{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/410/30/#05-overview-and-background","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"410","topic_title":"Asset Retirement and Environmental Obligations","subtopic":"410-30","subtopic_title":"Environmental Obligations","section":{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"410-30-05-1","para":"05-1","html":" This Subtopic provides guidance on accounting for environmental remediation liabilities and is written in the context of operations taking place in the United States; however, the accounting guidance is applicable to all the operations of the reporting entity.
The objective of this Overview and Background Section is to provide an overview of important environmental laws and regulations. It is intended to be nonauthoritative. The summary of legal matters contained in this Section represents an understanding of the legal requirements and practices at the time that these environmental laws were initially enacted. Any references to the various laws, rules, regulations established by others shall not be considered definitive interpretations of such laws, rules, and regulations for any purpose. Laws, rules and regulations may change over time and the standard Financial Accounting Standards Board (FASB) process will not update the Codification for such changes. The FASB assumes no responsibility for the accuracy of the legal guidance included here. Therefore, users must evaluate the current laws, rules, and regulations.
Although this Section focuses on both state and federal U. S. laws and regulations, environmental considerations are also important for foreign operations. Environmental laws and regulations in many countries are similar to U. S. laws. The legal and regulatory climates in other countries are evolving. Regardless of whether the host countries' environmental laws are as stringent as those in the United States, entities can often be held liable for environmental damages under a variety of nonenvironmental statutes and broad legal theories.
This Section is organized as follows:
- a
Environmental remediation liability laws
- b
Laws intended to control or prevent pollution
- c
Other federal statutes
- d
Potentially responsible parties
- e
Strict liability
- f
Joint and several liability
- g
Mitigation of strict, joint and several, and retroactive liability
- h
Costs associated with remediation
- i
Environmental loss contingencies.
The first kind of environmental law, environmental remediation liability laws, includes individual statutes as well as response provisions in other statutes. The most important of these are the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and the Reauthorization Act of 1986, which together are referred to as Superfund, and the corrective action provisions of the Resource Conservation and Recovery Act of 1976. Under Superfund's current broad liability provisions, the U.S. Environmental Protection Agency may order liable parties to remediate sites or use Superfund money to remediate them and then seek to recover its costs and additional damages. Similarly, under the corrective action provisions of the Resource Conservation and Recovery Act of 1976, the Environmental Protection Agency may order \"facilities that treat, store, or dispose of hazardous waste\" to clean up releases of hazardous waste constituents associated with past or ongoing practices. Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 in 1980 to facilitate the remediation of abandoned waste sites. The Comprehensive Environmental Response, Compensation, and Liability Act established a program to identify sites where hazardous substances have been or might be released into the environment; to ensure that they are remediated by responsible parties or the government; to compensate the United States, states, municipalities, and tribes for damages to natural resources; and to create a procedure for claims against responsible parties by parties who have cleaned up sites or spent money to restore natural resources. The Resource Conservation and Recovery Act provides comprehensive federal regulation of hazardous wastes from point of generation to final disposal. All generators of hazardous waste, transporters of hazardous waste, and owners and operators of hazardous waste treatment, storage, or disposal facilities must comply with the applicable requirements of the statute. Many states have also enacted laws that are similar to the federal statutes. Furthermore, under certain federal statutes, such as the Resource Conservation and Recovery Act of 1976, states are allowed to promulgate regulations to implement federal programs as long as the state law is at least as stringent as the federal law. In most such cases, states are free to enact more stringent provisions. Environmental laws of the second kind are intended to control or prevent pollution and are directed at identifying or regulating pollution sources or reducing emissions or discharges of pollutants. There are many statutes that regulate sources of pollution, including the pollution control provisions of the Resource Conservation and Recovery Act of 1976 (solid and hazardous wastes), the Clean Water Act (discharge of pollutants into the waters of the United States and to publicly owned treatment works), and the Clean Air Act (emission of pollutants into the atmosphere). Other examples are the Emergency Planning and Community Right-to-Know Act and the Pollution Prevention Act of 1990.
The pollution control provisions in Chapter 3 of the Resource Conservation and Recovery Act of 1976 provide for cradle-to-grave management standards for hazardous wastes. Section 7003 of the Resource Conservation and Recovery Act of 1976 also authorizes the Environmental Protection Agency to conduct removal actions, seek affirmative injunctive relief, and maintain cost-recovery actions where an imminent and substantial endangerment to the public health or welfare or to the environment is determined to exist. Much like under Superfund, one who has contributed to the disposal of waste that is causing an imminent and substantial endangerment can be required to perform or pay for associated remediation under section 7003. The Resource Conservation and Recovery Act of 1976 also requires the Environmental Protection Agency to regulate underground storage tanks. Most states have enacted their own underground storage tank regulations as well. The Clean Air Act provides comprehensive federal regulation of all sources of air pollution. Amendments to the Clean Air Act in the 1990s are designed to address issues such as acid rain, urban air pollution, toxic air pollutants, and ozone-depleting chemicals. The major provisions of the Clean Air Act amendments require emissions reduction in the electric utility industry, operating permits for existing facilities, an expansion of the air toxics program to regulate a large number of toxic air pollutants, and new source categories (including smaller sources, such as dry cleaners).
