n ' -
Wednesday
April-7, 1982
Standards-Applicable 'to-Owners and
Operators of. Hazardous Waste
Treatment, Storage, and Disposal
Facilities; Financial-Requirements :. '
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ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Parts 264 and 265
1SWH-FRL-1942-76]
Standards Applicable to Owners and
Operators of Hazardous Waste
Treatment, Storage, and Disposal
Facilities; Financial Requirements
AGENCY: Environmental Protection
Agency.
ACTION; Revised interim final rules.
SUMMARY! These regulations revise
Interim final regulations that were
promulgated on January 12,1981 [46 FR
2851-66,2877-88). Under the January 12,
1081, regulations owners or operators of
hazardous waste management facilities
had to estimate the costs of closure and
post-closure care of such facilities and
had to assure financial responsibility for
those costs through any of three
mechanisms:
A trust fund
A letter of credit, or
A surely bond. ,
State guarantees or State-required
mechanisms that are equivalent to the
mechanisms specified in the regulations
could also be used to satisfy the
requirements. Today's regulations
provide two additional options that can
be used by owners or operators to
demonstrate financial responsibility.
A financial test which demonstrates
the financial strength of the company
owning the facility (or a parent
company guaranteeing financial
assurance for subsidiaries), or
An insurance policy that will provide
funds for closure or post-closure care.
In addition, specifications for the
mechanisms included in the January 12,
1981, regulations have been modified,
and minor clarifications have been
made to the rules for estimating the .
costs of closure and post-closure care.
These amendments thus deal only
with closure and post-closure financial
assurance requirements. Third-party
liability insurance requirements were
also included in the January 12,1981,
promulgation. They will be the subject
of a separate Federal Register notice to
be published shortly.
DATES: Effective Dates: July 6,1982 for
standards for financial assurance of
closure and post-closure care (40 CFR
264.142-151 except 264.147, and 265.142-
151 except 265.147); November 19,1980.
for the cost-estimating standards for
interim status facilities (40 CFR 265.142
and 265.144), and July 13,1981, for cost
estimating standards for general status
(40 CFR 264.142 and 264.144). The
liability requirements (§§ 264.147 and
265.147) currently have an effective date
"of April 13,1982.
Comment Date: EPA will accept
public comments on the revised
regulations until June 7,1982.
ADDRESSES: Comments should be sent
to Docket Clerk (Docket No. 3004),
Office of Solid Waste (WH-562), U.S.
Environmental Protection Agency, 401M
Street, S.W.. Washington, D.C. 20460.
Public Docket: The public docket for
these regulations is located in Room
S269-C, U.S. Environmental Protection
Agency, 401M Street, S.W.,
Washington, D.C., which is open to the
Public from 9:00 a.m. to 4:00 p.m.,
' Monday through Friday, excluding
holidays. Among other things, the
docket contains background documents
which explain, in more detail than the
preamble to this regulation, the basis for
the provisions in this regulation.
Submissions and Correspondence to
the Regional Administrator: All
documents and correspondence to be
submitted to the Regional Administrator
regarding these financial requirments
should be marked "Attention: RCRA
Financial Requirements" as part of the
address.
Copies of Regulations: Single copies of
these regulations will be available while
the supply lasts from RCRA Hotline,
(800) 424-9346 (toll-free) or (202) 382-
3000. "
FOR FURTHER INFORMATION CONTACT.
For general information call the RCRA
Hotline or write to Emily Sano, Desk
Officer, Economic and Policy Analysis
Branch, Hazardous and Industrial
Waste Division, Office of Solid Waste
(WH-565), U.S. Environmental
Protection Agency, 401M Street, S.W.,
Washington, D.C. 20460".
For information on implementation of
these regulations, contact the EPA
regional offices below:
Region I
Gary Gosbee, Waste Management
Branch, John F. Kennedy Building,
.Boston, Massachusetts 02203, (617)
223-1591
Region II
Helen S. Beggun, Chief, Grants,
Administration Branch, 26 Federal
Plaza, New York, iNew York 10007,
(212)264-9860
Region in
Anthony Donatoni, Hazardous Materials
Branch, 6th and Walnut' Streets,
Philadelphia, Pennsylvania 19106,
(215)597-7937
Region IV
Dan Thoman, Residuals Management
Branch, 345 Courtland Street, N.E.,
Atlanta. Georgia 30308. (404) 881-3067
Region V
Thomas B. Golz, Waste Management
Branch, 230 South Dearborn Street,
Chicago. Illinois 60604, (312) 886-4023
Region VI
Henry Onsgard, Attention: RCRA
Financial Requirements, 1201 Elm
Street, First International Building,
Dallas, Texas 75270, (214) 767-3274
Region VII
Robert L. Morby, Chief, Hazardous
Materials Branch, 324 E. llth Street,
Kansas City, Missouri 64106, (816)
374-3307
Region VHI
Carol Lee, Waste Management Branch,
1860 Lincoln Street, Denver, Colorado
80203, (303) 837-6258
Region IX
Richard Procunier, Hazardous Materials
Branch, 215 Fremont Street, San
Francisco, California 94105, (415) 974-
8165
Region X
Kenneth D. Feigner, Chief, Waste '
' Management Branch, 1200 6th
Avenue, Seattle, Washington 98101,
(206) 442rl280
SUPPLEMENTARY INFORMATION:
, I. Authority
These regulations are issued under the
authority of Sections 1006, 2002(a), and
3004 of the Solid Waste Disposal Act, as
amended by the Resource Conservation
and Recovery Act of 1976 (RCRA), as
amended, 42 USC 6905, 6912(a), and
6924.
II. Background
Section 3004(6) of RCRA requires EPA
to establish financial responsibility
standards for owners and operators of
hazardous waste management facilities
as may be necessary or desirable to
protect human health and the
environment. EPA has concluded that, at
a minimum, financial responsibility
standards are necessary and desirable
to assure that funds will be available for
proper closure of facilities that treat,
store, or dispose of hazardous waste
and for post-closure care of hazardous
waste disposal facilities. The financial
responsibility standards promulgated
January 12,1981, included requirements
for such assurance and also for liability-
insurance coverage. The amendments
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federal Register / Vol. 47. No. 67 / Wedneaday.Apri| 7. 1982 J Rulesand
15033
promulgated today, and this Preamble,
are limited to the requirements for
financial assurance for closure and post-
closure care. -:."....--
Financial responsibility standards for
inclusion in Part 264 (general standards
to be used in issuing permits) and Part-,
265 (interim status standards for existing
facilities awaiting final disposition of
permit applications) were first proposed
on December 18,1978 (43 FR 58995,
59006-07). Under the proposed
- regulations"; the owner or operator could
assure payment of closure and post-
closure costs only with a trust fund. The
closure trust fund had to be 'fully paid-up
when established, while the post-closure
fund could be built up over 20 years or
the remaining operating life of the
facility, whichever was shorter.
As a result of eommenters'"
suggestions and further Agency
analysis, a reproposa'l was issued May
19,1980 (45 FR 32260-32278), which
allowed a variety of options in providing
financial assurance for closure and post-
closure care: trust fund, surety bond,
letter of .credit, financial test, guarantee
of the owner's or operator's obligations
by an entity meeting the financial test,
and a revenue test for municipalities.
The reproposal allowed both the closure
and post-closure trust funds to build
over 20 years or the remaining life.of the
facility, whichever was shorter. State
guarantees or State-required <
mechanisms could be used to satisfy the
financial requirements if they were
substantially equivalent to the
mechanisms specified.
Also on May 19, ;1980, final-regulations
establishing interim status standards for
estimating the costs of closure and post-
closure care (40 CFR 265.140,142, and
144) were promulgated (45 FR 33243-^4).
The compliance date for these cost- -*
estimating standards was changed from
November 19,1980, to May 19,1981, by
an amendment issued October 30,1980
(45 FR 72040).
Interim final regulations establishing
requirements for mechanisms providing
financial assurance for closure and post-
closure care were promulgated on ...
January 12,1981 (46 FR 2851, 2877-2888)
with an effective date of July 13,1981.
These regulations allowed the use of
trust funds, .surety bonds, and letters of
credit to satisfy,the requirements for
financial assurance for closure and post-
closure care. For interim status facilities,
the closure and post-closure trust fund
pay-in period was 20 years or the
remaining life of the facility/whichever
was shorter. The pay-in period was
limited to the term pf the permit for
permitted status/State guarantees and
State-required mechanisms that are
equivalent to the mechanisms specified
in the regulations could also be used to
- satisfy the requirements.
At the time of the January 12
promulgation, the Agency had not yet
decided whether to allow use of a
financial test, a guarantee based on a
financial test, or a revenue test for
municipalities to satisfy the financial
requirements. The Agency's analysis of
the numerous issues raised by
commenters regarding these
mechanisms was not complete at that
* time. The Agency decided to proceed
with promulgating regulations for the
other mechanisms because of the need
to begin assuring financial responsibility
for hazardous waste management and
also the need to meet the court-ordered
schedule for issuing RCRA regulations.
The Agency intended to publish its
decisions or regulations onthe financial
test, guarantee, and revenue test within
3 months of the January 12,1981, .
promulgation so that owners and
operators would have adequate
opportunity to consider any newly
available options prior to the effective
date of July 13,1981. However, this work
could not be completed in the expected
time. Furthermore, comments on the
January 12 regulations indicated that
some revision of those regulations
would be desirable. To allow adequate
time for completing the work on the
additional"options and the .revisions, the,
effective date was deferred from July 13
to October 13, iS3! (notice published
May 18,1981, 46 FR 27119). On October
1,1981, the .effective date was again
deferred, to April 13,1982, because the
revised regulations were not ready for
promulgation, and the Agency was
considering whether to propose
withdrawal pf the liability requirements,
The effective date for the standards
for financial assurance of closure and
post-closure care is now July 6,1982.
.The effective date is thus further
extended because the .Agency believes
that owners and operators will need
approximately 3 months after
promulgation to review the revised -
regulations and make arrangements to '
establish financial assurance. Owners
- and operators who plan to use the new
insurance option need only submit by
the effective date a statement from, a J
qualified insurer saying that the insurer
is considering issuance of a closure or
post-closure insurance policy meeting
the specifications of the regulation to the
owner or operator. Within 90 days after
the effective date, these'owners and
operators must submit a certificate of
insurance as specified in the regulations
or, if the policy is not issued, evidence of
having established other financial"
assurance. The Agency is making this
special provision for prospective users
of the insurance option because the
closure and post-closure insurance
mechanisms are being published for the
hrst time today; a competitive market in
this insurance is not available; and the
Agency believes an additional period
should be allowed during which the
market might develop and the price
advantage!! of a competitive market
might become available to owners and
operators. '- -.
The current effective date for the
liability requirements, April 13,1982, is
- retained for the present; these
, requirements will be the subject of-a
separate Federal Register notice to be
published shortly.
. Today's promulgation consists
essentially ;Df the January 12,1981,
, regulations with revisions to the
mechanisms for financial assurance for
closure andtpost-closure care, .the
addition of certain other mechanisms,
and revisions to the cost-estimating
provisions. The added mechanisms that
may be used in providing financial
assurance for closure and post-closure
care are a financial test, a guarantee
based on the financial test, and
insurance. A revenue test for ". ,
municipalities was not adopted for
reasons explained below.
. The following sections discuss the
additions, significant changes, and
major issues'raised by commenters:
III. Financial: Assurance for Closure and
Post-Closure Care
A. The Financial Test and,Guarantee ,'
. Following the original proposal of
financial requirements in December
1978, commeijiiers suggested that the
Agency allow many different means of
financial assiirance as alternatives to.
the propqsed'jtrustiund, including a test
of financial soundness. The Agency
agreed that .a'financial test might -
provide adequate assurance of financial
responsibility and developed such a test
for.inclusion :in the repropbsed
regulations oiFMay 19,1980 (45 FR'332bsi
33272). Evaluation of comments received
on that tested further Agency analysis
resulted inJhu financial test
promulgated today.
1. The Proposed Test. Under the'',
reproposed regulations of May 19," igao,
an owner or operator could satisfy the
'requirements for finanical assurance of
closure or post-closure care by having:
(1) At least $l0jnillion in net worth in
the Onited States; (2) a total-liabilities-
to-net-worth ratio of not more than -
three; and (3) net working capital in the
United States pqual to at least twice the
estimated closiure and post-closure costs
of the owner or operator. These
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Federal Register / Vol. 47, No. 67 / Wednesday. April 7. 1982 / Rules and Regulations
characteristics had to be demonstrated
In a financial statement audited by an
independent certified public accountant.
The statement was to contain
unconsolldated balance sheets dated no
more than 140 days prior to the date that
tho tost was applied. An owner or
operator using the financial test had to
notify the Agency within 5 days of
learning lhat he no longer met the test;
he was then obliged to substitute other
financial assurance within 30 days. This
financial test was intended to work so
that an owner or operator who passed it
had the financial capability to establish
one of the alternative forms of financial
assurance should he later fail the test.
Firms passing the test were not likely to
fail suddenly. This objective was
retained in the subsequent development
of the financial test.
2. The Financial Test Promulgated
Today, After a detailed revaluation, the
Agency is promulgating regulations that
allow an owner or operator to satisfy
tho financial assurance requirements by
demonstrating that he meets either of
the following sets of criteria.
Alternative I:
(A) Two of the following three ratios:
a ratio of total liabilities to net worth
less than 2.0; a ratio of the sum of net
Income plus depreciation, depletion, and
amortization to total liabilities greater
than 0.1; and a ratio of current assets to
current liabilities greater than 1.5; and
(B) Net working capital and tangible
net worth each at least six times the
aum of the current closure and post-
closure cost estimates; and
f C) Tangible net worth of at least $10
million; and
(D) Assets in the United States
amounting to at least 90 percent of total
assets or at least six times the sum of
the current closure and post-closure cost
estimates. ,
Alternative II:
(A) A current rating for his most
recent bond issuance of AAA, AA, A, or
BBS as Issued by Standard and Poor's or
Aaa, Aa, A, or Baa as issued by
Moody's; and
(B) Tangible net worth at least six
times the sum of the current closure and
post-closure cost estimates; and
fC) Tangible net worth of at least $10
million; and
(D) Assets in the United States
amounting to at least 90 percent of total
assets or at least six times the sum of
the current closure and post-closure cost
estimates.'
In developing the financial test the
Agency was particularly concerned with
three general goals: (1) Funds should be
available for closure and post-closure
care for protection of human health and
the environment. (2) As a.matter of
equity, the parties responsible for
closure and post-closure obligations, i.e.,
owners and operators, should pay those
costs. (3) Costs to the regulated
community of providing financial
assurance should be as low as possible.
The amount of direct public costs in the
form of unfunded closure and post-
closure care resulting from use of the
test indicates the degree to which the
first two goals are achieved, and the
.amount of private costs to owners and
operators of providing financial
assurance is the indicator for the third
goal. In assessing the various possible-
test criteria, the Agency examined these
costs and considered them in selecting
the elements of the test.
The following sections summarize the
comments received on the proposed
financial test and how the final
requirements were selected. This
information is presented in detail in a
Background Document which covers the
financial test and revenue test for
municipalities.
3. Comments on May 19,1980,
Proposed Test: General Aspects. Some
commenters suggested that the minimum
net worth and working capital
requirements be higher, lower, or
deleted entirely. Alternative tests or
additional elements of a test were
suggested, including net income, cash
flow measures, "quick assets," and
financial ratios. Bond ratings were . ,
suggested as an alternative to or
substitute for the proposed financial
test. Many commenters said the
reporting requirements were not,
consistent with other financial reporting
requirements and therefore represented
high additional costs.
4. Separate Industry Tests. Some
commenters suggested that each
industry should have its own financial
test, A review of the industries that
provided comments of this kind, as well
as a general analysis of industry data
and previous studies of the forecasting
of financial distress, suggest that a
single test can be used for most firms
engaged in manufacturing. However,
financial tests found to be valid for
distinguishing viable from nonviable
firms engaged in manufacturing were
often not valid or useful for establishing
the viability of firms in industries with
unique financial characteristics, such as
utilities. Positive net working capital, for
instance, is uncommonlor electric
utilities and firms in some other service-
related industries. As a result, an
alternative financial test option was
developed (see Alternative II above),
which is based on bond ratings and is
more appropriate for utilities and firms
with similar financial characteristics.
The Agency believes on the basis of its
evaluation (see paragraph 8 below) that
with these two options the financial test
is valid for all industries likely to engage
in hazardous waste management.
However, anyone who believes that
separate test criteria are necessary for a
particular industry may submit a
petition under Section 7004(a) of RCRA
requesting inclusion of such criteria in
the regulations. To enable the-Agency to
evaluate the petition adequately, it
should describe the proposed criteria
fully and how they may be routinely
verified, and include data and analysis
demonstrating the need for separate test
criteria and their validity.
5. Net Working Capital Requirement.
Some commenters strongly objected to
the use of working capital as a test
criterion, stating that their industries
commonly did not maintain a positive ,
net working capital position (excess of
current assets over current liabilities).
The Agency's analysis found that hi
manufacturing industries likely to
engage in hazardous waste treatment,
storage, or disposal, virtually all viable
firms maintain positive net working
capital. For a manufacturing firm, a. . ^
negative net working capital position is
an excellent indicator that the firm is in
a difficult financial situation. The
Agency's review of financial data for
bankrupt manufacturing firms indicated
that the vast majority experienced rapid
decline in working capital in the years
immediately prior to bankruptcy. As a
result, the Agency decided to require
that firms maintain a multiple of the cost
estimates in the form of net working
capital in one of the two test options.
Firms that satisfy the other test option,
which requires an investment-grade
bond rating, will have proven access to
credit and demonstrated viability.
Some commenters suggested _
modifications to the common definition
of working capital that would allow
owners and operators to use existing
lines of credit, cash flow, or fixed assets
that could be liquidated to satisfy part
or all of the net working capital
requirement. The Agency has decided to
retain the present definition of working
capital. Some of the alternatives
proposed by the commenters (lines of
credit, liquidation value of fixed assets)
are not usual line items in financial
statements and would therefore add to
-the administrative burden of these '
regulations. More importantly, the
Agency believes that, given the
significance of negative net working
capital as an indicator of financial
distress, it is useful to retain net working
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_Federal Register / Vol. 47, N67 / .Wednesday. April
and Regulations 15035
capital, as currently .defined, as an
element in one of the test alternatives.
In the proposed test of May 19,1980,
the owner or operator had to have net
working capital amounting to twice the
cost estimates in order to use the '--
financial test. This was intended to - - ,
ensure that the payment of closure and
post-closure costs could be made before
insolvency occurred. However, given the
, possibility, of rapid deterioration in net
working capital of a firm experiencing
serious financial distress, and the
possibility .that lengthy legal
proceedings may be required before the
.owner or operator establishes other
financial assurance, a higher multiple '
seemed advisable. The Agency
^conducted an analysis of firms iwhich
had experienced rapid deterioration of
their financial condition for 2,to 3 years
priot to business failure. This analysis
showed that net working capital of these
, firms fell by an average of 66 percent in
2 years. The Agency believes that in
order to ensure that adequate liquid
assets, as indicated by net working .
capital, will be available for closure and
post-closure care, net working capital of
at least six times the estimated costs is --
an appropriate level. This figure is
obtained by multiplying the factor of 2
(to ensure current ability to pay) times 3
(to ensure against a high rate of
deterioration-before payment can be
brought about). With'.a multiple of 6, it is
likely that even a rapidly deteriorating
firm, will have net working capital
amounting to twice the cost estimates 2
years after failing the test.
6. Net Worth Requirements. The May.
19,1980, proposed financial test required
net worth (total assets minus total
; liabilities) of at least $10 million. The
Agency has decided to retain that
requirement for several reasons. The
business failure rate for firms with $10
million or more in net worth is
significantly lower than for firms ^
overall. The Agency estimates that it
would enter into twice as many
bankruptcy proceedings to recover
funds for closure and post-closure care
if the $10 million in net worth criterion
were dropped, even if other criteria
were retained. In addition, the number
of instances in which the hazardous
waste facility itself represents the only
significant income-producing asset of an
owner or operator will be reduced by a
$10 million in net worth requirement. If
the facility is the owner's or operator's
only source of income, closure will cut
off all his income and thus increase the
risk that there will not be adequate
funds to complete closure and post-
closure care. ,
Since firms with $10 million or more in
net worth are more stable than smaller
companies, the Agency believes .these ,
_,.. larger firms, are less likely to abandon
hazardous waste facilities or otherwise
avoid closure or post-closure
, responsibilities. The Agency
furthermore' believes that retaining the
$lb million requirement will keep the
burden of administering this new
financial assurance mechanism at
.manageable levels; monitoring the use of
- the financial test by less stable firms
can be expected to be more time-
consuming and a greater administrative
burden. The Agency will, however,
continue to explore the possibilities of
having a financial test for firms of less
than $10 million in net worth. .
Suggestions from the public are invited
on this issue. , .
A number of commeriters suggested
that a firm passing the financial test
should be required to have a net worth
at least as great as the net working
capital requirement. While it is unusual
for firms to have less.net worth than net
working capital,.the possibility do,es :
exist, and such a firm would be very
weak financially. The Agency agrees
with these commenters and has added a
requirement that a firm have a net worth
of at least six times the closure and
' .post-closure cost estimates.
^ One commenter recommended that
owners and operators be allowed to
meet requirements for amounts of net -
worth with tangible net worth only.
' Assets of firms often include intangibles
such as goodwill, patents, and
trademarks which may be difficult to
convert into cash to pay for closure or
post-closure costs. The Agency agrees
with the commenter and is providing
that only tangible net worth may be
used to meet the requirements for $10
million in net worth and for net worth of
at least six tinWthe cost estimates.,In.
the financial ratio requirements,
however, net worth rather than tangible
net worth is used since that is
customary for financial ratios, which
were found to be effective predictors of
financial stability. '"-.-
7. Financial Ratios. The third,
component of the proposed financial test
was a required ratio of total liabilities to
ne"t worth of less than 3 to 1. A number
of commenters suggested that this ratio
was unrealistically high and that cutoff
points of 2 to 1 or 1.5 to 1 would be
better measures of viability. In
reevaluating. this requirement, the
Agency found that a ratio of 2 to 1 to be
a more appropriate ratio. Other
commenters suggested adding other
financial variables to the test, such as
cash flow, net income, and current and
quick asset ratios. The Agency
considered all of these in its evaluation
of alternative tests, as described .,
immediately below.
" , 8. Evaluation of Alternative Tests.
Following the suggestions of several
commenters, the Agency conducted an
extensive analysis of the performance of
numerous financial tests and made .
, detailed calculations of the costs they
would entail. ' ,
A sample, consisting of 178 viable
firms and 613 bankrupt firms was
constructed for the empirical testing of
candidate financial tests. The bankrupt
firms were Identified from previous
bankruptcy forecasting literature and an
independent search; all had filed for
bankruptcy between 1966 and 1979. The
sample of nonbankrupt firms was
designed to represent the expected asset
size range and mix of industries likely to
seek to use a financial test. Another
sample of 26 nonbankrupt utilities was '
also studied. From the comments on the
proposed test, and from the research
'results of previous bankruptcy
forecasting, Jthe Agency assembled a list
of over 300 candidate financial tests.
For each test evaluated against the
sample, the Agency computed two
primary mea.sures of effectiveness. One -
was the likely rate of bankruptcy for
firms passing the test. This measure
determines the effectiveness of a test in
eliminating firms that would be major
sources of direct public costs and also
indicates the: potential burden of the test
on Agency resources (i.e., the burden of
having to recover closure and post-
closure cosfe from these firms in
bankruptcy proceedings). The other
primary measure was the percentage of
viable firms lhat would be able to use ^
the financial test as an option. This
factor represents the test's potential for
reducingprivate costs by allowing firms
to use an alternative which costs less
than a letter ipf credit or other financial '
mechanism, j . ,
' The effectiveness of tests in
eliminating firms in the bankrupt firm
sample varied widely. Where several
tests attained the same level of
effectiveness in eliminating bankrupt
firms, the test^ that simultaneously
allowed the greatest number of viable .
firms to use if was judged a "'best test." '
This methodciqgy enabled the Agency
to identify IB, "£>est test" options which
could be 'fiti-tliler evaluated. Among these
"best : tests," those without the $10 .
million innet!yvorth,requirement were
eliminated bepause, as explained a*bove,
the Agency bjjlieves the requirement is
necessary .for assuring that funds will be
available for closure and post-closure
' '
care.
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Of the tests requiring $10 million in
tangible net worth, the one which
resulted in the lowest sum of direct
public and private costs was selected as
one of the financial test options. It
requires that an owner or operator have
$10 million in tangible net worth, have
tangible set worth and net working
capital each at least six times the sum of
closure and post-closure costs, and pass
two of the following three ratio tests: a
ratio of total liabilities to net worth less
than 2.0; a ratio of the sum of net income
plus depreciation, depletion, and
amortization to total liabilities greater
than 0.1; and a ratio of current assets to
current liabilities greater than 1.5. (The
"sum of net income plus depreciation,
depletion, and amortization" used in the
second ratio is often referred to as "cash
How.")
Finally, the owner or operator must
have assets in the United States
amounting to at least 90 percent of total
assets or at least six times the sum of
the closure and post-closure cost
estimates. This requirement was
Included to help ensure accessibility to
funds in the event of bankruptcy or
other default. The Agency believes that
allowing firms to meet this requirement
by having 90 percent of their assets in
the United States rather than requiring
all firms using the test to have six times
the cost estimates in U.S.-located assets
will save some firms added reporting
costs while providing equivalent
assurance. The standards of the
American Institute of Certified Public
Accountants provide that information
about the Identifiable assets fo a firm's
foreign operations should be included in
its financial statements if those assets
are 10 percent or more of total assets.
The Securities and Exchange
Commission requires that firms filing
Form 10K reports Indicate those assets
located outside the United States if 10
percent or more of their assets are
located outside this country. A firm with
less than 10 percent of its assets outside
the country and filing a Form 10K will
therefore not have to take the additional
step of identifying the exact amount of
assets in the United States in order to
meet this requirement of the financial
test
Bond ratings are required hi the
alternate test option. An analysis of
available data on the performance of the
two major bond rating services
(Moody's and Standard and Poor's)
showe-d that firms receiving any of the
four highest ratings (investment-grade
bonds) have compiled a record of
financial strength at least equal to that
indicated by meeting the criteria of the
first test option. In order to ensure that
adequate assets are available to cover
possible closure and post-closure
expenditures, a firm using the bond
ratings test must also have (1) tangible
net worth amounting to at least $10
million and at least six times the sum of
closure and post-closure cost estimates
and (2) assets in the United States must
represent aUeast 90 percent of total
assets or at least six times the sum of
cost estimates.
The Agency will initially accept bond
ratings issued only by Moody's or
Standard and Poor's. Hpwever, hi order
to determine whether there are other
bond rating services that could also be
used, EPA requests information
establishing how well the ratings
assigned by other bond-rating services
have performed over time.
In its study pf ratings that might be.
used hi the financial test, the Agency
focused on bond ratings because they
relate to long-term debt, and closure and
post-closure costs are generally long-
term obligations. However, the Agency
is considering the advisability of also
using commercial paper ratings in the
same manner. If its analysis indicates
that they would be effective when so
used, the Agency intends to amend the
regulation to allow use of certain
commercial paper ratings as an
alternative to bond ratings in the
financial test. The Agency invites
comment on such use of commercial
paper ratings.
The Agency estimates that amending
the financial assurance requirements to
.allow use of the financial test
significantly reduces the overall costs of
the regulation. As much as 96. percent of
currently viable firms with $10 million hi
net worth would pass the test. If the test
were not allowed as a financial
assurance mechanism, the additional
costs to those firms are estimated at $3
million per year. The Agency's, analysis
indicates that only a very small
percentage of the firms that pass this
test could be expected to go bankrupt
without providing alternative financial
assurance (.01 percent).
The Agency concluded from its
evaluation that the financial test should
be allowed as a means of satisfying the
financial requirements because it >.
provides strong assurance ofjivailability
of funds' and minimizes regulatory costs.
9. The Closure and Post-Closure Cost
Estimates. An owner or operator may
use the test to demonstrate financial
assurance for closure, post-closure care,
or both closure and post-closure care of
one or more facilities.
The "current closure and post-closure
cost estimates" referred to in the test
criteria must include, first, all such
estimates for facilities of which the firm
using the test is the'owner or operator
and for which it is demonstrating
financial assurance through the financial
test of Parts 264 or 265. Second, if the
firm is providing one or more guarantees
as spe'cified in these regulations Csee
later discussion of corporate guarantee),
the cost estimates of the facilities for
which closure dr post-closure care is
being guaranteed must be included.
Third, if the firm has facilities in States
where EPA is not administering the
financial requirements but the firm is
demonstrating financial assurance to the
State through a financial test equivalent
or substantially equivalent to the test in
Parts 264 and 265, the cost estimates
covered by such tests must be included.
Finally, if the firm is the owner or
operator of facilities for which financial
assurance for closure or required post-
closure care is not being demonstrated,
to a State or EPA, through the financial
test or any of the other mechanisms
specified in these regulations or
equivalent or substantially equivalent
State mechanisms, the closure and post-
closure cost estimates for such facilities
must be included. There are likely to be
some facilities in this last category
because, hi the first phase of
authorization of States to administer the
RCRA regulations, States are not
required to adopt requirements for
establishment of financial assurance,
although they are encouraged to do so.
In later phases of authorization, States
must have financial requirements
equivalent or substantially equivalent to
those in Parts 264 and 265.
The Agency's objective in these
provisions is to assure that the sum of
closure and post-closure costs against
which the firm's financial condition is -
being tested through the financial test is
complete. The sum should include all
estimated closure and post-closure costs
which the firm is obligated to cover,
minus those covered by acceptable,
financial assurance mechanisms other
than the financial test.
