1

JOHN W. SUTHERS

Attorney General

CYNTHIA H. COFFMAN

Chief Deputy Attorney General

DANIEL D. DOMENICO

Solicitor General

STATE OF COLORADO

DEPARTMENT OF LAW

OFFICE OF THE ATTORNEY GENERAL

STATE SERVICES BUILDING

1525 Sherman Street - 7th Floor

Denver, Colorado 80203

Phone (303) 866-4500

February 28, 2011

Jim Berlow

Director, Program Implementation and Information Division

Office of Resource Conservation and Recovery

U.S. Environmental Protection Agency

1200 Pennsylvania Avenue, NW (5303 P)

Washington, D. C. 20004

Phone: (703) 308-0314

RE: CERCLA Financial Assurances: Colorado Division of Reclamation Mining and Safety’s 

Position Regarding Preemption; Suggestions for Drafting the Upcoming Rule

Dear Mr. Berlow, 

Colorado’s Division of Reclamation Mining and Safety (“DRMS”) appreciates the

opportunity to provide preliminary input regarding EPA’s forthcoming financial assurance rule 

for hardrock mining. DRMS administers a robust regulatory program under Colorado’s Mined 

Land Reclamation Act (“MLRA”) (C.R.S. § 34-32-101 et. seq.). The MLRA minimizes the 

adverse impacts of hardrock mining in Colorado by requiring every operator to obtain a permit 

and adhere to rigorous reclamation standards, both during and after the mining activity. Many of 

the MLRA’s reclamation standards are designed to prevent the release of hazardous substances 

into the environment. Each operator must submit a financial warranty sufficient to assure 

compliance with applicable reclamation standards, as incorporated in the operation’s reclamation 

permit. See C.R.S. §34-32-117. 

Financial warranties are essential to DRMS’s ability to effectively regulate hardrock 

mining in Colorado. DRMS understands that EPA is in the process of developing its own 

financial assurance requirements for hardrock mining facilities. EPA’s entry into this field raises 

important questions related to preemption. This letter explains DRMS’s position that MLRA

financial warranties can co-exist with CERCLA financial assurance requirements, and are not the 

type of financial assurances that require preemption. It also provides suggestions intended to help 

EPA satisfy its rulemaking mandate, address important policy issues, and avoid unintended 

negative consequences for state programs such as Colorado’s.1

 1 David Berry, Director of the Colorado Office of Reclamation Mining and Safety, provided letters to EPA on 

October 8 and November 15, 2010, which explain certain technical details of Colorado’s regulatory program. This 

letter builds upon Mr. Berry’s letters in some respects. 

Although this letter is specific to 

Colorado, DRMS believes that it provides viable nationwide solutions to the difficult questions 

raised by EPA’s upcoming rulemaking.
2

THE PREEMPTION ISSUE

CERCLA directs EPA to “promulgate 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.” 42 U.S.C. § 9608(b). This rulemaking directive raises important preemption 

questions related to § 114(d), which states that owners or operators of facilities subject to 

CERCLA financial responsibility requirements “shall not be required under any State or local 

law, rule, or regulation to establish or maintain any other evidence of financial responsibility in 

connection with liability for the release of a hazardous substance from such facility.” 42 U.S.C. § 

9614(d). 

In order to understand the preemption question, we must analyze CERCLA using the 

same rules of construction employed by the courts. When courts consider a question of statutory 

construction, their foremost goal is to effectuate the intent of Congress. To determine intent, 

courts first examine the plain language of a statutory provision, with the presumption that 

Congress “says what it means” and “means what it says.” See Connecticut Nat. Bank v. Germain,

503 U.S. 249, 253-254 (1992). Courts interpret statutes so as to give meaning to every word, 

avoiding interpretations that render any language superfluous. See Montclair v. Randall, 107 

U.S. 147, 152 (1883) (holding that “[I]t is the duty of the court to give effect, if possible, to every 

clause and word of a statute”); Astoria Federal Savings and Loan Ass’n v. Solimino, 501 U.S. 

