 10 
dealing with annual valuations providing for and accounting for this 
possible role of the trustee. The intent of the language is to ensure 
that a trustee will be able to hold, account for, and draw upon, as 
necessary, a CERCLA Sec.  108(b) letter of credit issued in favor of 
the trustee. As discussed in the letter of credit section, EPA believes 
this a worthwhile feature to propose based on input from members of the 
banking community that suggested a trustee may be better suited to 
manage the CERCLA Sec.  108(b) claims process than an institution 
issuing a letter of credit. EPA requests comments on other provisions 
that could be included in the trust agreement that may provide further 
clarity of the trustee's ability to hold and draw on the letter of 
credit as provided for in the terms of the trust agreement.
    In addition to the trust providing the trustee the authority to 
draw on the letter of credit to satisfy valid third-party CERCLA claims 
brought to the trust fund, under the proposed trust agreement, the 
trustee would also have the responsibility to draw on the letter of 
credit in order to maintain continuity of coverage. Specifically, the 
proposed trust agreement language provides that in the event of receipt 
of a notice of a decision not to extend the letter of credit from an 
institution issuing a letter of credit held by the trust fund, the 
trustee shall draw on the letter of credit and deposit any unused 
portion of the credit into the trust fund if the Administrator informs 
the Trustee that the owner operator did not establish alternate 
financial responsibility and obtain written approval of such alternate 
financial responsibility from the Administrator within the time frame 
provided by the regulations. The trust agreement would specify that 
this draw must occur prior to the expiration of the letter of credit. 
EPA believes this a necessary provision as in the case of a letter of 
credit issued in favor of a CERCLA Sec.  108(b) trust fund trustee, EPA 
would not be authorized to draw on the letter of credit. EPA requests 
comment on this proposed trust agreement language.
j. Trustee Management
    In specifying the trustee's responsibilities with respect to trust 
management, EPA looked to the ``prudent investor'' standard which has 
become prevalent in trust law and practice. Specifically, the proposed 
language of the trust agreement reads as follows: ``In investing, 
reinvesting, exchanging, selling, and managing the Fund, the Trustee 
shall discharge its duties with respect to the trust fund with 
undivided loyalty and solely in the interest of the beneficiaries and 
with the reasonable care, skill, and caution of a prudent investor, in 
light of the purposes, terms, distribution requirements, and other 
circumstances of the trust.'' However, while EPA is proposing the 
prudent investor rule form the basis of the instruction to the trustee, 
the Agency is proposing a modified prudent investor standard. 
Specifically, the proposed trust agreement language would prohibit the 
trustee from acquiring or holding securities or other obligations of 
the grantor, or any other current owner or operator of the facilities, 
or any of their affiliates as defined in the Investment Company Act of 
1940, as amended, Title 15 U.S.C. 80a-2(a) unless they are securities 
or other obligations of the Federal or a state government. This 
provision is similar to language used in other EPA financial assurance 
programs including the RCRA Subtitle C Closure Post-closure and third-
party liability programs. The intent of the modification to the prudent 
investor rule is to restrict investments in assets whose performance 
may be correlated with the financial performance of the owners and 
operators at the facility. A further proposed modification to the 
prudent investor standard employed in the proposed trust agreement is 
an explicit authorization that the trustee may hold and draw upon 
standby letters of credit as specified in 40 CFR 320.40. EPA intends 
for the trustee management instructions in the trust agreement be 
consistent with current trust practice and requests comment on the 
proposed trustee management language in the trust agreement.
k. Refunds to the Grantor
    The proposed language of the trust agreement also includes a 
provision that if notified by the Administrator that the trust fund 
contains amounts in excess of the required CERCLA 108(b) financial 
responsibility amount, the trustee shall refund to the grantor such 
amounts in excess of the CERCLA Sec.  108(b) financial

[[Page 3451]]

responsibility amount covered by the trust fund. A similar provision 
was used in the RCRA Subtitle C Closure and Post-Closure trust 
agreement. EPA believes this provision is necessary to allow for excess 
funds in the trust agreement to be released back to the owner operator. 
EPA envisions that such a scenario could arise either due to growth of 
the value of the trust fund, the owner operator substituting alternate 
financial responsibility for some portion of the trust fund, or as a 
result of a downward adjustment in the required amount of CERCLA Sec.  
108(b) financial responsibility. EPA believes that providing for the 
possibility of a release of funds from the trust fund that did not 
necessitate the termination of the trust agreement was advantageous.
l. Termination of the Trust (Sec.  320.45(i))
    The Administrator would agree to the termination of the trust when 
the owner or operator substituted alternate financial assurance as 
specified in the regulations or the Administrator released the owner or 
operator from the requirements of these regulations in accordance with 
the proposed release provisions. As the proposed trust is irrevocable, 
\142\ termination of the trust would necessarily require the approval 
of the Administrator. The trust agreement itself specifies that the 
trust shall be irrevocable and shall continue until terminated at the 
written agreement of the trustee, the grantor, and the Administrator or 
by the Trustee and the Administrator, if the Grantor ceases to exist. 
The irrevocability of trust agreements is a common requirement in 
financial responsibility programs and ensures that the trust fund will 
not unilaterally be terminated and will be available to satisfy third-
party CERCLA claims when necessary.
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    \142\ An irrevocable trust agreement may not be revoked or 
amended without the agreement of key parties to the instrument.
---------------------------------------------------------------------------

7. Issuer Cancellation Provisions
    One similar feature across many of the instruments (surety bond, 
insurance, letter of credit and corporate guarantee, if allowed) in 
this proposal are cancellation provisions that include the potential 
requirement for the instrument provider to fund a standby trust (or in 
the case of a corporate guarantor, if a corporate guarantee is 
ultimately provided for, obtain alternate financial responsibility in 
the name of the owner operator). For the specifics related to 
cancellation for each instrument please see the instrument specific 
preamble discussions earlier in this preamble.
    In each of the scenarios governing insurance, surety bond, letter 
of credit and guarantee cancellation, the proposal specifies that the 
issuer would be liable for the value of the instrument in the event the 
owner or operator failed to obtain alternate financial responsibility 
and obtain the Administrator's written approval of the financial 
responsibility provided within ninety days after receipt of a notice of 
cancellation from the issuer by the relevant parties. In the case of 
insurance, letter of credit or surety bond, the issuer would be liable 
to fund the accompanying standby trust to the value of the instrument. 
In the instance of a guarantee, if allowed, the guarantor would be 
required to provide alternate financial responsibility, in accordance 
with the regulatory requirements, in the name of the owner or operator.
    Such cancellation provisions are very similar to provisions in 
other EPA financial assurance programs for letters of credit, surety 
bonds and corporate guarantees. EPA is proposing such cancellation 
provisions to ensure continuity of financial responsibility coverage 
and provide assurance that funds will be available to EPA and other 
third party claimants when necessary to pay for CERCLA response costs, 
health assessment costs, and natural resource damages incurred by 
claimants while limiting the implementation burden on EPA.
    EPA acknowledges that such a provision may impact providers' 
appetite to issue instruments in particular for insurance, where there 
is not past precedent in EPA financial assurance programs of a 
requirement for the insurer to fund a standby trust. EPA did consider 
alternatives that may reduce the likelihood the instrument provider 
would need to make payment and thus may provide greater flexibility 
but, for the reasons provided in subsequent preamble discussion, 
believes this proposed approach is the best option available.
    One possible alternative would be to specify issuer liability to 
fund a standby trust only after notice of cancellation by the provider 
if the owner or operator does not obtain alternate financial 
responsibility and obtain written approval of such alternate financial 
responsibility from the Administrator within ninety days after receipt 
by both the owner or operator and the Administrator of the notice and 
some additional triggering event had occurred. For example, additional 
conditions necessary to trigger issuer payment into a trust fund could 
include bankruptcy of the owner or operator, abandonment of the 
facility, and/or the issuance of a CERCLA notice letter. These are all 
indications of potential higher risk at the facility and a potential 
more imminent need for the financial responsibility. However, EPA is 
concerned that such criteria alone may not provide adequate assurance 
funds will be available when necessary to pay valid third-party CERCLA 
claims. Facilities owned or operated by non-bankrupt companies and non-
abandoned facilities can present risks and require Superfund actions or 
create natural resource damages for which the owner operator may not be 
able to pay. Further, EPA was told by potential providers of CERCLA 
Sec.  108(b) instruments that the credit profile of the owner or 
operator is an important consideration of theirs. If cancellation 
occurred when the owner operator was in marked financial decline, the 
facility may end up abandoned and the company bankrupt before alternate 
financial responsibility could be obtained, highlighting the risk of 
allowing cancellation of the financial responsibility instrument in a 
wide range of scenarios without a requirement to fund a standby trust. 
The inclusion of a CERCLA notice letter as another condition that would 
trigger issuer responsibility to fund a standby trust would provide 
some added assurance. However, this would potentially require EPA to 
perform a preliminary assessment/site investigation to assess the site 
which in many cases would not be possible in the 120-day notice of 
cancellation period. As EPA is not necessarily the primary regulator or 
permitting authority at these facilities, EPA may not have the same 
level of understanding of the conditions and risks at the facilities as 
it does in other EPA financial assurance programs. Beyond just 
practical timing and feasibility concerns, such an approach would raise 
serious resource concerns for the Superfund program. Such a provision 
may require the Superfund program to shift its resources from its 
priority sites to facilities where financial responsibility maintenance 
was in question. If EPA did not or could not take action to investigate 
the facility's condition to determine whether a notice letter should be 
issued, financial responsibility coverage could lapse in a broader 
range of circumstances that may ultimately be optimal and financial 
responsibility may not be available if a CERCLA action was necessary.
    EPA also considered a notification of a release of a hazardous 
substance at the facility to the National Response Center as required 
under CERCLA Sec.  103(a) as a

[[Page 3452]]

possible additional condition that could be proposed as a trigger for 
issuer liability to fund a standby trust in the instances of an issuer 
sending notice of cancellation and the owner operator's failure to 
obtain replacement financial responsibility. However, such a notice 
would be limited to only releases. The proposed CERCLA Sec.  108(b) 
financial responsibility program intends to cover CERCLA liabilities as 
defined in CERCLA Sec.  107 which is much broader than just costs 
associated with responding to releases. For example, response costs may 
also be incurred by reacting to a threat of a release which would not 
be accounted for in the notice of a release and may almost universally 
exist at facilities regulated under CERCLA Sec.  108(b). Further, such 
a provision may create a perverse incentive to not report releases in 
order to avoid triggering issuer liability and any costs to the owner 
operator that may result from payment from the instrument. In light of 
these considerations, and with the desire not to skew Superfund 
priorities while also providing strong assurance that funds would be 
available when necessary to pay valid third-party CERCLA claims, EPA is 
not proposing such a nuanced payment requirement into a standby trust. 
By proposing that the issuer be liable for the owner operator's 
obtaining alternate financial responsibility in all instances, EPA 
recognizes that it is erring on the side of caution with the intent of 
not creating additional administrative burden on EPA while providing a 
high level of assurance that funds would be available when necessary to 
pay valid third-party CERCLA claims.
    EPA requests comment, however, on any additional criteria (e.g. 
bankruptcy, abandonment of the facility), for requiring the issuer to 
fund the standby trust beyond the requirements previously discussed--
the owner operator does not obtain alternate financial responsibility; 
and obtain written approval of such alternate financial responsibility 
from the Administrator within ninety days after receipt by both the 
owner or operator and the Administrator of the notice. EPA is 
interested in whether such additional criteria may be optimal for 
certain instruments, despite reducing the level of assurance provided 
that financial responsibility will be available to pay valid third-
party CERCLA claims. Further, EPA is interested in other objective, 
readily identifiable supplemental criteria that EPA could include if 
such an option was ultimately pursued.
    Another option EPA considered to address the potential lapse in 
coverage that may result from the issuer of a financial responsibility 
instrument cancelling the instrument is to specify non-cancellation 
triggering events. Under such an option, cancellation of the instrument 
could not occur after notice of cancellation by the provider if: (1) 
The owner operator does not obtain alternate financial responsibility 
and obtain written approval of such alternate financial responsibility 
from the Administrator within ninety days after receipt by both the 
owner or operator and the Administrator of the notice of cancellation, 
and (2) some additional triggering event had occurred. A further 
refinement to such an option would be to also restrict the scenarios in 
which cancellation can occur. EPA's RCRA Subtitle C closure and post-
closure insurance regulations offer an example. Those regulations do 
not require the establishment of a standby trust alongside insurance. 
Rather, the provider is only permitted to cancel the policy in 
instances where the owner and operator failed to pay the premium and 
the provider gave at least 120 days advance notice. Further, 
cancellation, termination or failure to renew the policy may not occur 
in the event of one of several ``triggering events.'' Specifically, the 
RCRA Subtitle C closure insurance regulations state that cancellation, 
termination, or failure to renew may not occur and the policy will 
remain in full force and effect in the event that on or before the date 
of expiration: (1) The Administrator deems the facility abandoned; (2) 
the permit is terminated or revoked or a new permit is denied; (3) 
closure is ordered by the Administrator or a U.S. district court or 
other Federal court; (4) the owner or operator is named as debtor in a 
voluntary or involuntary proceeding under Title 11 U.S.C (Bankruptcy); 
or (5) the premium due is paid.\143\
---------------------------------------------------------------------------

    \143\ See 40 CFR 264.143(e)(8).
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    Such a series of non-cancellation provision was one alternative to 
a requirement to fund a standby trust that EPA considered. Such an 
option could potentially be used for all instruments. However, the non-
cancellation triggering events used in the RCRA Subtitle C closure 
post-closure would not all be applicable in the instance of the 
proposed CERCLA Sec.  108(b) financial responsibility program which 
does not compliment a broader permitting program. For example, two of 
the triggering events (the termination, revocation or denial of a 
permit and the Administrator ordering closure) are not applicable here 
as EPA does not have permitting authority over these facilities.
    Additional triggering events similar to those identified (e.g. 
issuance of a CERCLA notice letter, notification of a release at the 
facility) could bolster such a provision to lower the likelihood that 
financial responsibility was not available when needed to pay valid 
third-party CERCLA claims. However, these supplemental criteria would 
present the same limitations, implementation challenges and resource 
issues as they would in the option where they would be additional 
triggers for issuer liability to fund a trust fund. Moreover, EPA was 
also concerned that such an arrangement may lead to scenarios whereby 
instruments may need to remain in effect and non-cancellable for many 
years. For example, it could take several years before a claimant could 
obtain a judgment for CERCLA response costs, health assessment costs, 
and/or natural resource damages that may prompt a claim against the 
instrument. Based on conversations with instrument providers, EPA 
believes multi-year non-cancellation periods would likely be 
unpalatable to instrument providers. This concern is substantiated by 
past EPA experience. In the development of the RCRA Subtitle C closure 
and post-closure financial assurance programs EPA proposed that 
instruments would not be able to be terminated when a compliance 
procedure was pending. Specifically, after notice of intent to cancel 
or terminate an instrument was sent by the issuer, EPA would issue a 
compliance order requiring the owner operator to obtain alternate 
financial assurance. EPA would have been able to draw on the instrument 
to fund a standby trust had the owner operator not complied with the 
order. In the interim, the instrument would be non-cancellable as a 
result of the pending compliance proceeding and thus a lapse in 
financial assurance coverage would have been avoided.\144\ However, 
such proposal was met with dissatisfaction from issuers of letters of 
credit and surety bonds. Institutions that issue letters of credit 
commented that non-cancellation provisions would preclude a defined 
date on which the letter of credit could expire--an important feature 
of letters of credit. Sureties noted that such an arrangement did not 
provide them adequate opportunity to limit their risk. As a result, the 
RCRA Subtitle C closure post-closure financial assurance regulations 
include a 120 days' notice period of the intent to cancel or fail to 
extend a surety bond or

[[Page 3453]]

letter of credit during the last thirty days of which the instrument 
provider would be liable if the owner operator did not obtain alternate 
financial assurance. Such a provision is what is being proposed today 
for surety bonds, letters of credit and insurance.
---------------------------------------------------------------------------

    \144\ See 46 FR 2822-2823 January 12, 1981.
---------------------------------------------------------------------------

    Nevertheless, EPA requests comments on the option to specify non-
cancellation triggering events and provisions that could eliminate the 
need for providers to fund a standby trust after a notice of intent to 
cancel the instrument. Specifically, commenters are asked to identify 
appropriate non-cancellation triggers, how instrument providers may 
react to the prospect of protracted periods of non-cancellation and 
whether such an arrangement may be appropriate for some mechanisms but 
not others.
    EPA also considered an option whereby after the 120-day notice of 
cancellation period, issuers would face no potential liability and the 
instrument would be terminated regardless of whether the owner or 
operator provided alternate financial responsibility and obtained the 
Administrator's approval of the financial responsibility. This option 
has the advantage of possibly being the most palatable to instrument 
providers; however, it was not proposed for a variety of reasons. In 
particular, it provides the least assurance that funds would be 
available when necessary to pay CERCLA claimants. EPA believes the 
incentive to cancel, terminate, fail to renew or extend the coverage 
may be greatest in times when the facilities may present the greatest 
need for the instrument (e.g. the owner operator is experiencing 
financial decline, after a release of hazardous substances) and thus 
coverage may be lost precisely when it is most needed. Moreover, this 
concern is elevated in the case of CERCLA Sec.  108(b) which may 
require the cost recovery process to run its course before a claim 
could be made against an instrument.
    With all of these considerations in mind, EPA has decided to 
propose that the instruments would require a 120 day notice of 
cancellation, termination, failure to extend or failure to renew and 
that the issuer would become liable for the value of the instrument if 
the owner operator does not obtain alternate financial responsibility 
and obtain written approval of such alternate financial responsibility 
from the Administrator within ninety days after receipt by both the 
owner or operator and the Administrator of the notice. The proposed 
approach provides strong assurance that funds will be available when 
necessary to pay CERCLA claims and limits the extent to which Superfund 
resources are shifted from conducting cleanups to administering the 
proposed financial responsibility program. This approach also has the 
virtue of ensuring a trust fund is available to hold financial 
responsibility funds at each facility if necessary after facility 
closure or the owner operator no longer exists. EPA recognizes that a 
trust fund is unique when compared to third-party mechanisms such as 
surety bonds, letters of credit or insurance in that ongoing payments 
from the owner or operator are not necessary if funded adequately 
upfront. Depending on the duration of risk at a given facility, 
financial responsibility may need to remain in place long after the 
owner or operator ceases to exist. The proposed arrangement whereby if 
the owner or operator does not provide alternate financial 
responsibility in instances of cancellation of the instrument a trust 
is funded, ensures financial responsibility can remain in place for the 
long term.
    However, EPA acknowledges that under this construction there would 
be instances where issuers would be required to make payment into a 
standby trust at facilities where a CERCLA claim may never arise. EPA 
requests comments on these provisions of the proposal. Furthermore, EPA 
requests comment on whether a hybrid of the options may be most 
appropriate whereby for one instrument one option be employed, and for 
another instrument a different option might be employed.
8. Use of Multiple Financial Responsibility Instruments (Sec.  320.46)
    An owner or operator would be able to satisfy the requirements of 
this section by establishing more than one financial instrument per 
facility. The instruments would be required to meet the regulatory 
specifications applicable to each instrument except that it would be 
the combination of instruments, rather than the single instrument, 
which would have to demonstrate financial responsibility for an amount 
at least equal to the required amount of CERCLA Sec.  108(b) financial 
responsibility. If an owner or operator were to use a trust fund in 
combination with a surety bond, letter of credit or insurance policy, 
including a trust fund holding a letter of credit, the owner or 
operator would be able to use the trust fund as the standby trust fund 
for the other instruments. Should the owner or operator obtain a letter 
of credit issued in the favor of a trust fund trustee in combination 
with a surety bond or insurance policy, the owner or operator would be 
able to use the trust fund holding the letter of credit as the standby 
trust fund for the other mechanisms. A single standby trust fund could 
be established for two or more instruments. A claimant would be able to 
elect against which instrument used to provide evidence of financial 
responsibility to make a claim for CERCLA response costs, health 
assessment costs, and/or natural resource damages. In this way, there 
would not be `primary' or `excess' instruments where the ability to 
draw on one instrument may be predicated on the exhaustion of another. 
EPA is electing to provide for multiple instruments in this fashion as 
the Agency believes it will be significantly less administratively 
cumbersome and will make implementation of the claims process easier.
9. Use of a Financial Instrument for Multiple Facilities (Sec.  320.47)
    An owner or operator would be able to use a financial 
responsibility instrument specified in this section to meet the 
requirements of this section for more than one facility. Evidence of 
financial responsibility submitted to the Administrator must include, 
for each facility, the EPA Identification Number, name, address, and 
the amount of funds for CERCLA Sec.  108(b) financial responsibility 
assured by the instrument. If the facilities covered by the instrument 
are in more than one Region, identical evidence of financial assurance 
would be required to be submitted to and maintained with the regional 
delegees of the Administrator, as applicable, of all such Regions. The 
amount of funds available through the instrument would be required to 
be no less than the sum of funds that would be available if a separate 
instrument had been established and maintained for each facility. EPA 
is proposing this as it may provide for some administrative ease in the 
compliance and implementation process.
    This is also provided for in RCRA Subtitle C closure and post-
closure financial assurance program. However, in the proposed CERCLA 
Sec.  108(b) financial responsibility program there is a much wider 
range of potential parties that may make a claim against an instrument 
than in the Subtitle C program. Therefore, the instruments proposed 
today are intended to have clear facility-specific sub-limits. 
Maintaining the accuracy of the facility-specific sub-limits is 
important as the consolidated form provision in CERCLA Sec.  108(b)(4) 
provides that multiple owners and operators may obtain an instrument 
together while only one may be a common owner or operator at each 
facility covered by the instrument.

[[Page 3454]]

Ensuring the accuracy of the amount of coverage an instrument provides 
at each facility may occasion additional burden on the regulated 
community and on EPA. For example, EPA is proposing that schedule A of 
the trust agreement that identifies the facilities and amounts covered 
by the trust agreement, be updated within sixty days of a change in the 
information, even if the trust is not currently funded. EPA believes 
such a provision is necessary as the trust may ultimately be funded 
when the grantor of the trust is not around and such information should 
be as current as possible. However, EPA believes that such additional 
burden will likely be offset by the burden reduction provided by using 
one mechanism across facilities.
    One final consideration is whether the inclusion of facility 
specific sub-limits might affect instrument providers' willingness to 
provide instruments. EPA believes that the added clarity and clear 
delineation of a provider's potential liability at any given facility 
combined with the lower administrative burden of preparing only one 
instrument would be a welcome specification. However, EPA could 
envision a scenario where a provider found issuing multiple instruments 
cleaner and easier than maintaining an accounting of the sub-limits 
within an instrument. For example, the proposed wording of the letter 
of credit would require the identification of the amount of financial 
responsibility at each facility covered by the credit. EPA, in past 
Agency rulemakings had proposed including such information in the 
letter of credit but was informed by commenters that such information 
typically would not be included in a letter of credit. As, in that 
case, the information could be included in a separate letter from the 
owner operator, EPA decided not to require the inclusion of facility 
specific amount in the letter of credit itself (See 47 FR 15042 April 
7, 1982). However, as the Administrator will not be directing payments 
from CERCLA Sec.  108(b) instruments such information would need to be 
included in the instrument were a letter of credit to cover multiple 
facilities.
    The proposed instruments do not require that multiple facilities be 
covered and thus EPA believes and intended that they provide 
flexibility for regulated entities and instrument providers to identify 
the most efficient arrangement. EPA requests comment on the proposed 
allowance for mechanisms to cover multiple facilities. Specifically, 
EPA is interested in hearing if there are alternative means of 
specifying facility-specific sub-limits that may have certain 
advantages.
10. Consolidated Form and Multiple Owners and/or Operators (Sec.  
320.48)
    EPA had to consider how best to implement the provision for 
multiple owners or operators at a facility in CERCLA Sec.  108(b)(4). 
The provision provides guidance on how a financial responsibility 
instrument could provide financial responsibility for the CERCLA 
response costs, health assessment costs, and or natural resource 
damages of all the current owners and operators of the facility in 
instances where there is not one single owner and operator. Under the 
proposal, where a facility is owned and/or operated by more than one 
person, evidence of financial responsibility covering the facility may 
be established and maintained by one of the owners or operators, or, in 
consolidated form, by or on behalf of two or more owners or operators. 
In practice, the instruments would follow the same form regardless of 
whether one of the owners or operators establishes a single instrument 
at the facility, whether multiple owners or operators establish a 
single instrument at the facility, or whether multiple owners or 
operators establish one or more instruments at the facility. EPA 
believes the flexibility in establishing financial responsibility at a 
facility when there are multiple owner operators is important as each 
arrangement may lend itself best to certain instruments. For example, 
EPA understands that sureties and banks issuing letters of credit have 
strong preference for one party obtaining the instrument. In 
discussions with the surety community, EPA learned that the surety 
typically interacts and has a surety relationship with one party at a 
facility and thus prefer one principal on the bond. While the bond 
would cover the valid CERCLA claims associated with all current owners 
and operators at the facility, only one principal need be listed. 
Representatives from the banking community also expressed a preference 
for one applicant per letter of credit on whom the lending institution 
would perform its credit assessment. Similar to the bond, the credit 
will cover the CERCLA response costs, health assessment costs, and/or 
natural resource damages associated with all current owners and 
operators at the facility. On the other hand, EPA understands that with 
insurance a multiple insured arrangement is more common and may be 
required for the policy to cover claims against all the parties at the 
facility. In that case, EPA anticipates additional insureds may be 
listed on the policy. In this way, EPA proposes to implement the rule 
in a way that is consistent with both CERCLA's liability scheme and 
with commercial practice.
    When evidence of financial responsibility is established in a 
consolidated form, the proportional share of the cost of demonstrating 
the financial responsibility for each participant would have to be 
shown in a separate letter submitted to the Administrator. This 
provision will require the owners and operators to plan out and 
apportion the responsibility of obtaining and maintaining the 
instrument up front which EPA believes may help reduce the likelihood 
of an instrument obtained by multiple parties lapsing due to failure to 
pay any premiums or fees required by the instrument provider.
    In either scenario, the evidence of financial responsibility would 
have to be accompanied by a statement authorizing the owner or operator 
submitting the evidence of financial responsibility to act for and on 
behalf of each participant in submitting and maintaining the evidence 
of financial responsibility. It is worth noting that all of the current 
owners and operators at the facility would still be responsible for 
ensuring financial responsibility at the facility is obtained and 
maintained in accordance with the regulations. EPA would thus retain 
enforcement authority for the regulations against all of the current 
owners and operators.

E. Subpart H--Requirements Applicable to Hardrock Mining Facilities

1. Universe of Hardrock Mining Facilities Covered by the Rule (Sec.  
320.60)
a. Applicability of the Rule
    The Agency is proposing that the classes of facilities within the 
hardrock mining industry that are identified in Sec.  320.60 be subject 
to this rule. The classes of facilities that EPA is proposing for 
regulation are the classes of facilities that were identified in the 
2009 Priority Notice with the exception of four classes determined by 
the Agency to present a lower level of risk of injury than the 
remainder of the classes identified in the notice, if they meet certain 
conditions. The classes EPA is proposing not to include in the rule 
are: (1) Mines conducting only placer mining activities as defined in 
Sec.  320.62, (2) mines conducting only exploration activities as 
defined in Sec.  320.62, (3) surface mines with a disturbance as 
defined in Sec.  320.62 of less than five acres not located within a 
mile of mine disturbance that occurred in the prior ten-year period 
that do not

[[Page 3455]]

employ hazardous substances in their processes; and (4) mineral 
processors as defined in Sec.  320.62 with less than five acres of 
surface impoundment and waste pile disturbance. Owners or operators of 
facilities that conduct only these limited activities would not be 
required to comply with the requirements of Part 320.
b. Universe Development
(1) Identification of Classes of Facilities Within the Hardrock Mining 
Universe for Rule Development
    In the 2009 Priority Notice, EPA identified classes of facilities 
within the hardrock mining industry as those for which the Agency would 
first develop CERCLA Sec.  108(b) regulations. EPA stated, for purposes 
of the notice, that hardrock mining facilities include those which 
extract, beneficiate and process metals (e.g., copper, gold, iron, 
lead, magnesium, molybdenum, silver, uranium, zinc) and non-metallic, 
non-fuel minerals (e.g., asbestos, phosphate rock, sulfur). The Agency 
also noted that it was not identifying non-hardrock mineral mines, such 
as sand, gravel, limestone, and stone; oil, oil shale or gas 
operations; or the mining and preparation of coal as priority classes 
of facilities.\145\ In the 2009 Priority Notice, EPA stated it would 
inform its selection of classes based on indicators of risk and the 
related effects, and reviewed information contained in a number of 
studies, reports, and analyses. This review identified numerous factors 
EPA could consider. For example, typical elements in evaluating risk to 
human health and the environment include the probability of release, 
type and duration of exposure, and toxicity.146 147
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    \145\ EPA excluded several classes of facilities (identified by 
commodity sector), that otherwise fell within the broad definition 
of ``hardrock mining.'' See memorandum to Jim Berlow, from Stephen 
Hoffman and Shahid Mahmud, entitled: Mining Classes Not Included in 
Identified Classes of Hardrock Mining, June 2009.
    \146\ See Risk Assessment in the Federal Government: Managing 
the Process. National Research Council. National Academy Press, 
Washington, DC. 1983.
    \147\ See U.S. EPA 2004. Nationwide Identification of Hardrock 
Mining Sites. Office of Inspector General. Report No. 2004-P-00005. 
Available at: http://epa.gov/oig/reports/2004/20040331-2004-p-00005.pdf.
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    Based on the information available at the time, EPA concluded that 
hardrock mining facilities present such risk that warranted giving 
those classes of facilities priority in the development of financial 
responsibility requirements under CERCLA Sec.  108(b).
    Throughout the discussion of its data analysis, EPA addresses 
several topics that were raised in public comments that EPA received on 
its data analysis for the 2009 Priority Notice and in response to EPA's 
2010 ANPR relating to other facility classes, where those topics are 
relevant to the data analysis for this proposal. It is important to 
note, however, that the 2009 Priority Notice was a one-time event, 
under which EPA identified the classes for which EPA would first 
develop CERCLA Sec.  108(b) requirements. Consistent with this 
approach, EPA did not seek public comment on the notice, and nothing in 
CERCLA required EPA to issue its 2009 Priority Notice in proposed form, 
or required EPA to provide responses to comments received. The 2009 
Priority Notice's sole purpose was to identify a set of facilities for 
which EPA would begin the process of developing CERCLA Sec.  108(b) 
regulations, as provided for in CERCLA Sec.  108(b)(1) (second 
sentence), and EPA provided a significant amount of factual information 
in support of its conclusions. EPA is not reopening its identification 
in the 2009 Priority Notice of hardrock mining as the classes for which 
it would first develop CERCLA Sec.  108(b) regulations by this 
proposal. EPA requests public comment on its data analysis. However, 
EPA is not seeking comment on the 2009 Priority Notice.
    As previously discussed, CERCLA Sec.  108(b) states that 
``[p]riority in the development of such requirements shall be accorded 
to those classes of facilities, owners, and operators which the 
President determines present the highest level of risk of injury.'' 
Though the 2009 Priority Notice identified the classes of facilities 
within the hardrock mining industry as those for which the Agency will 
first develop financial responsibility requirements, it did not provide 
criteria to define classes of facilities, or to identify which classes 
of facilities within that universe present the highest level of risk of 
injury. In developing this proposed rule, EPA thus considered these 
issues to determine which facilities within the universe described in 
the 2009 Priority Notice would be included in this proposed rule.
    The Agency considered how to define classes of mining facilities. 
EPA considered two options. EPA first considered identifying classes of 
mines based on the commodity mined. This approach had two advantages--
it was consistent with the approach taken in the 2009 Priority Notice 
to identify the universe to be considered, and it was consistent with 
general industry practice to identify mines (e.g. gold mine, silver 
mine, phosphate mine, etc.) so would have been readily understandable 
to the regulated community. However, that approach had several 
drawbacks. First, the commodity mined is not necessarily the source of 
risk of injury at a mine. Numerous hardrock mining facilities mine 
multiple ores. Thus, it alone served as a poor basis to compare level 
of risk of injury. Second, similar sources of releases exist at 
facilities within a range of commodities. Third, minerals are not 
located in consistent geologic settings, so the risks associated with a 
specific commodity could vary on that basis alone from case to case. 
Under the second option considered by EPA, processes that are known to 
affect the level of risk of injury at a mine would be identified and 
facilities would be grouped based on the presence of those 
characteristics and the risk they present. EPA believes this approach 
created a more logical link to risk of injury, and the Agency adopted 
it in developing this proposed rule. As previously noted, EPA had 
identified hardrock mining facilities as those involved in the 
extraction, beneficiation or processing of metals (e.g., copper, gold, 
iron, lead, magnesium, molybdenum, silver, uranium, and zinc) and non-
metallic, non-fuel minerals (e.g., asbestos, phosphate rock, and 
sulfur) but not the specific classes of mining listed in a memorandum 
to the record for the 2009 Priority Notice.\148\ Based on the Agency's 
analysis of the current universe of hardrock mining and mineral 
processing facilities, for illustration purposes the following table 
provides examples of commodities that the Agency expects are subject to 
the regulations being proposed today. However, it is important to note 
that this list is not intended to be an all-inclusive list of the 
universe of commodities potentially subject to this rulemaking. This 
includes commodities with no currently active or abandoned facilities 
that might in the future commence/resume operation, e.g., asbestos, 
arsenic, bismuth. Any facility that meets the definition of a hardrock 
mining or mineral processing facility (see section VI.D.3. of this 
preamble), would also be subject to the requirements in this proposed 
rulemaking.
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    \148\ See supra note 130.

[[Page 3456]]



                                                    Commodity
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Alumina..............................  Germanium..............  Osmium.................  Sulfur
Antimony.............................  Gold...................  Palladium..............  Talc
Arsenic..............................  Hafnium................  Phosphate..............  Tantalite
Asbestos.............................  Huebnerite.............  Phosphorus.............  Tantalum
Bastnaesite..........................  Ilmenite...............  Platinum...............  Tellurium
Barite...............................  Iridium................  Potash.................  Thallium
Bauxite..............................  Iron (including          Potassium..............  Thorite
                                        hematite, magnetite,
                                        siderite, taconite).
Beryl................................  Lead...................  Psilomelane............  Thorium
Beryllium............................  Limonite...............  Pyrolusite.............  Tin
Bismuth..............................  Lithium................  Quicksilver............  Titanium
Boron................................  Magnesium..............  Radium.................  Trona
Cadmium..............................  Manganese..............  Rare earth metals......  Tungsten
Cerium...............................  Manganite..............  Rhenium................  Uranium
Chromite.............................  Mercury................  Rhodium................  Vanadium
Chromium.............................  Microlite..............  Rhodochrosite..........  Vermiculite
Cinnabar.............................  Molybdenite............  Ruthenium..............  Wolframite
Cobalt...............................  Molybdenum.............  Rutile.................  Wulfenite
Columbite............................  Molybdite..............  Scheelite..............  Zinc
Columbium............................  Monazite...............  Selenium...............  Zinc
Copper...............................  Nickel.................  Silver.................  Zirconium
Fluorspar............................  Niobium................  Strontium..............  .......................
----------------------------------------------------------------------------------------------------------------

    EPA has described in the following sections the basis for 
determining that exploration mines, placer mines, small surface mines 
of less than five acres, and mineral processors with less than five 
acres of surface impoundment and waste pile disturbance present a lower 
level of risk of injury. These classes, it should be noted, were 
identified based on facility characteristics and operations, rather 
than on the commodity mined.
    EPA solicits comment on whether it would be feasible and 
appropriate to identify additional classes of hardrock mining 
facilities as presenting a lower level of risk of injury, particularly 
classes of mines that differ in their operations and associated risk 
from more tradition hardrock mining operations. For consistency with 
the approach taken by EPA to identify the lower level of risk of injury 
classes proposed in this rule, information to support additional lower 
level of risk of injury classes should address facility characteristics 
and operations, and should not rely on the commodity mined as a 
classification factor. However, EPA further solicits comment on whether 
classes of mines identified by commenters as presenting a lower level 
of risk of injury based on facility characteristics and operations 
could potentially encompass iron ore, phosphate, and uranium mines.
(2) Basis for Determination of Lower Level of Risk of Injury for 
Classes Not Included in Proposal
(a) Exploration Mines
    EPA has determined that exploration mines present a lower level of 
risk of injury and thus propose that owners and operators of facilities 
that conduct only exploration activities as defined in Sec.  320.62 
would not be required to comply with the CERCLA Sec.  108(b) financial 
responsibility requirements. Mineral exploration is a precursor to the 
production of ores and associated wastes at hardrock mining and mineral 
processing facilities. The primary purpose of mineral exploration is to 
locate ore deposits and/or find significant extension of previously 
located deposits associated with operating or abandoned 
mines.149 150 However, exploration activities do not 
typically result in the generation of significant amounts of hazardous 
substances or mineral waste.
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    \149\ See Lee-Moreno, J.L. 2011. In SME Mining Engineering 
Handbook. Third Edition. Volume 1. Chapter 3.2: Minerals Prospecting 
and Exploration. United States: Society for Mining, Metallurgy, and 
Exploration, Inc.
    \150\ See BLM defines exploration as the creation of non-
negligible surface disturbance to evaluate the type, extent, 
quantity, or quality of mineral values present, including sampling, 
drilling, or developing surface or underground workings. 43 CFR 
Subpart 3809.5
---------------------------------------------------------------------------

    Many exploration projects have only minimal surface disturbances or 
impacts. Mineral exploration efforts begin with surface explorations 
for signs of potential mineral deposits, commonly utilizing initial 
field surveys generally involving low-impact techniques, such as aerial 
photography and remote sensing.151 152 Additional 
geochemical and geophysical survey techniques use either low-volume 
surface sampling \153\ or no sampling, relying on sophisticated tools 
to determine geologic properties of sites, such as chemical composition 
and magnetism. For most commodities, these result in only limited 
surface sampling as only a few minerals, such as gold and platinum-
group metals, economically justify deep subsurface exploration.\154\ In 
many cases, exploration activities thus present a negligible level of 
risk.
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    \151\ See International Council on Mining & Metals (ICMM). Good 
Practice Guidance for Mining and Biodiversity. Accessed February 25, 
2015 at: http://www.icmm.com/document/13.
    \152\ See A. Erickson and J. Padgett. 2011. Chapter 4.1 
Geological Data Collection. In SME Mining Engineering Handbook. Ed. 
P. Darling. Third Edition. Volume 1.
    \153\ For example, a survey conducted over gold-silver vein 
mineralization in Canada described the optimal sample depth of 18-24 
inches. For most stream sediment surveys, about 1.1 to 2.2 lbs of 
material are collected from the near-surface sediment layer. See: 
Jaacks, J.A., Closs, L.G., and J. A. Coope. 2011. Chapter 3.4. 
Geochemical Prospecting. In SME Mining Engineering Handbook, Ed. P. 
Darling. Third Edition. Volume 1.
    \154\ See Lee-Moreno, J.L. 2011. Chapter 3.2: Minerals 
Prospecting and Exploration. In SME Mining Engineering Handbook. 
Third Edition. Volume 1. United States: Society for Mining, 
Metallurgy, and Exploration, Inc.
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    Potential impacts of mineral exploration can arise when sub-surface 
exploration does occur and include clearing land and potential 
contamination from boreholes (narrow shafts penetrating below the 
surface). Poor planning and management of drilled holes may cause 
aquifer contamination by infiltration of polluted surface water or by 
migration of materials in other layers of the earth that previously did 
not come in contact with the aquifer. However, due to nature of these 
operations where large-scale extraction of resources has not occurred, 
the disturbance and impact would be expected to be significantly 
smaller. For example, tailings facilities, large open pits, heap and 
dump leach operations, and large waste rock deposits, leading sources 
of releases of hazardous

[[Page 3457]]

substances at hardrock mining sites historically, would not be expected 
to exist at exploration projects. Moreover, hazardous substances would 
typically not be employed in the exploration activities further 
lowering the risk posed by exploration activities compared to 
commercial or larger-scale mining operations. The limitation that 
exploration excludes activities where material from the site is 
extracted for commercial use or sale limits the construction of large 
facilities such as those named earlier.
    EPA found no evidence directly linking exploration activities to 
releases leading to CERCLA listing. Although CERCLA documents noted the 
presence of mineral exploration activities at eight sites, exploration 
activities appear to have played little to no direct role in releases 
of hazardous contaminants.
    For the reasons stated, EPA believes that mineral exploration 
presents a lower level of risk. As such, these mineral exploration 
activities are not included in today's proposed rule. EPA requests 
public comment regarding our determination to not include exploration 
mines in today's proposal.
(b) Placer Mines
    EPA has determined that placer mines, as defined by EPA in this 
proposal (See proposed definition in section 320.62) present a lower 
level of risk of injury. EPA recognizes that placer mining would not 
typically be considered hardrock mining; however such mining practices 
would fall within the definition of hardrock mining used by EPA in 
identifying the priority class for regulation in the 2009 Priority 
Notice. As a result, and due to the lower level of risk of injury 
presented by placer operations, EPA is proposing that placer mines not 
be included in the CERCLA 108(b) hardrock mining financial 
responsibility regulations.
    Placer mining is a method of mining in which the unconsolidated 
overburden is removed to expose valuable mineral-bearing gravel 
deposits beneath. Placer mines, commonly in alluvial deposits, 
typically seek to recover gold, titanium, and rare earths minerals. 
Alluvial deposits are commonly non-lithified (non-cemented) sands and 
gravels that rarely contain minerals that are more commonly the sources 
of contamination in other deposits (e.g. lode deposits). Placer mining 
can involve open pit, underground, or dredging operations using 
backhoes, bulldozers, or other excavating equipment to extract sand and 
gravel; at frozen placer mines, drilling and blasting techniques can be 
used to tunnel into the ground. Most commonly, dredges are used to 
break apart sand and gravel and remove valuable minerals. Dredge types 
vary widely, but generally use either mechanical methods to transport 
material on moving buckets or belts, or hydraulic methods to bring raw 
materials to the surface using pumps and pipes. Most placer recovery 
involves only sizing and separation by physical properties such as 
specific gravity, color, or magnetism.\155\ For example, vibrating 
screens can separate the ore into particles of different sizes. This 
stands in contrast to non-placer mines that may employ chemicals in 
their heap leaching processes, a significant source of releases or 
threatened releases at hardrock mining facilities. Placer mines may 
have tailings, open pits and other features common at other mines. 
However, due to the environmentally benign nature of typical alluvial 
deposits, such features would not be expected to result in releases of 
hazardous substances as such features would not typically contain 
minerals (e.g. pyrite) that are more commonly the sources of 
contamination in non-placer deposits at other mines.
---------------------------------------------------------------------------

    \155\ Chemicals are rarely used for processing. Flotation may be 
used in phosphate operations, and hot acid leaching using sulfuric 
or hydrochloric acid is sometimes used for zircon sand. In these 
operations, effluent treatment involves the addition of neutralizers 
and the removal of solids, with effluent water being recycled back 
to avoid off-site discharges.
---------------------------------------------------------------------------

