On the whole, the American mining industry is inclined to look favorably at President Donald Trump’s nascent administration. Just in the first months of his term, Trump has already approved two major oil pipeline projects, appointed energy-friendly Oklahoman Scott Pruitt to head the Environmental Protection Agency, and rumor has it, is poised to roll back the Clean Power Plan, a regulation that crippled the coal industry. However, mining companies remain concerned about the future of an expensive EPA rule change that passed in the waning days of the Obama administration.
In December, the EPA released a proposed rule change to CERCLA, better known as the Superfund law, that would require mining companies to have financial responsibility by mandating that they “provide funds necessary to address the CERCLA liabilities at their facilities.” The EPA argues that the change prevents taxpayer money from being used to pay to clean up environmental contamination caused by mine waste.
“To further CERCLA’s mission, we are proposing a rule that will reduce taxpayer costs at hardrock-mining and mineral-processing facilities,” wrote Mathy Stanislaus, then an assistant administrator at the EPA, who noted that “historically, hardrock-mining facilities have generated large quantities of hazardous substances.”
Yarra Square Partners returned 19.5% net in 2020, outperforming its benchmark, the S&P 500, which returned 18.4% throughout the year. According to a copy of the firm's fourth-quarter and full-year letter to investors, which ValueWalk has been able to review, 2020 was a year of two halves for the investment manager. Q1 2021 hedge fund Read More
The new regulation was daunting and vaguely defined. Under the proposed rule, mining companies would need to identify a financial responsibility amount for their facility, demonstration evidence that they had sufficient financial responsibility, and then maintain that responsibility under released from the requirements of the rule by EPA.
“Our latest proposed rulemaking ensures that future polluters are better prepared to pay,” wrote Stanislaus of the rule. “Under the rule, owners and operators at certain hardrock-mining and mineral-processing facilities would be required to make financial arrangements that address the risks from hazardous substances at these facilities.”
“Additionally, they would still have to pay the agreed-upon amount if the company closes its doors,” he concluded.
The scope and open-ended nature of the requirement worried many industry observers. At the time of the announcement, the EPA assured companies that the new rule “does not indicate that EPA has determined that requirements are necessary for any or all of the classes of facilities,” and that the amount of liability would vary from facility to facility. This did little to placate the mining industry, which was horrified by the amounts of capital companies would need to accumulate prior to opening a new mine.
“This proposed rule serves no purpose other than to stop investment in America’s mineral supply chain and drive jobs away,” said Laura Skaer, executive director of the American Exploration and Mining Association. “It provides no discernible environmental benefit, while adding hundreds of millions of dollars of costs and regulatory compliance burdens on industry.”
According to the EPA’s own estimates, implementation of the rule would cost American businesses up to $171 million a year. As part of the rule proposal process, the EPA convened the Small Business Advocacy Review Panel, which issued a report estimating the impact of the regulation on small businesses. The SBAR report was particularly critical of the regulatory impact on small mines, suggesting that the EPA rule change would likely put some smaller mines out of business.
“[The Office of Advocacy] believes that the current approach could unnecessarily threaten the viability of small mines by use of these inflated estimates,” wrote Darryl DePriest, chief counsel of the U.S. Office of Advocacy in the report, before recommending that the EPA modify its formula to be more sustainable for small mines.
Regulatory impact analysis of the EPA rule change suggests that it would cost the mining industry $7.1 billion.
The proposed rule has already met resistance from western governors and area Native American tribes, as well as the industry itself. Some observers have also warned that the EPA rule change for mining could signal similar shifts for the chemical manufacturing, petroleum, and electric power generation industries.
When Pruitt took over as head of the EPA, mining industry groups welcomed him and praised his “respect for the law and its limitations on a powerful bureaucracy.” So far, he has proven to be more open on the issue. In response to pressure from Congressional representatives and the industry, he opted to extend the comment period on the new regulations by 120 days, until July 11, 2017. The extra time was justified on the grounds that the nature of the ruling resulted in more than 2,300 technical documents being added to the docket and additional time was needed to digest them.
Now that Pruitt is in charge, the EPA rule change may be far more friendly to the mining industry than it would have been under the Obama administration. Still, the rulemaking process bears watching. Since the mid 1980s, the CERCLA legislation has required that mining companies maintain evidence of financial responsibility. It did not specify what that responsibility ought to look like, though. It was not until 2008 that the EPA was forced to develop regulations defining this responsibility after a lawsuit by the Sierra Club, Great Basin Resource Watch, Amigos Bravos, and Idaho Conservation League.
The judge’s decision in this case mandates that the EPA set a schedule for the rulemaking process and that it will develop a rule. The court order does not specify what sort of rule the EPA must make, only that it do so. Industry observers hope that under Pruitt, this means that the EPA will take a light hand. After a rule has been established, it could potentially be challenged again in court by the environmental groups.
Follow Erin on Twitter.