                                                                      6560-50-P
ENVIRONMENTAL PROTECTION AGENCY	
40 CFR Part 320
[EPA-HQ-OLEM-2016-0212; FRL--xxxxx]
RIN 2050-AG56
Financial Responsibility Requirements for Facilities in the Chemical, Petroleum and Electric Power Industries
AGENCY:  Environmental Protection Agency (EPA).
ACTION:  Notice.
SUMMARY:   Section 108(b) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) establishes certain regulatory authorities concerning financial responsibility requirements.  Specifically, the statutory language addresses the promulgation of 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.  On January 6, 2010, EPA published an Advance Notice of Proposed Rulemaking (ANPR)(75 FR 816) which identified additional classes of facilities within three industry sectors that may warrant the development of financial responsibility requirements under CERCLA §108(b) - 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).  This notice formally announces EPA's intention to publish a notice for proposed rulemaking for classes of facilities within the three industries identified in the 2010 ANPR, as well as gives an overview of some of the comments received on the ANPR and initial responses to those comments.  
FOR FURTHER INFORMATION CONTACT:  For more information on this notice, contact Peggy Vyas, U.S. Environmental Protection Agency, Office of Resource Conservation and Recovery, Mail Code 5303P, 1200 Pennsylvania Ave., NW., Washington, DC 20460; telephone (703) 308-5477 or (email) vyas.peggy@epa.gov.SUPPLEMENTARY INFORMATION: I. General InformationA.  How Can I Get Copies of This Document and Other Related Information?1. Docket.  EPA has established a docket for this action under Docket ID No. EPA-HQ-OLEM-2016-0212.  The 2010 Advance Notice of Proposed Rulemaking and its related documents, including background documents and public comments, are under Docket ID No. EPA-HQ-SFUND-2009-0834. All documents in the docket are listed in the http://www.regulations.gov index.  Although listed in the index, some information is not publicly available, e.g., CBI or other information whose disclosure is restricted by statute.  Certain other material, such as copyrighted material, will be publicly available only in hard copy.  Publicly available docket materials are available either electronically in http://www.regulations.gov or in hard copy at EPA/DC, EPA West, Room 3334, 1301 Constitution Ave., NW, Washington, DC 20460.  This Docket Facility is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays.  The Docket telephone number is (202) 566 - 0276.  The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays.  The telephone number for the Public Reading Room is (202) 566-1744.2. Electronic Access.  You may access this Federal Register document electronically from the Government Printing Office under the "Federal Register" listings at FDSys (http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=FR).
II. Overview of CERCLA §108(b)	                                                                                                                                                                                                                                                                                                                                                       
      CERCLA §108(b) generally requires that EPA develop requirements that classes of facilities 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."  CERCLA §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 judgements, and voluntary claims satisfaction.  
      CERCLA §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 EPA to specify policy or other contractual terms, conditions, or defenses which are necessary, or which 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 §108(b) instruments are to address multiple owners and operators at a single facility.  
      CERCLA §108(b)(3) requires that regulations promulgated under CERCLA §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.
      CERCLA §108(c) also includes a "direct action" provision under which any claim authorized by CERCLA §107 or 111 may be asserted directly against any guarantor providing evidence of financial responsibility under CERCLA §108(b) if the person is liable under CERCLA §107 and (1) is in bankruptcy, reorganization, or arrangement pursuant to the Federal Bankruptcy Code, or (2) is likely to be solvent at the time of judgement, but over whom jurisdiction in the Federal courts cannot be obtained with      
reasonable diligence.
