Report: EPA Lacks Control Over Site Cleanup Programs

While the federal government has enacted several measures throughout the past several decades to ensure industrial facility operators clean up after themselves, a recent report from the U.S. Environmental Protection Agency's inspector general suggests some of these programs could contain some potentially catastrophic flaws.

In the late 1970s and early 1980s, Congress passed two measures to hold companies accountable for the substances they were producing and releasing into the environment: the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as Superfund; and the Resource Conservation and Recovery Act (RCRA).

Regulations under both measures require certain companies, such as coal and chemical manufacturers and processors, and facilities that treat, store or dispose of waste, to obtain financial assurance to ensure they can afford the costs of site cleanup and maintenance.

If financial assurance is not obtained or is insufficient, the EPA has the authority to step in and could provide taxpayerfunded resources to clean up a site and protect public health if significant risks or an imminent threat exists.

"That's one of the things that makes the programs so strong," said Marc Glass, the principal overseeing environmental monitoring and remediation for Downstream Strategies. "If there's nobody accountable or available or financially solvent enough to pay for environmental liabilities that they've created, regulatory agencies have mechanisms to take over those cleanups."

The actions were meant to keep the burden of these cleanup projects off taxpayers' shoulders, but the recent IG report, published March 31, warns that these programs are being mismanaged, placing taxpayers at risk for having to take on these costs.

"When polluters do not pay the full cost and the government must step in, the financial burden shifts from the responsible private party onto taxpayers," the report states.

Data Gaps

The inspector general report, which is based on an audit that began in June 2015, found that data quality deficiencies and a lack of internal controls prevent the EPA from properly managing its financial assurance programs for RCRA and CERCLA.

More specifically, the report said the EPA data systems used for financial assurance, which were developed primarily for tracking cleanup progress rather than monitoring financial assurance compliance, are ineffective in tracking and monitoring compliance with financial assurance nationwide. Additionally, in evaluating the EPA's progress in reducing taxpayer liabilities from financial assurance instruments, the agency said it found "significant data gaps and invalid financial assurance instruments."

Altogether, the report said EPA data for corporate self-insurance contain an estimated $577 million in expired financial assurance instruments and more than $6 billion in financial assurance that is insufficient or not provided. These flaws, the IG argued, present environmental and financial risks to the EPA.

EPA disagreed with the IG's estimated numbers and cost of invalid financial assurance instruments, arguing that the instruments exist at the state or regional level but have not been reported to the EPA's RCRA and Superfund tracking systems, according to the report.

"While conceivable, this does not change the fact that there is no evidence available that adequate financial assurance exists," the inspector general responded. "Without evidence of valid financial assurance instruments for billions of dollars in estimated cleanup costs, there is a risk that taxpayer dollars could be used if responsible parties do not have the necessary funds to cover cleanups at contaminated facilities when needed."

EPA also disagreed with the IG's "portrayal of risk posed by data gaps" in the agency's financial assurance systems, according to EPA press secretary Melissa Harrison.

"EPA, through the Office of Enforcement and Compliance Assurance and the Office of Land and Emergency Management programs, has a range of tools and methods to manage site cleanup and secure financial assurance for cleanups," Harrison said, adding that the agency will continue to evaluate the issues raised in the report, and "believes there are opportunities to improve EPA's RCRA and CERCLA financial assurance tracking systems."

Losing Funds

With corporate bankruptcy making regular headlines in recent years, the inspector general noted, the EPA needs to be able to accurately track financial assurance data to avoid being stuck with the costs of cleaning up after companies that lack sufficient funding.

"At the point when a company files for bankruptcy, it can be too late for the EPA to take steps to recover the necessary cleanup funds," the report stated, citing one example in particular.

Asarco, an Arizona-based copper mining and processing company that filed for chapter 11 bankruptcy in 2005, settled with the EPA and other agencies for a total of $1.79 billion in 2009. At one Asarco site in Missouri, the EPA received approximately $29 million from the Asarco bankruptcy. However, the estimated cleanup cost of cleaning up the site far exceeded the settlement amount, reaching about $108 million.

"Without necessary funds from the responsible party at this and other sites, the EPA and, ultimately, the taxpayers will pay the cost of cleanup," the report stated. "This situation overall can result in delayed cleanups, longer human and environmental exposures to unsafe substances, and longer restrictions on public use of needed natural resources.

"Although the EPA performs some ad hoc reviews of the financial health of companies, it does not have a systematic means of quickly identifying those in trouble," the inspector general added.

Glass also agreed that the high rate of bankruptcy poses a "real risk" to the viability of these programs.

"If a polluter agrees to voluntarily engage in a cleanup and all the sudden go into bankruptcy or doesn't have enough money to complete it, the EPA is left on the hook," Glass said. "In order for these programs to be economically and ecologically viable in the future, there needs to be funding to address the disturbance or pollution."

While Glass said the component of the programs that allows the government to utilize taxpayer money to mitigate immediate health risks is important, he also stressed the importance of accountability.

"Most people would agree the person responsible for creating it should be the one paying, sometimes the money's not there; that means state and federal agencies will have to do it," he said.

Coal Troubles Transfer

While coal mining companies don't fall under RCRA or Superfund authorities, the report also noted that recent coal industry bankruptcies have demonstrated that companies that are struggling financially may eventually be unable to pay off their debts - specifically citing Appalachian coal producers Arch Coal and Alpha Natural Resources.

"Recent bankruptcies in the coal mining industry demonstrate how companies may be unable to pay obligations, including cleaning up sites," the report stated. "This underscores the importance of financial assurance to safeguard the use of taxpayer-funded resources."

Alpha caught backlash from West Virginia environmentalists in December, after a federal bankruptcy judge approved an agreement with the company and the West Virginia Department of Environmental Protection to resolve the company's reclamation obligations.

The Ohio Valley Environmental Coalition, Sierra Club and the West Virginia Highlands Conservancy filed an objection to the proposal, arguing that Alpha should be required to provide substitute reclamation bonds backed by a third-party financial institution.

West Virginia regulators have said the high rate of bankruptcy filings does pose a threat to the state's reclamation funds, they're not panicking just yet.

"A mine bankruptcy doesn't automatically mean a mine operator won't fulfill its reclamation obligations," said DEP spokeswoman Kelley Gillenwater.

West Virginia also operates a Special Reclamation Fund, which is funded by a tax on coal companies to cover reclamation costs in cases where a mine operator forfeits its bond or the bond amount isn't enough to pay for mine cleanup.

The most recent report from the Special Reclamation Fund Advisory Council suggests the state's reclamation, fuiids will have sufficient capital foftpërate until 2035.