1. www.alston.com EPA’s New Financial Assurance Guidance: Will EPA Get More Than it Bargained for? ABA Joint CLE - Park City, Utah January 23, 2016 Sarah Babcock

2. EPA Financial Assurance Guidance  Issued April 2015  Largely a compilation of existing policies  Notable changes:  Emphasis on liquidity  More HQ involvement  Apparent desire for nationwide consistency

3. Financial Assurance Basics  Intended to ensure adequate funding for completion of work  Under CERCLA, generally required for PRP-led response actions  Authority to impose FA under CERCLA is unclear  Six types of available instruments; third-party provided or self- insurance  FA requirements are memorialized in UAO or settlement document (CD or AOC)

4. Types of FA  Third-Party instruments:  Surety Bond  Letter of Credit  Trust Fund  Insurance Policy  Self-Insurance:  Corporate Guarantee  Financial Test

5. Financial Assurance Basics  Financial Assurance is often:  Duplicative or redundant  Based on estimated cost of all required work  Expensive

6. EPA Authority to Require FA  Unlike RCRA, no explicit authority under CERCLA  108(b) contains mandate for potential future releases, not removal or remedial actions  Subject of litigation (In re: Idaho Conservation League, No. 14-1149 (D.C. Cir.)) and EPA rulemaking

7. EPA Authority to Require FA  FA as “agreed-to” term in settlement agreements  Unilaterally mandated in UAOs  More questionable basis for inclusion

8. “New” FA Guidance - 2015  Background:  Decline in PRP-financed sites over past several years  Government scrutiny, e.g., 2005 GAO Report  Regional flexibility  Reflected in guidance:  Emphasis on protection of Superfund dollars  Increased HQ involvement in FA

9. Key Points in FA Guidance  Liquidity of FA mechanisms  Provide easy access to funds in event of work takeover  More scrutiny of financial test and corporate guarantee mechanisms  Account for all FA obligations entity-wide  Disfavoring of insurance mechanism  Establishment of stand-by trust  Recordkeeping requirements

10. Potential Implications  Some have opined this will lead to:  Less flexibility in negotiating FA  Less regional discretion  More difficult to use “self-insurance” instruments  More agency requests for updates

11. Questions? Sarah Babcock Alston & Bird LLP sarah.babcock@alston.co m 404-881-7632