[Federal Register Volume 82, Number 7 (Wednesday, January 11, 2017)]
[Proposed Rules]
[Pages 3388-3512]
[FR Doc No: 2016-30047]

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

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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<PHONE_NUMBER>; (email<EMAIL_ADDRESS>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<PHONE_NUMBER>; or (email<EMAIL_ADDRESS>
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)

    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

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

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
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Note: This exhibit presents extrapolation based on median values of financial responsibility amounts for the
  modeled universe.

    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

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.

               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

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

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

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

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) .
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    \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.
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    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.

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

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

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

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

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.<IP_ADDRESS>(01), Reclamation Plan

Approval Required and IDAHO ADMIN. CODE r.<IP_ADDRESS>(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