10. Reporting Requirements-^^
reporting requirements of the proposed
test were revised following evaluation
of the numerous comments on the
requirements and further information
obtained on.financial reporting
practices. To minimize reporting costs,
and as recommended by commenters,
the Agency evaluated only tests which it
could administerwithout requiring the
routine submission of financial data
which would ordinarily not be obtained
in the preparation of financial
" statements.
As evidence Dissatisfying the financial
test, a firm must submit:
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7, 1982 / Rules ;and Regulations 15037
(1) A letter to the Regional
Administrator signed by its chief
financial officer that includes the
required data from the firm's
independently audited, year-end
financial statements and the cost
. estimates, for closure and post-closure
care; and :.
(2) A copy of the independent certified
public accountant's report on
' examination of the owner's or operator's
financial statements for the latest
completed fiscal year; and
(3) A special report from the owner's
or operator's independent certified
public accountant to the owner or
operator stating that the accountant has
compared the data which the letter from
the chief financial officer specifies as
having been derived from the " :
independently audited, year-end
financial statements for the latest fiscal
year with the~amounts in such financial
statements and, in connection with this
procedure, no matters came to his
attention which caused him to believe
that the specified data should be
adjusted.
The Agency believes that the
independent accountant's reports add
significantly to the reliability of the data
submitted and therefore must be
required. Independent accountants are
guided by standards set by the
Securities and Exchange Commission
for auditors within the scope of the
Federal securities laws and by a Code of
Professional Ethics promulgated by the
American Institute of Certified Public
Accountants. In addition, the profession
is regulated, to differing extents, by
State licensing boards and State
societies of certified public accountants.
If the auditor's opinion that is
included in his report on examination of
the owner's or operator's financial
statements is an adverse opinion or
contains.a disclaimer of opinbn, the
owner or operator will be disallowed
from using the financial test to satisfy
the financial requirements. An adverse
opinion states that the financial
statements do not present fairly the
, financial condition of the firm in
conformity with generally accepted
accounting principles. A disclaimer of
opinion states that the auditor does not
express an opinion on. the financial
statements. TheAgency believes that in
either case it cannot rely on data from
such financial statements to determine
whether the firmppses the financial
test. \
The Regional Adntpistrator may
disallow use of thei ffijancial test based
on other qualificationsWpressed in the
auditor's opinion of the Sjjrms's financial
statements.. If the oP^jo
questions as to whe%
continue as a "going concern," the
Regional Administrator will disallow
use of the financial test. Other qualified
opinions will be evaluated on a case-by-
case basis. The owner or operator must
provide alternative financial assurance
within 30 days after disallowance.
After the initial submission of the
letter from the chief financial officer and
the accountant's reports, a new letter
and new reports for each subsequent
fiscal year must be submitted to the
Regional Administrator within 90 days
after the end of the firm's fiscal year.
Alternatively, the owner or operator
must deliver to, the Regional -
Administrator, by the end of this 90-day
period, a notice of intent to provide
substitute .financial assurance as -
specified in the regulations and, within
120 days after the end of the fiscal year,
establish the substitute financial
assurance. .
If the Regional Administrator has
reason to believe that the owner or
operator may no longer meet the test
criteria, he may request additional
financial reports or other relevant
.information from the owner or operator.
Upon a finding by the Regional
Administrator that the owner or
operator no longer meets the criteria, the
owner or operator will be required to
establish other financial assurance.
Failure to provide alternate assurance
when required, after disallowance or
after no longer passing the test, will be
considered.a violation of RCRA
regulations and cause for issuance of a
compliance order or initiation of legal
proceedings under Section 3008 of "
RCRA.
A number of firms will probably show
part or all of the estimated costs of
closure arid post-closure care of their
hazardous waste facilities as liabilities
on their financial statements. However,
since this may not yet be common
practice, and it is'not clear to what
extent the estimated costs will appear
as liabilities in the statements, the test
as currently constituted does not
assume that the statements include the
estimated closure or post-closure costs
as liabilities. In order not to penalize
those firms that do include these costs in
their liabilities, the chief financial officer
is authorized to subtract any portion of
closure and post-closure costs included '
in liabilities from the figure shown for ''
total liabilities in his annual letter and
add"-that amount to the figures for net
worth and tangible net worth.
The effective date of the regulations
may come too soon after the end of an
owner's or operator's fiscal year to
allow adequate time to prepare the
required documents based on data for
the just-completed fiscal year. To
resolve this problem, the financial test
provisions in Part 265 allow a one-time
extension if an owner's or operator's
fiscal yeair ends during the 90 days
before the effective date and if the firm's
1 financial statements are being
independently-audited. The extension
may last up to the date 90 days after the
end of the fiscal year. To obtain the
extension the chief financial officer of
the firm must send a letter to the
RegionalAdministrator by the effective
date of these regulations. In the letter he
must request the extension; certify that'
he has gropnds to believe that his firm
meets the financial test criteria; identify
. the facilities to be covered and their cost
estimates; specify the date when the .
firm's fiscal year ended; specify the date
no more than 90 days after the end of
the fiscal year when he will submit the
documents required; and certify that the
firm's year-end financial statements are
being independently audited.
The Agency is Studying the possibility
of reducing the reporting burden of the
financial test for many owners and
operators by using data they have
.already submitted in routine reports to
the Securities and Exchange
Commissioii. Such data are available on
computer teipes from commercial
companies. If this approach proves "
feasible, users of the test who file data
regularly with the SEC may have to '
report only current closure and post-
closure cosl:^estimates annually to EPA.
The Agency plans to examine the
workability of this system during the
first year that the financial test is in use. '
Following evaluation of the results, the
Agency will decide whether to amend
the regulations to eliminate reporting of
data that is Obtainable through the
automated system.
11. The Corporate Guarantee. Under
the May 19,1980, proposal, an "owner or
operator couhTmeet the financial
assurance requirements by obtaining a
guarantee from another entity that met -
the financial, test requirements. The
object was to allow qualified parent '
corporations to provide financial
assurance for subsidiaries. In the
guarantee requirements promulgated
today, the gtiirantee is explicitly .
restricted to Such use. Furthermore, the
Agency has adopted a definition of
parent and siiibsidiary (a parent must
own at least SO percent of the voting
stock of the subsidiary) which ensures '
that the connection between the two
firms will be'dose and direct. The
parent company is likely to have a
strong interestin the satisfactory
performance ',of its subsidiary, and this
incentive ste hgthens the guarantee, in
the Agency's view. Nevertheless the
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67 / Wednesday. April 7, 1982 / Rules and Regulations
Agency invites comments on the
question of whether a guarantee by a
business entity other than a parent
corporation, as defined in these
regulations, should be allowed.
Comments addressing the extent of need
for such an option, how it should differ
from the one promulgated today, and the
enforceabillty of such a guarantee under
State laws are particularly encouraged.
Under the regulations promulgated
today, the parent-guarantor must meet
the same requirements as an owner or
operator using the financial test and has
an independent contractual obligation to
EPA. In effect, he "stands in the shoes"
' of the owner or operator, as far as
assurance for closure or post-closure
care is concerned, through this
guarantee If the owner or operator fails
to perform closure or post-closure care
as required, the guarantor must do so or
fund a trust fund in the full amount of
the cost estimates in the name of the
owner or operator. If the guarantor falls
bolow the test criteria or is disallowed
from continuing as a guarantor because
of qualifications in the auditor's opinion
of the guarantor's financial statements,
the guarantor must provide alternate
assurance financial assurance in the
name of the owner or operator if the
owner or operator himself does not do
so.
The cancellation provisions are
comparable to those of the surety bonds
and Totters of credit (infra). The
guarantor must give a 120-day notice of
cancellation to the owner or operator
and the Regional Administrator by
certified mail. If the owner or operator
does not establish alternate financial
assurance and obtain the Regional
Administrator's written approval of this
assurance within 90 days after the
notice is received, the guarantor must^
provide alternate assurance in the name
of the owner or operator.
B. Closure and Post-Closure Insurance
This promulgation includes insurance
as another mechanism that may be used
to satisfy the financial assurance ,
requirements (§§ 264.143{e), 264.145(e),
285.143(d), and 265.145(dJ). The
insurance mechanism was not
sufficiently developed for inclusion in
past proposals or in the interim final
regulations of January 12,1981, although
the Agency's consideration of such a
mechanism was noted in the
Background Document for the January
12 regulations. The Agency believes that
the Insurance mechanism will provide
strong financial assurance; add to the
range of options available to owners
and operators, especially small entities;
and offer cost advantages to some
owners and operators.
As explained above in the
Background section, owners and
operators who plan to use the insurance
option have until 90 days after the
effective date to submit evidence of
having obtained the insurance. They do
have to submit by the effective date a
statement from a qualified insurer
saying that the insurer is considering
issuance to the owner or operator of a
closure or post-closure insurance policy
conforming to the specifications of the
regulations. If such a policy is not
issued,-the owner or operator must
submit evidence of other financial
assurance as specified in these'
regulations within 90 days after the
effective date.
The Agency decided to include the
insurance option in the interim final
regulations without first proposing it for
several reasons. First, inclusion of the
insurance option in today's regulations
will provide a reasonable degree of
assurance that owners and operators
will be able to consider insurance along
with the other mechanisms as the means
they will use to satisfy the financial
assurance requirements, by the effective
date. Later promulgation of the
insurance option could mean that ^ .
owners and operators who prefer this
option would first have to obtain
another instrument until the insurance
mechanism^was allowed and until they
could review its provisions and make
arrangements to obtain it. Second,
promulgation of the insurance option at
this time provides prospective suppliers
of the insurance with a firm basis for
analysis and planning. The Agency
believes this may lead to the
development of a more competitive
market among insurers by the date
certificates of insurance must be
submitted by owners and operators, and
that such competition would be
conducive to reasonable prices for the ,
insurance. Third, the insurance option
does not impose additional regulatory
burdens on the owner or operator but
rather adds to his range of alternatives
in meeting a regulatory requirement.
Because the financial requirements
are being issued as interim final
regulations, there will be a 60-day
' comment period. Any inadequacies in
the closure and post-closure insurance
provisions may be called to the
Agency's attention during, that time. The
agency will make any necessary
corrections before the date by which
those who select the insurance option
must submit a certificate of insurance
(90 days after the effective" date of the
regulations).
1. Face Amount of Policy. The policy
will be issued with a face amount (the
total amount the insurer is obligated to
pay under the policy) equal to at least ,
the current cost estimate for closure or
post-closure care unless the policy
covers only part of the estimated cost
and the rest is covered by another
instrument. When the cost estimate
increases, the face amount of the policy
must be increased by the owner or
operator, unless the increase is covered
by another instrument, when the
estimate decreases, the face amount
may be decreased following written
approval by the Regional Administrator.
During the post-closure period, the
face amount of the post-closure policy
will increase annually to reflect earnings
of the funds remaining under the policy.
The minimum increase must be equal to
the face amount, less any payments by
the insurer for post-closure expenses,
multiplied by 85 percent of the most
recent investment rate or the equivalent
coupon-issue yield announced by the
U.S. Treasury for 26-week Treasury
securities. The Agency believes this
provision ensures a rate of return that is
reasonable compared with other low-
risk investments and allows for
compensation to the insurer for
administrative costs. A higher rate, of
return may be agreed upon by insurer '
and insured.
2. Maintenance of Coverage. The
owner or operator must continue to
make premium payments which are due
unless alternate financial assignee as
specified in the regulations is
substituted, Failure to pay the premium
without alternate financial assurance
will constitute a serious violation of
these regulations, a violation that begins
upon receipt by the Regional
Administrator of a notice ,of
cancellation, termination, or
nonrenewal.
The insurer may cancel, terminate, or
fail to renew the policy only if the
premium is not paid. The automatic
renewal of the policy must, at a
minimum, 'provide the insured with the
option of renewal at the face amount of
the expiring policy. If the cost estimates
to which the policy applies have
increased, the insurer and insured may
agree to cover that increase in the
renewal policy.
In order to cancel, terminate, or not
renew the policy upon nonpayment of
premium, the insurer must provide 120
days' notice to the owner or operator
,and the Regional Administrator, by
'" certified mail Cancellation, termination,
or nonrenewal may not occur, however,
if by the expiration date: the Regional
Administrator deems the facility to be
abandoned; the Regional Administrator
terminates interim status or the permit,
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Federal Register / Vol. 47, Np. 67 / Wednesday April 7, 1982 /Rules Jnd Regulations
15039
whichever is in effect; Closure is ordered
by the Regional Administrator or a U.S.
district court or other court of competent
jurisdiction; the owner or,operator is
named as a debtor in bankruptcy
proceedings; or the premium is paid. -
The owner or operator may cancel the
policy if the Regional Administrator
gives written consent based on his
receipt of alterhate financial assurance
that meets, the requirements of the
regulations or on completion of the
. closure or post-closure obligations.
3. Payment Pro visions. The insurer
will make available the face amount of
, the policy for closure whenever closure
occurs. The amount for post-closure care
will be made available whenever post-
closure care begins. These funds for
closure and post-closure care will be:
made available regardless of the :.
owner's or operator's ability to pay
these costs.'The insurer will pay out the
funds at the direction of the Regional
Administrator to the owner or operator
or any other party authorized to conduct
closure or post-closure care. The
Regional Administrator will approve
payments when they are in accordance
with the closure or post-closure plan or
otherwise justified.
The Regional Administrator may
withhold reimbursement of a portion of
closure expenditures as he deems
prudent if he determines that the cost of
closure appears to be significantly
greater than the face amount of the ' .
policy. The purpose of such withholding
is to extend;financial assurance until
completion of closure. Any funds
withheld will be released when
satisfactory certifications of closure are
received by the Regional Adminisfrator.
These provisions for payment are the
same as those'for the trust fund.-
4. Costs and'Availability.
Development of the insurance plan was
encouraged by the Agency in hopes of
providing smaller entities with a widely
available alternative to the trust fund.
Insurance offers several advantages,
over the trust fund. The insurance plan
assures that the full amount of the cost
estimate will be available for closure or
post-closure care whenever the the
funds are needed, even upon ,
abandonment of the facility, financial
incapacity of the owner of operator, or
premature closure. By contrast, the trust
fund can provide only that which has
been paid into the fund plus trust
earnings. The owner or operator as well
as the public benefits from this Complete
coverage, as the owner or operator is
relieved of the economic burden of the
potential liability for closure and post-
closure costs. With insurance coverage,
these costs will not appear as liabilities
on the financial statements of the firm.
The cost of .the insurance; to owners
and operators will be strongly affected
by the tax treatment of the premium
payments. EPA plans to ask IRS to
clarify how tax rules apply to this
insurance plan. Individual owners and
operators may request a ruling or
determination letter under Revenue
Procedure 80-20.
5. Requirements for Insurers. The
requirements for this insurance include
qualifications of the insurer. The insurer
must, at a minimum, be licensed to
transact the business of insurance, or be
eligible to provide insurance as an
excess or surplus lines insurer^ in one or
more States. The Agency is studying the
, need to include other quaUfications and
invites comments on this matter. Among
the possible qualifications that the
" Agency is studying are those suggested
by the National Association of
Insurance Commissioners and others in
connection with the liability
requirements of §§ 264.147 and 26S.147.
The NAIC recommended the following
wording for a provision setting forth
qualifications that must be met by
f providers of the liability insurance:
"The Regional Administrator shall not
accept insurance policies as cbmplying with
this section unless such policies are
underwritten by an insurance institution
which:
"(1) Is domiciled in the United States and
authorized to transact the business of
insurance as an admitted or nonadmitted
'insurer in the state where the insured facility
is located, or
"(2) Is a captive insurer licensed under a
state law authorizing the formation and
operation of captive insurers, or
"(3) Is an alien insurer in good standing on
the Non-Admitted Insurers Quarterly List
published by the Non-Admitted Insurers
Information Office of the National
Association of Insurance Commissioners."
Another commenter said a rating of at
least "A" in Best's Insurance Reports
and a Best's financial size rating, which
may be related to the size of the risk
involved, should be required of insurers.
Other commenters advised that many
companies rely heavily on captive
insurers for liability coverage .and
captives should not be;excluded by the
regulations. , "'_
The Agency invites comments on the
subject of qualifications for insurers
providing insurance for costs of closure
and post-closure care, including '
comments on the suggestions received
regarding liability insurance.
C. Trust Funds '
A number of revisions, mainly
clarifications and corrections, have been
made to the January 12,1981, trust fund
provisions/The following describes the
revisions and major comments received.
1. The Trust Agreement. The Agency
has made the follbxving changes to the-
wording of the trust agreement. In the
revised agreement, the identification of
, facilities and cost estimates are on a
separate Schedule A instead of in the
agreement itself; this avoids amending
the entire,sagreement when a cost
estimate changes. Inadvertent
carryovers from a trust agreement used
as a model [an agreement for trusts
under the Employee Retirement Income
Security Act) were eliminated. A
clarification was made to avoid the
implication that the owner or operator
could impose specific investment
-. directions oh the_trustee. The section on
annual-valuations was revised to make
it clear, when the trustee must furnish
toe valuations (at least 30 days prior to
the anniversary date of establishment of
the fund, with securities valued as of no
more than.60. days prior to the -"-,
anniversaryi date). The section on
sucqessor trastees was revised to allow
- trustees 'to resign without first obtaining
written agreement from the Regional
Administrator and the owner or
operator but with resignation effective '.
only after a (successor is appointed and
accepts the trust, which is standard
practice. These changes in the trust
agreementreisulted from evaluation of
suggestions from the banking .
qommunity. -\ ' '
2. Updating Cost Estimates in the
Trust Agreement. The trust agreement
must show the current cost estimate or
portion thereof for which financial
assurance is being demonstrated -
through the trust fund. The January 12,
1981, regulations did not explicitly state
that the ownisr or operator must keep
this information up to date. This . ~
information must be up to date in order
for the Regional Administrator to
monitor the airiount of funds being
assured thWgh the trust fund and the
adequacy of payments. A provision has
therefore been added to the trust
regulations stating that whenever the
amount of the cost estimate being
assured through the trust fund changes,-
the owner or operator must update
Schedule A of the trust agreement,
which contains this information.withm
60 days after the change.
3. The Pay-In Period -Several
commenters said that limiting the pay-in
period for the | trust funds under Part 264
to the term of,[th.e permit seemed
unreasonable-land recommended a
period of 20 years or remaining
operating life, ^whichever is shorter, as
under Par1265. As stated in the
preamble to the January 12 regulations,
-------
however, the Agency does not want to
bo in the position of considering, at the
and of the term of a pemit, whether to
allow a poorly managed facility to
remain in operation so that it could
continue to build its trust fund to cover
the costs of closure and post-closure
care. The trust must therefore be fully
funded over the term of the initial permit
or the remaining operating We of the
facility, wliichever is shorter, to assure
that the money to provide proper closure
and post-closure care will be available.
In the January 12,1981, regulations, the
pay-in period under Part 264 was the
term of the permit only; it was assumed
that the term would never exceed
operating life. The change to term of
permit or operating life, whichever is
shorter, was made since it is possible
that operating life will not always
extend to the formal term of the permit. .
4. Initial Payment into Trust for a
New Facility. The January 12,1981,
regulations required the first payment
for a trust fund for a new facility 60 days
before waste was first received for
treatment, storage, or disposal. A
oommenter said that this was
unnecessary and that it was also unfair
because the surety bonds and letters of
credit do not have to be effective until
waste is received. The revised
regulation requires the initial payment
to be made before the first receipt of
waste rather than 60 days before. The
Agency agrees with the commenter that
little is gained in added financial
assurancs by requiring payment 60 days
fa advance. The trust agreement,
however, must be submitted to the
Regional Administrator 60 days in
advance of the initial receipt of waste at
the facility.
5. Tax Traatment. One comment was
received on the tax treatment of the
trust fund. The Internal Revenue Service
is currently considering the tax
treatment of these trusts. Owners and
operators who desire individual rulings
may request them from the IRS.
8. Payments for Closure. Under the
proposed regulations of December 18,
1878, the entire amount of the closure
trust fund was retained by the trustee
until completion of closure. Financial
assurance for closure was thus
maintained in case closure was not
completed or not completed properly.
Tho Agency decided, however, that this
would impose a hardship on some
owners and operators, since, in effect,
they would have to pay for closure twice
before they were reimbursed. Under the
proposed regulations of May 19,1980,
therefore, owners and operators could
be reimbursed even while closure was
taking place. However, the Regional
Administrator was to withhold approval
of payment of 20 percent of the fund
until he received satisfactory
certifications of closure. The January 12,
1981 regulations continued the
withholding of 20 percent, and the trust
agreement required the trustee to notify
the Regional Administrator when 20
percent remained in the fund following
payment of bills. The Agency has
concluded, however, that it is more
properly the Regional Administrator's
role to keep track of the amount of funds
remaining and therefore deleted that
requirement in the trust agreement. In
addition, the Agency is concerned that
in some instances where the cost
estimate is found to be seriously
inadequate, more than 20 percent should
be held in reserve. Therefore, the
regulations now provide that if the cost
of closure appears to be significantly
greater than the value of the trust fund,
the Regional Administrator may
withhold such amounts from payment as
he deems prudent until he receives
satisfactory certifications of closure.
Both in the January 12,1981
regulations and the revised regulations,
the Regional Administrator has 60 days
to make determinations regarding
requests for payments out of the trust
funds. One commenter stated that this
provision penalized the owner or
operator by restricting cash flow. The
Agency believes that there will be
instances when 60 days will be needed
by the Agency to approve payments
from the trust funds in order to
adequately assess whether the bills are
in accordance with the closure plan for
the facility or are otherwise justified.
The Regional Administrator may need
part of this period to determine whether
the cost of closure is significantly
greater than the value of the trust fund,
and if so, what portion of the fund
should be withheld from disbursement
until satisfactory completion of closure.
The Agency recognizes that withholding
approval of release of the funds can
cause a problem to owners and
operators and will follow a policy of
expediting payment requests as quickly
as possible, with 60 days as the limit.
D. Surety Bonds
The only substantive changes to ihe
January 12, 1981 regulations for surety
bonds used to satisfy the financial
assurance requirements are changes hi
the cancellation provisions and hi the
timing of the guaranteed payment of
funds for closure into a standby trust
un- m,
1. Cancellation Provisions. The
requirements for the surety bonds and
letters of credit in the January 12, 1981
regulations included a provision
preventing their cancellation or
termination while a compliance
procedure was pending. This prohibition
has been eliminated and other related
changes have been made in the
cancellation provisions. The changes are
the same for letters of credit and surety
bonds and are discussed hi the
following section on letters of credit.
2. Time of Funding. The financial
guarantee bond for closure now
guarantees funding of the standby trust
fund before the beginning of final
closure, while in the January 12
regulation the trust had to be funded 60
days before the beginning of closure.
(Alternatively, the standby trust must be
funded 15 days after an order to begin
closure is issued by the Regional
Administrator or a court of competent
jurisdiction.] The 60-day period was
required to ensure that funds would be
available by the expected date of
closure, either from the owner or
operator or the surety. Upon
reconsideration, however, the Agency
believes the added assurance of
advanced funding is not necessary. In
order to obtain and retain the surety
bond, the owner or operator must assure
the surety company of its continuing
capacity to meet obligations. The
Agency believes it is unlikely that the
owner or operator with a surety bond
will fail to fund the trust; however, if he
does fail, under the terms of the bond
the surety must fund the trust in his
.place.
3. Limits on Use of Performance
Bonds. Financial guarantee bonds may
be used as a financial assurance
instrument during interim status (Part
265) and permitted status (Part 264), and
they may be used to cover part or ah1 of
the closure or post-closure cost estimate.
Performance bonds are allowed only for
permitted status and must cover the
whole amount of the estimate.
A few commenters disagreed with the
Agency's decision to not allow use of.
performance bonds during interim status
(Part 265). The Agency's reason for
retaining this restriction is as follows.
During interim status the closure and
post-closure plans for a facility are
generally not reviewed by the Regional
Administrator until shortly before the
time of closure. Upon such review the
Regional Administrator may find that
major changes are needed in the plans.
The Agency believes a performance
bond is not appropriate when the actual
required performance for the particular
facility may not be specified in any
- detail during most of the term of the
bond.
One commenter said he disagreed
with the Agency's decision not to allow
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Federal Register /Vol. 47, No.
/ Rules and1 Regulations 15941
an owner or operator to cover a cost
estimate partially with a performance
bond and partially with other
instruments. The commenter said the
surety cbmpariy would simply pay its
pro rata share if this owner or operator
defaulted. The Agency has: decided to
retain this restriction because putting
together the performance guarantee with
funds from sources other than the surety
may necessitate protracted negotiations '
_ among financial institutions which
": would delay closure or post-closure
care.
4. Format. The January 12,1981
regulations had separate bond forms for
closure and for post-closure care
because the Agency believed combining;
them might be confusing. Commenters
suggested that a combined format would
be more convenient and save;
paperwork. The Agency accepted this
suggestion. One-financial guarantee
bond or performance bond may now .be
written to cover closure, post-closure
care, :or both, Identifying information at
the beginning of the form will indicate
.which type of coverage is being . :
r, provided for each facility. ! ."";:.'<.
. 5. Availability. Several members of " ,'.'
the surety industry commented that,
because of the long periods of the,>,
obligations and the cancellation^
: provisions requiring alternatejirancial
: assurance, they would either not write '
these bonds or do so only for their
largest, strongest clients. Commenters
from the regulated community, however,
have recommended that.bonds be -.--.".
included as an allowable option or
indicated that they intended to obtain
bonds. The Agency believes that the
availability of surety bonds'may
.increase as experience of sureties! with
hazardous waste facilities increases.
Also, bonds may be more available for
facilities that are-nearing the time of
closure since the period of the obligation
would then be relatively short and
definite. ' "'
to issue a compliance order requiring the
owner or operator to provide, within 30
days, alternate financial assurance in -
accordance with the regulations. The
issuing institution could not terminate
E. Letters of'Credit
Several changes were made in the
letter of credit in the January 12,1M
regulations. Most were recommended by
. banks and banking organizations to
'.achieve conformity with current
practices. . - '-: .
1. Cancellation Rfovisions. Under the "
January 12,1981 regulations for ^ 4
termination or cancellation of let&fs,of
credit and surety bonds, the issuing
\ institution had to provide at least 90
days' notice of intent to terminate or
cancel the instrument. The notice was to
be sent by certified mail to both fee
owner or operator and to the Regional
Administrator. Upon receipt .61 the
notice, the Regional Adminisjator was
the instrument while a compliance
procedure was.pending. If the owner or
operator failed to establish alternate
financial assurance, the Regional
Administrator could direct the issuer of
'the letter of credit or bond to pay the
amount of the credit or bond into the .
owner's or operator's standby trust. The
Agency believes a compliance
proceeding should be instituted to
provide opportunity for a hearing in
accordance with procedures under
Section 3008 of RCRA prior to ordering
such payment. Since it might not always
be possible to hold a hearing within the
90-day period, it seemed necessary to
prevent termination until the compliance
procedure was completed.
Financial institutions that issue letters
of credit expressed strong
dissatisfaction with the provision
preventing expiration while a ,
compliance .procedure is pending, since
it did riot permit a definite date of -
termination, which is considered an
important feature of letters of credit.
Staff of the U.S. Comptroller of the
Currency confirmed that this'
cancellation provision went against
accepted principles regarding letters of
credit. Sureties did not cite the provision
specifically but said that the - "':...
cancellation provisions did not give
them adequate opportunity to limit then-
risk. ,
''One commenter opposed issuance of a
compliance order by the Regional
Administrator upon'his receipt of a
notice of cancellation from a surety. The
W**M «.v»** Jjiwm fx, OUULGUV. J..IJ
commenter said it seemed unfair to the
owner or operator since he would not
have an opportunity to obtain alternate
financial assurance before such an order
.was issued. , -
In response to the comments by
financial institutions and others, the
Agency modified its approach to
cancellation of letters of-credit and
surety bonds. The prohibition of
expiration while a compliance
procedure is pending was eliminated.
Under the revised regulations, notices of
cancellation must be delivered to both
the owner or operator and the Regional
Administrator at least 120 days before
actual cancellation. A compliance
procedure will not be instituted because
a cancellation notice is received. -
Owners or operators will have 90 days
to provide alternate financial assurance '
and obtain written approval from the
Regional Administrator based on his
determination that the mechanism is in
accordance with the required
specificaMons. If the owner or operator
fails to provide such assurance and
obtain such approval within the 90 days
the Regional Administrator will direct
- the issuing institution to make payment
into the owner's or operator's standby
trust. The Agency views such drawings
. on the instruments in the 30 days'before
cancellation as the normal and
necessary means of maintaining
financial assurande through these
instruments.
The Agency believes that this
provision avoids the problem of the
uncertain expiration date and allows the
owner or operator an adequate
opportunity after a cancellation notice
to clearly establish alternate financial
assurance before the Regional
Administrator draws on the instrument.'
Several eonimeriters said that
uncertainty of the expiration date would
also be caused by the provision in the
January 12regulations requiring that the
90-day period for notice of cancellation
was to begin on the date of receipt of
the notice by the Regional - .
Administrator, as shown on the return
receipt, rather than on the date such '
notice was isent. The Agency believes,
however, .that the amount,of uncertainty
% should be minimal in most instances and
that the possibility of .delay in delivery
can be planned for and monitored by the
sender. The provision is necessary to
prevent expiration from taking place
without the knowledge of the Regional
Administrator or the owner oroperator
and to .prevent shortening of the .
effective notification period due to"'
delays between mailing and actual
, receipt. As explained above, under the
revised regulations 120 days' notice is
required to allow adequate time for the
owner or operator to obtain substitute '
. financial assurance and approval of
such assurance by the Regional
Administrator. This period is to begin on
the date when both the owner or
operator and the Regional Administrator
have received the notice, as evidenced -
by the return receipts. .