104, 112 (1991) (holding that statutes are to be construed, where possible “so as to avoid 

rendering superfluous any parts thereof”). Courts analyze specific provisions in light of the 

language and design of the statute as a whole, because “meaning, plain or not, depends on 

context.” King v. St. Vincent's Hosp., 502 U.S. 215, 221 (1991); See also United states v. 

Boisdore’s Heirs, 49 U.S. 113, 122 (1850) (holding that courts should not focus solely on “a 

single sentence or member of a sentence, but look to the provisions of the whole law, and to its 

object and policy”).

When we examine the “plain language” of § 114(d), it is clear Congress intended that 

CERCLA financial assurance requirements would preempt only those state financial assurance 

requirements that are connected with liability for the release of a hazardous substance. As 

instructed by the Montclair and Astoria cases, we cannot gloss over the term “liability.” By 

referring to liability, Congress ensured that the provision would not broadly prohibit states from 

imposing financial assurance requirements in connection with the release of hazardous 

substances, but would only prohibit state financial assurances that are specifically connected to 

liability.

2

 2 It is important to note the incredibly broad definitions of the terms “release” and “hazardous substance.” CERCLA 

defines “release” as including any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, 

escaping, leaching, dumping, or disposing into the environment...” See 42 U.S.C. § 9601(11). CERCLA defines 

“hazardous substance” as including substances designated by CERCLA § 102, CWA § 311(b)(2)(a) and 307(a), 

RCRA § 3001, CAA § 112, and TSCA § 7. See 42 U.S.C. § 9601(14). Over 800 different substances fall within the 

definition of a CERCLA hazardous substance. See http://www.epa.gov/oem/content/hazsubs/cercsubs.htm. If we 

were to ignore the term “liability,” the practical result would likely be the preemption of all state financial assurance 

requirements related to hardrock mining. 

With the presumption that Congress meant what it said, we must avoid interpreting § 

114(d) in such a manner that renders the term liability meaningless.
3

It is also important to examine § 114(d)’s plain language within the broader context of 

the statute. CERCLA’s fundamental statements of policy regarding its relationship to other law

dictate a narrow interpretation of its preemption provisions. Section 114(a), instructs that 

CERCLA “shall not be construed or interpreted as preempting any State from imposing any 

additional liability or requirements with respect to the release of hazardous substances within 

such State.” 42 U.S.C. § 9614(a). Section 302(d) states that “[n]othing in this chapter shall affect 

or modify in any way the obligations or liabilities of any person under other Federal or State law, 

including common law, with respect to the releases of hazardous substances or other pollutants 

or contaminants.” 42 U.S.C. § 9652(d). The Tenth Circuit has held that, in these two statements 

of policy, “Congress clearly expressed its intent that CERCLA should work in conjunction with 

other federal and state hazardous waste laws in order to solve this country's hazardous waste 

cleanup problem.” United States v. Colorado, 990 F.2d 1565, 1575 (10th Cir. 1993). Freestanding and contextual analysis of § 114(d) indicates that Congress intended to preempt only 

those state financial assurances that are connected to liability. 

Having established that Congress intended to preempt only state financial assurances in 

connection with liability, we must now determine what it means for a financial responsibility 

requirement to be “in connection with liability” in the context of CERCLA. CERCLA’s liability 

scheme is retroactive. It allows the federal government and other parties to recover certain 

cleanup costs from potentially responsible parties (“PRPs”) associated with facilities from which 

there has been a release, or a threatened release which causes the incurrence of response costs. 

See 42 U.S.C. § 9607(a). CERCLA also authorizes EPA to order PRPs to perform certain 

remedial actions, subject to severe damages and fines if the order is not obeyed. See 42 U.S.C. § 

9606. Unlike regulatory statutes such as RCRA or Colorado’s MLRA, which proscribe standards 

for planning and operational practices, CERCLA does not impose liability until a release or a 

threatened release causes someone to incur response costs. Accordingly, CERCLA § 114(d) 

preempts only those state financial assurances connected with an operator’s ability to pay for 

response costs caused by the release of a hazardous substance. 

