Go to Source July 16, 2019
EPA’s decision to forego financial requirements will likely face opposition by eNGOs.
By Claudia M. O’Brien and Stacey L. VanBelleghem
On July 2, 2019, the US Environmental Protection Agency (EPA) published its proposed decision not to impose new financial responsibility requirements on the Electric Power Generation, Transmission, and Distribution industry under Section 108(b) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), following nearly a decade of litigation, stakeholder input, and EPA assessment.
Section 108(b) and EPA’s Path to This Decision
CERLCA imposes a joint and several liability scheme that holds certain entities (e.g., certain owners and operators, generators, arrangers, and transporters of hazardous substances) liable for the costs or damages associated with environmental remediation. Section 108(b) of CERCLA authorizes EPA[i] to develop regulations requiring owners or operators of certain “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.” Section 108(b)(2) identifies factors to consider to determine the level of financial assurances necessary in light of the level of risk. These factors include: “the payment experience of the [Hazardous Substance Superfund], commercial insurers, courts settlements and judgments, and voluntary claims satisfaction.”
EPA’s electric power sector proposal follows nearly ten years of litigation filed by environmental non-governmental organizations (eNGOs) and resulting court-ordered EPA rulemaking. Pursuant to court order, EPA must finalize this regulation by December 2, 2020.
EPA’s Interpretation of Its Authority
EPA’s first rulemaking under Section 108(b), for the Hardrock Mining sector, was not completed until 2018, so minimal precedent exists under Section 108(b). Moreover, pending litigation challenging EPA’s 2018 findings creates uncertainty regarding how a court will view EPA’s authority under this provision. The July 2019 notice asserts that CERCLA confers significant discretion on the agency. Although the statute requires EPA to determine the level of financial responsibility necessary to protect against the level of risk, it imposes no particular methodology for that determination. EPA also takes the position that CERCLA’s list of factors is not exhaustive and that the statute is silent on how EPA should weigh the factors. Thus, EPA’s analysis relies on several additional factors:
EPA’s Process and Rationale
EPA reviewed current industry practices for operational and decommissioning materials and wastes to evaluate the types of hazardous materials used and released by the electric power sector. EPA also looked at the financial health of the industry, cleanups in the sector, federal and state regulatory requirements governing releases of hazardous substances in the sector, and voluntary practices.
EPA made several interesting findings, including:
Thus, in this evaluation of CERCLA cleanups, EPA concluded that two out of 10,330 establishments in the industry involved significant costs covered by the Hazardous Substance Superfund in the modern regulatory framework. EPA observed that coal fired plants have presented a minimal impact on Superfund resources to date.
Interestingly, EPA noted that the CCR Rule has not yet been fully implemented. EPA points to the CCR Rule’s groundwater monitoring and corrective action program as an example of the CCR Rule already providing “meaningful protection.” However EPA acknowledged that “[b]ased on information made publicly available by electric utilities, current groundwater monitoring results show that a significant percentage of utilities will need to implement the rule’s corrective action program.” Because the corrective action responses are not yet underway, EPA could not yet fully discern whether taxpayer cleanup may result. EPA noted that the CCR Rule did not include financial assurance requirements, but that EPA committed to continue to investigate financial responsibility requirements under other statutes. EPA expects a significant percentage of surface impoundments to begin to close in coming years.
What Does This Mean for the Electric Power Sector?
A final EPA decision not to require evidence of financial responsibility for the Electric Power Generation, Transmission, and Distribution industry would essentially codify the status quo, as there are no current financial assurance requirements for this sector. However, any such decision will almost certainly be litigated by the eNGOs who are advocating for financial assurance obligations for this and other sectors under Section 108(b). Indeed, these eNGO groups are currently challenging EPA’s decision not to impose financial responsibility requirements for the Hardrock Mining sector. Opponents of the rule could focus their challenge on, for example, EPA’s statements regarding the financial stability of the electric power sector and its reliance on the CCR rule regulatory requirements as a basis for not imposing requirements on this sector. Given that CCR-required corrective action is not fully underway, findings from that experience could serve as fodder for litigation.
To the extent that future developments related to the financial stability of the sector or EPA’s experience related to CCR rule corrective action measures subsequently call into question EPA’s current findings, this could provide support for a future administration to revisit the decision.
Importantly, even if EPA does not impose financial assurance requirements under Section 108(b), the agency retains general enforcement authority under CERCLA and other statutes under which EPA could impose liability on this sector, including the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, or the Toxic Substances Control Act.
EPA will take public comment on the proposed decision for 60 days after the notice is published in the Federal Register. Per a court-ordered schedule, EPA must issue a notice of final decision regarding the Electric Power Generation, Transmission, and Distribution industry Section 108(b) requirements by December 2, 2020.
[i] The statute authorizes the President to carry out this responsibility, but it has long been delegated to EPA by Executive Order.
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