III. In re Idaho Conservation League
      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 lawsuit in the U.S. Court of Appeals for the District of Columbia Circuit, for a writ of mandamus requiring issuance of CERCLA §108(b) financial responsibility rules for the hardrock mining industry, and for the three additional industries identified by EPA in the ANPR, that is, Chemical Manufacturing, Petroleum and Coal Products Manufacturing, and Electric Power Generation, Transmission, and Distribution.  Following oral arguments, EPA and the petitioners submitted Joint Motion for an Order on Consent, filed on August 31, 2015, which included a schedule for further administrative proceedings under CERCLA §108(b).  The court order granting the motion was issued on January 29, 2016.  A copy of the order can be found in the docket for this notice.
      In addition to requiring EPA to publish a proposed rule on hardrock mining financial requirements by December 1, 2016, the January 2016 Order requires EPA to "sign for publication in the Federal Register a determination whether EPA will issue a notice of proposed rulemaking on financial responsibility requirements under CERCLA section 108(b) in the (a) chemical manufacturing industry; (b) petroleum and coal products manufacturing industry; and (c) electric power generation, transmission, and distribution industry by December 1, 2016."  The publication of this notice satisfies that component of the January 2016 order. The order includes the following schedule for these rulemakings:
      "EPA will sign for publication in the Federal Register a notice of proposed
      rulemaking in the first additional industry by July 2, 2019, and sign for
      publication in the Federal Register a notice of its final action by December
      2, 2020.
      EPA will sign for publication in the Federal Register a notice of proposed
      rulemaking in the second additional industry by December 4, 2019, and
      sign for publication in the Federal Register a notice of its final action by
      December 1, 2021.
      EPA will sign for publication in the Federal Register a notice of proposed
      rulemaking in the third additional industry by December 1, 2022, and sign
      for publication in the Federal Register a notice of its final action by December 4, 2024."
	While the January 2016 Order identifies the other industries as being the Chemical Manufacturing industry, the Petroleum and Coal Products Manufacturing industry, and the Electric Power Generation, Transmission and Distribution industry, and sets a rulemaking schedule, it does not specify which industry will be the first, second or third.  EPA will decide that at a later date.  Nor does the January 2016 Order mandate any specific outcome of the rulemakings.  The Joint Motion specified that it did not alter the Agency's discretion provided by CERCLA and administrative law.  In other words, the substance of any requirements arising out of CERCLA §108(b) for the additional classes are not established in this notice - any such requirements, if they are imposed, will not be established until EPA issues any final rules for these classes.  Consequently, this notice is not a final agency action.
IV. Additional Classes Advance Notice of Proposed Rulemaking
	On January 6, 2010, EPA published an ANPR, in which the Agency identified three additional industrial sectors for the development, as necessary, of a proposed CERCLA §108(b) regulation.   To develop the list of additional classes for the 2010 ANPR, EPA used information from the National Priorities List (NPL), as well as analyzed data from the Biennial Report (BR) and Toxics Release Inventory (TRI).  As was discussed in the notice, these sources were chosen because "they are well-established, reliable sources of information on facilities associated with hazardous substances, and were readily available to the Agency."  In addition to these sources, EPA further evaluated industry sectors by gathering additional information from damage cases.  The result of this analysis is explained in the 2010 ANPR in detail, with the conclusion that three industries  -  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)  -  should be considered for financial responsibility requirements under CERCLA §108(b).
	EPA specifically requested public comment in the 2010 ANPR on whether to propose a regulation under CERCLA §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 responsibility mechanisms by the industry categories, existing financial responsibility requirements, and other information the Agency might consider in setting financial responsibility levels.  Finally, EPA requested information from the insurance and the financial sectors related to instrument implementation and availability, and potential instrument conditions. 
	EPA received over sixty comments on the ANPR, which can be found in the docket for that notice (see Docket ID No. EPA-HQ-SFUND-2009-0834).  EPA considered the comments, but they did not include evidence to support any change in the Agency's approach to the additional classes, as stated in the ANPR.  While the Agency is not obligated to respond to comments received on the ANPR, EPA has provided general responses to those comments that relate specifically to this announcement that EPA will continue the regulatory process under CERCLA §108(b).
