NOVEMBER 7, 2006

Mining companies that own or operate permitted hazardous waste management units should consider reevaluating their financial assurance programs amid indications the U.S. Environmental Protection Agency (EPA) will target underinsured companies for enforcement in the coming year.  Granta Nakayama, Assistant Administrator for the Office of Enforcement and Compliance Assurance, announced at a recent conference that widespread noncompliance in the mining industry (as well as at commercial waste management operations) will prompt increased enforcement actions as early as November 2006.  The threat comes after complaints by state environmental agencies that insufficiently capitalized companies have left states with millions of dollars in cleanup costs.  The Agency is also responding to criticism from the Government Accountability Office and its own Inspector General that inadequate federal oversight of financial assurance programs has hampered state enforcement.

Under EPA regulations implementing the Resource Conservation and Recovery Act (RCRA), owners and operators of facilities that treat, store, or dispose of hazardous waste must maintain adequate financial assurance to cover projected future costs of closing their facilities, e.g, through removal of hazardous constituents, and for any required post-closure care, e.g., groundwater monitoring.  In order to obtain a permit to manage hazardous wastes, companies must demonstrate that they have adequate financial assurance utilizing a variety of EPA-approved instruments, including letters of credit or third-party insurance policies, or that they meet a financial test or have a qualifying self-insurance program.  These permits required that companies periodically update their financial assurance to account for increased closure or post-closure costs due to inflation or changes in their operations.   

However, according to a September 2005 report by the EPA Inspector General, the Agency has not been collecting updated financial assurance information from RCRA permittees.  While some states do collect this information, their reporting requirements vary widely, hampering efforts to assess nationwide financial assurance problems and trends.  EPA officials have said improving compliance will require a combination of stringent enforcement of existing regulations and fundamental regulatory change.   

EPA solicited comments on new financial assurance regulations, but recently deferred rulemaking, opting instead to focus money and personnel on enforcement actions.  The Agency announced in July that it has trained 200 state and 100 federal staff on methods of enforcing RCRA’s financial assurance requirements.  The Agency said it will launch investigations by reevaluating whether firms truly have the financial assets to cover RCRA closure and post-closure costs, and then determining whether companies have complied with the letter of the law.  Sources within EPA have indicated the Agency will focus on mining facilities in the West as one of the main targets of this enforcement effort.   

Patton Boggs attorneys are experienced in evaluating all aspects of companies’ compliance status under RCRA, including financial assurance, and in negotiating favorable pre-enforcement settlements with federal regulators.  If you need assistance in evaluating your company’s financial assurance position, considering a self-reporting plan, entering a compliance agreement, or preparing a defense, please contact Duane Siler (202-457-5615, dsiler@pattonboggs.com) or John Austin (202-457-6167, jaustin@pattonboggs.com).

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The Patton Boggs Health and Safety Law Group consists of attorneys who have resolved client problems in environmental, energy, natural resource, and safety and health law since the late 1960s. With lawyers in Washington, D.C., Alaska, Colorado, Texas, New Jersey, New York, and Northern Virginia, we have experience with EPA, OSHA, MSHA, NIOSH, DOT, OPS, Coast Guard, NTSB, FAA, FDA, CSP, the Chemical Safety Board, and almost every other federal and state government health and safety agency in the United States and throughout the world. We speak a variety of languages; have backgrounds in business, science, engineering, industry, and government; and combine preventive law counseling with courtroom and lobbying expertise to achieve results. For more information go to: http://www.pattonboggs.com or contact Henry Chajet (hchajet@pattonboggs.com) at 202-457-6511, Mark Savit (msavit@pattonboggs.com) at 202-457-5269, Cole Wist (cwist@pattonboggs.com) at 303-894-6159, John Austin (jaustin@pattonboggs.com) at 202-457-6167 or Willa Perlmutter (wperlmutter@pattonboggs.com) at 202-457-5223.

Important Note: This ALERT does not constitute legal advice and counsel should be consulted regarding specific factual situations which will determine the compliance advice applicable to any particular question regarding the subject matter. If you would like additional information or advice and counsel on training, compliance or audits, please let us know. 

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