Background
Action Taken
Today
Discussion
United States
Environmental Protection
Agency
Solid Waste and
Emergency Response
Washington, DC 20460
OS-420 (WF)
EPA510-F-93-010
February 1993
Office of Underground Storage Tanks
Environmental
Fact Sheet
Additional Mechanisms For Local
Government Entities Owning Or
Operating Petroleum Underground
Storage Tanks: Final Rule
Subtitle I of the Resource Conservation and Recovery Act (RCRA)
requires owners and operators of underground storage tanks (USTs) to show
through insurance coverage or other acceptable financial mechanisms that they
can pay for cleanups and third-party damages resulting from any leaks that may
occur. In the final regulations on financial responsibility that were published on
October 26,1988, EPA stated that it would accept a variety of mechanisms as
meeting this criteria. These mechanisms included a corporate test of self-
insurance, a letter of credit, a surety bond, private insurance, and a guarantee.
In the intervening years, the Agency has learned that many of these mecha-
nisms (e.g., the corporate self-insurance test) are not appropriate for use by
local governments. As a result of this new information, the Agency has
developed this final rule to establish four alternate mechanisms that local
governments may use to demonstrate compliance with the financial responsibil-
ity regulations.
Local governments that own or operate USTs were originally required to
comply with the financial responsibility regulations by October 26,1990. The
Agency later extended this compliance date to one year past publication of this
final rule describing additional financial responsibility mechanisms for local
governments.
On February 18,1993, EPA promulgated additional assurance mechanisms for
use by local government entities that own or operate petroleum underground
storage tanks. These mechanisms will help local governments comply with the
UST financial responsibility requirements and add to the mechanisms previ-
ously identified in 53 FR 43322. The compliance date for local governments is
February 18,1994.
The additional mechanisms allowed are:
Bond Rating Test - General purpose governments (e.g., cities, counties) with
outstanding issues of general obligation bonds rated by Standard & Poor's or
Moody's as "investment grade" will be allowed to self-insure. In addition,
special districts (e.g., school districts, airport authorities) that do not have the
authority to issue general obligation bonds may also self-insure if they have
outstanding revenue bonds rated "investment grade." To be eligible to use the
test, a local government must have $1 million or more in currently outstanding
bonds.
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Rationale
Contact
Worksheet Test - A financial worksheet has been developed that recognizes
the unique financial structure of government entities. Local governments can
use readily available financial data to complete the worksheet anc culate a
score. Governments with scores at or above a selected level will tx illowed to
self-insure.
Governmental Guarantee - A local government will be allowed to obtain a
guarantee from its state or another local government with which it can demon-
strate a "substantial governmental relationship." In order to serve as guarantor,
a local government must qualify using the bond rating or worksheet test
Fund Balance Test - Local governments may self-administer an UST response
fund if appropriate safeguards are met
Because several of the mechanisms contained in the original financial respon-
sibility rule promulgated on October 26,1988 do not apply to local govern-
ments (e.g., the corporate test for self-insurance), the Agency has developed a
rule which addresses the unique financial characteristics of local governments,
and which allows financially capable entities the opportunity to self-insure.
For additional information, contact EPA's RCRA/Superfund Hotline, Monday
through Friday, 8:30 a.m. to 7:30 p.m. EST. The national toll-free number is
800 424-9346; for the hearing impaired, the number is TDD 800 553-7672.
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