V.  Comments Received on the 2010 ANPR  
	Representatives for the electric utility industry submitted roughly one-third of the comments on the 2010 ANPR.  Representatives for the chemical manufacturing industry, the petroleum industry, the waste management industry, the hardrock mining industry, as well as other interested parties also submitted comments.
	The comments on the 2010 ANPR, which specifically addressed the need for CERCLA §108(b) regulation for the additional classes, can be divided into four categories: (1) other laws that the industry complies with that obviate the need for CERCLA §108(b) regulation; (2) the sources of data EPA used to select the industries; (3) past versus current practices within each industry; and (4) the overall need for financial responsibility for each industry.  EPA is broadly addressing these categories of comments in this notice.
A.  Other Laws 
	Many commenters cited existing laws that their industries are already complying with to ensure that there are no occurrences of non-permitted releases of hazardous substances.  In particular, commenters pointed out that there are already financial responsibility requirements under the Resource Conservation and Recovery Act (RCRA).   While EPA appreciates the concern, as was discussed above, CERCLA §108(b) broadly directs the development of financial responsibility requirements consistent with the degree and duration of risk associated with the production, transportation, treatment, storage or disposal of hazardous substances.  These requirements, which are designed to help ensure that CERCLA liabilities are paid if CERCLA claims are made, are distinct from financial responsibility requirements for closure imposed under other statutes, such as RCRA, which are more narrowly designed to assure compliance with those closure requirements.
	At the same time, the Agency recognizes that compliance with regulatory requirements may reduce the risks at a facility.  Thus, as EPA moves forward with developing proposed rules for additional classes of facilities, EPA expects to consider site factors that reduce risks, including those that result from compliance with other regulatory requirements.  EPA has taken a similar approach in the CERCLA §108(b) proposed rule applicable to hardrock mining, which is published elsewhere in today's Federal Register.
B.  Data Used in Developing the ANPR
	In the ANPR, EPA used data from the Toxics Release Inventory (TRI), and RCRA's national Biennial Report (BR), among other sources, to identify and prioritize which classes of facilities present the highest risk of injury due to exposure, and thus to justify the need to prioritize financial responsibility requirements.   The Chemical Manufacturing and Petroleum and Coal Products Manufacturing industries were the top two industries in a ranking of the quantity of hazardous waste generated in 2007.  They were responsible for approximately 64 percent of all the hazardous waste reported to the 2007 Biennial Report cycle.  The Electric Power Generation, Transmission and Distribution industry was responsible for approximately 0.05 percent hazardous waste generated.  However, considering that coal combustion residuals (CCRs) are "Bevill exempt" waste, and thus not subject to Biennial Reporting requirements, this is a likely underrepresentation of the amount of hazardous substances produced by that industry.  
	The Chemical Manufacturing and Electric Power Generation, Transmission and Distribution industries ranked high on the list of on-site releases reported to TRI in 2007, at number two and three respectively.  The Petroleum and Coal Products Manufacturing industry ranked seventh on that list.
	Commenters expressed concern that releases reported to TRI are permitted releases, subject to various environmental laws.  Commenters also expressed concern that BR data merely shows the quantity of hazardous substances generated and managed, and not any mismanagement of those substances.  Neither of these, commenters felt, should be used as indicators of potential risk of exposure due to a release.  EPA recognizes the limitations on the extent of information that can be gained from TRI and BR data, however, EPA believes these data do offer insight into the characteristics and management of hazardous substances for facilities in each industry, and that in conjunction with other information, can be used as to evaluate the relative degree of risk posed by a class of facilities and the priority need for financial responsibility regulation under CERCLA §108(b).  As with the hardrock mining rule, for each subsequent industry rule, EPA intends to use other, more industry-specific and more current sources of data to identify risk, and will propose financial responsibility requirements based on the record EPA will develop for each rulemaking.  Where the Agency finds risk associated with management of hazardous substances for a class of facilities, it is obligated to promulgate financial responsibility requirements that are consistent with the degree and duration of that risk.  None of the commenters submitted any data to dissuade the Agency from the path to pursue rulemakings for these industries, since quantity and toxicity of hazardous substances released to the environment are good indicators of risk. 
