Double Jeopardy

Bank bailouts, insurance company bailouts, auto company bailouts—right up to this summer's "Cash for Clunkers" program, federal dollars have been flowing quite freely over the past year or so to help out various industries and individuals.

So, the Feds must have some program in the works to help out struggling finishers, right? Right? (Cue the sound of crickets chirping, or maybe an image of a tumbleweed blowing forlornly across an empty lot.)

In other words, no, there's no such plan on the horizon. In fact, a proposal from the U.S. Environmental Protection Agency could present a major new financial hardship for many finishing shops.

According to the National Association for Surface Finishing (NASF), the agency has targeted metal finishers and chemical manufacturers on a short list that it will examine for a new Superfund regulatory mandate by the end of this year. The new mandate would impose Superfund financial assurance requirements for finishers and require companies to secure and maintain evidence of financial responsibility for potential contamination cleanup in the event of bankruptcy.

NASF says EPA plans to complete and publish in the Federal Register by December a notice addressing how it plans to impose financial responsibility requirements under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, more commonly known as Superfund) of 1980. Section 108(b) of the statute requires some facilities to establish and maintain evidence of financial responsibility in the event a cleanup ever becomes necessary at their site. The level of financial responsibility required is based on the degree and duration of risk associated with production, transportation, treatment, storage or disposal of hazardous substances at the facility.

The same section also requires EPA to publish a notice of the classes for which financial responsibility requirements will be first developed, and this is where things could get ugly for some finishers. Both finishing shops and chemical suppliers could be required to provide bonds, irrevocable letters of credit or other financial instruments to ensure they could finance cleanup costs in the face of bankruptcy or other financial adversity.

For me, this brings to mind the "double jeopardy" clause of the Fifth Amendment. If it comes to pass, finishers will not only have to comply with all current environmental regulations—something most shops do simply as a matter of course—but they will also have to guarantee up front that they can pay for any cleanup that may result from some future disaster.

The idea of this potentially devastating new financial requirement is being floated at a time when some companies are still having difficulty obtaining lines of credit just to keep their businesses operating. A reasonable person might ask, "How are finishers supposed to fulfill their new financial obligations if this becomes reality?"

We should know more about the answer to that question over the next few months. Stay tuned.