Financial Responsibility For Underground Storage Tanks: A ...

United States Environmental Protection Agency

Solid Waste And Emergency Response 5401G

EPA 510-B-00-003 January 2000 oust/

Financial Responsibility For Underground Storage Tanks: A Reference Manual

Overview of Financial Responsibility (FR) Requirements

Explanation Of How Each FR Mechanism Works

Owner And Implementing Agency Responsibilities For Each FR Mechanism

Glossary

Printed on Recycled Paper

Disclaimer

This document provides guidance to State and EPA personnel in understanding and reviewing financial responsibility documentation used to comply with the Federal financial responsibility regulations [40 CFR Part 280, Subpart H]. It is intended solely for the education and assistance of State and EPA personnel. This document is not a substitute for EPA regulations nor is it a regulation itself. This, it does not impose legally binding requirements on EPA, States, or the regulated community.

The Web sites and other non-EPA references are for informational purposes only and we cannot guarantee the accuracy of the information.

TABLE OF CONTENTS

Page 1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. OVERVIEW OF FINANCIAL RESPONSIBILITY REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . 5

3. FINANCIAL RESPONSIBILITY USING THE FINANCIAL TEST OF SELF INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

4. FINANCIAL RESPONSIBILITY USING THE CORPORATE GUARANTEE . . . . . . . . . . . . . . . 51

5. FINANCIAL RESPONSIBILITY USING INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

6. FINANCIAL RESPONSIBILITY USING SURETY BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

7. FINANCIAL RESPONSIBILITY USING IRREVOCABLE STANDBY

LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

8. FINANCIAL RESPONSIBILITY USING STATE-REQUIRED MECHANISMS . . . . . . . . . . . . 147

9. FINANCIAL RESPONSIBILITY USING STATE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

10. FINANCIAL RESPONSIBILITY USING TRUST FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

11. USING STANDBY TRUST FUNDS WITH OTHER MECHANISMS TO DEMONSTRATE

FINANCIAL RESPONSIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

12. FINANCIAL RESPONSIBILITY USING THE LOCAL GOVERNMENT

BOND RATING TEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193

13. FINANCIAL RESPONSIBILITY USING THE LOCAL GOVERNMENT

FINANCIAL TEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

14. FINANCIAL RESPONSIBILITY USING A LOCAL GOVERNMENT OR STATE

GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229

15. FINANCIAL RESPONSIBILITY USING A LOCAL GOVERNMENT FUND . . . . . . . . . . . . . . 251

16. OTHER FINANCIAL RESPONSIBILITY MECHANISMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267

GLOSSARY OF TERMS RELATED TO UST FINANCIAL ASSURANCE . . . . . . . . . . . . . . . . . . . . . . 293

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1. INTRODUCTION

Subpart H of the federal underground storage tank (UST) regulations requires UST owners and operators to demonstrate financial responsibility (FR) -- the ability to pay for cleanup or third-party liability compensation that results from a release from an UST. FR ensures the timely completion of corrective action and third-party compensation and thus reduces the risk to human health and the environment posed by leaks. UST FR also may provide an incentive for operating practices that can prevent leaks. The purpose of this Manual is to provide a comprehensive reference on the federal UST FR program that states and EPA regions can use to learn about the various FR mechanisms. This Manual also can assist them in reviewing FR documentation.

State agencies are primarily responsible for ensuring compliance with all aspects of the UST regulations, including FR. State inspectors are generally technical experts with little experience in financial or legal matters. This Manual addresses their need for assistance in understanding and reviewing FR mechanisms. While there are some basic explanations of the various FR mechanisms available, including materials prepared by the State of Arizona, there is no published source for a comprehensive discussion of the FR mechanisms.

NOTE: This Manual applies only to federal UST FR requirements under Subtitle I of RCRA. State UST FR requirements may mirror the federal requirements or may differ from them. Where there are similarities to the federal UST FR requirements, this Manual shoud be useful for state UST FR requirements. There also are several other state and federal FR programs for environmental clean-up and compensation unrelated to USTs. These programs all contain unique features. Although there may be some common elements among these FR programs, readers should not assume that this UST FR Manual is applicable to other FR programs.

EPA anticipates that if state funds are discontinued, questions will arise about the other options for demonstrating FR. Because most of these options are creative adaptations of mechanisms typically used in other ways, there are few sources of information about them, aside from the regulations themselves and the accompanying preambles published in the Federal Register. This Manual does more than simply compile existing information in one place. The Manual organizes the information according to its relevance for owners or operators, for federal and state implementing agencies, and for providers of FR, respectively. The Manual also draws upon FR implementation and training experience and offers opinions and perspectives.

November 30, 1999

CHAPTER 1: INTRODUCTION

Page 1

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In order to avoid copyright disputes, this page is only a partial summary.

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