2. Standby Trust; Comments were ;
received on the requirement that the
issuing institution deposit any payments
it makes into the owner's or operator's
standby trust. Banks said that letters of
credit do not usually entail such a
responsibility, and furthermore the bank
cannot know whether it has deposited
the money into the right trust. They
recommended that the Regional
Administrator make the deposit or at
le,ast have the bank depend on the ;
Regional Adininistrator's instructions in
making the deposit. Under the revised
' regulations the bank'still must deposit
the funds into the standby iriist,:since
-------
EPA does not have authority to directly
receive funds derived from financial
assurance mechanisms under RCRA, but*
tho deposit must be made in accordance
with the Regional Administrator's
instructions.
3. Separate Letter Identifying
Facilities and Cost Estimates. The letter
of credit in the January'12,1981,
regulations incorporated information
identifying the facilities for which funds
were being assured and the amounts of
the credit designated for financially
assuring closure or post-closure care of
each facility. Commenters said that such
information is usually not included in
letters of credit, which should be written
as simply and briefly as possible. Since
the information could be in an
accompanying letter from the owner or
operator, the Agency decided to require
such a letter and remove the
requirement for having the information
In the letter of credit itself.
4. Certifications. Certification of
authority to execute the letter of credit
was part of the required language for the
letter of credit included in the January
12,1981, regulations. Commenters said
such a certification is not part of other
letters of credit and serves no purpose.
One commenter said that a person who
would write a letter of credit without
authority to do so would not be stopped
by a certification hi the letter. The
Agency agrees that it provides little
added protection and has removed it.
Commenters also recommended that
certification that the wording of the
letter is identical to the wording
specified in the regulations be
eliminated, but the Agency believes the
requirement is necessary to ensure that
the specified wording is used. Standard
language is necessary because infinite
variations are otherwise possible, and
the Agency does nbt have the resources
or expertise to review unlimited
numbers of variations to determine
whether they adequately assure
availability of funds for closure and
post-closure care.
One commenter stated that it was
unreasonable to require wording
identical to that specified in the
regulations because,regulations change.
To clarify the Agency's intent, the
revised regulations now state that the
wording of the letter of credit must be
identical to that specified in the
regulations as these regulations were
constituted on the date the letter was
executed. This change has been made
also in each of the other financial
assurance instruments.
5. Facilities in Different Regions.
Several commenters from the regulated
community said they should be allowed
to cover facilities in different Regions
with one letter of credit. The Agency did
not allow this in the January 12,1981,
regulations because it appeared that,
under the policies of Some banks,
increasing and decreasing the amount of
the credit could be a complex procedure
when multiple beneficiaries were
involved. However, the Agency has now
decided to allow coverage of facilities m
different Regions with a single letter of
credit. Where banking procedures are
cumbersome the owner or operator is
likely to use a separate letter of credit
for each Region since he must still meet
the time requirements for increasing the
amount of the credit if the cost estimate
goes up. In instances where coverage in
different Regions through one letter is
not complicated, there may be
paperwork savings for the owner or
operator hi obtaining such a letter of
credit.
F. Revenue Test for Municipalities
A revenue test for municipalities was
part of the May 19,1980 reproposal (45
FR 33268, 33273). A municipality passed
the test and thereby demonstrated
financial assurance if it had annual
general tax revenues which were 10
times the cost estimates to be covered.
As with the financial test, however, the
Agency could not reach a decision as to
whether to include or nbt include the
revenue test hi time for the January 12,
1981, regulations.
After intensive study the Agency has
decided not to include the revenue test
for municipalities among the allowed
mechanisms. The analysis leading to
this decisioais described in the t
Background Document for the financial
test and revene test. The Agency is
concerned that if funds are not set aside
specifically for closure and post-closure
care, the municipality will face
difficulties m allocating funds for that
purpose when they are needed. If
budgetary and legislative processes,
bond issues, or voter approval of new
taxes are necessary, there is the
possibility that necessary closure and
post-closure activities will not be '.
performed in a timely manner. A
majority of comments received from
local officials and other individuals
knowledgeable about local government
finances, as well as the literature on the
subject, stress .the fact there is little
leeway in most local budgets and some
municipalities are presently in severe.
financial straits. A 10-percent budget
reallocation would be possible only in
extreme situations. Also, the Agency
has not been able to find strong
empirical support for the argument that
a larger multiple will provide
satisfactory assurance. It is not clear
that municipalities will be able to shift
expenditures rapidly to closure or post-
closure care regardless of the multiple
adopted. Furthermore, enforcement
proceedings to bring about such a
reallocation by a municipality may
engender difficult issues in Federal-
State-local relations.
The Agency considered the use of a
test for municipalities based on detailed
financial information indicative of
current financial solvency. Accounting
and reporting procedures of
municipalities in general vary greatly,
however. The Agency concluded that a
requirement which would be based upon
the quantification of assets and tangible
net worth would not be uniformly
applicable because of these various
accounting and reporting methods
presently employed by municipalities.
The Agency does not believe that
municipal bond ratings, a criterion
suggested by several commenters,
would be adequate as a sole indicator of
ability to pay the amounts of the
estimated closure or post-closure costs.
The Agency wa§ thus, unable to develop
a set of financial indicators, similar to
the financial test criteria; that would be
suitable for municipalities in general. A
number of special-purpose, fee-based
municipalities are essentially identical
to private entities; because of their'
financial characteristics and accounting
and reporting practices they may be
able to use the financial test to satisfy
the financial assurance requirements.
The Agency believes that other
municipalities that are financially sound
will be able to use a'trust fund or one of
the other financial assurance
mechanisms allowed. The guarantee by
the State (§§ 264.150 and 265.150) may
be an especially appropriate mechanism
for municipalities. Municipalities are
created by State law, and the States are
in a far better position to gauge the
financial condition of their
municipalities than is EPA.
Consequently, in the event a State
wishes to reduce the cost of the program
upon its municipalities, it may choose to
guarantee the obligations of certain or
all of its municipalities. In the even a
State lacks sufficient confidence in the
. fiscal strength of its municipality to
extend such a guarantee, it would
clearly not be appropriate for EPA to
allow the municipal entity to avoid
providing adequate financial assurance.-
G. Use of State Mechanisms
States in which EPA is administering
the RCRA financial requirements may
also have issued their own financial
requirements applicable to owners and
operators. Under the financial
requirements of Parts 264 and 265, an
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I
Federal Register / Vol. 47. No: 67 /Wednesday. April 7. 1982:/ Rulel and Regulations
15043
owner or operator may use State-
required mechanisms:to meet EPA's
requirements for financial assurance for
closure and post-closure care and
liability coverage if such mechanisms
are equivalent to those specified by
EPA. Commenters on this provision
(§§ 264.149 and 265.149) in the January
12,1981, regulations said it was
inadequate because it did not say who
'would decide whether the mechanism
. was equivalent or how equivalency
would .be.determined. The Agency
agreed with these comments and revised
the Section. It now provides that the
Regional Administrator will decide
whether the mechanism is equivalent.
Two principal factors will be evaluated:
whether availability of funds for
financial assurance for closure or post-
closure care or for liability coverage is
of a least equivalent certainty, and
whether the amount of funds assured is
at least equivalent. The Regional
Administrator also has discretion to
consider other factors. If a mechanism is
equivalent except in the amount of
funds it will make available, the owner
or operator may still use the mechanism
in satisfying the EPA financial
requirements but must make up the
difference in amount by increasing the
funds available through the State
mechanism or through use of the EPA-
specified mechanisms.
An owner or operator who wishes to
use a State-required mechanism to
satisfy the financial requirements of
Parts 264 or 265 must submit a request to
do so and evidence of establishment of
the State-required mechanism. He will
be considered to be in compliance with
the relevant portion of the financial
requirements of :Parts 264 or265 pending
a determination of equivalency by the
Regional Administrator.
These same provisions for .
determining equivalency were
incorporated into § § 264.150 and 205.150,
which allow owners and operators to
use State guarantees to satisfy the
financial requirements of Parts 264 and
265 if they are equivalent to mechanisms
specified in those Parts.
H. Exemption of Facilities With Small
Cost Estimates
Several commenters recommended
that the Agency exempt facilities with
small closure cost estimates from the
requirements for financial assurance for
closure because the cost of establishing
financial assurance would amount to
more than the cost of closure. The
Agency has concluded that, on the basis
of current available information, an
exemption should not be allowed on the
grounds that the cost estimate is small.
A small cost estimate is not an
indication that the iisk of damage is
small. The failure to perform necessary
closure or post-closure activities at sites
. at which even a small amount of
hazardous waste is present could result
- in a great deal of damage. Many large
firms will be able to use the financial
test to easily cover small estimates.
Small firms should be able to reduce the
administrative costs of financial
assurance for small amounts to a
minimum by using a fully collateralized
letter of credit.
The Agency believes a facility for
which the cost estimate is as small as
the minimum cost of providing financial
assurance will usually be a small
storage facility owned or operated by a
hazardous waste generator. Under
existing rules for hazardous waste
generators (§ 262.34), waste generators '
can avoid providing financial assurance
by not storing waste on site longer than
90 days. This practice would also
promote environmental protection.
Over the next year, the Agency plans
to study actual facilities with relatively
small closure cost estimates to evaluate
the potential risks posed to human
health and the environment should an
exemption be allowed/The Agency will
then review the question of exempting
facilities with small estimates in light of
the study findings. For purposes of this
review the Agency also solicits
information from owners and operators
with closure cost estimates of up to
$10,OOO on the specific costs of the
mechanisms 4hey are using to satisfy:the
financial assurance requirement.
/. Restricting Means of Financial
Assurance
Several commenters have stated that
EPA should, not require specific means
of financial assurance and specific "
wording of financial instruments
because alternate methods and wording
may be preferable to some owners and
operators and equally effective for the
Agency's purposes.
As discussed in the Preamble to the
January 12,1981, regulations (46 FR
2823), the Agency has concluded that it
must require specific .mechanisms for
financial assurance. An open-ende'd
approach would impose an intolerable
administrative burden on the Agency
especially in light of its limited
experience and resources in the area of
evaluating financial mechanisms. EPA
believes it has allowed those
mechanisms which adequately provide
financial assurance and are feasible,
and EPA will continue to be receptive to
proposals and petitions for additions "
and improvements to the allowed .
options.
/. Notice of Release From Financial
Assurance for Post-Closure Care
the January 12,1981, regulations in
Part 264 provided that when an owner or
operator completed all post-closure care
requirements to the satisfaction of the
Regional! Administrator for the period of
post-closure care specified in the permit
for the facility or the period specified by-
the Regional Administrator after
closure, whichever period was shorter,
the Regional Administrator would, at
the request of the owner or operator,
notify hub that he is no longer required
to maintain financial assurance for post-
closure care of the facility. In Part 265,
this provision was the same except that,
rather than the period specified in the
permit, a period of 30 years for post- - *
closure care was used, in accordance
with Subpart G of Part 265. In the
revised regulations, the notice of release
is contingent on completion of all post-
closure care requirements in accordance
with the post-closure plan. The Agency
intends that the post-closure plan for the
facility wnll continuously reflect the
post-elosiire care requirements for the
facility, including the perio'd of post-
closure care. The Agency therefore
decided that financial assurance for
post-closure care should be explicitly
- tied to the plan and the period set forth
intheplaiL .
During the post-closure period, if the
owner or operator can demonstrate that
the amount of funds assured by a '
mechanism specified in these "
regulations exceeds the amount that will
be neededjover the entire period of post-
closure care, the Regional Administrator
may approve a decrease in the amount
assured by the mechanism. Potential
effects of inflation as well as
requirements specified in the post-
closure plan will be major
considerations in evaluating requests for
decreases in the amounts of funds
assured. | -..;.,. .
K. Incapacity of Owners, Operators~
Guarantors, and Issuing Institutions
The January 12,1981, regulations
required that if the institution that has
issued the siurety bond, letter of credit,
or insurnace policy used by an owner or -
operator to satisfy the financial
requirements become incapacitated by
bankruptcy;, insolvency, or suspension
or revocation of its license or charter,
the owner or operator must establish
other financial assurance within 60 days
-after such an event. The Agency decided
to eliminate insolvency of the issuing
institution from this provision in the
revised regulations because of its
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150M Federal Register / Vol. 47, No. 67 / Wednesday. April 7.
conclusion that insolvency is not a
readily identifiable condition.
Under the revised regulations, an
owner or operator using a trust fund to
satisfy the financial requirements must
also obtain alternate financial assurance
if the trustee institution becomes
bankrupt or its authority to act as
trustee is suspended or revoked. The
Agency decided that mainenance and
quality of financial assurance are better
protected if trust funds are also covered
by this provision. The affected owner or
operator may comply with the
requirement simply by arranging for a
successor trustee that meets the
qualifications of the regulations.,
One commenter said that the period
during which alternate assurance must
be provided should be extended to 120
days and should begin after public
notice of the event rather than the event
itself. The Agency has retained the
provision in its original form since it
believes 60 days is adequate time for an
owner or operator to become aware of
Incapacity of the issuing institution and
to obtain an alternate mechanism.
The Agency has added a provision
requiring an owner or operator named
as a debtor in a bankruptcy proceeding
under Title 11 of the U.S. Code to notify
the Regional Administrator within 10
days after commencement of the
proceeding. It is important that the
Regional Administrator be aware of
such an event since it may have
important implications for continuity of
operations at the facility and the
owner's or operator's ability to meet
financial obligations such as costs of
closure and post-closure care. Under the
terms of the guarantee based on the
financial test, a guarantor is also
obligated to notify the Regional
Administrator if he is named as debtor
in a bankruptcy proceeding.
IV. Estimating Costs of Closure and
Post-Closure Care
Several clarifications have been made
to the cost-estimating regulations
(§§ 204.142, 204.144, 205.142, 205.144).
The cost-estimating regulations for
interim status facilities were issued as
final regulations on May 19,1980 (45 FR
33243-33244). The compliance date for
these regulations was changed from
November 19,1980, to May 19,1981, by
an amendment issued on October 30,
1980. The cost-estimating regulations for
permitted status were issued as interim
final regulations on January 12,1981 (46
FR 2852 and 2858) and were effective
July 13,1981. The clarifications include:
Jn the revised Part 265 cost-estimating
regulations, it is made clear that the
adjustment for inflation must be done on
the anniversary of the date on which the
first estimate was prepared, rather than
on the anniversary of the effective date
of the regulations (November 19,1980).
This is consistent with the specifications
for Part 264 and the Agency's'intent that
the adjustments should be done on an
annual basis.
In the previous regulations, the
required annual inflation adjustments to
the post-closure cost estimates were
clearly limited to the operating life of
the facility, but changes hi the estimates
due to changes hi the post-closure plan
were not. The revised regulations state
that the latter changes are also required
only during the operating life of the
facility. This revision makes the
regulation internally consistent and
consistent with the Agency's intent that
cost-estimating be required only during
operating life.
The previous regulations required that
all cost estimates be retained at the
facility because the Agency was
concerned that the estimates showing a
breakdown of costs as well as the
adjustments be available at the facility.
To reduce the possible burden on
owners and operators if they were
required to keep every cost estimate
over the years and because of the
Agency's conclusion that having all
prior estimates available at the facility
is not necessary, the revised regulation
states explicitly that only the latest cost
estimate based on the closure or post-
closure plan and the latest adjusted cost
estimate have to be kept at the facility.
In the January 12,1981, regulations,
the term "adjusted cost estimate" was
used to represent the latest estimate as
required in-the regulations. In the
revised regulations, the term "current
cost estimate" is used instead to avoid
confusion in instances where the latest
estimate is one which has not yet been
adjusted for inflation.
Because the Agency has received
several inquiries from owners and
operators as to whether the first
estimates were to be prepared in current
dollars, the revised regulations state
explicitly that current dollars are to be
used.
V. Regulatory Impact Analysis
Executive Order 12291 (46 FR 13193,
February 19,1981) requires that EPA
prepare a Regulatory Impact Analysis
for each major rule. The Order defines a
"major rule" as any regulation that is
likely to result hi:
An annual effect on the economy of
$100 million or more;
A major increase in costs or prices for
consumers, individual industries,
Federal, State, or local government
agencies or geographic regions; or
Regulations
Significant adverse effects on
competition, employment,
productivity, innovation, or on the
ability of United States-based
enterprises to compete with foreign-
based enterprises in domestic or
export markets.
These revised regulations are not
"major" hi themselves; rather, they are
changes to existing regulations. These
changes reduce the cost of meeting
RCRA financial responsibility
requirements by providing additional
options that will be less expensive.
Nevertheless, a preliminary Regulatory
Impact Analysis of these interim final
requirements was completed in
September 1981 because they constitute
a significant component of the body of
RCRA regulations. The final analysis is
scheduled to be completed in the spring
of 1983, after the Agency determines
how it will comply with Executive Order
12291 and publishes that guidance in the
Federal Register. The following is a
summary of the preliminary analysis:
A. Benefits of the Regulation
The financial assurance requirements
will result in the following benefits:
1. Greater Equity. The requirements
will ensure the equitable result that the
persons wlio benefit directly from
hazardous waste treatment, storage, and
disposal activities will pay the costs of
proper closure and post-closure care.
2. Other Economic Benefits. The
requirements will also provide the
following benefits:
A reduction in the number of
accidents resulting from releases of
hazardous wastes; '
« A reduction in the costs of disposal of
hazardous wastes;
Avoidance of increases in cost of
closure and post-closure care by
ensuring available funds; and
Elimination of unfair competition.
a. Accident Reduction. The
requirements will result in the costs of
closure and post-closure care being
included in the cost of managing
hazardous waste. This should result in
reduced amounts of hazardous waste
being generated, which will itself reduce
the chance of accidents. More " "
importantly, however, facility owners
and operators will have greater,
incentive to improve operating
procedures and reduce the risk of
accidents. In particular, the funds to be
set aside for closure depend directly on
the maximum extent of operation
(amount of waste exposed) and the
maximum amount of inventory. Thus
there is a built-in incentive to minimize
waste exposed to the environment,
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Federal Register /Vol. 47. 67 /
i - : .
J[982_7J*ulesiand Regulations -15045
which should reduce the risk of '-\
accidents. .' -_ ; -
b. Reduced Costs-of Proper Disposal
Owners and operators of hazardous
waste treatment, storage, and disposal
facilities will now almost certainly be
faced with assuming the cost of closure
and post-closure care. This creates an
incentive to locate, design, and operate
facilities to minimize closure and post-
closure costs. For example, design and
operating procedures which would leave
a costly post-closure care responsibility
are more likely to be avoided.
. c. Avoidance of Increases in Closure
and Post-Closure Costs by Ensuring
Available Funds. The regulations will
ensure that nearly every owner or
operator will have funds available to"
cover the costs of proper closure and
post-closure care. Past incidents confirm
that-the absence of funds for closure and
post-closure care can lead to significant
deterioration in the condition of the
facility and that this deterioration
results in much higher closure and post-
closure costs tiian would have occurred
if funds had been available to take
immediate measures. For example, it is
less costly to handle hazardous waste in
a container before it has raptured,
rusted, or otherwise spilled on the
ground,' into an aquifer or surface body
of water, or in an ecologically sensitive
area. Therefore, the regulations will help
to reduce the total costs of managing
hazardous waste by ensuring that funds
will be available for timely closure and
.post-closure care.
d. "Elimination of Unfair Competition.
In the past, some owners and operators '
have chosen to ignore costs of closure
and post-closure care, which has
enabled them to gairi.a competitive edge
over owners and operators who
assumed these responsibilities, These
_ regulations will help to discourage'
unfair competition and ensure that
owners and operators bear these costs
of their operations.
B. Costs of the Regulation '.'
The annual private costs 6f these
regulations are $9.4 million for closure
assurance and $10.6 million for post-
closure assurance, for a total annual
private cost of $20 million. The annual
social costs of the regulationsthe
value of resources actually used,
disregarding transfers of money
between private parties and between
private parties and the governmentare
$6.7 million, or 34 percent of annual -~
private costs. Owners and operators of
landfills and surface impoundments will
incur over 84 percent of the annual
private costs and over 53 percent of the
annual social costs of these regulations.
C. Comparison .of Costs and Benefits
Even if no value is assigned to greater
equity in distribution oncosts and to
reduction in unfair competition, the
benefits of these regulations are likely to
exceed their social costs if::.'.
» This regulation causes 4.5 percent of
the accidents at hazardous waste sites
to be prevented, and there is no
reduction in the cost of disposal and
no avoidance of growth in costs of
closure and post-closure care; or
This regulation causes the costs of
closure and post-closure care to be
reduced 11 percent, on average, by '
proper location, design, andjjperation
of hazardous waste facilities, and
there is no reduction in accidents; or
« This regulation causes some '
combination of these two factors sach
as a 2 percent reduction in the number
, of accidents at "hazardous waste
. facilities and a 6 percent reduction'in
the costs of closure and post-closure
care.
Because the Agency believes that
such savings are likely, because there is
considerable value to equitable cost
distribution and reduction of unfair
competition, and because the record
shows considerable irreversible damage
from abandonment of hazardous waste
facilities, the Agency has concluded that"
"the benefits of these regulations
outweigh their costs.
VL Paperwork Reduction Act
. Under the Federal Reports Act of '
1942, as amended by the Paperwork
Reduction Act of 1980, the Office of
Management and Budget (OMB) reviews
reporting requirements in regulations in
order to minimize the reporting burden
on respondents and the cost to
government, EPA submitted an
information collection report to OMB in
March 1981 covering the financial
responsibility mechanisms promulgated
as interim.final regulations on January
12,1981. EPA believes the reporting of
the information required by the
additional financial assurance -
mechanisms promulgated today
represents no additional burden to the ,
regulated community/The financial test
requirements could result in added
reporting burden, if, as provided by the
regulations, the Regional Administrator
requests financial information in
addition to the documents routinely
required because of his resonafale belief
that the firm may:not meet the test
criteria. However, thejBriancial test is
one of several options; the firm may
choose to substitute other financial
assurance if it does not wish to supply
the requested information. The reporting .,
burden for the closure and post-closure
insurance! provisions promulgated today
corresponds closely to that of the trust
fund, surety bond, or letter of credit.
In othe;p revisions to the January 12,
1981, regulations, the Agency has
reduced the paperwork burden. Owners
and operators are no longer required to
keep all their estimates for closure and
post-closuire care (only the latest ones).
The same bond form can be used to
cover financial assurance for closure'
and post-closure care. A single letter of
credit may be used to cover faciHties in
different Regions..Instruments specified
in both Parts 264 and 265 are now
wordedldentically, so that an owner or
operator vrfth multiple facilities can
provide financial assurance for those
facilities through one instrument even if
some facilities are permitted and others
are under :inferim status. (The
instruments appear inPart 264 arid .are
incorporated by reference in Part 265.)
An ameiided information collection
report covering the additional
mechanisms* and revisions will be
submitted to OMB, EPA anticipates that
OMB reviejjy will be completed well
before (he reporting requirements take
effect. ' [" ' ' -- .'--'-
VII. Regulatory .Flexibility Act
Under the Regulatory Flexibility Act -
(5 U.S.G. 601 etseq.}. Federal agencies
must; injdeyeloping regulations.'analyze
their impact on small entities (small
, businesses, small governmental
jurisdictions, and-small organizations).'
This requirement applies to Federal
regulationsjjproposed after January 1,
1981. Of the .financial responsibility '
reguki]ions:"praniulgated today, the only
portion thai: was not proposed before
January!, 1981, is the portion on the
insurancf for closure and post-closure
costs (wfflcii was developed specifically
with small businesses in mind). In " "
keeping with the spirit of the Regulatory
Flexibility Act, however, the following
summary is presented of the 'expected
effects of the requirements on small
entities;-.!^ - . , -. -
EPA studigs indicate that treaters,
storers, and (disposers of hazardous
waste represent a wide spectrum of U.S.
industry. Governmental bodies and
other types ii>f organizations are also
represented lamong'owners and
.operatorsjykjge entities'are '-.'-
predominanffbf a sample of facilities for
which nofifirations were received under
Section 301Q| of RCRA, two-thirds were
located at plants with over 500
employees, ^definition of Ismail
entities" for ^lie purposes of the RCRA
regulations lias not yetbeen set;
however; entities with 500 or more
employees alt a plant would probably
-------
not ba considered small under any such
definition. In this same sample, among
facilities located at plants with less than
100 employees, the following industries
were most frequently represented:
Chemicals and Allied Products;
Fabricated Metal Products; Agricultural
Services; Machinery, Except Electrical;
Business Services; Printing and
Publishing, Miscellaneous
Manufacturing Industries; Electric and
Electronic Equipment; Petroleum and
Coal Products; Transportation
Equipment; and Primary Metal
Industries.
In developing the array of financial
assurance mechanisms to be included in
the regulations the Agency considered
every suggested means and has greatly
widened the range of alternatives
allowed since the first proposal of
December 1978. The Agency has sought
to allow maximum flexibility within the
constraints of the need for reliable
financial assurance and for
administrative feasibility. The Agency
believes that this approach will prove
beneficial to owners and operators of all
sizes.
Of the financial assurance
mechanisms allowed as means of
satisfying the requirements, the Agency
expects that the trust fund and the
insurance plan will be the ones most
frequently used by small entities
because their availability will not be
dependent on the size of the owner or
operator. The Agency believes that fully
collaterallzed letters of credit will also
be widely available, but except for
assurance of small amounts, such
instruments would be comparatively
expensive for long-term financial
assurance. Some small entities will be
able to use corporate guarantees written
by their parent firms which pass the
financial test. Small entities themselves
arc not likely to pass the financial test,
and often will not be able to obtain
surety bonds or unsecured letters of
credit
Following are major actions and
decisions of the Agency affecting the
means of financial assurance available
to small entities:
« The Agency developed insurance as
an alternative for small entities that
would otherwise have only trust funds
as available means of financial
assurance. As described earlier,-the
insurance plan may offer cost
advantages to small owners and
operators as well as provide more
effective financial assurance.
« Allowing the trust funds to be built
during a pay-in period will lessen the
impact of the cost of this instrument.
The Agency is concerned that
requiring immediate full funding may
lead to many premature closures by
small and other entities with closure
costs that are large in relation to
operating income. This could lead to
less overall environmental protection
as a result of poorly closed or
abandoned sites as well as undue
economic hardship for small owners
and operators.
The Agency obtained a "no-action"
letter from the Securities and
Exchange Commission which will ,
allow banks to commingle trust funds
for investment purposes. The Agency
took this action after it was informed
that more banks would be willing to
act as trustees for smaller trust funds
if the funds could be so commingled.
The savings to the regulated
community resulting from the
Agency's decision to allow the . 4 .
financial test as a financial assurance
mechanism will not be shared in by
small entities. On the basis of its
analysis, however, the Agency
believes these criteria are necessary
to clearly demonstrate financial
soundness for purposes of these
regulations.
The Agency believes that its decision
not to allow the revenue .test as a,
means by which municipalities could
satisfy the financial requirements will
affect very few small entities. This
test could not be justified as a means
of assuring availability of funds for
closure and post-closure care, as
explained above, under "Revenue
Test."
The Agency's decision not to allow an
exemption for facilities with small
cost estimates will affect some small
entities, although small estimates are
- not necessarily associated with small
entities. The Agency believes that
small estimates are likely to be for
small hazardous waste storage
facilities that may .be part of the
operations of small or large entities.
As discussed above, the Agency has
concluded on the basis of currently
available information that such an
exemption for facilities with small
estimates would not be consistent
with the need to assure funds for
protection of human health and the
. environment, and that administrative
costs of financial assurance for small
amounts could be limited through use
of collateralized letters of credit. The
Agency plans to reevaluate this issue
after studying the environmental risks
josed by actual facilities with small
closure cost estimates.
As a result of the mandates of RCRA,
entities of all sizes must incorporate into
their management of hazardous waste
certain measures to protect human
health and the environment. The Agency
has concluded that one such measure is
assurance of funds for closure and post-
closure care of hazardous waste
management facilities. Within this
context, the Agency has given
consideration to the impact of the costs
on small entities, as summarized above,
and will continue to look for possible
ways to reduce costs without sacrificing
the goal of the regulations.
VIII. Supporting Documents
Background Documents supporting the
financial requirements and providing
responses to public comments include:
(1) The Background Document
prepared for the regulations as
promulgated January 12,1981. All
significant issues raised by commenters
on the January 12 regulations regarding
financial assurance for closure and post-
closure care-are discussed in this
preamble. Responses to other comments
on this area are presented in a summary
that has been included in the docket for
these regulations.
(2) A Background Document.for the
Agency's decisions regarding the
financial test and the revenue test for
municipalities, including responses to
comments.
(3) A Background Document for the
new insurance option for providing
financial assurance for closure and post-
closure care. .
Copies of these documents and the.
preliminary Regulatory Impact Analysis
"are available for review in the EPA
regional office libraries and at the EPA
headquarters library, Room 2404,
Waterside Mall, 401M Street, S.W.,
Washington, D.C. 20460.
EPA is also preparing guidance
manuals on the financial requirements
to assist owners and operators and
.regulatory officials and expects to make
them available from EPA headquarters
and the regional offices.-
IX. Deletion of "Comments" From
Regulations
The financial regulations issued
January 12,1981, included numerous
explanatory comments set off from the
regulatory text by brackets. On the
advice of the Office of the Federal
Register, EPA has deleted the comments
from the regulations. Most of this
explanatory material will be included in
the guidance manuals for these
regulations.
This regulatioiTand the preliminary
Regulatory Impact Analysis were
submitted to the Office of Management
and Budget for review as required by
Executive Order 12291. .
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Federal Register /'Vol. 47. No. 67 / Wednesday, April 7, 1982 / Rules and
15047
Dated: March 31,1982.
Anne M. Gorsuch,
Administrator, .-..
For the reasons set out in the .
preamble, Title 40 of the Code of Federal
Regulations is amended as follows:
PART 264STANDARDS FOR
OWNERS AND OPERATORS OF
HAZARDOUS WASTE TREATMENT,
STORAGE, AND DISPOSAL
FACILITIES
Subpart HFinancial Requirements
1. Amend 40 CFR Part 264 by revising
§ § 264.140, 264.141{a), 264.142-264.146,
and 264.148-264.l51(aMf) and by adding
paragraphs (cMg) to § 264.141 and
paragraph (h) to § 264.151 as follows:
§264.140 Applicability.