A court has been called upon to consider § 114(d) preemption on only one occasion. In 

Chemclene v. Commonwealth of Pennsylvania, the Pennsylvania Commonwealth Court held that 

federal financial assurance requirements did not preempt state financial assurance requirements 

that were related to hazardous substances but were not connected to an operator’s ability to pay 

for response costs. Chemclene v. Commonwealth of Pennsylvania, 497 A.2d 268 (Pa. Commw. 

1985). In Chemclene, a group of motor carriers claimed that bonds required under the 

Pennsylvania Solid Waste Management Act (“SWMA”) were preempted by CERCLA § 114(d) 

because motor carriers were also subject to federal financial assurance requirements

implemented by the U.S. Department of Transportation (“DOT”) pursuant to CERCLA § 

108(b)(5).3 The Chemclene court denied the preemption claim, reasoning that:

 3 CERCLA § 108(b)(5) provides that financial assurance requirements for “motor carriers” be set by the Motor 

Carrier Act of 1980. Financial assurance requirements under the Motor Carrier Act were implemented by DOT 

through regulations discussed in greater detail below. 
4

The term ‘financial responsibility’ as used in Section 114(d) of CERCLA contemplates 

an insurance program designed to pay the costs of cleaning up accidental spills of 

hazardous waste or hazardous materials and the claims resulting therefrom. In 

contrast, the bond required by Section 505(e) of the SWMA is a compliance bond. Its 

purpose is to insure the performance by a transporter of hazardous waste of all the 

obligations imposed by the SWMA, rules and regulations promulgated by DER, and the 

terms and conditions of the license; it is not intended to cover costs incurred by an 

accidental discharge of hazardous waste.

Chemclene, at 272. The Chemclene case demonstrates that federal financial assurance 

requirements do not prohibit states from using financial assurances as a regulatory tool related to

hazardous substances, so long as those financial assurances are not in connection with an 

operator’s ability to pay for response costs. 

Colorado’s financial warranties do not address an operator’s ability to pay for response 

costs. They assure compliance with reclamation requirements. In this respect, MLRA financial 

warranties are directly analogous to the “compliance bonds” at issue in Chemclene. Under the 

MLRA, reclamation must be conducted, both during and after the mining operation, in 

accordance with a reclamation plan that meets certain performance standards. Many of those 

standards are designed to prevent releases of hazardous substances and prevent adverse impacts 

on surrounding properties. See C.R.S. § 34-32-116 (requiring measures to minimize disturbance

to the hydrologic balance, protect outside areas from damage, and control erosion and attendant 

air and water pollution). MLRA financial warranties assure that DRMS can complete 

reclamation according to those standards if the operator is unwilling or unable. C.R.S. § 34-32-

117(1).

The MLRA addresses response to emergency releases via a mechanism completely 

separate from financial warranties. See C.R.S. § 34-32-122(b)(3) (describing a cash fund for 

release response, funded by grants, donations, and appropriations). MLRA financial warranties 

are a vital part of a regulatory program designed to prevent the release of hazardous substances, 

but they do not assure an operator’s ability to pay for potential response costs. Accordingly, 

DRMS does not believe that MLRA financial warranties will be preempted by EPA’s upcoming 

financial assurances rule.

FINANCIAL ASSURANCE RULEMAKING

Throughout its correspondence with the states, EPA has indicated that it hopes to fulfill 

its rulemaking mandate in the most direct and efficient manner possible. To that end, DRMS 

suggests that the upcoming rulemaking addresses only those requirements necessary to assure 

that operators of hardrock mining facilities demonstrate their ability to pay for response costs. 

DRMS believes that this strategy is not only the most direct and efficient way of satisfying 

EPA’s rulemaking mandate, but is also the most effective solution to avoid unintended negative 

consequences for the states. Like Colorado, most other states use financial assurances to secure 

reclamation obligations.

4

 4 DRMS is aware of only one state, South Dakota, which requires financial assurances in connection with an 

operator’s ability to pay for response costs.

By focusing on operators’ ability to pay for response costs, EPA can 
5

fill a discrete gap, complement existing state programs, and provide an additional layer of 

protection for the taxpayer. 

