Hardrock Mining Will Require Hard Cash

On January 11, 2017, EPA published a proposed new rule that would require hardrock mining facilities to post security or prove their financial responsibility under Section 108(b) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund).  Owners and operators of such facilities can already be held strictly liable under CERCLA for cleanup of hazardous substances.  Soon they may also be required to demonstrate their financial strength as a condition of operating.  The total financial obligations imposed by the new rule could exceed $7 billion.

The new rule will apply to over 200 mines and processing facilities that produce gold, silver, copper, lead, iron ore, molybdenum, uranium and other hardrock minerals in over 30 states.  Four types of operations will, however, be exempt:  (1) placer mining; (2) exploration; (3) “[m]ines 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 (4) “[p]rocessors with less than five disturbed acres of waste pile and surface impoundment.”

The new rule requires calculation every three years of the amount of security to be posted by looking at price deflators and the type of facility.    As an example, EPA proposes the following for a single heap leach operation: 

 

 

 

 

 

Where: 

????????? = the most recent available GDP Implicit Price Deflator for year y; and 

????????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).

The formula will require some effort to figure out and must be certified by an independent qualified professional engineer.

The types of financial security that companies can use, depending on the situation and their financial strength, include letters of credit, surety bonds, insurance, financial tests, corporate guarantees, trust funds, and other financial instruments, some of which may be mixed and matched to add up to the required amount.  Owners or operators of multiple facilities will also be allowed to post one bond or other financial instrument to cover all of their facilities.  The total amount of security will not be reduced by doing so, but it may make administering the security easier.

  The full rule will be phased in over four years.  Demonstration of financial responsibility for health assessment costs will be required within two years of publication of the final rule.  Demonstration of financial responsibility for 50 percent of the response and natural resources damages amount will be required within three years, and for 100 percent within four years. 

Although EPA states that the new rule is not meant to preempt, duplicate or disrupt existing state reclamation bonding programs, it seems inevitable that there will be some overlap.  “EPA expects CERCLA § 108(b) to effectively complement” state programs, but mining companies will undoubtedly complain about having to post duplicative financial security for the same reclamation work.

The mining industry has long argued that EPA's proposed financial assurance requirement would duplicate reclamation and closure bonding requirements already mandated by federal and state law. One might expect that the proposed regulation would be a target for the Trump administration’s promised effort to rein in costly EPA regulations, but this new regulation will not go away altogether because it is required by court order in a mandamus petition filed by the Idaho Conservation League and other environmental groups in the D.C. Circuit Court of Appeals.  In Re: Idaho Conservation League, No. 14-1149 (D.C. Cir. January 29, 2016). The court ordered EPA to develop draft CERCLA 108(b) regulations for hardrock mining by December 1, 2016, and final regulations by December 1, 2017. 

A copy of the proposed rule may be found at 82 Fed. Reg. 3388.  Comments should be submitted by March 13, 2017.

 

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EPA Proposes Methane Emissions Cuts for Oil and Gas to Meet Climate Change Goals

On January 14, 2015, the Obama Administration announced a plan to reduce methane emissions from oil and gas operations by 40 to 45 percent by 2025. http://www.whitehouse.gov/the-press-office/2015/01/14/fact-sheet-administration-takes-steps-forward-climate-action-plan-anno-1

This announcement is part of the implementation of the President’s 2013 Climate Action Plan, and, in particular, the 2014 “Strategy to Reduce Methane.” President Obama stated then that reducing methane emissions is “critical.” Widely viewed as part of the U.S. “quid” for the “quo” of China’s agreement to peak its greenhouse gas (GHG) emissions by 2030, methane reduction will be a focus of administration policy-making for the next two years.

This 2015 announcement is built on the foundation of several earlier actions. In 2009, pursuant to the Clean Air Act (CAA), the EPA issued the “Endangerment Finding” determining that GHG emissions endanger public health. At that time, the EPA identified methane as one of “the two most important, directly emitted, long-lived greenhouse gases.” 74 Fed. Reg. 66,496, 66,517 (Dec. 15, 2009). Methane is considered to be a more potent GHG than CO2. Also in 2009, the EPA issued a mandatory GHG reporting rule under CAA §114. The oil and gas industry began reporting under subpart W of this rule in 2011. As of 2014, subpart W now covers multiple oil and gas facilities and activities including upstream, gathering and boosting, completions and workovers of fracked oil wells, natural gas distributors, pipeline transportation, and blowdowns of natural gas transmission pipelines between compressors. Finally, in April 2014 the EPA issued five technical “white papers” on oil and gas methane and volatile organic compounds (VOCs) emissions covering compressors, completions/productions, leaks, liquids unloading and pneumatic devices.

The EPA’s 2015 proposal is based on the data collected from the 2009 mandatory reporting rule and the analyses in the 2014 white papers. According to the EPA, methane makes up 10% of GHG and of that total, 30% is contributed by oil and gas. The EPA recognizes that the industry has decreased its methane emissions by 16% since 1990, but is focused on a predicted 25% increase over the next decade. As proposed, these EPA measures apply only to new or modified facilities. Environmental groups will push for application to existing facilities while the industry will argue that voluntary actions have a proven record of achievement.

In order to meet the new goal, the White House proposes several initiatives that will be implemented by several federal agencies:

EPA - New Standards for Methane and VOC Emissions - In the summer of 2015, the EPA will be proposing new standards in a rule for methane and VOCs from “new and modified oil and gas production sources, and natural gas processing and transmission sources” for the oil and gas industry. On January 28, 2015, the EPA called for input from oil and gas small businesses, NGOs and states on the development of a rule to reduce methane and VOCs under the CAA New Source Performance Standards. After considering comments from the states, the oil and gas industry and the public, the EPA will issue a final rule in 2016.
EPA - New Guidelines for Reducing VOCs - The EPA will be developing new guidelines and proposing control measures to reduce VOC emissions from oil and gas operations that states could adopt to help meet air quality standards for ozone. The EPA will publish Control Technique Guidelines (CTG) to address options for VOC emissions in ozone nonattainment areas and states in the Ozone Transport Region.

EPA - Enhanced Leak Detection and Reporting - The EPA will be considering remote sensing technologies to improve the accuracy of reported methane emissions.

BLM - Updated Standards on Public Lands - In April 2015 the BLM will be proposing an update to standards (Onshore Order No. 9) for new and existing oil and gas wells on public lands to reduce venting, flaring and leaks of methane. The final Order is expected in April 2016.

DOT - New Pipeline Safety Standards - Later this year, the Pipeline and Hazardous Materials Safety Administration (PHMSA) will be proposing new natural gas pipeline safety standards to reduce emissions.

DOE - Technology and Emissions Quantification - The federal budget for Fiscal Year 2016 includes approximately $25 million in funding for the development of technology to detect and repair natural gas transmission leaks, development of next generation compressors and quantification of natural gas emissions.

Over the next few years, methane emissions may be reduced automatically if low prices for oil and gas persist and production drops. In the meantime, the emissions reducing strategies outlined above will begin to take effect.

EPA Fact Sheet on the Proposal may be found at: http://yosemite.epa.gov/opa/admpress.nsf/d0cf6618525a9efb85257359003fb69d/ba7961bf631c87bf85257dcd00526ff7!OpenDocument

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