(a) The requirements of § § 264.142,
264.143, and 264.147-151 apply to owners,
, and operators of all hazardous waste
facilities, except as provided otherwise
in this section or in §264.1.
(b) The requirements of § § 264.144,
2.64.145, and 264.146 apply only to -:
owners and operators of disposal
facilities.
(c) States and the Federal government
are exempt.from the requirements of this
subpart. . v.
§264.141 Definitions of terms as used in
this Subpart. .
(a) "Closure plan" means the plan for
closure prepared in accordance with the
requirements of § 264.112.'
(b) "Current closure.cost estimate"
means "the most recent of the estimates
prepared in accordance with
§§264.142(a), (b). and [c).
[dj "Current post-closure cost '
estimate" means the'most recent of the
estimates prepared in" accordance with
§§264.144(a), (b), and (c]. '
(e) "Parent corporation" means a
corporation which directly owns at least
50 percent of the voting stock of the .
corporation which is the facility owner
or operator; the latter corporation is '
deemed a "subsidiary" of the parent
corporation. ,.
(fj "Post-closure plan" means the plan
for post-closure care prepared in
accordance with the requirements of
§§264.117-264.120.
. (g) The following terms are used hi the
specifications for the financial test for .
closure and post-closure care. The
definitions are intended to represent the
common meanings of the terms as they
are generally used by the business
community.
"Assets" means all existing and all. :
probable future economic benefits
obtained or controlled by a particular
entity.
"Current assets" means cash or other
assets or resources commonly identified
as those which are reasonably expected
to be realized in cash or sold or,
consumed during the^normal operating
cycle of the business." r
"Current liabilities" means obligations
whose liquidation is reasonably
- expected to require the use of existing
resources properly classifiable as
current assets or the creation of other
current liabilities.
"Independently audited" refers to an
audit performed by an independent :
certified public accountant in
accordance with generally accepted
.auditing standards.
"Liabilities" means probable future
sacrifices of economic benefits arising
from present obligations to transfer
assets or provide services to other
entities in the future as a result of past
transactions or events.
"Net working capital" means current
. assets minus current liabilities.
"Net worth" means total assets minus
total liabilities and is equivalent to '
owner's equity. '
"Tangible net worth" means the
tangible assets that remain after
deducting liabilities; such-assets would
not include intangibles such as goodwill
and rights to patents or royalties.
§264.142 Cost estimate for closure.
(a) The owner or operator must
prepare a written estimate, in current
dollars, of the cost of closing the facility
in accordance with the^ closure plan as
, specified in § 264.112. The closure cost
estimate must equal the cost of closure
at the point in the facility's operating life
when the extent and manner of its
operation would make closure the most
- expensive, as indicated by its closure
plan. ,
(b) The owner or operator must adjust
the closure cost estimate for inflation
within 30 days after each anniversary of
the .date on which the first closure cost
estimate was prepared. The adjustment
: must be made as specified in paragraphs
(b)(i) and (b)(ii) of this section, using an
inflation-factor derived from the annual
Implicit Price Deflator for Gross .
National Product as published by the
U.S. Department of Commerce in its
Survey of Current Business. The
inflation factor is the result of dividing
the latest published annual Deflator by
the Deflator for the previous year.
(i) The first adjustment is made, by
multiplying the closure cost estimate by
the inflation factor. The result is the '
adjusted closure cost estimate.
(ii) Subsequent adjustments'are made
by mutliplying the lastest adjusted
closure cosit.estimate by the latest
inflation factor.
(c) The owner or operator must revise
the closure cost estimate whenever a
change in the closure plan .increases the
cost of closure. The revised closure cost
estimate must be adjusted for inflation
as specified in §-264.142(b).
(d) The owner or operator must keep
-the following at the facility~during the
operating life of the facility: The latest
1 closure cost estrmate.prepared in ,*
accordance'with §§ 264.142 (a) and (c)
and, when Ihis estimate has been
adjusted in accordance with
§ 264.142(b), the latest adjusted closure
cost estimate., ' -
- §264.143 Financial assurance for closure.
An owner or operator of each facility
must establish financial assurance for
closure of the facility. He must choose
from the options as specified in
paragraphs (a) through (f) of this section.
(a) Closure trust fund (1) An owner or
operator may satisfy the requirements of
this section by establishing a closure
trust fund which conforms to the
requirements of this paragraph and
submitting an originally signed duplicate
of the trust sigreement to the Regional
Administrator. An owner or operator of
a new facility must submit the originally
signed duplicate of the trust agreement
to the Regional Administrator at least 60
days before'the date on which
hazardous waste is first received for
treatment, storage, or disposal. The
trustee must be an entity which has the
authority to act as a trustee and whose
trust operations are regulated and
examined by a Federal or State agency.
(2) The wording of the trust agreement
must be iden tical to the wording
specified in § 264.151(a)[l), and the trust
" agreement must be accompanied by a
formal certification of acknowledgment
(for example, see § 264.151(a)(2)J.
Schedule A of the trust agreement must
be updated within 60 days after a
change in the amount of the current
closure cost e stimate covered by the
agreement.
(3) Payments into the trust fund must
be made anmially by the owner or
operator over, the,term of the initial
RCRA permit "or over the remaining "
operating life of the facility as estimated
in the closure plan, whichever period is
shorter; this period is hereafter referred
to as the "pay-in period." The payments
into the closure trust fund must be made
as follows: j ' ".
(i) For a new.facility, the first payment
must be made;before the initial receipt
of hazardous waste for treatment,
storage, or disposal. A receipt from the
trustee for thisi payment must be
-------
submitted by the owner or operator to
the Regional Administrator before this
initial receipt of hazardous waste. The
first payment must be at least equal to
the current closure cost estimate, except
as provided in § 264.143(g), divided by
the number of years hi the pay-in period.
Subsequent payments must be made no
later than 30 days after each
anniversary date of the first payment
llie amount of each subsequent
payment must be determined by this
formula:
cs-cv
Next p«ynwnl»
where CE is the current closure cost
estimate, CV is the current value of the
trust fund, and Y is the number of years
remaining in the pay-in period.
(ii) If an owner or operator establishes
a trust fund as specified in § 265.143(a)
of this chapter, and the value of that
trust fund is less than the current
closure cost estimate when a permit is
awarded for the facility, the amount of
the current closure cost estimate still to
be paid into the trust fund must be paid
in over the pay-in period as defined in
' paragraph [a)(3) of this section.
Payments must continue to be made no
later than 30 days after each
anniversary date of the first payment
made pursuant to Part 265 of this
chapter. The amount of each payment
must be determined by this formula:
Next payment;.
CE-CV
where CE is the current closure cost
estimate, CV is the current value of the
trust fund, and Y is the number of years
remaining in the pay-in period.
(4) The owner or operator may
accelerate payments'into the trust fund
or he may deposit the full amount of the
current closure cost estimate at the time
the fund is established. However, he
must maintain the value of the fund at
no less than the value that the fund
would have if annual payments were
made as specified in paragraph (a)(3) of
this section.
(5) If the owner or operator
establishes a closure trust fund after
having used one or more alternate
mechanisms specified hi this section or
In § 265,143 of this chapter, his first
payment must be in at least the amount
that the fund would contain if the trust
fund were established initially and
annual payments made according to
specifications of this paragraph and
1265.143(a) of this chapter, as
applicable.
(6) After the pay-in period is
completed, whenever the current closure
cost estimate changes, the owner or
operator must compare the new estimate
with the trustee's most recent annual
valuation of the trust fund. If the value
of the fund is less than the amount of the
new estimate, the owner or operator,
within GO. days after the change in the
cost estimate, must either deposit an
amount into the fund so that its value
after this deposit at least equals the
amount of the current closure cost
estimate, or obtain other financial
assurance as specified in this section to
cover the difference.
(7) If the value of tiie trust fund is
greater than the total amount of the
current closure cost estimate, the owner
or operator may submit a written
request to the Regional Administrator
for release of the amount in excess of
the current cldsure cost estimate.
(8) If an owner or operator substitutes
Qther financial assurance as specified in
this section for all or part of the trust
fund, he may submit a written request to
the Regional Administrator for release
of the amount in excess of the current
closure cost estimate covered by the
trust fund.
(9) Within 60 days after receiving a
request from the owner or operator for
release of funds as specified hi
paragraphs (a) (7) or (8) of this section,
the Regional Administrator will instruct
the trustee to release to the owner or
operator such funds as the Regional
Administrator specifies in writing.
(10) After beginning final closure, an
owner or operator or any other person
authorized to perform closure may
request reimbursement for closure
expenditures by submitting itemized
bills to the Regional Administrator.
Within 60 days after receiving bills for
closure activities, the Regional
Administrator will determine whether
the closure expenditures are in
accordance with the closure plan or
otherwise justified, and if so, he will
instruct the trustee to make
reimbursement hi such amounts as the -
Regional Administrator specifies in
writing. If the Regional Administrator
has reason to believe that the cost of
closure will be significantly greater than
the value of the trust fund, he may
withhold reimbursement of such
amounts as he deems prudent until he
determines, hi accordance with
§ 264.143(i). that the owner or operator
is no longer required to maintain
financial assurance for closure.
(11) The Regional Administrator will
agree to termination of the trust when:
(i) An owner or operator substitutes
alternate financial assurance as
specified hi this section; or
(ii) The Regional Administrator
releases the owner or operator from the
requirements of this section-in
accordance with § 264.143(i).
(b) Surety bond guaranteeing payment
into a closure trust fund (I) An owner
or operator may satisfy the requirements
of this section by obtaining a surety
bond which conforms to the
requirements of this paragraph and
submitting the bond to the Regional
Administrator, An owner or operator of
a new facility must submit the bond to
the Regional Administrator at least 60
days befgre the date on which .
hazardous waste is first received for
treatment, storage, or disposal. The
bond must be effective before this initial
receipt of hazardous waste. The surety
company issuing the bond must, at a
minimum, be among those listed as
acceptable sureties on Federal bonds in
Circular 570 of the U.S. Department of
the Treasury.
(2) The wording of the surety bond
must be identical to the wording
specified in §264.151(b).
(3) The owner or operator who uses a
surety bond to satisfy the requirements
of this section must also establish a
standby trust fund. Under the terms of
the bond, all payments made thereunder
will be deposited by the surety directly
into the standby trust fund in
accordance with instructions from the
Regional Administrator. This standby
trust fund must meet the requirements
specified in § 264.143(a), except that:
(i) An originally signed duplicate of
the trust agreement must be submitted
to the Regional Administrator with the
surety bond; and
(ii) Until the standby trust fund is
funded pursuant to the requirements of
this section, the following are not
* required by these regulations:
(A) Payments into the trust fund as
specified in § 264.143(a);
(B) Updating of Schedule A of the
trust agreement (see § 264.151(a)) to
show current closure cost estimates;
- (C) Annual valuations as required by
the trust agreement; and
(D) Notices of nonpayment as
required by the trust agreement.
(4) The bond must guarantee that the
owner or operator will:
(i) Fund the standby trust fund in an
amount equal to the penal sum of the
bond before the beginning of final
closure of the facility; or
. (ii) Fund the standby trust fund in an ,
amount equal to the penal sum within 15
days after an order to begin closure is
issued by the Regional Administrator oy
a U.S. district court or other court of
competent jurisdiction; or
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Federal Register / Vol. 47. No. 67 / Wednesday, April 7,
tfl »«'"^^^^PMg^^BiKEgMgBia^BB^BnflrT'nntaiuay.mi»nil'j""-" TtpnmHIM * i m. p mm n i « L u _-.,--,.,.-_
and Regulations 15049
(iii) Provide alternate financial .
assurance as specified in this section,
and obtain the Regional Administrator's
written approval of the assurance
provided, within 90 days after receipt by
both the owner or operator and the
Regional Administrator of a notice of
cancellation of the bond from the surety.
(5] Under the terms of the bond, the
surety will become liable on'the bond
obligation when 'the owner or operator
fails to perform as guaranteed by the
bond. ' , .
(6) The penal sum-of the bond must be
in an amount at least equal to the
current closure cost estimate,, except as
provided in §-264.143(g).
(7) Whenever the current closure cost
estimate increases to an amount greater
then the penal sum, the owner or
operator, within',60 days after the
increase, must either cause the penal
. sum to be increased to an amount at
least equal to the current closure cost
estimate and submit evidence, of such
increase to the Regional Administrator,
or obtain other financial assurance as " ' -
specified in this section to cover the
increase. Whenever the current closure
cost estimate decreases, the penal sum
may be reduced, to the amount of the
current closure cost estimate following
written approval by the Regional
" Administrator. , '
Cylinder the terms of the bond, the
surety may cancel the bond by sending
notice of cancellation by certified mail -
to the owner or operator and to the
Regional Administrator. Cancellation *
may not occur, however, during the 120
days beginning on the date of receipt of
the notice of cancellation by both the
owner or operator and the Regional
Administrator, as evidence by the return
-, receipts. ,
(9) The owner or operator may cancel
the bond if the Regional Administrator
has given prior written consent based on
his receipt of evidence of alternate
financial assurance as specified in this
section. '...-'
(c) Surety bond guaranteeing
performance of closure. (I) An owner or
operator may satisfy the requirements of
this section by.obtaining a surety bond
which conforms to the requirements of
this paragraph and submitting the bond
to the Regional'Administrator. An
owner or operator of a new facility must'
submit the bond to the Regional
Administrator at least 60 days before
the date on which hazardous waste is
first received for treatment, storage, or
disposal. The bond must be effective
before this initial receipt of hazardous
waste. The surety company issuing the
bond must, at a minimum, be among
those listed as acceptable sureties on
Federal bonds in Circular 570 of the U.S.
Department~of the Treasury.
^ [2) The wording of the surety bond
must be identical to the wording
specified in § 264.151(c). '
(3) The owner or operator who uses a
surety bond to satisfy the requirements
of this section must also establish a
standby trust fund. Under the terms of
the bond, all payments made thereunder
will be deposited by the surety directly
into the standby trust fund in
accordance wife instructions from the
Regional Administrator. This standby :
trust must meet the requirements
specified in § 264.143(a), except that:
(i) An originally signed duplicate of
the trust agreement must be submitted
to the Regional Administrator with the
surety bond; and
(ii) Unless the standby trust fund is
funded pursuant to the requirements of
this section, the following'are not
required by these regulations: '
(A) Payments into the trust fund as
specified in § 264.143(a);
(B) Updating of Schedule A of the
trust agreement (see § 264.151(a)).tp
show current closure cost estimates;
(C) Annual valuations as required by '
the trust agreement; and
(D) Notices of nonpayment as
required by the trust agreement.
(4) The bond must guarantee that the
owner or operator will:
(i) Perform final closure in accordance
with the closure plan and other
requirements of the permit for the
facility whenever required to do so; or
(ii) Provide alternate financial
assurance as specified in this section,
and obtain the Regional Administrator's
written approval of the assurance
provided, within 90 days after receipt by
both the owner or operator and the
Regional Administrator of a notice of
cancellation of the bond from the surety
(5) Under the terms of the bond, the
surety will become liable oii the bond
obligation when the owner or operator
.fails to perform as guaranteed by the,
bond. Following a determination
pursuant to Section 3008 of RCRA that
the owner or operator has failed to
perform final closure in accordance with
the closure plan and other permit
requirements whe'n required to do so,
under the terms of the bond the surety
will perform final closure as guaranteed
by the bond or will deposit the amount
of the penal sum into the standby trust
fund. .
(6) The penal sum of the bond must be
in an amount at least equal to the
current closure cost estimate.
(7) Whenever the current closure cost
estimate increases to an amount greater
than the penal sum, the owner or
operator, within 60 days after the
increase, must either cause the penal
sum to be|increased to an amount at'.'.
least equal to the current closure cost
estimate and submit evidence of such
increase to the Regional Administrator,
or obtain other financial assurance as
specified in this section, Whenever the
current closure cost estimate decreases,
the penal Hum may be reduced to the.
amount of the current closure cost
estimate following written approval by
the Regional Administrator. -
(8} Under the terms of the bond, the
surety may canel the bond by sending V
notice of cancellation by certified mail
to the owner or operator and to the
Regional Administrator. Cancellation
may not occmvJiowever, during the 120
days beginning on the date of receipt of
the notiqe of cancellation by both the
owner or operator and the Regional
Administrator, as evidenced by the v
. return receipts.
(9) The owner or operator may cancel
the bond if the Regional Administrator
has given prior written.consent. The.
Regional Aiiministrator will provide "
such written conseirLwhen:
[i) An owner or operator substitutes
alternate financial assurance as
specified in, this section; or
(ii] The Regional Administrator
releases the owner.or operator from the
requirements of this section in
accordance with § 264.143(i).
(10) The surety will not be liable for
deficiencies in the performance of
closure by the owner or operator after
the Regional Administrator releases the
owner or operator from the requirements
of this section in accordance with
§ 264.143(i). [ ' .-;.
(d) Closure letter of credit. (1) An
owner or operator may satisfy the
requirements of this section by
obtaining an1 irrevocable standbyletter
of credit which conforms to the
requirements of this paragraph and
submitting the letter to the Regional" ,-.
Administrator. An owner-or operator of
a new facility must submit the letter of
credit to the Regional Administrator at
least 60 days before the date on which
hazardous waste is first received for
treatment, storage, or disposal. The
letter of credit must be effective before
this initial receipt of hazardous.waste. -.
The issuing institution must be an entity
which has the authority to issue letters .
of credit and whose letter-of-credit
operations are regulated and examined
by a Federal or State agency.
(2) The wording of the letter of credit
must be identical to the wording
specified in ij 264.151(d). -
(3) An owner or operator who uses a
letter of credit to satisfy the
.requirements of this section must also :
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establish a standby trust fund. Under
the terms of the letter of credit, all
amounts paid pursuant to a.draft by the
Regional Administrator will be
deposited by the issuing institution
directly into the standby trust fund in
accordance with instructions from the
Regional Administrator. This standby
trust fund must meet the requirements of
the trust fund specified in § 264.143(a),
except that:
(S) An originally signed duplicate of
the trust agreement must be submitted
to the Regional Administrator with the
letter of credit; and .
(ii) Unless the standby trust fund is
funded pursuant to the requirements of
this section, the following are not
required by these regulations:
[A) Payments into the trust fund as
specified in § 264.143M;
(B) Updating of Schedule A of the
trust agreement (see § 264.151(a}) to
show current closure cost estimates;
(C) Annual valuations as required by
the trust agreement; and
(D) Notices of nonpayment as
required by the trust agreement.
(4) The letter of credit must be
accompanied by a letter from the owner
or operator referring to the letter of
credit by number, issuing institution,
and date, and providing the following
Information: the EPA Identification
Number, name, and address of the
facility, and the amount of funds
assured for closure of the facility by the
letter of credit. "S
{5) The letter of credit must be
irrevocable and issued for a period of at
least 1 year. The letter of credit must
provide that the expiration date will be
automatically extended for a period of
at least 1 year unless, at least 120 days
before the current expiration date, the
issuing institution notifies both the
owner or operator and the Regional
Administrator by certified mail of a
decision not to extend the expiration
date. Under the terms of the letter of
credit, the 120 days will begin on the ,
date when both the owner or operator
and the Region Administrator have
received the notice, as evidenced by the
return receipts. .
(6) The letter of credit must be issued
Jn an amount at least equal tt> the
current closure cost estimate, except as
provided in §264.143(g).
(7) Whenever the current closure cost
estimate increases to an amount-greater
than the amount of the credit, the owner
or operator, within 60 days after the
increase, must either cause the amount
of the credit to be increased so that it at
least equals the current closure cost
estimate and submit evidence of such
increase to the Regional Administrator,
or obtain other financial assurance as
specified in this section to cover the
increase. Whenever the current closure.
cost estimate decreases, the amount of ^
the credit may be reduced to the amout
of the current closure cost estimate
following written approval by the
Regional Administrator.
(8) Following a determination
pursuant to Section 3008 of RCRA that
the owner or operator has failed to
perform final closure in accordance with
the closure plan and other permit
requirements when required to do so,
the Regional Administrator may draw
on the letter of credit.
(9jlf the owner or operator does not
establish alternate financial assurance
as specified in this section and obtain
written approval of such alternate
assurance from the Regional
Administrator within 90 days after
receipt by both the owner or operator
and the Regional Administrator of a
notice from issuing institution that it has
decided not to extend the letter of credit
beyond the current expiration date, the
Regional Administrator will draw on the
letter of credit The Regional
Administrator may delay tire drawing it
the issuing institution grants"an
' extension of the term of the credit.
During the last 30 days.of any such
extension the Regional Administrator
will draw on the letter of credit if the
owner or operator has failed to provide
alternate financial assurance as
specified in this section and obtain
written approval of such assurance from
the Regional Administrator.
(10) The Regional Administrator will
return the letter of credit to the issuing
institution for termination when:
(i) An owner or operator substitutes
alternate financial assurance as
specified in this section; or
(ii) The Regional Administrator
releases the owner or operator from the
requirements of this section in
accordance with § 264.143(1).
(e) Closure insurance. (1) An owner or
operator may satisfy the requirements of
this section by obtaining closure
insurance which conforms to the
requirements of this paragraph and
submitting a certificate of such
insurance to the Regional Administrator.
An owner or operator bf a new facility
must submit the certificate of insurance
to the Regional Administrator at least 60
days before the date on which
hazardous waste is first received for
treatment, storage, or disposal. The
insurance must be effective before this
initial receipt of hazardous waste. At a"
minimum, the insurer must be lidensed
to transact the business of insurance, or
eligible to provide insurance as an
excess or suplus lines insurer, in one or
more States.
(2) The wording of the certificate of
insurance must be identical to the
wording specified in § 264,15i(e).
(3) The closure insurance policy must
be issued for a face amount at least
equal to the current closure cost
estimate, except as provided in
' § 264.143(g). The term "face amount"
means the total amount the insurer is
obligated to pay under the policy. Actual
payments by the insurer will not change
the face amount, although the insurer's
future liability will be lowered by the
amount of the payments.
(4) The closure insurance policy must
guarantee that funds will be available to
close the facility whenever final closure
occurs. The policy must also guarantee
that once final closure begins, the ^
insurer will be responsible for paying
out funds, up to an amount equal to the
face amount of the policy, upon the
direction of the Regional Administrator,
to such party or parties as the Regional
Administrator specifies.
(5) After beginning final closure, an
owner or operator or any other person
authorized to perform closure, may
request reimbursement for closure
expenditures by submitting itemized
bills to the Regional Administrator.
Within 60 days after receiving bills for
closure activities, the Regional
Administrator will determine whether
the closure expenditures are in
accordance with the closure plan or
otherwise justified, and if so, he will
instruct the insurer to make .
reimbursement in such amounts as the
Regional Administrator specifies in
..writing. If the Regional Administrator
has reason to believe that the cost of
closure will be significantly greater than
the face amount of the policy, he may
withhold reimbursement of such
amounts as he .deems prudent until he
determines, in accordance with
§ 264.143(1), that the owner or operator
is no longer required to maintain
financial assurance for closure of the
facility. .
(6) The owner or operator must
maintain the policy in full force and
effect until the Regional Administrator
consents to termination of the policy by
the owner or operator as specified in
paragraph (e)(10) of this section, Failure
to pay the premium, without substitution
of alternate financial assurance as
specified in this section, will constitute a
significant violation of these regulations,
warranting such remedy as the Regional
Administrator deems necessary. Such
violation will be deemed to begin upon
receipt by the Regional Adminstrator of
a notice of future cancellation, . .
termination, or failure to renew due to
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Federal Register / Vol. 47, No. 67 / Wednesday. April 7, 1982 /Rules £ind Regulations
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15051
nonpayment of the premium, rather than
upon the date of expiration.
(7) Each policy must contain a
provision allowing assignment of the
policy to a successor owner or operator.
Such assignment may be conditional
upon consent of the insurer, provided
such consent is not unreasonably
refused. ,
(8) The policy must provide that the
insurer may not cancel, terminate, or fail
to renew the policy except for failure to
pay the premium. The automatic
renewal of the policy must, at a ,'.''
minimum, provide the insured With the
.option of renewal at the face amount of
the expiring policy. If there is a failure to
pay the premium, the insurer may elect -
to cancel, terminate, or fail to renew the
policy by sending notice by certified-
mail to the owner or operator and the
>, Regional Administrator. Cancellation,
termination, or failure to renew may not
occur, however, during the 120 days
beginning with the date of receipt of the
notice by both the Regional
' Administrator and the owner or
"operator, as evidenced by the return
receipts. Cancellation, termination, or
failure to renew may not occur and die
policy will remain in full force and effect
in the event that on or before,the date of
expiration:
(i) The Regional Administrator deems
the facility abandoned; or
(ii) The permit is terminated or
revoked or a new permit is denied; or
(iii) Closure is ordered by the Regional
Administrator or a U.S. district court or
other court of competent jurisdiction; or '
(iv) The owner or Operator is named
as debtor in a voluntary or involuntary
' proceeding under Title 11 (Bankruptcy),
U.S.Code;or .
(v) The premium due is paid.
(9) Whenever .the current closure cost
estimate increases to an amount greater
than the face amount of the policy, the
owner or operator, within 60 days after
the increase, must either cause die face
amount to. be increased to an amount at
least equal to the current closure cost
estimate and submit evidence of such
increase to the Regional Administrator,
or obtain odier financial assurance as
specified in diis section to cover the ,
increase. Whenever die current closure
'cost estimate decreases, the face ,
amount may be reduced to the amount
of die current, closure coat estimate
following written approval by the
Regional Administrator.
(10) The Regional Administrator will.
give written consent to the owner or
operator that he may terminate the
insurance policy when:
(i) An owner or operator substitutes
alternate financial assurance as
specified in tiiis section; or
(ii) The Regional Administrator
releases the owner or operator from the
requirements of this section in
accordance witii § 264.143(i)..
{f) Financial test and corporate '
guarantee for closure. (1) An owner or
operator may satisfy the requirements of
this section by demonstrating that he "
passes a financial test as specified in
diis paragraph. To pass this test the
owner or operator must meet die criteria
of either paragraph (f)(l)(i) or (f)(l)(ii) of
tiiis section:
(i) The owner or operator must have:
(A) Two of die following tiiree ratios:
a ratio of total liabilities to net worth
less tiian 2.0; a ratio of die sum of net
income plus depreciation, depletion, and
amortization to total liabilities greater
tiian 0.1; and a ratio of current assets to
current liabilities greater than 1.5; and
(B) Net working capital and tangible
net worth each at least six times die
sum of die current closure and post-
closure cost estimates; and
(C) Tangible net worth of at least $10
million; and
(D) Assets in die United States
amounting to at least 90 percent of his
total assets or at least six tunes the sum
of die current closure and post-closure
cost estimates. - ;
, (ii) The owner or operator must have:
(A) A current rating for his most
recent bond issuance of AAA, AA, A, or
BBB as issued by Standard and Poor's or
Aaa, Aa, A, or Baa as issued by
Moody's; and
(B) Tangible net worth at least six
times die sum of die current closure and
post-closure cost estimates; and
(C) Tangible net worth of at least $10
million; and
(D) Assets located in die United
States amounting to at least 90 percent
of his total assets or at least six times
the sum of die current closure and post-
closure cost estimates.
(2) The phrase "current closure and
post-closure cost estimates" as used in
paragraph (f)(l) of-tills section refers to
the cost estimates required to be shown
in paragraphs 1-4 of the letter from the
owner's or operator's chief financial
officer (§ 264.151(fJ). :
(3) To demonstrate tiiat he meets tins
test, the owner or operator must submit
the following items to die Regional
Administrator:
(i) A letter signed by the owner's or
operator's chief financial officer and
worded as specified in § 264.151(f); and
(ii) A copy of the independent
certified public accountant's report on
examination of the owners or operator's
financial statements for die latest
completed fiscal year; and
(iii) A special report from the owner's
or operator's independent certified
public accountant to the owner or
operator stating that:
(A) He has,compared the data which
the letter from the chief financial officer
specifies as having been derived from
the independently*audited, year-end
financial statements for the latest fiscal
year with tlie amounts in such financial
statements; and.
(B). In connection with that procedure,
no matters came to his attention which
caused him to believe that the specified
data should be adjusted.
(4) An owner or operator of a new
facility must submit the items specified
in paragraph (f}(3) of this section to the
Regional Administrator at least 60 days
before die date on which hazardous
waste is first received for treatment,
storage, or disposal.
(5) After the initial submission of
items specified in paragraph (f)(3)of diis
section, the 'owner or operator must
send updated information to the
Regional Administrator within 90 days
after the dose of each succeeding fiscal
year. This information must consist of
all three items specified in paragraph
(f)(3) of this section. .
(6) If the owner or operator no longer
meets the requirements of paragraph
(0(1) of this section, he must send notice
to the Regional Administrator of intent
to establish alternate financial
assurance as specified in this section.
The notice must be sent by certified mall
within 90 days after the end of the fiscal
year for whlsh the year-end financial
data show diat the owner "or operator no
longer meets die requirements. The
owner or operator must provide die
alternate financial assurance within, 120
days after the end of such fiscal year.
, (7) The Regional Administrator may,
based on a reasonable belief that the
owner or operator may no longer meet
the requirements of paragraph (fj(l) of
tiiis section, require reports of financial
condition at any time from the owner or
operator in addition to those specified in
paragraph (f)(3) of this section. If the .
Regional Administrator finds, on the
basis of such reports or other
information, that the owner or operator
no longer meets the requirements of
paragraph (f)[l) of this section, the
owner or operator must provide
alternate financial assurance as
specified in tiiis section within 30 days
after notification of such a finding.
(8) The Regional Administrator may
disallow use of this test on the basis of
, qualifications in the opinion expressed
by the independent certified public
accountant in his report on examination
, of die owner's or operator's financial
statements (see paragraph (f)(3)(ii) of
this section). An adverse opinion or a
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15052
1982 / Rules and Regulations
Federal Register / Vol. 47. No. 67 / Wednesday. April 7
disclaimer of opinion will be cause for
disallowance. The Regional
Administrator will evaluate other
qualifications on an individual basis.