    Placer mining sediment discharges may diminish the quality of 
surrounding environmental resources such as surface water, ground 
water, soil, wetlands, and wildlife. Historically, the primary 
environmental impact from placer mining has been increases in 
sedimentation and heavy metals concentrations downstream from mining 
operations. Most current placer mining does not utilize added 
chemicals, nor would a placer operation using hazardous substances meet 
EPA's definition of placer mine, minimizing the potential for release 
of hazardous substances.
    Placer mining practices were directly linked to releases leading to 
a CERCLA listing at two mining sites stemming from methods not 
typically recently employed domestically as a result of enhanced 
environmental regulation and law. Evidence revealed that at one of the 
sites sediment discharges resulted from hydraulic mining techniques 
which disturbed large volumes of sediment. Hydraulic mining, which was 
common in California and Alaska through the 1980s, used high-pressure 
jets of water to break apart gravel beds, washing mixtures of water, 
sand and minerals into a collection area. However, regulatory regimes 
that have since emerged greatly restrict hydraulic placer mining \156\ 
and EPA thus does not expect it to be a common practice at placer mines 
in the US going forward. At the other site where placer mining 
practices were directly linked to releases leading to a CERCLA listing, 
contamination stemmed from mercury amalgamation, which was historically 
used for processing gold in placer mining operations. By following this 
process, mercury and gold would form an amalgamated substance from 
which pure gold could be extracted. The use of amalgamation processes, 
however, has fallen precipitously in the US since the 1970s due to its 
high cost, inefficiency for larger-scale mines, growing scarcity of 
ores for which the technique can be used, and the introduction of 
various environmental regulations.\157\ Furthermore, a placer mine that 
did employ mercury amalgamation would need to comply with the Part 320 
financial responsibility regulations as they would fail to meet the 
proposed definition of placer mine which specifies that a placer mine 
does not use CERCLA hazardous substances in the concentration or 
processing of materials (see definitions at Sec.  320.62).
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    \156\ See Bullock, Richard L et al., Placer Mining and Dredging. 
SME Mining Engineering Handbook. 3rd ed. Vol. 2. Society for Mining, 
Metallurgy, and Exploration, (SME), 2011. 1062.
    \157\ See U.S. Environmental Protection Agency. Gold Placers. 
Technical Resource Document: Extraction and Beneficiation of Ores 
and Minerals, Volume 6. October 1994.
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    In light of the benign nature of alluvial deposits and the absence 
of hazardous substances in the processing operations at placer mines 
meeting EPA's proposed definition, EPA believes such placer mines are 
unlikely to result in contamination. EPA requests public comment 
regarding our determination to not include placer mines in today's 
proposal. EPA requests comment on whether the class of placer mines as 
defined that is proposed as a lower level of risk of injury classes is 
appropriate, or whether that class should be further defined to limit 
the placer mines not included under this proposal.
(c) Small Surface Mines of Less Than Five Acres
    EPA has determined that small surface mines with a disturbance of 
less than five acres not located within a mile of mine disturbance that 
occurred in the prior ten-year period that do not employ hazardous 
substances in their processes, and are not underground, present a lower 
level of risk of injury. While individual small mines may cause

[[Page 3458]]

releases or contamination as a result of certain hazardous substances 
or mining practices used, such contamination tends to be more limited 
due to their lower volumes of mining. Superfund sites are therefore not 
generally associated with small individual surface mining facilities, 
except in circumstances where there are major clusters that increase 
the potential for cumulative impacts.
    Small surface mines tend to extract near-surface higher grade ores 
and previously unmined placer deposits. Larger mines are more able to 
take advantage of new ultra-mechanized mining; metallurgical techniques 
allow them to use lower-grade, large-volume extraction and processing. 
Small surface mines likely do not engage in these more modern practices 
due to financial factors. As a result, small surface mines will have 
much lower volumes of waste and the features from which releases have 
historically occurred (e.g. waste rock piles, open pits) will be much 
smaller. Furthermore, lower level of risk is further ensured by the 
requirement that the small mine also not employ hazardous substances in 
their mining practices. As a result, cyanide leaching, one source of 
releases or threatened releases, would not be practiced at small mines; 
nor would hazardous process chemicals be stored at the facility 
lowering the possibility of spills or other mishandling of hazardous 
substances. Additionally, it is worth noting that because this 
determination of lower risk is being made for small surface mines, 
processing operations would not be included in this lower risk class. 
As such, practices such as electrowinning, hydrometallurgy, or 
pyrometallurgy would not occur at these facilities; nor would tailings 
facilities exist. Underground mines are excluded because an underground 
mine can expose significant reactive material (e.g. pyrite) in 
underground workings, thereby causing contaminated mine drainage, and 
still be in an area covering less than 5 acres if the mined material is 
hauled off site for processing. Please see a discussion of low risk 
mineral processing facilities later in this preamble for more 
information on what class of mineral processing facilities EPA has 
determined present lower levels of risk of injury.
    In current Federal and state regulations, ``small'' mines are also 
typically defined by acreage or volume of ore processed. Small mines 
are regulated by the BLM, Forest Service and most states based on their 
potential impacts and in most cases face reduced permitting and 
operation requirements.\158\ In the case of both BLM and the Forest 
Service, small mine projects causing a surface disturbance of less than 
five acres are eligible for exemptions from certain financial 
responsibility requirements. Alaska, Montana, Nevada, and other states 
also have reduced requirements for facilities and projects no greater 
than five acres in size. BLM, USFS, and most states do not extend non-
major mining exemptions to operations that use toxic process chemicals 
or that have the potential to discharge hazardous substances to water 
resources.
---------------------------------------------------------------------------

    \158\ See Kuipers, J., 2000, Hardrock Reclamation Bonding 
Practices in the Western United States, National Wildlife 
Federation.
---------------------------------------------------------------------------

    The reduced risk presented by small mines is evident by the lack of 
small mines individually becoming Superfund sites. Historically, 
Superfund sites with smaller-scale mines reflect the combined 
environmental impacts of non-major mines in close proximity. One 
example consists of numerous abandoned and inactive hardrock mine sites 
that produced gold, lead, zinc and copper.159 160 Mining 
waste problems impacting the 53-square mile watershed from abandoned 
and inactive mine sites led to CERCLA listing. EPA identified 150 
individual mine sites within the watershed boundary, of which 70 have 
been prioritized for cleanup. Concern over the potential issues that 
may arise from the cumulative impact of numerous small mines in close 
proximity is the rationale for the proposed additional qualification 
for small mines determined to present a lower level of risk as those 
not located within a mile of mine disturbance that occurred in the 
prior 10-year period.
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    \159\ See http://www2.epa.gov/region8/upper-tenmile-creek-mining-area.
    \160\ Additional Superfund sites representing mining districts 
with multiple smaller-scale operations include: Copper Basin Mining 
District (CERCLIS ID TN0001890839), Oronogo-Duenweg Mining Belt 
(CERCLIS ID MOD980686281), Cherokee County (CERCLIS ID 
KSD980741862), Washington County Lead District (CERCLIS ID 
MON000705027), Basin-Cataract Mining District (CERCLIS ID 
MTD982572562), California Gulch (CERCLIS ID COD980717938), and 
Carpenter Snow Creek Mining District (CERCLIS ID MT0001096353).
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    EPA believes that small surface mines of less than five acres 
present a lower level of risk when such mines are not in close 
proximity to another mine and do not use hazardous substances. EPA 
requests public comment on the proposal that owners and operators of 
such small mines would not be required to comply with the CERCLA Sec.  
108(b) hardrock mining financial responsibility regulations.
(d) Mineral Processors With Less Than Five Acres of Surface Impoundment 
and Waste Pile Disturbance
    EPA is proposing that owners and operators of mineral processing 
facilities with less than five acres of surface impoundment and waste 
pile disturbance not be required to comply with the financial 
responsibility requirements in Part 320. EPA is proposing this because 
the Agency believes that releases from surface impoundments and waste 
piles present elevated risk at mineral processing facilities. These 
features were identified as contamination sources at many superfund 
sites historically. For example, surface impoundments which contained 
tailings and wastewater were the source of contamination for more than 
160 different response actions; slag and heap leach waste piles were 
sources of contamination for more than 54 and 17 responses 
respectively. Further waste piles and surface impoundments at mineral 
processing and combined mining and mineral processing sites have caused 
natural resource damages.\161\ Additionally, releases from surface 
impoundments have resulted in EPA needing to issue imminent and 
substantial endangerment orders and other orders requiring injunctive 
relief.\162\ Moreover, in a 1998 EPA study of mineral processing damage 
cases, EPA found that many of the cases involved releases from waste 
piles and surface impoundments. Additionally, the report noted at least 
one additional NPL site (not included in the damage cases reviewed) 
where contamination appeared to be from land-based mineral processing 
units. The report also noted that land placement of products, 
byproducts, in-process materials, and intermediates can result in 
environmental problems.\163\ Since 2004, EPA's National Enforcement 
Initiative on Mining and Mineral Processing has performed over 100 
inspections of mineral processing facilities. These facilities ranged 
from small to very large operations and had a wide variety of waste 
management practices. However, EPA found that facilities that managed 
wastes in large surface impoundments or piles posed higher 
environmental risk to human health and the environment

[[Page 3459]]

than facilities with smaller waste management units.\164\
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    \161\ For examples, see Select NRD Cases at Mineral Processing 
Facilities, PDF portfolio available in the docket for this proposed 
rule.
    \162\ For examples, see Select Enforcement Cases at Mineral 
Processing Facilities, PDF portfolio available in the docket for 
this proposed rule.
    \163\ See U.S. EPA. Damage Cases and Environmental Releases from 
Mines and Mineral Processing Wastes. April 1998.
    \164\ See U.S. EPA. National Enforcement Initiative for Mining 
and Mineral Processing Summary of Activities 2005 to 2016. November 
15, 2016.
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    Some of the risk of surface impoundments and waste piles stems from 
poor environmental practice (e.g. failure to use liners, overtopping, 
instability of berms). For example, in 2004, an EPA inspection of a 
mineral processing facility in Florida found that storage and disposal 
of hazardous waste into unlined ditches and surface impoundments 
released hazardous substances off-site. Nearby groundwater and private 
drinking water wells were contaminated as a result of these 
releases.\165\
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    \165\ For examples see 2004 Coronet compliance evaluation 
inspection report file in Select Enforcement Cases at Mineral 
Processing Facilities, PDF portfolio available in the docket for 
this rulemaking.
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    As the volume of wastes disposed of in a surface impoundment or 
pile increase, the units become larger and hydraulic pressure 
increases. This results in higher incidents of leaks and structural 
failures.\166\ Larger units also have increased pressure due to larger 
surface areas exposed to rainfall. Sometimes a surface impoundment may 
be located on top of or adjacent to a waste pile. For example, releases 
from a large waste pile/surface impoundment (referred to as a 
``phosphogypsum stacks'') in Florida, Texas, and Mississippi released 
millions of gallons of highly acidic wastewater resulting in fish kills 
and impacting other aquatic life and natural resources.\167\
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    \166\ See Select Surface Impoundment Technical Reports PDF 
portfolio in the docket.
    \167\ See Mosaic, Agrifos, and Piney Mulberry examples in Select 
NRD Cases at Mineral Processing Facilities, and Select Enforcement 
Cases at Mineral Processing Facilities, PDF portfolios, available in 
the docket for this rulemaking.
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    Mineral processing facilities with less than five acres of surface 
impoundment and waste pile disturbance generally pose lower risk due to 
the lower quantities of hazardous substances present, and less 
likelihood of spills and structural instability and the smaller 
expected impact of any releases. As such, EPA proposes that owners and 
operators of mineral processing facilities with less than five acres of 
surface impoundment and waste pile disturbance not be required to 
comply with the financial responsibility requirements in Part 320. EPA 
requests comment on this proposal. Specifically, EPA is interested in 
damage cases that have arisen at mineral processing facilities with 
less than five acres of waste pile or surface impoundment disturbance.
2. Timeframes for Compliance (Sec.  320.61)
    CERCLA Sec.  108(b)(3) requires a phased-in approach to 
implementation of the financial responsibility requirements of this 
proposal. That section requires that financial responsibility 
requirements be imposed as quickly as can reasonably be achieved but in 
no event more than four years after the date of promulgation of the 
final rule. The statute further requires that, where possible, the 
amount of financial responsibility shall be achieved through 
incremental, annual increases. This phased approach provides time for 
the financial markets to develop and make available instrument capacity 
while, at the same time, has financial responsibility put into place at 
facilities subject to the rule quickly.
    Under the proposed schedule for implementation of financial 
responsibility requirements, owner or operator's would be required to 
demonstrate financial responsibility for: (1) Health assessment costs 
by twenty four months after promulgation of the final rule, i.e., after 
publication of the final rule in the Federal Register; (2) for fifty 
percent of the response and natural resource damages amount of 
financial responsibility by thirty six months after promulgation of the 
final rule; and (3) for full response and natural resource damages 
amount by forty eight months after promulgation of the rule.
    In developing this proposed schedule for implementation of 
financial responsibility requirements, EPA considered the requirement 
in the statute that financial responsibility implemented in incremental 
annual increases, as well as the need for the financial markets do 
develop and make available capacity. EPA also sought to provide the 
maximum amount of time for owners or operators to establish a financial 
responsibility level for their facilities.
    EPA proposed that owners or operators provide the amount of 
financial responsibility for the health assessment component of the 
formula first as that amount does not require a calculation, and thus 
requires no input of information by the facility. This approach 
provides three years before the first amount of financial 
responsibility that must be calculated is due to EPA. EPA believes that 
this is a reasonable approach, and that it balances the needs of the 
owner or operator as well as the financial market. Delaying further 
significant levels of financial responsibility would have resulted in a 
surge in demand on the financial market in year four. Requiring 
calculated financial responsibility earlier would have provided less 
time for owners or operators to become familiar with the formula, 
gather any necessary information, and perform necessary calculations.
    EPA believes that this schedule would meet the statutory 
requirement for phased implementation, and would provide owners and 
operators an adequate time period to identify the necessary financial 
responsibility amount for their sites. Further, these phased-in 
requirements would help to assure the availability of instruments by 
providing extended time for market capacity to build. EPA solicits 
comment on this approach to implementation of the financial 
responsibility requirements, on the schedule for compliance, and on 
whether this approach would help assure availability of instruments. 
EPA solicits comment on this approach.
    For owners and operators of hardrock mining facilities that come 
into operation after the effective date of this rule, the Agency is 
proposing a different approach.
    Facilities that become subject to the rule after the effective date 
of the final rule and on or before the date four years after the 
effective date would be comply with the requirements for demonstrating 
financial responsibility that are applicable to facilities that were 
authorized to operate, or should have been authorized to operate on the 
effective date of the final rule. For example, if a facility were to 
become subject to the requirements of this rule two years after the 
effective date, the owner or operator would be required to demonstrate 
financial responsibility for the health assessment amount prior to 
beginning operations, and then follow the schedule provided in Sec.  
320.61(a).
    Finally, facilities that become subject to the rule more than four 
years after the effective date of the final rule would be required to 
demonstrate financial responsibility for the full amount required under 
this rule before beginning operations.
    The Agency believes this approach is reasonable in that the 
capacity concerns that arise when a newly promulgated rule becomes 
effective are not relevant as the Agency does not expect a large number 
of newly regulated facilities to enter the market seeking financial 
responsibility instruments after the rule initially becomes effective. 
The Agency solicits comment on this approach.
3. Definitions (Sec.  320.62)
    The Agency is proposing definitions in Sec.  320.62 that are 
applicable to this

[[Page 3460]]

Subpart. The Agency solicits comment on these definitions.
4. Determining the Financial Responsibility Amount (Sec.  320.63)
    EPA considered options for how to calculate financial 
responsibility amounts for classes of facilities under CERCLA Sec.  
108(b). The statute provides only very general direction on this 
question, and thus confers upon EPA significant discretion in both 
methodology and in the ultimate selection of the appropriate amount. 
CERCLA Sec.  108(b) establishes a general end-point for the Agency's 
financial responsibility requirements, which must be ``consistent 
with'' the ``degree and duration of risk associated with the 
production, transportation, treatment, storage, or disposal of 
hazardous substances'' at the facility. EPA does not interpret this to 
require any precise association with a risk calculation. Standard 
dictionary definitions of the term ``consistent'' include merely 
``being in agreement'' or ``compatible.'' \168\ Moreover, as discussed 
earlier, CERCLA Sec.  108(b) amounts are necessarily established in the 
absence of any response action, although it is through such response 
actions that the precise level of risk associated with a particular 
site is ascertained. Thus, EPA believes that Congress intended for the 
Agency to set a level of risk that is generally reflective of risk for 
each facility class.
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    \168\ 301 Webster's II New Riverside University Dictionary 
(1988).
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    The statute also does not specify any particular methodology to 
reach that general end-point, specifying simply that the amount of 
financial responsibility be established at the level that the EPA 
``determines is appropriate.'' The statute does provide a non-exclusive 
list of information sources in CERCLA Sec.  108(b)(2) on which it is to 
base its decision--the payment experience of the Superfund; courts 
settlements and judgments; and voluntary claims satisfaction. Notably, 
it does not specify how the information from these sources is to be 
used--for example, how the data from each source should be weighted 
relative to the other sources. Similarly, the list of sources does not 
specify whether EPA is to derive particular values from each category 
to be aggregated into one amount that is ``consistent with the degree 
and duration of risk,'' or whether EPA is to identify from each 
category, particular practices (that is, for example, the types of 
activities for which the Fund has paid) the cost of which can form the 
basis for an amount. Therefore, EPA has concluded that these provisions 
of the statute confer a significant amount of discretion upon the 
Agency in how it uses the data it has, to determine the appropriate 
amount for which owners and operators must provide evidence of 
financial responsibility.
    EPA considered four approaches to identify a financial 
responsibility amount for a facility--fixed amount, site-specific 
amount, parametric approach, and formulaic approach. A description of 
each approach follows. This proposed rule uses a combination of these 
approaches--specifically, a fixed cost approach for certain costs 
(health assessments) and a formulaic approach to identify an amount for 
potential response costs consistent with the risks to human health and 
the environment based on facility features.
    Under a fixed amount approach, the Agency would identify a standard 
cost for the class. This method does not rely on site-specific factors 
but rather on historical costs associated with similar facilities to 
calculate an expected future amount. This approach is best applied 
where the costs at issue are fairly uniform, as the wider the 
variation, the lower the accuracy of the financial responsibility 
amount for that cost. If there is wide variation in the costs 
associated with the facilities within the class to which the fixed 
amount is applied, the result can be significant over-regulation at 
those facilities with lower levels of liabilities, and significant 
under-regulation of facilities with higher levels of liabilities. At 
the same time, this approach has advantages in that it requires a lower 
level of effort on the part of the regulated community and the Agency 
to implement because the rule does not require a site-specific 
calculation to be developed, submitted, or evaluated. Thus, EPA 
believes that in certain circumstances the fixed amount approach may be 
the best choice to implement CERCLA Sec.  108(b) requirements.
    For example, as discussed in section VI.D.4. of this preamble, the 
Agency was able to determine a fixed level for health assessment costs 
under this proposed rule, but applied a formulaic approach to determine 
financial responsibility amounts for response costs and natural 
resource damage costs.
    The second method considered by EPA is a site-specific approach. 
Under this approach, the owner or operator would calculate the cost of 
conducting known activities to address identified problems. This 
approach is the most precise of the three approaches considered by EPA. 
However, it is also the most resource intensive to implement. It 
requires gathering detailed information about the site, including an 
assessment of the site conditions, and is most easily implemented where 
a release has occurred, a response is necessary, and a remedy 
determination has been made. As described earlier, CERCLA Sec.  108(b) 
financial responsibility is not based on a remedy determination; 
therefore, EPA determined that a site-specific approach was not 
appropriate or practical for use under this rule. EPA solicits comment 
on how a site-specific approach might be developed for future CERCLA 
Sec.  108(b) rulemakings in situations where there has been no remedy 
decision.
    Having identified reasons that a site-specific approach may not be 
appropriate or practical to determine financial responsibility amounts 
for response costs and for natural resource damages, EPA sought to 
develop an approach that was more accurate than the fixed amount, yet 
could be implemented without conducting a full site investigation at 
the facility. The Agency's efforts resulted in development of a formula 
designed for facilities within the hardrock mining industry.
(a) Information Used To Determine Financial Responsibility Amounts 
Under CERCLA Sec.  108(b)
    As discussed earlier, CERCLA Sec.  108(b)(2) requires that the 
level of financial responsibility must be ``based on the payment 
experience of the Fund, commercial insurers, courts settlements and 
judgments, and voluntary claims satisfaction.'' Thus, in developing 
this proposed rule, EPA considered how to consider those factors. EPA 
considered two approaches to basing financial responsibility levels on 
the ``payment experience of the Fund.'' Under one approach, the Agency 
would consider the cost of past cleanups at similar facilities, and use 
those costs as a basis for financial responsibility. For example, EPA 
would look to historical cost data and, if a Superfund remedy at 
similar facilities averaged $X dollars, EPA would consider that the 
appropriate amount of financial responsibility for that class of 
facilities and promulgate a regulation requiring that amount at 
facilities in the class.
    This interpretation would best be applied to the fixed amount 
methodology. Thus, if past Superfund actions at a class of facilities 
averaged $X dollars, the Agency would identify by rule that amount as 
the financial responsibility amount required for that class of 
facilities. EPA recognized limitations associated with this approach. 
For example, because it looks

[[Page 3461]]

to historical data, it assumes that operations at historical facilities 
are similar to current operations, and that costs will be similar. The 
Agency recognizes, however, that past operating procedures, before the 
advent of environmental laws, were likely in many cases to give rise to 
environmental problems that current regulations and modern operating 
practices can prevent or minimize. In addition, Superfund cost data 
represents only a portion of the expenditures at historical facilities, 
especially those with ongoing cleanups or maintenance, and a uniform 
set of data that includes all expenditures at facilities is not 
available. However, EPA believes this approach is appropriate in some 
circumstances--for example, where current costs are available for an 
activity that is fairly consistent in cost from facility to facility. 
Thus, EPA has proposed adopting this approach to determine the 
financial responsibility amount for health assessment costs as 
discussed in section VI.D.4. of this preamble.
    Under a second approach, EPA would look at components of response 
actions taken by Superfund in the past--that is, distinct activities 
Superfund paid for--at facilities within the to-be-regulated class, and 
determine the cost of those activities today. For example, if a 
Superfund remedy involved installing an impermeable cap at a surface 
impoundment, the Agency would calculate the cost of installing such a 
cap today at the regulated facility with a similar unit to determine 
the financial responsibility amount. This second approach to 
considering the ``payment experience of the Fund'' was used by EPA in 
developing the formula for determining financial responsibility amounts 
for response costs and natural resource damages under this proposal. 
The Agency solicits comment on these two approaches to basing financial 
responsibility under this proposal on the criteria in CERCLA Sec.  
108(b)(2).
    It should be noted that the Agency's decision to not propose 
requirements in this rule based on a site-specific approach to 
determining financial responsibility amounts does not mean that the 
Agency has concluded that methodology is not appropriate under CERCLA 
Sec.  108(b). In fact, following initial implementation of financial 
responsibility at facilities subject to this proposed rule, EPA may 
identify site-specific conditions that indicate a response action is 
needed at the facility, and that the current amount of financial 
responsibility implemented under CERCLA Sec.  108(b) is not adequate to 
cover the costs associated with the response. In those cases, the 
Agency believes it could apply a site-specific methodology at the 
facility to determine a more precise amount of financial responsibility 
more consistent with the degree and duration of risk at the facility. 
EPA would increase the amount of financial responsibility required at 
the facility under CERCLA Sec.  108(b) rather than apply CERCLA Sec.  
106 authority to require a separate financial responsibility 
instrument. The Agency solicits comment on this approach.
(b) Development of the Hardrock Mining Financial Responsibility Formula
    EPA developed a financial responsibility formula for owners and 
operators of hardrock mining facilities to use to calculate the amount 
of financial responsibility that would be required under this proposed 
rule. EPA considered how to develop an amount of financial 
responsibility that reflected an estimate of funds that might be 
required in the event of a release from a regulated facility.
    As described in section IV.B of this preamble, EPA is proposing to 
make the financial responsibility instruments available for all types 
of CERCLA liabilities enumerated in CERCLA Sec.  107. Thus, in 
developing the financial responsibility formula, EPA sought to take 
into account the same three categories of costs (response costs 
(including both removals and remedial actions), natural resource 
damages, and health assessment costs) that may be incurred by owners 
and operators of facilities subject to the rule. To do so, EPA 
separately developed three formula components to estimate financial 
responsibility for each of those three categories. These three 
components--response costs, natural resource damages, and health 
assessment costs--make up the final formula.
    EPA collected and analyzed data on both the total funds expended at 
CERCLA sites and the types of goods and services on which those funds 
were spent. Total funds expended were used to estimate both the health 
assessment component and the natural resource damage component, while 
the types of goods and services were used to estimate the response 
component. For each, this preamble discusses EPA's data collection 
efforts, how the Agency developed estimates of costs from that data, 
and how it developed the resulting formula.\169\ EPA has followed the 
Agency's Peer Review Policy with respect to the underlying formula 
supporting this action. Specifically, EPA has conducted a peer review 
of the Background Document. Peer review materials, including charge 
questions, are available in docket for this proposed rule (Docket No. 
EPA-HQ-SFUND-2015-0781).
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    \169\ For a detailed discussion of the development of the 
formula, see the CERCLA 108(b) Financial Responsibility for Hardrock 
Mining Facilities Background Document--Peer Review Draft (Background 
Document), located in the docket for this proposal (Docket No. EPA-
HQ-SFUND-2015-0781).
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(i) Response Component
    EPA collected information on response costs from national 
priorities list (NPL) and non-NPL CERCLA response activities. This data 
consisted of records of decision (RODs), settlements, actual 
expenditures to date by EPA, and estimated expenditures for present and 
future work by potentially responsible parties. EPA used these data to 
generate a best estimate of total response costs at these hardrock 
mining facilities. EPA was able to collect this information for 319 
sites.
    In addition to the total response cost data, EPA also collected 
data on specific activities conducted at 438 operable units at 88 NPL 
or Superfund alternative hardrock mining sites. From this data on 
activities themselves, EPA could link specific site features to 
releases or threatened releases of hazardous substances, and to 
remedies that incurred response costs. EPA found that thirteen site 
features \170\ \171\ served as the source of release that resulted in 
remedies within the following twelve categories: (1) On-site disposal 
(excavation, capping, covering, revegetation); (2) off-site disposal; 
(3) engineering and/or containment (other); (4) surface water 
diversion; (5) water treatment (other); (6) water treatment (lime 
addition); (7) no action; (8) alternative drinking water; (9) sediment 
dredging/disposal; (10) monitoring (all media and as separate remedy); 
(11) monitored natural attenuation/recovery; and (12) deconstruction/
decontamination of buildings. EPA solicits comments on additional 
remedies or categories of CERCLA

[[Page 3462]]

response costs that do not appear in this list, as well as the data 
supporting the inclusion of those remedies.
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    \170\ The 13 site features include (in order of frequency): (1) 
Contaminated soils, (2) tailings (pond, pile), (3) waste rock or 
overburden, (4) contaminated sediments, (5) acid mine/rock drainage, 
(6) slag, (7) smelter emissions, (8) underground workings, (9) 
process areas and buildings, (10) leachate (from failed cap/cover or 
similar system), (11) demolition debris, (12) heap leach piles/
leaching waste, and (13) open pits/pit lakes.
    \171\ The 13 site features include (in order of frequency): (1) 
Contaminated soils, (2) tailing (pond, pile), (3) waste rock or 
overburden, (4) contaminated sediments, (5) acid mine/rock drainage, 
(6) slag, (7) smelter emissions (8) underground workings, (9) 
process areas and buildings, (10) leachate failed cap/cover or 
similar system), (11) demolition debris, (12) heap leach piles/
leaching waste, and (13) open pits/pit lakes.
---------------------------------------------------------------------------

(aa) Linking Response Categories to Current Cost Estimates
    EPA's prior experience with CERCLA cleanups leads it to expect that 
similar types of remedies will continue to be selected for mining sites 
in the future. EPA also expects that for eleven of the twelve remedy 
categories described earlier (the exception being ``no action''), the 
magnitude of that cost will differ with changing site characteristics. 
For example, the expected costs of constructing a cap over a unit to 
prevent water infiltration can be expected to increase with the acreage 
of that cap. Thus, in order to produce more accurate estimations of 
costs at a particular facility, it is necessary to consider both 
specific response costs and specific response activities. However, EPA 
generally found that the response cost data discussed earlier were 
available in the form of payments or total expenditures. Since these 
payments or expenditures were aggregated across various activities, 
they could not be separated into more specific cost amounts (e.g., the 
cost to construct a particular cap on a particular tailings 
impoundment).
    Given this difficulty, EPA considered how to estimate the expected 
costs associated with these particular activities. EPA searched for 
existing, publicly available engineering cost estimates that contained 
costs specific to these activities. EPA found that such engineering 
cost data was readily available from cost estimates developed for state 
and Federal mining reclamation and closure plans, and associated 
documents. These engineering cost data were available for currently 
operating facilities potentially regulated under the proposed rule, and 
represented similar site features (e.g., tailings facilities, open 
pits) as facilities for which prior response actions were taken. Thus, 
these data reflect recent engineering cost values appropriate for EPA's 
statistical analysis.
    In order to monetize the expected costs for eight of the twelve 
types of remedies listed earlier, EPA linked these remedy types to 
similar tasks identified in the current engineering cost data. The 
remaining three CERCLA remedy types, ``No action,'' ``Alternative 
drinking water,'' and ``Monitored natural attenuation'' are excluded 
from the initial list of twelve remedy types. Since these three remedy 
types do not involve engineered controls, EPA was concerned that 
including them as part of a nationally-applicable rule could have the 
effect of producing an inadequate amount of financial responsibility 
for those sites where engineered controls were necessary. Therefore, as 
a conservative assumption to help ensure thea adequacy of the amount of 
financial responsibility should engineering controls prove necessary, 
EPA excluded these three remedy types from further consideration.
    Also excluded was ``Sediment dredging/disposal.'' Although this 
element has appeared historically as a response category, EPA notes 
that it was already incorporated in the natural resource damages 
component. For example, the final restoration plan for the Upper 
Arkansas River/California Gulch Superfund site (one of the data points 
used in developing the natural resource damages multiplier) includes 
dredging of contaminated soils as a restoration alternative.\172\ Thus, 
EPA believes that since this cost is already represented in the natural 
resource damages multiplier, it is inappropriate to duplicate that cost 
in the response component of the formula. EPA solicits comment on 
whether this activity is more appropriately included in the response 
component or the natural resource damages component of the formula.
---------------------------------------------------------------------------

    \172\ See Stratus Consulting Inc. (2010). Restoration Plan and 
Environmental Assessment for the Upper Arkansas River Watershed. 
Available at: http://www.fws.gov/mountain-prairie/nrda/leadvillecolo/californiagulch.htm.
---------------------------------------------------------------------------

    ``On-site disposal (excavation, capping, covering, revegetation)'' 
and ``Engineering/containment (other)'' were linked to engineering cost 
estimates categorized as backfill, portal closure, earthwork, 
revegetation, feature-specific stormwater controls, and source 
controls. These first two remaining categories were further linked to 
the specific site feature being addressed: Open pit, underground mine, 
waste rock, tailings facility, heap/dump leach, process ponds and 
reservoirs, and slag piles. Since not all currently operating 
facilities have all of these site features, this site-feature linkage 
allowed EPA to identify costs for only the features present at a given 
mine.
    ``Off-site disposal'' and ``Deconstruction/decontamination of 
buildings'' were linked to engineering cost estimates categorized as 
solid waste disposal, hazardous waste disposal, organic solution 
removal, building decontamination, contaminated soils disposal, and 
haulage and disposal. ``Surface water drainage'' was linked to drainage 
controls. ``Water treatment (lime)'' and ``Water treatment (other)'' 
were linked to engineering cost estimates categorized as site and water 
management, process fluid stabilization, neutralization, solution 
disposal, reclamation of well-field and disposal wells, seepage 
capture, and water treatment. Finally, ``Monitoring (all media and as 
separate remedy)'' was linked to engineering cost estimates categorized 
as groundwater and surface water monitoring, geotechnical stability 
monitoring, erosion and vegetation monitoring, fish and wildlife 
monitoring, and other short- and long-term monitoring.
    While not specific to any remedy category, multiple remedies' 
operations and maintenance activities were linked to the reclamation 
and closure plan tasks of road maintenance, stormwater repairs, 
revegetation repairs, reclamation of monitoring and pumpback wells, 
well maintenance, evaporation pond maintenance, and stormwater, 
erosion, and vegetation maintenance. Additionally, all remedies were 
linked to reclamation and closure plan tasks necessary to conduct 
direct engineering work including mobilization/demobilization, 
engineering design/redesign, contingency, contractor profit and 
overhead, contractor liability insurance, payment and performance 
bonds, agency direct costs, and agency indirect costs. EPA solicits 
comment on the accuracy of these linkages, and specific data or 
examples that would indicate an alternative linkage should be made.
(bb) Response Component Data Collection
    EPA sought through its engineering cost estimate data collection 
effort to accumulate as much recent, high quality cost information for 
currently-operating hardrock mining facilities as possible and 
represent the range of states and commodities produced. EPA obtained 
and sorted data from the Mining Safety and Health Administration (MSHA) 
and the U.S. Geological Survey (USGS) to generate a combined list of 
354 facilities. To derive this group of 354, EPA identified facilities 
that would correspond to the scope of the proposed rule. Thus, EPA 
excluded from the combined MSHA/USGS data set, those facilities that 
were not identified in the 2009 Priority Notice,\173\ as well as closed 
or abandoned facilities. Therefore, the data set consisted of active, 
intermittent, or temporarily idled mining or mineral processing 
facilities. Comprehensive lists of all data sources

[[Page 3463]]

are available in Appendices A through M of the Background Document.
---------------------------------------------------------------------------

    \173\ See Identification of Priority Classes of Facilities for 
Development of CERCLA Section 108(b) Financial Responsibility 
Requirements, 74 FR 37213, July 28, 2009.
---------------------------------------------------------------------------

    EPA obtained a sample of 63 facilities' reclamation and closure 
plan engineering cost data. This 63 facility subset was representative 
of the frequency of states and commodities identified in the full 
universe of 354 potentially regulated mines. Thus, EPA expected it 
would be representative of the larger group of facilities. This dataset 
included costs as well as related inputs that drive these cost 
components. For example, acreage is an input of the Standardized 
Reclamation Cost Estimator model used to conduct several of the 
collected engineering cost estimates. One of the highest-dollar 
response categories, water treatment, also presented one of the 
smallest cost sample sizes with only 15 facilities represented. As a 
result, EPA supplemented the closure plan cost data on water treatment 
costs with data from the three CERCLA sites contained in EPA's CERCLA 
site data set, for which water treatment cost data were readily 
available, and could be disaggregated from the sites' full costs. EPA 
solicits comment on additional cost estimates, whether historical or 
current, that would appropriately represent active hardrock mining 
facilities. EPA solicits comment on data generally, and specifically 
regarding industrial minerals, slag pile, in-situ leach, and water 
flows. EPA solicits comment on expanding the water treatment variable 
to capture additional facilities that would necessarily need more 
advanced water treatment due to the nature of their leachate.
    EPA subject-matter experts believed that other variables could 
explain the differences between higher and lower costs at sites based 
on their professional experience. First, these experts believed that 
water-related factors such as distance to groundwater or surface water, 
as well as net precipitation could influence the costs estimated for a 
site. Second, these experts believed that the process methods used 
could influence costs necessary for a site. These data are not included 
in the reclamation plan data collected. Therefore, EPA located and 
collected them from Environmental Impact Statements or other publicly 
available documents.
    Water-balance-related data that were available in these public 
documents included precipitation, evaporation, distance to surface 
water, and depth to groundwater. EPA solicits comment on the collection 
of these water balance data. In particular, six of the hardrock mining 
facilities in EPA's data set did not contain depth to groundwater data. 
EPA solicits comments on depth to groundwater data for the six hardrock 
mining facilities for which data were not collected. These facilities 
are: Silver Bell (Arizona), Clear Creek (Colorado), Hibbing Taconite 
(Minnesota), SCRAM (Minnesota), Standard (Nevada), and Trenton Canyon 
(Nevada).
    In addition to water-balance-related data, EPA collected data 
related to process methods for the four leaching processes identified 
at the 63 sites in EPA's data set. These process method data included 
the use of floatation, cyanide, acid, and in-situ leaching processes. 
EPA solicits comments on data characterizing the process methods for 
these 63 sites as well as how EPA might analyze such data.
    For more details about the data collected, see Section 4 of the 
Background Document. EPA solicits comment on alternative uses of its 
actual cost data from Section 2.2 of the background document. EPA 
solicits comment on additional data points that may be more 
appropriately apportioned to other site features. EPA solicits comments 
on the use of a 62 percent upward adjustment based on Ernst & Young 
(2015). The Agency also solicits comment on the proposal to use the 
2013 Reclamation and Closure Plan document for Pinto Valley.
(cc) Response Component Regression Analysis
    EPA performed statistical analysis on the engineering cost data 
collected, for each response category. The purpose of this statistical 
analysis was to establish a numerical relationship between a limited 
number of a facility's site-specific characteristics and the resulting 
associated reclamation and closure plan costs. Once this relationship 
was established, it could be used to generate a sub-formula that 
results in an expected financial responsibility amount for each 
response category, on a nation-wide basis. To ensure the accuracy of 
the regressions, EPA solicits comment on whether the reclamation and 
closure plan data is accurately described in Appendix G of the Formula 
Background Document. Specifically, EPA solicits comment on the accuracy 
of the estimated cost figures, acres, and source control tags for the 
thirteen response categories, as described in Appendix G.
    A number of site-specific engineering-based models generated the 
detailed engineering cost estimates collected by EPA. However, certain 
parameters appeared to be central to the workings of those 
calculations. For instance, capital costs appeared to be affected by 
the relevant acreage that these costs were applied. While EPA did not 
know the exact suite of variables that might be relevant for any 
particular response category, some variables were much more likely to 
be statistically significant based on the use of these variables in 
reclamation and closure plan cost estimates. As a result, EPA chose to 
conduct a bidirectional elimination stepwise regression that started 
with variables believed to be most significant and test the addition or 
deletion of individual variables. Further details on the regression 
methodology, as well as the results of the regressions are available in 
Section 5 of the Background Document.
    These results generally confirmed the significance of the variables 
EPA expected to be predictive. EPA performed an additional 88 
robustness tests to demonstrate that the regressions selected by the 
stepwise regression process were the best fit possible for the data. 
EPA solicits comment on the appropriateness of the bidirectional 
elimination stepwise regression used here as well as alternative 
methods that may be appropriate and justifications for using those 
methods. EPA also solicits comments generally on the steps and criteria 
used in the stepwise regression process as applied. In particular, EPA 
solicits comment on the retention of the source control variable in the 
heap/dump leach regression (including additional data points that would 
supplement the two source controls in the dataset) and on the addition 
or removal of variables from the starting suite of variables when such 
additions or removals were made. EPA solicits comment on influence 
points Continental and Chino Mines for the Interim O&M regression, and 
Phoenix Copper for Water Treatment regression.
    Further, because the formula is trying to monetize potential future 
CERCLA liability response costs, in the absence of an actual release/
response to monetize, a potential drawback of this approach of 
predicting levels of financial responsibility could be that future 
major incidents will not have sufficient assurance to cover the 
necessary response costs, and that there could be an associated risk 
that the rule will potentially require financial responsibility that 
may never be required. EPA solicits comments on this potential drawback 
to the chosen approach.
    EPA also calculated overhead and oversight costs (OCs) as a percent 
of direct engineering costs rather than through regressions on site-
specific characteristics. However, not every facility calculated or 
reported every category of oversight costs. Thus, to avoid biasing any 
of the oversight cost

[[Page 3464]]

estimates low, EPA calculated each oversight cost separately, and used 
only data from facilities which had calculated that oversight cost. EPA 
estimated each oversight cost category at each facility as a percent of 
engineering costs. This was done by dividing the oversight cost in 
question at a facility by that facility's total direct engineering 
costs. Once all facility-specific oversight cost percentages were 
calculated, EPA averaged these oversight cost percentages for each 
category. EPA solicits comment on the approach of a fixed percentage of 
direct engineering costs for estimating oversight costs.
(dd) Converting O&M Costs into a Net Present Value
    Four of the response cost categories--interim O&M, water treatment, 
short-term O&M, and long-term O&M--represent the expected costs for 
activities over time. Thus, the regression equations for represent 
annualized amounts. These annualized amounts must further be converted 
into a single net present value, so that they can be included as part 
of the final formula, which represents a facility's total financial 
responsibility amount. EPA converted to net present value using the 
same equation as that presented in U.S. EPA (2001).\174\
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    \174\ See U.S. EPA (Environmental Protection Agency). 2001. 
Groundwater Pump and Treat Systems: Summary of Selected Cost and 
Performance Information at Superfund-financed Sites. EPA 542-R-01-
021a. OSWER. Washington, DC 20460. December. Available at: http://www.epa.gov/superfund/cleanup/postconstruction/p1report.pdf.
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    EPA used an O&M period of ten years for converting both the short-
term O&M and interim O&M costs into a net present value. This period 
has been discussed and used in guidance documents such as U.S. EPA and 
USACE (2000).\175\ O&M after ten years could prove to be unnecessary, 
or continue indefinitely. The cost estimation formula uses a perpetual 
period of O&M for both water treatment and long-term O&M. EPA 
considered using a period of thirty years similar to the default long-
term O&M period of thirty years historically used by EPA for purposes 
of cost estimation in the absence of detailed estimates of project 
duration (U.S. EPA, 1988).\176\ However, more recent guidance relies 
less heavily on this default period and more heavily on the actual 
project duration of each alternative considered in the RI/FS process 
(U.S. EPA and USACE, 2000).
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    \175\ See U.S. EPA (Environmental Protection Agency) and USACE 
(Army Corps of Engineers). 2000. A Guide to Developing and 
Documenting Cost Estimates during the Feasibility Study. EPA 540-R-
00-002. OSWER. Washington, DC 20460. July. Available at: 
www.epa.gov/superfund/policy/remedy/pdfs/finaldoc.pdf.
    \176\ See U.S. EPA (Environmental Protection Agency). 1988. 
Guidance for Conducting Remedial Investigations and Feasibility 
Studies under CERCLA (Interim Final). EPA/540/G-89/004. OSWER. 
Washington, DC 20460. October. Available at: www.epa.gov/superfund/policy/remedy/pdfs/540g-89004-s.pdf.
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    In addition, EPA's CERCLA data from hardrock mining facilities 
indicates that perpetual O&M expenditures are common. Specifically, in 
U.S. EPA (2004),\177\ EPA's Office of Inspector General collected 
survey responses from regional experts regarding expected long-term O&M 
durations at 156 hardrock mining facilities. The median response from 
that survey was that long-term O&M at hardrock mining facilities would 
continue into perpetuity. Therefore, the financial responsibility 
formula uses a perpetual period of O&M for both water treatment and 
long-term O&M. EPA solicits comment on the timeframes used in the net 
present value conversion. Specifically, EPA solicits comment on whether 
justifications of alternate timeframes exist for long-term O&M.
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    \177\ See U.S. EPA (Environmental Protection Agency). 2004. 
Nationwide Identification of Hardrock Mining Sites. Report No. 2004-
P-00005. OIG. Washington, DC. 20460. March. Available at: https://www.epa.gov/sites/production/files/2015-12/documents/20040331-2004-p-00005.pdf.
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    Finally, annualized O&M costs are converted to a net present value 
based on the ten-year short-term and perpetual long-term time horizons 
seen in the CERCLA cost data using the rate of return of the Superfund. 
Analysis of these real rates of return from the Superfund yielded a 
geometric mean of 2.63 percent. This approach is also consistent with 
recent EPA guidance on O&M cost estimation processes in the separate 
context of CERCLA settlement agreements and unilateral orders (U.S. 
EPA, 2015) \178\ which recommends using a discount rate representative 
of real investment returns. EPA solicits comments on whether and how 
future rates of return should be automatically used to update the 2.63 
percent rate of return of the Superfund. The Agency also solicits 
comments on the use of net present value of O&M.
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    \178\ See U.S. EPA (Environmental Protection Agency). 2015. 
Guidance on Financial Assurance in Superfund Settlement Agreements 
and Unilateral Administrative Orders. OECA. Washington, DC 20460. 
April 6. Available at: https://www.epa.gov/sites/production/files/2015-04/documents/fa-guide-2015.pdf.
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(ee) State-Specific Adjustment Factors
    On average, the sub-total of overhead costs calculated by EPA was 
found to be 35.78 percent of direct engineering costs. However, a 
similar sub-total of oversight cost percentages was not estimated due 
to the region-specific nature of agency indirect costs. To calculate 
these percentages, region-specific indirect cost rates are multiplied 
by the national average agency direct cost percentage to estimate the 
agency indirect costs as a percentage of direct engineering costs. 
Adding agency direct cost percentage to the region-specific indirect 
cost percentages yields region-specific agency cost percentages. Total 
non-construction costs are estimated by adding the 35.78 percent 
overhead cost percentage sub-total to the region-specific total agency 
cost percentages. Using this approach, EPA calculated ten region-
specific oversight cost percentages to be applied to the direct 
engineering costs estimated in the formula response components. These 
percentages can be found in Appendix II of the proposed rule.
    Furthermore, the relationships estimated represent only a generic, 
nationwide engineering cost of a CERCLA response because the response 
category regressions were estimated using reclamation and closure plan 
cost data that had been normalized to national values. While this was 
necessary to perform regression analysis and develop a nationwide 
formula, the same labor and materials can have different prices in 
different locations. Hence, the resulting estimates described in 
earlier sections would immediately be inaccurate for any given state. 
To adjust for these locality differences in prices, the response 
component of the formula is multiplied by the most current state cost 
adjustment factors in USACE (2015).\179\ These adjustment factors can 
be found in Appendix III of the proposed rule.
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    \179\ See U.S. Army Corps of Engineers, ``Civil Works 
Construction Cost Index System,'' Manual No. 1110-2-1304 (31 March 
2012, revised through September 30, 2015). Available at: http://www.publications.usace.army.mil/Portals/76/Publications/EngineerManuals/EM_1110-2-1304.pdf.
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(ii) Natural Resource Damage Component
    EPA collected data on both natural resource damages and natural 
resource damage assessment costs at hardrock mining sites from CERCLA 
court settlements and judgments, and voluntary payments. This effort 
resulted in data on 64 sites. EPA's data indicate that natural resource 
damages and response costs are not independent of each other. Instead, 
response actions have regularly been shown to influence natural 
resource damages. This is particularly true in the case of sites 
receiving technical impracticability