EPA’s § 108(b) mandate is to create a program whereby operators provide “insurance” 

against potential response costs. Section 108(b) financial assurances are not intended to assure 

compliance with regulatory requirements or operational practices; they are intended to protect 

the Superfund, and ultimately federal taxpayers, from incurring response costs. Congress has 

directed EPA to consult sources of information that will be helpful in developing an insurance 

model rule.5 See 42 U.S.C. § 9608(b)(2) (instructing EPA to consider “the payment experience 

of the Fund, commercial insurers, court settlements and judgments, and voluntary claims 

satisfaction”). Consistent with the insurance concept, Congress provided that parties may assert

claims directly against financial warrantors if there is no financially-viable PRP. See 42 U.S.C. § 

9608(c)(2). Elsewhere in § 108, Congress made direct reference to liability coverage, requiring 

operators of vessels to submit financial assurances “to cover the liability prescribed...” and “to 

cover such liabilities recognized by law.” 42 U.S.C. §9608(a). Each of these factors indicates 

that Congress intended for § 108 financial assurances to serve as an insurance policy rather than 

to ensure compliance with an undefined set of regulatory requirements or operational practices.

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It would be a mistake to borrow financial assurance models from regulatory contexts such as 

RCRA and lose sight of the ultimate objective of § 108 financial assurances.

An insurance model rule is not only the most appropriate means of accomplishing EPA’s 

statutory directive - it also allows EPA to avoid costly facility-by-facility analysis. Regulatory 

financial assurances require enormous expertise, and must be established by fact-intensive caseby-case review.

7 In contrast, insurance model financial assurances can be accomplished using 

industry-wide risk data that may already be available from the various sources that Congress has 

instructed EPA to consider. The financial responsibility requirements for motor carriers 

implemented by DOT (as delegated by CERCLA § 108(b)(5)) provide a helpful example. DOT 

has promulgated implementing regulations that define “financial responsibility” as financial 

reserves (e.g., insurance policies or surety bonds) sufficient to cover public liability.” 49 C.F.R. § 

387.5. DOT regulations explain that “public liability” includes, among other things:

environmental restoration restitution for the loss, damage, or destruction of natural 

resources arising out of the accidental discharge, dispersal, release or escape into or 

upon the land, atmosphere, watercourse, or body of water of any commodity transported 

by a motor carrier. This shall include the cost of removal and the cost of necessary 

 5 Congress did not direct EPA to consider sources of information that would be helpful to develop a regulatory 

model of financial assurances similar to RCRA or the MLRA. DRMS believes that this provides a significant 

indication of Congress’s intent, as well as a pragmatic reason to align the rulemaking with these sources of helpful 

information. 

6 The Chemclene Court also characterized CERCLA § 108(b) financial assurances as an “insurance program.” 

Chemclene at 272. 7 DRMS calculates the financial warranties that secure MLRA reclamation requirements by developing and 

aggregating task-by-task costs estimates using current reference materials as well as the significant regional 

expertise of its staff. Applicants may submit initial estimates; however, those estimates must be subjected to a 

rigorous review. DRMS is also charged with continuously ensuring the adequacy of financial warranties using the 

same methods. 
6

measure taken to minimize or mitigate damage to human health, the natural environment, 

fish, shellfish, and wildlife. 

49 C.F.R. § 387.5. The minimum levels of financial assurances required to satisfy public liability

are documented in a schedule that references the type of carriage and the commodity transported. 

49 C.F.R. 387.9; See also http://www.fmcsa.dot.gov/forms/print/MCS-90.htm (containing links 

to online forms and guidance). Hardrock mining is clearly more complicated than transportation 

of hazardous substances via motor carrier. Nonetheless, the DOT example demonstrates that 

insurance model financial assurances can be established using industry-wide data and effectively 

implemented without costly case-by-case review. 