The owner or operator must provide
alternate financial assurance as
specified in this section within 30 days
after notification of the disallowance.
(9) The owner or operator is no longer
required to submit the items specified in
paragraph (f)(3) of this section when: .
(i) An owner or operator substitutes
alternate financial assurance as
specified in this section; or
(ii) The Regional Administrator
releases the owner or operator from the
requirements of this section in
accordance with § 264.143(i).
(10) An owner or operator may meet
the requirements of this section by
obtaining a written guarantee, hereafter
referred to as "corporate guarantee."
The guarantor must be the parent
corporation of the owner or operator.
The guarantor must meet the
requirements for owners or operators in
paragraphs (f)(l) through (f)(8) of this
section and must comply with the terms
of the corporate guarantee. The wording
of the corporate guarantee must be
Identical to the wording specified in
§ 264.151(h). The corporate guarantee
must accompany the items sent to the
Regional Administrator as specified in
paragraph (f)(3) of this section. The
terms of the corporate guarantee must
provide that:
(i) If the owner or operator fails to
perform final closure of a facility
covered by the corporate guarantee in
accordance with the closure plan and
other permit requirements whenever
required to do so, the guarantor will do
80 or establish a trust fund as specified
in § 284.143(a) in the name of the owner
or operator.
(ii) The corporate guarantee will
remain in force unless the guarantor
sends notice of cancellation by certified
mail to the owner or operator and to the
Regional Administrator. Cancellation
may not occur, however, during the 120
days beginning on the date of receipt of
the notice of cancellation by both the
owner or operator and the Regional
Administrator, as evidenced by the
return receipts.
(iii) If the owner or operator fails to
provide alterriate financial assurance as
specified in this section and obtain the
written approval of such alternate
assurance from the Regional
Administrator within 90 days after
receipt by both the owner or operator
and the Regional Administrator of a
notice of cancellation of the corporate
guarantee from the guarantor, the
guarantor will provide such alternative
financial assurance in the name of the
owner or operator.
(g) Use of multiple financial
mechanisms. An owner or operator may
satisfy the requirements of this section
by establishing more than one financial
mechanism per facility. These
mechanisms are limited to trust funds,
surety bonds guaranteeing payment into
a trust fund, letters of credit, and
insurance. The mechanisms must be as
specified in paragraphs (a), (b), (d), and
(e), respectively, of this section, except
that it is the combination of
mechanisms, rather than the single
mechanism, which must provide
financial assurance for an amount at
least equal to the current closure cost
estimate. If an owner or operator uses a
trust fund in combination with a surety
bond or a letter of credit, he may use the
trust fund as the standby trust fund for
the other mechanisms. A single standby
trust fund may be established for two or
more mechanisins. The Regional
Administrator may use any or all of the
mechanisms to provide for closure of the
facility. ,-*''
(h) Use of a financial mechanism for
multiple facilities. An owner or operator
may use a financial assurance
mechanism specified in this section to
meet the requirements of this section for
more than one facility. Evidence of
financial assurance submitted to the
Regional Administrator must include a
list showing, for each facility, the EPA
Identification Number, name, address,
and the amount of funds for closure
assured by the mechanism. If the
facilities covered by the mechanism are ,
in more than one Region, identical
evidence of financial assurance must be
submitted ,to and maintained with the
Regional Administrators of all such
Regions. The.amount of funds available
through the mechanism must be no less
than the sum of-funds that would be
available if a separate mechanism had
been established and maintained for
each facility. In directing funds
available through the mechanism for
closure of any of the facilities covered
by the mechanism, the Regional
Administrator may direct only the
amount of funds designated for that
facility, unless the owner or operator
agrees to the use of additional funds
available under the mechanism.
(i) Release of the owner or operator
from the requirements of this section.
Within 60 days after receiving
certifications from the owner or operator
and an independent registered
professional engineer that closure has
been accomplished in accordance with
the closure plan, the Regional
Administrator will notify the owner or
operator in writing that he is no longer
required by this section to maintain
financial assurance for closure of the
particular facility, unless the Regional
Administrator has reason to believe that
closure has not been in accordance with
the closure plan.
§ 264.144 Cost estimate for post-closure
care.
(a) The owner or operator of a
disposal facility must prepare a written
estimate, in current dollars, of the
annual cost of post-closure monitoring
and maintenance of the facility in
accordance with the applicable post-
closure regulations in §§ 264.117-
264.120. The post-closure cost estimate
is calculated by multiplying the annual
post-closure cost estimate by the
number of years of post-closure care
required under Subpart G of Part 264.
(b) During the operating life of the
facility, the owner or operator must
adjust the post-closure cost estimate for
inflation within 30 days after each
anniversary of the date on which the
first post-closure cost estimate was
prepared. The adjustment must be made
as specified in paragraphs (b)(i) and
(b)(ii) of this section, using an inflation
factor derived from the annual Implicit
Price Deflator for Gross National
Product as published by the U.S,
Department of Commerce in its Survey
of Current Business. The inflation factor
is the result of dividing the latest
published annual Deflator by the
Deflator for the previous year,
(i) The first adjustment is made by
multiplying the post-closure cost
estimate by the inflation factor. The
result is the adjusted post-closure cost
estimate.
(ii) Subsequent adjustments are made
by multiplying the latest adjusted post-
closure cost estimate by the latest
inflation factor.
(c) The owner or operator must revise
the post-closure cost estimate during the
operating life of the facility whenever a
change in the post-closure plan
increases-the cost of post-closure care.
The revised post-closure cost estimate
must be adjusted for inflation as
' specified in § 264.144(b).
(d) The owner or operator must keep
the following at the facility during the
operating life of the facility: The latest
post-closure cost estimate prepared in
accordance with §§ 264.144 (a) and (c)
and, when this estimate has been
adjusted in accordance with
§ 264.144(b), the latest adjusted post-
closure cost estimate.
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67 /Wednesday, April 7. 1982 / Rules i and Regulations 15053
,§264.145 Financial assurance, for post-
closure care. .
An owner pi operator of each disposal
facility must establish-financial
assurance for post-closure care of the
facility. He must choose from the ;
options as specified in paragraphs (a)
through (fj of this section:"
(a) Post-closure trust fund (1) An
owner or operator may satisfy the :
requirements of this section by
establishing a post-closure trust fund
' which conforms to the requirements of
this paragraph and submitting an
originally signed duplicate .of the trust
, agreement to the Regional
Administrator. An owner or operator of
a new facility must submit the originally
signed duplicate of the trust agreement
to the Regional Administrator at least 60
days before the date on which
hazardous waste is first received for
disposal. The trustee must be an entity
which has the authority to act as a
trustee and whose trust operations are
regulated and examined by a Federal or
State agency.
[2) The wording of the trust agreement
must be identical to the wprding - ,
specified in § 264.isa(a)(l), and the trust:
agreement must be accompanied by a
formal certification of acknowledgment -
(for example, see § 264.151(aK2)).
Schedule A of the trust agreement must
., be updated within 60 days after a ' -.-.
change in the amount of the current
post-closure cost estimate covered by
' the agreement. ,. . . .
(3) Payments into the trust "fund must'
be made annually by the owner or
operator over the term of the initial
. RGRA permit or over the remaining
operating life of the facility as estimated
in the closure plan, whichever period is
shorter; this period is hereafter referred
td'as the "pay-in period." The payments
into the post-closure, trust fund must be
made as follows:
(i) For a new facility, the first payment
must be made before the initial receipt
of hazardous waste for disposal. A
receipt from the trustee for this payment
must be submitted by the owner or
operator to the Regional Administrator
before this initial receipt of hazardous
waste. The .first payment must be at
least equal to the current post-closure
cost estimate, except as provided in
§ 264.145(g), divided by the number of
years in the pay-in period. Subsequent
payments must be made no later than 30
days after each anniversay date of the
first payment. The amount of each
subsequent payment must be
determined" by this formula:
Next payment=CE-iCV ' ' '
- . - . Y -.:'' -"''' '."'' ""'-.
where CE is the current post-closure -
cost estimate, CV is the current value of
the trust fund, and Y is the number of
. years remaining in the pay-in period.
pi) Jf an owner or operator establishes
a trust fund as specified in § 265.145(a)
of this Chapter, and the value of that
trust fund is less than the current post-
closure cost estimate when a permit is
awarded for the facility, the amount of
the current post-closure cost estimate
still to be paid into the fund must be
paid in over the pay-in period as defined
in paragraph (a)(3) of this section.
Payments must continue.to be made no
later than 30 days after each
anniversary date of the first payment
made pursuant to Part 265 of this
chapter. The amount of each payment '
must be determined by this formula: .
Next payment=CE-CV <:;
Y "'.' -.-' -:
, where CE is the current post-closure
cost estimate; CVis the current value of
the trust fund, and Y is the number of
years remaining in the pay-in period.
[4] The owner or operator may
accelerate payments into the trust fund
or he may deposit the full amount of the.
current post-closure cost estimate at the
time the fund is established. However,
he must maintain the value of the fund -
at no less than the value that the fund
would have if annual payments were
made as specified in paragraph [a)(3) of
this section.
(5) If the owner or operator
establishes a post-closure trust fund
after having used one or more alternate .
mechanisms specified m this section or
in § 265.145 of this chapter, his first
payment must be hi at least the amount
that the fund would contain if the trust
fund were established initially and
annual payments made according to
, specifications of this paragraph and
§ 265.145(a) of this chapter, as
applicable.
(6) After the pay-in period is
completed, whenever the current post-:
closure post estimate changes during the
operating life of the facility, the owner
or operator must compare the new
estimate with the trustee's most recent"
annual valuation of the trust fund. If the
value of the fund is less than the amount
of the new estimate, the owner or
operator, within 60 days after the
change in the cost estimate/must either
deposit an amount into the fund so that
its value after this deposit at least.
equals the amount of the current post-
closure cost estimate; or obtain other
financial assurance as specified in this
section to cover the difference.
(7) During the operating life of the'
facility, if the value of the trust fund is
greater than the total amount of the
current post-closure cost estimate, the-.
owner or operator may submit a written
request to the Regional Administrator
for release of the amount in excess of
the current post-closure cost estimate.
[8] If an owner or operator substitutes
other financial assurance as specified in
this section for all or part of the trust
fund, he-may submit a written request to
the Regional Administrator for release
of the amount in excess of the current
post-closure cost estimate covered bv
the trust fund. - . .......
(9) Witliin 60 days after receiving a
request from the owner or operator for
release of funds as-specified in ~ V .---
paragrajphsifa) (7) or (8) of this section,
the Regional Administrator will instruct -
the trustee to release to the owner or
operator such rurids as the Regional
Administrator specifies in writing. ~
(10) During the period of post-closure
care, the Regional Administrator may
approve a release of funds if the owner
or operator demonstrates to the
Regional Administrator"that the value of
the trust frind exceeds the remaining -
-cost of post-closure care.
-,'- W) An owner or operator or any
other person Authorized to perform post-
closure.care may request reimbursement
for post-closure expenditures by
submitting[itemized biUs to the Regional
Administrator, Within 60 days after .
receiving bills for post-closure activities;
the Regional Administrator will .' !
determine whether the post-closure
expenditures are in accordance with the
post-closure plan or otherwise justified,
and. if so, he will instruct the trustee to :
make reimbursement in such amounts as
; the Regional Administrator specifies in
writing., ';'"- . . . -
(12) The Regional Administrator will
agree, to termination of the trust when:
(i) An owner or operator substitutes
alternate financial assurance as
specified hrthis section; or "'
(ii) The Regional Administrator
releases the- owner or operator from the
Requirements of this section in -.
"accordance with § 264.145(i).
(b) Surety bondguaranteeing payment
into a post-closure trust fund. (1) An
owner or operator may satisfy the
requirements of this section by
obtaining a isurety bond which,conforms
to the requirements of this paragraph
and submitting the bond to the Regional
Administrator.- An owner, or operator."of
a new facility must submit the bond to
the Regional Administrator at least 60
days before the date on which
hazardous waste is first received for
disposal. The bond must be effective.
before this initial Ireceiptof hazardous '
waste. The surety company issuing the . - *
bond must, a,t:a minimum, be among ,-. .:-
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15054
Federal Register / Vol. 47. No. 67 / Wednesday. April 7, 1982 / Rules and Regulations
those listed as acceptable sureties on
Federal bonds in Circular 570 of the U.S.
Department of the Treasury.
(2) The wording of the surety bond
must be identical to the wording
specified in §264.151(b).
(3) The owner or operator who uses a
surety bond to satisfy the requirements *
of this section must also establish a
standby trust fund. Under the terms of
the bond, all payments made thereunder
will be deposited by the surety directly
into the standby trust fund in
accordance with instructions from the
Regional Administrator. This standby
trust fund must meet the requirements
specified in § 284.145(a), except that:
(i) An originally signed duplicate of
the trust agreement must be submitted
to the Regional Administrator with the
surety bond; and
(ii) Until the standby trust fund is
funded pursuant to the requirements of
this section, the following are not
required by these regulations:
(A) Payments into the trust fund as
specified in §264.145(a);
' (B) Updating of Schedule A of the
trust agreement (see § 264.151(a)) to
show current post-closure cost
estimates;
(C) Annual valuations as required by
the trust agreement; and
(D) Notices of nonpayment as
required by the trust agreement.
(4) The bond must guarantee that the
owner or operator will:
(i) Fund the standby trust fund in an
ampunt equal to the penal sum of the
bond before the beginning of final
closure of the facility; or
(ii) Fund the standby trust fund in an
amount equal to the penal sum within 15
days after an order to begin closure is
issued by the Regional Administrator or
a U.S. district court or other court of
competent jurisdiction; or
(iii) Provide alternate financial
assurance as specified in this section,
and obtain the Regional Administrator's
written approval of the assurance
provided, within 90 days after receipt by
both the owner or operator and the
Regional Administrator of a notice of
cancellation of the bond from the surety.
(5) Under the terms of the bond, the
surety will become liable on the bond
obligation when the owner or operator
fails to perform as guaranteed by the
bond.
(6) The penal sum of the bond must be
in an amount at least equal to the
current post-closure cost estimate,
except as provided in § 264.145(g).
(7) Whenever the current post-closure
cost estimate increases to an amount
greater than the penal sum, the owner or
operator, within 60 days after the
increase, must either cause the penal
sum to be increased to an amount at
least equal to the current post-closure
cost estimate and submit evidence of
such increase to the Regional .
Administrator, or obtain other financial
assurance as specified in this section to
cover the increase. Whenever the
current post-closure cost estimate
decreases, the penal sum may be
reduced to the amount of the current
post-closure cost estimate following
written approval by the Regional
Administrator. -,
(8) Under the terms of the bond, the
surety may cancel the bond by sending
notice of cancellation by certified mail
to the owner or operator and to the
Regional Administrator. Cancellation
may not occur, however, during the 120
days beginning on the date of receipt of
the notice of cancellation by both the
owner or operator and the Regional
Administrator, as evidenced by the
return receipts. ' -
(9) The owner or operator may cancel
the bond if the Regional Administrator
has given prior written consent based on
his receipt of evidence of alternate
financial assurance as specified in this
section.
(c) Surety bond guaranteeing
performance of post-closure care, (1) An
owner or operator may satisfy the
requirements of this section by
obtaining a surety bond which conforms
to the requirements of this paragraph
and submitting the bond to the Regional
Administrator. An owner or operator of
a new facility must submit the bond to
the Regional Administrator at least 60
days before the date on which
hazardous waste is first received for
disposal. The bond must be effective
before this initial receipt of hazardous
waste. The surety company issuing the
bond must, at a minimum, be among
those listed as acceptable sureties on
Federal bonds in Circular 570 of the U.S.
Department of the Treasury.
[2) The wording of the surety bond
must be identical to the wording
specified in § 264.151(c).
(3) The owner or operator who uses a
surety bond to satisfy the requirements
of this section must also establish a
standby trust fund. Under the terms of
the bond, all payments made thereunder
' will be deposited by the surety directly
into the,standby trust fund in
accordance with instructions from the
Regional Administrator. This standby
trust fund must meet the requirements
specified in § 264.145(a), except that:
(i) An originally signed duplicate of
the trust agreement must be submitted
to the Regional Administrator with the
surety bond; and
(ii) Unless the standby trust fund is
funded pursuant to the requirements of
this section, the following are not
required by these regulations:
(A) Payments into the trust fund as
specified in § 264.145(a);
(B) Updating of Schedule A of the ._
trust agreement (see ,§ 264.151(a)) to
show current post-closure cost
estimates; -
(C) Annual valuations as required by
the trust agreement; and
(D) Notices of nonpayment as
required by the trust agreement.
(4) The bond must guarantee that the
owner or operator will:
(i) Perform post-closure care in
accordance with the post-closure plan
and other requirements of the permit for
the facility; or
(ii) Provide alternate financial
assurance as specified in this section,
and obtain the Regional Administrator's
written approval of the assurance
provided, within 90 days of receipt by
both the owner or operator and the
Regional Administrator of a notice of
cancellation of the bond from the surety.
(5) Under the terms of the bond, the
surety will become liable on the bond
obligation when the owner or operator
fails to perform as guaranteed by the -
bond. Following a determination
pursuant to Section 3008 of RCRA that
the owner or operator has failed to
perform post-closure care in accordance
with the post-closure plan and other
permit requirements, under the terms of
the bond the surety will perform post-
closure care in accordance with the
post-closure plan and other permit
requirements or will deposit the amount
of the penal sum into the standby trust
fund.
(6) The penal sum of the bond must be
in an amount at least equal to the
current post-closure cost estimate.
(7) Whenever the current post-closure
cost estimate increases to an amount
greater than the penal sum during the
operating life of the facility, the owner
or operator, within 60 days after, the
increase, must either cause the penal
sum to be increased to an amount at
least equal to the current post-closure
cost estimate and submit evidence of
such increase to the Regional
Administrator, or obtain other financial '
assurance as specified in this section.
Whenever the current post-closure cost
estimate decreases during the operating
life o.f the facility, the penal sum may be
reduced to the amount of the current
post-closure cost estimate following
written approval by the Regional
Administrator.
(8) During the period of post-closure
care, the Regional Administrator may
approve a decrease hi the penal sum if
the owner or operator demonstrates to
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47' No-
April 7. 1982 / Rules ankReguktion^ 15Q55
the Regional Administrator that the
.amount exceeds the remaining cost of
post-closure care. -.",._
(9) Under the-terms of the bond, the
' surety may cancel the bond by sending
notice of cancellation by certified mail
.to the owner or operator and to the
Regional Administrator/Cancellation
may not occur, however, during the 120
days beginning on the date of receipt of
the notice of cancellation by both the
owner or operator and the Regional
Administrator, as evidenced by the
return receipts.
(10) The owner or operator may
cancel the bond if the Regional
Administrator has given prior written
consent. The Regional Administrator
will provide such written consent when:
(i) An owner or operator substitutes
alternate financial assurance as
specified in this section; or .
(ii) The Regional Administrator
releases the owner or operator from the
requirements of this section in
accordance with § 264.145(i).
(11) The surety will not be liable for
deficiencies hi the performance of post-
closure case by the owner or operator.
after the Regional Administrator
releases the owner or operator from the
requirements of this section in
accordance with. §264.145(i). . < --.
(d) Post-closure letter of credit. (1) A?i
owner or operator may satisfy the
- requirements of this section by
obtaining an irrevocable standby letter
of credit which conforms to the
requirements of this paragraph and
submitting the letter to the Regional
Administrator. An owner or operator of
a new facility must submit the letter of
credit to the Regional Administrator at
least 60 days before the date on which
hazardous waste is first received for
disposal. The letterof credit must be .
.effective before this initial receipt of
hazardous waste. The issuing institution
must be an entity which has the
authority to issue letters of credit and
whose letter-of-credit operations are
regulated and examined by a Federal or
State agency.
(2) The wording of-the letter of credit
must be identical to the wording
specified in § 264.151(d).
(3) An owner or operator who uses a
letter of credit to satisfy the
requirements 'of this section must also
establish a standby trust fund. Under
the terms of the letter of credit, all
amounts paid pursuant to a draft by the
Regional Administrator will be
deposited by the issuing institution
directly into the standby trust fund in
accordance with instructions from the
Regional Administrator. This standby
trust fund must meet the requirements of
the trust fund specified in §264.145(a),
except that: .,.-' .';
(i) An originally signed duplicate of'
the trust agreement must be submitted
. to the Regional Administrator with the
letter of credit; and ' " '
(ii) Unless the standby trust fund is -
funded pursuant to the requirements of
this section, the following are not
required by these regulations:
(A) Payments into the trust fund as
specified in § 264.145(a); -,
(B) Updating of Schedule A of the
trust agreement (see § 264.151(a)) to
show.current post-closure cost
, estimates; ; *
(C) Annual valuations as required by
the trust agreement; and
(D) Notices of nonpayment as
required by the trust agreement.
"(4) The letter of credit must be
accompanied by a letter from the owner
or operator referring to the letter of
credit by number, issuing institution,
and date, and providing the following
information: the EPA Identification
Number, name, and address of the
facility, and the amount of funds
assured for post-closure care of the
facility by the letter of credit.
(5) The letter of credit must be
irrevocable and issued Jor a period of at
least 1 year. The letter of credit must
provide that the expiration date willbe
automatically extended for a period of
at least 1 year unless, at least 120 days
before the current expiration date, the
issuing institution notifies both the
owner or operator and the Regional -
Administrator by certified mail of a ~
- decision not to extend the expiration
date. Under the terms of the letter of
credit, the 120 days will begin on the
date when both the owner or operator
and the Regional Administrator have
received the notice, as evidenced by the
return receipts, '
(6) The letter of credit must be issued
in a amount at least equal to the current
post-closure cost estimate, except as
provided in § 264.145(g).
(7) Whenever the current post-closure
cos.t estimate increases to an amount
greater than the amount of the credit
during Hie operating life of the facility,
the owner or operator, within 60 days
after the increase, must either cause the
amount of the credit to be increased so
that it at least equals the current post-
closure cost estimate and submit
evidence of such increase to the
Regional Administrator, or obtain other
financial assurance as specified hi this
section to cover the increase. Whenever
the current post-closure cost estimate
decreases during the operating life of the
facility, the amount of the credit may be
reduced to the amount of the current
post-closure cost .estimate following
written approval by the Regional
Administrator.: , - "'.--.
(8) During the period of post-closure
care, the Regional Administrator may
approve a de crease in the amount of the
letter of credit if the owner or operator
demonstrates to the Regional
Administrator that the amount exceeds
the remaining cost of post-closure care.
(9) Following a\ determination
-. pursuant to Section 3008 of RCRA that
the owner or operator has failed to
pprform post-clpsure care hi accordance
with the post-closure plan and other
permit requirements, the Regional
Adminstratoi may draw on the letter of
credit. ; -;.--.
(10) If the owner or operator does not
establish alternate financial assurance
as specified in this section and obtain
written approval of such-alternate
assurance from the Regional
Administrator within 90 days after
receipt by both the owner or operator
and the Regional Administrator o£,a
notice from the issuing institution that it
has decided not to extend the letter of
credit-beyond the current expiration
date, the Regional Administrator will
draw on the letter of credit. The
Regional Administrator may delay the
drawing if the.issuing institution grants
an extension of the term of the credit.
During the last 30 days of any such
extension the Regional Administrator
will draw on tie Jetter of credit if the
owner or operator has faOed to provide
alternate financial assurance as
specified in this section arid obtain
written approval of such assurance from
the Regional Administrator.
(11) The Regional Administrator will
retunrthe letter of credit to the issuing
institution for termination when:
(i) An owner or operator substitutes
alternate financial assurance as
specified in this section; or
(ii) The Regional Administrator
releases the ovmer or operator from the
requirements of-this section in
accordance wiih § 264.145(i). "_
(e) Post-closure insurance. (1) An
.owner or operator may satisfy the
requirements of this section by
obtaining post-closure insurance which
conforms to the! requirements of this
paragraph and submitting a certificate of ,
such insurance !to the Regional
Administrator. An owner or operator of
a new facility must submit the
certificate of insurance to the Regional
Administrator sit least 60 days before
the date on which hazardous-waste is
first received for disposal. The
insurance must be effective before this
initial receipt of hazardous waste. At a
minimum, the insurer must be licensed
to transact the business of insurance, or
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Federal Register / Vol. 47
15056
eligible to provide insurance as an
excess or surplus lines insurer, in one or
more States.
(2) The wording of the certificate of
Insurance must be identical to the
wording specified in § 264.151(e).
(3) The post-closure insurance policy
must be issued for a face amount at
least equal to the current post-closure
cost estimate, except as provided in
§ 2G4.145(g). The term "face amount"
means the total amount the insurer is
obligated to pay under the policy. Actual
payments by the insurer will not change
the face amount, although the insurer's
future liability will be lowered by the
amount of the payments.
(4) The post-closure insurance policy
must guarantee that funds will be
available to provide post-closure care of
the facility whenever the post-closure
period begins. The policy must also
guarantee that once post-closure care
begins, the insurer will be responsible
for paying out funds, up to an amount
equal to the face amount of the policy,
upon the direction of the Regional
Administrator, to such party or parties
as the Regional Administrator specifies.
(5) An owner or operator or any other
person authorized to perform post-
closure care may request reimbursement
for post-closure expenditures by
submitting itemized bills to the Regional
Administrator. Within 60 days after
receiving bills for post-closure activities,
the Regional Administrator will
determine whether the post-closure
expenditures are in accordance with the
post-closure plan or otherwise justified,
and if so, he will instruct the insurer to
make reimbursement in such amounts as
the Regional Administrator specifies in
writing.
(B) The owner or operator must
maintain the policy in full force and _
effect until the Regional Administrator
consents to termination of the policy by
the owner or operator as specified in^
paragraph (e)(ll) of this section. Failure
to pay the premium, without substitution
of alternate financial assurance as
specified in this section, will constitute a
significant violation of these regulations,
warranting such remedy as the Regional
Administrator deems necessary. Such
violation will be deemed to begin upon
receipt by the Regional Administrator of
a notice of future cancellation,
termination, or failure to renew due to
nonpayment of the premium, rather than
upon the date of expiration.
(7) Each policy must contain a
provision allowing assignment of the
policy to a successor owner or operator.
Such assignment may be conditional
upon consent of the insurer, provided
such consent is not unreasonably
refused
(8) The policy must provide that the
insurer may not cancel, terminate, or fail
to renew the policy except for failure to
pay the premium. The automatic
renewal of the policy must, at a
minimum, provide the insured with the
option of renewal at the face amount of
the expiring policy. If there is a failure to
pay the premium, the insurer may elect
to cancel, terminate, or fail to renew the
policy by sending notice by certified
mail to the owner or operator and the
Regional Administrator. Cancellation,
termination, or failure to renew may not
occur, however, during the 120 days
beginning with the date of receipt of the
notice by both the Regional
Administrator and the owner or
operator, as evidenced by the return
receipts. Cancellation, termination, or
failure to renew may not occur and the
policy will remain in full force and effect
in the event that on or before the date of
expiration:
(i) The Regional Administrator deems
the facility abandoned; or
(ii) The permit is terminated or
revoked or a new permit is denied; or -
(Hi) Closure is ordered by the Regional
Administrator or a U.S. district court or
other court of competent jurisdiction; or
(iv) The owner or operator is named
as debtor in a voluntary or involuntary
proceeding under Title 11 (Bankruptcy),
U.S. Code; or
(v) The premium due is paid.
(9) Whenever the current post-closure
cost estimate increases to an amount
greater than the face amount of the
policy during the operating life of the
facility, the owner or operator, within 60
days after the increase, must either .
cause the face amount to be increased to
an amount at least equal to the current
post-closure cost estimate and submit
evidence of such increase to the
Regional Administrator, or obtain other
financial assurance as specified in this
section to cover the increase. Whenever
the current post-closure cost estimate
decreases during the operating life of the
facility, the face amount may be reduced
to the amount of,the current post-closure
cost estimate following written approval
by the Regional Administrator.
(10) Commencing on the date that
liability to make payments pursuant to
the policy accrues, the insurer will
thereafter annually increase the face
amount of the policy. Such increase
must be equivalent to the face amount of
the policy, less any payments made,
multiplied by an amount equivalent to
85 percent of the most recent investment
rate or of the equivalent coupon-issue
yield announced by the U.S. Treasury
for 26-week Treasury securities.
(11) The Regional Administrator will
give written consent to the owner or
operator that he may terminate the
insurance policy when: . . .
' (i) An owner or operator substitutes
alternate financial assurance as, ,
specified in this section; or
(ii) The Regional Administrator
releases the owner or operator from the ,
requirements of this section in
accordance with.§ 264.145(i)
(f) Financial test and corporate
guarantee for post->closure care. (1) An
owner or operator may satisfy the
requirements of this section by
demonstrating that he passes a financial
test as specified in this paragraph. To
pass this test the owner or operator
must meet the criteria of either
paragraph (f)(l)(i) or (f)(l)(ii) of this
'section: ;
(i) The owner or operator must have:
(A) Two of the following three ratios:
a ratio of total liabilities to net worth
less than 2.0; a ratio of the sum of net
income plus depreciation, depletion, and
amortization to total liabilities greater
than 0.1; and a ratio of current assets to
current liabilities greater than 1.5; and
(B) Net working capital and tangible
net worth each at least six times the
sum of the current closure and post-
closure cost estimates; and
(C) Tangible net worth of at least $10
million; and ,
(D) Assets in the United States
amounting to at least 90 percent of his
total assets or at least six times the sum
of the current closure and post-closure
cost estimates. '
(ii) The owner or operator must have:
(A) A current rating for his most
recent bqrid issuance of AAA, AA, A, or
BBB as issued by Standard and Poor's or
Aaa, Aa, A or Baa as issued by
Moody's; and
(B) Tangible net worth at least six
times the sum of the current closure and
post-closure cost estimates; and
(C) Tangible net worth of at least $10
million; and ,
(D) Assets located in the United
: States amounting to at least 90 percent
of his total assets or at least six times ,'
the sum of the current closure and post-
closure cost estimates.