[[Page 3465]]

waivers. When a technical impracticability waiver is issued, previously 
projected response costs may be reduced. However, the remaining 
contamination may lead to additional natural resource damages.
    One example summarized in U.S. EPA (2012) \180\ is the technical 
impracticability waiver at the Silver Bow Creek/Butte Area. At that 
site, an EPA evaluation concluded that the water quality in an affected 
alluvial aquifer could not be improved within a reasonable time frame 
even assuming the most extensive and costly alternatives. Thus, EPA 
issued a technical impracticability decision that waived cleanup levels 
for several constituents in that aquifer. However, when such an aquifer 
is left contaminated, trustees may seek natural resource damages for 
that aquifer. In the case of the Silver Bow Creek/Butte Area, this same 
groundwater appeared in the trustees' final restoration plan.\181\ So 
while the technical impracticability waiver reduced response costs, it 
increased the natural resource damages. Thus, while the proportion of 
total liabilities relating to response costs and natural resource 
damages was altered, the overall magnitude was similar.
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    \180\ See U.S. EPA (Environmental Protection Agency). 2012. 
Summary of Technical Impracticability Waivers at National Priorities 
List Sites. OSWER Directive 9230.2-24. August. Available at: https://nepis.epa.gov/Exe/ZyNET.exe/P100EYIC.TXT?ZyActionD=ZyDocument&Client=EPA&Index=2011+Thru+2015&Docs=&Query=&Time=&EndTime=&SearchMethod=1&TocRestrict=n&Toc=&TocEntry=&QField=&QFieldYear=&QFieldMonth=&QFieldDay=&IntQFieldOp=0&ExtQFieldOp=0&XmlQuery=&File=D%3A%5Czyfiles%5CIndex%20Data%5C11thru15%5CTxt%5C00000005%5CP100EYIC.txt&User=ANONYMOUS&Password=anonymous&SortMethod=h%7C-&MaximumDocuments=1&FuzzyDegree=0&ImageQuality=r75g8/r75g8/x150y150g16/i425&Display=hpfr&DefSeekPage=x&SearchBack=ZyActionL&Back=ZyActionS&BackDesc=Results%20page&MaximumPages=1&ZyEntry=1&SeekPage=x&ZyPURL.
    \181\ See Butte Natural Resource Damage Restoration Council 
(BNRC) and Montana Natural Resource Damage Program (NRDP). 2012. 
Butte Area One: Final Restoration Plan. December. Available at: 
https://dojmt.gov/wp-content/uploads/Final-BAO-Restoration-Plan.pdf.
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    EPA notes that although the extent of response actions ultimately 
necessary as a result of a release may affect the relative portion of 
how much natural resource damages may be in comparison with damages, 
the total magnitude of potential liabilities (response costs and 
natural resource damages combined) will increase or decrease together. 
This is effectively captured by a multiplier. Thus, EPA uses a similar 
approach here as to U.S. EPA (2014) \182\ where the Agency estimated 
natural resource damages as a percent of cleanup costs where both 
future cleanup costs and future natural resource damages were 
uncertain. This average percent was used as a multiplier for the 
purposes of estimating natural resource damages once potential future 
response costs were estimated. As with that previous study, the natural 
resource damages and response costs are uncertain, but EPA found that a 
similar relationship between damages and costs was presented.
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    \182\ See U.S. EPA (Environmental Protection Agency). 2014. 
Regulatory Impact Analysis (RIA) for EPA's 2015 Coal Combustion 
Residuals (CCR) Final Rule. OSWER. Washington, DC. December. 
Available at: www.regulations.gov Document ID#: EPA-HQ-RCRA-2009-
0640-12034.
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    Within this dataset, EPA had both natural resource damages and 
total response costs from the response component data collection for 24 
sites. From this subset of 24, EPA divided the average natural resource 
damages by the average response costs to generate a hardrock mining-
specific natural resource damages multiplier. This resulted in average 
natural resource damages and natural resource damage assessment costs 
of 13.4 percent of the response costs to account for natural resource 
damages and assessment costs. Thus, EPA included a multiplier of 1.134 
in the financial responsibility formula for the natural resource damage 
component. EPA solicits comment providing additional natural resource 
data. The Agency also solicits comment on the appropriateness of a 
fixed multiplier to estimate natural resource damages within the 
hardrock mining class of facilities, particularly with respect to the 
risk of magnifying any potential bias from the response cost formula. 
EPA solicits comment on alternate approach such as the use of a 
geometric mean or median instead of the mean for the multiplier 
calculation. EPA solicits comment on the feasibility of running the 
response component of the model for facilities which EPA has natural 
resource damages data for an alternative method, if data is readily 
available.
    EPA is also considering an alternative approach. Under this 
approach, EPA would use the median natural resource damages and natural 
resource damage assessment costs of 3.8 percent of the response costs 
to account for natural resource damages and assessment costs. Thus, EPA 
would include a multiplier of 1.038 in the financial responsibility 
formula for the natural resource damage component. EPA solicits comment 
on whether the median or average NRD multiplier is more representative 
for application to future hardrock mining facilities.
(iii) Health Assessment Component
    Under 42 CFR 90.14, by the Agency for Toxic Substances and Disease 
Registry (ATSDR) is required to maintain documentation pertaining to 
the costs associated with all phases of a Public Health Assessment or a 
Health Consultation (HA) performed by the Agency to form the basis for 
cost recovery by EPA.\183\ Upon EPA's request, ATSDR provided cost 
information for recently completed health assessments. ATSDR limited 
the data provided to the minimum, maximum, and average costs of health 
assessments conducted over the past 18 months (as of March 2016). ATSDR 
did not provide hardrock mining-specific data, and thus non-mining 
health assessment costs are included in this dataset.
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    \183\ See 42 CFR 90.14 Documentation and cost recovery: (a) 
During all phases of ATSDR health assessments and health effects 
studies, documentation shall be completed and maintained to form the 
basis for cost recovery, as specified in Sec.  107 of CERCLA; (b) 
Where appropriate, the information and reports compiled by ATSDR 
pertaining to costs shall be forwarded to the appropriate EPA 
regional office for cost recovery purposes.
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    Based on the information available to it, EPA adopted a fixed 
amount of $550,000 representing the average health assessment cost 
reported by ATSDR as the health assessment component of the proposed 
formula. Health assessments often make use of EPA-collected data. 
Because this approach avoids potentially costly data collection 
activities, a relatively low amount of $550,000 is not unexpected for 
an average cost. Furthermore, EPA expects future health assessments to 
generally be consistent with this amount since ATSDR has experience 
performing the same types of reports routinely. Finally, EPA notes that 
this average health assessment cost reported by ATSDR is consistent 
with additional second-hand sources of estimates that EPA presents in 
Section 7 of the Background Document. EPA solicits comment on the 
appropriateness of a fixed health assessment cost for all classes, 
including data that would justify any alternate approaches suggested.
(c) Hardrock Mining Financial Responsibility Formula
    EPA's proposed rule requires that a facility's financial 
responsibility amount be adjusted for inflation to preserve the real 
value of the financial responsibility. This inflation adjustment must 
be made to the entire financial responsibility amount as calculated in 
2014 dollars. The proposed rule uses an inflation

[[Page 3466]]

factor derived from the most recent Implicit Price Deflator for Gross 
Domestic Product (GDP) published by the U.S. Department of Commerce in 
its Survey of Current Business. The inflation factor is the result of 
dividing the latest published annual Deflator by the Deflator for 2014. 
EPA selected the Implicit Price Deflator for the GDP as that has become 
the Department of Commerce's favored basis for the Implicit Price 
Deflators a representation of national output. Furthermore, the data is 
readily accessible from the Department of Commerce's Bureau of Economic 
Analysis providing for transparent implementation.\184\ The Agency 
solicits comment on the appropriateness of the Engineering News-Record 
Construction Cost Index as an alternative inflation adjustment.
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    \184\ See Table 1.1.9, Implicit Price Deflators for Gross 
Domestic Product. Available at: http://www.bea.gov/iTable/iTableHtml.cfm?reqid=9&step=3&isuri=1&903=13.
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    Additionally, in the absence of a site-specific remedial 
investigation/feasibility study (RI/FS) or ROD, EPA cannot 
categorically determine that source controls and water treatment 
activities would not be necessary to minimize the volume, toxicity, or 
mobility of hazardous substances. Therefore, as a conservative 
assumption to help ensure the adequacy of the amount of financial 
responsibility should source controls and water treatment prove 
necessary, EPA assumes that both will be used, and sets the variables 
corresponding to the activities equal to one for all hardrock mining 
facilities calculating CERCLA Sec.  108(b) financial responsibility 
amounts. EPA solicits comment on two alternatives to this approach that 
could be used alone or in conjunction. In the first alternative, EPA 
solicits comment on whether a weighted average of costs with and 
without source controls or water treatment would be appropriate. The 
weights for this average would be determined based on historical use of 
these responses. EPA also solicits comment on whether a conservative 
upper confidence interval such as the 95 percent confidence levels 
presented in Appendix J of the background document would be appropriate 
to avoid underestimating future financial responsibility needs.
    Incorporating the net present value calculations and the 
assumptions of source controls and water treatment into the regression 
results, the response category equations for the response component 
are:
    (1) Solid and hazardous waste disposal category = $2,600,000 \185\
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    \185\ No variables were found to predict the variability in 
solid and hazardous waste costs. Thus, an average cost was applied 
as discussed in Section 5 of the Background Document.
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    (2) Open pit category = 
5.07x10[supcaret](4.24+1.08xLog10[Open Pit Disturbed Acres])
    (3) Underground mine category = $4,500,000 for an underground mine 
with hydraulic head or $200,000 for an underground mine otherwise.
    (4) Waste rock category = 
1.85x10[supcaret](5.18+0.75xLog10[Waste Rock Disturbed 
Acres])
    (5) Heap/dump leach category = 
2.29x10[supcaret](4.57+1.01xLog10[Heap and Dump Leach 
Disturbed Acres])
    (6) Tailings category = 
1.71x10[supcaret](5.32+0.68xLog10[Tailings Disturbed Acres])
    (7) Process pond and reservoir category = 
1.64x10[supcaret](4.29+1.03xLog10[Process Pond and Reservoir 
Disturbed Acres])
    (8) Drainage category = 
9.56x10[supcaret](3.42+0.57xLog10[Total Disturbed Acres+1])
    (9) Slag pile category = $64,000x[Slag Pile Acres] \186\
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    \186\ Slag piles were represented by only one cost data point, 
and therefore were included as a fixed cost of $64,000 per acre 
based on that data point.
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    (10) Interim O&M category = {1.46x10[supcaret](6.04+0.01x[Net 
Precipitation]+0.34xLog10[Heap and Dump Leach Disturbed 
Acres+1]+0.10xLog10[Tailings Impoundment Disturbed 
Acres+1]){time} x{1/0.0263{time} x{1-(1/[1.0263[supcaret]10]){time} 
    (11) Water treatment category = 
{1.16x10[supcaret](3.22+1.10xLog10[Flow]+0.70x[In-Situ 
Leach]){time} /0.0263
    (12) Short-term O&M and monitoring category = 
{1.82x10[supcaret](4.01+0.38xLog10[Total Disturbed 
Acres+1]){time} x{1/0.0263{time} x{1-(1/[1.0263[supcaret]10]){time} 
    (13) Long-term O&M and monitoring category = 
{1.64x10[supcaret](3.12+0.58xLog10[Total Disturbed 
Acres+1]){time} /0.0263
    Furthermore, the cost equation for water treatment requires the 
input of gallon per minute flows that require treatment. However, as 
discussed earlier, EPA calculates the potential costs associated with 
the use of source control covers for many site features. Albright 
(2015) \187\ provides results of EPA's Alternative Cover Assessment 
Program (ACAP). These results indicate that such controls in place will 
necessarily reduce the amounts of seepage that may require capture and 
treatment prior to discharge. Thus, EPA expects that source controls 
would have the effect of reducing the expected volumes of water 
requiring treatment. The average infiltration for the ACAP data set was 
five percent of precipitation. As a result of these considerations, EPA 
has adopted the presumption of 95 percent effectiveness for source 
control covers, resulting in a residual five percent infiltration based 
on gross precipitation. EPA solicits comment on data demonstrating that 
source controls reduce the costs of diversion and/or O&M other than 
water treatment.
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    \187\ See Albright, William. 2015. Final Covers for Mine 
Tailings. Desert Research Institute Clu-In Seminar. Available at: 
https://clu-in.org/conf/tio/mining_052015/slides/Albright_Day_Two.pdf.
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    This results in flows being calculated as 0.05 x Precipitation x 
[Total Disturbed Acres] x 0.05166 for all flows except for underground 
mine flows and in-situ leach flows which are not assumed to receive the 
same types of source controls evaluated in ACAP. The Agency solicits 
comment on this approach for calculating the gallons per minute flow at 
a facility. EPA also solicits comment providing data demonstrating that 
source controls reduce the costs of diversion and/or O&M other than 
water treatment. EPA solicits comment on the exercise of validating the 
formula by running it for CERCLA sites that have incurred costs across 
all site features.
    For a hypothetical facility with a single site feature of each type 
(e.g., a single heap leach), EPA shows the proposed financial 
responsibility formula in Equation 1. EPA solicits comment on the 
appropriateness of this draft formula developed in the formula-approach 
to determine a reasonable amount for CERCLA Sec.  108(b) financial 
responsibility.

[[Page 3467]]

[GRAPHIC] [TIFF OMITTED] TP11JA17.000


Where:

Deflatory = the most recent available GDP Implicit Price Deflator 
for year y; and
Deflator 2014 = the GDP Implicit Price Deflator for 2014
i = the ith response category (e.g., water treatment costs);
n = the total number of relevant response categories;
r = EPA region r (e.g., EPA Region 3); and
s = state s (e.g., Montana).
(d) Inputs to the Financial Responsibility Formula
    To implement the formula and calculate a financial responsibility 
amount for the facility, the owner or operator will have to input 
facility information. The Agency anticipates that the information 
required by the formula will largely be existing information, and that 
most facilities will not have to develop information to implement the 
financial responsibility formula. EPA solicits comment on whether the 
information required is largely existing at facilities.
    The first piece of information required is acreage. For the site 
feature-specific calculations, the acreage is the total of all areas 
covered by the particular site feature. For example, a facility with 
two waste piles would add the acreage of each together and input the 
total acreage into the calculation. For site-wide calculations, such as 
short-term O&M, the acreage entered would be the entire area covered by 
the hardrock mine and/or mineral processor.
    Several inputs to the formula are yes/no determinations. These 
include the presence of a pressurized bulkhead, in-situ leaching, and 
underground mines. If these are not present, the owner or operator 
should enter a zero into the formula.
(e) Reductions to the Financial Responsibility Amount
    The Agency is proposing under Sec.  320.63(c) to allow (but not 
require) owners or operators to reduce the response cost component 
under Sec.  320.63(b) by making an adequate demonstration that risk 
reducing regulatory requirements are in place. Owners and operators 
will have to demonstrate that they meet specific minimum standards for 
various formula components, along with a general performance standard, 
and other requirements. This approach is specifically designed to 
account for reductions in risk at a facility that may result from 
compliance with applicable Federal, state, tribal, and local 
requirements. The Agency solicits comment on this approach.
    In developing these proposed requirements, EPA sought to balance a 
number of competing concerns. EPA desires to account for risk-reducing 
effects of compliance with other programs, while acknowledging that 
requirements for hardrock mining and mineral processing facilities, and 
implementation of them, vary substantially across the country. The 
CERCLA Sec.  108(b) proposed rules, however, are nationally applicable. 
EPA was thus concerned that, should it allow an owner or operator to 
invoke other requirements as justification for reducing the amount 
otherwise required by the formula, it should do so only to the extent 
that reductions can confidently be tied to reductions in risk in a 
nationally-applicable rule. Similarly, in order for EPA to allow an 
owner or operator to reduce the amount of financial responsibility that 
it must obtain under CERCLA Sec.  108(b) based on its compliance with 
non-CERCLA regulatory requirements imposing future risk-reducing 
controls, EPA must be confident that those non-CERCLA requirements will 
have their intended risk-reducing effects, by ensuring the controls 
will be implemented when necessary. Lastly, as discussed earlier, EPA 
has sought to develop an effective, nationally-applicable formula that 
can be readily applied by the regulated community and overseen by EPA. 
EPA is accordingly proposing to allow for simple, all-or-nothing 
reductions for the formula sub-components, when they can be justified. 
In sum, therefore, this proposed rule allows an owner or operator to 
rely on other regulatory controls in order to obtain reductions in the 
amount of CERCLA financial assurance it must obtain, but includes 
several conditions that must first be met by the owner or operator. EPA 
intends for this approach to allow for a more tailored amount of 
financial responsibility under the nationally-applicable formula, while 
still providing assurance that the resultant amount is consistent with 
the level of risk.
    First, the reductions incorporate a general performance standard in 
paragraph 326.63(c). In order to qualify for a reduction, the owners 
and operators must be prepared to demonstrate to EPA that any 
requirements relied upon under paragraph 320.63(d) also meet the 
general standard, that the engineering requirements will result in a 
minimum degree and duration of risk associated with the production, 
transportation, treatment, storage, or disposal, as applicable, of all 
hazardous substances present at that site feature. This general 
requirement will provide a benchmark against which the controls can be 
measured. In addition, this provision is intended to reflect that if 
the general performance standard is met, the proposed approach allows 
for a complete reduction from the financial responsibility formula 
component. Where the requirements do not result in a minimum level of 
risk, EPA cannot be confident that a complete reduction for that cost 
component is warranted.
    Next, EPA is proposing to require that any of the requirements 
relied upon be enforceable against the owner or operator claiming the 
reduction, that they have in place adequate financial responsibility to 
assure that the requirements will be implemented, and that they certify 
that the facility is in compliance with the requirements. These 
conditions are intended to ensure that the underlying controls that 
form the basis of the risk reduction are highly likely to occur and 
thereby achieve their intended risk-reducing effect.
    Third, EPA is proposing to require that the owner or operator 
certify that the facility is in compliance with the requirements relied 
upon in claiming a reduction to the facility's financial responsibility 
amount. This condition is intended to ensure that the controls

[[Page 3468]]

upon which the reduction is based are, in fact, currently implemented 
at the facility.
    Fourth, the proposed rule also includes a general requirement that 
the owner and operator provide the information necessary for EPA to 
evaluate the claimed reductions. Specifically, Sec.  320.63(c)(2) 
provides that information submitted must provide sufficient and 
detailed supporting information adequate to allow EPA to evaluate the 
adequacy of the financial assurance and of the underlying requirements 
for meeting the reduction.
    Finally, EPA is proposing specific minimum standards for the 
various categories of reductions.\188\ These are specified in Sec.  
320.63(d)(3). This portion of the proposed rule provides the criteria 
that owners or operators must meet for particular reductions. The 
performance standards in paragraph (c) describe objectives for reducing 
risk at facilities and include future engineering controls and 
practices that reduce the risk associated with the hazardous substances 
at the site. That paragraph provides reduction criteria for each 
component of the maximum financial responsibility formula--capital 
costs, interim O&M, short-term O&M, long-term O&M, water treatment, 
hazardous materials management, and surface water drainage. For capital 
costs, the paragraph provides reductions for each site-feature 
category--open pits, underground mines, waste rock, heap and dump 
leach, tailings impoundments and stacks, process ponds and reservoirs, 
and slag piles. Owners and operators that meet the criteria for a 
formula component reduction would not have to calculate financial 
responsibility for that component. Because the natural resource damage 
component is calculated by a multiplier, this component would produce a 
correspondingly smaller amount, as the reductions are claimed.
---------------------------------------------------------------------------

    \188\ See U.S. EPA, Office of Land and Emergency Management, 
Reductions Technical Support Document: Financial Responsibility 
Requirements under CERCLA Sec.  108(b) for Classes of Facilities in 
the Hardrock Mining Industry Proposed Rule, November 30, 2016 for 
discussion of the development of the reduction criteria.
---------------------------------------------------------------------------

    EPA solicits comment on the proposed reductions to the financial 
responsibility amount. EPA solicits comment specifically on whether the 
Agency has identified the appropriate criteria for the reductions, and 
whether the reduction criteria will provide incentives for owners or 
operators to implement more protective practices at their facilities to 
lower their financial responsibility amounts. EPA solicits comment on 
whether the criteria for the reductions are described in sufficient 
detail to allow for effective implementation and, if not, how they 
might be modified. EPA solicits comment on whether the reduction 
criteria are likely to be complied with and/or enforced such that, at 
the applicable time, risk at the facility will, in fact, be reduced.
    EPA solicits comment on whether alternate or more flexible 
engineering standards can substitute for some or all of the numeric 
engineering standards in the proposed reduction criteria (e.g. planning 
for a 200-year storm event, reduction of net precipitation by 95 
percent). In addition, EPA requests comment on whether the proposed 
reduction criteria would limit flexibility necessary for innovative or 
different site-specific approaches and, if so, how those might be 
preserved under the proposed rule. EPA also invites comment on a 
possible role for third-party certifiers or other regulatory 
authorities in identifying alternative, protective site-specific 
controls as a basis for financial responsibility reductions. EPA also 
requests comment on whether other regulatory programs already impose 
the requirements that would satisfy the reduction criteria. Finally, 
EPA solicits comment on allowing reductions to the financial 
responsibility amount for other risk-reducing practices and/or controls 
(e.g., voluntary practices) that are implemented at hardrock mining 
facilities that should be accounted for in the reductions, and on how, 
if reductions were allowed for such practices and/or controls, EPA 
could assure that those controls would remain in place and be effective 
over time where there is no regulatory program overseeing their 
maintenance and operation.
    As discussed above, EPA is seeking to develop reduction criteria 
standards that are appropriate in the context of a nationally 
applicable rule. The Agency requests comment on whether any particular 
reduction criteria in paragraph 320.63(c) might be inappropriate under 
particular facility conditions that could still be defined in the 
context of a national rule. Specifically, EPA requests that commenters 
identify particular facility conditions where a nationally applicable 
standard different from the reduction criteria proposed should be 
applied. EPA requests that commenters identify both those alternative 
facility conditions and any appropriate reduction criteria with 
particularity. EPA is particularly interested in objective criteria 
that define facility conditions that could be verified by a certified 
professional.

Program Deferral Approach

    As described above, EPA is proposing to allow reductions to the 
financial responsibility amount for the response component of the 
financial responsibility formula. Those reductions are based on 
criteria established in the rule for each of the thirteen response 
categories that together determine the response component amount. EPA 
is proposing that eligibility for the reductions be determined by 
owners and operators on a site-specific basis, subject to EPA review.
    EPA has also considered whether reductions to the financial 
responsibility amount could be made by EPA, on a broader basis, to 
avoid expenditure of facility resources to determine eligibility for 
reductions, and reduce the burden on EPA to review each facility's 
claimed reductions individually. EPA is therefore also soliciting 
comment on whether the rule should also allow for EPA to conduct a 
programmatic review of other regulatory requirements and their 
implementation, with the objective of determining whether the reduction 
criteria are met across the program in question. Such a program 
deferral approach would provide for programmatic-based reductions in 
situations where the program meets the requirements for deferral of 
CERCLA Sec.  108(b) requirements for the full response component of the 
financial responsibility formula--that is, for all facilities and all 
response categories.
    Under this approach, owners and operators of facilities would not 
be required to comply with the requirements to calculate a financial 
responsibility amount and to obtain a financial responsibility 
instrument under EPA's CERCLA 108(b) regulations after EPA determines 
that a state or federal program meets certain criteria. The remainder 
of the requirements of Part 320 would remain applicable at the facility 
(e.g., notification to EPA, public notice requirements). Facilities 
would remain subject to these other requirements in order for EPA to 
monitor the regulated universe and ensure the continuing validity of 
any deferral determination. EPA would be able to withdraw its 
determination and impose all CERCLA Sec.  108(b) requirements if the 
requirements for deferral are no longer met.
    The criteria for deferral would be designed to assure that EPA 
would be able to make a program-wide determination that facilities 
regulated

[[Page 3469]]

by a particular program would be subject to, and in compliance with, 
requirements that will result in a minimum degree and duration of risk 
associated with the production, transportation, treatment, storage, or 
disposal of all hazardous substances present. This would involve EPA 
making a determination that: (1) The federal or state program has 
authority to impose all of the requirements necessary for the 
reductions described in proposed 320.63(d); (2) the program would 
impose those requirements on the same regulated universe subject to the 
proposed rule; (3) the program ensures that each facility obtains 
adequate financial assurance to ensure the other requirements will be 
implemented; and (4) the requirements will be enforced to assure 
compliance.
    EPA recognizes potential advantages to this approach. First, 
deferral of these requirements would minimize the implementation of the 
CERCLA Sec.  108(b) rule at facilities that are already subject to 
programmatic requirements that, if implemented and enforced, can be 
determined to result in a minimum level of risk, thereby focusing 
implementation resources on the remaining universe of facilities with 
less protective practices. This approach would also reduce costs for 
owners and operators subject to programs that qualify for deferral of 
CERCLA Sec.  108(b) requirements, as they would not have to submit 
information to support the calculation of a financial responsibility 
amount, or the reductions to that amount. Finally, providing for 
deferral provides an incentive for programs to adopt the necessary 
requirements to comply with the reduction criteria.
    At the same time, EPA recognizes several disadvantages to the 
programmatic deferral approach. First, EPA is concerned that it may be 
difficult for the Agency to ensure that facilities remain in compliance 
with the underlying requirements, and thus ensure that the facilities 
continue to present a minimum degree and duration of risk over time. 
Potential problems could include the necessity for EPA to monitor 
changes to permitting regimes and substantive technical requirements. 
EPA is also concerned about how it could ensure that the financial 
assurance actually provided by every facility under a given regulatory 
regime is sufficient to ensure that the reduction criteria would be met 
in practice. Without such an assurance, EPA may find it difficult to 
conclude that the regulatory program requirements relied upon for the 
deferral determination will result in minimum risk. This concern is 
presented particularly where the determination of the amount of 
financial assurance is subject to the discretion of the regulator, 
instead of being identified with particularity in the terms of the 
regulations. In this case, EPA is unsure how it could make a broad-
based determination that financial assurance requirements will be 
sufficient, if they have potential for varying stringency in practice. 
Finally, EPA is concerned that as a practical matter it may be 
difficult for the Agency to withdraw a programmatic deferral once 
granted, even where there is evidence that the criteria for 
programmatic deferral are no longer met. Thus, EPA expects that any 
deferral option would necessitate an oversight mechanism short of full 
withdrawal. EPA also expects that a dispute resolution process to 
resolve differences that arise among implementers would be an important 
component of a programmatic deferral approach.
    It should be noted, however, that in taking this approach, EPA 
would not expect to review Federal and state closure and reclamation 
programs for adequacy, or to judge the quality or efficacy of those 
programs. EPA's concern would be whether requirements meeting the 
reduction criteria, designed for purposes of CERCLA Sec.  108(b), are 
imposed and enforced at facilities, and secured with financial 
assurance adequate to assure their implementation. Those questions are 
separate from the question of whether the Federal or state closure 
program is adequate for its intended purpose or whether the financial 
assurance required is adequate financial responsibility for the purpose 
of that program.
    EPA solicits comment on the programmatic deferral approach. EPA 
particularly solicits comment on whether regulators would be interested 
in seeking an EPA determination of programmatic deferral, whether 
existing programs would qualify for programmatic deferral based on the 
proposed reduction criteria, whether commenters believe EPA could 
assure compliance with the proposed reduction criteria if a 
programmatic deferral was implemented, how a conflict resolution 
process might be developed and implemented, and how a programmatic 
deferral approach might be improved.
Partial Program Deferral Approach
    EPA also solicits comment on whether to consider partial deferral 
from the response component of the formula where a federal or state 
program met the criteria for deferral for some but not all of the 
thirteen response categories. This would result in a requirement to 
calculate a financial responsibility amount and to obtain a CERCLA 
Sec.  108(b) instrument, for a lower overall amount. This would not, 
however, otherwise change the operation of the rule in practice. As was 
discussed in section IV.D of this preamble, because the formula employs 
an aggregation of individual costs to obtain an overall amount for the 
facility, the individual cost components are not themselves intended to 
represent any sub-limits within the actual financial responsibility 
instrument--in other words, the total amount of funds would be 
available for any future Superfund action anywhere across the facility, 
and would not be tied to particular site features. This would remain 
the case in any partial deferral approach. For example, a program might 
include requirements that would satisfy the reduction criteria for the 
waste pile response category but not for the open pit category. In that 
situation, under this approach, owners or operators would not have to 
calculate an amount for waste pile areas at their facilities, or make 
the demonstrations necessary to qualify for reductions to that amount. 
Those facilities would still have to calculate a financial 
responsibility amount for open pit areas at their facilities, and any 
other portions of the formula not subject to an EPA partial deferral 
determination. The total amount of funds would be available for any 
future Superfund action
    EPA sees a potential advantage to the regulated community from such 
an approach, because of the timing requirements of the statute. As was 
discussed in section VI.D.2 of this preamble, CERCLA Sec.  108(b)(3) 
includes a statutory phasing provision that requires financial 
responsibility requirements to be imposed as quickly as can reasonably 
be achieved but in no event more than four years after the date of 
promulgation of the final rule. Thus, EPA has included provisions in 
the proposed rule reflecting this provision (Sec.  320.61). Owners and 
operators will need to comply with the requirement to calculate a 
financial responsibility amount and obtain a CERCLA Sec.  108(b) 
instrument in accordance with the phase-in provisions of the proposed 
rule, until EPA makes a final determination on deferral. EPA's ability 
to make any deferral decisions (partial or complete) quickly, may in 
turn depend upon the actions of another regulator to make changes to 
its regulations, and/or the resources available to the Agency to 
undertake the necessary reviews. A partial program

[[Page 3470]]

deferral approach, even if adopted on a temporary basis, may allow EPA 
to make more rapid determinations on deferral requests, while federal 
and state mining programs make any necessary modifications to qualify 
for programmatic deferral. On the other hand, a partial deferral 
approach may increase the burden on EPA to undertake multiple reviews 
of many different programs.
    EPA solicits comment on this approach. EPA requests comment on any 
drawbacks to allowing for partial deferral and, if the Agency were to 
adopt this approach, whether this approach should be a long-term 
component of the CERCLA Sec.  108(b) requirements, or whether it should 
be a temporary mechanism to allow time for program modifications 
necessary to comply with the reduction criteria.
Partial Reductions Within Formula Sub-Components
    Finally, EPA is also soliciting comment on whether partial 
reductions should be allowed within the formula sub-components, and how 
partial reductions might be structured. As was explained above, EPA is 
proposing to allow for all-or-nothing reductions when all reduction 
criteria are met, and when the general performance standard (and other 
requirements) are met. As also explained above, one key consideration 
is how to ensure that the reductions can confidently be tied to 
reductions in risk in a nationally-applicable rule. Accordingly, EPA 
does not expect that allowing partial reductions for a response 
category amount based on partial compliance with the reduction criteria 
would be appropriate, as the reduction criteria are not intended to 
reflect proportional reductions in risk--rather, EPA's intent is to 
establish a combined system of requirements that together, would result 
in a set of conditions that result in a minimum degree and duration of 
risk. Nonetheless, EPA solicits comment on whether partial reductions 
should be allowed for response categories. EPA requests information 
regarding how the amount of a partial reduction could be determined, 
and the basis upon which EPA could apportion the reduction in risk 
among the reduction criteria to assign a corresponding decrease in the 
financial responsibility, while still providing assurance that the 
resultant financial responsibility amount will be consistent with the 
level of risk.
5. Information Submission and Recordkeeping Requirements (Sec.  320.64)
    Owners or operators are required under Sec.  320.66 to submit 
information to support the calculation of financial responsibility at 
their facility, and to maintain that information for a period of three 
years. The information submitted must be in sufficient detail to enable 
EPA to review the cost estimate and determine its adequacy.
    The Agency anticipates that the type of information can be found in 
existing documents such as the owners or operator's plan of operations, 
reclamation and/or closure plans, and permits. EPA solicits comment on 
these reporting and recordkeeping requirements.
6. Third-party Certification (Sec.  320.65)
    EPA is proposing that elements of the calculation of the financial 
responsibility amount submitted to EPA be certified by an independent 
qualified professional engineer. EPA believes that this requirement 
would improve the accuracy of submissions, and would thereby facilitate 
implementation of the rule by requiring less review by EPA of financial 
responsibility amount submissions.
    The requirements to determine a financial responsibility amount 
that are proposed in Sec.  320.63 include a formula in Sec.  320.63(b) 
and criteria for reducing the financial responsibility amount in Sec.  
320.63(c). EPA solicits comment on the use of professional 
certifications in the implementation of those requirements. EPA is 
particularly interested in which elements of the formula would be best 
suited to certification by an independent professional engineer, what 
other independent professional certifications might be appropriate, and 
whether independent professional certifications are beneficial.
    Proposed Sec.  320.65 includes the requirement that the qualified 
professional engineer that certifies the financial responsibility 
amount be ``independent.'' EPA is considering whether the requirement 
for independence would help strengthen the certifications under this 
proposal, and whether that extra level of protection is necessary in 
this rule where EPA is not the permitting authority and will therefore 
have less familiarity with the facility than it would in other 
circumstances (e.g., RCRA closure requirements under 40 CFR part 264 
and Part 265). EPA solicits comment on the proposed requirement for 
independence of the qualified professional engineer, on whether a 
requirement that a qualified professional engineer be independent would 
strengthen the certification requirement, and on whether such a 
requirement is appropriate under this proposed rule. EPA wants to 
ensure that the definition of ``independent'' contribute to the 
objectivity of the certifier. Thus, EPA solicits comment on criteria to 
define ``independent,'' including criteria related to personal, 
professional, and economic relationships between the owner or operator 
and the certifier.
    Finally, EPA solicits comment on whether certification by other 
professionals other than professional engineers could be incorporated 
into this proposed rule to facilitate implementation. For example, EPA 
has heard from states that they are using third parties to review site 
features, bonding requirements, and financial documents. EPA request 
comment on the experience of implementers and the regulated community 
on the use of professional certifications in regulatory programs, 
including the benefits and disadvantages of such an approach.
7. Continued Risk at Hardrock Mining Facilities
    Since issuing the 2009 Priority Notice, EPA has continued to gather 
data and information on hardrock mines, practices, and risks associated 
with classes of facilities within the industry. EPA's review of 
available data indicates abundant evidence that hardrock mining 
facilities continue to pose risks associated with the management of 
hazardous substances at their sites. EPA reached this determination 
after further identifying and analyzing various sources of data, 
including: (1) CERCLA site data to better understand the types and 
sources of releases that occurred at National Priority List (NPL) and 
NPL-equivalent cleanups, (2) Toxics Release Inventory (TRI) and 
Resource Conservation and Recovery Act (RCRA) Hazardous Waste Biennial 
Report (BR) data to determine which facilities reported CERCLA 
hazardous substances/hazardous wastes, (3) Emergency Response 
Notification System (ERNS) to learn about the types and causes of 
releases reported, and (4) numerous existing reports that evaluated 
releases that occurred at hardrock mining and processing 
facilities.\189\ Each of these are further discussed later in this 
preamble.
---------------------------------------------------------------------------

    \189\ These databases are all available on the EPA Web site--
www.epa.gov.
---------------------------------------------------------------------------

    In developing this proposed rule, EPA also documented examples of 
releases and threatened releases of hazardous substances from recent 
and current mining operations. The documents developed by EPA can be 
found in the docket for this rulemaking, and are discussed below.

[[Page 3471]]

a. Releases from Mining and Mineral Processing Facilities \190\
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    \190\ See U.S. EPA, Office of Land and Emergency Management, 
Memorandum to the Record: Releases from Hardrock Mining Facilities, 
November 2016.
---------------------------------------------------------------------------

    This document discusses sources of releases at approximately thirty 
recently or currently operating mines and mineral processing facilities 
that had no previous significant legacy mining issues. These releases 
to the environment from mining and mineral processing activities, 
including tailings impoundments, waste rock piles, open pits, and leach 
pads were subsequently mitigated using CERCLA or CERCLA like actions 
under Federal and/or state statutory authority. Mines that have 
predicted future discharges to the environment and have proposed either 
preventative actions or CERCLA like mitigations also are discussed.
    Examples of releases at currently operating facilities discussed in 
this document include:
    Smoky Canyon Mine/Pole Canyon Overburden Disposal Area (ODA): At 
the Smoky Canyon Mine in Idaho, phosphate ore is extracted from a 
series of open pits, located on the eastern slope of the Webster Range 
between Smoky Canyon and South Fork Sage Creek. To extract the ore, JR 
Simplot removes and disposes the overburden nearby; the Pole Canyon 
Overburden Disposal Area (ODA). The Pole Canyon ODA is an external 
disposal area that covers approximately 120 acres. Downstream of the 
ODA, selenium concentrations in groundwater and surface water emanating 
from the toe of the ODA exceed risk-based screening-level benchmarks 
for human receptors (surface water and groundwater) and ecological 
receptors (surface water). Removal and remedial actions are currently 
ongoing at the site.
    Buckhorn Mine: The Buckhorn gold mine owned by Kinross Corp. 
located in Washington has been in operation since 2007. The site is an 
underground mine that includes waste rock. Water management during 
spring snow melt has been a well-documented problem at the mine. In 
2011 and 2012, the Buckhorn Mountain mine's groundwater capture zone 
failed to contain spring rains and snow melt, resulting in contaminated 
water reaching Gold Bowl Creek. Water generated in the underground mine 
can carry high concentrations of heavy metals such as copper, lead and 
zinc that must be captured and processed before being discharged at 
approved outfalls. Violations in 2011 include allowing water discharges 
causing slope instability and erosion, and for discharging water at an 
unauthorized point. The mine is required to capture contaminated 
groundwater from around mine excavations and tunnels and under surface 
stockpiles, and pump it to a treatment plant. Since operations began at 
the mine in 2007, the Washington Dept of Ecology has issued $62,000 in 
penalties, six notices of violation and six administrative orders 
directing the company to control stormwater, rectify groundwater 
capture zone inadequacies, prevent slope failures, and comply with 
permit limits for nitrates, sulfate, acidity, copper, lead, zinc and 
solids from stormwater ponds.
    Florida Canyon Mine: The Florida Canyon gold and silver open pit 
mine with cyanide heap leach operation, located in Nevada, has been in 
operation since 1986. A groundwater plume consisting of weak acid 
dissociable (WAD) cyanide, mercury and nitrate was identified on the 
west side of the mine's leach pad and appeared to be related to process 
solution leakage. As a result of continued contamination of groundwater 
the Nevada Division of Environmental Protection (NDEP) issued a Finding 
of Alleged Violation and Order in August 2012. BLM also placed the mine 
in non-compliance in August 2012. The facility has identified and 
mitigated groundwater contaminant sources, as well as operated and 
optimized the groundwater plume pump-back system and evaluates on a 
quarterly basis to verify that the plume migration has been halted, and 
that groundwater cleanup is occurring.
    Jerritt Canyon: The Jerritt Canyon mine located in Nevada has been 
in operation since 1981. The gold and silver mine is an open pit and 
underground cyanide vat leach operation that also processes refractory 
ores using both roasting and chlorination processes. Seepage from the 
Tailings Storage Facility 1 (TSF-1) was detected in the alluvium in 
1987. In an effort to address the seepage issue nine trench drains were 
constructed along the embankment toes in 1988 to intercept and collect 
seepage from the impoundment. As of January 2015, a ring of ninety 
monitoring wells surrounded TSF-1, of which 76 are operational. The 
facility is required to operate, maintain and monitor the Seepage 
Remediation System at all times to ensure the capture of affected 
groundwater, to preclude further migration, and to ensure contraction 
of the overall extent of the TSF-1 seepage groundwater contaminant 
plume. Contamination from TSF-1 leakage has degraded groundwater in the 
immediate vicinity, including in some cases with antimony, arsenic, 
cadmium, magnesium, manganese, mercury, selenium, and WAD cyanide. 
Authorization by NDEP to impound tailings slurry into another tailings 
storage facility (TSF-2) was granted in July 2013 and almost 
immediately, the 150 gpd permitted leak detection rate was exceeded. 
The facility believed that the specific cause of the exceedance was 
unknown but it was assumed to be puncture(s) in the primary liner 
system and/or residual meteoric waters that entered the system during 
liner repairs before operation began. After several unsuccessful 
attempts at addressing the leakage, the facility opted to manage TSF-2 
as a single-lined facility and agreed to install vadose zone wells 
outside the periphery of TSF-2.
b. Overview of Practices at Hardrock Mining and Mineral Processing 
Facilities and Related Releases \191\
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    \191\ See U.S. Environmental Protection Agency, Draft 
Comprehensive Report: An Overview of Practices at Hardrock Mining 
and Mineral Processing Facilities and Related Releases of CERCLA 
Hazardous Substances, November 2016.
---------------------------------------------------------------------------

    EPA also gathered information on current mining and mineral 
processing practices to better understand the extent to which present 
day practices might have changed, determine whether currently operating 
hardrock mining and processing facilities continue to release CERCLA 
hazardous substances, and evaluate the present and future concerns 
regarding these releases. Initial research efforts focused on 
characterizing practices within each commodity sector. However, 
hardrock mining encompasses multiple commodities that represent a broad 
range of activities and marketable products. Through initial research 
and consultation with mining experts, EPA concluded that, for the most 
part, many of the mining, mineral processing, and waste management 
practices that are in widespread use within the current U.S. hardrock 
mining industry have a common thread regardless of the commodity. EPA 
therefore concluded that rather than evaluate releases on a commodity 
by commodity basis, a better approach was to focus on commonly employed 
practices and, when necessary, also evaluate commodity-specific issues 
and processes. EPA thus identified the following thirteen hardrock 
mining, mineral processing, and associated waste management practices 
for detailed evaluation: (1) Surface and underground mining; (2) non-
entry (in-situ leaching or solution) mining; (3) physical, gravity, and 
magnetic processing; (4) flotation; (5)

[[Page 3472]]

cyanidation; (6) acid leach, solvent extraction, and electrowinning; 
(7) pyrometallurgical processes; (8) Bayer process for refining 
alumina; (9) ion exchange in uranium and phosphoric acid processing; 
(10) mine-influenced water; (11) waste rock piles; (12) tailings 
management; and (13) mining processes leaks and spills.
    For each practice, EPA gathered information including literature 
reviews of technical references, academic sources, and government 
publications. EPA also consulted with United States Geological Survey 
(USGS) staff and mining experts. EPA focused this research and 
discussions on the following topics for each practice listed earlier: 
(1) Historical and current use, (2) technical description, (3) 
potential sources and releases of CERCLA hazardous substances and 
management practices to address those potential sources and releases, 
and (4) documented releases at historical sites and currently operating 
facilities.192 193 194 195
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    \192\ See U.S. Environmental Protection Agency Region 10, EPA 
and Hardrock Mining: A Source Book for Industry in the Northwest and 
Alaska (Washington, DC: U.S. Government Publishing Office, 2003).
    \193\ See U.S. Environmental Protection Agency, Damage Cases and 
Environmental Releases from Mines and Mineral Processing Sites, 
March, 2007.
    \194\ See Mining Sites on Superfund's National Priorities List--
Past and Current Mining Practices, Van E. Housman and Stephen 
Hoffman, U.S. Environmental Protection Agency, Washington, D.C., 
Published in: Proceedings, Chapter 6, Risk Assessment/Management 
Issues in the Environmental Planning of Mines, Society for Mining, 
Metallurgy and Exploration (SME) (September 1992), Proceedings, 
Second International Conference on Environmental Issues and 
Management of Waste in Energy and Mineral Production, University of 
Calgary (1992).
    \195\ See U.S. EPA, Office of Land and Emergency Management, 
Memorandum to the Record: Releases from Hardrock Mining Facilities, 
November 2016.
---------------------------------------------------------------------------