The Clean Water Act provides comprehensive federal regulation of all sources of water pollution. The act authorizes cleanup, injunctive, and cost-recovery actions where an imminent hazard is caused by pollution. It also prohibits the discharge of oil and other hazardous substances to the navigable waters of the United States, imposes a criminal penalty for failure to notify the appropriate entity of such discharges, and provides for citizen suits. Most states have assumed enforcement of the Act within their borders through state regulations that correspond to the federal regulations related to the control or prevention of pollution of water.
There are a variety of other statutes that relate to environmental matters. Two of the more significant statutes are the Emergency Planning and Community Right-to-Know Act and the Toxic Substances Control Act.
The Emergency Planning and Community Right-to-Know Act requires facilities that have certain quantities of extremely hazardous substances to notify their state emergency response commission that they are subject to the emergency planning requirements of the Superfund Amendments and Reauthorization Act of 1986. They must also report releases to the local emergency planning committee. In addition, facilities that store chemicals over specified threshold amounts must submit material safety data sheets, or their equivalent, to the appropriate local emergency planning committee, the state emergency response commission, and the fire department with jurisdiction over the facility.
The Toxic Substances Control Act regulates the manufacture, processing, and distribution in commerce of chemical substances and mixtures capable of adversely affecting health or the environment. The Toxic Substances Control Act may require testing and may impose use restrictions, along with requirements for the reporting and retention of information on the risks of Toxic Substances Control Act- regulated substances. Regulations promulgated under the Toxic Substances Control Act also govern the manufacturing, processing, and distribution in commerce of polychlorinated biphenyls and asbestos.
Superfund places liability on the following four distinct classes of responsible parties: - a
Current owners or operators of sites at which hazardous substances have been disposed of or abandoned
- b
Previous owners or operators of sites at the time of disposal of hazardous substances
- c
Parties that \"arranged for disposal\" of hazardous substances found at the sites
- d
Parties that transported hazardous substances to a site, having selected the site for treatment or disposal.
This liability is imposed regardless of whether a party was negligent, whether the site was in compliance with environmental laws at the time of the disposal, or whether the party participated in or benefited from the deposit of the hazardous substance. Parties that disposed of hazardous substances many years ago—including the years preceding the enactment of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 —at sites where there is, was, or may be a release into the environment, may be liable for remediation costs. The courts have interpreted the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 to impose strict liability. Thus, a waste generator that disposed of its waste at approved facilities, in accordance with all then-current requirements, having exercised \"due care,\" would nevertheless be liable. Further, a waste generator that is responsible for a small percentage of the total amount of waste at a site may be held liable for the entire cost of remediating the site. Also noteworthy is that wastes need not be hazardous wastes for there to be environmental remediation liability. If the waste generator \"arranged for disposal\" of wastes containing hazardous substances (at any concentration level and regardless of whether the substances were defined as, or known to be, hazardous at the time of disposal), and a \"release\" of hazardous substances has or could occur, the waste generator could be subject to environmental remediation liability.
Hazardous substance is a much broader term than hazardous waste. It includes any substance identified by the Environmental Protection Agency by regulation, pursuant to a number of federal statutes. Covered, for example, are substances considered to be toxic pollutants under the Clean Water Act or hazardous air pollutants under the Clean Air Act. The various lists of hazardous substances identified by the Environmental Protection Agency contain more than one thousand chemicals and chemical compounds.
The possibility of becoming subject to liability for environmental remediation costs associated with past waste disposal practices based on strict liability can affect transactions involving the acquisition or merger of an entity or the purchase of land.
Through Environmental Protection Agency initiated legal action, liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 may be joint and several. If a potentially responsible party can prove, however, that the harm is divisible and there is a reasonable basis for apportionment of costs, the potentially responsible party may ultimately be responsible only for its portion of the costs. In order to mitigate the potentially harsh effects of the strict, joint and several, and retroactive liability scheme, however, Superfund does permit responsible parties to sue other responsible parties to make them contribute to the cost of the remediation or to recover money spent on remediation.
Costs to a potentially responsible party may include cleanup costs (containment, removal, remedial action), enforcement costs (for example, legal), government oversight costs, and natural resource damages. Though the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 does not provide for personal injury or property damage suits, suits for injury to health or property (referred to as toxic torts) may also be brought by third parties under various legal theories. There is a growing specter of liability for natural resource damages under the Superfund laws. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 authorizes the recovery of damages for injury to, destruction of, or loss of natural resources, including reasonable costs for assessing such injury resulting from a release of a hazardous substance. Natural resource damage claims include actual restoration costs and lost use values and may in the future include nonuse values, such as the intrinsic public value of protecting or restoring resources that may not be used but are valuable for their mere existence. Additional costs can include a remedial investigation and a feasibility study that together generally take a minimum of two years to complete and, depending on factors such as the types of hazardous substances, soil formations, and number of parties involved, may take more than five years. The Environmental Protection Agency oversees the progress of the remedial investigation and feasibility study, and completion is sometimes performed in stages. After Superfund site remedial action is completed, activities must be conducted at the site to ensure that the remedy is effective and operating properly. For example, after a system to pump and treat groundwater is constructed (remedial action), the system must be operated and maintained. In addition, the Environmental Protection Agency may require postremediation monitoring. These operation and maintenance activities may continue for 30 years or longer.
Although environmental remediation liabilities is not one of the examples discussed in paragraph 450-20-05-10, environmental remediation liabilities are loss contingencies, and the discussion in paragraphs can be useful in understanding the requirements of Subtopic 450-20 as they relate to environmental remediation liabilities.