(2) The phrase "current closure and _
post-closure cost estimates" as used in
paragraph (f)(l) of this section refers to
the cost estimates required to be shown
in paragraphs 1-4 of the letter from the
owner's or operator's chief financial
officer (§ 264.151(f)).
(3) To demonstrate that he meets this
test, the owner or operator must submit
the following items to the Regional
Administrator:
(i) A letter signed by the owner's or
operator's chief financial officer and
worded as specified in § 264.151(f); and
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Vol. 47.
(ii) A copy of the independent '
certified public accountant's report on.
examination of the owner's or operator's
financial statements for the latest
completed fiscal year; and '
(iii) A special report from the owner's
, or operator's independent certified
public accountant to the owner or
operator stating that:
(A) He has cpmpared the data which
the letter from the chief financial officer
specifies as having been derived from
the independently audited, year-end
' financial statements for the latest fiscal
year with the amounts in such financial
statements; and
(B) In connection with that procedure,
no matters came to his attention which :
caused him to believe that the specified
data should be adjusted.
(4) An owner or operator of a new
facility .must submit the items specified
in paragraph (f)(3) of this section to the
Regional Administrator at least 60 days
before the date on which hazardous
waste is first received for disposal.
(5} After the initial submission of
items specified in paragraph (f){3) of this
section, the owner or operator must
send updated information to the
Regional Administrator within 90 days
after the close of each succeeding fiscal
year. This information must consist of
all three items specified in paragraph
(f)(3) of this section. '
{6} If the owner or operator no longer
meets the requirements of paragraph
(f)(l) of this section, he must send notice*
to the Regional Administrator of intent
to establish alternate financial
assurance as specified in this section.
The notice must be sent by certified mail
within 90 days after the end of the fiscal
year for which the year-end financial
data show that the owner or operator ho
longer meets the.requirements. The
owner or operator must provide the
alternate financial assurance within 120 ;
days after the end of such fiscal year.
(7) The Regional Administrator may,
based on a reasonable belief that the
owner o_r operator may no longer meet
the requirements of paragraph (f)(lj of
this section, require reports of financial
condition at any time from the owner or
operator in addition to those specified in
paragraph (f)(3) of this section. If the
Regionar Administrator finds,ion the
basis of such reports or other
information, that the owner or operator
no longer meets the requirements of
paragraph (fj(l) of this section, the '
owner or operator must provide
alternate .financial assurance as
specified in this section within 30 days
after notification of such a finding.
(8) The Regional Administrator may
disallow use of this test on the basis of
qualifications in the opinion expressed
by the independent certified public
accountant in his report on examination
of the owner's or operator's financial
statements (see paragraph (f)(3)(ii) of
this section). An adverse opinion or a*
disclaimer of ppiniori will be cause for
disallowance.-The Regional
Administrator will evaluate other
qualifications on an individual basis.
-The owner or operator must provide
alternate financial assurance as
specified in this section within 30 days
after notification of the disallowance.
{9} During the period of post-closure
care, the Regional Administrator may
approve a decrease in the current post-
closure cos-t estimate for which this test
demonstrates financial assurance if the
owner or operator demonstrates to the
Regional Administrator that the amount
of the cost estimate exceeds/he
remaining cost of post-closure care.
(10) The owner or operator is no
longer required to submit the items
specified hi paragraph (f)(3) of this
section when:
(i) An owner or operator substitutes
alternate financial assurance as
specified in this section; or
pi) The Regional Administrator
releases the owner or operator from the
requirements of this section in
accordance with §264.145(1),
(11) An owner or operator may meet
the requirements of this section by
obtaining a written guarantee, hereafter
referred to as "corporate guarantee."
The guarantor must be the parent
corporation of the owner or operator, '
The guarantor must meet the
requirements for owners or operators in
paragraphs (f)(l) through [f)[9) of this
section and must comply with the terms
of the corporate guarantee. The wording
pf the corporate guarantee must be ' -.
identical to the wording specified in
§ 264.151(h). The corporate guarantee
, must accompany the items sent to the
Regional Administrator as specified hi
paragraph (f)(3) of this section. The
terms of the corporate guarantee must
provide that: -
(i) If the owner or operator fails to
perform post-closure care of a facility"
covered by the corporate guarantee in
accordance with the post-closure plan
and other permit requirements whenever
required to do so, the guarantor will do
so or establish a trust fund as specified
in § 264.145(a) in the name of the owner
or operator.
(ii) The corporate guarantee will
remain in force unless the guarantor
sends notice of cancellation by certified
mail to the owner or operator and to the
Regional Administrator. Cancellation
may not .occur, however, during the 120
days beginning on the date of receipt of
the notice of cancellation by both the
owner broperator and the Regional
Administrator, as evidenced by the
return receipts. ,
(iii) If the bwner or operator fails to '
provide alternate financial assurance as
specified in (this section and obtain the
written approval of such alternate
assurance from the Regional
Administrator within 90 days after
repeipt by both the owner or operator
and the Regional Administrator of a
notice of cancellation of the corporate
guarantee from the guarantor, the
guarantor will provide such alternate
financial assurance in. the name of the
owner or operator.
(g) Use of 'multiple financial
mechanisms,, An owner or operator may
satisfy the requirements of this section
by establishiiig more than one financial
mechanism per facility. These
mechanisms are limited to trust funds,
surety bonds .guaranteeing payment ih'to
- a trust fund, letters of credit, and
insurance. The mechanisms must be as
specified in paragraphs (a), (b), (d), and
(e), respectively, of this section, except
that it is the combination of . '" .
mechanisms, rather than the single
mechanism, which must provide
financial assurance for an amount at
least equal to the current post-closure
cost estimate. If an owner or operator
uses a trust fund in combination with a
surety bond or a letter of credit, he may
use the trust fund as the standby trust
fund for the other mechanisms. A single
standby trust hind may be established
for two or more mechanisms. The
Regional Admiinistrator may use any or
all of the mechanisms to provide for
post-closure care of the facility.
(h)Use>oj'a financial'mechanism for
multiple facilities. An owner or operator
may use a financial assurance
mechanism specified hi this section-to
meet the requirements of this section for
, more than one facility. Evidence of
financial assurance submitted to the
Regional Administrator must include a
list showing; for each facility, the EPA
Identification Number, name, address,
and the amount of funds for post-closure
care assured by the mechanism. If the
facilities covered by the mechanism are
in more than one Region, identical
evidence of fimmcial assurance must be
, submitted to and maintained with the
Regional Admimstrators of all such
Regions. The amount of funds available,
through the mechanism must be no less
than the sum of funds that would be
available if a separate mechanism had
been established and maintained for
each facility. In directing funds
available through the mechanism for
post-closure care of any of the facilities
covered by the mechanism, the Regional
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15058
mmmmfrnm
Administrator may direct only the
amount of funds designated for that
facility, unless the owner or operator
agrees to the use of additional funds
available under the mechanism.
(i) Release of the owner or operator
from the requirements of this section.
When an owner or operator has
completed, to the satisfaction of the
Regional Administrator, all post-closure
care requirements in accordance with
the post-closure plan, the Regional
Administrator will, at the request of the
owner or operator, notify him hi Writing
that he is no longer required by this
section to maintain financial assurance
for post-closure care of the particular
facility.
§ 264.146 Use of a mechanism for
financial assurance of both closure and
post-closure care.
An owner or operator may satisfy the
requirements for financial assurance for
both closure and post-closure care for
one or more facilities by using a trust
fund, surety bond, letter of credit, .
insurance, financial test, or corporate
guarantee that meets the specifications
for the mechanism in both § § 264.143
and 284,145. The amount of funds
available through the mechanism must
be no less than the sum of funds that
would be available if a separate
mechanism had been established and
maintained for financial assurance of
closure and of post-closure care.
§264.148 Incapacity of owners or
operators, guarantors, or financial
Institutions.
(a) An owner or operator must notify
the Regional Administrator by certified
mail of the commencement of a
voluntary or involuntary proceeding
under Title 11 (Bankruptcy), U.S. Code,
naming the owner or operator as debtor,
within 10 days after commencement of
the proceeding. A guarantor of a
corporate guarantee as specified in
§§ 2fJ4.143(f) and 264.145(0 must make
such a notification if he is named as
debtor, as required under the terms of
the corporate guarantee (§ 264.151(h)).
(b) An owner or operator who fulfills
flje requirements of §§ 264.143,264.145,
or 204.147 by obtaining a trust fund,
surety bond, letter of credit, or insurance
policy will be deemed to be without the
required financial assurance or liability
coverage in the event of bankruptcy of
the trustee or issuing Institution, or a
suspension or revocation of the
authority of the trustee institution to act
as trustee or of the institution issuing the
surety bond, letter of credit, or insurance
policy to issue such instruments. The
owner or operator must establish other
1982 / Rules and Regulations
financial assurance or liability coverage
within 60 days after such an event.
§ 264.149 Use of State-required
mechanisms. .
(a) For a facility located in a State
where EPA is administering the
requirements of this Subpart but where
the State has hazardous waste
regulations that include requirements for
financial assurance of closure or post-
closure care or liability coverage, an
owner or operator may use State-
required financial mechanisms to meet
the requirements of §§ 264.143,264.145,
or 264.147, if the Regional Administrator
determines that the State mechanisms
are at least equivalent to the financial
mechanism specified in this Subpart.
The Regional Administrator will
evaluate the equivalency of the
mechanisms principally in terms of (1)
certainty of the availability of funds for
the required closure or post-closure care
activities or liability coverage and (2)
the amount of funds that will be made
available. The Regional Administrator
may also consider other factors as he
deems appropriate. The qwner or
operator must submit to the Regional
Administrator evidence of the
establishment of the mechanism
together with a letter requesting that the
State-required mechanism be considered
acceptable for meeting the requirements
of this Subpart. The submission must
include the following information: The
faculty's EPA Identification Number,
name, and address, and the amount of
funds for closure or post-closure care o&
liability coverage assured by the
mechanism. The Regional Administrator
will notify the owner or operator of his
determination regarding the
mechanism's acceptability in lieu of .
financial mechanisms specified in this
Subpart. The Regional Administrator
may require the owner or operator to
submit additional information as is
deemed necessary to make this
determination. Pending this .
determination, the owner or operator _
. will be deemed to be in compliance with
the requirements of §.§ 264.143, 264.145,
or 264.147, as applicable.
' (b) If a State-required mechanism is
found acceptable as specified in
paragraph (a) of this section except for
the amount of funds available, the
owner or operator may satisfy the
requirements of this Subpart by
increasing the funds available through
the State-required mechanism or using
additional financial mechanisms as
specified hi this Subpart. The amount of
funds available through the State and,
Federal mechanisms must at least equal
the amount required by this Subpart.
§264.150 State assumption of
responsibility.
(a) If a State either assumes legal
responsibility for an owner's or
operator's compliance with the closure,
post-closure care, or liability
requirements of this Part or assures that
funds will be available from State
sources to cover those requirements, the.
owner or operator will be in compliance
with the requirements of § § 264.143,
264.145, or 264.147 if the Regional
Administrator determines that the
State's assumption of responsibility is at
least equivalent to the financial
mechanisms specified in this Subpart.
The Regional Administrator will
evaluate the equivalency of State
guarantees principally in terms of (1)
certainty of the availability of funds for
the required closure or post-closure care
activities or liability coverage and (2)
the amount of funds that will be made
available. The Regional Administrator
may also consider other factors as-he
deems appropriate. The owner or
operator must submit to the Regional
Administrator a letter from the State
describing the nature of the State's
assumption of responsibility together
with a letter from the owner or operator
requesting that the State's assumption of
responsibility be considered acceptable
for meeting the requirements of this
Subpart. The letter from the State must
include, or have attached to it, the
following information: the facility's EPA
Identification Number, name, and
address, and the amount of funds for
closure or post-closure care or liability
coverage that are guaranteed by the
State.-The Regional Administrator will
notify the owner or operator of his
determination regarding the
acceptability of the State's guarantee in
lieu of financial mechanisms specified in
this Subpart. The Regional
Administrator may require the owner or
operator to submit additional
information as is deemed necessary to
" make this determination. Pending this
determination, the owner or operator
will be deemed to be in compliance with
the requirements of §§ 264.143, 264.145,
or 264.147, as applicable.
(b) If a State's assumption of
responsibility is found acceptable as
specified hi paragraph (a) of this section
except for the amount of funds
available, the owner or operator may
satisfy the requirements of this Subpart
by use of both the State's assurance and
additional financial mechanisms as
specified in this Subpart. The amount of.
funds available through the State and
Federal mechanisms must at least equal
the amount required by this Subpart.
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/Vol. 47. No. 67 /Wednesday. April 7, 1982 / Rules an143(a} or
264.145(a) or § § 265.143(a) or 265.145(a).
of this chapter, must be worded as . ....
follows, except that instructions in
brackets are to be replaced with the
- relevant information and Ihejbrackets
deleted: .-.'. * -
Trust Agreement '.':'
Trust Agreement, the "Agreement,!' entered
, into as of [date] by"and between [name of the
owner or operator], a [name of State] [insert.
"corporation," "partnership," "association,".
or "proprietorship"], the "Grantor," and
[name of corporate trustee], [insert
"incorporated in the State of -" or "a
. national bank"], the "Trustee."
Whereas, the United States Environmental
Protection Agency, "EPA," an agency of the
United States Government, has established
certain regulations applicable to the Grantor,'
requiring that an owner or operator of a
hazardous waste management facility shall
.provide assurance that funds will be
available when needed for closure «nd/or
post-closure care of the facility,
Whereas, the Grantor has elected to
establish a trust to provide all or part of such
financial assurance for.the facilities
identified herein, ,
Whereas, the Grantor, acting through its
duly authorized officers, has selected the
Trustee to be the trustee under this
agreement, and the Trustee is willing to act
as trustee,' .
Now, Therefore, the Grantor and the
Trustee agree as follows:
Section 1. Definitions. As used in this
Agreement:
(a) The term "Grantor" means the owner or
operator who enters into this Agreement and
any successors or assigns of the Grantor.
(b) The term "Trustee" means the Trustee
who enters into-this Agreement and any
successor Trustee. --
Section 2. Identification ofFqoilities and
Cost Estimates. This Agreement pertains to
the facilities and cost estimates identified on
attached Schedule A [on Schedule A, for each
facility list the EPA Identification Number,
name, address, and the current closure and/
or post-closure cost estimates, or portions
.thereof, for,which financial assurance is
demonstrated by this Agreement].
Section 3, Establishment-of Fund. The
Grantor and the Trustee hereby establish a
trust fund, the "Fund," for the benefit of EPA,
The Grantor and the Trustee intend that no
third party have access to the Fund except as
herein provided. The Fund is established
initially as consisting of the property, -which
is acceptable to the Trustee, described in
Schedule B attached hereto. Such property
and any other property subsequently
transferred to the Trustee is referred to as the
Fund, together with all earnings and profits
thereon, less any payments or distributions
made by the Trustee pursuant to this
Agreement. The Fund shall be held by the
Trustee, IN TRUST, as hereinafter provided.
The Trustee shall not be responsible nor shall
it undertake any responsibility for the
amount or adequacy of, nor any duty to
collect from the Grantor, any payments
necessary to discharge any liabilities of the
,' Grantor established by EPA.
Section 4. Payment for Closure and Post-
Closure Care. The Trustee shall make
payments from the Fund as the EPA Regional
Administrator shall direct, in writing, to
provide for the payment of the costs of
.closure and/or post-closure care of the
. facilities covered by this Agreement. The
Trustee shall reimburse the Grantor or "other
"- persons as specified by the EPA Regional
Administrator from the Fund for closure and
post-closure expenditures in such amounts as
the EPA Regional Administrator shall direct
in writing. In addition, the Trustee shall ;
refund to the Grantor such amounts as tha
EPA Regional Administrator specifies in
writing. Upon refund, such funds shall no
longer constitute part of the Fund as defined
herein.
Section 5> Payments Comprising the Fund.
Payments made to the Trustee for the Fund
shall consist of cash or/securities acceptable
to the Trustee. ;
Section 6. Trustee Management. The
Trustee shall invest and reinvest the principal
and income of the Fund and keep the Fund
invested as a single fund, without distinction
between principal and income, in accordance
with general investment policies and
guidelines which the Grantor may -
communicate in writing to the Trustee from -
time to time, subject, however, to the
provisions .of this Section. In investing,
reinvesting, .exchanging, selling, and
managing the Fund, the Trustee shall
discharge his duties with respect to the trust
fund solely in the interest of the beneficiary ,-
' and with the care, skill, prudence, and
diligence under the circumstances then
prevailing which persons of prudence, acting
in a like capacity arid familiar with such
matters, would use in the conduct of an
enterprise of a like character and with like
aims; except that: -
_ (i) Securities or other obligations of the
Grantor, or any other owner or operator of
the facilities, or any of their affiliates as
defined in the Investment Company Act of
1940, as amended, 15 U.S.C. 80a-2.(a), shall
not be acquired or held; unless they are
securities or other obligations of the Federal
or a State government; » .
(ii) The Trustee is authorized to invest the
Fund in time or demand deposits of the
Trustee, to the extent insured by an agency of
the Federal or State government; and
(iii) The Trustee is authorized to hold cash
awaiting investment or distribution
uninvested for a reasonable time and without
liability for the payment of interest thereon.
Section 7. Commingling and Investment.
The Trustee is expressly authorized in its
discretion: ;
(a) To tranfer from time to time any or all
of the assets of the Fund to any common,
commingled, or collective trust fund created
by the Trustee in which the Fund is eligible to
participate, subject to all of the provisions
thereof, to be commingled with the assets of
other trusts'participating therein; and
(b) To purchase shares in any investment
company registered under the Investment
Company Act of 1940,15 U.S.C. 80a-l et seq.,
including one which-may be creafed,
managed, underwritten, or to which
investment adirice.is rendered or the shares
of which are sold by the Trustee. The Trustee
may vote such shares in its discretion.
Sectfon 8. Express Powers of Trustee.
Without in any way limiting the ppwers and
discretions conferred upon the Trustee by the
other provisions of this Agreement or by law,
the Trustee is expressly authorized and
empowered: j _
'(a) To sell,'exchange, convey, transfer, or
, otherwise dispose of any property held by it,
by public or private sale. No person dealing
with the Trustee shall be bound to see to the
application of the purchase money or to
inquire into the validity or expediency of any
such sale or other disposition;
(b) To make, execute, acknowledge, and
deliver any and. all documents of transfer and
conveyance and any and all other , ;
instruments that may be necessary or
appropriate to carry out the powers herein
granted;, J _
(c) To register any securities held in the
Fund in its own name or in the name of a
nominee and to hold any security in bearer
formor'iri book entry, or to combine
certificates representing such securities with '
certificates of the same issue held by the
Trustee in other fiduciary capacities, or to.
deposit or arrange for the deposit of such
securities in a qualified central depositary
even though, when so deposited, such
securities may be merged and held in bulk in
the name of the nominee of such depositary'
with other securities deposited therein by
another person, or to deposit or arrange for
the deposit of any securities issued by the
United States Government, or any agency or
, instrumentality 'thereof, with a Federal
Reserve bank, but the books and records of
the Trustee shall at all times show-that all
, such securities sire part of the Fund;
[d) To deposit any cash in the Fund in
interest-bearing accounts maintained or
savings certificates issued by the Trustee, in
its separate corporate capacity, or in any
other banking institution affiliated with the
Trustee, to the extent insured by an agency of
the Federal or State government; and
(e) To compromise or otherwise adjust all
claims in favor of or against the Fund.
Section 9. Taxes and Expenses. All taxes,of
any kind that may be assessed or levied
against or in"respect of the Fund and all
brokerage commissions incurred by, the Fund
shall be paid from the Fund. All other
expenses incurred by the Trustee in
connection-with the administration of this
Trust, including lees for legal services
rendered to the Trustee.-the compensation of
the Trustee to the extent hot paid directly by
the Grantor, and all other proper charges and
disbursements of the Trustee shall be paid
from _the Fund. I
Section 10. Annual Valuation. The Trustee
Shall annually, at least 30 days prior to the
anniversary date of .establishment of the
Fund, furnish to the Grantor and to the
appropriate EPA Regional Administrator a
statement cohfirniing the value of the Trust.
Any securities in the Fund, shall be valued at
market value as of no more than 60 days
prior to the anniversary date of establishment
of the-Fund. The failure of the Grantor to -
-------
Federal Register / Vol. 47. No. 67 / Wednesday. April 7. 1982 / Rules and Regulations
15060
object in writing to the Trustee within 90
days after the statement has been furnished
to the Grantor and the EPA Regional
Administrator shall constitute a conclusively
binding aasent by the Grantor, barring the
Grantor from asserting any claim or liability
against the Trustee with, respect to matters
disclosed in the statement.
Section 11. Advice of Counsel. The Trustee
may from time to time consult with counsel,
who may be counsel to the Grantor, with
respect to any question arising as to the
construction of this Agreement or any action
to bo taken hereunder. The Trustee shall be
fully protected, to the extent permitted by
Jaw, in acting upon the advice of counsel.
Section 12. Trustee Compensation. The
Trustee shall be entitled to reasonable
compensation for its services as agreed upon
In writing from time to time with the Grantor.
Section 13, Successor Trustee. The Trustee
may resign or the Grantor may replace the
Trustee, but such resignation or replacement
shall not be effective until the Grantor has
appointed a successor trustee and this
successor accepts the appointment. The
successor trustee shall have the same powers
and duties as those conferred upon the
Trustee hereunder. Upon the successor
trustee's acceptance of the appointment, the
Trustee shall assign, transfer, and pay over to
the successor trustee the funds and properties
then constituting the Fund. If for any reason
the Grantor cannot or does not act in the
event of the resignation of the Trustee, the
Trustee may apply to a court of competent
jurisdiction for the appointment of a
successor trustee or for instructions, The
successor trustee shall specify the date on
which it assumes administration of the trust
in a writing sent to the Grantor, the EPA
Regional Administrator, and the present
Trustee by certified mail 10 days before such
change becomes effective. Any expenses
incurred by the Trustee as a result of any of
the acts contemplated by this Section shall be
paid as provided in Section 9.
Section 14, Instructions to the Trustee. All
orders, requests, and instructions by the
Grantor to the Trustee shall be in writing,
signed by such persons as are designated in
the attached Exhibit A or such other j
dcslgneos as the Grantor may designate by
amendment to Exhibit A. The Trustee shall
be fully protected in acting without inquiry in
accordance with the Grantor's orders,
requests, and instructions. All orders,
requests, and instructions by the EPA
Regional Administrator to the Trustee shall
be in writing, signed by the EPA Regional
Administrators of the Regions in which the
facilities are located, or their designees, and
the Trustee shall act and shall be fully
protected in acting in accordance with such
orders, requests, and instructions. The
Trustee shall have the right to assume, in the
absence of written notice to the contrary, that
no event constituting a change or a
termination of the authority of any person to
act on behalf of the Grantor or EPA
hereunder has occurred. The Trustee shall
have no duty to act in the absence of such
orders, requests, and instructions from the
Grantor and/or EPA, except as provided for
herein.
Section IS. Notice of Nonpayment. The
Trustee shall notify the Grantor and the
appropriate EPA Regional Administrator, by
certified mail within 10 days following the
expiration of the 30-day period after the
anniversary of the establishment of the Trust,
if no payment is received from the Granted
during that period. After the pay-in period is
completed, the Trustee shall not be required
to send a notice of nonpayment.
Section 16. Amendment of Agreement. This
Agreement may be amended, by an
instrument in writing executed by the
Grantor, the Trustee, and the appropriate
EPA Regional Administrator, or by the
Trustee and the appropriate EPA Regional
Administrator if the Grantor ceases to exist.
Section 17. Irrevocability and Termination.
Subject to the right of the parties to amend
this Agreement as provided in Section 16, this
Trust shall be irrevocable and shall continue
until terminated at the written agreement of
the Grantor, the Trustee, and the EPA
Regional Administrator, or by the Trustee
and the EPA Regional Administrator, if the
Grantor ceases to exist Upon termination of >
the Trust, all remaining trust property, less
final trust administration expenses, shall be
delivered to the Grantor.
Section 18. Immunity and Indemnification.
The Trustee shall not incur personal liability
of any nature in connection with any act or
omission, made in good faith, in the
administration of this Trust, or in carrying out
any directions by the Grantor or the EPA
Regional Administrator issued in accordance
with this Agreement. The Trustee shall be
indemnified and saved harmless by the
Grantor or from the Trust Fund, or both, from
and against any personal liability to which
the Trustee may be subjected by reason of
any act or conduct in its official capacity,
Including all expenses reasonably incurred in
its defense in the event the Grantor fails to
provide such defense.
Section 19. Choice of Law. This Agreement
shall be administered, construed, and
enforced according to the laws of the State of
[insert name of State],
Section 20. Interpretation. As used in this
Agreement, words in the singular include the
plural and words in the plural include the
singular. The descriptive headings for each
Section of this Agreement shall not affect the
interpretation or the legal effic'acy of this .
Agreement.
In Witness Whereof the parties have
, caused this Agreement to be executed by .
their respective officers duly authorized and
their corporate seals to be hereunto affixed
and attested as of the date first above
written: The parties below certify that the
wording of this Agreement is identical to the
wording specified in 40 CFR 264.151(a)(l) as
such regulations .were constituted on the date
first above written. .
[Signature of Grantor]
[Title]
Attest:
[Title] .
[Seal]
[Signature' of Trustee]
Attest: . '
[Title]
[Seal]
f2) The following is an example of the
certification of acknowledgment which
must accompany the trust agreement for
a trust fund as specified in § § 264.143(a)
and 264.145(a) or §§ 265.143(a) or
265.145(a) of this chapter. State
requirements may differ on the proper
content of this acknowledgment.
State of "
County of
On this [date], before me personally came
[owner or operator] to me known, who, being
by me duly sworn, did depose and say that
she/he resides at [address], that she/he is
[title] of [corporation], the cqrppration
described in and which executed the above
ins'trument; that she/he knows the seal of
said corporation; that the seal affixed to such
instrument is such corporate seal; that it was
so affixed by order of the Board of Directors
of said corporation, and that she/he signed
her/his name thereto by like order.
[Signature of Notary Public]
(b) A surety bond guaranteeing
payment into a trust fund, as specified in
§'§ 264.143(b) or 264.145{b] or
§§ 265.143(b) or 265.145(b) of this
chapter, must be worded as follows,
except that instructions in brackets are
to be replaced with the relevant
information and the brackets deleted:
Financial Guarantee Bond
Dated bond executed: :
Effective date:
Principal: [legal name and business address
of owner or operator]
Type of organization: [insert "individual,"
"joint venture," "partnership," or
"corporation"]
State of incorporation:
Surety(ies): [name(s) and business
' address(es)]
EPA Identification Number, name, address,
and closure and/or post-closure amount(s)
for each facility guaranteed by this bond
[indicate closure and post-closure amounts
separately]:
Total penal sum of bond: $ ;
Surety's bond number:
^Know All Persons By These Presents, That
we, the Principal and Suretypes) hereto are
firmly bound to the U.S. Environmental
Protection Agency (hereinafter called EPA),
in the above penal sum for the payment of
which we bind ourselves, our heirs,
executors, administrators, successors, and
assigns jointly and severally; provided that,
where the Surety(ies) are corporations acting
as co-sureties, we, the Sureties, bind
ourselves in such sum "jointly and severally"^
only for the purpose of allowing a joint action
or actions against any or all of us, and for all
other purposes each" Surety binds itself,
jointly and severally with the Principal, for
the payment of such sum only as is set forth
opposite the name of such Surety, but if no
limit of liability is indicated, the limit of
liability shall be the full amount of the penal
sum.
Whereas said Principal is required, under
the Resource Conservation and Recovery Act
as amended (RCRA), to have a permit or
interim status in order to own or operate each
-------
^e.!pSter 1 VbL 47> N0j 67 /-'Wednesday; April 7, 1982 / Rides ami Regulations 15061
hazardous waste management facility'
Identified above, and , , ,-
Whereas said principal is required to
provide financial assurance for closure, or
; closure and post-closure care, as a condition
of the permit or interim status; and
Whereas said Principal shall establish a
standby trust fund as is required when a
, surety bond is used to provide such financial
assurance;
Now, Therefore, the conditions of the
obligation are such that if the Principal shall
faithfully, before the beginning of final
closure of each facility identified above, fund
the standby trust fund' in the amount(s)
identified above for the facility,
Or, if the Principal shall fund the standby '
trust fund in such amount(s) within 15 days
after an order to begin closure is issued by an-
EPA Regional Administrator or a U.S. district
court or other court of competent jurisdiction,,
Or, if the Principal shall provide .alternate
financial assurance, as specified in Subpart H
of 40 CFR Parts 264 or 265, as applicable, and
obtain the EPA Regional Administrator's
written approval of such assurance, within 90
days after the date notice of cancellation is '
received by both the Principal and the EPA
Regional Administrators) from the
Surety,(ies), then this obligation shall be null
and void, otherwise it is to remain in full
force and effect.
The Suretypes) shall become liable on this
. bond obligation only when the Principal has ,
failed to fulfill the conditions described
above. Upon notification.by an EPA Regional
Administrator that the Principal has failed to
perform as guaranteed by this bond, the
Suretypes) shall place funds in the amount
guaranteed for the facility(ies) into the - *.
standby trust fund as directed by the EPA
Regional Administrator.
The liability of the Suretypes} shall not be
discharged by any payment or succession of
payments hereunder, unless and until such
payment or payments shall amount in the ,
aggregate to the penal sum of. the bond, but in
no event shall the obligation of the
Suretypes) hereunder exceed the amount of
- said penal sum.