    EPA developed a profile of historical and contemporary practices 
and the environmental releases of CERCLA hazardous substances 
associated with each practice. Information about historical sites was 
gathered largely from Record of Decision (ROD) and Remedial 
Investigation/Feasibility Study (RI/FS) documents. Information about 
currently operating sites came from various EPA databases, Emergency 
Response Notification System (ERNS) incident notifications, Mine Safety 
and Health Administration (MSHA) records, Federal and state permit 
documents, and general research.
    EPA selected a sample of the 102 historical CERCLA sites (including 
both NPL and non-NPL sites at which removal actions occurred), 
involving hardrock mining and primary mineral processing sites, for 
additional data collection to characterize the practices and releases 
of hazardous substances. Some findings of the study follow.
    Underground and surface mining create large amounts of excavated 
material, with surface mining tending to generate greater amounts of 
waste rock. Large-scale surface (open-pit) mining techniques generally 
create a greater surface impact than underground or non-entry (e.g., in 
situ leaching) mining methods. Surface mines generate dust, large piles 
of waste rock, and large, usually permanent holes in the earth's 
surface. The corresponding amount of waste rock and tailings being 
mined and deposited is increasing as a result of large-scale mining 
operations. The scale of these mining operations poses formidable 
obstacles to effectively and efficiently addressing releases. Such 
large scale mining operations cause a significant increase in exposure 
of ore constituents to precipitation, resulting in the leaching of 
hazardous substances to ground and surface waters, and to the wind, 
resulting in air emissions. The Rio Tinto Kennecott Bingham Canyon 
site, an open-pit copper, gold, silver, and molybdenum mine located 
near Salt Lake City, Utah provides an example of the problems posed by 
such large scale mining operations. As part of its operations, 
Kennecott had deposited waste rock on the slopes of the nearby Oquirrh 
Mountains. The waste rock dumps leached metals-rich acidic water first 
through an unlined reservoir and then into a groundwater plume that 
extended 72 square miles. The State of Utah took legal action against 
Kennecott as a result of the contamination in 1986; as a result of a 
consent decree reached in 2007, Kennecott agreed to treat the 
contaminated groundwater for the next forty years.\196\
---------------------------------------------------------------------------

    \196\ See Earthworks Factsheet: Problems with Bingham Canyon 
Mine, Earthworks, published 2011. Accessed December 29, 2015, at: 
https://www.earthworksaction.org/files/publications/FS_Problems_BinghamCanyon_2011_low.pdf; and U.S. EPA Region 8 and 
Utah Department of Environmental Quality, Five-Year Review Report: 
Kennecott North Zone Superfund Site, Salt Lake County and Tooele 
County, Utah (Washington, DC: U.S. Government Printing Office, 
2014).
---------------------------------------------------------------------------

    Similar to practices at some mines that became NPL sites, mining is 
currently performed in open pits and underground mines, both of which 
may discharge acidic waters, referred to as acid mine drainage that can 
result when stormwater, surface water or ground water comes in contact 
with sulfur bearing minerals, creating acidic water which dissolves and 
leaches toxic metals into the environment. The Formosa Mine, a former 
copper, zinc and thorium mine in southwest Oregon, provides an example 
of the risk posed by releases from underground mines. In this case, 
storm water-driven contaminant releases from the mine have led to an 
annual discharge of approximately five million gallons of acid rock 
drainage, containing up to 30,000 pounds of dissolved copper and zinc, 
along with other metals. One of the primary sources of these metals is 
underground mine workings; low pH shallow ground water and adit 
drainage to surface water, both laden with high concentrations of 
metals. According to the State of Oregon, the mine has contaminated 18 
miles of the Oregon's Umpqua watershed (Middle Creek and South Fork of 
Middle Creek and Cow Creek)--eliminating prime habitat for the 
threatened Oregon coast Coho salmon and steelhead.\197\
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    \197\ Also see: Earthworks, Modern Mining Needs a Modern Mining 
Law. Available at: https://www.earthworksaction.org/library/detail/modern_mining#.V-QlSk37VD8.
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    Dust and waste rock, produced during both open-pit and underground 
mining, can release trace elements and other toxic substances. Waste 
rock and overburden piles are typically stored on-site and remain an 
important consideration for the environmental performance of currently 
operating mines. Disposal typically involves depositing the waste rock 
in dedicated dumps or piles, or in some cases using it as mine 
backfill. Waste rock can also be co-disposed with filtered tailings, or 
in a slurry pond. Further, releases from waste rock disposals can arise 
years after operations have ceased, through discharges of mine 
influenced water, and pile deformation or collapse. Thus, waste rock 
disposals are often the focus of reclamation and closure plans and 
require consistent and long-term maintenance, monitoring, and 
potentially treatment.
    As with acid mine drainage, other mine influenced water can also be 
of concern. Mine influenced water encompasses any water whose chemical 
composition has been affected by mining or mineral processing. This 
includes not only acid mine drainage but also drainage that is neutral 
or alkaline. In addition to environmental concerns posed by acidity or 
alkalinity, mine influenced water often contains elevated 
concentrations of mobilized contaminants, suspended solids, or sulfate 
or arsenate content. There are many potential sources of mine 
influenced water, because it includes any natural waters that come into 
contact with mining operations. Common sources include groundwater 
affected by pits or underground workings, surface water that has 
entered

[[Page 3473]]

surface excavations, or any precipitation that comes into contact with 
pit faces, leach piles, waste rock piles, or tailings piles.
    The risk for contamination from hazardous substances originating in 
waste rock depends on the mineralogy and geochemical composition of the 
waste rock and its level of exposure to air and water at the disposal 
site. For example, sulfide rock can generate acids that dissolve trace 
elements that, without long-term containment, collection, and 
treatment, pose a significant concern long after initial disposal. 
Discharges can take years to develop, and pose a long-term risk of 
hazardous releases at the site. Environmental issues resulting from 
mine influenced water vary depending on commodity, climate, type of 
mine or mineral processing facility, and mine phase. A key 
characteristic for most mine influenced water (whether acidic, neutral, 
or alkaline drainage) is an elevated concentration of trace elements 
that have leached from surrounding solids such as waste rock, tailings, 
or mine surfaces. These acidic and metal-contaminated fluids are 
frequently a serious problem at mines and may be acutely or chronically 
toxic and may have harmful effects on humans, fish, animals, and 
plants.
    An example of such a situation is the Barite Hill/Nevada Goldfields 
facility. The Barite Hill gold/silver mine located in South Carolina 
was previously owned by Nevada Goldfields, Inc., who operated an open 
pit cyanide heap leach operation on the property from 1989 until 1994. 
Nevada Goldfields conducted mine reclamation activities from 1995 until 
1999 when they went bankrupt and subsequently abandoned the property. 
After the mine closed, the 10-acre Main Pit began to fill with water. 
At its highest, the Main Pit contained approximately sixty million 
gallons of highly acidic water with high dissolved metals content. The 
main mine pit, ponds, sediment, surface water and soil are contaminated 
with arsenic, cadmium, chromium, copper, lead, mercury, nickel, 
selenium, silver, zinc, and cyanide. Contamination affected surface 
water and sediment in Hawe Creek and its tributaries, posing a threat 
to people who eat fish from the Hawe Creek fishery as well as a nearby 
drinking water reservoir. When acid mine drainage occurs, it is 
extremely difficult and often very expensive to control, and also often 
requires costly long-term management measures.
    Mineral processing practices likewise raise significant release 
issues. For example, flotation processes generate tailings that consist 
of a mixture of waste material and the remaining liquid, which consists 
mostly of water and any remaining reagents. These are generally pumped 
to a tailings impoundment, where solids are settled out of the 
solution. In some cases, reagents have the potential for environmental 
harm. Although most of these reagents are consumed during flotation and 
only small residual quantities make it into the tailings, facilities 
might dispose of wastes from various processes in the same waste 
management units, with the resulting mixture containing more hazardous 
constituents than tailings from flotation alone.
    The use of cyanide in gold mining operations creates additional 
risks, including the potential release of cyanide into soil, 
groundwater, and/or surface waters, which has resulted in catastrophic 
cyanide spills. Cyanide leaching has occurred since the mid 1900's. 
While the use of acid to leach copper dumps, the use of cyanide to 
leach gold in heaps, and the spread of solvent extraction techniques 
have changed some aspects of mining, the basic operation of removing 
ore from the ground and concentrating it through beneficiation has 
remained fundamentally the same as when most of the non-active NPL 
sites were in operation. In the case of heap and dump leaching, the 
metals and other compounds in the ores have become more mobile due to 
the increased use of efficient lixiviants. In addition to the release 
of cyanide, discharges from cyanidation processes both during 
operations and after closure can also contain potentially toxic 
elements including lead, cadmium, copper, arsenic, and mercury. 
Leaching tanks, leach pads, piping and storage facilities (e.g., 
process solution ponds and facilities associated with leaching) can 
release sulfuric acid and mobilized contaminants into the environment. 
These leaching solutions can pose significant environmental and human 
health risks if they are not contained successfully. Information on 
documented releases reveals that acid leach operations have caused 
contamination of both surface and ground waters in addition to injuring 
habitat and wildlife. Releases due to equipment failures, chronic 
seepage, or weather-related overflows seem to be the most common 
problems; acid leach operations need to ensure proper reclamation of 
spent dump or heap leach piles, maintenance of equipment, and 
preparation of systems for severe weather in order to minimize 
environmental impacts. Cyanide leaching processes create wastes that 
can present risks of releases of hazardous substances such as cyanide, 
cyanide-metal complexes, and metals via groundwater and surface water 
routes. In addition, sulfuric acid can leach metals from other mining 
wastes and containment areas, transporting other contaminants to 
surface and groundwater systems. While leaching solutions are generally 
recycled back to the process, failure to contain them properly can 
result in releases. After leaching has been discontinued, the abandoned 
leach site can be a source of acidic effluents, hazardous trace 
elements, and total dissolved solids if it is not properly monitored 
and managed. Mine influenced water (e.g., acid, alkaline, or neutral 
mine drainage), i.e., runoff originating from exposed heap leach piles 
or tailings, is also a distinct risk associated with this practice.
    The Beal Mountain Mine, a gold and silver mine in Montana, used 
cyanidation to extract precious metals until it was closed in 1997 when 
Pegasus gold went bankrupt. Although the mine is no longer operating, 
it has continued to pollute neighboring streams with cyanide, selenium 
and copper. Ongoing issues include the geotechnical stability of the 
pit high wall and leach pad dike, infiltration of precipitation and 
groundwater into the leach pad, and treatment and disposal of excess 
solution accumulating on the heap leach pad.\198\ This mine also 
demonstrates the limitations of predicting environmental impacts of 
these facilities -when this mine was permitted, the Environmental 
Analysis concluded that the operation of the mine would have no impacts 
to water quality, because there will be no discharge of mine or process 
water to surface waters.\199\
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    \198\ See USDA-FS, Preliminary Leach Pad Investigation Beal 
Mountain Mine, February 2010. Available at: http://www.fs.usda.gov/detail/bdnf/landmanagement/projects/?cid=stelprdb5076989.
    \199\ See False Promises: Water Quality Predictions Gone Wrong--
Large Mines and Water Pollution, 2012. Available at: http://wman-info.org/wp-content/uploads/2012/08/FalsePromisesWater.pdf.
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    Zortman and Landusky Mines, in Montana, likewise used cyanidation 
to extract precious metals and also underwent bankruptcy and left 
significant pollution at their respective sites. In addition to a heap 
leach pad leak, the Zortman and Landusky facility experienced cyanide 
releases from a leach pad pipe, a solution pond liner leak, and a 
process pond liner leak.\200\

[[Page 3474]]

According to BLM, ``modern'' open pit heap leach operations began in 
1977.\201\ The BLM, as the lead Federal agency, conducted removal 
actions under its CERCLA authority. In response to the numerous issues 
associated with cyanide leaching in Montana, the state, in 1998, 
enacted a referendum banning the development of new open pits that use 
cyanide leaching.
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    \200\ See U.S. Bureau of Land Management, Final Engineering 
Evaluation/Cost Analysis (EE/CA) For Water Management at the Zortman 
and Landusky Mines, Phillips County Montana, prepared by Spectrum 
Engineering (Washington, DC: U.S. Government Printing Office, 2006). 
Accessed August 28, 2015 at: http://www.blm.gov/style/medialib/blm/mt/field_offices/lewistown/zortman.Par.62509.File.dat/finaleeac.pdf.
    \201\ See Zortman and Landusky Mines--Project History, February 
2006. Available at: http://www.blm.gov/style/medialib/blm/mt/field_offices/lewistown/zortman.Par.32256.File.dat/ZLbackground.pdf.
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    Releases also have occurred from other leach pad operations, 
including the Barrick Goldstrike mine in Nevada, where there was a 
release of 159,000 gallons of cyanide in 2003 and 21,625 gallons of 
sodium cyanide in 1995. Also, the Florida Canyon mine in Nevada 
released 52,500 gallons of sodium cyanide (30 percent solution) in 
1996. The groundwater contamination that resulted from releases from 
this facility's leach pad operation was previously discussed.
    Similar to historical releases, tailings management played a role 
in roughly half of the publicly documented releases. Tailings are the 
waste material created when valuable minerals or metals have been 
extracted from ore. Depending on the commodity and the mineral 
processing method, tailings may contain chemical residues inherent to 
processing. For example, milling operations that practice flotation or 
leaching may produce tailings containing reagents such as lime or 
glycol ether and lixiviants including acids and cyanide. The Robinson 
Nevada Mining Company operates the Robinson Operation surface mine in 
White Pine County, Nevada. This facility produces gold and copper using 
flotation processes. The facility released copper flotation tailings 
five times in 1996, leading to violations of its water pollution 
control permit.
    Tailings usually take the form of a slurry (e.g., wet tailings), 
but may also undergo dewatering and disposal as paste or filtered 
tailings. Depending on the commodity and the beneficiation process, 
tailings may contain a variety of hazardous materials, originating from 
geologic components of the ore or chemicals introduced during 
processing. Therefore, they require proper disposal and storage.
    In addition to the previously discussed releases from the tailings 
storage units at the Jerritt Canyon mine, there have been releases at 
other tailings storage units, including: ArcelorMittal Minorca is an 
iron mining and processing facility located in Virginia, Minnesota. 
Three failures in the tailings and waste rock pipe and tailings dike at 
the site occurred in 2013 and 2014, discharging 8,500 cubic yards of 
tailings and waste rock and affecting 15.3 acres of wetlands, 
potentially destroying the area's ability to function as a natural 
aquatic habitat and filtration system.\202\
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    \202\ See Pipeline, Storage Basin Failures Send Ore Tailings and 
Road Aggregate into Wetlands, Minnesota Pollution Control Agency, 
June 24, 2015.
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    The U.S. Silver Galena mine is a silver-lead and silver-copper 
underground mine located near Wallace, Idaho, and operated by the U.S. 
Silver Corporation since 2007. In 2014, U.S. Silver Corporation signed 
a Consent Agreement and Final Order with EPA Region 10 admitting to 
discharging wastewater from the Osburn tailings pond into Lake Creek 
and the Coeur d'Alene River that carried excessive concentrations of 
mercury and copper in 2012 and 2013. The discharge was the result of a 
failure to monitor treated water normally discharged to water system. 
U.S. Silver also admitted that on March 14, 2014, it discharged 
tailings slurry directly into Lake Creek.\203\
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    \203\ See U.S. Environmental Protection Agency, Consent Agree 
and Final Order In the Matter of U.S. Silver--Idaho Inc., Coeur and 
Galena Mines and Mills, Wallace, Idaho, effective 16 September 2014.
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    The Golden Sunlight mine located in Montana is a gold and silver 
open pit mine and underground cyanide vat leach operation. This 
facility's original tailing disposal facility operated from 1983 to 
1995. Seepage was detected from Tailing Impoundment No. 1 in 1983. To 
control effluent from the impoundment, the bentonite cut-off wall was 
immediately repaired. An extensive system of monitoring wells has been 
installed over the years, and several hydrogeologic investigations have 
been undertaken to continue to monitor, evaluate, and control leakage 
from the impoundment.
    Tailings management presents significant environmental challenges 
to current mining operations. Because acid may not be generated for 
many years and most tailings ponds are designed to allow infiltration 
of water through the pond, the potential of acid generation and mobile 
metals are of such concern that many mines construct complex monitoring 
and water management systems for their tailings ponds. It is likely 
that some constituents of concern (i.e., arsenic, sulfates, etc.) have 
become more mobile due to crushing the ore to a smaller particle size. 
Although operators now generally attempt to contain these waste 
management features, proper long-term management is required to 
safeguard against leaks, runoff, and catastrophic failure. Because 
reclamation and closure are yet to occur at currently operating 
facilities, the available data do not capture information 
characterizing the scope and efficacy of these practices. Based on the 
experience of currently closed sites, the environmental impacts of 
releases to groundwater and runoff from tailings impoundments and waste 
rock piles will continue to be of concern at these facilities long 
after closure.
    Fugitive dust emissions from tailings storage units also can be a 
concern. For example, Hecla Greens Creek is a lead, zinc, silver, and 
gold underground mine located near Juneau, Alaska, and operated by the 
Hecla Greens Creek Mining Company. The mill produces 650,000 tons of 
tailings annually. In 2013, elevated concentrations of metals were 
detected in the snow and lichens adjacent to the tailings disposal 
facility. The USFS, who installed the lichen to act as a biomonitor of 
the recently expanded tailings facility, concluded the contamination 
was the result of fugitive dust emissions from the tailings.\204\
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    \204\ See United States Department of Agriculture, Forest 
Service, Greens Creek Mine Tailings Disposal Facility Expansion: 
Final Environmental Impact Statement and Record of Decision 
(Washington, DC: U.S. Government Printing Office, 2013), Volume 1.
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    EPA recognizes various environmental regulatory programs may affect 
releases of CERCLA hazardous substances at hardrock mining and mineral 
processing facilities. Examples of the regulations include requirements 
under: (1) The Clean Water Act (CWA), (2) the Uranium Mill Tailings 
Radiation Control Act (UMTRCA), and (3) reclamation requirements such 
as the BLM's 3809 regulations. However, EPA has found that significant 
issues involving noncompliance with regulatory requirements resulting 
in releases of hazardous substances persist. EPA's ongoing concern with 
reducing the risk of mining waste contamination of drinking water, 
rivers, and streams, and work to cleanup mining and mineral processing 
facilities has been an enforcement priority for almost ten years, as 
reflected in the Agency's National Enforcement Initiative (NEI): 
Reducing Pollution from Mineral Processing Operations reflects the 
Agency's concerted effort to reduce the risk of mining waste 
contamination of drinking water, rivers, and streams, and work to 
cleanup mining and mineral

[[Page 3475]]

processing facilities.\205\ The Agency's FY 2011-2013 National 
Enforcement Initiatives states `At some sites, EPA's inspections have 
found significant non-compliance with hazardous waste and other 
environmental laws.' EPA's National Enforcement and Compliance Strategy 
for Mineral Processing FY2008-2010 states `Environmental impacts caused 
by the mineral processing and mining sectors are significant. The 
mineral processing and mining sectors generate more wastes that are 
corrosive or contain toxic metals than any other industrial sector. 
Over the past decade, we have found that many of the facilities that 
manage these wastes, due either to noncompliance with state or Federal 
environmental requirements or legally permissible waste management 
practices, have created groundwater, surface water, and soil 
contamination.'
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    \205\ See U.S. EPA Office of Enforcement and Compliance 
Assurance, National Program Manager Guidance, April 2015. Available 
at: https://www.epa.gov/sites/production/files/2015-02/documents/oecas_draft_fy_2016-2017_national_program_manager_guidance_february_19_2.pdf.
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    EPA believes the results of this relatively recent effort to 
further document the state of current mining practices substantiates 
the findings from the other documents described herein and further 
reinforces the Agency's belief that currently operating hardrock mining 
and mineral processing facilities subject to this proposal continue to 
present risks of release of hazardous substances.
c. Evidence of CERCLA Hazardous Substances and Potential Exposures at 
CERCLA Sec.  108(b) Mining and Mineral Processing Sites \206\
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    \206\ See U.S. EPA, Office of Land and Emergency Management, 
Memorandum to the Record: Releases from Hardrock Mining Facilities, 
November 2016.
---------------------------------------------------------------------------

    The document ``Evidence of CERCLA Hazardous Substances and 
Potential Exposures at CERCLA Sec.  108(b) Mining and Mineral 
Processing Sites'' reports EPA preliminary efforts from 2009-2012 to 
examine CERCLA site-specific documents for estimated exposures of human 
and ecological receptors to CERCLA hazardous substances from mining and 
mineral processing sites cleaned up under Superfund in the past. The 
report also collects available information on potential exposures of 
human and ecological receptors to CERCLA hazardous substances from 
mining and mineral processing sites that were operational in 2009 (the 
most current available data at the time the evaluation took place).
    EPA concluded the following: (1) Some of the sites operational in 
2009 are already on Superfund's National Priority List (NPL) requiring 
cleanup; (2) mining and mineral processing practices at sites cleaned 
up under Superfund in the past continue to be used at sites operational 
in 2009, especially when comparing sites that mine or process the same 
range of commodities; (3) there are similarities between the 
Contaminants of Concern \207\ at sites cleaned up under Superfund in 
the past, and the CERCLA hazardous substances present at sites 
operational in 2009; (4) human and ecological receptors at sites 
cleaned up under Superfund in the past have parallel potential 
receptors at sites operational in 2009; and (5) environmental settings 
and exposure pathways at sites cleaned up under Superfund in the past 
have corresponding environmental settings and potential exposure 
pathways at sites operational in 2009.
---------------------------------------------------------------------------

    \207\ A CERCLA hazardous substance found at a concentration that 
a Superfund risk assessment has determined poses an unacceptable 
risk to human health or the environment.
---------------------------------------------------------------------------

    Overall, the compiled information demonstrates that sites requiring 
cleaned up under Superfund in the past, and sites operational in 2009 
share characteristics related to the potential release of CERCLA 
hazardous substances and the exposure of human and ecological 
receptors, and illustrates the applicability of EPA's CERCLA experience 
to evaluating currently operating mines and processors.
d. Previous Studies About Releases From Hardrock Mining and Mineral 
Processing Facilities
    EPA has also identified numerous documents showing recent releases 
of CERCLA hazardous substances at hardrock mining and processing 
facilities and thus continuing risks of release or threatened release 
of CERCLA hazardous substances associated with those activities. These 
documents are available in the docket for this proposed rule and 
include:
Damage Cases and Environmental Releases from Mines and Mineral 
Processing Sites \208\
    This document, published in 1997, presents summaries about mining 
and mineral processing damage cases that occurred since 1990. Many of 
the damage cases included in this document involved mining and mineral 
processing of commodities covered by this proposed rule. The release 
incidents occurred from the production, treatment, storage or disposal 
of hazardous substances involving extraction and beneficiation 
operations, including inadequate containment of tailings, clay ponds, 
waste rock, process water, process solution (e.g., cyanide), 
wastewater, acid mine drainage, and stormwater. Many of the releases 
occurred through spills resulting from equipment failure, and operator 
error while others resulted from unusually heavy rains and, 
consequently, the generation of high stormwater volumes. The typical 
management practices used for storage or disposal of mineral processing 
secondary materials and wastes were found to have created or 
exacerbated ground water contamination in the immediate area. In some 
cases, a combination of feedstock, in-process materials, secondary 
materials, and wastes contributed to ground water, surface water, or 
soil contamination. EPA believes that this document presents a 
relatively accurate description of current mining and processing 
practices and the potential releases associated with these practices.
---------------------------------------------------------------------------

    \208\ See U.S. EPA 1997. Damage Cases and Environmental Releases 
from Mines and Mineral Processing Sites.
---------------------------------------------------------------------------

Mining Sites on Superfund's National Priorities List--Past and Current 
Mining Practices \209\
---------------------------------------------------------------------------

    \209\ See Van E. Housman and Stephen Hoffman U.S. Environmental 
Protection Agency Washington D.C. Published in: Proceedings, Chapter 
6, Risk Assessment/Management Issues in the Environmental Planning 
of Mines, Society for Mining, Metallurgy and Exploration (SME) 
(September 1992), and in: Proceedings, Second International 
Conference on Environmental Issues and Management of Waste in Energy 
and Mineral Production, University of Calgary (1992).
---------------------------------------------------------------------------

    This document provides an overview of the types of releases of 
hazardous substances associated with the production, storage, and 
disposal of hazardous substances and the associated impacts, including 
NPL cleanups. It also documents that `although some mining waste 
management practices have changed over time, the basic technology for 
extraction and beneficiation of mineral ores have remained fairly 
constant over the last fifty years.'
    This document states that mining activities at many NPL sites 
resulted in the generation of tailings, acid drainage, waste dumps, and 
waste rock and that these are the same types of wastes generated by 
current mines. It further reports that tailings, mine water, and waste 
rock are the highest volume wastes generated by all past and current 
mining operations. In the case of tailings, it is likely that some 
constituents (i.e., arsenic, sulfates, etc.) have become more mobile 
due to crushing the ore to a smaller particle size. In the case of heap 
and dump leaching, the metals and other compounds in the ores have 
become more mobile due to the increased use of

[[Page 3476]]

efficient lixiviants (i.e., the solution used in hydrometallurgy to 
assist in extracting the desired metal from ore in heap leaching, dump 
leaching, and in situ leaching).
    The document also states that `many current mining operations are 
extracting sulfide ores, having exhausted the less acidic oxide ores. 
Therefore, the potential for environmental damage from acid mine 
drainage at existing mines is possible, if favorable geologic and 
climatic factors exist. There are dozens of current mining operations 
with open pits or that have extensive underground tunnels are, similar 
to NPL sites, located in high sulfide environments.' These current 
operations continuously pump and treat groundwater that enters the pit 
or mined tunnels as part of the overall mine water management system. 
Some of the larger currently operating mines are not only pumping and 
chemically treating mine water, they are using other control methods 
such as intercepting aquifers to control water flow into the mine and 
diverting entire surface streams. In many cases, once the decision is 
made to divert streams and intercept aquifers, active water management 
will have to continue indefinitely, long after the mine is closed.
    Finally, the document states that current mining practice is to 
impound tailings behind engineered dams and attempt to control and 
treat discharges to surface water and groundwater. Current design 
rarely includes lining the ponds. Unlined tailings ponds are 
specifically designed either to introduce water directly to groundwater 
or direct it to leachate collection systems that flow into surface 
ponds at the base of a dam (toe ponds). Tailings management presents 
significant environmental challenges to current mining operations. 
Because acid may not be generated for many years and most tailings 
ponds are designed to allow infiltration of water through the pond, the 
potential for acid generation and mobile metals are of such concern 
that many mines construct complex monitoring and water management 
systems for their tailings ponds.
    Although this document was published almost 25 years ago, EPA has 
concluded that it still presents a relatively accurate description of 
current mining and mineral processing practices and the potential 
releases associated with these practices, as identified in the more 
recent documents previously described.210 211
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    \210\ See U.S. EPA, Draft Comprehensive Report: An Overview of 
Practices at Hardrock Mining and Mineral Processing Facilities and 
Related Releases of CERCLA Hazardous Substances, November 2016.
    \211\ See U.S. EPA, Draft Report--Discharges from Recently or 
Currently Operating Mines and Mineral Processing Facilities. 
September 2016.
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Human Health and Environmental Damages from Mining and Mineral 
Processing Wastes \212\
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    \212\ See U.S. EPA December 1995. Technical Background Document 
Supporting the Supplemental Proposed Rule Applying Phase IV Land 
Disposal Restrictions to Newly Identified Mineral Processing Wastes. 
Damage cases used for this document were derived from previous 
studies by EPA identifying human health and environmental damages 
caused by mining and mineral processing waste management activities, 
including: Report to Congress on Special Wastes from Mineral 
Processing, July 1990; Mining Waste Release and Environmental 
Effects Summaries, Draft, March 1994; Mining Sites on the National 
Priorities List: NPL Site Summary Report, June 21, 1991; and Mining 
Sites on the NPL, August 1995.
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    EPA developed this document to illustrate the human health and 
environmental damages caused by management of wastes from mining (i.e., 
extraction and beneficiation) and mineral processing, particularly 
damages caused by placement of mining and mineral processing wastes in 
land-based units, including piles, surface impoundments, and ponds as 
part of its ``Phase IV'' Land Disposal Restrictions rulemaking under 
the RCRA Subtitle C program. This document presents 66 mining and 
mineral processing damage cases, including mining and mineral 
processing of commodities covered by this proposed rule. The damage 
cases demonstrate that land-based management practices for mining and 
mineral processing wastes are responsible for considerable damages to 
human health and the environment. These damages commonly arise from 
land placement of wastes in unlined units having minimally engineered 
release controls. These units include piles of slags, dusts, refractory 
bricks, sludges, waste rock and overburden, and spent ore; surface 
impoundments containing mill tailings and/or process wastewaters; and 
heap leaching solution ponds. In addition, many, if not most of the 
damage case facilities have caused human health or environmental 
damages through leaks or spills, such as releases from lined management 
units, valves, and pipes.
    The damage cases illustrate the wide variety of human health and 
environmental impacts caused by wastes from mining and mineral 
processing operations, including groundwater, surface water, and soil 
contamination; human health damages or risks; and damages to 
vegetation, wildlife, and other biota. As noted earlier, in more recent 
documents prepared by EPA, many of the damage cases cited in this 
document involved releases that EPA has concluded are still indicative 
of current mining and mineral processing practices and the potential 
releases associated with these practices.
e. Data Concerning Releases, Generation, and Management of CERCLA 
Hazardous Substances
    EPA evaluated several databases, as follows:
(1) Releases Reported Under the Emergency Response Notification System 
(ERNS)
    EPA also looked at releases of CERCLA hazardous substances reported 
under the Emergency Response Notification System (ERNS). EPA considered 
these data because of the potential insights the data offered on an 
annual basis over a prolonged period of time--providing a means by 
which to show the extent of and reasons for reported releases of CERCLA 
hazardous substances by hardrock mining and mineral processing 
facilities.
    ERNS primarily contains initial accounts of releases reported to 
the National Response Center, made during or immediately after a 
release occurs. The National Response Center receives all reports of 
releases involving hazardous substances and oil that trigger Federal 
notification requirements under several laws. It also should be noted 
that the National Response Center is strictly an initial report-taking 
agency and does not participate in the investigation or incident 
response. The National Response Center receives initial reporting 
information only and notifies Federal and state On-Scene Coordinators 
for response.
    From the National Response Center Web site (http://www.nrc.uscg.mil/), EPA downloaded, by year, the details for each call 
reporting a release--from 1990 through 2014. Although releases have 
been reported to the National Response Center since 1982, the data from 
1982-1989 are difficult to use because of inconsistent formats, and 
missing and/or inconsistent data fields, among other problems. A more 
uniform and consistent format for documenting calls was put into place 
in 1990, so EPA examined National Response Center data from 1990 
through 2014. For the purpose of this rulemaking, EPA only focused on 
reported releases that involved CERCLA hazardous substances.\213\ The 
ERNS data contains information about the material and the

[[Page 3477]]

quantity released, where and when the release occurred, and information 
about property damage, injuries, and deaths occurring due to the 
release. The ERNS data include a general Incident Type and Incident 
Cause. Analyzing information from the Incident Description for each 
reported release, EPA developed and assigned a more detailed 
description of the incident type and cause.
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    \213\ See U.S. EPA, Extracting Useable Data from ERNS Incidents 
Applicable to HRM Facilities, December 2015.
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    EPA's analyses show that, since 1990, more than 950 reported 
releases of CERCLA hazardous substances were associated with currently 
operating facilities in the hardrock mining industry.\214\ Looking at 
the more recent data, approximately 435 of the releases were reported 
since 2000, for an average of about thirty reported releases per year 
since 2000. These ERNS data provide yet another indicator of ongoing 
reported releases of CECLA hazardous substances at hardrock mining and 
mineral processing facilities. Many of the reported releases were due 
to: (1) Damage to/overflow of pond/impoundment/pile/landfill due to 
storms, (2) breaks or leaks of piping/hoses, (3) accidents/operator 
error, and (4) failure or overflow of process units and storage/
treatment tanks/sumps.
---------------------------------------------------------------------------

    \214\ See U.S. EPA, Analyses of ERNS Data Applicable to HRM 
Facilities, December 2015.
---------------------------------------------------------------------------

    EPA also reviewed a report that substantially relied on ERNS data 
to show pipeline, seepage control and tailings impoundment failures at 
operating copper porphyry mines in the U.S., and the associated water 
quality impacts.\215\ This document states that `copper porphyry mines 
are often associated with water pollution associated with acid mine 
drainage, metals leaching and/or accidental releases of toxic 
materials.'
---------------------------------------------------------------------------

    \215\ See Bonnie Gestring, U.S. Copper Porphyry Mines Report: 
The Track Record of Water Quality Impacts Resulting from Pipeline 
Spills, Tailings Failures, and Water Collection and Treatment 
Failures (Washington, DC: Earthworks, July 2012). Available at: 
https://www.fxsp0;earthworkfxsp0;saction.fxsp0;org/files/
publications/Porphyry_Copper_Mines_Track_Record&lowbar-_8-
2012.pdf.
---------------------------------------------------------------------------

(2) Analysis of Toxics Release Inventory (TRI) Data
    The Toxics Release Inventory (TRI) includes data on chemicals 
(including numerous CERCLA hazardous substances) that are released, 
recycled, treated, or used for energy recovery. Under TRI, releases 
include air emissions, surface water discharges, underground injection 
wells, and placement to land, including RCRA hazardous waste landfills 
and other landfills. TRI data also show quantities transferred to 
publicly owned treatment works (POTWs) and to off-site facilities. In 
developing this proposal, EPA examined recent TRI data \216\ in order 
to identify the types, amounts, and methods of hazardous substance 
management at facilities potentially subject to the rule. EPA's 2010 
through 2013 Toxic Release Inventory (TRI) data indicates that the 
metal mining industry (e.g., gold ore mining, lead ore and zinc ore 
mining, and copper ore and nickel ore mining) reported quantities of 
onsite releases of hazardous substances, averaging nearly 1.7 billion 
pounds per year. In 2013, the metal mining sector reported the largest 
quantity of total disposal or other releases, accounting for 47 percent 
of the releases for all industries. It also represents almost three 
quarters (71 percent) of the on-site land disposal for all sectors in 
2013. (See: http://www.epa.gov/toxics-release-inventory-tri-program/2013-tri-national-analysis-metal-mining.) The preliminary 2014 TRI data 
likewise show nearly 1.8 billion pounds of onsite releases. Specific 
hazardous substances of concern that are released into the environment 
by mining facilities include: Ammonia, benzene, chlorine, hydrogen 
cyanide, hydrogen fluoride, toluene, and xylene, as well as heavy 
metals and their compounds (e.g., antimony, arsenic, cadmium, chromium, 
cobalt, copper, lead, manganese, mercury, nickel, selenium, vanadium 
and zinc).
---------------------------------------------------------------------------

    \216\ TRI is a publicly available EPA database that contains 
information on a list of 581 individually listed chemicals and 
thirty chemical categories that are being used, manufactured, 
treated, transported, released into the environment, or recycled. 
Facilities (certain regulated industries and federal facilities) are 
required to annually report to TRI under the Emergency Planning and 
Community Right to Know Act (EPCRA Sec.  313).
---------------------------------------------------------------------------

    More than 99 percent of these onsite releases involved surface 
impoundments (e.g., tailings) and other land placement (e.g., waste 
piles) not subject to RCRA Subtitle C permits.\217\ In addition to the 
placement of these quantities of CERCLA hazardous substances on the 
land, for the period covering 2010-2013, metal mining facilities also 
reported an average of three million pounds of air releases and over 
800,000 pounds of surface water discharges. Over the time period of 
2010-2012, releases of hazardous substances (ranging between 425,000 
pounds and 978,000 pounds) also were reported due to catastrophic or 
one-time events; in 2013, nearly 194 million pounds of such releases 
were reported.
---------------------------------------------------------------------------

    \217\ Many of the wastes generated by mining and processing 
operations, i.e., those processes that remove, concentrate, and/or 
enhance values contained in ores and minerals or beneficiated ores 
and minerals, have been excluded from regulation under RCRA Subtitle 
C per the Bevill Amendment.
---------------------------------------------------------------------------

    In the 2009 Priority Notice, EPA used Toxics Release Inventory 
(TRI) data to provide an indication of the quantities of hazardous 
substances that were associated with facilities in the hardrock mining 
industry. Commenters objected to EPA's use of these data. Commenters 
noted that releases reported to TRI encompass releases that may be 
permitted under the Clean Air Act, Clean Water Act, Safe Drinking Water 
Act, and RCRA Subtitle C. Thus, these commenters argued that these 
releases should not be used to predict the risk of releases and 
exposures to hazardous substances associated with potential 
mismanagement of hazardous substances.
    EPA considered these objections to the use of these data, in 
developing its data for this proposal. The Agency recognizes that a 
significant portion of the TRI releases reported as air emissions and 
surface water discharges are likely permitted by Federal/state 
regulatory authorities. EPA also recognizes that some of the surface 
impoundments, landfills, and waste piles used to manage wastes 
containing these large volumes of hazardous substances might be 
designed and operated to mitigate releases into the environment.
    These data provide some perspective about the number of currently 
operating facilities and offer insights on the types, amounts, and 
management of hazardous substances at hardrock mining and mineral 
processing facilities potentially subject to this proposed rule. The 
presence of such significant amount of hazardous substances, even if 
subject to regulatory controls, provides some indication of the 
potential for risks to result if improperly managed. In addition, EPA 
previously has discussed the evidence of non-compliance with regulatory 
standards. Thus, the TRI data provide relevant information on the risks 
associated with hardrock mining facilities.
(3) Analysis of RCRA Hazardous Waste Biennial Report (BR) Data
    The RCRA Hazardous Waste Biennial Report (BR) contains data 
reported by hazardous waste handlers and must be submitted by large 
quantity hazardous waste generators and treatment, storage, and 
disposal facilities every two years. Because RCRA hazardous wastes, by 
statute, are designated CERCLA hazardous substances, EPA analyzed the 
BR data for the 2009, 2011, and 2013 reporting cycles. These data show 
the quantities of RCRA hazardous waste streams generated and how the 
waste

[[Page 3478]]

was managed. It is important for the reader to note that many wastes 
generated by mining and mineral processing operations are excluded from 
RCRA Subtitle C hazardous waste regulation under the Bevill Amendment.)
    EPA found a wide variation in the quantity of hazardous waste 
generated by facilities in the hardrock mining industry, including 
nearly 3,000 tons in 2009, nearly 25,000 tons in 2011, and more than 
13,000 tons in 2013. These generated quantities, for the most part, do 
not represent actual releases to the environment but instead represent 
amounts of hazardous substances produced and managed at the reporting 
facilities. The sources and types of hazardous wastes generated by 
these facilities are numerous and varied, including: (1) Contaminated 
soil from remediation and/or past contamination; (2) contaminated soil 
and debris from spills and accidental releases; (3) filters, solid 
adsorbents, ion exchange resins and spent carbon from air pollution 
control devices; (4) sludges, liquids, solids from cleanout of process 
equipment; (5) laboratory analytical wastes; (6) spent process liquids 
or catalysts, (7) removal of tank sludge, sediments, or slag; and (8) 
discarding off-specification or out-of-date chemicals or products.
    To a large extent, facilities in the hardrock mining industry 
ultimately transfer their RCRA hazardous wastes to offsite treatment 
and disposal facilities. However, for those facilities that do treat 
and dispose of hazardous wastes onsite, the potential co-mingling of 
hazardous wastes with Bevill excluded wastes or non-hazardous wastes is 
a concern to EPA. Indeed, EPA has determined that some facilities place 
mixtures of exempt wastes (e.g. tailings) and non-exempt wastes in an 
on-site waste management unit.\218\ Recently, EPA and the U.S. 
Department of Justice announced a settlement with Mosaic Fertilizer, 
LLC that will ensure the proper treatment, storage, and disposal of an 
estimated sixty billion pounds of hazardous waste at Mosaic's 
facilities in Bartow, Lithia, Mulberry and Riverview in Florida and St. 
James and Uncle Sam in Louisiana. At these facilities, sulfuric acid is 
used to extract phosphorus from mined phosphate rock, which produces 
large quantities of a solid material called phosphogypsum and 
wastewater that contains high levels of acid. EPA inspections revealed 
that Mosaic was mixing certain types of highly-corrosive substances 
from its fertilizer operations, which qualify as hazardous waste, with 
the phosphogypsum and wastewater from mineral processing (Bevill 
wastes), which is a violation of Federal and state hazardous waste 
laws. The phosphogypsum piles can contain several billion gallons of 
highly acidic wastewater, which can threaten human health and cause 
severe environmental damage if it reaches groundwater or local 
waterways. In August 2016, one of these facilities (the New Wales in 
Mulberry) experienced a sinkhole, leaking 215 million gallons of 
contaminated water into the Floridian aquifer.
---------------------------------------------------------------------------

    \218\ See U.S. EPA, Mineral Processing Facilities Placing 
Mixtures of Exempt and Non-Exempt Wastes in On-Site Waste Management 
Units, Technical Background Document Supporting the Supplemental 
Proposed Rule Applying Phase IV Land Disposal Restrictions to Newly 
Identified Mineral Processing Wastes, December 1995. (Note: See 
EPA's Supplemental Phase IV LDR Final Rule [63 F.R. 28595-97 (May 
26, 1998), which included discussion of mineral processing secondary 
materials and Bevill Exclusion issues.
---------------------------------------------------------------------------

    In the 2009 Priority Notice, EPA also used BR data to show the 
quantities of hazardous wastes that were associated with facilities in 
the hardrock mining universe. Commenters objected to EPA's use of these 
data to justify the need for financial responsibility requirements. 
Specifically, commenters stated: (1) That the BR data simply show the 
quantities of RCRA hazardous wastes that are generated and managed in 
accordance with the RCRA Subtitle regulations. They argued that thus 
these data are not an indicator of mismanagement and provide no 
information concerning the degree and duration of risk associated with 
the production, transportation, treatment, storage, or disposal of 
hazardous substances; (2) that EPA did not discuss whether, or how 
often, the generation of hazardous waste corresponds to on-site 
discharges of hazardous substances, or to costly cleanups; and (3) that 
the volume of hazardous waste reported on the RCRA BR may not be a 
realistic indicator of risk for CERCLA Sec.  108(b) purposes. High 
volume waste streams often are highly dilute aqueous wastes that are 
managed in Clean Water Act wastewater treatment facilities.
    EPA recognizes that the BR data concerning volume of hazardous 
waste generated and managed onsite, when considered alone, does not 
provide a direct indicator of risk of release or of mismanagement of 
wastes. Notwithstanding the issues pointed out by commenters, EPA 
believes these data do offer insights on the types, amounts, and 
management of RCRA hazardous wastes (by definition, CERCLA hazardous 
substances) at hardrock mining and mineral processing facilities 
potentially subject to this proposed rule.
e. Government Expenditures--Historical CERCLA Costs
    EPA conducted analysis of historical response costs at 319 hardrock 
mining and processing sites on the National Priorities List (NPL) and 
at non-NPL CERCLA sites. EPA used this information to help further 
identify the magnitude of continuing risks from hardrock mining 
facilities potentially subject to the rule. Such costs also serve as a 
measure of the severity of consequences impacting human health and the 
environment as a result of releases of and exposure to hazardous 
substances. Specifically, the past and estimated future costs 
associated with protecting public health and the environment through 
what is often extensive and long-term reclamation and remediation 
efforts can be substantial.
    The Agency developed a database for purposes of analysis that uses 
the ``Expenditures'', ``ROD Costs'', and ``Settlements'' data derived 
from CERCLIS, Integrated Financial Management System (IFMS), and Office 
of Enforcement and Compliance Assurance (OECA) information resources. 
These data sources for response costs included: (1) Fund expenditures 
incurred at each site to date, the type of expenditure (broadly 
speaking, construction versus non-construction) and the source of funds 
(whether the Fund was reimbursed by the potentially responsible party 
(PRP) through a ``special account''); and (2) Records of Decision 
(RODs) at each site. A ROD is a document that provides the 
justification for the remedial action (treatment) chosen at a Superfund 
site. It also contains information concerning site history, site 
description, and site characteristics. The ROD Costs database provides 
a dollar estimate for each remedial action chosen at a site. Last, 
information was compiled about settlements with PRPs, including ``cash 
out'' funds accrued and deposits into special accounts associated with 
settlements at each site.
    Following a review of the discussed data sources, EPA developed a 
tailored approach that attempts to characterize the total (i.e., past 
and future) response cost at each of the historical sites identified, 
taking advantage of all available data sources and site 
characteristics. EPA then verified and adjusted the response costs 
using reports from the U.S. Government Accountability Office (GAO) and 
from the Office of the Inspector General