C.  Past versus Current Industry Practices
	Another source of data for the ANPR was the Superfund National Priorities List (NPL).  The NPL is the list of national priorities among the known releases or threatened releases of hazardous substances, pollutants, or contaminants in the United States.  The Agency assigned three-digit NAICS codes that best identified the activities at each site, using available data and best professional judgement.  The Chemical Manufacturing industry had a total of 181 sites on the NPL from 1981-2009, the Petroleum and Coal Products Manufacturing industry had 30 sites.
      Commenters whose industries had sites listed on the NPL pointed out that many of those sites either did not remain in production, or had practices that were improved based on environmental regulations issued after the initial contamination.  Commenters felt that legacy contamination was not a valid indicator of current and future risk.  Also at issue was EPA's analysis of the NPL data.  Some commenters felt their industry was over-represented based on incorrect analysis of the NPL data.  
      EPA disagrees with commenters' assessment of the Agency's analysis.  Like the TRI and BR data, NPL data was used to indicate which industries pose potential risk that would warrant pursuing financial responsibility regulation under CERCLA §108(b).  The Agency did not receive evidence that risks do not continue at these sites.  Where risk continues, EPA believes it is appropriate to consider site factors that reduce risks, such as current industry practices, in determining the level of financial responsibility required.  Consideration will also be given to payment experience of the Fund, commercial insurers, court settlements and judgements, and voluntary claims satisfaction.
D.  Need for Financial Responsibility
	A common theme in the comments, across all three industries, was that there was no need for financial responsibility since facilities within these industries are not in danger of going bankrupt.  Many commenters felt that rather than focus on a few examples of past bankruptcies, EPA should consider the financial health of all the companies in an industry as a group.  
      EPA disagrees with commenters' assessment of when financial responsibility is needed.  Financial responsibility is imposed on classes within an industry, but is assessed at the facility level, and not the industry as a whole.  Economic solvency at an industry-wide level is not a substitute for insurance against the possibility of CERCLA liabilities remaining unsatisfied on a facility-specific basis.  Furthermore, CERCLA §108(b) funds could be used to address releases at currently-operating facilities.
E.  Comments that Support CERCLA §108(b) Requirements for Additional Classes
      The Agency received two comments on the ANPR that supported the need for CERCLA §108(b) regulations for the additional classes.  The first commenter provided an example of a facility that required cleanup and where, in the commenter's opinion, had the facility been subject to financial responsibility requirements, remediation would have been achieved much earlier as financial resources would have been available from the outset to carry out the remediation and there would have been less incentive for the responsible party to delay cleanup.
      The second commenter supporting the need for financial responsibility requirements for the additional classes cited a 2005 GAO report that the number of sites on the NPL continues to expand, with EPA adding an average of 28 sites to the NPL each year from 1983 to 2003, and the 1995 expiration of CERCLA authority to collect taxes for the Superfund as reasons for EPA to move forward with regulations "to ensure that facilities generating and handling hazardous substances will remain financially able to clean-up improperly disposed substances that could pose threats to public health and the environment."  
VI. Conclusion
	Since the issuance of the 2010 ANPR, EPA has not received evidence that would demonstrate that regulation under CERCLA §108(b) is not necessary for the Chemical Manufacturing industry, the Petroleum and Coal Products Manufacturing industry, and the Electric Power Generation, Transmission, and Distribution industry.  In response to the January 29, 2016 Court Order, EPA is announcing its intent to proceed with rulemakings according to the schedule stipulated in the order.


Dated:________________________



					
Mathy Stanislaus,
Assistant Administrator, 
Office of Land and Emergency Management.