The Suretypes) may cancel the bond by
sending notice of cancellation by certified
mail to the Principal and to the EPA Regional
Administrator(s) for the Region(s) in which
. the facilitypes) is (are) located, provided,
however, that cancellation shall not occur
during the 120 days beginning on the date of
receipt of the notice of cancellation by both
the Principal and the EPA Regional
Administrator(s), as evidenced by the return
receipts.
The Principal may .terminate this bond by
sending written notice to the Surety(ies),
provided, however, that no such notice shall
become effective until the Suretypes)
receive(s) written authorization for.
termination of the bond by the EPA Regional
Administrator(s) of the EPA Region(s) in
, which the bonded facilitypes) is (are) located.
[The following paragraph is an optional
rider that may be included but is not
required.]
Principal and Suretypes) hereby agree to
adjust the penal sum of the bond yearly so *
that-it guarantees a new closure and/or post-,
closure amount, provided that the penal sum
does not increase by more than 20 percent in
any one year, and no decrease in the penal
sum takes place without the written '
. permission of the EPA Regional
Administratorfs).
In Witness Whereof, the Principal and
Suretypes) have executed this Financial
Guarantee Bond and have affixed their seals
on the date set forth above, .
The persons whose signatures appear
below hereby certify that they are authorized
to execute this surety bond on behalf of the
Principal and Suretypes) and that the
wording of this surety bond is identical to .the
wording specified in 40 CFR 264.i51(b) as
such regulations were constituted on the date
this bond was executed.
Principal x, '
[Signature(s)] -. '""""
[Name(s)] -
[Corporate seal]
Corporate Suretypes)
[Name and address]
State of incorporation: , '
yability limit: $ -':. ' ' ',"'
[Signature(s)] ;
[Name(s)andtiue(s)]- .".-
[Corporate seal]
[For every co-surety, provide signature(s)i
corporate seal, and other information in the
same manner as for Surety above.]
Bond premium: $
(c) A surety bond guaranteeing
performance of closure and/or post-
closure care, as specified in
§§ 264.143(c) or 264.145[c), must be- "
worded as follows, except that the
instructions in brackets are to be
replaced with the relevant information
and the brackets deleted:
Performance Bond ~~~
Date bond executed: '
'Effective date:
Principal: [legal name and business address
.. of owner or operator]
Type of organization: [insert "individual,"
"joint venture," "partnership," or
"corporation"] ,.
State of incorporation: '-L
Suretypes): [name(s) and business
address(es)] : . '
EPA Indetification Number, name, address,
and closure and/or post-closure amount(s)
for each facility quaranteedby this bond
[indicate closure and post-closure amounts
separately]: " ,
Total penal sum of bond: $
Surety's bond number:
Know All Persons By These Presents, That"
we, the Principal and Suretypes) hereto are
firmly bound to the U.S. Environmental
Protection Agency (hereinafter called EPA),
in the above penal sum for the payment of
which we bind ourselves, our heirs,
executors, administrators, successors, and
assigns jointly and severally; provided that,
where the Suretypes) are corporations acting
as co-sureties, we, the Sureties, bind
ourselves in such sum "jointly and severally"'
only for the purpose of allowing a joint action
or actions against any or all of us, and for all
other purposes each Surety binds itself, ,
jointly.and severally,with the Principal, for
the payment ol: such sum only as is set forth
opposite the name of such Surety, but if no,
limit of liability is indicated, the limit of
liability shall be the Ml amount of the penal
sum.' '..''' [' ' ' ' . ',.'
Whereas sail Principal is required, under
the Resource Conservation and Recovery Act
as amended (RCRA), to have a permit in
order to own oir operate each hazardous
waste management facility indentified above,
and . v . ,i ..-.;."
Whereas said Principal is required to
provide financial assurance for closure, or
closure and pout-closure.care, as a condition
of the permit, and'
Whereas said Principal shall establish a
standby, trust fiihd as is required when a
surety bond is used to provide such financial
assurance; i i
Now, Therefore, the conditions of this
obligation are such that if the Principal shall
faithfully perfoim closure, whenever required
to do so, of each facility for which this bond
guarantees closure,-in accordance with the
closure plan and other requirements of the
permit as such plan and permit may be
amended, pursuant to all applicable laws,
statutes, rules, and regulations, as such laws,
statutes, rules, iind regulations may be
amended, i
And, if the Principal shall faithfully perform
post-closure_cai e of each facility for which
this bond guarantees post-closure care, in
accordance with the post-closure plan and
other requirements of the permit, as such plan
and permit may be amended, pursuant to all
applicable laws, statutes, rules, and
regulations, as such laws, statutes, rules, and
regulations may be amended,
Or, if the Principal shall provide alternate
financial assurance as specified in Subpart H
of 40 CFR Part 264, and obtain the EPA
Regional Administrator's Written approval of
such assurance, within SO days after the date
notice of cancellation is received by both the
Principal and tho EPA Regional
Administrators) from the Suretypes), then -
this obligation shall be null and void, '-
otherwise it is to remain in full force and «,
effect. ;[: . ,
The Suretypes!) shall become liable on this
.bond obligation only when the Principal has
failed to fulfill the conditions described
above. : , . .,
Upon notification by an EPA Regional
Administrator that the Principal has been
found in violation of the closure requirements
of 40 CFR Part 204, for a facility, for which
this bond guarantees performances of
closure, the Suretypes) shall either perform
closure in accordance with the closure plan
and other permit requirements or place the
closure amount guaranteed for. the facility
into the standby trust fund as directed by the
EPA Regional Administrator.
Upon ratification by an EPA Regional
Administrator that the Principal has been
found in violation of the post-closure
requirements of 40 CFR Part 264 for a facility
for which this bond guarantees performance
of post-closure care, the Suretypes) shall
either perform post-closure care in
-------
1982 / Rules and Regulations
Federal Register / Vol. 47, No. 67 / Wednesday. April 7
15062
Bocordanco with the post-closure plan and
other permit requirements or place the post-
cloauro amount guaranteed for the facility
Into the standby trust fund as directed by the
EPA Regional Administrator.
Upon notification by an EPA Regional
Administrator that the Principal has failed to
provide alternate financial assurance as
SpocIRed In Subpart H of 40 CFR Part 264,
and obtain written approval of such
assurance from the EPA Regional
Administrators) during the 90 days following
receipt by both the Principal and the EPA
Regional Administrators) of a notice of
cancellation of the bond, the Suretypes) shall
place funds In the amount guaranteed for-the
facility(ies) Into the standby trust fund as
directed by the EPA Regional Administrator.
The aur«ty(les) hereby walve(s) notification
of amendments to closure plans/permits,
applicablo laws, statutes, rules, and
regulations and agrees that no such
amendment shall in any way alleviate its
(their) obligation on this bond.
The liability of the Surety(ies) shall not be
discharged by any payment or succession of
payments hereunder, unless and until such
payment or payments shall amount in the
aggregate to the penal sum of the bond, but in
no event shall the obligation of the ~
8urcty(!es) hereunder exceed the amount of
said penal sum.
The Suretypes) may cancel the bond by
ending notice of cancellation by certified
mail to the qwner or operator and to the EPA
Regional Administrators) for the Region[s) in
which the fadlity(ies) is (are) located,
provided, however, that cancellation shall
not occur during the 120 days beginning on
the date of receipt of the notice of
cancellation by both the Principal and the
EPA Regional AdmlnistratorCs), as evidenced
by tiie return receipts.
The principal may terminate this bond by
sanding written notice to the Suretypes).
provided, however, that no such notice shall
become effective until the Suretypes)
recelve(s) written authorization for
termination of the bond by the EPA Regional
Administrators) of the EPA Region(s) in
which tha bonded facility(ies) is (are) located.
[The following paragraph is an optional
rider that may be included but is not
required.]
Principal and Suretypes) hereby agree to
adjust the penal sum of the bond yearly so
that It guarantees a new closure and/or post-
closure amount, provided that the penal sum
does not increase by more than 20 percent in
any one year, and no decrease in the penal
sum takes place without the written
permission of the EPA Regional
Admlnlstrator(s).
In Witness Whereof, The Principal and
Surety(Ies) have executed this Performance
Bond and have affixed their seals on the date
set forth above.
The persons whose signatures appear
below hereby certify that they are authorized
to execute this surety bond on behalf of the
Principal and Surety(ies) and that the
wording of this surety bond is identical to the
wording specified in 40 CFR 264.151(c) as
such regulation was constituted on the date
this bond was executed.
Principal
[Signature(s)]
[Name(s)]
[TitleCs)]
[Corporate seal]
Corporate Surety(ies)
[Name and address]
State of incorporation:
Liability limit: $
[Signature(s)]
[Name(s) and title(s)] ,
Corporate seal:
[For every co-surety, provide signature(s),
corporate seal, and other information in the
same manner as for Surety above.]
Bond premium: $ ''
(d) A letter of credit, as specified in
|§ 264.143(d) or 264.145(d) or
§§ 265.143(c) or 265.145(c) of this
chapter, must be worded as follows,
except that instructions in brackets are
to be replaced with the relevant
information and the brackets deleted:
Irrevocable Standby Letter of Credit
Regional Administrators)
Region(s) '
Kegioniaj
U.S. Environmental Protection Agency
Dear Sir or Madam: We hereby establish
our Irrevocable Standby Letter of Credit
No. in your favor, at the request and for
the account of [owner's or operator's name
and address] up to the aggregate amount of
[in words] U.S. dollars $, available upon
presentation [insert, if more than one
Regional Administrator is a beneficiary, "by
any one of you"] of
(1) your sight draft, bearing reference to
this letter of credit No. , and
(2) your signed statement reading as
follows: "I certify that the amount of the draft,
is payable pursuant to regulations issued
under authority of the Resource Conservation
and Recovery Act of 1976 as amended."
This letter of credit is effective as of [date]
and shall expire on [date at least 1 year
later], but such expiration date shall be
automatically extended for a period of [at
least 1 year] on [date] and on each successive
expiration date, unless, at least 120 days
before the current expiration date, we notify
both you and [owner's or operator's name] by
certified mail that we have decided not to
extend this letter of credit beyond the current
expiration date. In the event you are so
notified, any unused portion of the credit
shall be available upon presentation of your
sight draft for 120 days after the date of
receipt by both you and [owner's or
operator's name], as shown on the signed
return receipts.
Whenever this letter of credit is drawn on
under and in compliance with' the terms of
this credit, we shall duly honor such draft
upon presentation to us, and we shall deposit
the amount of the draft directly into the
standby trust fund of [owner's or operator's
name] in accordance with your instructions.
We certify that the wording of this letter of
credit is identical to the wording specified in
40 CFR 264.151(d) as such regulations were
constituted on the date shown immediately
below.
[Signature(s) and title(s) of official(s) of
issuing institution] [Date]
This credit is subject to [insert "the most'
recent edition of the Uniform Customs and . ,
Practice for Documentary Credits, published
by the International Chamber of Commerce,"
or "the Uniform Commercial Code"].
fe) A certificate of insurance, as
specified in §§ 264.143(e) or 264.145(e) or
§ § 265.143(d) or 265.145(d) of this
chapter, must be worded as follows,
except that instructions in brackets are
to be replaced with the relevant
information and the brackets deleted: .
Certificate of Insurance for Closure or Post-
Closure Care
. Name and Address of Insurer
(herein called the '.'Insurer")1. :
Name and Address of Insured
(herein called the "Insured"): -
Facilities Covered: [List for each facility: The
EPA Identification Number, name, address,
and the amount of insurance for closure
and/or the amount for post-closure care
(these amounts for all facilities covered
must total the face amount shown below).]
Face Amount: '
Policy Number: ~'
Effective Date: -^ '
The Insurer hereby certifies that it has
issued to the Insured the policy of insurance
identified above to provide financial -
assurance for [insert "closure" or "closure
and post-closure care" or "post-closure care"]
for the facilities identified above. The Insurer
further warrants that such policy conforms in
all respects with the requirements of 40 CFR
264.143(e), 264.145(e), 265.143(d), and
265.145(d), as applicable and as such
regulations,were constituted on the date
shown immediately below. It is agreed that
any provision of the policy inconsistent with
such regulations is hereby amended to
eliminate such inconsistency.
Whenever requested by the EPA Regional
*Administrator(s) of the U.S. Environmental
Protection Agency, the Insurer agrees to
furnish to the EPA Regional Administrator(s)
a duplicate original of the policy listed above,
including all endorsements thereon.
I hereby certify that the wording of this
certificate is identical to the wording
specified in 40 CFR 264.151(e) as such
regulations were constituted on the date
shown immediately below.
[Authorized signature for Insurer]
[Name of person signing]
[Title of person signing] ' ,
Signature of witness or notary: '
[Date] " -
(f) A letter from the chief financial
officer, as specified in §§ 264.143(f) or
264.145(f) or §§ 265.143[e) or 265.145(e)
of this chapter, must be worded as
follows, except that instructions in
brackets are to be replaced with the
relevant information and the brackets
deleted:
Letter From Chief Financial Officer
[Address to Regional Administrator of every
" Region in which facilities for which financial
-------
Register / Vol. 47, No. 67 /Wednesday, April 7. 1982, / Rules and .Regulations . 15063
I am the chief financial office^f [name
fi
, this firm, as owner or
operator or guarantor, is demonstrating
fanancial assurance for the closure or post-
^ThisIirm'wroroperatorofthe
following hazardous waste management
facilities for which financial assurance for
closure or, if a disposal facility, post-closure
care, is not demonstrated either to EPA or a
State through the financial test o^oSer
financial assurance mechanism specified in
Subpart H of 40 CFR Parts 264 and 265 or
equivalent or substantially equivalent State
mechanisms. The current closure and/or
post-closure cost estimates not covered by
such financial assurance are shown for each
facility- -
This firm [insert "is required" or "is not
required"] to file a Form 10K with the
Securities and Exchange Commission fSECV
for the latest fiscal year
The fiscal year of this firm ends on [month,
day]. The figures for the following items
marked 'with an asterisk are derivedfrom this
firm's independently audited, year-end
financial statements for the latest, completed
fiscal year, ended [datel.
ffill in Alternative lif the criteria of
ptoaSaph mmai r«rf i§ 26^wT or 264 145 or
of §§265.143 or 265.145 of this chapter are
use(j] -
' ALTERNAT.VEI
i: sun, o, ^m closure and pos,-o.osUre cos,
ctotal of a// cost estimates shown in
organized under the laws of the State of
demonstrate financial assurance, as specified
in Subpart H of 40 GFR Parts 264 and 265.
[Fill out the following four paragraphs
regarding facilities andassociaied cost
estimates, if your firm has no facilities that
belong in a particular paragraph, write
"No^Mn fee space i^icafedjFor each , .
facility, include Its EPA Identification
Number, name, address, and current closure
and/or post-closure cost estimates. Identify
each cost estimate as to whether it is for
closure or post-closure care.]
1. This firm is the owner or operator of the
following facilities for which financial
assurance for closure or post-closure care IB
demonstrated through the financial test
specified in Subpart H of 40 CFR Parts 264
and 265,Thecuri-ent closure and/or post- ,
closure cost estimates covered by the test are
shown for each facility: - ,
2. This firm guarantees, through the '
corporate guarantee specified in Subpart H of
40 CFR Parts 264 and 265, the closure or post-
closure care of the following facilities owned
or operated by subsidiaries of this firm. The
current cost estimates for .the closure or post-
closure care so guaranteed are shown for .
eacn tacility: - - .
3. Li States where EPA is not administering
or post-closure cost estimates is included in
total liabilities, you may deduct the amount of
that portion ,r0m this line and add that amopnt
........... ' ..........
M. Net worth
'* Current-assets..
onefstnl nf m ,)noco =
operaforj ot Business address].
Recitals
" T xceedf ^.^^
9 *° ""^y with the
reporting requirements for guarantors as
*8. The sum of net income plus depreciation
depletion, and amortization...- ................... .. ..... '
\ JptS,.!5S1ts« in, u& (required "*» if less
U.SJ.. !.1.!..;!S are cated in tha
.............. .................. .......
10. Is line 3 at least $10 million? .......... . _____
11- ls fins 3 at least 6.flmss line 1? .......... *
«il ^te^1we«.Z.1SiJii; toied 'in
the U.S.? )f not, complete line 14
14- |s Bne 9 at least 6 times line 1 ?.........!""""
17. is line s divided by line 6 greater than is?"
"
Yes No
ALTERNATIVE H
ihe four paragraphs above] ................. .. ..... ...........
2- Current bond rating of most recent issuance
4. Date Of maturity of bond: .......
"5. Tangible net worth [if any portion of the
closure and post-closure cost estimates is
orr .-,
. 2- [Owner or operator] owns or operates
*e following hazardous waste management
facilityCies) covered by this, guarantee: [List
i°r each facility: EPA Identification Number,
name> and address. Indicate for each whether
guarantee is f o;c closure, post-closure care, or, ,
both.] j , .
3. "Closure plans" and "post-closure plans"
as used below refer to the plans maintained '
asf ^/d by Subpart G of 40 CFR Parts 264
an" 263 tor the closure and post-closure care
of facilities as identified above
4. For value received from [owner or
' °Perator]. guarantor guarantees to EPA that
in the event that [owner or operator] fails to
perform [insert "closure," "post-closure care"
or "closure and post-closure care"] of the
above facilityfiiss) in accordance with the
closure or post-clLure plans a^dXr
permit or interim status requirements
so
specified in Subipart Hpf 40 CFR Parts 264 or
265, as applicable, in the name of [owner or
7- * «~ s at least sio million?.... ..... ..
» 's «ne s at least 6 Bmes.iine 1?
10. Is line 6 at least e Bmes line 1? ................... .. .
v * r ,
s) in whj.ch the facihtyfies) is (are)
f°^at^d f1"1 to ('^ff or operator] that he
intends to provide alternate financial
' ,_ .' ' t , -
\herebycertifythatthewordingofthis
In PTO^ S *° 6 T^*?8 sPecified to
fc^f"51ffl as. such regulations were
constituted on the date shown immediately .
[Signature] ' ..'
[Name] ,
[Title] '
Pate3 .
*. * -. * » -
[h) A corporate guarantee, as
specifled'ta T§§ 264143ffl or -2Mi«ffl «r
I « SS ^SJ *1 ?t fSl n^ 264 145[f)^r
88 Z65.143[ejOT26B.145(e) of this
chapter, must b.e worded as follows,
6X£fpt ^ to***** ta brackets are
.n A . ,
name,°f lo?e? or operator]. Within 120 days
after the end of isuch fiscal year, the
guarantor shaU establish such financial
*** «nl*ss [owner or operator] has
6. The guarantor agrees to notify the EPA
Regional Administrator by certified mail, of a
voluntary or involuntary proceeding under
T»«e 11 (Bankruptcy), U.S. Code, naming
guarantor as debtor, within 10 days after
commencement of the proceeding.
7. Guarantor agrees that within 30 days
%T. -^ .f0^ by an EPA Regional
Admm!stratoJ oi a determination that
guarantor no logger meets the financial test
criteria or that he is disallowed from
continuing as a guarantor of closure or post-
closure care, he »hall establish alternate ;
r,, t ' ' ^ n.-' M » , u r
Guarantee made this [date] by [name of
guaranteeing entity], a business corporation
to remam bound under ,
this guarantee notwithstanding any or all of
the following: amendment or modification of
-------
15064 Federal Register / Vol. 47, No. 67 / Wednesday, April 7. 1982 / Rules and Regulations
the closure or post-closure plan, amendment
or modification of the permit, the extension
or reduction of the lime of performance of
closure on post-closure, or any other
modification or alteration of an obligation of
the owner or operator pursuant to 40 CFR
Parts 284 or 265.
9, Guarantor agrees to remain bound under
this guarantee for so long as [owner or
operator] must comply with the applicable
financial assurance requirements of Subpart
H of 40 CFR Parts 264 and 265 for the above-
listed facilities, except that guarantor may
cancel this guarantee by sending notice by
Certified mail to the EPA Regional
Admmlslralorts) for the Region[s) in which
the facttiryfiei) is (are) located and to [owner
or operator], such cancellation to become
effective no earlier than 120 days after
receipt of such notice by both EPA and
[owner or operator], as evidenced by the
return receipts.
10. Guarantor agrees that if [owner or
operator] fails to provide alternate financial
assurance as specified in Subpart H of 40
CFR Parts 2S4 or 265, as applicable, and
obtain written approval of such assurance
from the EPA Regional Administrator{s)
within 90 days after a notice of cancellation
by the guarantor is received by an EPA
Regional Administrator from guarantor,
guarantor shall provide such alternate
financial assurance in the name of [owner or
operator].
11. Guarantor expressly waives notice of
acceptance of this guarantee by the EPA or
by [owner or operator]. Guarantor also
expressly waives notice of amendments or
modifications of the closure and/or post-
closure plan and of amendments or
modifications of the facility permit(s).
I hereby certify that the wording of this
guarantee is identical to the wording
specified in 40 CFR 204.151(h) as such
regulations were constitituted on the date
first above written.
Effective date:
Name of guarantor]
Authorized signature for guarantor]
Name of person signing)
Title of person signing]
Signature of witness or notary: /
Title 40 of the Code of Federal
Regulations is amended as follows:
PART 265INTERIM STATUS
STANDARDS FOR OWNERS AND
OPERATORS OF HAZARDOUS WASTE
TREATMENT, STORAGE, AND
DISPOSAL FACILITIES
Subpart HFinancial Requirements
Amend 40 CFR Part 285 by revising
§§ 265.140,265.141(a), 265.142-265.146,
265.148-265.150, by deleting § 265.151,
and by adding new paragraphs (c]-(g) to
1265.141 to read as follows:
§265.140 Applicability.
(a) The requirements of §§ 265.142,
285.143, and 265.147-151 apply to owners
and operators of all hazardous waste
facilities, except as provided otherwise
in this section or in § 265.1.
(b) The requirements of §§ 265.144,
265.145, and 265.146 apply only to
owners and operators of disposal
facilities.
(c) States and the Federal government
are exemp't from the requirements of this
Subpart.
§ 265.141 Definitions of terms as used in
this Subpart.
(a) "Closure plan" means the plan for
closure prepared in accordance with the
requirements of § 265.112.
(b) * * *
(c) "Current closure cost estimate"
means the most recent of the estimates
prepared in accordance with § § 265.142
[a], (b), and (c).
(d) "Current post-closure cost
estimate" means the most recent of the
estimates prepared in accordance with
§§265.144 (a), (b), and (e).;
(e) "Parent corporation" means a
corporation which directly owns at least
50 percent of the voting stock of the
corporation which is the facility owner
or operator; the latter corporation is
deemed a "subsidiary" of the parent
corporation,
(f) "Post-closure plan" means the plan
for post-closure care prepared in
accordance with the requirements of
§§ 265.117-265.120.
(g) The following terms are used in the
specifications for the financial test for
closure and post-closure care. The
definitions are intended to represent the
common meanings of the terms as they
are generally used by the business
community.
"Assets" means all existing and all
probable future economic benefits
obtained or controlled by a particular
entity.
"Current assets" means cash or other
assets or resources commonly identified
as those which are reasonably expected
to be realized in cash or sold or
consumed during the-normal operating
cycle of the business.
"Current liabilities" means obligations
whose liquidation is reasonably
expected to require the use of existing
resources properly classifiable as
current assets or the creation of other
current liabilities.
"Independently audited" refers to an
audit performed by an independent
certified public accountant in ,
accordance with generally accepted
auditing standards.
"Liabilities" means probable future
sacrifices of economic benefits arising
from present obligations to transfer
assets or provide services to other
entities in the future as a result of past
transactions or events.
"Net working capital" means current
assets minus current liabilities.
"Net worth" means total assets minus
total liabilities and is equivalent to
owner's equity.
"Tangible net worth" means the
tangible assets that remain after
deducting liabilities; sut$i assets would
not include intangibles such as goodwill
and rights to patents or royalties.
§ 265.142 Cost estimate for closure.
(a) On May 19,1981, the owner or
operator must prepare a written
estimate, in current dollars, of the cost
of closing the facility in accordance with
the closure plan as specified in
§ 265.112. The closure cost estimate
must equal the cost of closure at the
point in the facility's operating life when
the extent and manner of its operation
would make closure the most expensive,
as indicated by its closure plan.
(b) The owner or operator must adjust
the closure cost estimate for inflation
within 30 days after each anniversary of
the date on which the first closure cost
estimate was prepared. The adjustment
must be made as specified in paragraphs
(b)(i) and (b)[ii) of this section, using an
: inflation factor derived from the annual
Implicit Price Deflator for Gross
National Product as published by the"
U.S. Department of Commerce in its
Survey of Current Business. The
inflation factor is the result of dividing
the latest "published annual Deflator by
the Deflator for the previous year.
(i) The first adjustment is made by
multiplying the closure cost estimate by
the inflation factor. The .result is the
adjusted closure cost estimate,.
(ii) Subsequent adjustments are made
by multiplying the latest adjusted
closure cost estimate by the latest
inflation factor.
(c) The owner or operator must revise
the closure cost estimate whenever a
change in the closure plan increases the
cost of closure. The revised closure cost
estimate must be adjusted for inflation
as specified in § 265.142(b).
(d) The owner or operator must keep
the following at the facility during the
operating life of the facility: The latest
closure cost estimate prepared in '
accordance with §§ 265.142 (a] and (c)
and, when this estimate has been
adjusted hi accordance with
§ 265.142(b), the latest adjusted closure
cost estimate.
§ 265.143 Financial assurance for closure.
By the effective date of these
regulations, an owner or operator of
each facility must establish financial
assurance for closure of the facility. He
must choose from the options as
specified in paragraphs (a) through (e) of
this section.
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L±JLL^g*gg*fy-.'fPff..!"*2 / *ules anil Regulations 15065
(a) Closure trust fund. (1) An owner or
operator may satisfy the requirements of
this section by establishing a closure
trust fund which conforms to the '.
requirements of this paragraph and
submitting an originally signed duplicate
of the trust agreement to the Regional
Administrator. The trustee must be an
, entity which has the authority to act as
a trustee and whose trust operations are
regulated and examined by a Federal or
State agency. '
(2) The wording of the trust agreement
must be identical to the wording
specified in § 264.151(a)(l). and the trust
agreement must be accompanied by a
formal certification of acknowledgment
(for example, see § 264.151(a)(2)).
Schedule A of the trust agreement must
be updated within 60 days after a
change in the amount of the current .
closure cost estimate covered by the -
agreement. ;
(3) Payments into the trust fund must
be made annually by the owner or
operator over the 20 years beginning
with the effective date of these
regulations or over the remaining
operating life of the facility as estimated
in the closure plan, whichever period is
shorter; this period is hereafter referred
to as the "pay-in period." The payments
into the closure trust fund must be made
as follows:
p) The first payment must be made by
the effective date of these regulations,
except as provided in paragraph (a)(5) of
this section. The first payment must be
at least equal to the current closure cost
estimate, except as provided in
§ 265.143(f), divided by the number of
years in the pay-in period.
pi) Subsequent payments must be
made no later than 30 days after each
anniversary date of the first payment.
The amount of each subsequent
payment must be determined by this
formula:
Next payment
CE CV
where CE is the current closure cost
estimate, CV is the current value of the
trust fund, and Y is the number of years
remaining in the pay-in period.
(4) The owner or operator may
accelerate payments into the trust fund
or he may deposit the full amount of the
current closure cost estimate at the time
the fund is established. However, he
must maintain the value of the fund at
no less than the value that the fund
would have if annual payments were
made as specified in paragraph (a)(3) of
this section.
(5) If the owner or operator
establishes a closure trust fund after
having used one or more alternate
mechanisms specified in this section, his
first payment must be in at least the
amount that the fund would contain if
the trust fund were established initially
and annual payments made,as specified
in paragraph (a)(3) of this section.
(6) After the pay-in period is
completed, whenever the current closure
cost estimate changes, the owner or
operator must compare the new estimate
with the trustee's most recent annual
valuation of the trust fund. If the value
of the fund is less than the amount of the
new estimate, the owner or operator, '
within 60 days after the change in the
cost estimate, must either deposit an
amount into the fund so that its value
after this deposit at least equals the
amount of the current closure cost -
estimate, or obtain other financial
assurance as specified in this section to
cover the difference.
(7) If the value of the trust fund is
greater than the total amount of the
current closure cost estimate, the owner
or operator may submit a written
request to the Regional Administrator
for release of the amount in excess of
the current closure cost estimate.
(8) If an owner or operator substitutes
other financial assurance as specified in
this section for all or part of the trust
fund, he may submit a written request to
-the Regional Administrator for release
of the amount in excess of the current
closure cost estimate covered by the
trust fund.
(9] Within 60 days after receiving a
request from the owner or operator for
release of funds as specified in
paragraphs (a] (7) or (8) of this section,
the Regional Administrator will instruct
the trustee to release to the owner or
operator such funds as the Regional
Administrator specifies in writing.
(10) After beginning final closure, an
owner or operator or any other person
authorized to perform closure may
request reimbursement for closure
expenditures by submitting itemized
bills to the Regional Administrator.
Within 60 days after receiving bills for
closure .activities, the Regional
Administrator will determine whether
the closure expenditures are in
accordance with the closure plan or
otherwise justified, and if so, he will
instruct the trustee to make
reimbursement in such amounts as the
Regional Administrator specifies in
writing. If the Regional Administrator
has reason to believe that the cost of
closure will be significantly greater than
the value of the trust fund, he may
withhold reimbursement of such.
amounts as he deems prudent until he
determines, in accordance with
§ 265.143(h), that the owner or operator
is no longer required to maintain
financial assurance for closure.
(11) The Resgional Administrator will
agree to termination of the trust when:
(i) An owner or operator substitutes
alternate financial assurance as"
specified in this section; or
pi) The Rejjional Administrator
releases the owner or operator from the
requirements of this section in
accordance with § 265.143(h).