[[Page 3479]]

(OIG)) that investigated past and future costs at NPL 
sites.219 220
---------------------------------------------------------------------------

    \219\ See U.S. Government Accountability Office, Superfund: 
EPA's Estimated Costs to Remediate Existing Sites Exceed Current 
Funding Levels, and More Sites Are Expected to Be Added to the 
National Priorities List. Report No. GAO-10-380. May 2010 (the GAO 
Report).
    \220\ See Office of Inspector General, Nationwide Identification 
of Hardrock Mining Sites. Report No. 2004-P-00005. March 31, 2004 
(the OIG Report).
---------------------------------------------------------------------------

    In considering the total remediation and other expenditures 
experienced at these sites (including both past and projected future 
expenditures necessary to complete cleanup), EPA estimates that the 
historical response costs total $12.9 billion at 243 hardrock mining 
and minerals processing facilities evaluated for which data were 
available at the time of the analyses. The estimate of response costs 
for just 117 NPL sites from the sample totals more than $12 billion, or 
an average of more than $103 million per site. Federal expenditures to 
date total roughly one-third of the total (or $4 billion), paid for 
through EPA's Superfund program. Such significant cleanup costs may be 
considered as an indication of the relative risks present at these 
sites, and the potential magnitude of environmental liabilities 
associated with this industry overall. It should be noted that this 
data does not capture funds spend cleaning up hardrock mining 
facilities outside of the Superfund program (e.g., by a state cleanup 
authority).
    Costs associated with ATSDR Health Assessments and Natural Resource 
Damages further increase the liabilities attributable to the hardrock 
mining and mineral processing sectors. EPA identified documented 
natural resource damages settlements at 64 sites within this sector. 
This statistic alone suggests that as many as 25 percent of CERCLA 
sites in this sector have also been the source for associated damages 
to natural resources. Based on the natural resource damages cases 
identified, the values of the damages average more than $16 million 
across all of the cases, with individual settlements ranging from 
$32,000 to over $400 million.
f. EPA's Conclusions Regarding Risks Posed by Facilities in the 
Hardrock Mining Universe
    Information available to EPA indicates strongly that the hardrock 
mining industry continues to present risks associated with the 
production, transportation, treatment, storage, and disposal of 
hazardous substances. Mining activities at many NPL sites resulted in 
the generation of tailings, acid drainage, waste dumps, and waste rock; 
these are the same types of wastes generated by current mines. In many 
cases, releases were largely due to the direct discharge of wastes into 
the local environment or minimal containment efforts. For example, the 
P4/Monsanto-South Rasmussen facility, operating near Soda Springs in 
southeast Idaho, discharged wastewater containing high concentrations 
of selenium and heavy metals from a waste rock dump at the mine without 
a required permit. Further, P4's unpermitted discharges, which 
contained selenium levels far above Idaho's state water quality 
standards, polluted a nearby wetland and an unnamed tributary of Sheep 
Creek, as well as downstream waters that drain to the Snake River. P4 
agreed to pay a $1.4 million civil penalty for alleged Clean Water Act 
violations and to continue collecting selenium-contaminated leachate 
from the waste rock pile and to prevent leachate from entering nearby 
creeks and wetlands until such time as the company either obtains a 
National Pollution Discharge Elimination System permit, or it 
undertakes a restoration of the waste rock dump under another state or 
Federal order.
    Additionally, many releases described in publicly available 
information occurred after closure of the mine or mineral processing 
site, suggesting that the potential for releases and adequate 
monitoring remains a long-term concern after closure of the mining or 
mineral processing operation.
    While some mining waste management practices have changed over 
time, the basic technologies for extracting and processing of mineral 
ores have remained fairly constant over approximately the last 50 
years. Mining technology has become more efficient over time in 
recovering mineral values--allowing lower grade ores to be mined which 
produce more waste. At the same time, a combination of economic and 
technological factors have increased the scale of surface disturbance 
and waste generation. Mining and mineral processing facilities generate 
more toxic and hazardous waste than any other industrial sector.
    Underground and surface mining create large amounts of excavated 
material. Disposal typically involves depositing the waste rock in 
dedicated dumps or piles, or in some cases using it as mine backfill. 
Waste rock can also be co-disposed with paste or filtered tailings, or 
in a slurry pond. Waste rock and overburden piles are typically stored 
on-site, which may result in acidic or other mine-influenced water. 
Common sources include groundwater affected by pits or underground 
workings, surface water that has entered surface excavations, or any 
precipitation that contacts pit faces, leach piles, waste rock piles, 
or tailings piles. Sulfide rock can generate acids that dissolve trace 
elements which, without long-term containment, collection, and 
treatment, pose a significant concern long after initial disposal.
    Further, releases from waste rock disposal can arise years after 
operations have ceased, through discharges of mine influenced water, 
and pile deformation or collapse. Most mines require ongoing management 
for acidic drainage. Evidence has shown that such problems continue to 
be a problem even at sites that have been inactive for more than a 
century. Thus, discharges can take years to develop, and pose a long-
term risk of hazardous releases at the site.
    EPA's research indicates that all processing of ore, including 
physical and magnetic processing, can result in spills of intermediate 
material and waste. This is because transport within the facility of 
the many different commodities and process chemicals used in hardrock 
mining activities is required between subsequent processing steps, thus 
resulting in risk of release. In addition, where operators use toxic 
process chemicals, the potential for harm associated with these spills 
is increased. Similarly, ore must be transported from the extraction 
site to the mineral processing facility. Process water and solutions 
are often stored in ponds on site for use and recycling. Slurries are 
piped from mill facilities to storage facilities (which can include 
waste management features such as tailings ponds) by pipeline, truck, 
or conveyor. The slurry, containing ore and process chemicals, can 
contain mobilized contaminants and other hazardous substances. EPA has 
documented that leaks also often occur due to liner failures, 
containment failures during transport or at exchange points (e.g., 
conveyor drop points or truck offloads), and defects in pipe seams. EPA 
has also documented that operator error, such as mishandling of 
solutions (e.g., over-fills) or equipment, and severe weather events 
that overwhelm containment systems can contribute to these types of 
releases.
    Finally, information available to EPA indicates that potential 
risks posed by hardrock mining and mineral processing facilities can 
affect all environmental media. Air, land, and water contamination may 
result when waste rock dumps, tailings disposal facilities and open 
pits are not maintained properly and release hazardous

[[Page 3480]]

substances to the environment.\221\ EPA has also documented that 
releases of CERCLA hazardous substances have occurred and continue to 
occur, including ongoing releases that have not yet been detected and/
or mitigated.
---------------------------------------------------------------------------

    \221\ See U.S. EPA. 2004. Cleaning Up the Nation's Waste Sites: 
Markets and Technology Trends. EPA 542-R-04-015. Accessed at: http://www.epa.gov/tio/pubisd.htm.
---------------------------------------------------------------------------

VII. Statutory and Executive Orders Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    This action is an economically significant regulatory action that 
was submitted to the Office of Management and Budget (OMB) for review. 
Any changes made in response to OMB recommendations have been 
documented in the docket. The EPA prepared an analysis of the potential 
costs and benefits associated with this action. This analysis, 
Regulatory Impact Analysis, is available in the docket. Section I.C. of 
this preamble summarizes the results of the RIA. As discussed in that 
section of the preamble, on annualized basis, the estimated regulatory 
costs to private entities for the two options in the proposed action 
are $171 million (without a financial test), and $111 million (with a 
financial test). EPA also segregated the costs borne by private 
entities into social cost (borne by society) and intra-industry 
transfers. The majority of the industry costs represent a transfer from 
the regulated industry to the financial industry, and hence the 
quantified annualized net social costs are estimated at $30 million to 
$44 million. Similarly, the Agency conducted a qualitative analysis of 
the benefits of the rule; however, the results were not monetized. As 
such, the net benefit-cost analysis of the two options may have an 
annual effect on the economic near $100 million or more. Accordingly, 
EPA submitted this action to the OMB for review under Executive Order 
12866, and plans to incorporate changes in response to OMB 
recommendations on the proposal rule.

B. Paperwork Reduction Act (PRA)

    The information collection activities in this proposed rule have 
been submitted for approval to the OMB under the PRA. The ICR document 
that the EPA prepared has been assigned EPA ICR number 2554.01. You can 
find a copy of the ICR in the docket for this rule, and it is briefly 
summarized here.
    The proposed rule would require that owners or operators of 
facilities subject to the rule submit information to EPA. This ICR 
addresses the following proposed information requirements that are part 
of the rule: (1) Submit an initial Notification Form to EPA within 
thirty days of the effective date of the regulation; (2) make relevant 
information available to the public on the company's website; (3) 
calculate financial responsibility amount and submit information to 
support the calculation to EPA; (4) submit evidence that support the 
establishment of financial responsibility; (5) update financial 
responsibility amount at minimum every three years and submit evidence 
of proper maintenance of financial responsibility; (6) notify EPA when 
the owner or operator and the issuer of financial instruments enter 
Chapter 11 bankruptcy proceedings; (7) notify EPA of any claim pursuant 
to CERCLA naming the owner, operator, or guarantor as defendant; (8) 
notify EPA when the facility is no longer authorized to operate or the 
date by which the owner or operator must provide notification that the 
facility is ceasing operations under another regulatory program; and 
(9) maintain a record of all of the information related to financial 
responsibility requirements and retain those records for three years 
after the owner or operator released from financial responsibility 
requirements.
    EPA believes that submission of the information would be needed for 
effective implementation of CERCLA Sec.  108(b) requirements. By 
requiring the owner or operator to submit information about the 
facility to EPA, these requirements would better enable the Agency to 
assure full compliance with the requirements for financial 
responsibility throughout the time the facility is subject to those 
requirements.
    As discussed in section VI.A.3. of this preamble, some element of 
the information required for submission under this proposed rule may be 
claimed as proprietary business information or trade secrets. As 
described in that section, the proposal would not require or provide 
for posting of this sensitive information. However, the Agency expects 
that much of the information submitted to EPA under the proposal could 
be made available.
    Respondents/affected entities: Hardrock Mining Industry.
    Respondent's obligation to respond: Mandatory, pursuant to CERCLA 
Sec. Sec.  104, 108, and 115, 42 U.S.C. Sec. Sec.  9604, 9608, 9615.
    Estimated number of respondents: 221.
    Frequency of response: One to three times (the first three years).
    Total estimated burden: 7,057 hours (per year). Burden is defined 
at 5 CFR 1320.3(b).
    Total estimated cost: $490,504 (per year), includes $12,532 
annualized capital or operation & maintenance costs.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for the 
EPA's regulations in 40 CFR are listed in 40 CFR part 9.
    Submit your comments on the Agency's need for this information, the 
accuracy of the provided burden estimates, and any suggested methods 
for minimizing respondent burden to EPA. This information should be 
submitted to the docket for tis proposed rule (Docket No. EPA-HQ-SFUND-
2015-0781). You may also send your ICR-related comments to OMB's Office 
of Information and Regulatory Affairs via email to 
[email protected], Attention: Desk Officer for EPA. Since OMB 
is required to make a decision concerning the ICR between thirty and 
sixty days after receipt, OMB must receive comments no later than 
February 10, 2017. EPA will respond to any ICR-related comments in the 
final rule.

C. Regulatory Flexibility Act (RFA)

    Pursuant to section 603 of the RFA, EPA prepared an initial 
regulatory flexibility analysis (IRFA) that examines the impact of the 
proposed rule on small entities along with regulatory alternative that 
could minimize that impact. The complete IRFA is available for review 
in the docket and is summarized here.
1. Why EPA is Considering This Action
    A series of studies and reviews conducted by the EPA Office of 
Inspector General (OIG) and the Government Accountability Office (GAO) 
from 2004 through 2008 demonstrated that the hardrock mining industry 
presented a risk to EPA and taxpayers with respect to the amount of 
cleanup costs for which they would be responsible. Information 
available to EPA indicates strongly that the hardrock mining industry 
continues to present risks associated with the production, 
transportation, treatment, storage, and disposal of hazardous 
substances. In accordance with CERCLA Sec.  108(b) and in response to 
these concerns, EPA is publishing the proposed rule that would create a 
financial responsibility program in CERCLA.

[[Page 3481]]

2. Objectives of, and Legal Basis for, the Proposed Rule
    The proposed rule endeavors to increase the likelihood that owners 
and operators will provide funds necessary to address the CERCLA 
liabilities at their facilities, thus preventing the burden from 
shifting to the taxpayer. In addition, the rule would provide an 
incentive for implementation of sound practices at hardrock mining 
facilities that would decrease the need for future CERCLA actions.
3. Estimate of the Number of Small Entities To Which the Proposed Rule 
Would Apply
    For purposes of assessing the impacts of this regulation on small 
entities, a small entity is defined as: (1) A small business as defined 
by the Small Business Administration's (SBA) regulations at 13 CFR part 
121.201; (2) a small governmental jurisdiction that is a government of 
a city, county, town, school district or special district with a 
population of less than 50,000; and (3) a small organization that is 
any not-for-profit enterprise which is independently owned and operated 
and is not dominant in its field.
    For the purposes of this analysis, EPA identified approximately 221 
mines/processing facilities in the potentially regulated universe; of 
these, 53 facilities are estimated to have a small owner (including 
joint ventures), corresponding to 43 firms. Twelve additional mines 
have owners of unknown size (due to lack of available company data). 
Most (38) of these 53 facilities engage in mining/extraction; 15 
facilities engage in processing/refining only.
    Depending on the specific NAICS code of the owner, the 
determination of ``small entity'' status depends on either the revenue 
or the number of employees of the firm. The minimum threshold for 
revenue in the relevant NAICS codes ranges from $11 million to $36.5 
million. The employment qualifications ranges from 100 employees to 
1,500 employees. Table C-1 lists summary information on the small 
entity universe.

[[Page 3482]]



                                                               Table C-1--Summary of Small Business Statistics (Company Revenues)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                SBA small business size
                                               standard (as of February                                                                            Number of small firms   Number of small firms
                                                         2016)                                        Average  annual       Average  number of         facing annual           facing annual
       NAICS code              Industry       --------------------------  Number of small firms     revenues of  small      employees  of small    compliance costs >1%    compliance costs >3%
                                                 Revenues                                           firms  ($Millions)             firms                 (Median)*               (Median)*
                                               ($millions)   Employees
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
211111.................  Crude Petroleum and   ...........         1250  1......................  $61...................  194...................  1.....................  0-1.
                          Natural Gas
                          Extraction.
212210.................  Iron Ore Mining.....  ...........          750  1......................  100...................  475...................  1.....................  0-1.
212221.................  Gold Ore Mining.....  ...........         1500  10.....................  96....................  261...................  6-7...................  5-6.
212234.................  Copper Ore and        ...........         1500  5......................  22....................  80....................  5.....................  4.
                          Nickel Ore Mining.
212291.................  Uranium[dash]Radium[  ...........          250  2......................  15....................  48....................  1.....................  0-1.
                          dash]Vanadium Ore
                          Mining.
212392.................  Phosphate Rock        ...........         1000  <1.....................  <1....................  6.....................  1.....................  1.
                          Mining.
212393.................  Other Chemical and    ...........          500  1......................  <1....................  3.....................  1.....................  1.
                          Fertilizer Mineral
                          Mining.
212399.................  All Other             ...........          500  3......................  329...................  173...................  2.....................  2.
                          Nonmetallic Mineral
                          Mining.
213114.................  Support Activities           20.5  ...........  2......................  <1....................  7.....................  2.....................  2.
                          for Metal Mining.
213115.................  Support Activities            7.5  ...........  1......................  <1....................  2.....................  1.....................  1.
                          for Nonmetallic
                          Minerals (except
                          Fuels).
236115.................  New Single-family            36.5  ...........  1......................  8.....................  10....................  1.....................  0.
                          Housing
                          Construction
                          (Except For-Sale
                          Builders).
238910.................  Site Preparation               15  ...........  2......................  2.....................  100...................  2.....................  1.
                          Contractors.
325180.................  Other Basic           ...........         1000  2......................  168...................  295...................  0-1...................  0.
                          Inorganic Chemical
                          Manufacturing.
325312.................  Phosphatic            ...........          750  1......................  47....................  315...................  1.....................  0-1.
                          Fertilizer
                          Manufacturing.
327992.................  Ground or Treated     ...........          500  2......................  32....................  111...................  2.....................  1.
                          Mineral and Earth
                          Manufacturing.
331313.................  Alumina Refining and  ...........         1000  1......................  2.....................  550...................  1.....................  1.
                          Primary Aluminum
                          Production.
331410.................  Nonferrous Metal      ...........         1000  1......................  13....................  83....................  1.....................  0.
                          (except Aluminum)
                          Smelting and
                          Refining.
331491.................  Nonferrous Metal      ...........          750  1......................  34....................  500...................  1.....................  1.
                          (except Copper and
                          Aluminum) Rolling,
                          Drawing and
                          Extruding.
423520.................  Coal and Other        ...........          100  1......................  15....................  54....................  0.....................  0.
                          Mineral and Ore
                          Merchant
                          Wholesalers.
522390.................  Other Activities             20.5  ...........  1......................  <1....................  1.....................  1.....................  1.
                          Related to Credit
                          Intermediation.
551112.................  Offices of Other             20.5  ...........  2......................  <1....................  2.....................  2.....................  2.
                          Holding Companies.
561499.................  All Other Business             15  ...........  1......................  <1....................  1.....................  1.....................  1.
                          Support Services.
561990.................  All Other Support              11  ...........  1......................  <1....................  2.....................  1.....................  1.
                          Services.
Unknown................  Unknown.............  ...........  ...........  Up to 12 additional....  Unknown...............  Unknown...............  Up to 12 additional     Up to 12 additional
                                                                                                                                                   firms.                  firms.
                                                           -------------------------------------------------------------------------------------------------------------------------------------
    TOTAL..............  ....................  ...........  ...........  44 to 56 firms.........  ......................  ......................  35 to 49 firms........  25 to 42 firms.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 3483]]

    As required by section 609(b) of the RFA, EPA convened a Small 
Business Advocacy Review (SBAR) Panel to obtain advice and 
recommendations from small entity representatives that potentially 
would be subject to the rule's requirements. The SBAR Panel evaluated 
the assembled materials and small-entity comments on issues related to 
elements of an IRFA. A copy of the full SBAR Panel Report is available 
in the rulemaking docket.
    The SBAR Panel recommended that EPA:
    (1) Solicit comment on whether to provide for programmatic-based 
deferral of the requirement for owners and operators of facilities to 
calculate an individual financial responsibility amount and to obtain a 
financial responsibility instrument in situations where all facilities 
regulated by a particular Federal or state mining program could qualify 
for reductions for the full response component of the financial 
responsibility formula--that is, for all response categories, and at 
all facilities.
    (2) propose to allow reductions to the financial responsibility 
amount applicable at facility for future requirements that are 
enforceable against the owner and operator, that are supported by 
adequate financial assurance, and with which the owner and operator are 
in compliance, and solicit comment on allowing reductions to the 
financial responsibility amount for other risk-reducing practices and/
or controls (e.g., voluntary practices) that are implemented at 
hardrock mining facilities that should be accounted for in the 
reductions, and on how, if reductions were allowed for such practices 
and/or controls, EPA could assure that those controls would remain in 
place and be effective over time where there is no regulatory program 
overseeing their maintenance and operation.
    (3) provide in the rule discussion and solicitation of comment on 
the impact of the financial test on small businesses. The discussion 
and solicitation of comment should consider whether making a financial 
test available would increase the available capacity for third-party 
instruments in the marketplace and increase the availability of such 
instruments to owners or operators of small businesses and/or whether 
it would create a competitive disadvantage for small business, and 
solicit comment on those concerns.
    (4) solicit comment on all aspects of the proposed financial 
responsibility formula, including comment on specific elements of the 
formula such as the robustness of the regression analyses, 
identification and treatment of influential data points (i.e. potential 
outliers), the use and calculation of the individual smear factors, and 
the assumption of source controls.
    (5) solicit comment on the criteria used to identify lower-level of 
risk of injury classes in the proposed rule, and whether it would be 
feasible and appropriate to identify additional classes as presenting a 
lower level of risk of injury, particularly classes of mines that 
differ in their operations and associated risks from more traditional 
hardrock mines, and on whether such classes of mines, defined based on 
facility characteristics, could potentially encompass iron ore, 
phosphate, and uranium mines.
    (6) request comment on whether more alternate or more flexible 
engineering standards can substitute for some or all of the numeric 
engineering standards in the proposed reduction criteria (e.g. planning 
for a 200-year storm event, reduction of net precipitation by 95 
percent), on whether the proposed reduction criteria would limit 
flexibility necessary for innovative or different site-specific 
approaches and, if so, how those might be preserved, and on whether 
other regulatory programs already impose the requirements that would 
satisfy the reduction criteria.
    EPA revised the rule to include in Sec.  320.63 a proposal to allow 
reductions to the financial responsibility amount applicable at 
facility for future requirements that are enforceable against the owner 
and operator, that are supported by adequate financial assurance, and 
with which the owner and operator are incompliance. These reductions 
are described in section VI.D.4. of this preamble. EPA also solicited 
comment on most of the areas recommended by the Panel.
4. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements of the Proposed Rule
    EPA estimates industry costs for the owner/operator companies that 
are unable to utilize a self-insurance option under the proposed rule 
as the resources expended and/or foregone to obtain a third-party 
financial responsibility instrument. Additional administrative and 
recordkeeping costs to industry include reading the regulations, 
submitting initial facility information to EPA and the public, 
calculating financial responsibility amounts, choosing a financial 
responsibility instrument, acquiring and maintaining a financial 
responsibility instrument, recalculating financial responsibility 
amounts to reflect any changes in facility operations, and any 
functions the rule requires of owners and operators upon the transfer 
of a facility, owner or operator default, a CERCLA claim against the 
owner or operator, and release from financial responsibility.
    As described earlier, EPA began its assessment of the impact of 
regulatory options on small entities by first estimating the number of 
small entities owning hardrock mining facilities that would be subject 
to the proposed rule. EPA then assessed whether these small entities 
would be expected to incur costs that constitute a significant impact; 
and whether the number of those small entities estimated to incur a 
significant impact represent a substantial number of small entities.
    To assess whether small entities' compliance costs might constitute 
a significant impact, EPA averaged the annualized compliance costs as a 
percentage of entity revenue (cost-to-revenue test). EPA compared the 
resulting percentages to impacts criteria of one percent and three 
percent of revenue. Small entities estimated to incur compliance costs 
exceeding one or more of the one percent and three percent impact 
thresholds were identified as potentially incurring a significant 
impact.
    Table C-1 shows that 35 to 49 small entities may face an average 
annual compliance cost of greater than the one percent of revenues. 
Similarly, 25 to 42 small entities may experience impact on revenues 
above three percent. The results of the impacts analysis do not vary 
significantly between the two regulatory options. However, impacts are 
generally lower under Option 2 due to the lower compliance costs when a 
financial test is available.
    These results may suggest that a significant number of small 
entities expected to incur annualized cost of more than the three 
percent of the revenue thresholds. However, because of data 
limitations, the screening level analysis relied upon estimated 
financial responsibility amounts for each facility based on facility 
type, rather than actual size and nature of operations. Further, 
reliable and current revenues information for small, private firms was 
not readily available. As a result, these results are not suggestive of 
impacts for any specific company or entity.
5. Related Federal Rules
    These are the only financial responsibility requirements for non-
transportation related facilities pursuant to CERCLA.

[[Page 3484]]

6. Description of Alternatives to the Proposed Rule
    The Agency considered alternatives to provisions of this rule. 
Those alternatives are discussed in section VII.K. of this preamble.

D. Unfunded Mandates Reform Act (UMRA)

    This action contains a Federal mandate under UMRA, 2 U.S.C. 1531-
1538, that may result in expenditures of $100 million or more for 
state, local and tribal governments, in the aggregate, or the private 
sector in any one year. Accordingly, EPA has prepared a written 
statement required under section 202 of UMRA. The statement is included 
in the docket for this action and briefly summarized here.
    The RIA estimates the rule may affect 221 hardrock mining and 
processing facilities. EPA estimates that the regulation will have 
aggregate annual compliance costs ranging from $111 million to $171 
million to the private sector. A detailed assessment of the anticipated 
costs and benefits (presented qualitatively) of the Federal mandate is 
provided in the RIA.
    In accordance with UMRA Sec.  205, EPA is proposing a range of 
regulatory options. The options can be summarized as: (1) A financial 
responsibility regulation that allows for a financial test, and (2) a 
financial responsibility regulation that does not allow for a financial 
test. These options are all considered to be technologically feasible 
and economically achievable.
    This action is not subject to the requirements of Sec.  203 of UMRA 
because it contains no regulatory requirements that might significantly 
or uniquely affect small governments.
E. Executive Order 13132: Federalism
    EPA believes that this action will not have federalism implications 
as defined by agency policy for implementing Executive Order 13132, 
entitled ``Federalism.''
    Earlier in the development of this proposed rule, EPA projected 
that the CERCLA Sec.  108(b) rules would have federalism implications 
under the terms of Executive Order 13132, and EPA planned certain 
outreach activities accordingly. As discussed in Section IV of this 
preamble, EPA spent significant time and effort gathering and 
evaluating information on regulated entities and considering various 
approaches to structuring the proposed rule. EPA also considered as 
part of this the potential relevance of CERCLA Sec.  114(d). In light 
of further development of the proposed rule and its resultant analysis 
of the question of federalism implications as explained below, EPA has 
come to expect that this action does not, in fact, have federalism 
implications. Regardless of this determination on the applicability of 
the Executive Order, EPA nonetheless engaged its intergovernmental 
partners in the same pre-proposal outreach activities expected under 
the Executive Order.
    As part of the regulatory impact analysis, EPA analyzed the CERCLA 
Sec.  108(b) proposed rule's potential for federalism implications as 
defined in the Executive Order to include regulations that have 
``substantial direct effects on the states, on the relationship between 
the national government and the states, or on the distribution of power 
and responsibilities among the various levels of government.'' EPA 
typically considers a policy or regulation to have federalism 
implications if it results in the expenditure by State and/or local 
governments in the aggregate of $25 million or more nationally in any 
one year, or if the policy or regulation results in preemption, whether 
by intent or effect, of State of local government law. The proposed 
CERCLA Sec.  108(b) rule does not impose requirements on, nor is 
expected to result in significant expenditure by, state and/or local 
governments. Further, as discussed in Section V of the preamble, EPA 
does not believe that CERCLA Sec.  114(d) gives a preemptive effect to 
EPA's CERCLA Sec.  108(b) financial responsibility regulations over 
state reclamation bonding requirements.
    In any case, this proposed rule is of significant interest to state 
and/or local governments. Therefore, consistent with the EPA's policy 
to promote intergovernmental communication and cooperation, and in 
response to the considerable interest shown by states prior to and 
during the development of this action, EPA engaged in extensive pre-
proposal consultation, under the auspices of Executive Order 13132, to 
ensure that our state and local partners would have the opportunity to 
provide meaningful and timely input into its development. EPA also 
anticipates additional state and local government input in response to 
the proposed rule. In this regard, EPA is interested in receiving 
information on any state hazardous substance response program(s) that 
require demonstrations of financial responsibility for claims made and 
that states believe could be preempted by this proposal. EPA is 
committed to continued interactions with the states before promulgating 
any final rule.

F. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    This action does not have tribal implications as specified in 
Executive Order 13175 (Executive Order 13175). Executive Order 13175, 
Consultation and Coordination with Indian Tribal Governments,\222\ 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by tribal officials in the development of regulatory 
policies that have tribal implications.'' EPA believes that any tribal 
impacts from this regulation will be limited, because no tribal 
governments own or operate facilities in the potentially regulated 
universe.
---------------------------------------------------------------------------

    \222\ See 65 FR 67249, November 9, 2000.
---------------------------------------------------------------------------

    Earlier in the development of this proposed rule, EPA projected 
that the CERCLA 108(b) rules would have tribal implications and EPA 
planned certain outreach activities accordingly. As discussed in 
Section IV of this preamble, EPA spent significant time and effort 
gathering and evaluating information on regulated entities and 
considering various approaches to structuring the proposed rule. In 
light of further development of the proposed rule and its resultant 
analysis of the question of tribal implications as explained below, EPA 
has come to expect that this action does not, in fact, have tribal 
impacts. Regardless, EPA held early engagement with tribal governments 
as guided by EPA Policy on Consultation and Coordination with Indian 
Tribes.
    To assess the impact on tribal governments, EPA identified tribal 
lands and associated tribes that overlap with the ``included'' universe 
of currently operating facilities potentially subject to the CERCLA 
Sec.  108(b) rulemaking. Relevant tribal lands were identified through 
a GIS dataset available from the U.S. Census Bureau.\223\ This dataset 
included the following legal and statistical entities: Federally 
recognized American Indian reservations and off-reservation trust land 
areas; \224\ State-recognized

[[Page 3485]]

American Indian reservations; Hawaiian home lands (HHLs); Alaska Native 
village statistical areas (ANVSAs); Oklahoma tribal statistical areas 
(OTSAs); Tribal designated statistical areas (TDSAs); and State 
designated tribal statistical areas (SDTSAs).
---------------------------------------------------------------------------

    \223\ See U.S. Census Bureau. (2014). ``TIGER/Line Shapefile, 
2014, Series Information File for the Current American Indian/Alaska 
Native/Native Hawaiian Areas National (AIANNH) National Shapefile.'' 
Accessed at: https://catalog.data.gov/dataset/tiger-line-shapefile-2014-series-information-file-for-the-current-american-indian-ala.
    \224\ The Census Bureau defines off-reservation trust land as 
``areas for which the United States holds title in trust for the 
benefit of a tribe (tribal trust land) or for an individual American 
Indian (individual trust land). Trust lands can be alienated or 
encumbered only by the owner with the approval of the Secretary of 
the Interior or his/her authorized representative. Trust lands may 
be located on or off a reservation; however, the Census Bureau 
tabulates data only for off-reservation trust lands with the off-
reservation trust lands always associated with a specific federally 
recognized reservation and/or tribal government.''
    See U.S. Census Bureau. ``Geographic Terms and Concepts--
American Indian, Alaska Native, and Native Hawaiian Areas.'' 
Accessed August 21, 2015 at: https://www.census.gov/geo/reference/gtc/gtc_aiannha.html.
---------------------------------------------------------------------------

    To estimate the physical extent of the facilities, buffers of 
varying sizes were projected around these coordinates in ArcGIS. Half 
mile, one-mile, and ten-mile buffers were projected around each set of 
coordinates. The number of facilities overlapping tribal lands varied 
considerably depending on the size of the buffer used: with the half-
mile buffer, four facilities overlapped three tribal land areas; with 
the one-mile buffer, six facilities overlapped four tribal land areas; 
and with the ten-mile buffer, 35 facilities overlapped 38 tribal land 
areas. A complete list of the facilities and tribes that fall within 
these buffers is presented in the RIA.
    EPA has concluded that this action will have limited tribal 
implications to the extent that the facilities in its regulated 
universe are located close to tribal lands. As no tribal governments 
own or operate any of the regulated facilities, and therefore will not 
incur any direct compliance costs as a result of the proposed rule, 
Executive Order 13175 does not apply to this rule.
    Although Executive Order 13175 does not apply, the EPA consulted 
with tribal officials during the development phase of the proposed 
rule, consistent with the EPA Policy on Consultation and Coordination 
with Indian Tribes. In early June 2016, EPA sent letters to all 
federally recognized Indian tribes, notifying them of the opportunity 
to provide input to the proposed rule during the consultation and 
coordination period. EPA conducted tribal outreach activities including 
a tribal webinar on June 22, 2016, and conference calls with the 
National Tribal Caucus on August 3, 2016, and the Great Lakes Fish and 
Wildlife Commission on August 8, 2016. EPA also participated in the 
Tribal Lands and Environment Forum from August 15-18, 2016, where 
several tribal leaders expressed interest in the proposed rulemaking. 
The EPA also intends to hold a second round of consultation and 
coordination with tribal officials aligned with the public comment 
period for the proposed rule. EPA also intends to summarize comments 
and input received from both consultation and coordination periods with 
the final action.

G. Executive Order 13045: Protection of Children From Environmental 
Health and Safety Risks

    This action is not subject to Executive Order 13045 because EPA 
does not expect the environmental health risks or safety risks 
addressed by this action present a disproportionate risk to children. 
EPA expects that by adjusting the amount of financial responsibility to 
account for environmentally safer practices, the proposed rule would 
provide an incentive for implementation of sound practices at hardrock 
mining facilities and thereby decrease the need for future CERCLA 
actions. To the extent that environmental conditions surrounding mine 
sites improve following this rule, the children living in close 
proximity to mining facilities are likely to benefit. To assess the 
proportional distribution of the benefits of the proposed rule, EPA 
prepared an analysis of the demographic characteristics of populations 
surrounding hardrock mining site to identify the number and proportion 
of children living in close proximity to these sites. This analysis is 
presented in the Regulatory Impact Analysis (RIA), which is available 
in the docket.
    As discussed in the RIA, of the 775,000 people living within one 
mile of regulated facilities, approximately 188,000 or 24.3 percent, 
are under the age of 18. Nationwide, approximately 23.5 percent of the 
population is under the age of 18. To the extent that environmental 
conditions surrounding mine and mineral processor sites improve 
following this rule, the children living in close proximity to mining 
facilities are likely to benefit.

H. Executive Order 13211: Actions That Significantly Affect Energy 
Supply, Distribution, or Use

    This action is not a ``significant energy action'' because it is 
not likely to have a significant adverse effect on the supply, 
distribution or use of energy. This proposed rule would establish 
financial responsibility requirements under CERCLA designed to assure 
that owners and operators of facilities provide funds to address CERCLA 
liabilities at their sites, and to create incentives for sound 
practices that will minimize the likelihood of a need for a future 
CERCLA response. The proposed rule is not expected to impact energy 
production, distribution, or consumption.

I. National Technology Transfer and Advancement Act (NTTAA)

    This rulemaking does not involve technical standards.

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    EPA believes that this action does not have disproportionately high 
and adverse human health or environmental effects on minority 
populations, low-income populations and/or indigenous peoples, as 
specified in Executive Order 12898 (59 FR 7629, February 16, 1994).
    The documentation for this decision is contained in the Regulatory 
Impact Analysis (RIA). A copy of the RIA can be found in the docket for 
this rule. As discussed in Section 8 of the RIA, EPA examined whether 
the actions being proposed under the proposed rules present 
environmental justice concerns for communities surrounding mining 
facilities.
    EPA conducted an analysis of demographic characteristics of 
populations near hardrock mining and mineral processing facilities to 
determine whether the benefits of the proposed rule are differentially 
distributed. For this analysis, the agency analyzed national census 
population data within one-mile, five-mile, 15-mile, and 25-mile radii 
from mining facilities, and compared them with the demographic 
characteristics of states and national levels. Of the 221 hardrock 
mining/mineral processing facilities in the RIA universe, the total 
population within one mile of these sites is approximately 775,000 
people, of which 260,000 (34 percent), belong to a minority group. In 
addition, 157,000 (21 percent) live below the Federal Poverty Level. 
Both of these proportions are roughly comparable to nationwide 
benchmarks. Nationally, 37 percent of the population belongs to a 
minority group, and 16 percent of the population lives below the 
Federal Poverty Level. The analysis also compared the concentrations of 
minority groups and people living in poverty to state averages. The 
results show that within one-mile radius, 230 (36 percent) census block 
groups exceeded the statewide minority average, and 356 (56 percent) 
census block groups exceeded their respective statewide poverty levels.
    EPA expects this proposed rule will, when made final, increase the 
likelihood that owners and operators will provide funds necessary to 
address the CERCLA liabilities at their facilities, thus preventing 
owners or operators from shifting the burden of cleanup to

[[Page 3486]]

other parties, including the taxpayer. In addition, EPA expects that by 
adjusting the amount of financial responsibility to account for 
environmentally safer practices, the proposed rule would provide an 
incentive for implementation of sound practices at hardrock mining 
facilities and thereby decrease the need for future CERCLA actions. 
Groups within the proximity of hardrock mining sites are expected to 
benefit from the environmental performance improvements, and other 
benefits of the rule. This analysis shows that the percentage of 
minority and low-income populations in and near hardrock mining sites 
are proportionally represented (in some case higher) compared to 
national and state averages. This analysis indicates that minority and 
low-income communities are expected to benefit as much as any other 
group under the proposed rule.

List of Subjects in 40 CFR Part 320

    Environmental protection, Financial responsibility, Hardrock 
mining, Hazardous substances.

    Dated: December 1, 2016.
Gina McCarthy,
Administrator.

    For the reasons set forth in the preamble, title 40, chapter I of 
the Code of Federal Regulations is proposed to be amended by adding 
part 320 to read as follows:

PART 320--FINANCIAL RESPONSIBILITY REQUIREMENTS FOR CERCLA 
LIABILITIES

Subpart A--General Facility Requirements
Sec.
320.1 Purpose, scope.
320.2 Applicability.
320.3 Definitions and usage.
320.4 Availability of information; confidential business 
information.
320.5 Notification requirement.
320.6 General information submission requirements.
320.7 Requirement for electronic submission of information.
320.8 Recordkeeping requirements.
320.9 Requirements for public notice.
Subpart B--General Financial Responsibility Requirements
320.20 Applicable financial responsibility amounts.
320.21 Procedures for establishing financial responsibility.
320.22 Maintenance of instruments.
320.23 Incapacity of owners or operators, corporate guarantors, or 
financial institutions.
320.24 Notification of claims brought against owners, operators, or 
guarantors.
320.25 Facility transfer.
320.26 Notification of cessation of operations.
320.27 Release from financial responsibility requirements.
Subpart C--Available Financial Responsibility Instruments.
320.40 Letter of credit.
320.41 Surety bond.
320.42 Insurance.
320.43 [Reserved] (Option 1--Preferred Option).
320.43 Financial test (Option 2).
320.44 [Reserved] (Option 1--Preferred Option).
320.44 Corporate guarantee (Option 2).
320.45 Trust fund.
320.46 Use of multiple financial responsibility instruments.
320.47 Use of a financial instrument for multiple facilities.
320.48 Consolidated form and multiple owners and/or operators.
320.49 [Reserved]
320.50 Wording of the Instruments.
Subpart D--G [Reserved]
Subpart H--Hardrock Mining Facilities
320.60 Applicability
320.61 Timeframes for Compliance
320.62 Definitions
320.63 Determining the Financial Responsibility Amount
320.64 Information Submission and Recordkeeping Requirements
320.65 Third-party Certification.

Subpart A--General Facility Requirements


Sec.  320.1  Purpose and Scope.

    (a) The purpose of this part is to establish requirements under 
Sec.  108(b) of the Comprehensive Environmental Response, Compensation, 
and Liability Act (CERCLA), 42, U.S.C. 9601, et seq., for current 
owners and operators of non-transportation-related facilities to 
establish and maintain evidence of financial responsibility.
    (b) The amount of financial responsibility under this part must be 
consistent with the degree and duration of risk associated with the 
production, transportation, treatment, storage, or disposal of 
hazardous substances at their facilities, and must be available to pay 
for the response costs, health assessment costs, and natural resource 
damages under CERCLA for which the owner and operator are responsible.


Sec.  320.2  Applicability.

    (a) The regulations of this part apply to current owners and 
operators of facilities that are authorized to operate, or should be 
authorized to operate, on or after the effective date of the rule under 
which they become subject to this part. The Federal Government and 
States are exempt from the requirements of this part.
    (b) Owners and operators of all facilities within the classes 
identified in Table A-1 must comply with the applicable requirements of 
subparts A through C of this part.
    (c) Owners and operators of facilities identified in Table A-1 of 
this section must also comply with the applicable class-specific 
requirements as specified in Table A-1 of this section.
    (d) The requirements of this part apply until EPA releases the 
owner and operator from the obligation to maintain financial 
responsibility for its facility in accordance with Sec.  300.25 or 
Sec.  300.27.

                                                    Table A-1
----------------------------------------------------------------------------------------------------------------
         Facility class(es)                  Effective date            Applicable class-specific  requirements
----------------------------------------------------------------------------------------------------------------
Owners and operators of hardrock      [Date 30 days after date of   Subpart H.
 mining facilities identified in       publication of Final Rule].
 Sec.   320.60(a).
----------------------------------------------------------------------------------------------------------------

Sec.  320.3  Definitions and usage.

    (a) As used in this part, words in the singular include the plural; 
words in the plural include the singular; and words in the masculine 
gender also include the feminine and neuter genders as the case may 
require.
    (b) When used in this part, the following terms have the meanings 
given in this paragraph. Terms not defined in this part have the 
meaning given by CERCLA or the national Oil and Hazardous Substances 
Pollution Contingency Plan, 40 CFR part 300.
    Administrator means the EPA Administrator, or designee thereof.
    Authoriz(-ed)(-ation) to operate means the owner or operator has 
obtained permission through a permit, license, or other legally 
applicable form of permission to conduct the activities under Federal, 
state, or local law, and is irrespective of the level of activity at 
the facility that causes the owner and operator to be subject to this 
part.
    Current Sec.  108(b) financial responsibility amount means the most

[[Page 3487]]

recent amount required to be prepared under Sec.  320.20 of this part.
    Electronic financial responsibility reporting compliance date means 
the date that EPA announces in the Federal Register, on or after which 
owners and operators are required to file submissions required by this 
part in an EPA electronic system, or its successor system.
    Enforceable Document means a document issued under a Federal, 
state, tribal, or local governmental authority, to which the owner or 
operator is currently subject, and the requirements of which can be 
enforced against the owner or operator by the issuing authority. An 
enforceable document can be a permit, a settlement, an order, or any 
other document that meets the above criteria.
    Parent Corporation means a corporation that directly owns at least 
50 percent of the voting stock of the corporation which is the facility 
owner or operator; latter corporation is deemed a subsidiary of the 
parent corporation.
    Substantial Business Relationship means the extent of a business 
relationship necessary under applicable State law to make a guarantee 
contract issued incident to that relationship valid and enforceable. A 
``substantial business relationship'' must arise from a pattern of 
recent or ongoing business transactions, in addition to the guarantee 
itself, such that a currently existing business relationship between 
the guarantor and the owner or operator is demonstrated to the 
satisfaction of the Administrator.


Sec.  320.4  Availability of information; confidential business 
information.

    (a) Any information provided to EPA under this part, or required to 
be provided to the public by the owner or operator under this part, 
will be made available to the public to the extent and in the manner 
authorized by the Freedom of Information Act, 5 USC 552, section 104 of 
CERCLA, and EPA regulations implementing the Freedom of Information Act 
and section 104 of CERCLA, as applicable.
    (b) Any person who submits information to EPA in accordance with 
this part, or who is required to provide information to the public 
under this part, may assert a claim of business confidentiality 
covering part or all of that information by following the procedures 
set forth in Sec.  2.203(b). Information covered by such a claim will 
be disclosed by EPA, or will be required to be released by the owner or 
operator only to the extent, and by means of the procedures, set forth 
in part 2, subpart B, of this chapter. However, if no such claim 
accompanies the information when it is received by EPA, it may be made 
available to the public without further notice to the person submitting 
it.
    (c) Assertions of claims of business confidentiality will not be 
considered by EPA if the information is covered by a Class 
Determination of non-confidentiality.


Sec.  320.5  Notification requirement.

    (a) (1) Each owner and operator that is authorized to operate or 
should be authorized to operate on the effective date of the final rule 
under which the facility becomes subject to the requirements of this 
part must complete the Notification Form in Appendix A of this part, 
providing all information requested, and submit it to the Administrator 
within thirty days of the effective date of that regulation.
    (2) Owners or operators that become authorized to operate after the 
effective date of the final rule that makes their facility subject to 
the requirements of this part must submit the notification form 
required in paragraph (a)(1) of this section prior to beginning 
operations.
    (b) Within thirty days of receiving notification EPA will:
    (1) Provide the owner or operator acknowledgement of receipt of the 
notification, and
    (2) If the facility has not received one, assign and provide an EPA 
Identification number to the facility.
    (c) Owners and operators must notify EPA of changes at their 
facilities by updating their Notification Form, and/or other documents 
required under the applicable class-specific subpart, and resubmitting 
it to EPA within thirty days of the change.