An insurance model rule addresses the fundamental problems that have raised the public 

profile of CERCLA financial assurances in recent years. The federal court for the Northern 

District of California cited two significant Government Accountability Office (“GAO”) reports 

in its order directing EPA to publish the notice that led to the upcoming rulemaking. See Sierra 

Club v. Johnson, 2009 WL 482248, 6 (N.D. Cal. 2009). In each report, the GAO criticized

EPA’s failure to adopt CERCLA financial assurance requirements, stating that, “as a result of 

EPA’s inaction, the federal treasury continues to be exposed to potentially enormous cleanup 

costs...” US GAO, Environmental Liabilities: EPA Should Do More to Ensure that Liable 

Parties Meet Their Cleanup Obligations, GAO-05-658 (Aug. 2005). The GAO explained that, in 

the absence of financial assurance requirements, businesses can limit or avoid responsibility for 

liabilities by organizing or restructuring in ways that limit their ability to pay for cleanups or by 

filing for bankruptcy. US GAO, Superfund: Better Financial Assurances and More Effective 

Implementation of Institutional Controls Are Needed to Protect the Public, GAO-06-900T (Jun. 

2006). An insurance model rule prevents operators from avoiding liability by specifically 

addressing an operator’s ability to pay response costs. DRMS encourages EPA to focus on the 

fundamental issues raised in the GAO reports by adopting a targeted rule, rather than adopt

overly-broad requirements that produce less overall benefit by unintentionally undercutting 

states’ ability to implement existing regulatory programs. 

In addition to sound legal and fiscal rationale, there are important federalism 

justifications for an insurance model rule. The standing Executive Order on federalism directs 

federal agencies to consult with and defer to states where possible when formulating policies that 

will have “substantial direct effects on the states.” 64 Fed. Reg. 43255, 43256 (1999). The Order 

further instructs federal agencies to avoid action that “limits the policymaking discretion of the 

states except where there is constitutional and statutory authority for the action and the national 

activity is appropriate in light of the presence of a problem of national significance.” Id. DRMS 

appreciates EPA’s ongoing effort to request and consider the states’ input on the upcoming 

rulemaking. While there can be no doubt that CERCLA financial assurances will address a 

problem of national significance, the statutory directive does not contemplate a rule that would 

overlap with state regulatory programs like the MLRA.

8

 8 President Obama issued a Memorandum for the Heads of Executive Departments and Agencies on May 20, 2009, 

strongly discouraging federal actions that preempt state law. http://www.whitehouse.gov/the-pressoffice/presidential-memorandum-regarding-preemption. Thankfully, EPA has not indicated that it intends to 

purposely preempt state law. Nonetheless, it is worth noting that an overly-broad federal rule could effectively 

disable existing state programs by creating unmanageable ambiguity and litigation burdens. 

A targeted insurance model rule allows 
7

EPA to address important policy issues while avoiding action that could have negative 

federalism implications. In fact, such a rule would likely complement and bolster existing state 

regulatory programs.

SUGGESTIONS FOR DEVELOPING THE RULE

Consistent with the analysis above, DRMS submits the following suggestions for EPA to 

consider in developing its financial assurances rule for hardrock mining. DRMS is aware that the 

following suggestions may be somewhat premature at this early juncture and is happy to 

continue working with EPA as the issues are more fully developed. 

• Include language in the preamble explaining that the rule is intended to assure that all 

operators are able to pay for response costs that could be incurred as the result of a 

release or threatened release of hazardous substance, and is not intended to prevent states 

from imposing financial assurance requirements related to reclamation planned and 

permitted as part of a permitted mining operation. 

• Reference the “insurance” concept described in this letter. 

• Explain the phrase “in connection with liability” by referencing response costs. 

• Avoid using RCRA financial assurances as a template as they represent a regulatory 

approach to financial assurance. 

• Avoid creating or implying standards for reclamation or operational practices. 

• Reference the sources of input listed in CERCLA § 108 when developing standards for 

establishing levels of financial responsibility, as those sources make it clear that the rule 

is intended to provide insurance for response costs.

DRMS sincerely hopes that you will find this letter helpful as EPA moves forward with its 

rulemaking process. DRMS believes that appropriate CERCLA financial assurances can provide 

tremendous value to both the taxpayer and the environment. DRMS hopes that it can serve as a 

helpful resource as we move forward. 

Sincerely,

FOR THE ATTORNEY GENERAL

STEVEN M. NAGY

Assistant Attorney General

Resource Conservation Unit

Natural Resources & Environment

303-866-5049

Email: steven.nagy@state.co.us