San Francisco, CA —

A federal court has ruled that the U.S. Environmental Protection Agency must close a loophole that — for more than 25 years — has made it easy for mining companies, coal ash dumps, and a host of other polluting industries to skip out on costly cleanups by declaring bankruptcy. The case concerned EPA’s failure to issue “financial assurances” standards that ensure that polluting industries will always remain financially able to clean up dangerous spills and other contaminated sites.

Attorneys Lisa Evans and Jan Hasselman with the public interest law firm Earthjustice represented the Sierra Club and environmental groups in New Mexico, Nevada, and Idaho in the case, decided late yesterday by U.S. District Judge William Alsup, based in San Francisco.

Environmental advocates hailed the decision as a victory that paves the way for new federal rules that would require hardrock and phosphate mine operators, metal finishers, wood treatment facilities, and other industries to post bonds covering the cost of potential future cleanups.

“By not promulgating financial assurance requirements, EPA has allowed companies that otherwise might not have been able to operate and produce hazardous waste to potentially shift the responsibility for cleaning up hazardous waste to taxpayers,” Judge Alsup wrote in the decision. The undisputed evidence before the Court demonstrated that such financial assurance requirements result in better environmental protection and faster and more thorough cleanups.

When the Superfund law was passed in 1980, lawmakers gave EPA three years to start putting financial assurance regulations in place. More than 25 years later, these regulations remain unwritten. Under the terms of the decision, EPA has until May 4 to identify the industries that will be first subject to these financial assurance requirements.

“This victory paves the way for the new administration to correct a longstanding environmental problem while saving taxpayers billions of dollars at the same time,” said Earthjustice attorney Jan Hasselman, who argued the case before Judge Alsup. “New standards will push companies that deal with toxic substances towards more responsible practices.”

Perhaps the industries most impacted by the decision are hardrock and phosphate mining. The Environmental Protection Agency (EPA) ranks the mining industry as the nation’s top toxic polluter, reporting more toxic releases annually than any other industry. The industry generates more than 2 billion pounds of toxic waste each year and has polluted more than 40 percent of western watershed headwaters. Without financial assurance regulations, it has been easy for mine operators to walk away from sites contaminated with cyanide, lead, arsenic, mercury and other toxins, and they have done so time after time.

In 2004, the EPA reported that 63 hardrock mining sites were listed as Superfund sites on the agency’s National Priority List (NPL), EPA’s list of the most contaminated Superfund sites, with an estimated cleanup cost of $7.8 billion. Of that, $2.4 billion was expected to come from taxpayers. Another 93 mining sites were being eyed for inclusion on the Superfund NPL list.

One of those Superfund sites is the Molycorp/Chevron molybdenum mine near Questa, New Mexico. The Taos-based organization Amigos Bravos has long called for Molycorp to take responsibility for the toxins it released during the mine’s 40-year history, contaminating the Red River and nearby groundwater aquifers. In 2002, after much of the damage was already done, the company agreed to set aside $152 million for cleanup. But total cleanup costs could reach $400 million, and observers wonder if the scale of destruction would have been less if Molycorp knew at the outset it would be held responsible.

“This victory will encourage mine operators to act more responsibly, hopefully preventing future problems in New Mexico,” said Brian Shields, executive director of Amigos Bravos. “Now that companies know that they are responsible for cleaning up after themselves, there’s a strong incentive for them to improve their waste management practices.”

Perhaps the most far-reaching example of irresponsible mining operations is Asarco, which declared bankruptcy in 2005. The century-old mining and smelting company left behind 94 Superfund sites in 21 states, with a total cleanup cost estimated at more than $1 billion, far more than the $62 million trust the company set aside for cleanup.

In Idaho, Asarco is among mining companies responsible for contamination spread across the 1,500-square-mile Coeur d’Alene River basin. Cleanup work is likely to last for generations. EPA has estimated the cost of the first 30 years at $359 million.

The Idaho Conservation League is also watching prospective cleanup costs mount from 17 contaminated sites caused by phosphate mining.

“We’re heartened by this victory and hope that it will help relieve taxpayers of a financial burden and keep our rivers and streams clean,” said Justin Hayes, Program Director of the Idaho Conservation League.

In Nevada, 27 mining companies had declared bankruptcy as of July 2000, creating some of the country’s highest potential taxpayer liability.

“This victory comes at a crucial time for communities impacted by Nevada’s mining industry,” said John Hadder, executive director of Great Basin Resource Watch. “The gold mine bankruptcies from the 1990s left our state riddled with contaminated sites. But from now on, we hope to benefit from the stronger protections brought by this court win.”

Another industry potentially impacted by the decision are coal-fired power plants, responsible for generating 131 million tons of toxic coal ash per year. The industry has been in the spotlight in the wake of immense toxic spills at two Tennessee Valley Authority sites. When coal ash is dumped in mines and waste ponds, financial assurance for cleanup is rarely required.

“We hope that the municipal utilities and coops that now own most of the Peabody Prairie State Energy power plant in downstate Illinois take notice of this decision,” said Kathy Andria, Waste & Recycling chair of the Illinois chapter of Sierra Club.  Prairie State plans to dump 60 million tons of coal combustion waste on a 4,000-acre site of old strip-mined land near farms and homes. “After the recent disasters in Tennessee and Alabama, we want to make sure Peabody and its partners have the cash to pay for any problems that could arise in the future. More importantly, we hope that cash will serve as an incentive for them to act responsibly to keep surrounding communities and water resources safe.”

Read the decision (PDF)