Sec.  320.6  General information submission requirements.

    Owners and operators must submit information as required by this 
part to support financial responsibility requirements including:
    (a) The notification form required in Sec.  320.5;
    (b) Information required under the public involvement requirements 
of Sec.  320.9;
    (c) Notifications required under subpart B of this part;
    (d) Demonstration of financial responsibility as required under 
subpart C of this part; and
    (e) Information required under class-specific requirements 
identified in Table 1 of Sec.  320.1(f) as applicable to the facility.


Sec.  320.7  Requirement for electronic submission of information.

    (a) Information submitted to the Administrator under the 
requirements of this part must be submitted in paper format until the 
electronic reporting compliance date, defined in Sec.  320.3.
    (b) Electronic submissions that are obtained, completed, and 
transmitted in accordance with this section, and used in accordance 
with this section, are the legal equivalent of paper submissions 
bearing handwritten signatures, and satisfy for all purposes any 
requirement in these regulations to obtain, complete, sign, provide, 
use, or retain such information.
    (c) Where an electronic signature is required, such signature must 
be a legally valid and enforceable signature under applicable EPA and 
other Federal requirements pertaining to electronic signatures.
    (d) The Administrator may waive the requirement for electronic 
submission under the following conditions:
    (1) General waiver. The Administrator may grant a general waiver 
for a renewable period of one year to owners or operators that cannot 
comply with the requirement for electronic submission. The owner or 
operator must submit a written request for a general waiver to the 
Administrator at least thirty days in advance of the date the first 
submission that would be subject to the requested general waiver is due 
to EPA or, for a renewal, thirty days in advance of the expiration of 
the waiver. The request for a general waiver must describe the 
conditions(s) in paragraphs (i) through (iv) that prevent electronic 
submission of information. The Administrator may grant a general waiver 
upon a finding that:
    (i) The owner or operator is unable to gain access to a system 
allowing electronic reporting because the owner or operator is located 
in an area with insufficient broadband access;
    (ii) Obtaining a system to support electronic submission would 
impose an undue cost burden on the owner or operator,
    (iii) The owner or operator's electronic system is incompatible 
with the Agency's, or
    (iv) Religious practices of the owner or operator prohibit the use 
of necessary technologies.
    (2) Emergency waiver. The Administrator may grant a non-renewable 
emergency waiver for an individual submission required under this part 
to an owner or operator that would not is unable to comply with the 
requirement for electronic submission. The owner or operator must 
submit a written request for an emergency waiver

[[Page 3488]]

within ten days of the date the submission was due to EPA. The request 
for an emergency waiver must describe the condition(s) in paragraphs 
(i) through (iii) that prevented the electronic submission of 
information and must be accompanied by a paper copy of the information 
due. The Administrator may grant an emergency waiver upon a finding 
that one of the following events occurred that prevented the electronic 
submission of information by the owner or operator:
    (i) A large-scale national disaster (e.g., hurricane);
    (ii) A prolonged electronic reporting system outage; or
    (iii) A prolonged failure of the owner's and operator's computer 
system.


Sec.  320.8  Recordkeeping requirements.

    (a) The owner or operator must develop a facility record that 
contains information related to its compliance with the financial 
responsibility requirements under this part.
    (b) The facility record must include, at a minimum, the information 
that must be submitted to EPA under Sec.  320.6(a), as applicable, and 
all notifications received from EPA related to the financial 
responsibility obligations of the facility.


Sec.  320.9  Requirements for public notice.

[PROPOSED REGULATORY TEXT FOR APPROACH 1]
    (a) Within sixty days of the date it becomes subject to the 
requirements of this part, the owner or operator must establish and 
maintain a website titled ``CERCLA Section 108(b) Financial 
Responsibility Information' and submit to EPA the URL of a location on 
its company Web site where it will make information available to the 
public.
    (b) Within thirty days of receiving the URL, EPA will post on its 
website notice to the public that the facility is subject to Sec.  
108(b) requirements, and provide the public the facility name, EPA ID, 
and the URL.
    (c) Beginning ninety days after the effective date of the final 
rule under which the facility becomes subject to the requirements of 
this part, the owner or operator must make information available to the 
public on its company website at the URL provided to EPA. The initial 
posting must include at least the information required under paragraph 
(d)(1).
    (d) The information on the website must include, at a minimum:
    (1) The current name and contact information for a person that will 
provide the public information about the facility's financial 
responsibility requirement under CERCLA Sec.  108(b);
    (2) Information the owner or operator is required to submit, or has 
submitted, to EPA under this part so long as that information is not 
successfully claimed as Confidential Business Information under 40 CFR 
2.203(b).
    (3) Notifications from EPA to the owner or operator.
    (e) The owner or operator must assure that the information is 
readily available to the public by placing it in a prominent position 
on the company's website, and by assuring that public access is not 
obstructed by complex or overly burdensome access processes, passwords, 
or other information requirements.
    (f) The owner or operator must update the website with new 
information including information submitted to EPA in compliance with 
this part. Information submitted to EPA must be posted on the owner or 
operator's website within thirty days of submitting it to EPA.
[PROPOSED REGULATORY TEXT FOR APPROACH 2]
    (a) EPA will provide the public information related to facilities 
subject to financial responsibility requirements under this part. That 
information may include, at a minimum:
    (1) The current name and contact information for a person that can 
provide the public information about the facility's financial 
responsibility requirement under this part;
    (2) Information the owner or operator is required to submit, or has 
submitted, to EPA under this part so long as that information is not 
successfully claimed as Confidential Business Information under 40 CFR 
2.203(b).
    (3) Notifications from EPA to the owner or operator.

Subpart B--General Financial Responsibility Requirements


Sec.  320.20  Applicable financial responsibility amounts.

    Owners and operators must calculate a current amount of financial 
responsibility at their facilities in accordance with the requirements 
of this section, and in accordance with applicable class-specific 
subparts identified in Sec.  320.1(f) Table 1.


Sec.  320.21  Procedures for establishing financial responsibility.

    Owners and operators must submit evidence of financial 
responsibility and supporting information to EPA in accordance with the 
requirements of this section, and in accordance with applicable class-
specific subparts identified in Sec.  320.2 Table 1.


Sec.  320.22  Maintenance of instruments.

    (a) An owner or operator must recalculate the financial 
responsibility level three years after the date the owner or operator 
is first required to submit the full amount of financial responsibility 
under Sec.  320.61, every three years thereafter, and within sixty days 
after every successful claim against a CERCLA Sec.  108(b) financial 
responsibility instrument. The recalculation must use the most current 
facility information available. The owner or operator must submit the 
revised financial responsibility amount to EPA, along with supporting 
documentation.
    (b) If the resulting amount of financial responsibility required is 
greater than the amount of financial responsibility provided by the 
current CERCLA Sec.  108(b) financial responsibility instrument(s), the 
owner or operator must submit evidence of the increased value of the 
instrument(s) within sixty days of the recalculation.
    (c) If the resulting amount of financial responsibility required is 
less than the amount of financial responsibility provided by the 
current CERCLA Sec.  108(b) financial responsibility instrument(s), the 
owner and operator may submit a written request to the Administrator to 
lower the required financial responsibility amount at the facility. The 
request must include updated information to support the revised 
financial responsibility amount. The amount of financial responsibility 
required at the facility may be reduced to the recalculated amount only 
with written approval by the Administrator.


Sec.  320.23  Incapacity of owners or operators, corporate guarantors, 
or financial institutions.

[PROPOSED REGULATORY TEXT FOR OPTION 1 (Preferred Option)]
    (a) An owner or operator must notify the Regional Administrator by 
certified mail of the commencement of a voluntary or involuntary 
proceeding under Title 11 (Bankruptcy), U.S. Code, naming the owner or 
operator as debtor, within ten days after commencement of the 
proceeding.
    (b) An owner or operator who demonstrates financial responsibility 
under this part by obtaining a trust fund, surety bond, letter of 
credit, or insurance policy will be deemed to be without the required 
financial responsibility in the event of bankruptcy of the trustee or 
issuing institution, or a suspension or revocation of the authority of 
the trustee

[[Page 3489]]

institution to act as trustee or of the institution issuing the surety 
bond, letter of credit, or insurance policy to issue such instruments. 
The owner or operator must provide other evidence of financial 
responsibility within sixty days after such an event.
[PROPOSED REGULATORY TEXT FOR OPTION 2]
    (a) An owner or operator must notify the Administrator by certified 
mail of the commencement of a voluntary or involuntary proceeding under 
Title 11 (Bankruptcy), U.S. Code, naming the owner or operator as 
debtor, within ten days after commencement of the proceeding. A 
corporate guarantor of a corporate guarantee as specified in Sec.  
320.44, if named as a debtor, must make such a notification, as 
required under the terms of the corporate guarantee (Sec.  320.50(f)).
    (b) An owner or operator who demonstrates financial responsibility 
under this part by obtaining a trust fund, surety bond, letter of 
credit, or insurance policy will be deemed to be without the required 
financial responsibility in the event of bankruptcy of the trustee or 
issuing institution, or a suspension or revocation of the authority of 
the trustee institution to act as trustee or of the institution issuing 
the surety bond, letter of credit, or insurance policy to issue such 
instruments. The owner or operator must provide other evidence of 
financial responsibility within sixty days after such an event.


Sec.  320.24  Notification of claims brought against owners, operators, 
or guarantors.

    An owner or operator subject to this part must notify the 
Administrator by certified mail of the filing of any claim pursuant to 
CERCLA naming the owner or operator or the owner or operator's 
guarantor, as defendant, within ten days after commencement of the 
proceeding. Such notification shall include a copy of any papers filed 
by the claimant with a court, or other information allowing the 
Administrator to identify the court, case name and number, and parties.


Sec.  320.25  Facility transfer.

    (a) If a facility, or a portion of a facility, subject to the 
requirements of this part is sold or otherwise transferred to another 
owner, or if the operation of a facility is transferred to another 
operator, the previous owner or operator must maintain financial 
responsibility for the facility, or transferred portion of the 
facility, in accordance with this part, until the Administrator 
releases the previous owner or operator from the obligation to maintain 
financial responsibility under paragraph (b) of this section.
    (b) Any new owner or operator of a facility must provide evidence 
of financial responsibility as required in this part for the facility 
or portion of the facility prior to assuming ownership or operation. 
Upon the new owner or operator's demonstration of financial 
responsibility in accordance with this part, the Administrator will 
provide notice to the prior owner and operator that they are no longer 
required to provide evidence of financial responsibility in accordance 
with this part.


Sec.  320.26  Notification of cessation of operations.

    The owner or operator must notify the Administrator thirty days 
prior to:
    (1) The date the facility is no longer authorized to operate, or
    (2) The date the owner or operator is required under another 
applicable regulatory program to notify the relevant regulatory 
authority that the facility is ceasing operations, whichever is 
earlier.


Sec.  320.27  Release from financial responsibility requirements.

    (a) The owner or operator may petition to be released from its 
obligations under this part by submitting a request to the 
Administrator, which must include evidence demonstrating that the 
degree and duration of risk associated with the production, 
transportation, treatment, storage and disposal of hazardous substances 
is minimal. Upon receiving such request, the Administrator will 
evaluate facility information, including the information submitted by 
the owner or operator, regarding the degree and duration of risk 
associated with the production, transportation, treatment, storage, and 
disposal of hazardous substances at the facility, and make a 
determination regarding the owner's or operator's request.
    (1) If the Administrator determines that the degree and duration of 
risk associated with the production, transportation, treatment, 
storage, and disposal of hazardous substances at the facility is 
minimal, and that the facility should therefore be released from the 
requirements of this part, the Administrator will post the draft 
decision on the EPA website, provide the public opportunity to comment 
on the decision, and post the Agency's final decision, and response to 
comments received, on the EPA website.
    (2) If the Administrator determines (either initially or following 
consideration of public comment during the procedures described in 
paragraph (a)(1) of this section), that the degree and duration of risk 
associated with the production, transportation, treatment, storage, and 
disposal of hazardous substances is not minimal, the Administrator will 
not release the owner or operator from the requirement to maintain 
financial responsibility in accordance with this part. The 
Administrator will provide notice of the Agency's final decision, and 
response to comments received, and will provide the owner or operator a 
detailed written statement explaining the decision.
    (3) An owner or operator that petitions the Administrator under the 
procedures in this section and does not obtain a release from 
requirements under this part may submit a petition for a renewed 
determination under this section only if the owner or operator can 
provide additional, relevant information, not previously considered by 
the Administrator, demonstrating that there is minimal risk associated 
with the production, transportation, treatment, storage, and disposal 
of hazardous substances at the facility.
    (b) [Reserved].

Subpart C--Available Financial Responsibility Instruments

[PROPOSED REGULATORY TEXT FOR OPTION 1 (Preferred Option)]
    Owners and operators may demonstrate financial responsibility using 
one or a combination of the financial responsibility instruments 
provide in Sec. Sec.  320.40 through 320.43.
[PROPOSED REGULATORY TEXT FOR OPTION 2]
    Owners and operators may demonstrate financial responsibility using 
one or a combination of the financial responsibility instruments 
provide in Sec. Sec.  320.40 through 320.45.


Sec.  320.40  Letter of Credit.

    (a) An owner or operator may satisfy the requirements of this part 
by obtaining an irrevocable standby letter of credit which conforms to 
the requirements of this section and is issued by an institution which 
has the authority to issue letters of credit and whose letter of credit 
operations are regulated and examined by a Federal or state agency.
    (b) The wording of the letter of credit must be identical to the 
wording specified in Sec.  320.50(b). The letter of credit must either 
be issued in favor of:
    (1) The trustee of a trust fund established by an agreement worded 
identical to the language in Sec.  320.50(a) and must authorize the 
trustee to make draws on the letter of credit to

[[Page 3490]]

administer the claims process for CERCLA response costs, health 
assessment costs, and natural resource damages in accordance with the 
terms of the trust agreement; or
    (2) Any and all third-party CERCLA claimants and must provide for 
payment directly to claimants for CERCLA response costs, health 
assessment costs, and natural resource damages.
    (c) If the letter of credit is issued in favor of the trustee of a 
trust fund, the owner or operator must submit a certified copy of the 
letter of credit to the Administrator and submit the original letter of 
credit to the trustee authorized to make draws on the letter of credit. 
An acknowledgment of the receipt of the letter of credit from the 
trustee must be submitted by the owner or operator to the 
Administrator.
    (d) If the letter of credit is issued in the favor of any and all 
third-party CERCLA claimants, the owner or operator must submit the 
originally signed letter of credit to the Administrator.
    (e) An owner or operator who uses a letter of credit to satisfy the 
requirements of this part must also establish a trust fund and update 
Schedule A of the trust agreement within sixty days after a change in 
the amount of CERCLA Sec.  108(b) financial responsibility. This trust 
fund must meet the requirements of the trust fund specified in Sec.  
320.45, except that:
    (1) An originally signed duplicate of the trust agreement must be 
submitted to the Administrator with the original or the certified copy 
of the letter of credit; and
    (2) Unless the trust fund is funded pursuant to the requirements of 
this part, including by holding the letter of credit as specified in 
this section, the following are not required by these regulations:
    (i) Payments into the trust fund as specified in Sec.  320.45;
    (ii) Annual valuations as required by the trust agreement; and
    (iii) Notices of payment as required by the trust agreement.
    (f) The letter of credit must be irrevocable and issued for a 
period of at least one year. The letter of credit must provide that the 
expiration date will be automatically extended for a period of at least 
one year unless, at least 120 days before the current expiration date, 
the issuing institution notifies both the owner or operator, the trust 
fund trustee (if the letter is issued in favor of the trustee), and the 
Administrator by certified mail of a decision not to extend the 
expiration date. Under the terms of the letter of credit, the 120 days 
will begin on the date when the owner or operator, the trust fund 
trustee (if applicable), and the Administrator have received the 
notice, as evidenced by the return receipts. If the issuing institution 
timely notifies the owner or operator, the trustee, and the 
Administrator, and the owner or operator fails to submit and obtain the 
Administrator's approval of alternate financial responsibility within 
ninety days of the receipt of such notice, the Administrator is 
authorized to draw on the letter of credit as specified in paragraphs 
(k) and (l) of this section.
    (g) The letter of credit must be issued in an amount at least equal 
to the current required CERCLA Sec.  108(b) financial responsibility 
amount, except as provided in Sec.  320.46.
    (h) Whenever the required amount of CERCLA Sec.  108(b) financial 
responsibility increases to an amount greater than the credit, the 
owner or operator, within sixty days after the increase, must either 
cause the credit to be increased to an amount at least equal to the 
CERCLA Sec.  108(b) financial responsibility amount and submit evidence 
of such increase to the Administrator and the trust fund trustee (if 
the letter is issued in favor of the trustee), or obtain other 
financial responsibility as specified in this part to cover the 
increase. Whenever the required amount of CERCLA Sec.  108(b) financial 
responsibility decreases, the credit may be reduced to the amount of 
the current required CERCLA Sec.  108(b) financial responsibility 
amount following written approval by the Administrator.
    (i) If the letter of credit is issued in favor of the trust fund 
trustee, parties may make claims against the trust fund in accordance 
with the terms of the trust agreement in order to receive payment from 
the letter of credit.
    (j) If the letter of credit provides for direct payment, claimants 
may make claims as follows:
    (1) Any party that obtains a final judgment from a Federal court 
awarding CERCLA response costs, health assessment costs, and/or natural 
resource damages associated with the facility against any of the 
current owners or operators may make a claim against the letter of 
credit. The party may only make a claim after the thirtieth day after 
the judgement and if they have not recovered or been paid the funds 
from any other source.
    (2) The Administrator or other authorized Federal agency may make a 
claim against the letter of credit for payment if payment has not been 
made as required by a CERCLA settlement associated with the facility 
between a current owner or operator and EPA or another Federal agency.
    (3) The Administrator or another authorized Federal agency may make 
a claim against the letter of credit requesting payment into a trust 
fund established pursuant to a CERCLA unilateral administrative order 
issued to a current owner or operator if performance at the facility as 
required by the order has not occurred. The Administrator or another 
Federal agency may only make the claim against the letter of credit if 
the owner or operator has provided a written statement that the letter 
of credit may be used to assure the performance of the work required in 
the order.
    (k) If the owner or operator does not establish alternate financial 
responsibility as specified in this part and obtain written approval of 
such alternate financial responsibility from the Administrator within 
ninety days after receipt by the owner or operator, the trust fund 
trustee (if the letter is issued in favor of the trustee), and the 
Administrator of a notice from the issuing institution that it has 
decided not to extend the letter of credit beyond the current 
expiration date:
    (1) The Administrator will draw on the letter of credit if the 
letter of credit is issued in favor of any and all third party CERCLA 
claimants; or
    (2) If the letter of credit is issued in favor of the trust fund 
trustee, the Administrator will inform the trustee of the trust fund 
that the owner or operator did not establish alternate financial 
responsibility and obtain written approval of such alternate financial 
responsibility within ninety days. In accordance with the terms of the 
trust agreement, this notice will prompt the trustee to draw on the 
letter of credit and deposit any unused portion of the letter of credit 
into the trust fund.
    (l) The Administrator may delay the drawing or the notification to 
the trustee of the trust fund that the owner or operator did not 
establish alternate financial responsibility and obtain written 
approval of such alternate financial responsibility within ninety days 
if the issuing institution grants an extension of the term of the 
credit. During the last thirty days of any such extension the 
Administrator will draw on the letter of credit or notify the trustee 
of the trust fund that the owner or operator did not establish 
alternate financial responsibility and obtain written approval of such 
alternate financial responsibility if the owner or operator has still 
failed to provide alternate financial responsibility as specified in 
this section and obtain

[[Page 3491]]

written approval of such financial responsibility from the 
Administrator.
    (m) The Administrator will return the letter of credit to the 
issuing institution for termination or agree to the termination of the 
trust holding the letter of credit when:
    (1) An owner or operator substitutes alternate financial assurance 
as specified in this part; or,
    (2) The Administrator releases the owner or operator from the 
requirements of this part in accordance with Sec.  320.27.


Sec.  320.41   Surety bond.

    (a) An owner or operator may satisfy the requirements of this part 
by obtaining a surety bond which conforms to the requirements of this 
paragraph and submitting the originally signed bond to the 
Administrator.
    (b) The surety company issuing the bond must, at a minimum, be 
among those listed as acceptable sureties on Federal bonds in Circular 
570 of the U.S. Department of the Treasury.
    (c) The wording of the surety bond must be identical to the wording 
specified in Sec.  320.50(c).
    (d) A surety bond may be used to satisfy the requirements of this 
section only if the Attorneys General or Insurance Commissioners of:
    (1) The state in which the surety is incorporated, and
    (2) Each state in which a facility covered by the surety bond is 
located have submitted a written statement to EPA that a surety bond 
executed as described in this section and Sec.  320.50(c) of this part 
is a legally valid and enforceable obligation in that state.
    (e) The surety bond may be issued by multiple sureties provided 
that each is liable for its individual vertical percentage share of the 
total penal sum of the bond.
    (f) An owner or operator who uses a surety bond to satisfy the 
requirements of this part must also establish a standby trust fund and 
update Schedule A of the trust agreement within sixty days after a 
change in the amount of CERCLA Sec.  108(b) financial responsibility. 
This standby trust fund must meet the requirements specified in Sec.  
320.45, except that:
    (1) An originally signed duplicate of the trust agreement must be 
submitted to the Administrator with the surety bond; and
    (2) Until the standby trust fund is funded pursuant to the 
requirements of this section, the following are not required by these 
regulations:
    (i) Payments into the trust fund as specified in Sec.  320.45;
    (ii) Annual valuations as required by the trust agreement; and
    (iii) Notices of nonpayment as required by the trust agreement.
    (g) The surety bond must guarantee that the owner or operator will:
    (1) Make payments or ensure that payments are made for CERCLA 
response costs, health assessment costs, and/or natural resource 
damages associated with the facility as required in a final court 
judgment from a Federal court against any current owner or operator 
within thirty days to the party or parties obtaining the judgment;
    (2) Make payments or ensure payments are made as required in a 
CERCLA settlement associated with the facility between any of the 
current owners and operators at the facility and EPA or another Federal 
agency;
    (3) Perform or ensure the performance of the work required at the 
facility by a CERCLA unilateral administrative order issued to any of 
the current owners or operators by EPA or by another Federal agency for 
which the owner or operator provides a written statement allowing for 
the bond to assure performance of the work; and
    (4) Provide alternate financial responsibility as specified in this 
part or ensure that alternate financial responsibility as specified in 
this part is provided for facilities covered by the bond, and obtain 
the Administrator's written approval or ensure the Administrator's 
written approval is obtained of the financial responsibility provided, 
within ninety days after receipt by both the owner or operator and the 
Administrator of a notice of cancellation of the bond from the surety.
    (h) Under the terms of the surety bond, the surety will become 
liable on the bond obligation when the owner or operator fails to 
perform as guaranteed by the bond and must make payment in accordance 
with the direction of the claimant and the terms of the bond. Provided, 
however, the liability of the surety will be limited to the penal sum 
of the bond plus the amount of any investigation or legal defense fees 
incurred by the surety.
    (i) The penal sum of the bond must be in an amount at least equal 
to the required current CERCLA Sec.  108(b) financial responsibility 
amount, except as provided in Sec.  320.46.
    (j) Whenever the required amount of CERCLA Sec.  108(b) financial 
responsibility increases to an amount greater than the penal sum, the 
owner or operator, within sixty days after the increase, must either 
cause the penal sum to be increased to an amount at least equal to the 
CERCLA Sec.  108(b) financial responsibility amount and submit evidence 
of such increase to the Administrator, or obtain other financial 
assurance as specified in this section to cover the increase. Whenever 
the required amount of CERCLA Sec.  108(b) financial responsibility 
decreases, the penal sum may be reduced to the amount of the current 
required CERCLA Sec.  108(b) financial responsibility amount following 
written approval by the Administrator.
    (k) Under the terms of the bond, the surety may cancel the bond by 
sending notice of cancellation by certified mail to the owner or 
operator and to the Administrator. Cancellation may not occur, however, 
during the 120 days beginning on the date of receipt of the notice of 
cancellation by both the owner or operator and the Administrator, as 
evidenced by the return receipts.
    (l) The owner or operator may terminate the bond if the 
Administrator has given prior written authorization based on his 
receipt of evidence of alternate financial responsibility as specified 
in this part or the Administrator releases the owner or operator from 
the requirements of this part in accordance with Sec.  320.27.


Sec.  320.42  Insurance.

    (a) An owner or operator may satisfy the requirements of this part 
by obtaining insurance for CERCLA response costs, health assessment 
costs, and natural resource damages that conforms to the requirements 
of this section. Each insurance policy must be amended by the 
attachment of a CERCLA Sec.  108(b) endorsement as worded in Sec.  
320.50(d).
    (b) At a minimum, the insurer must be licensed to transact the 
business of insurance, or eligible to provide insurance as an excess or 
surplus lines insurer, in one or more states.
    (c) The owner or operator must submit a signed duplicate original 
of the CERCLA Sec.  108(b) financial responsibility endorsement to the 
Administrator, or regional delegees of the Administrator as applicable 
if the endorsement covers facilities located in multiple regions. The 
endorsement must provide coverage effective when required by the 
compliance schedule in Sec.  320.2.
    (d) The owner or operator may obtain insurance from up to four 
insurers to demonstrate CERCLA Sec.  108(b) financial responsibility. 
If the owner operator obtained insurance from multiple insurers, an 
endorsement from each insurer must be submitted and must provide that a 
claimant may make a claim against each of the insurers providing 
evidence of financial responsibility for the insurer's proportional 
share of the CERCLA

[[Page 3492]]

Sec.  108(b) financial responsibility up to the face value of the 
policy.
    (e) The insurance policy must provide coverage for third-party 
CERCLA claims against all current owners and operators at the facility 
as required by this part.
    (f) An owner or operator who uses insurance to satisfy the 
requirements of this part must also establish a standby trust fund and 
update Schedule A of the trust agreement within sixty days after a 
change in the amount of CERCLA Sec.  108(b) financial responsibility. 
This standby trust fund must meet the requirements of the trust fund 
specified in Sec.  320.45, except that:
    (1) An originally signed duplicate of the trust agreement must be 
submitted to the Administrator with the endorsement; and
    (2) Unless the standby trust fund is funded pursuant to the 
requirements of this part, the following are not required by these 
regulations:
    (i) Payments into the trust fund as specified in Sec.  320.45;
    (ii) Annual valuations as required by the trust agreement; and
    (ii) Notices of payment as required by the trust agreement.
    (g) The insurance must provide first dollar coverage irrespective 
of any deductibles or self-insured retention both of which must be paid 
by the insurer with a right of reimbursement from the insured. The 
policy must be issued for a face amount at least equal to the required 
current CERCLA Sec.  108(b) financial responsibility amount, except as 
provided in Sec.  320.46, Sec.  320.1(g)(1) and paragraph (d) of this 
section. The term ``face amount'' means the total amount the insurer is 
obligated to pay under the policy as required by this section, without 
sub-limits except for those that specify facility specific amounts of 
coverage, exclusive of legal defense and investigation costs, and must 
be segregated and independent from other coverage provided for by the 
policy that is outside the scope of paragraphs (h), (i), (j), and (l) 
of this section. Actual payments by the insurer will not change the 
face amount, although the insurer's future liability will be lowered by 
the amount of the payments.
    (h) The policy must provide for the payment awarded in final court 
judgments from a Federal court against any of the current owners and 
operators for CERCLA response costs, health assessment costs, and/or 
natural resource damages associated with the facility to the party 
obtaining the judgment should such payment not be made within thirty 
days.
    (i) The policy must provide for payment as required by a CERCLA 
settlement associated with the facility between any of the current 
owners or operators at the facility and EPA or another Federal 
government agency should payment as required by the settlement not be 
made.
    (j) The policy must also provide for payment into a trust fund 
established pursuant to a CERCLA unilateral administrative order issued 
to any of the current owners or operators at the facility by EPA or 
another Federal agency in instances where performance at the facility 
as required by the order does not occur. The owner or operator must 
have provided a written statement allowing the insurance policy be used 
to assure performance of the work required in the order.
    (k) The endorsement must provide that cancellation, failure to 
renew, or any other termination of the insurance by the insurer will be 
effective only upon written notice to the owner operator and the 
Administrator by certified mail and only after the expiration of 120 
days beginning with the date of receipt of the notice by both the 
Administrator and the owner or operator, as evidenced by the return 
receipts. Such automatic renewal of the policy must, at a minimum, 
provide the insured with the option of renewal at the face amount of 
the expiring policy.
    (l) The endorsement must specify that in instances where the owner 
or operator fails to obtain alternate financial responsibility and 
obtain written approval of such alternate financial responsibility from 
the Administrator within ninety days after receipt by both the owner or 
operator and the Administrator of a notice from the insurer that it has 
decided to cancel, not renew or otherwise terminate the insurance 
policy the insurer will be liable up to the face value of the policy 
for payment into the standby trust following notification by the 
Administrator.
    (m) The endorsement must also provide that in the case of a release 
or threatened release of (a) hazardous substance(s) from a facility 
covered by the policy, the insurer acknowledges that any claim 
authorized by section 107 or section 111 of CERCLA may be asserted 
directly against the insurer as provided by CERCLA Sec.  108(c)(2). 
Further, the endorsement must state that the insurer consents to suit 
with respect to these claims subject to the limitations in section 
108(d) of CERCLA.
    (n) The owner or operator must maintain the insurance in full force 
and effect until the Administrator consents to termination of the 
insurance by the owner or operator as specified in paragraph (p) of 
this section.
    (o) Whenever the required CERCLA Sec.  108(b) financial 
responsibility amount increases to an amount greater than the face 
amount of the policy, the owner or operator, within sixty days after 
the increase, must either cause the face amount of the policy to be 
increased to an amount at least equal to the required amount and submit 
evidence of such increase to the Administrator, or obtain other 
financial responsibility as specified in this section to cover the 
increase. Whenever the amount of required CERCLA Sec.  108(b) financial 
responsibility decreases, the face amount may be reduced to the amount 
of the current required CERCLA Sec.  108(b) amount following written 
approval by the Administrator.
    (p) The Administrator will give written consent to the owner or 
operator that he or she may terminate the insurance policy when:
    (1) An owner or operator substitutes alternate financial 
responsibility as specified in this part; or
    (2) The Administrator releases the owner or operator from the 
requirements of this section in accordance with Sec.  320.27.
[PROPOSED REGULATORY TEXT FOR Sec.  320.43 OPTION 1 (Preferred Option)]


Sec.  320.43  [Reserved]

[PROPOSED REGULATORY TEXT FOR Sec.  320.43 OPTION 2]


Sec.  320.43  Financial Test.

    (a) An owner or operator may satisfy the requirements of this 
section, up to the amount specified in this section, by demonstrating 
that it passes a financial test.
    (1) To cover up to the full amount of financial responsibility 
required at its facility, the owner or operator must have:
    (i) At least one-long term credit rating of AAA, AA+, AA, AA-, A+, 
A or A- as issued by Standard and Poor's (S&P), or an equivalent as 
issued by another Nationally Recognized Statistical Rating Organization 
(NRSRO);
    (ii) Tangible net worth at least six times the amount of 
environmental obligations, including guarantees, covered by a financial 
test or guarantee, including this financial test and the corporate 
guarantee in Sec.  320.44; and
    (ii) Assets located in the United States amounting to either at 
least ninety percent of total assets; or at least six times the amount 
of financial responsibility obligations covered by a financial test or 
guarantee, including this financial test and the corporate guarantee in 
Sec.  320.44; and
    (2) To cover up to one half of the value of the financial 
responsibility

[[Page 3493]]

amount specified in this section, the owner or operator must have:
    (i) At least one-long term credit rating of BBB+ or BBB as issued 
by S&P, or the equivalents as issued by another NRSRO;
    (ii) Tangible net worth at least six times the financial 
responsibility obligations covered by a financial test or guarantee, 
including this financial test and the corporate guarantee in Sec.  
320.44; and
    (ii) Assets located in the United States amounting to either at 
least ninety percent of the firm's total assets or at least six times 
the amount of financial responsibility obligations covered by a 
financial test or guarantee, including this financial test and the 
corporate guarantee in Sec.  320.44.
    (b) To demonstrate that it satisfies this financial test, an owner 
or operator must post on its website, include in its facility record, 
and annually submit all of the following:
    (1) A letter to the Administrator signed by its chief financial 
officer (CFO) as worded in Sec.  320.50(e).
    (2) A special report of procedures and findings from an independent 
certified public accountant (CPA) resulting from an agreed-upon 
procedures engagement in accordance with the American Institute of 
Certified Public Accountants' (AICPA) Statement on Standards for 
Attestation Engagements (SSAE) and Related Attestation Interpretations, 
AT section 201--Agreed Upon Procedures Engagements, or any future 
superseding standards set by AICPA or any superseding body. The report 
would be required to describe the procedures performed and related 
findings as to whether or not there were differences or discrepancies 
identified between the financial information in the owner's or 
operator's CFO's letter and the owner's or operator's most recent 
audited annual financial statements. Where differences or discrepancies 
were found in the comparison of the owner's or operator's CFO's letter 
and the owner's or operator's most recent audited annual financial 
statements, the report of procedures and findings would reconcile any 
differences or discrepancies.
    (3) A copy of the owner's or operators' most recent independently 
audited annual financial statements prepared in accordance with an 
accounting standard deemed acceptable by the SEC.
    (c) An owner or operator of a facility must submit the three items 
specified in paragraph (b) of this section to the Administrator within 
sixty days of the date on which the CERCLA financial responsibility 
amount is first established.
    (d) After the initial submission of the items specified in 
paragraph (b) of this section, the owner or operator must send annually 
updated information to the Administrator within sixty days after the 
close of each succeeding fiscal year. This information must consist of 
the three items specified in paragraph (b) of this section.
    (e) An owner or operator who no longer meets the requirements of 
paragraph (a) of this section for any portion of his CERCLA financial 
responsibility requirement must send notice of the intent to establish 
an alternate financial responsibility instrument as specified in this 
section to the Administrator to cover the portion of the obligations 
that can no longer be covered by the financial test. This notice must 
be sent by certified mail within thirty days. The owner operator must 
then obtain alternate financial responsibility for the entire amount of 
required coverage as specified in paragraph (a) of this section. The 
owner or operator must submit evidence of coverage to the Administrator 
within 120 days of no longer meeting the requirements.
    (f) The Administrator may, based on a reasonable belief that the 
owner or operator may no longer meet the requirements of paragraph (a) 
of this section for any portion of the CERCLA financial responsibility 
obligation, require reports of financial condition at any time from the 
owner or operator in addition to those specified in paragraph (b) of 
this section. If the Administrator finds, on the basis of such reports 
or other information, that the owner or operator no longer meets the 
requirements of paragraph (a) of this section for any portion of the 
CERCLA liability financial responsibility obligation, the owner or 
operator must provide alternate financial responsibility as specified 
in this section within thirty days after notification of such a 
finding.
    (g) The Administrator may disallow use of this test on the basis of 
qualifications of opinion given in the independent certified public 
accountant's report in the agreed upon procedures engagement or the 
audited financial statements. An adverse opinion or disclaimer of 
opinion in either report will result in disallowance of the test. The 
Administrator will evaluate other qualifications on an individual 
basis. The owner or operator must provide alternate evidence of 
financial responsibility within thirty days after notification of the 
disallowance.
    (h) The owner or operator is no longer required to submit the items 
specified in paragraph (b) of this section when:
    (1) An owner or operator substitutes alternate financial 
responsibility as specified in this section; or
    (2) The Administrator releases the owner or operator from the 
requirements of this section in accordance with Sec.  320.27.
[PROPOSED REGULATORY TEXT FOR Sec.  320.44 OPTION 1 (Preferred Option)]


Sec.  320.44  [Reserved]

[PROPOSED REGULATORY TEXT FOR Sec.  320.44 OPTION 2]


Sec.  320.44  Corporate guarantee.

    (a) An owner or operator may meet the requirements of this part by 
obtaining a written guarantee, hereinafter referred to as 
``guarantee.''
    (b) The guarantor must be the direct or higher-tier parent 
corporation of the owner or operator, a firm whose parent corporation 
is also the parent corporation of the owner or operator, or a firm with 
a ``substantial business relationship'' with the owner or operator. The 
guarantor must meet the requirements for owners or operators in Sec.  
320.43 (a) through (g) and must comply with the terms of the guarantee.
    (c) The wording of the guarantee must be identical to the wording 
specified in the Corporate Guarantee at Sec.  320.50(f) of this part. A 
certified copy of the guarantee must accompany the items sent to the 
Administrator as specified in Sec.  320.43(b). One of these items must 
be the letter from the guarantor's chief financial officer. If the 
guarantor's parent corporation is also the parent corporation of the 
owner or operator, this letter must describe the value received in 
consideration of the guarantee. If the guarantor is a firm with a 
``substantial business relationship'' with the owner or operator, this 
letter must describe this ``substantial business relationship'' and the 
value received in consideration of the guarantee.
    (d) The terms of the guarantee must provide that:
    (1) In the event that payment for CERCLA response costs, health 
assessment costs, and/or natural resource damages associated with the 
facility required in a final court judgment from a Federal court 
against one of the current owners or operators is not made within 
thirty days, the guarantor shall do so;
    (2) In the event payment is not made as required in a CERCLA 
settlement associated with the facility between a current owner or 
operator and EPA or another Federal government agency, the guarantor 
shall do so;

[[Page 3494]]

    (3) In the event that performance at a facility covered by the 
guarantee does not occur as required under a CERCLA unilateral 
administrative order issued to a current owner or operator by EPA or 
another Federal agency and for which the owner or operator provides a 
written statement allowing the guarantee to serve as financial 
responsibility assuring the work in the order, the guarantor shall make 
payment into a trust fund established pursuant to the order;
    (4) The corporate guarantee will remain in force unless the 
guarantor sends notice of termination by certified mail to the owner or 
operator and to the Administrator. Termination may not occur, however, 
unless and until the owner or operator obtains, and the Administrator 
approves alternate financial responsibility complying with the 
requirements of this part; and
    (5) If the owner or operator fails to provide alternate financial 
responsibility as specified in this part and obtain the written 
approval of such alternate financial responsibility from the 
Administrator within ninety days after receipt by both the owner or 
operator and the Administrator of a notice of termination of the 
corporate guarantee from the guarantor, the guarantor will provide such 
alternative financial responsibility, in accordance with the 
requirements of this part, in the name of the owner or operator.
    (e) The guarantee must provide for payment as described in this 
section up to the required amount of the CERCLA Sec.  108(b) financial 
responsibility covered by the guarantee.
    (f) In the case of a corporation incorporated in the United States, 
a guarantee may be used to satisfy the requirements of this part only 
if the Attorneys General or Insurance Commissioners of:
    (1) The state in which the guarantor is incorporated, and
    (2) Each state in which a facility covered by the guarantee is 
located have submitted a written statement to EPA that a guarantee 
executed as described in this section and Sec.  320.50(f) is a legally 
valid and enforceable obligation in that state.
    (g) In the case of a guarantee provided by a corporation 
incorporated outside the United States, a guarantee may be used to 
satisfy the requirements of this part only if:
    (1) The non-U.S. corporation has identified a registered agent for 
service of process in each state in which a facility covered by the 
guarantee is located and in the state in which it has its principal 
place of business; and
    (2) The Attorney General or Insurance commissioner of each state in 
which a facility covered by this guarantee is located and the state in 
which the guarantor corporation has its principal place of business has 
submitted a written statement to EPA that a guarantee executed as 
described in this section and Sec.  320.50(f) is a legally valid and 
enforceable obligation in that state.


Sec.  320.45  Trust fund.

    (a) An owner operator may satisfy the requirements of this section 
by establishing a trust fund that conforms to the requirements of this 
paragraph, and submitting an originally signed duplicate of the trust 
agreement to the Administrator. The trustee must be an entity which has 
the authority to act as a trustee and whose trust operations are 
regulated and examined by a Federal or state agency.
    (b) The wording of the trust agreement must be identical to the 
wording specified in Sec.  320.50(a)(1), and the trust agreement must 
be accompanied by a formal certification of acknowledgment (for 
example, see Sec.  320.50(a)(2)). Schedule A of the trust agreement 
must be updated within sixty days after a change in the amount of Sec.  
108(b) financial responsibility.
    (c) Payments into the trust fund must be made so that the value of 
the trust fund is at least as great as the required CERCLA Sec.  108(b) 
financial responsibility amount required under Sec.  320.20. The trust 
must be fully funded within four years of the owner operator being 
subject to the regulations. This funding amount may include the value 
of any letters of credit held by the trust in accordance with Sec.  
320.40. Receipt from the trustee for these payments must be submitted 
by the owner or operator to the Administrator.
    (d) Whenever the required financial responsibility amount 
increases, the owner operator must compare the new amount with the 
trustee's most recent annual valuation of the trust fund. If the value 
of the fund is less than the new amount, the owner or operator, within 
sixty days after the change in the required Sec.  108(b) financial 
responsibility amount, must either deposit an amount into the fund so 
that its value after this deposit at least equals the required Sec.  
108(b) financial responsibility amount, or obtain other financial 
assurance as specified in this section to cover the increase.
    (e) If the value of the trust fund is greater than the required 
financial responsibility amount, the owner or operator may submit a 
written request to the Administrator for release of the amount of in 
excess of the required CERCLA Sec.  108(b) financial responsibility 
amount.
    (f) If the owner or operator substitutes other financial 
responsibility as specified in this section for all or part of the 
trust fund, it may submit a written request to the Administrator for 
release of the amount in excess of the required amount of CERCLA Sec.  
108(b) financial responsibility.
    (g) Within sixty days after receiving a request from the owner 
operator for release of funds as specified in paragraph (e) or 
paragraph (f) of this section, the Administrator will notify the 
trustee that the trust fund contains amounts in excess of the required 
amount. Following this notification, the trustee may release the excess 
funds in accordance with the terms of the trust agreement.
    (h) The trust, up to the value of funds held including letters of 
credit held in accordance with Sec.  320.40, is required to provide for 
payment:
    (1) To parties that obtain a final court judgment from a Federal 
court against any of the current owners or operators at the facility 
for awarding CERCLA response costs, health assessment costs, and/or 
natural resource damages associated with a facility covered by the 
trust agreement should payment not occur as required by the judgment 
within thirty days.
    (2) As required in a CERCLA settlement associated with the facility 
between a current owner or operator and EPA or another Federal agency 
if payment is not otherwise made.
    (3) Into a trust fund established pursuant to a CERCLA unilateral 
administrative order issued to one of the current owners or operators 
by EPA or another Federal agency in the event the work is not performed 
at the facility as required by the order. The Administrator or other 
Federal agency shall only make such a claim if the owner or operator 
provides written consent for the financial responsibility instrument to 
assure the obligations under the unilateral administrative order.
    (i) The Administrator will agree to the termination of the trust 
when:
    (1) The owner operator substitutes alternate financial assurance as 
specified in this section; or
    (2) The Administrator releases the owner or operator from the 
requirements of this section in accordance with Sec.  320.27.


Sec.  320.46  Use of multiple financial responsibility instruments.

    (a) An owner or operator may satisfy the requirements of this part 
by establishing more than one financial instrument per facility.

[[Page 3495]]

    (b) The instruments must be as specified in Sec. Sec.  320.40 
through 320.45, respectively, except that it is the combination of 
instruments, rather than the single instrument, which must demonstrate 
financial responsibility for an amount at least equal to the required 
CERCLA Sec.  108(b) financial responsibility amount.
    (c) An owner or operator using a trust fund in combination with a 
surety bond, letter of credit or insurance policy, including a trust 
fund holding a letter of credit, may use the trust fund as the standby 
trust fund for the other instruments.
    (d) A single standby trust fund may be established for two or more 
instruments. A claimant may make a claim against any of the instruments 
used to provide evidence of financial responsibility.


Sec.  320.47  Use of a financial instrument for multiple facilities.

    (a) An owner or operator may use a financial responsibility 
instrument specified in this part to meet the requirements of this 
section for more than one facility.
    (b) Evidence of financial responsibility submitted to the 
Administrator must include for each facility, the EPA Identification 
Number, name, address, and the amount of funds for Sec.  108(b) 
financial responsibility assured by the instrument.
    (c) If the facilities covered by the instrument are in more than 
one Region, identical evidence of financial responsibility must be 
submitted to and maintained with the regional delegees of the 
Administrator, as applicable, of all such Regions.
    (d) The amount of funds available through the instrument must be no 
less than the sum of funds that would be available if a separate 
instrument had been established and maintained for each facility.


Sec.  320.48  Consolidated form and multiple owners and/or operators.

    (a) Where a facility is owned or operated by more than one person, 
evidence of financial responsibility covering the facility may be 
established and maintained by one of the owners or operators, or, in 
consolidated form, by or on behalf of two or more owners or operators.
    (b) When evidence of financial responsibility is established in a 
consolidated form, the proportional share of the cost of demonstrating 
the financial responsibility for each participant shall be shown in a 
separate letter to the Administrator.
    (c) The evidence shall be accompanied by a statement authorizing 
the owner or operator submitting the evidence of financial 
responsibility to act for and on behalf of each participant in 
submitting and maintaining the evidence of financial responsibility.


Sec.  320.49  [Reserved]


Sec.  320.50  Wording of the instruments.

    (a)(1) A trust agreement for a trust fund, as specified 40 CFR 
320.45 must be worded as follows, except that instructions in brackets 
are to be replaced with the relevant information and the brackets 
deleted.
TRUST AGREEMENT
EPA contact information:
[Insert Name, Phone Number, Mailing Address of EPA and Point of 
Contact(s)]
Account Number: [insert account number]

    Trust Agreement (the ``Agreement'') is entered into as of [insert 
date] by and between [insert name of owner(s)/operator(s)], a business 
[insert relevant entity (corporation, partnership, association, 
proprietorship, etc.)], (the ``Grantor'') and [insert name of corporate 
trustee], [insert ``incorporated in the state of [name of state]'' or 
``a national bank''] (the ``Trustee'').
    Whereas, the United States Environmental Protection Agency 
(``EPA'') has established regulations applicable to the Grantor 
requiring that an owner or operator of a facility subject to the 
regulations demonstrate financial responsibility as proof that funds 
will be available when needed for payment of CERCLA response costs, 
health assessment costs, and natural resource damages at the facility.
    Whereas, the Grantor has elected to establish a trust to provide 
all or part of such financial responsibility and/or to receive the 
proceeds from a letter of credit to assure all or part of such 
financial responsibility for the facilities identified herein.
    Whereas, the Grantor, acting through its duly authorized officers, 
has selected the Trustee to be the trustee under this agreement, and 
the Trustee is willing to act as trustee,
    Now, therefore, the Grantor and the Trustee agree as follows:
    Section 1. Definitions as used in this Agreement.
    a) ``Grantor'' means the owner or operator who enters into this 
Agreement and any successors or assigns of the Grantor.
    b) ``Trustee'' means the Trustee who enters into this Agreement and 
any successor Trustee.
    Section 2. Identification of Facilities and Financial 
Responsibility Amounts. This Agreement pertains to the facilities and 
CERCLA 108(b) financial responsibility amounts identified on attached 
Schedule A [on Schedule A, for each facility list the EPA 
Identification Number, name, address, current owners and operators, and 
the current financial responsibility amount, and portions thereof, for 
which financial responsibility is being demonstrated by this 
Agreement.]
    Section 3. Establishment of Fund. The Grantor and the Trustee 
hereby establish a trust fund (the ``Fund'') for the benefit of any and 
all parties with valid third-party CERCLA claims against the Grantor or 
other current owners and operators arising from the operation of the 
facilities covered by this Agreement. The Grantor and Trustee do not 
intend for the Trustee to qualify as a ``guarantor'' as that term is 
used in CERCLA sections 101(13) and 108(c)(2), and therefore intend 
that the Trustee will not be subject to a direct action by Trustee's 
agreement to act as Trustee for the Fund. The Grantor and Trustee 
intend for the Fund to qualify as a ``guarantor'' as that term is used 
in CERCLA sections 101(13) and 108(c)(2), and therefore intend that 
only the Fund will be subject to any direct action brought pursuant to 
CERCLA section 108(c)(2). The Fund is established initially as 
consisting of property, which are acceptable to the Trustee, described 
in Schedule B attached hereto. Such property, along with any other 
monies and/or property subsequently transferred to the Trustee, 
together with all earnings and profits thereon, less any payments or 
distributions made by the Trustee pursuant to this Agreement, are 
referred to herein collectively as the Fund. The Fund shall be held by 
the Trustee, IN TRUST, as hereinafter provided. The Trustee shall not 
be responsible nor shall it undertake any responsibility for the amount 
or adequacy of, nor any duty to collect from the Grantor, any payments 
necessary to discharge any liabilities of the Grantor under CERCLA.
    Section 4. Payments from the Fund. The Trustee shall make payments 
from the Fund to parties with valid CERCLA claims against the Grantor 
or other current owners or operators at the facility(-ies). To make 
these payments, the Trustee shall draw on any letters of credit 
described in Schedule B and/or make payments from the funds held by the 
Fund described in Schedule B. The Trustee shall make payment from the 
Fund for valid third-party CERCLA claims only up to the lesser of: (1) 
The value of the valid third-party CERCLA claim; or (2) the amount of 
CERCLA 108(b) financial responsibility provided

[[Page 3496]]

for the facility(ies) associated with the claim provided by the Fund as 
identified in Schedule A.
    The Trustee shall satisfy valid unpaid CERCLA claims by making 
payments on a first come first served basis from the Fund only upon 
receipt of one or more of the following documents and only in amounts 
up to the values specified in the document(s):
    (i) A final court judgment dated at least 30 days earlier from a 
Federal court, in favor of the claimant, awarding CERCLA response 
costs, health assessment costs, and/or natural resource damages 
associated with a facility covered by this Agreement against the 
Grantor or any of the current owners or operators at a facility covered 
by this agreement;
    (ii) A written signed statement from the EPA Administrator or 
another Federal government agency requesting payment from the Fund on 
the grounds that payment has not been made as required by a CERCLA 
settlement associated with a facility covered by this Agreement and 
with any of the current owners or operators; or
    (iii) A written signed statement from the EPA Administrator or 
other Federal government agency requesting payment from the Fund into a 
trust fund established pursuant to a CERCLA unilateral administrative 
order on the grounds that performance at a facility covered by this 
Agreement has not occurred as required by a CERCLA unilateral 
administrative order issued to a current owner or operator that 
references this trust agreement.
    In addition to one of the documents listed above, all claimants 
must also present the following:
    A signed statement from the claimant certifying that these amounts 
have not been recovered or paid from any other source, including, but 
not limited to, the owners or operators, insurance, judgments, 
agreements, and other financial responsibility instruments.
    In the event of simultaneous valid claims that exceed the value of 
the Fund, the Trustee shall pay the claimants a pro rata share of their 
claim determined by the size of each valid claim.
    In addition to the payment instructions above, in the case of a 
release or threatened release from a facility covered by the Agreement, 
any claim authorized by section 107 or 111 of CERCLA may be asserted 
directly against the Fund as provided by CERCLA section 108(c)(2) 
subject to the limitations in CERCLA section 108(d). The Fund shall be 
entitled to all rights and defenses provided to guarantors by CERCLA 
section 108(c). The Fund is available for paying and defending claims 
in these instances.
    In addition, if notified by the EPA Administrator that the trust 
fund contains amounts in excess of the required CERCLA 108(b) financial 
responsibility amount, the Trustee shall refund to the Grantor such 
amounts in excess of the required CERCLA 108(b) financial 
responsibility amount.
    Section 5. Payments Comprising the Fund. Payments made to the 
Trustee for the Fund shall consist of cash or securities acceptable to 
the Trustee and/or a standby letter of credit as specified in 40 CFR 
320.50(b). In the event of receipt of a notice of a decision not to 
extend the expiration date of a letter of credit from an institution 
issuing a letter of credit held by the Fund, the Trustee shall draw on 
the letter of credit prior to expiration occurring and deposit any 
unused portion of the credit into the Fund if the EPA Administrator 
informs the Trustee that the owner operator did not establish alternate 
financial responsibility and obtain written approval of such alternate 
financial responsibility from the EPA Administrator within the time 
frame provided by 40 CFR 320.40(k) and (l).
    Section 6. Trustee Management. The Trustee shall invest and 
reinvest the principal and income of the Fund and keep the Fund 
invested as a single fund, without distinction between principal and 
income, in accordance with the Grantor's disclosures communicated in 
writing to the Trustee from time to time of the names of all current 
owners and operators and their affiliates including issuers of 
securities or other obligations, subject, however, to the provisions of 
this Section. In investing, reinvesting, exchanging, selling, and 
managing the Fund, the Trustee shall discharge its duties with respect 
to the trust fund with undivided loyalty and solely in the interest of 
the beneficiaries and with the reasonable care, skill, and caution of a 
prudent investor, in light of the purposes, terms, distribution 
requirements, and other circumstances of the trust; except that:
    (i) Securities or other obligations of the Grantor, or any other 
current owner or operator of the facilities, or any of their affiliates 
as defined in the Investment Company Act of 1940, as amended, 15 U.S.C. 
80a-2(a), shall not be acquired or held, unless they are securities or 
other obligations of the Federal or a state government;
    (ii) The Trustee is authorized to invest the Fund in time or demand 
deposits of the Trustee, to the extent insured by an agency of the 
Federal or state government;
    (iii) The Trustee is authorized to hold and draw upon standby 
letters of credit specified as in 40 CFR 320.50(b); and
    (iv) The Trustee is authorized to hold cash awaiting investment or 
distribution un-invested for a reasonable time and without liability 
for the payment of interest thereon.
    Section 7. Common and Collective Investment Practices. The Trustee 
is expressly authorized in its discretion:
    (a) To transfer from time to time any or all of the assets of the 
Fund to any common or collective trust fund created by the Trustee in 
which the Fund is eligible to participate, subject to all of the 
provisions thereof, to be jointly invested with the assets of other 
trusts participating therein; and
    (b) To purchase shares in any investment company registered under 
the Investment Company Act of 1940, 15 U.S.C. 80a-1 et seq., including 
one which may be created, managed, underwritten, or to which investment 
advice is rendered or the shares of which are sold by the Trustee. The 
Trustee may vote such shares in its discretion.
    Section 8. Express Powers of Trustee. Without in any way limiting 
the powers and discretions conferred upon the Trustee by the other 
provisions of this Agreement or by law, the Trustee is expressly 
authorized and empowered:
    (a) To sell, exchange, convey, transfer, or otherwise dispose of 
any property held by it, by public or private sale. No person dealing 
with the Trustee shall be bound to see to the application of the 
purchase money or to inquire into the validity or expediency of any 
such sale or other disposition;
    (b) To hold and draw upon standby letters of credit that are worded 
as specified in 40 CFR 320.50(b);
    (c) To make, execute, acknowledge, and deliver any and all 
documents of transfer and conveyance and any and all other instruments 
that may be necessary or appropriate to carry out the powers herein 
granted;
    (d) To register any securities held in the Fund in its own name or 
in the name of a nominee and to hold any security in bearer form or in 
book entry, or to combine certificates representing such securities 
with certificates of the same issue held by the Trustee in other 
fiduciary capacities, or to deposit or arrange for the deposit of such 
securities in a qualified central depositary even though, when so 
deposited, such securities may be merged and held in bulk in the name 
of the nominee of such depositary with other securities deposited 
therein by another person, or to deposit or arrange for the deposit of 
any securities issued by the United

[[Page 3497]]

States Government, or any agency or instrumentality thereof, with a 
Federal Reserve bank, but the books and records of the Trustee shall at 
all times show that all such securities are part of the Fund;
    (e) To deposit any cash in the Fund in interest-bearing accounts 
maintained or savings certificates issued by the Trustee, in its 
separate corporate capacity, or in any other banking institution 
affiliated with the Trustee, to the extent insured by an agency of the 
Federal or state government;
    (f) To compromise or otherwise adjust all claims in favor of or 
against the Fund.
    Section 9. Taxes and Expenses. All taxes of any kind that may be 
assessed or levied against or in respect of the Fund and all brokerage 
commissions incurred by the Fund shall be paid from the Fund. All other 
expenses shall be paid directly by the Grantor. All other expenses 
incurred by the Trustee in connection with the administration of this 
Trust including fees for legal services rendered to the Trustee, the 
compensation of the Trustee, and all other proper charges and 
disbursements of the Trustee not paid directly by the Grantor shall be 
paid from the Fund.
    Section 10. Annual Valuation. The Trustee shall annually, at least 
30 days prior to the anniversary date of establishment of the Fund, 
furnish to the Grantor and to the appropriate EPA Administrator a 
statement confirming the value of the Trust including the value of any 
funds held by the Trust and of any letters of credit held by the Trust. 
Any letters of credit shall be valued at the face amount less the value 
of any draws. Any securities in the Fund shall be valued at market 
value as of no more than sixty days prior to the anniversary date of 
establishment of the Fund. The failure of the Grantor to object in 
writing to the Trustee within 90 days after the statement has been 
furnished to the Grantor and the EPA Administrator shall constitute a 
conclusively binding assent by the Grantor barring the Grantor from 
asserting any claim or liability against the Trustee with respect to 
matters disclosed in the statement.
    Section 11. Advice of Counsel. The Trustee may from time to time 
consult with counsel, who may be counsel to the Grantor, with respect 
to any question arising as to the construction of this Agreement or any 
action to be taken hereunder. The Trustee shall be fully protected, to 
the extent permitted by law, in acting upon the advice of counsel.
    Section 12. Trustee Compensation. The Trustee shall be entitled to 
reasonable compensation for its services as agreed upon in writing from 
time to time with the Grantor.
    Section 13. Successor Trustee. The Trustee may resign or the 
Grantor may replace the Trustee, but such resignation or replacement 
shall not be effective until the Grantor has appointed a successor 
trustee and this successor accepts the appointment. The successor 
trustee shall have the same powers and duties as those conferred upon 
the Trustee hereunder. Upon the successor trustee's acceptance of the 
appointment, the Trustee shall assign, transfer, and pay over to the 
successor trustee the funds and properties then constituting the Fund. 
If for any reason the Grantor cannot or does not act in the event of 
the resignation of the Trustee, the Trustee may apply to a court of 
competent jurisdiction for the appointment of a successor trustee or 
for instructions. The successor trustee shall specify the date on which 
it assumes administration of the trust in a writing sent to the 
Grantor, the EPA Administrator, and the present Trustee by certified 
mail 10 days before such change becomes effective. Any expenses 
incurred by the Trustee as a result of any of the acts contemplated by 
this Section shall be paid as provided in Section 9.
    Section 14. Instructions to the Trustee. All orders, requests, and 
instructions to the Trustee shall be in writing, signed by such persons 
as are designated in the attached Exhibit A or such other designees as 
the Grantor may designate by amendment to Exhibit A. The Trustee shall 
be fully protected in acting without inquiry in accordance with the 
Grantor's orders, requests, and instructions. All orders, requests, and 
instructions by the EPA Administrator to the Trustee shall be in 
writing, signed by the EPA Administrator, or designee thereof, and the 
Trustee shall act and shall be fully protected in acting in accordance 
with such orders, requests, and instructions. The Trustee shall have 
the right to assume, in the absence of written notice to the contrary, 
that no event constituting a change or a termination of the authority 
of any person to act on behalf of the Grantor or EPA hereunder has 
occurred. The Trustee shall have no duty to act in the absence of such 
orders, requests, and instructions from the Grantor and/or EPA, except 
as provided for herein.
    Section 15. Notices of Payment. If a payment for CERCLA response 
costs, health assessment costs, and/or natural resource damages is made 
under Section 4 of this trust, the Trustee shall notify the Grantor of 
such payments and the amounts thereof within five (5) working days. If 
the Grantor ceases to exist, such notice shall be provided to the EPA 
Administrator. Further, the Trustee shall notify the EPA Administrator 
of all claims against the Fund resulting from a direct action under 
CERCLA section 108(c).
    Section 16. Amendment of Agreement. This Agreement may be amended 
by an instrument in writing executed by the Grantor, the Trustee, and 
the EPA Administrator, or by the Trustee and the EPA Administrator if 
the Grantor ceases to exist.
    Section 17. Irrevocability and Termination. Subject to the right of 
the parties to amend this Agreement as provided in Section 16, this 
Trust shall be irrevocable and shall continue until terminated at the 
written agreement of the Grantor, the Trustee, and the EPA 
Administrator, or by the Trustee and the EPA Administrator, if the 
Grantor ceases to exist. Upon termination of the Trust, all remaining 
trust property, less final trust administration expenses, shall be paid 
to the Grantor.
    Section 18. Immunity and Indemnification. The Trustee shall not 
incur personal liability of any nature in connection with any act or 
omission, made in good faith, in the administration of this Trust, or 
in carrying out any directions by the Grantor or the EPA Administrator 
issued in accordance with this Agreement. The Trustee shall be 
indemnified and saved harmless by the Grantor or from the Trust Fund, 
or both, from and against any personal liability to which the Trustee 
may be subjected by reason of any act or conduct in its official 
capacity, including all expenses reasonably incurred in its defense in 
the event the Grantor fails to provide such defense. EPA does not 
indemnify either the Grantor or the Trustee due to the restrictions 
imposed by the Anti-Deficiency Act, 31 U.S.C. 1341.
    Section 19. Choice of Law. This Agreement shall be administered, 
construed, and enforced according to the laws of the state of [enter 
name of state].
    Section 20. Interpretation. As used in this Agreement, words in the 
singular include the plural and words in the plural include the 
singular. The descriptive headings for each section of this Agreement 
shall not affect the interpretation or the legal efficacy of this 
Agreement.
    In Witness Whereof the parties have caused this Agreement to be 
executed by their respective officers duly authorized and their 
corporate seals to be hereunto affixed and attested as of the date 
first above written. The parties below certify that the wording of this 
Agreement is identical to the wording

[[Page 3498]]

specified in 40 CFR 320.50(a) as such regulations were constituted on 
the date first above written.

-----------------------------------------------------------------------
[Signature of Grantor

-----------------------------------------------------------------------
[Printed Name of Grantor]

[Title]
Attest:
[Title]
[Seal]

-----------------------------------------------------------------------
[Signature of Trustee]

-----------------------------------------------------------------------
[Printed Name of Trustee Official]

-----------------------------------------------------------------------
[Mailing Address, Telephone Number, Email of Trustee Official]

Attest:
[Title]
[Seal]

    (2) The following is an example of the certification of 
acknowledgement which must accompany the trust agreement for a trust 
fund as specified in 40 CFR 320.45 of this chapter. State requirements 
may differ on the proper content of this acknowledgement.

State of---------------------------------------------------------------

County of--------------------------------------------------------------

    On this [date], before me personally came [owner or operator] to me 
known, who, being by me duly sworn, did depose and say that she/he 
resides at [address], that she/he is [title] of [corporation], the 
corporation described in and which executed the above instrument; that 
she/he knows the seal of said corporation; that the seal affixed to 
such instrument is such corporate seal; that it was so affixed by order 
of the Board of Directors of said corporation, and that she/he signed 
her/his name thereto by like order.

[Signature of Notary Public]-------------------------------------------

    (b) A letter of credit, as specified in 40 CFR 320.40 of this 
chapter, must be worded as follows, except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:
Irrevocable Standby Letter of Credit
IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: [insert number]
ISSUER: [insert name and address of issuing institution]
ISSUANCE DATE: [insert date]
MAXIMUM AMOUNT: $[insert dollar amount]
APPLICANT:
[Insert name of Owner or Operator of Facility]
[Insert contact person(s), title(s), and contact information (address, 
phone, email, etc.)]
FACILITY:
[Insert EPA Identification number(s), name(s), address(es) and CERCLA 
108(b) financial responsibility amount(s) covered by the letter of 
credit for facility(ies) to be covered by this instrument]
TO:
[If the letter of credit is established in favor of any and all third-
party CERCLA claimants insert: ``Administrator(s)
Region(s) [region numbers]
U.S. Environmental Protection Agency (EPA)
[Insert name and mailing address of Administrator or designee(s)]''
Or,
If letter of credit is established in favor of a trust fund trustee 
insert the name and mailing address of trustee]
Dear Sir or Madam:

    We hereby establish our Irrevocable Standby Letter of Credit No. 
[insert number] in the favor of [insert either ``any and all third-
party CERCLA claimants'' or the name of trustee of the trust fund that 
will hold the letter of credit], at the request and for the account of 
[insert name of Owner or Operator of Facility] (the ``Applicant''), in 
the amount of $[insert amount] (the ``Maximum Amount'') for the [insert 
name(s) and address(es) of the facility(ies) to be covered by this 
instrument] (the ``Facility''). The letter of credit is established to 
assure payment for the current owners or operators' CERCLA response 
costs, health assessment costs, and/or natural resource damages 
associated with the facilities covered by this letter. Payment shall be 
made up to amounts provided above for each facility and not to exceed 
in total the Maximum Amount, upon presentation of:
    [If letter of credit is established in favor of a trust fund 
trustee insert: ``A demand for payment from [name of trust fund 
trustee] bearing reference to this letter of credit number No. [insert 
number]
    If letter of credit is issued in favor of any and all third-party 
CERCLA claimants insert: ``A demand for payment bearing reference to 
this letter of credit number No. [insert number]; and
    A final court judgment dated at least 30 days earlier from a 
Federal court, in favor of the claimant, awarding CERCLA response 
costs, health assessment costs, and/or natural resource damages 
associated with a facility covered by the letter of credit against any 
of the current owners or operators at a facility covered by the letter 
of credit accompanied by a certification from the claimant that reads 
as follows: `I hereby certify that the amount of the demand is payable 
pursuant to regulations issued under the Comprehensive Environmental 
Response, Compensation and Liability Act of 1980 as amended.'; or
    A certification from the EPA Administrator or another Federal 
agency that reads as follows: `I hereby certify that the amount of the 
demand is payable pursuant to regulations issued under the 
Comprehensive Environmental Response, Compensation and Liability Act of 
1980 as amended.''']
    This letter of credit is effective as of [date] and shall expire on 
[date at least one year later], but such expiration date shall be 
automatically extended for a period of [at least one year] on [date at 
least one year later as specified above] and on each successive 
expiration date, unless, at least 120 days before the current 
expiration date, we notify [If letter of credit is issued in favor of a 
trust fund trustee insert: ``[name of trustee],'' ] the EPA 
Administrator and the Applicant by certified mail that we have decided 
not to extend this letter of credit beyond the current expiration date. 
In the event of such notification, any unused portion of the credit 
shall be paid into the accompanying trust fund issued by [insert name 
of issuing institution of trust fund] with account number [insert 
account number of the trust fund] upon presentation by [If issued in 
favor of any and all third-party CERCLA claimants enter ``the EPA 
Administrator''; if issued in favor of a trust fund trustee insert name 
of trustee] of a demand for payment compliant with the terms above 
within 120 days after the date of receipt of such notification by both 
you and [owner's or operator's name], as shown on the signed return 
receipts.
    Whenever this letter of credit is drawn on under and in compliance 
with the terms of this credit, we shall duly honor such demand upon 
presentation to us and shall pay as directed by claimant or the 
trustee.
    [Insert if letter of credit is issued in favor of any and all 
third-party CERCLA claimants: ``In the case of a release or threatened 
release of (a) hazardous substance(s) from a facility covered by the 
letter of credit, we acknowledge that any claim authorized by section 
107 or 111 of CERCLA may be asserted directly against us as provided by 
CERCLA section 108(c)(2). We consent to suit with respect to these 
claims subject to the limitations in CERCLA section 108(d). We 
acknowledge that we are entitled to all rights and defenses provided to 
guarantors by CERCLA section 108(c). We will provide notice of

[[Page 3499]]

any such resulting claims and payments to the EPA Administrator.'']
    This credit is subject to [insert the most recent edition of either 
the Uniform Customs and Practice for Documentary Credits or 
International Standby Practices published and copyrighted by the 
International Chamber of Commerce.]
    We certify that the wording of this letter of credit is identical 
to the wording specified in 40 CFR 320.50(b) as such regulations were 
constituted on the date shown immediately below. [Signature(s) and 
title(s) of official(s) of issuing institution] [Date].
    (c) A surety bond, as specified in 40 CFR 320.41 of this chapter, 
must be worded as follows, except that instructions in brackets are to 
be replaced with the relevant information and the brackets deleted:

EPA contact information:
U.S. Environmental Protection Agency
[Insert Name, Phone Number, Mailing Address of the Administrator and 
Points of Contact]

-----------------------------------------------------------------------

Surety Bond No. [Insert number]
Date bond executed: [Insert date]
Parties [Insert name and address of owner or operator], Principal, 
incorporated in [Insert state of incorporation] of [Insert city and 
state of principal place of business] and [Insert name and address of 
surety company(ies)], Surety Company(ies), of [Insert surety(ies) place 
of business].
EPA Identification Number, name, address, and CERCLA 108(b) financial 
responsibility amount, specifying the portion covered by this bond, for 
each facility guaranteed by this bond:

-----------------------------------------------------------------------

Total penal sum of bond:-----------------------------------------------

    Purpose: This is an agreement between the Surety(ies) and the 
Principal under which the Principal and Surety(ies) hereto are firmly 
bound to any and all third-party CERCLA claimants , in the above penal 
sum plus the amount of any investigation or legal defense fees incurred 
by Surety(ies) for the payment of which we bind ourselves, our heirs, 
executors, administrators, successors and assigns jointly and 
severally; provided that, where the Surety(ies) are corporations acting 
as co-sureties, we, the Sureties, bind ourselves in such sum ``jointly 
and severally'' only for the purpose of allowing a joint action or 
actions against any or all of us, and for all other purposes each 
Surety binds itself, jointly and severally with the Principal, for the 
payment of such percentage of the total penal sum only as is set forth 
opposite the name of each Surety plus the amount of any investigation 
or legal defense fees incurred by Surety, but if no limit of liability 
is indicated, the limit of liability shall be the total penal sum of 
the bond plus the amount of any investigation or legal defense fees 
incurred by Surety. We agree to be responsible for the following:
    (1) the satisfaction of valid third-party CERCLA claims against the 
Principal or the other current owners and operators for CERCLA response 
costs, health assessment costs, and natural resource damages associated 
with the facility(ies) covered by this bond in the sums prescribed 
herein; and
    (2) the guarantee that the Principal or other current owners and 
operators shall obtain alternate financial responsibility as specified 
in subpart C of 40 CFR 320 for the facility(ies) covered by this bond 
and obtain written approval of that financial responsibility provided 
within 90 days of receipt by the EPA Administrator and the Principal of 
a notice of cancellation of the bond from the Surety(ies).
    The aforementioned responsibilities are subject to the governing 
provisions and the following conditions. Any provision in this bond 
conflicting with the following governing provisions or conditions shall 
be deemed deleted herefrom and provisions conforming to such governing 
provisions or condition shall be deemed incorporated herein.
    Governing Provisions:
    (1) the Comprehensive Environmental Response, Compensation and 
Liability Act of 1980, as amended.
    (2) Rules and regulations of the U.S. Environmental Protection 
Agency (EPA), particularly 40 CFR part 320.
    Conditions:
    (1) The Principal and all the current owners and operators at the 
facility(ies) covered by this bond are subject to the applicable 
governing provisions that require the Principal and all the current 
owners and operators to have and maintain CERCLA Sec.  108(b) financial 
responsibility to cover CERCLA response costs, health assessment costs, 
and natural resource damage claims.
    (2) This bond assures that the Principal will ensure that at 
facilities covered by this bond: (a) payments will be made as required 
by final court judgments from a Federal court against a current owner 
or operator for CERCLA response costs, health assessment costs, and/or 
natural resource damages within 30 days; (b) payments will be made when 
required by a CERCLA settlement with a current owner or operator; (c) 
work will be performed as required in CERCLA unilateral administrative 
orders issued to a current owner or operator for which the owner or 
operator has provided a written statement allowing the bond to assure 
the performance of the work in the order; and (d) CERCLA 108(b) 
financial responsibility coverage will be maintained as described in 
condition 1.
    (3) If the Principal fails to perform as described above the 
Surety(ies) becomes liable on this bond obligation.
    (4) The Surety(ies) shall satisfy a valid claim for CERCLA response 
costs, health assessment costs, and/or natural resource damages only 
upon the receipt of one of the following documents plus the additional 
signed statement specified below:
    (a) A final court judgment dated at least 30 days earlier from a 
Federal court, in favor of the claimant, awarding CERCLA response 
costs, health assessment costs, and/or natural resource damages 
associated with a facility covered by this bond against the Principal 
or any of the current owners or operators at a facility covered by this 
bond;
    (b) A written signed statement from the EPA Administrator or 
another Federal government agency requesting payment from the 
Surety(ies) on the grounds that payment has not been made as required 
by a CERCLA settlement associated with a facility covered by this bond 
and with any of the current owners or operators; or
    (c) A written signed statement from the EPA Administrator or other 
Federal government agency requesting payment from the Surety(ies) into 
a trust fund established pursuant to a CERCLA unilateral administrative 
order on the grounds that performance at a facility covered by this 
bond has not occurred as required by a CERCLA unilateral administrative 
order issued to a current owner or operator.
AND
    A signed statement from the claimant certifying that these amounts 
have not been recovered or paid from any other source, including, but 
not limited to, the owner operator, insurance, judgments, agreements, 
and other financial responsibility instruments.
    (5) In addition to condition 4, in the case of a release or 
threatened release of (a) hazardous substance(s) from a facility 
covered by the bond, the Surety(ies) acknowledge that any claim 
authorized by section 107 or 111 of CERCLA may be asserted directly 
against the Surety(ies) as provided by CERCLA section 108(c)(2). The 
Surety(ies) consent(s) to suit with respect to these claims subject to 
the limitations in CERCLA section 108(d). The Surety(ies) shall be 
entitled to all

[[Page 3500]]

rights and defenses provided to guarantors by CERLCA section 108(c). 
The Surety(ies) will provide notice of any such resulting claims and 
payments to the EPA Administrator.
    (6) If upon notice of cancellation by the Surety(ies) the Principal 
fails to obtain replacement CERCLA financial responsibility consistent 
with subpart C of 40 CFR 320 and written approval of the EPA 
Administrator of that replacement financial responsibility within 90 
days of receipt of said notice by the EPA Administrator and the 
Principal the Surety(ies) shall become liable on this bond and shall 
make payment into the standby trust fund as directed by the EPA 
Administrator.
    (7) The liability of the Surety(ies) shall not be discharged by any 
payment or succession of payments hereunder, unless and until such 
payment or payments shall amount in the aggregate to the penal sum of 
the bond. In no event shall the obligation of the Surety(ies) hereunder 
exceed the amount of said penal sum plus the amount of any 
investigation or legal defense fees.
    (8) The Surety(ies) may cancel the bond by sending notice of 
cancellation by certified mail to the Principal and the EPA 
Administrator, provided, however, that cancellation shall not occur 
during the 120 days beginning on the date of receipt of the notice of 
cancellation by the Principal and the EPA Administrator, as evidenced 
by the return receipt.
    (9) The Principal may terminate this bond by sending written notice 
to the Surety(ies), provided however, that no such notice shall become 
effective until the Surety(ies) receive(s) written authorization for 
termination of the bond by the EPA Administrator.
    (10) The Surety(ies) hereby waive(s) notification of amendments to 
applicable laws, statutes, rules and regulations and agree(s) that no 
such amendment shall in any way alleviate its (their) obligation on 
this bond.
    (11) This bond is effective from [insert date] (12:01 a.m., 
standard time, at the address of the Principal as stated herein) and 
shall continue in force until cancelled or terminated as described 
above.
    In Witness Whereof, the Principal and Surety(ies) have executed 
this Bond and have affixed their seals on the date set forth above.
    The persons whose signatures appear below hereby certify that they 
are authorized to execute this surety bond on behalf of the Principal 
and Surety(ies) and that the wording of this surety bond is identical 
to the wording specified in 40 CFR 320.50(c), as such regulations were 
constituted on the date this bond was executed.

PRINCIPAL
[Signature(s)]
[Name(s)]
[Name, Telephone Number, Email of Representative]
[Title(s)]
[Corporate Seal]
CORPORATE SURETY[IES]
[Name and address]
State of incorporation:___
Liability Limit: %___
[Signature(s)]
[Name(s) and title(s)]
[Corporate seal]
[For every co-surety, provide signature(s), corporate seal, liability 
limit and other information in the same manner as for Surety above.]
Bond premium: $___

    (d) A CERCLA Sec.  108(b) insurance endorsement as required in 40 
CFR 320.42 must be worded as follows, except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:
CERCLA Sec.  108(b) Financial Responsibility Endorsement
EPA contact information:
[Insert Name, Phone Number, Mailing Address of EPA Administrator and 
Points of Contact]

    1. This endorsement certifies that the policy to which the 
endorsement is attached provides liability insurance covering CERCLA 
response costs, health assessment costs, and natural resource damages 
in connection with the insured's obligation to demonstrate financial 
responsibility under 40 CFR 320. The coverage applies at [list EPA 
Identification Number, name, address, total CERCLA 108(b) financial 
responsibility amount for each facility] for CERCLA response costs, 
health assessment costs, and natural resource damages at a covered 
facility. The limits of liability are [insert the dollar amount(s) of 
the limits and the percentage share of the Insurer's liability for each 
covered facility], exclusive of legal defense and investigation costs.
    2. The insurance afforded with respect to such facilities is 
subject to all of the terms and conditions of the policy; provided, 
however, that any provision, exclusion, definition, condition, 
retroactive date, clause, defense, or other term of the policy 
inconsistent with 40 CFR 320.42, or subsections (a) through (f) of this 
Paragraph 2 are hereby amended to conform with 40 CFR 320.42 and 
subsections (a) through (f) below:
    (a) The Insurer will make payment only for third-party CERCLA 
claims as defined in section 101 of CERCLA; the insurance coverage is 
not available for payments to the insured. The Insurer will make:
    i. payments awarded in final court judgments from a Federal court 
against any of the current owners and operators for CERCLA response 
costs, health assessment costs, and/or natural resource damages 
associated with a facility covered by the policy to the party obtaining 
the judgment should such payments not otherwise be made within 30 days.
    ii. payments as required by a CERCLA settlement associated with a 
facility covered by the policy between EPA or another Federal 
government agency and any of the current owners and operators should 
such payments not occur.
    iii. payments in instances where performance does not occur at a 
facility covered by the policy as required by a CERCLA unilateral 
administrative order issued by EPA or another Federal agency for which 
the owner or operator has provided a written statement that the policy 
be used to assure performance of the work required in the order.
    iv. payment into a standby trust in instances where the owner or 
operator fails to obtain alternate financial responsibility and obtain 
written approval of such alternate financial responsibility from the 
EPA Administrator within 90 days after receipt by both the insured and 
the EPA Administrator of a notice from the insurer that it has decided 
to cancel, terminate or fail to renew the insurance policy beyond the 
current expiration date as provided for in paragraph (f) below.
    (b) In addition to the payment condition in subsection (a), in the 
case of a release or threatened release of (a) hazardous substance(s) 
from a facility covered by the policy, the insurer acknowledges that 
any claim authorized by section 107 or section 111 of CERCLA may be 
asserted directly against the insurer as provided by section 108(c)(2) 
of CERCLA. Insurer consents to suit with respect to these claims 
subject to the limitations in section 108(d) of CERCLA. The Insurer 
will be entitled to all rights and defenses provided to guarantors by 
section 108(c) of CERCLA. Insurer will provide notice of any such 
resulting claims and payments to the EPA Administrator.
    (c) Bankruptcy or insolvency of the insured shall not relieve the 
Insurer of its obligations under the policy to which this endorsement 
is attached.
    (d) The Insurer is liable for the payment of amounts within any

[[Page 3501]]

deductible or self-insured retention applicable to the policy, with a 
right of reimbursement by the insured for any such payment made by the 
Insurer.
    (e) Whenever requested by the Administrator of the U.S. 
Environmental Protection Agency (EPA), the Insurer agrees to furnish to 
the EPA Administrator a signed duplicate original of the policy and all 
endorsements.
    (f) Cancellation, failure to renew or any other termination of the 
insurance by the insurer will be effective only upon written notice to 
the owner operator and the EPA Administrator by certified mail and only 
after the expiration of 120 days beginning with the date of receipt of 
the notice by both the Administrator and the owner or operator, as 
evidenced by the return receipts.
    Attached to and forming part of policy No. __ issued by [name of 
Insurer], herein called the Insurer, of [address of Insurer] to [name 
of insured] of [address] this___ day of___, 20__. The effective date of 
said policy is___ day of ___, 20__.
    I hereby certify that the wording of this endorsement is identical 
to the wording specified in 40 CFR 320.50(d) as such regulation was 
constituted on the date first above written, and that the Insurer is 
licensed to transact the business of insurance, or eligible to provide 
insurance as an excess or surplus lines insurer, in one or more states.

[Signature of Authorized Representative of Insurer]
[Type name]
[Title], Authorized Representative of [name of Insurer]
[Address, Phone Number, Email of Representative]
[PROPOSED REGULATORY TEXT FOR PARAGRAPHS (e) and (f)--Option 2 only]
    (e) A letter from the chief financial officer, as specified in 
Sec.  320.43, must be worded as follows, except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:
FINANCIAL TEST
Letter from Chief Financial Officer
    [Address to EPA Administrator or Regional delegees for every Region 
in which facilities for which financial responsibility is to be 
demonstrated through the corporate financial test are located.]
    I am the Chief Financial Officer (``CFO'') of [insert name and 
address of firm] (``firm''). This letter is in support of this firm's 
use of the financial test to demonstrate Financial Responsibility for 
CERCLA 108(b) as specified in 40 CFR part 320.43.
    [Fill out paragraphs 1-4, below, and provide supporting 
documentation, when required as specified below. If your firm has no 
facilities that belong in a particular paragraph, write ``None'' in the 
space indicated.]
    1. This firm is the owner or operator of the facilities, listed 
below, for which Financial Responsibility is demonstrated through the 
financial test specified in 40 CFR part 320.43. The current CERCLA 
Sec.  108(b) Financial Responsibility amount and the amount covered by 
the financial test are provided for each listed facility:
    [For each facility, identify: Facility name; Address; EPA 
Identification Number; CERCLA Sec.  108(b) financial responsibility 
amount; and amount covered by financial test]
    2. This firm guarantees, through the guarantee specified in 40 CFR 
part 320.44, financial responsibility of the following facilities owned 
or operated by the guaranteed party. The current CERCLA Sec.  108(b) 
financial responsibility amount so guaranteed are shown for each listed 
facility:
    [For each facility, identify: Facility name; Address; EPA 
Identification Number; CERCLA Sec.  108(b) financial responsibility 
amount; and amount covered by financial test]
    The firm identified above is: [insert one or more: (1) The direct 
or higher-tier parent corporation of the owner or operator; (2) owned 
by the same parent corporation as the parent corporation of the owner 
or operator, and receiving the following value in consideration of this 
guarantee ___ [insert description of value received] ; or (3) engaged 
in the following substantial business relationship with the owner or 
operator ___ [insert characterization of relationship] , and receiving 
the following value in consideration of this guarantee___ [insert 
description of value received]].
    [Attach a written description of the business relationship or a 
copy of the contract establishing such relationship to this letter].
    3. The firm, as owner or operator or guarantor, is using a 
financial test to secure the environmental obligations of the 
facilities listed below for which financial responsibility is required. 
These obligations include, but are not limited to: current cost 
estimates for corrective action, closure, post-closure care, and 
amounts required for third-party liability for hazardous waste 
treatment, storage and disposal facilities under 40 CFR 264.101, 
264.142, 264.144, 264.147, 265.142, 265.144 and 265.147 and as required 
by order under section 3008(h) of RCRA, 42 U.S.C. 6928(h); cost 
estimates for municipal solid waste landfill units under 40 CFR 258.71, 
258.72 and 258.73; current plugging and abandonment cost estimates for 
underground injection control facilities under 40 CFR 144.62; cost 
estimates for underground storage tanks under 40 CFR 280.93; cost 
estimates for facilities storing polychlorinated biphenyls under 40 CFR 
761.65; cost estimates for underground injection control class VI 
facilities for corrective action under 40 CFR 146.84, for injection 
well plugging under 40 CFR 146.92, for post injection facility care and 
facility closure under 40 CFR 146.93, and emergency and remedial 
response under 40 CFR 146.94; any financial responsibility required 
under any CERCLA settlement or order; and any other environmental 
obligation assured through a financial test or guarantee, excluding 
those costs represented in paragraphs 1 and 2 listed above. The cost 
estimates by obligation are provided for each listed facility:
    [For each facility, identify: Facility name; Address; EPA 
Identification Number (if any); and amount covered by financial test]
    4. The total of all such environmental obligations the firm is 
covering with a financial test or for which it issued a corporate 
guarantee for the listed facilities in paragraphs 1-3 above [sum of the 
portion covered by the financial test in paragraph 1 plus the sums in 
paragraphs 2 and 3] is $ [insert amount], as of___ [insert date].
    5. The firm [insert ``is required'' or ``is not required''] to file 
a Form 10-K or 20-F with the Securities Exchange Commission (SEC) for 
the latest fiscal year.
    6. The fiscal year of the firm ends on [month, day]. The figures 
for the following items marked with asterisk are derived from this 
firm's independently audited, year-end financial statements for the 
latest completed fiscal year, ended [date].
    7. The firm has received a qualified or adverse accountant's 
opinion for the latest completed fiscal year ended [insert date] ___ 
(Yes/ No) ___
    8. The firm represents that as of the latest completed fiscal year-
end [insert date] ___, the Assets located in the United States in the 
amount of $___ amount to at least 90% of the firm's total assets. (Yes/
No) ___
    Test Worksheet:
    1. The total of all environmental obligations the firm is covering 
with a financial test or for which it issued a

[[Page 3502]]

corporate guarantee [enter the sum from paragraph 4 above] ___.
    2. The firm represents that it holds the following long term credit 
ratings: [list all ratings and their dates that apply including but not 
limited to Long-Term Issuer Credit Ratings from Standard and Poor's, 
Long-Term Corporate Family Ratings from Moody's Investor Services, 
Long-Term Issuer Default Ratings from Fitch Ratings, and any other 
long-term credit rating from a Nationally Recognized Statistical Rating 
Organization (NRSRO)]
    *3. Tangible Net Worth $___
    4. Is line 3 at least 6 times line 1? (Yes/No) ___
    *5. Total assets in U.S. [required only if the answer in paragraph 
8 above is ``No''] $___
    6. Is line 5 at least 6 times line 1? (Yes/No) ___
    I hereby certify that the information included in this letter, 
including all attachments and exhibits, is true and accurate. I further 
certify that the wording of this letter is identical to the wording 
specified in 40 CFR 320.50(e) as such regulations were constituted on 
the date shown immediately below.

[Signature]------------------------------------------------------------
[Name]-----------------------------------------------------------------
[Title]----------------------------------------------------------------
[Date]-----------------------------------------------------------------

    (f) A corporate guarantee, as specified in Sec.  320.44 must be 
worded as follows, except that instructions in brackets are to be 
replaced with the relevant information and the brackets deleted:
Corporate Guarantee for CERCLA 108(b) Financial Responsibility
    Guarantee made this [date] by [name of guaranteeing entity], a 
business corporation organized under the laws of [if incorporated 
within the United States insert ``the State of ___'' and insert name of 
state; if incorporated outside the United States insert the name of the 
country in which incorporated, the principal place of business within 
the United States, and the name and address of the registered agent in 
the state of the principal place of business], herein referred to as 
guarantor. This guarantee is made on behalf of the [owner or operator] 
of [business address], which is [one of the following: ``our 
subsidiary''; ``a subsidiary of [name and address of common parent 
corporation], of which guarantor is a subsidiary''; or ``an entity with 
which guarantor has a substantial business relationship, as defined in 
40 CFR 320.3'' to any and all third-party CERCLA claimants.
Recitals
    1. Guarantor meets or exceeds the financial test criteria and 
agrees to comply with the reporting requirements for guarantors as 
specified in 40 CFR 320.44 and will report the full amount of CERCLA 
108(b) financial responsibility for which it is eligible to cover as 
determined by the financial test criteria at 40 CFR 320.43 for each 
facility covered by the guarantee in the letter from its chief 
financial officer.
    2. [Owner or operator] owns or operates the following facilities 
subject to CERCLA 108(b) financial responsibility requirements covered 
by this guarantee: [List for each facility: EPA Identification Number, 
name, address and if guarantor is incorporated outside the United 
States list the name and address of the guarantor's registered agent in 
each state.]
    3. For value received from [owner or operator], and up to the most 
current Sec.  108(b) financial responsibility amount required at each 
facility covered by the guarantee as identified in paragraph 2 of the 
guarantor's most recent CFO letter submission required under 40 CFR 
320.44, and exclusive of any legal defense costs incurred by the 
guarantor, guarantor guarantees to any and all third-party CERCLA 
claimants that:
    a) in the event that payment for CERCLA response costs, health 
assessment costs, and/or natural resource damages associated with a 
facility identified above as required in a final court judgment from a 
Federal court against one of the current owners or operators is not 
made within 30 days, the guarantor shall do so;
    b) in the event payment is not made as required in a CERCLA 
settlement associated with a facility identified above between a 
current owner or operator and EPA or another Federal government agency, 
the guarantor shall do so; and
    c) in the event that performance at a facility covered by the 
guarantee does not occur as required under a CERCLA unilateral 
administrative order issued to a current owner or operator by EPA or 
another Federal agency and for which the owner or operator provides a 
written statement allowing the guarantee to serve as financial 
responsibility assuring the work in the order, the guarantor shall make 
payment into a trust fund established pursuant to the order.
    4. The guarantor shall satisfy a third-party CERCLA claim only on 
receipt of one of the following documents plus the additional signed 
statement specified below:
    (a) A final court judgment dated at least 30 days earlier from a 
Federal court, in favor of the claimant, awarding CERCLA response 
costs, health assessment costs, and/or natural resource damages 
associated with a facility covered by this guarantee against any of the 
current owners or operators at a facility covered by this guarantee;
    (b) A written signed statement from an EPA Administrator or another 
Federal government agency requesting payment from the Guarantor on the 
grounds that payment has not been made as required by a CERCLA 
settlement associated with a facility covered by this guarantee and 
with any of the current owners or operators; or
    (c) A written signed statement from the EPA Administrator or other 
Federal government agency requesting payment from the Guarantor into a 
trust fund established pursuant to a CERCLA unilateral administrative 
order on the grounds that performance at a facility covered by this 
guarantee has not occurred as required by a CERCLA administrative order 
issued to a current owner or operator.
AND
    A signed statement from the claimant certifying that these amounts 
have not been recovered or paid from any other source, including, but 
not limited to, the owner operator, insurance, judgments, agreements, 
and other financial responsibility instruments.
    5. In addition to the payment provisions in paragraph 4 of this 
agreement, in the case of a release or threatened release of (a) 
hazardous substance(s) from a facility covered by the guarantee, 
guarantor acknowledges that any claim authorized by section 107 or 111 
of CERCLA may be asserted directly against the guarantor as provided by 
CERCLA section 108(c). Guarantor consents to suit with respect to these 
claims subject to the limitations in CERCLA section 108(d). Guarantor 
will be entitled to all defenses provided to guarantors by CERCLA 
section 108(c). Guarantor agrees to provide notice of any such 
resulting claims and payments to the EPA Administrator.
    6. The guarantor agrees that if, at any time before the termination 
of this guarantee, the guarantor fails to meet the financial test 
criteria, guarantor shall send within 90 days, by certified mail, 
notice to the EPA Administrator and to [owner or operator] of its 
intent to provide alternate financial responsibility as specified in 
subpart C of 40 CFR part 320 in the name of [owner or operator]. Within 
120 days after the guarantor fails to meet the financial test criteria, 
the guarantor shall establish such financial responsibility unless 
[owner or operator] has done so.

[[Page 3503]]

    7. The guarantor agrees to notify the EPA Administrator by 
certified mail, of a voluntary or involuntary proceeding under Title 11 
(Bankruptcy), U.S. Code, naming guarantor as debtor, within 10 days 
after commencement of the proceeding.
    8. Guarantor agrees that within 30 days after being notified by an 
EPA Administrator of a determination that guarantor no longer meets the 
financial test criteria or that he is disallowed from continuing as a 
guarantor, he shall establish alternate financial responsibility as 
specified in subpart C of 40 CFR part 320, as applicable, in the name 
of [owner or operator] unless [owner or operator] has done so.
    9. Guarantor agrees to remain bound under this guarantee 
notwithstanding any or all of the following: enforcement action taken 
under CERCLA at a covered facility, or any modification or alteration 
of an obligation of owner or operator pursuant to 40 CFR part 320, or 
the bankruptcy of an owner or operator at a facility covered by the 
agreement.
    10. Guarantor agrees to remain bound under this guarantee for as 
long as [owner or operator] must comply with the applicable financial 
assurance requirements of subpart C of 40 CFR part 320 for the above-
listed facilities, except as provided in paragraph 11 of this 
agreement.
    11. Guarantor may terminate this guarantee by sending notice by 
certified mail to the EPA Administrator and to [owner or operator], 
provided that this guarantee may not be terminated unless and until 
[the owner or operator] obtains, and the EPA Administrator approves, 
alternate financial responsibility complying with subpart C of 40 CFR 
part 320.
    12. Guarantor agrees that if [owner or operator] fails to provide 
alternate financial assurance as specified in subpart C of 40 CFR part 
320 and obtain written approval of such assurance from the EPA 
Administrator within 90 days after a notice of cancellation by the 
guarantor is received by the EPA Administrator from guarantor, 
guarantor shall provide such alternate financial assurance in the name 
of [owner or operator].
    13. Guarantor expressly waives notice of acceptance of this 
guarantee by the EPA or by [owner or operator]. Guarantor also 
expressly waives notice of any modification or alteration of an 
obligation of owner or operator pursuant to 40 CFR part 320.
    I hereby certify that the wording of this guarantee is identical to 
the wording specified in 40 CFR part 320.50(f) as such regulations were 
constituted on the date first above written.

Effective date:--------------------------------------------------------
[Name of guarantor]----------------------------------------------------
[Authorized signature for guarantor]-----------------------------------
[Name of person signing]-----------------------------------------------
[Title of person signing]----------------------------------------------
Signature of witness or notary:----------------------------------------

Subpart D--G [Reserved]

Subpart H--Hardrock Mining Facilities


Sec.  320.60  Applicability

    (a)(1) The requirements of this subpart apply to owners or 
operators of hardrock mining facilities within the classes identified 
in the Federal Register notice issued by EPA at 74 FR 37213 (July 28, 
2009) that are authorized to operate, or should be authorized to 
operate, on [Date 30 days after publication of Final Rule], or who 
become authorized to operate, or should become authorized to operate, 
after [Date 30 days after publication of Final Rule] except for the 
classes identified in paragraph (b) of this section.
    (2) The requirements of this subpart do not apply to owners or 
operators of the following classes of hardrock mining facilities 
identified in the Federal Register notice referred to in paragraph (a) 
of this section:
    (i) Mines conducting only placer mining activities
    (ii) Mines conducting only exploration activities
    (iii) Mines with less than five disturbed acres that are not 
located within one mile of another area of mine disturbance that 
occurred in the prior ten-year period, and that do not employ hazardous 
substances in their processes, and
    (iv) Processors with less than five disturbed acres of waste pile 
and surface impoundment


Sec.  320.61  Timeframes for compliance.

    (a) Owners and operators of hardrock mining facilities that are 
authorized to operate, or should be authorized to operate, on [Date 30 
days after publication of Final Rule] must demonstrate financial 
responsibility according to the following schedule:
    (1) For the amount of the health assessment cost component 
identified in this subpart by [Date 24 months after promulgation of the 
final rule];
    (2) For fifty percent of the response and natural resource damages 
cost components amount identified in this subpart by [Date 36 months 
after promulgation of the final rule]; and
    (3) For the full response and natural resource damages component 
amount identified in this subpart by [Date 48 months after promulgation 
of the Final Rule].
    (b) Owners and operators of hardrock mining facilities that are 
authorized to operate, or should be authorized to operate, between 
[Date of publication of final rule] and [Date four years after 
publication of the final rule] must be incompliance with the schedule 
in paragraph (a) and continue to comply with that schedule after 
beginning operations.
    (c) Owners or operators of hardrock mining facilities that become 
authorized to operate, or should become authorized to operate, after 
[Date four years after the effective date of this rule] must 
demonstrate financial responsibility for the full financial 
responsibility amount required under this subpart before beginning or 
resuming operations.


Sec.  320.62  Definitions.

    When used in this subpart, the following terms are defined as 
follows:
    Critical structure means a feature where a significant or high 
hazard potential is determined to exist. A significant hazard potential 
exists where failure or mis-operation is unlikely to cause loss of 
human life but is could cause economic loss, environmental damage, or 
other concerns; a high hazard potential exists where failure or mis-
operation is likely to cause loss of human life.
    Disturbed acreage/acres means the area of land or surface water 
that has been altered for purposes of accommodating mining and/or 
processing activities. The term includes the area from which the 
overburden, tailings, waste materials, ore, or targeted minerals have 
been removed or placed, and areas where tailings ponds, waste dumps, 
roads, conveyor systems, load-out facilities, heap leach, dump leach, 
ponds and impoundments, slag and other mineral processing waste, and 
all similar excavations or placements that result from the operation 
are located.
    Dump leach means ore or mineralized material that has been stacked 
without a liner and has been leached, is currently being leached, or 
has been placed in a pile for the purpose of being leached.
    Exploration means activities conducted to ascertain the existence, 
location, extent and/or quality of a deposit of ore or other mineral 
and does not include activities where 1000 tons or more of presumed ore 
have been removed for testing or where development or production has 
occurred. Exploration does not include activities where material is 
extracted for commercial use or sale.

[[Page 3504]]

    Extraction means the sequence of activities intended to physically 
gain access to and remove ore or a mineral body.
    Feature means open pit, underground mine, waste rock pile, tailings 
impoundment, tailings stack, heap leach pile, dump leach pile, process 
pond, impoundment, reservoir, slag pile, in-situ leach facility, or 
other area or feature used for mining or processing activities.
    Heap leach means ore or mineralized material that has been stacked 
on a lined leach pad and has been leached, is currently being leached, 
or has been placed in a pile for the purpose of being leached.
    Heap/dump leach means both heap and valley leach facilities, which 
are used for gold and sometimes copper processing, or run-of-mine 
copper leach dumps (or piles), that may have originally been intended 
for leaching, or originally were waste rock that was later leached in 
place.
    In-situ Leaching means the removal of targeted materials by 
injection and extraction of an acidic or alkaline solvent solution.
    Mine means all areas and equipment used for mining, including but 
not limited to injection and extraction wells used for in-situ mining 
or the extraction of mineral-bearing groundwater brines; surface 
excavations, pits, slopes, and spoil; underground passageways, shafts, 
stopes, tunnels, adits and workings; waste rock, slag and tailings; 
piles, ponds, impoundments and reservoirs; retention dams; dump, heap, 
or other leach facilities; mills, smelters, structures, tanks, 
equipment, machines, tools, and process components; private roads, 
ports, transmission lines, pipelines, or any other means of access 
owned or maintained by the operator; and any other ancillary areas or 
activities owned or used by the operator and resulting from the work of 
extracting minerals from their natural deposits. Adjacent and/or 
noncontiguous properties located within close proximity of the 
extraction site are part of the mine if those properties are managed 
under a unified operational control (e.g., under the same owner or 
operator and with oversight by a unified managerial staff and budget) 
provided those adjacent and/or noncontiguous properties are engaged in 
any of the above activities as part of the sequential management of 
ore, beneficiated ore, mineral concentrate, waste rock or tailings.
    Mineral processing means the sequence of activities following 
extraction of metallic or non-fuel non-metallic minerals to: (1) 
Separate and concentrate a target metallic or non-fuel non-metallic 
mineral from the ore, and/or (2) to refine ores or mineral concentrates 
to extract a target metallic or non-fuel non-metallic material. Mineral 
processing includes the mechanical, thermal, and/or chemical treatment 
of naturally occurring earthen materials, either solid or liquid (e.g., 
rock, ore, mineral or extracted subsurface brine) to recover, purify or 
create a final mineral product (e.g., dimension stone, expanded 
vermiculite, or refractory clay) or a feedstock of sufficient purity 
that it can then be used in further industrial or manufacturing 
operations.
    Mineral processor means all areas and equipment used for mineral 
processing.
    Mining means the extraction of rock and other materials that 
contain a target ore or mineral deposit from the earth. Mining 
includes, but is not limited to, in-situ solution mining, extraction of 
mineral-bearing groundwater brines, and surface or underground 
excavation of solid earthen materials.
    Net precipitation means annual precipitation minus annual pan 
evaporation, or gross precipitation minus pan evaporation loss. Net 
precipitation is in inches.
    Open pit means any open pits, cuts, or other surface features from 
which ore was extracted. It does not include borrow pits, sand boxes, 
or other surface features used for extracting soil, gravel, or sand for 
any purposes other than ore extraction.
    Pile is as defined in 40 CFR 260.10
    Placer mining is the extraction or prospecting of materials in 
unconsolidated deposits using water to excavate, transport, concentrate 
and recover heavy minerals using beneficiation methods such as 
screening, hand-panning, sluicing or dredging provided they are 
otherwise in compliance with applicable state and Federal regulations 
and do not use CERCLA hazardous substances (e.g., mercury, cyanide) in 
the concentration or processing of materials.
    Pressurized hydraulic head means a discharge from underground mine 
workings at greater than 100 kPa.
    Process pond/reservoir means process ponds, reservoirs, 
impoundments, ditches, channels or other wet acreage that were used in 
heap leach, dump leach, metals or minerals processing and other 
activities that have resulted in deposits of sludge and other 
potentially toxic and/or hazardous materials within those features.
    Qualified professional engineer means an individual who is licensed 
by a state as a Professional Engineer to practice one or more 
disciplines of engineering and who is qualified by education, technical 
knowledge, and experience to make the specific technical certifications 
required under this subpart. Professional engineers making these 
certifications must be currently licensed in the state where the 
hardrock mining facility is located.
    Slag pile means the storage location of glass-like particles 
generated when molten materials produced by a smelter are quenched.
    Surface impoundment is as defined in 40 CFR 260.10.
    Surface mine means the open pits, adits, general workings, and 
other features associated with surface extraction of ore.
    Tailings means the remaining waste material following the removal 
of valuable minerals from ore.
    Tailings facility means ponds, dams, and other facilities including 
spillways and associated features used for the deposition of process/
beneficiation waste or tailings from either pulp or vat leaching, 
flotation, or gravity processing facilities. This also includes paste 
and dry stacks.
    Underground mine means adits, portals, shafts, raises, drifts, and 
general workings (stopes, rooms or caving areas), vents and other 
features associated with underground extraction of ore.
    Waste rock means waste rock and overburden piles, dumps, and other 
features associated with run-of-mine disposal of waste on the surface 
whether from open pit or underground mines.


Sec.  320.63  Determining the financial responsibility amount.

    (a) Owners and operators subject to the requirements of this 
subpart must calculate the financial responsibility amount for their 
facilities in accordance with this section.

[[Page 3505]]

[GRAPHIC] [TIFF OMITTED] TP11JA17.001

Where:

Deflatory = the most recent available GDP Implicit Price Deflator 
for year y; and
Deflator2014 = the GDP Implicit Price Deflator for 2014
i = the ith response category (e.g., water treatment costs);
n = the total number of relevant response categories;
r = EPA region r (e.g., EPA Region 3); and
s = state s (e.g., Montana).

    (b)(1) Response component--
    [GRAPHIC] [TIFF OMITTED] TP11JA17.002
    
    Determine the response component of the financial responsibility 
amount for the facility by totaling the response category amounts in 
paragraphs (i) through (xii) for all applicable response categories. 
Include in the calculation all site features that are authorized to 
operate, or should have been authorized to operate on [Effective Date 
of the Final Rule], or on the date the facility first becomes subject 
to requirements of this part, and have not been released from financial 
responsibility obligations under Sec.  320.27.
    (i) Open pit category. The open pit category amount equals: 5.07 x 
10[caret] (4.24 + 1.08 x Log10[Open Pit Disturbed Acres])
    (ii) Underground mine category. The underground mine category 
amount for an underground mine with a hydraulic head is $4,500,000. The 
amount for an underground mine without a hydraulic head is $200,000.
    (iii) Waste rock category. The waste rock category amount equals: 
1.85 x 10[caret] (5.18 + .75 x Log10[Waste Rock Disturbed 
Acres])
    (iv) Heap and dump leach category. The heap and dump leach category 
amount equals: 2.29 x 10[caret] (4.57 + 1.01 x Log10[Heap 
and Dump Leach Disturbed Acres])
    (v) Tailings category. The tailings category amount equals: 1.71 x 
10[caret] (5.32 + .68 x Log10[Tailings Disturbed Acres])
    (vi) Process pond and reservoir category. The process pond and 
reservoir category amount equals: 1.64 x 10[caret] (4.29 + 1.03 x 
Log10[Process Pond and Reservoir Disturbed Acres])
    (vii) Slag pile category. The slag pile category amount equals: 
$64,000 x [Slag Pile Disturbed Acres].
    (viii) Solid and hazardous waste disposal category. The solid and 
hazardous waste disposal category amount is $2,600,000.
    (ix) Drainage category. The drainage category amount equals: 9.56 x 
10[caret] (3.42 + .57 x Log10(Total Disturbed Acres + 1)
    (x) Short-term O&M and monitoring category. The short-term O&M and 
monitoring category amount equals: {1.82 x 10[caret] (4.01 + 0.38 x 
Log10[Total Disturbed Acres + 1]){time}  x {1/0.0263{time}  
x {1 - (1/[1.0263[caret]10]){time} 
    (xi) Interim O&M category. The interim O&M category amount equals: 
{1.46 x 10[caret] (6.04 + 0.01 x [Net Precipitation] + 0.34 x 
Log10[Heap and Dump Leach Disturbed Acres + 1] + 0.10 x 
Log10[Tailings Impoundment Disturbed Acres + 1]){time}  x 
{1/0.0263{time}  x {1 -(1/[1.0263[caret] 10]){time} 
    (xii) Long-term O&M category. The long-term O&M amount equals: 
{1.64 x 10[caret] (3.12 + 0.58 x Log10[Total Disturbed Acres 
+ 1]){time}  /0.0263
    (xiii) Water treatment category. The water treatment category 
amount is: {1.16 x 10[caret] ( 3.22 + 1.10 x Log10[flow] + 
.70 x [In-Situ leach]){time} /.0263

Where:

Flow = flow in gallons/minute through in-situ leach features + flow 
in gallons/minute through underground mine features + 0.05 x 
Precipitation x [Total Disturbed Acres] x 0.05166.
In-situ leach = 1 if present; 0 if not present.

    (2) Multiply the response cost amount calculated under paragraph 
(b)(1) of this section by the following:
    (i) Overhead and oversight percentage ([1 + OverheadOversightr]) 
The applicable OverheadOversightr value is the value in 
Appendix II for the Region in which the largest disturbed acreage of 
the facility is located.
    (ii) State adjustment factor ( StateAdjustmentFactors).The 
applicable state adjustment factor is the factor in Appendix III for 
the state in which the largest disturbed acreage at the facility is 
located.
    (iii) Natural resource damage component. The financial 
responsibility amount for natural resource damages at a facility is 
13.4 percent of the total response component.
    (3) Add the health assessment component to the amount calculated 
under paragraph (b)(2) of this section. The financial responsibility 
amount for the health assessment component is $550,000.
    (c) Owners and operators may satisfy requirements of paragraph 
(b)(i) through (xiii), in whole or in part, by demonstrating that they 
are subject to, and in compliance with, requirements that will result 
in a minimum degree and duration of risk associated with the 
production, transportation, treatment, storage, or disposal, as 
applicable, of all hazardous substances present at that site feature. A 
demonstration under this paragraph will reduce the amount of financial 
responsibility that an owner and operator must demonstrate under this 
part.
    (1) The demonstration must be made individually for each site 
feature that must be included in the calculation as required by 
paragraph (b)(1) of this section, and must include, at a minimum:
    (i) Evidence that the owner or operator is subject to the 
requirements described in paragraph (d) of this section,
    (ii) Evidence that the owner's or operator's obligation to 
implement such requirements are imposed in an enforceable document as 
defined in Sec.  320.61,
    (iii) Evidence that the owner or operator has demonstrated, and is 
required to demonstrate, adequate financial responsibility to assure 
implementation of the required activities, and
    (iv) Certification by the owner or operator that the facility is in

[[Page 3506]]

compliance with the requirements described in paragraph (d) of this 
section.
    (2) Information provided to make the demonstration in paragraph 
(c)(1) of this section must provide sufficient and detailed supporting 
information adequate to allow EPA to evaluate the adequacy of the 
financial responsibility and the underlying requirements.
    (3) In the event that an owner or operator that reduces the maximum 
financial responsibility at its facility based on a reduction under 
paragraph (d) of this section becomes ineligible for that reduction 
because the facility no longer meets the requirements in paragraph 
(c)(1)(i) through (iii) of this section, it must recalculate the 
financial responsibility level at its facility and submit evidence of 
financial responsibility for the increased amount within thirty days of 
the date it no longer is eligible. The requirement to recalculate a 
financial responsibility level and submit evidence of financial 
responsibility under this paragraph does not affect the owner's or 
operator's obligations for instrument maintenance under Sec.  320.22.
    (d) Reductions to the response component amount.
    (1) To satisfy the open pit category component in paragraph 
(b)(1)(i) of this section:
    (i) A plan to address safety by prevention of public access by 
means of security fencing, or other effective methods.
    (ii) Where ponding will occur, a plan that requires:
    (A) regrading the bottom surface during closure to a stable 
configuration that prevents ponding and promotes the conveyance of 
surface water off the unit
    (B) closure of all open pits where public access is not restricted
    (C) structures that are considered to be critical structures to be 
designed for a long-term static factor of safety of 1.5 or greater
    (D) structures that are considered to be non-critical structures to 
be designed for a long-term static factor of safety of 1.3 or greater
    (E) units being closed be designed for a factor of safety of 1.1 or 
greater under pseudostatic analysis, and
    (F) a stability analysis to be conducted for the unit and include 
evaluation for static and seismic induced liquefaction.
    (iii) A plan for the management of all stormwater and sediment 
generated during reclamation and following closure that includes 
permanent stormwater conveyances, ditches, channels, and diversions, as 
necessary, designed to convey the peak flow and ponds and other 
collection devices, and that provides for controls designed to store 
the volume generated during a 24-hour period by a 200-year return 
interval storm event.
    (iv) Where conditions at the open pit may allow a pit lake to form, 
or where meteoric water may percolate through the pit rock into 
groundwater below, and pit lake or any discharges may not meet water 
quality standards, a plan for the minimization, prevention, or 
collection and treatment of water in the pit lakes, discharges, and/or 
seepage, that factors in information on site hydrology, water quality 
characterization information, and pit lake ecological risk assessment 
information. The plan must address and provide for capture and 
treatment at closure consisting of a capture and treatment system that 
meets a minimum 200-yr life design criteria, and that is designed to 
either prevent pit lake formation or groundwater contamination 
exceeding applicable water quality standards to achieve at least a 95 
percent capture efficiency of the affected groundwater, and to meet 
applicable water quality standards.
    (v) If prevention/avoidance is relied on, a management plan that 
demonstrates geochemically active materials will effectively be 
avoided, and that includes provisions for sampling and monitoring 
documentation.
    (vi) Requirements for concurrent or sequential reclamation of mined 
areas as they become available prior to final cessation of operations 
and closure.
    (2) To satisfy the underground mine category component in paragraph 
(b)(1)(ii) of this section:
    (i) A plan to address public safety by prevention of public access 
by means of security fencing, or other effective methods.
    (ii) A plan for the minimization, prevention or collection and 
treatment of discharges and or seepage based on site hydrology and 
water quality characterization information that provides for necessary 
additional source controls and/or capture and treatment at closure, all 
of which meet a minimum 200-year life design criteria, and includes:
    (A) If seepage and/or discharge water quality is not expected to 
meet applicable water quality standards, requirements for a capture and 
treatment system designed to achieve at least a 95 percent capture 
efficiency and to meet applicable water quality standards, and
    (B) If there will be a pressurized plug as a permanent feature 
controlling a discharge from underground mine workings at moderate to 
high heads (100-1,000+ kPa), a requirement to maintain the plug as a 
permanent feature.
    (iii) If prevention/avoidance is relied on, a management plan that 
demonstrates geochemically active materials will effectively be 
avoided, and that includes provisions for sampling and monitoring 
documentation.
    (iv) Requirements for concurrent or sequential reclamation of mined 
areas as they become available prior to final cessation of operations 
and closure.
    (3) To satisfy the waste rock category component in paragraph 
(b)(1)(iii) of this section:
    (i) A plan to address public safety by prevention of public access 
by means of security fencing, or other effective methods.
    (ii) If prevention/avoidance is relied on, a management plan that 
demonstrates geochemically active materials will effectively be 
avoided, and that includes provisions for sampling and monitoring 
documentation.
    (iii) Requirements for concurrent or sequential reclamation of 
mined areas as they become available prior to final cessation of 
operations and closure.
    (iv) Requirements to regrade the surface during closure to a stable 
configuration that prevents ponding and promotes the conveyance of 
surface water off the unit, that requires closure of all waste rock 
piles considered to be critical structures to be designed for a long-
term static factor of safety of 1.5 or greater, that requires all non-
critical structures to be designed for a long-term static factor of 
safety of 1.3 or greater; and that requires that the units being closed 
be designed for a factor of safety of 1.1 or greater under pseudostatic 
analysis.
    (v) Requirements to provide for a stability analysis to be 
conducted for the unit as part of the original design, and as part of 
mine modifications during the active life of the mine.
    (vi) A plan for the management of all stormwater and sediment 
generated during operations and during and following closure. For 
existing units, the plan must provide for permanent stormwater 
conveyances, ditches, channels and diversions designed to convey the 
peak flow and ponds and other collection devices designed to store the 
volume generated during a 24-hour period by a 100-year return interval 
storm event. For unit that become authorized to operate after [Date of 
the Final Rule], the plan must provide for controls designed to store 
the volume generated during a 24-hour

[[Page 3507]]

period by a 200-year return interval storm event.
    (vii) A plan for the minimization, prevention, or collection and 
treatment of discharges and/or seepage, based on site hydrology and 
water quality characterization information, that provides for a cover 
system of, at a minimum, a store and release earthen cover system with 
a thickness of at least twelve inches and, if necessary, additional 
source controls or capture and treatment at closure, all of which meet 
a minimum 200-year life design criteria. If seepage water quality is 
not expected to meet applicable Federal and state groundwater and 
surface water quality standards at the point of compliance, the plan 
must provide for:
    (A) Implementation of a containment system that immobilizes 
hazardous substances to meet applicable water quality standards (e.g., 
an engineered cover system designed to achieve, at a minimum, a 95 
percent reduction in annual net-percolation based on the long-term 
average to reduce seepage discharges to meet applicable water quality 
standards;
    (B) A capture and treatment system designed to achieve at least a 
95 percent capture efficiency and meet applicable water quality 
standards; or a combination of an engineered cover system and a capture 
and treatment system to achieve at least a 95 percent reduction in 
discharged load and meet applicable water quality standards at the 
point of compliance, or
    (C) A solution containment system to assure seepage flows are 
collected, contained, conveyed, and treated to achieve at least a 95 
percent reduction to meet applicable water quality standards.
    (4) To satisfy the heap and dump leach category component in 
paragraph (b)(1)(v) of this section:
    (i) A plan to address public safety by prevention of public access 
by means of security fencing, or other effective methods.
    (ii) A plan to regrade surface during closure to a stable 
configuration that prevents ponding and promotes the conveyance of 
surface water off the unit, and that requires closure of all heap leach 
and dump leach piles considered to be critical structures to be 
designed for a long-term static factor of safety of 1.5 or greater and 
all non-critical structures to be designed for a long-term static 
factor of safety of 1.3 or greater; and requires that the units being 
closed be designed for a factor of safety of 1.1 or greater under 
pseudostatic analysis. The plan must also provide for a stability 
analysis to be conducted for the unit and include evaluation for static 
and seismic induced liquefaction.
    (iii) A plan for the management of all stormwater and sediment 
generated during operations and during and following closure. For 
existing units, the plan must provide for permanent stormwater 
conveyances, ditches, channels and diversions designed to convey the 
peak flow and ponds and other collection devices designed to store the 
volume generated during a 24-hour period by a 100-year return interval 
storm event. For unit that become authorized to operate after [Date of 
the Final Rule], the plan must provide for controls designed to store 
the volume generated during a 24-hour period by a 200-year return 
interval storm event.
    (iv) A plan for the minimization, prevention, or collection and 
treatment of discharges and/or seepage, based on site hydrology and 
water quality characterization information, that provides for a cover 
system of, at a minimum, a store and release earthen cover system with 
a thickness of at least twelve inches and, if necessary, additional 
source controls or capture and treatment at closure, all of which meet 
a minimum 200-year life design criteria. If seepage water quality is 
not expected to meet applicable water quality standards, the plan must 
provide for:
    (A) Implementation of an engineered cover system designed to 
achieve at least a 95 percent reduction in annual net-percolation based 
on the long-term average and reduce seepage discharges to meet 
applicable water quality standards;
    (B) A capture and treatment system designed to achieve at least a 
95 percent capture efficiency and meet applicable water quality 
standards; or combination of an engineered cover system and a capture 
and treatment system to achieve at least a 95 percent reduction in 
discharged load and meet applicable water quality standards; or
    (C) A solution containment system to assure seepage flows are 
collected, contained, conveyed, and treated to achieve at least a 
percent reduction to meet applicable water quality standards.
    (v) (For heap leach) A liner designed to minimize/eliminate 
releases from the unit based on site specific conditions.
    (vi) Requirements for concurrent or sequential reclamation of mined 
areas as they become available prior to final cessation of operations 
and closure.
    (5) To satisfy the tailings category component in paragraph 
(b)(1)(v) of this section:
    (i) A plan to address public safety by prevention of public access 
by means of security fencing, or other effective methods.
    (ii) A plan to regrade surface during closure to a stable 
configuration that prevents ponding and promotes the conveyance of 
surface water off the unit, and that requires closure of all tailings 
impoundments and stacks considered to be critical structures to be 
designed for a long-term static factor of safety of 1.5 or greater and 
all non-critical structures to be designed for a long-term static 
factor of safety of 1.3 or greater; and requires that the units being 
closed be designed for a factor of safety of 1.1 or greater under 
pseudostatic analysis. The plan must also provide for a stability 
analysis to be conducted for the unit and include evaluation for static 
and seismic induced liquefaction.
    (iii) A plan for the management of all stormwater and sediment 
generated during operations and during and following closure. For 
existing units, the plan must provide for permanent stormwater 
conveyances, ditches, channels and diversions designed to convey the 
peak flow and ponds and other collection devices designed to store the 
volume generated during a 24-hour period by a 100-year return interval 
storm event. For unit that become authorized to operate after [Date of 
the Final Rule], the plan must provide for controls designed to store 
the volume generated during a 24-hour period by a 200-year return 
interval storm event.
    (iv) A plan for the minimization, prevention, or collection and 
treatment of discharges and/or seepage, based on site hydrology and 
water quality characterization information, that provides for a cover 
system of, at a minimum, a store and release earthen cover system with 
a thickness of at least twelve inches and, if necessary, additional 
source controls or capture and treatment at closure, all of which meet 
a minimum 200-year life design criteria. If seepage water quality is 
not expected to meet applicable water quality standards, the plan must 
provide for:
    (A) Implementation of an engineered cover system designed to 
achieve at least a 95 percent reduction in annual net-percolation based 
on the long-term average and reduce seepage discharges to meet 
applicable water quality standards;
    (B) A capture and treatment system designed to achieve at least a 
95 percent capture efficiency and meet applicable water quality 
standards; or combination of an engineered cover system and a capture 
and treatment system to achieve at least a 95 percent reduction in

[[Page 3508]]

discharged load and meet applicable water quality standards, or
    (C) A solution containment system to assure seepage flows are 
collected, contained, conveyed, and treated to achieve at least a 
percent reduction to meet applicable water quality standards.
    (v) A liner designed to minimize/eliminate releases from the unit 
based on site specific conditions.
    (vi) If prevention/avoidance is relied on, a management plan that 
demonstrates geochemically active materials will effectively be 
avoided, and that includes provisions for sampling and monitoring 
documentation.
    (vii) If a wet tailings impoundment is present:
    (A) A requirement to develop and implement a Tailings Operations, 
Maintenance and Surveillance (TOMS) manual, or similar plan, that 
defines and describes roles and responsibilities of personnel assigned 
to the facility; procedures and processes for managing change; the key 
components of the facility; procedures required to operate, monitor the 
performance of, and maintain a facility to ensure that it functions in 
accordance with its design, meets regulatory and corporate policy 
obligations, and links to emergency planning and response; downstream 
notification; and, requirements for analysis and documentation of the 
performance of the facility.
    (B) Annual tailings inspection reports by a qualified engineer, and 
an inspection report by an independent qualified engineer at least 
every five years.
    (viii) Requirements for concurrent or sequential reclamation of 
mined areas as they become available prior to final cessation of 
operations and closure.
    (6) To satisfy the process pond and reservoir category component in 
paragraph (b)(1)(vi) of this section:
    (i) A plan to address public safety by prevention of public access 
by means of security fencing, or other effective methods.
    (ii) A plan for the design and operation of such ponds and 
reservoirs to ensure they have adequate freeboard and are designed to 
prevent discharges of hazardous substances.
    (iii) A liner and collection system designed to minimize/eliminate 
releases from the unit based on site specific conditions.
    (iv) A requirement that sludge and the sub-base below the liner be 
sampled and addressed in a manner that is protective of human health 
and the environment as part of closure.
    (v) Requirements for concurrent or sequential reclamation of mined 
areas as they become available prior to final cessation of operations 
and closure.
    (vi) A plan for the management of all stormwater and sediment 
generated during operations and during and following closure. For 
existing units, the plan must provide for permanent stormwater 
conveyances, ditches, channels and diversions designed to convey the 
peak flow and ponds and other collection devices designed to store the 
volume generated during a 24-hour period by a 100-year return interval 
storm event. For unit that become authorized to operate after [Date of 
the Final Rule], the plan must provide for controls designed to store 
the volume generated during a 24-hour period by a 200-year return 
interval storm event.
    (7) To satisfy the slag pile category component in paragraph 
(b)(1)(iv) of this section:
    (i) A plan to address public safety by prevention of public access 
by means of security fencing, or other effective methods.
    (ii) If prevention/avoidance is relied on, a management plan that 
demonstrates geochemically active materials will effectively be 
avoided, and that includes provisions for sampling and monitoring 
documentation.
    (iii) Requirements for concurrent or sequential reclamation of 
mined areas as they become available prior to final cessation of 
operations and closure.
    (iv) Requirements to regrade surface during closure to a stable 
configuration that prevents ponding and promotes the conveyance of 
surface water off the unit, and that requires closure of all waste rock 
piles considered to be critical structures to be designed for a long-
term static factor of safety of 1.5 or greater and all non-critical 
structures to be designed for a long-term static factor of safety of 
1.3 or greater; and requires that the units being closed be designed 
for a factor of safety of 1.1 or greater under pseudostatic analysis.
    (v) Requirements to provide for a stability analysis to be 
conducted for the unit as part of the original design, and as part of 
mine modifications during the active life of the mine.
    (vi) A plan for the management of all stormwater and sediment 
generated during operations and during and following closure. For 
existing units, the plan must provide for permanent stormwater 
conveyances, ditches, channels and diversions designed to convey the 
peak flow and ponds and other collection devices designed to store the 
volume generated during a 24-hour period by a 100-year return interval 
storm event. For unit that become authorized to operate after [Date of 
the Final Rule], the plan must provide for controls designed to store 
the volume generated during a 24-hour period by a 200-year return 
interval storm event.
    (vii) A plan for the minimization, prevention, or collection and 
treatment of discharges and/or seepage, based on site hydrology and 
water quality characterization information, that provides for a cover 
system of, at a minimum, a store and release earthen cover system with 
a thickness of at least twelve inches and, if necessary, additional 
source controls or capture and treatment at closure, all of which meet 
a minimum 200-year life design criteria. If seepage water quality is 
not expected to meet applicable Federal and state groundwater and 
surface water quality standards at the point of compliance, the plan 
must provide for:
    (A) Implementation of a containment system that immobilizes 
hazardous substances to meet applicable water quality standards (e.g., 
an engineered cover system designed to achieve, at a minimum, a 95 
percent reduction in annual net-percolation based on the long-term 
average to reduce seepage discharges to meet applicable water quality 
standards;
    (B) A capture and treatment system designed to achieve at least a 
95 percent capture efficiency and meet applicable water quality 
standards; or combination of an engineered cover system and a capture 
and treatment system to achieve at least a 95 percent reduction in 
discharged load and meet applicable water quality standards at the 
point of compliance, or
    (C) A solution containment system to assure seepage flows are 
collected, contained, conveyed, and treated to achieve at least a 95 
percent reduction to meet applicable water quality standards.
    (8) To satisfy the solid and hazardous waste disposal component in 
paragraph (b)(1)(viii):
    (i) Requirements for disposal of all solid and hazardous wastes in 
a manner that is protective of human health and the environment and 
that is compliance with all applicable Federal, state, and local 
requirements.
    (ii) Requirements for contaminated soil disposal in a manner that 
is protective of human health and the environment and that is in 
compliance with all applicable Federal, state, and local requirements.
    (iii) Requirements to decontaminate buildings and structures to 
remove and safely dispose of hazardous substances.
    (9) To satisfy the drainage category component in paragraph 
(b)(1)(ix) of

[[Page 3509]]

this section, a plan for the management of all stormwater and sediment 
generated during operations and during and following closure. For 
existing units, the plan must provide for permanent stormwater 
conveyances, ditches, channels and diversions designed to convey the 
peak flow and ponds and other collection devices designed to store the 
volume generated during a 24-hour period by a 100-year return interval 
storm event. For unit that become authorized to operate after [Date of 
the Final Rule], the plan must provide for controls designed to store 
the volume generated during a 24-hour period by a 200-year return 
interval storm event.
    (10) To satisfy the short-term O&M category component in paragraph 
(b)(1)(x) of this section:
    (i) A plan for groundwater and surface water monitoring to assure 
that monitoring wells are located to detect an exceedance(s) or trends 
towards exceedance(s) of the applicable standards, and are detected at 
the earliest possible occurrence, so that investigation of the extent 
of contamination and actions to address the source of contamination may 
be implemented as soon as possible. The plan must be currently in 
effect and must cover a period of at least five years.
    (ii) A plan for inspection and monitoring of erosion and 
revegetation to ensure reclamation success.
    (iii) A plan for routine maintenance and repairs to roads, 
stormwater conveyances and collection devices and revegetation 
maintenance (e.g. weed controls) and repairs (e.g. areas of 
revegetation failure).
    (11) To satisfy the interim O&M category component in paragraph 
(b)(1)(xi) of this section:
    (i) A plan for the purpose of interim emergency water management to 
provide information on how process water systems, interceptor wells, 
seepage collection systems and storm water management systems are 
operated and maintained to prevent discharges in the event the 
regulator assumes management of the mine facility. The plan must 
include process water flow charts showing electrical system 
requirements, pump operations, seepage collection and interceptor well 
operations and applicable operation and maintenance requirements. The 
plan must be updated as major process water system changes occur that 
would affect the interim emergency water management plan.
    (ii) A conceptual engineering document that describes the processes 
and methods that are expected to be used to reduce the quantities of 
process water in storage and circulation inventory at the end of mine 
production until all process solutions are eliminated and steady-state 
discharge is reached, in preparation for long-term water management or 
treatment. The document must include:
    (A) A description and list of the current or proposed process water 
management units and inventories of process water;
    (B) A description of the modifications to the process water 
management system required to create an efficient process water 
reduction system;
    (C) The operation and maintenance requirements for the system with 
material take-offs of sufficient detail to prepare an engineering-level 
cost estimate; and
    (D) An estimate of the required water reduction period based on the 
water reduction calculations provided in the plan to be used for 
planning and operation and maintenance cost calculations.
    (12) To satisfy the long-term O&M category component in paragraph 
(b)(1)(xii) of this section:
    (i) A plan for groundwater and surface water monitoring to assure 
that additional monitoring wells are located to detect an exceedance(s) 
or trends towards exceedance(s) of the applicable standards and that 
they are detected at the earliest possible occurrence, so that 
investigation of the extent of contamination and actions to address the 
source of contamination may be implemented as soon as possible. The 
plan must be currently in effect, and must cover a period of at least 
200 years.
    (ii) A plan for inspection and monitoring of mass stability, 
erosion and revegetation certified by a professional engineer to ensure 
reclamation success.
    (iii) A plan for routine maintenance and repairs to roads, 
stormwater conveyances and collection devices, cover systems, and 
revegetation maintenance (e.g. weed controls) and repairs (e.g. areas 
of revegetation failure) and monitoring wells.
    (13) To satisfy the water treatment category component in paragraph 
(b)(1)(xiii) of this section:
    (i) A plan for closure water management and water treatment 
consisting of a conceptual engineering document that describes the 
processes and methods that are expected to be used for long-term 
management or treatment of seepage and includes an analysis of the 
expected operational life of each long-term water management or water 
treatment system, including collection/interceptor systems, until each 
system is no longer needed to protect water quality and applicable 
standards are met. The plan must describe whether active or passive 
treatment is proposed and include all operations and maintenance 
activities required to support all collection and treatment systems. 
The plan must describe the long-term water management and water 
treatment systems with sufficient detail, including locations of key 
components, expected operational life, material take-offs, and capital, 
operational and maintenance costs to prepare an engineering-level cost 
estimate. The plan must be currently in effect and must cover a period 
of at least 200 years.
    (ii) A plan for disposal of wastes produced from water treatment 
that is protective of human health and the environment and meets 
applicable Federal, state, and local requirements.


Sec.  320.64  Information submission and recordkeeping requirements

    (a) Owners or operators must submit to EPA information that 
supports the cost calculation including the maximum financial 
responsibility amount, final financial responsibility amount, 
information to support all inputs to the formula, and information to 
support reductions to the maximum financial responsibility amount in 
accordance with paragraph (c), including necessary components of 
applicable enforceable documents. Such information must provide 
sufficient detail about facility conditions to allow the Administrator 
to review the formula calculation and determine if the inputs to the 
formula were accurate, and should include site characterization 
information and evaluations that support the enforceable documents 
provided to support reductions.
    (b) Owners or operators must retain the calculation of the 
financial responsibility amount and the information supporting it for a 
period of three years following submission to EPA.


Sec.  320.65  Third-Party Certification

    The financial responsibility amount submitted by owners or 
operators in compliance with Sec.  320.63 must be certified by an 
independent qualified professional engineer as defined in Sec.  320.62.
BILLING CODE 6560-50-P

[[Page 3510]]

Appendix I
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[[Page 3511]]


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[[Page 3512]]


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BILLING CODE 6560-50-C

Appendix II

           Region-Specific Overhead and Oversight Percentages
------------------------------------------------------------------------
                                                             Total OC
                         Region                             percentage
------------------------------------------------------------------------
1.......................................................           48.64
2.......................................................           47.60
3.......................................................           51.42
4.......................................................           49.57
5.......................................................           50.13
6.......................................................           48.66
7.......................................................           47.63
8.......................................................           48.19
9.......................................................           48.73
10......................................................           48.14
------------------------------------------------------------------------

Appendix III

                        State Adjustment Factors
------------------------------------------------------------------------
                                                               State
                          State                             adjustment
                                                              factor
------------------------------------------------------------------------
AK......................................................            1.19
AL......................................................            0.91
AR......................................................            0.87
AZ......................................................            0.96
CA......................................................            1.17
CO......................................................            0.97
CT......................................................            1.18
DE......................................................            1.10
FL......................................................            0.92
GA......................................................            0.89
HI......................................................            1.19
IA......................................................            0.98
ID......................................................            0.97
IL......................................................            1.15
IN......................................................            1.00
KS......................................................            0.94
KY......................................................            0.99
LA......................................................            0.89
MA......................................................            1.20
MD......................................................            0.99
ME......................................................            1.03
MI......................................................            1.04
MN......................................................            1.12
MO......................................................            1.04
MS......................................................            0.89
MT......................................................            0.97
NC......................................................            0.87
ND......................................................            0.92
NE......................................................            0.97
NH......................................................            1.06
NJ......................................................            1.20
NM......................................................            0.92
NV......................................................            1.08
NY......................................................            1.17
OH......................................................            1.02
OK......................................................            0.88
OR......................................................            1.06
PA......................................................            1.09
RI......................................................            1.16
SC......................................................            0.87
SD......................................................            0.87
TN......................................................            0.91
TX......................................................            0.89
UT......................................................            0.95
VA......................................................            0.94
VT......................................................            1.01
WA......................................................            1.05
WI......................................................            1.06
WV......................................................            1.04
WY......................................................            0.92
------------------------------------------------------------------------

[FR Doc. 2016-30047 Filed 1-10-17; 8:45 am]
 BILLING CODE 6560-50-P