, (b) Surety bond guaranteeing payment
into a closure trust fund. (1) An owner
or operator may satisfy the requirements
of this section by obtaining a surety
bond which conforms to the
requirements of this paragraph and
submitting the bond to the Regional
Administrator. The surety company
issuing the bond must, at a minimum, be
among those listed as acceptable
sureties on Federal bonds in Circular
570 of the,U.S. Department of the
Treasury. ;
(2) The wording of the surety bond
must be identical to the wording
specified in § 264.151{b).
(3) The owner or operator who uses' a
surety bond to satisfy the requirements
of this section must also establish a
standby trust fund. Under the terms of
the bond, all payments made thereunder
will be deposited by the surety directly
into the standby trust fund in
accordance with instructions from the
Regional Administrator. This standby
trust fund musl: meet the requirements
specified in § 265.143(a), except that:
(i) An originally signed duplicate of
the trust agreement must be submitted
to the Regional Administrator with the
surety bond; arid - .
pi) Until the standby trust fund is
funded pursuant to the requirements of
this section, the following are not
required by these regulations:
(A) Payments into the trust fund as
specified in § 2l35.143(a);
(B) Updating of Schedule A of the
trust agreement (see § 264.151(a)) to
show current closure cost estimates;
(C) Annual valuations as required by
the trust agreement; and
(D) Notices of nonpayment as
required by the trust agreement.
- (4) The bond must guarantee that the
owner or operator will:
(i) Fund the standby trust fund in an
amount equal to the penal sum of the
bond before the beginning of final
closure of tihe facility; or
pi) Fund the standby trust fund in an :
amount equal to the penal sum within 15
days after an order to begin closure is
issued by the Regional Administrator or
a U.S. district court or other court of
competent jurisdiction; or
pii) Provide alternate financial
assurance as specified in this section,
and obtain the Regional Administrator's
K
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written approval of the assurance
provided, within 90 days after receipt by
both the owner or operator and the
Regional Administrator of a notice of
cancellation of the bond from the surety.
(5) Under the terms of the bond, the
aurety will become liable on the bond
obligation when the owner or operator
fails to perform as guaranteed by the
bond.
(6) The penal sum of the bond must be
in an amount at least equal to the
current closure cost estimate, except as
provided in § 285.143(f).
(7) Whenever the current closure cost
estimate increases to an amount greater
than the penal sum, the owner or
operator, within 60 days after the
increase, must either cause the penal
sum to be increased to an amount at
least equal to the current closure cost
estimate and submit evidence of such
increase to the Regional Administrator,
or obtain other financial assurance as
specified in this section to cover the
increase. Whenever the current closure
cost estimate decreases, the penal sum
may be reduced to the amount of the
current closure cost estimate following
written approval by the Regional
Administrator.
(8) Under the terms of the bond, the
aurety may cancel the bond by sending
notice of cancellation by certified mail
to the owner or operator and to the
Regional Administrator. Cancellation
may not occur, however, during the 120
days beginning on the date of receipt of
the notice of cancellation by both the
owner or operator and the Regional
Administrator, as evidenced by the
return receipts.
(9) The owner or operator may cancel
the bond if the Regional Administrator
has given prior written consent based on
his receipt of evidence of alternate
financial assurance as specified in this
section.
(c) Closure letter of credit. (1) An
owner or operator may satisfy the
requirements of this section by
obtaining an irrevocable standby letter
of credit which conforms to the
requirements of this paragraph and
submitting the letter to the Regional
Administrator. The issuing institution
must be an entity which has the
authority to issue letters of credit and
whose letter-of-credit operations are
regulated and examined by a Federal or
State agency.
(2) The wording of the letter of credit
must be identical to the wording
specified in §264.151(d).
(3) An owner or operator who uses a
letter of credit to satisfy the
requirements of this section must also
establish a standby trust fund. Under
the terms of the letter of credit, all
amounts paid pursuant to a draft by the
Regional Administrator will be
deposited by the issuing institution
directly into the standby trust fund hi
accordance with instructions from the
Regional Administrator. This standby
trust fund must meet the requirements of
the trust fund specified in § 265.143[a),
except that:
(i) An originally signed duplicate of
the trust agreement must be submitted
to the Regional Administrator with the
letter of credit; and
(ii) Unless the standby trust fund is
funded pursuant to the requirements of
this section, the following are not
required by these regulations:
[A) Payments into the trust fund as
specified in § 265.143(a);
(B) Updating of Schedule A of the
trust agreement (see § 264.151(a)) to
* show current closure cost estimates;
(C) Annual valuations as required by
the trust agreement; and
(D) Notices of nonpayment as
required by the trust agreement.
(4) The letter of credit must be
accompanied by a letter from the owner
or operator referring to the letter of
credit by number, issuing institution,
and date, and providing the following
information: the EPA Identification
Number, name, and address of the
facility, and the amount of funds
assured for closure of the facility by the
letter of credit.
(5) The letter of credit must be
irrevocable and issued for a period of at
least 1 year. The letter of credit must
provide that the expiration date will be
automatically extended for a period of
at least 1 year unless, at least 120 days
before the current expiration date, the
issuing institution notifies both the
owner or operator and the Regional
Administrator by certified mail of a .
decision not to extend the expiration
date. Under the terms of the letter of
credit, the 120 days will begin on the
date when both the owner or operator
and the Regional Administrator have
received the notice, as evidenced by the
return receipts.
[6) The letter of credit must be issued
in an amount at least equal to the
current closure cost estimate, except as
provided in § 265.143(f).
(7) Whenever the current closure cost
estimate increases to an amount greater
than the amount of the credit, the owner
or operator, within 60 days after the
increase, must either cause the amount
of the credit to be increased so that it at
least equals the current closure .cost
estimate and submit evidence of such
increase to the Regional Administrator,
or obtain other financial assurance as
specified in this section to cover the
increase. Whenever the current closure
.cost estimate decreases, the amount of
the credit-may be reduced to the amount
of the current closure cost estimate
following written approval by the
Regional Administrator.
(8) Following a determination
pursuant to Section 3008 of RCRA that
the owner or operator has failed to
perform final closure in accordance with
the closure planjand other interim status
requirements when required to do so,
the Regional Administrator may draw
on the letter of credit.
(9) If the owner or operator does not
establish alternate financial assurance
as specified in this section and obtain
written approval of such alternate
assurance from the Regional
Administrator within 90 days after
receipt by both the owner or operator
and the Regional Administrator of a
notice from the issuing institution that it
has decided not to extend the letter of
credit beyond the current expiration
date, the Regional Administrator will
draw on the letter of credit. The
Regional Administrator may delay the
drawing if the issuing institution grants
an extension of the term of the credit.
During the last 30 days of any such
extension the Regional Administrator
will draw on the letter of credit if the
owner or operator has failed to provide
alternate financial assurance as
specified in this section and obtain
written approval of such assurance from
the Regional Administrator.
(10) The Regional Administrator will
return the letter of credit to the issuing
institution for termination when:
(i) An owner or operator substitutes
alternate financial assurance as
specified in this section; or
(ii) The Regional Administrator
releases the owner or operator from the
requirements of this section hi
accordance with § 265.143(h).
(d) Closure insurance, (i) An owner or
operator may satisfy the requirements of
this section by obtaining closure
insurance which conforms to the
requirements of this paragraph and
submitting a certificate of such .
insurance to the Regional Administrator.
By the effective date of these regulations
the owner or operator must submit to
the Regional Administrator a letter from
an insurer stating that the insurer is ,
' considering issuance of closure
insurance conforming to the
requirements of this paragraph to the
owner or operator. Within 90 days after
the effective date of these regulations,
the owner or operator must submit the
certificate of insurance to the Regional
Administrator or establish other
financial assurance as specified hi -this
section. At a minimum, the insurer must
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April 7<
Rules and Regulations 15067
be licensed to transact the business of
insurance, or eligible to provide
insurance as an excess or surplus lines
insurer, in one or more States.
(2) The wording of the certificate of
insurance must be identical to the
wording specified in § 264.151(e).
(3] The closure insurance policy must
be issued for a face amount at least -
egual to the current closure cost
estimate, except as provided in
§ 265.143(f). The term "face amount"
means the total amount the insurer is
obligated to pay under the policy. Actual
payments by the insurer will not change'
the face amount, although the insurer's
future liability will be lowered by the
amount of the payments. .
(4) The closure insurance policy must
guarantee that funds will be available to
close the facility whenever final closure
occurs. The policy must also guarantee
that once final closure begins, the '
insurer will be responsible for paying
out funds, up to an amount equal to the
face amount of the policy, upon the
direction of the Regional Administrator,
to such party or parties as the Regional
Administrator Specifies.
(5) After beginning final closure, an
owner or operator or any other person
authorized to perform closure may
request reimbursement for closure
expenditures by submitting itemized
bills to the .Regional Administrator.
Within 60 days after receiving bills for
closure activities, the Regional
Administrator will determine whether
... the closure expenditures are in
accordance with the closure plan or
otherwise justified, and if so, he will
instruct the insurer to make
reimbursement in such amounts as the
Regional Administrator specifies in .
writing. If the Regional Administrator
has -reason to believe that the cost of
closure will be significantly greater than
the face amount "of the policy, he may
withhold reimbursement of such
amounts as he deems prudent until he
determines,'in accordance with
§ 265.143(h), that the owner or operator
is no longer required to maintain -.
financial assurance for closure of the
facility.
(6) The owner or operator must
maintain the policy in full force and
effect until the Regional Administrator
consents to termination of the policy by
the owner or operator as specified in
paragraph (d)(10) of this section. Failure
to pay the premium, without substitution
of alternate financial assurance as
specified in this section, will constitute a
significant violation of these regulations,
warranting such remedy as the Regional
Administrator deems necessary. Such
violation will be deemed to begin upon /'
receipt by the Regional Administrator of
a notice of future cancellation,
termination, or failure to renew due to
nonpayment of the premium, rather than
upon the date of expiration.
(7) Each policy must contain a
provision allowing assignment of the
policy to a successor owner or operator.
Such assignment may be conditional
upon consent of the insurer, provided
such consent is not unreasonably
refused.
(8) The policy must provide that the
insurer may not cancel, terminate, or fail
to renew the policy except for failure to
pay the premium. The automatic
renewal of the policy must, at a
minimum, provide the insured with the
option of renewal at the face amount of
the expiring policy. If there is a failure to
pay the premium, the insurer may elect
to. cancel, terminate, or fail to renew the
policy by sending notice by certified
.mail to the owner or operator and the
Regional Administrator. Cancellation,
termination, or failure to renew may not
occur, however, during the 120 days
beginning with the date of receipt of the
notice by both the Regional
Administrator and the owner or
operator, as evidenced by the return
receipts. Cancellation, termination, or
failure to renew may not occur and the
policy will remain in full force and effect
in the event that on or before the date of
expiration: -; -
(i) The Regional Administrator deems
the facility abandoned; or - ' '.
(ii) Interim status is terminated or
revoked; or - ,
(Hi) Closure is ordered by the Regional
Administrator or a U.S. district court or
other court of competent jurisdiction; or
pv) The owner or operator is named
as debtor in a voluntary or involuntary
proceeding under Title 11 (Bankruptcy].
U.S.Code;or
(v) The premium due is paid.
(9J Whenever the current closure cost
estimate increases to an amount greater
than the face amount of the policy, the
owner or operator, within 60 days after
the increase, must either cause the face
amount to be increased to an amount at
least equal to the current closure cost
estimate and submit evidence of such
increase to the Regional Administrator,
or obtain other financial assurance as
specified in this section to cover the
increase. Whenever the current closure
cost estimate decreases, the face
amount may be reduced to the amount
of the current'closure cost estimate
following written approval by the
Regional Administrator.
(10) The Regional Administrator will
give written consent to die owner or
operator that he may terminate the
insuran.ee policy when: ,.
(i) An owner or operator substitutes
, alternate financial assurance as
specified in this section; or
(ii) The Regional Administrator ;
releases the owner or operator from the
requirements cif this section in
accordance with § 265.143(h).
{&} Financial test and corporate
guarantee for closure. (1) An owner or
operator may satisfy the requirements of
this section by demonstrating that he
passes a financial test as-specified in
this paragraph, To pass this test the
owner or operator must meet the criteria
of either paragraph (e)(l)(i) or (e)(l)(ii)
of this section:;" '
(i) The owner or operator must have:
(A) Two of the following three ratios:
A ratio of total liabilities to net worth
less than 2.0; a ratio of the sum of net
income plus depreciation, depletion, and
amortization to total liabilities greater
than.0.1; and a ratio of current assets to
current liabilities greater than 1.5; and
(B) Net working capital and tangible
net worth each at least six times the
sum of the current closure and post-
closure cost estimates; and 7
(C) Tangible net worth of at least $10
million; and . j , -
(D) Assets in the United States
amounting to al least 90 percent of his
total assets or at least six times the sum
of the current closure, and post-closure
cost estimates. [":
(ii) The owner or operator must have:
(A) A current gating for his most
recent bond issuance of AAA, AA, A, or
EBB as issued by Standard and Poor's or
Aaa, Aa, A, or Baa as issued by
Moody's; and ,i
(B) Tangible net wbrtiiat least six
, times the sum of the current closure and
post-closure cost estimates;.and
(C) Tangible net worth of at least $10
million; and ! '- . - -
(D) Assets located in the United
States amounting to at least 90 percent
of his total assets or at least six times
the sum of the current closure and-post-
closure cost estimates.
(2) The phrase "current closure and
post-closure cost estimates" as used in r
paragraph (e)(l) of this section refers to
the cost estimates required to be shown
inparagraphs 1-4 of the letter from the
owner's or operator's chief financial
officer (§ 264.151(fj). \
(3) To demonstrate that he meets this
test, the owner o'f operator must submit
the following items to the Regional
Administrator: j
(i) A letter signed by the owner's or
operator's chief financial officer and
worded as specified in § 264.151(f); and
(ii) A copy of the independent
certified public accountant's report on
examination of the owner's or operator's
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Federal Register / Vol. 47, No. 67 /Wednesday. April 7.
1982 / Rules and Regulations
financial statements for the latest .
completed fiscal year; and
(ill) A special report from the owner's
or operator's independent certified
public accountant to the owner or
operator stating that:
(A) He has compared the data which
the letter from the chief financial officer
specifies as having been derived from
the independently audited, year-end
financial statements for the latest fiscal
year with the amounts In such financial
statements; and
(B) In connection with that procedure,
no matters came to his attention which ,
caused him to believe that the specified
data should be adjusted,
(4) The owner or operator may obtain
an extension of the time allowed for
submission of the documents specified
in paragraph (e)(3) of this section if the
fiscal year of the owner or operator ends
during the 90 days prior to the effective
date of these regulations and if the year-
end financial statements for that fiscal
year will be audited by an independent
certified public accountant. The
extension will end no later than 90 days
after the end of the owner's or
operator's fiscal year. To obtain the
extension, the owner's or operator's
chief financial officer must send, by the
effective date of these regulations, a
letter to the Regional Administrator of
each Region in which the owner's or
operator's facilities to be covered by the
financial test are located. This letter
from the chief financial officer must:
(i) request the extension;
(II) certify that he has grounds to
believe that the owner or operator meets
the criteria of the financial test;
(iii) specify for each facility to be
covered by the test the EPA
Identification Number, name, address,
and current closure and post-closure
cost estimates to be covered by the; test;
(iv) specify the date ending the
owner's or operator's last complete
fiscal year before the effective date of
these regulations;
(v) specify the date, no later than 90
days after the end of such fiscal year,
when he will submit the documents
specified In paragraph (e)(3) of this
section; and "
(vi) certify that the year-end financial
statements of the owner or operator for
such fiscal year will be audited by an
independent certified public accountant.
(5) After the initial submission of
Items specified in paragraph (e)(3) of
thla section, the owner or operator must
send updated information to the
Regional Administrator within 90 days
after the close of each succeeding fiscal
year. This information must consist of
all three items specified in paragraph
(e)(3) of this section.
(6) If the owner or operator no longer
meets the requirements of paragraph
(e)(l) of this section, he must send notice
to the Regional Administrator of intent
to establish alternate financial
assurance as specified in this section.
The notice must be sent by certified mail
within 90 days after the end of the fiscal
year for which the year-end financial
data show that the owner or operator no
longer meets the requirements. The
owner or operator must provide the
alternate financial assurance within 120
days after the end of such fiscal year.
(7) The Regional Administrator may,
based on a reasonable belief that the
owner or operator may no longer meet
the requirements of paragraph (e)(l) of
this section, require reports of financial
condition at any time from the owner or
operator in addition to those specified in
paragraph (e](3) of this section. If the
Regional Administrator finds, on the
basis of such reports or other
information, that the owner or operator
no longer meets the requirements of
paragraph (e)(l) of this section, the
owner or operator must provide
alternate financial assurance as
specified in this section within 30 days
after notification of such a finding.
(8) The Regional Administrator may
disallow use of this test on the basis of
qualifications in the opinion expressed
by the independent certified public
accountant in his report on examination
of the owner's or operator's financial
statements (see paragraph (e)(3)(ii) of
this section]. An adverse opinion or a
disclaimer of opinion will be cause for
" disallowance. The Regional
Administrator will evaluate other
qualifications on an individual basis.
The owner or operator must provide
alternate financial assurance as
specified in this section within 30 days
after notification of the disallowance.
(9) The owner or operator is no longer
required to submit the items specified in
paragraph (e)(3) of this section when:
(I) An owner or operator substitutes
alternate financial assurance as '
specified in this section; or
(iij The Regional Administrator
releases the owner or operator from the
requirements of this section in
accordance with § 265.143[h).
, (10) An owner or operator may meet
the requirements of this section by
obtaining a written guarantee, hereafter
referred to as "corporate guarantee."
The guarantor must be the parent
corporation of the owner or operator.
The guarantor must meet the
requirements for owners or operators in
paragraphs (e)(l) through (e)(8) of this
section and must comply'with-the terms
of the corporate guarantee. The wording
of the corporate guarantee must be
identical to the wording specified hi
§ 264.151(h). The corporate guarantee
must accompany the items sent to the .
Regional Administrator as specified in
paragraph (e)(3) of this section. The
terms of the corporate guarantee must
provide that:
(ij If the owner or operator fails to
perform final closure of a facility
covered by the corporate guarantee in
accordance with the closure plan and
other interim status requirements
whenever required to do so, the
guarantor 'will do so or establish a trust
fund as specified in § 265.143(a) in the
name "of the owner or operator.
(ii) The corporate guarantee will
remain in force unless the guarantor
sends notice of cancellation by certified
mail to the owner or operator and to the
Regional Administrator. Cancellation
may not occur, however, during the 120
days beginning on the date of receipt of
the notice of cancellation by both the
owner or operator and the Regional
Administrator, as evidenced by the
return receipts. .
(iii) If the owner or operator fails to
provide alternate financial assurance as
specified in this section and obtain the
written approval of such alternate ;
assurance from the Regional ,
Administrator within 90 days after
receipt by both the owner or operator
and the Regional Administrator of a
notice of cancellation of the corporate
guarantee from the guarantor, the
guarantor will provide such alternate
financial assurance in the name of the
owner or operator. '
(f) Use of multiple financial
mechanisms. An owner or operator may
satisfy the requirements of this section
by establishing more than one financial
mechanism per facility. These
mechanisms are limited to trust funds,
surety bonds, letters of credit, and
insurance. The mechanisms must be as
specified in paragraphs' (a) through (d),
respectively, of this section, except that
it is the combination of mechanisms,
rather than the single mechanism, which
must provide financial assurance for an .
amount at least equal to the current
closure cost estimate. If an owner or
operator uses a trust fund in
combination with a surety bond or a
letter of credit, he may use the trust fund
as the standby trust fund for the other
mechanisms. A single standby trust fund
may be established for two or more
mechanisms. The Regional
Administrator may use any or all of the
mechanisms to provide for closure of the
facility., . .
(g) Use of a financial mechanism for
multiple facilities. An owner or operator
may use a financial assurance .
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Federal Register / Vol. 47. No. 67 /Wednesday. April 7. 1982 /Rules and 'Reflations-' 15069
mechanism specified in this section to
meet the requirements of this section for
more than one facility. Evidence of
financial assurance submitted"to the
Regional Administrator must include a
list showirig,"for each facility, the EPA,
Identification Number, name, address,;
and the amount of funds for closure
assured by the mechanism. If the
facilities covered by the mechanism are
in more than one Region, identical
evidence of financial assurance must be-.
submitted to and maintained with the
Regional Administrators of all such
Regions. The amount of funds available
through the mechanism must be no less
than the sum of funds that would be
available if a separate mechanism had
been established and maintained for
each facility. In directing funds
available through the mechanism for
closure of any of the facilities covered
by the mechanism, the Regional
Administrator may direct only the >~-
amount of funds designated for that
facility, unless the owner or operator
agrees to the use of additional funds
available under the mechanism.
(h) Release of the owner or operator
from the requirements of this section.
Within 60 days after receiving
certifications from the owner or operator
and an independent registered
professional engineer that closure has
been accomplished in accordance with
the closure plan, the Regional
Administrator will notify the owner or
operator in writing that he is no longer
required by this section to maintain
financial assurance for closure of the
particular facility, unless the Regional
Administrator has reason to believe that
, closure has not been in accordance with
the closure pla».
§ 265.144 Cost estimate for post-closure
care.'
(a) On May 19,1981, the owner or
operatbr of a disposal facility must
prepare a written estimate, in current
dollars, of the annual cost of post-
closure monitoring and maintenance of
the facility in accordance with the
applicable post-closure regulations in
§§ 265.117-265.120. The posf-closure
cost estimate is calculated by
multiplying the annual post-closure cost
estimate by the number of years, of post-
closure care required under Subpart G
of Part 265.
(b) During the operating life of the
facility, the owner or operator must
adjust the post-closure cost estimate for
inflation within 30 days after each
anniversary of the date on which the
first post-closure cost estimate was
prepared. The adjustment must be made
as specified in paragraphs (b)(i) and
(bj(ii) of this section, using an inflation
factor derived from the'annual Implicit
Price Deflate? for Gross National
Product as published by the U.S.
Department of Commerce in its Survey
of Current Business. The inflation factor
is the*result of dividing the latest
published annual Deflator by the
Deflator for the previous year.
(ij The first adjustment is made by
multiplying the post-closure cost T-
estimate by the inflation factor. The
result is the adjusted post-closure cost
"estimate. ,
(ii) Subsequent adjustments are made
by multiplying the latest adjusted post-
closure cost estimate by the latest
inflation factor. . ,
(c) The owner or operator must revise
the post-closure cost estimate during the
operating life of the facility whenever a
change in the post-closure plan
increases the cost of post-closure care.
The revised post-closure cost estimate
must be adjusted for inflation as
specified in § 265.144(b).
(d) The oVner or operator must keep
the following at the facility during the
operating life of the facility: the latest
post-closure cost estimate prepared in -
accordance with § § 265.144 (aj and (c)
and, when this estimate has been
adjusted in accordance with ,
§ 265.144(b), the latest adjusted post-
closure cost estimate.
§ 265.145, Financial assurance for post-
closure care., - j
By the effective date, of these
regulations, an owner or operator of
each disposal facility must establish
financial assurance for post-closure care
of the facility. He must choo'se from the
options as specified in paragraphs (a)
through (e) of this section.
(a) Post-closure trust fund. (1) An
owner or operator may satisfy the
. requirements of this section by
establishing a post-closure trust fund
which conforms to the requirements of
this paragraph and submitting an
originally signed duplicate of the trust
agreement 'to the Regional
Administrator. The trustee must be an
entity which has the authority to act as
a trustee and whose trust operations are
regulated and examined by a Federal or
State agency.
(2) The wording of the trust agreement
must be identical to the wording .
specified in § 264.15i(a)(l}, and the trust
agreement must be accompanied by a
formal certification of acknowledgment^
(for example, see § 264.151(a)(2)).
Schedule A of the trust agreement must
be updated within 60 days after a '
change in the amount of the current
post-closure cost estimate covered by
the agreement. .'"!:
(3) Payments into the trust fund must
be made annually by the owner or -
operator over the 20 years beginning
with the effective date of these
regulations oir over the remaining
operating life of the facility as estimated
in the closure plan, whichever period is
shorter; this period is hereafter referred
to as the "pay-in period." The payments
into the post-dosure trust fund must be
made as follows: '-
(i) The first payment must be made by
the effective'date of these regulations/
except as provided in paragraph (a)(5) of
this section. The first payment must be
at least equal to the current post-closure
cost estimate, except as provided in
§ 265.145(1), divided by the number of
years in the piay-in period.
- (ii) Subsequent payments must be
made no later than 30 days after each
anniversary date of the first payment.
The amount of each subsequent
payment must be determined by this
formula: [ -
. ; ' / " . 1
Next payment= GE-CV :
''" ".' :' 'I" -:" Y -. ' ' : -.- -" '
where CE is the current post-closure
cost estimate, GVis the current value of
the trust fund, and Y is the number of
years remaining in the pay-in period.
(4) The owner or operator may
accelerate payments into the trust fund
or he may deposit the full amount of the
current post-clpsure cosj estimate at the
time the fund is established. However,
he must maintain the value of the fund
at no less than the value that the fund
would have if annual payments were
made as specified in paragraph (a)(3) of
this section. - .
(5) If the owner or operator
establishes a post-closure trust fund.
after having used one or more alternate
mechanisms specified in this section, his
first payment must be in at least the
amount that this fund would contain if
the trust fund were established initially
and annual payments made as specified
in paragraph (a)(3) of this section.
(6) After the pay-in period is
completed, whenever the current post- ,
closure cost estimate changes during the
operating life 6i: the facility, the owner
or operator musit compare the new
estimate with the trustee's most recent
annual valuation of the trust fund. If the
value of the fund is less than the amount
of the new estimate, the owner or
operator, withini 60 days after the
change in the,cost estimate, must either
deposit an amount into the fund so that
its value after this deposit at least
equals the amotint of the current post-
closure cost estimate, or obtain other
-------
financial assurance as specified in this
section to cover the difference.
(7) During the operating life of the
facility, if the value of the trust fund is
greater than the total amount of the
current post-closure cost estimate, the
owner or operator may submit a written
request to the Regional Administrator
for relcmse of the amount in excess of ,
the current post-closure cost estimate.
(8) If an owner or operator substitutes
other financial assurance as specified in
this section for all or part of the trust
fund, he may submit a written request to
the Regional Administrator for release
of the amount in excess of the current
post-closure cost estimate covered by
the trust fund.
(9) Within 60 days after receiving a
request from the owner or operator for
release of funds as specified in
paragraphs (a] (7) or (8) of this section,
the Regional Administrator will instruct
the trustee to release to the owner or
operator such funds as the Regional
Administrator specifies in writing.
(10) During the period of post-closure
care, the Regional Administrator may
approve a release of funds if the owner
or operator demonstrates to the
Regional Administrator that the value of
the trust fund exceeds the remaining
cost of post-closure care.
(11) An owner or operator or any
other person authorized to perform post-
closure care may request reimbursement
for post-closure expenditures by
submitting itemized bills to the Regional
Administrator. Within 60 days after
receiving bills for post-closure activities,
the Regional Administrator will
determine whether the post-closure
expenditures are in accordance with the
post-closure plan or otherwise justified,
and if so, he will instruct the trustee to
make reimbursement in such amounts as
the Regional Administrator specifies in
writing.
(12J The Regional Administrator will
agree to termination of the trust when:
(i) An owner or operator substitutes
alternate financial assurance as
specified in this section; or
(ii) The Regional Administrator
releases the owner or operator from the
requirements of this section in
accordance with § 265.l45(h).
(b) Surety bond guaranteeing payment
into a post-closure trust fund. [I] An
owner or operator may satisfy the
requirements of this section by
obtaining a surety bond which conforms
to the requirements of this paragraph
and aubmitting the bond to the Regional
Administrator. The surety company
issuing the bond must, at a minimum, be
among those listed as acceptable
sureties on Federal bonds in Circular
570 of the U.S. Department of the
Treasury.
(2) The wording of the surety bond
must be identical to the wording
specified in § 264.151(b).
(3) The owner or operator who uses a
surety bond to satisfy the requirements
of this section must also establish a
standby trust fund. Under the terms of
the bond, all payments made thereunder
will be deposited by the surety directly
into the standby trust fund in
accordance with instructions from the *
Regional Administrator. This standby
trust fund must meet the requirements.
specified in § 265.145(a), except that:
(i) An originally signed duplicate of
the trust agreement must be submitted
to the Regional Administrator with the
surety bond; and
(ii) Until the standby trust fund is
funded pursuant to the requirements of
this section, the following are not
required by these regulations:
(A) Payments into the trust fund as.
specified hi § 265.145(a);
(B) Updating of Schedule A of the
trust agreement (see § 264.151(a)) to
show current post-closure cost
estimates; . ,
(C) Annual valuations as required by
the trustagreement; and
(D) Notices of nonpayment as
required by the trust agreement.
(4) The bond must guarantee that the
owner or operator will:
(i) Fund the standby trust fund in an
amount equal to the penal-sum of the
bond before the beginning of final
closure of the facility; or
(ii) Fund the standby trust fund hi an
amount equal to the penal sum within 15
days after an order to begin closure is
issued by the Regional Administrator or
a U.S. district court or other court of
competent jurisdiction; or
(iii) Provide alternate financial
assurance as specified in this section,
and obtain lie Regional Administrator's
written approval of the assurance
provided, within 90 days after receipt by
both the owner or operator and the
Regional Administrator of a notice of
cancellation of the bond from the surety.,
(5) Under the terms of the bond, the
surety will become liable on the bond
obligation when the owner or operator
fails to perform as guaranteed by the
bond. .
(6) The penal sum of the bond must be
in an amount at least equal to the
current post-closure cost estimate,
except as provided hi § 265.145(f).
(7) Whenever the current post-closure
cost estimate increases to an amount
greater than the penal sum, the owner or
operator, within 60 days after the .
increase, must either cause the penal
sum to be increased to an amount at
least equal to the current post-closure
cost estimate and submit evidence of
such increase to the Regional -
Administrator, or obtain other financial
assurance as specified in this section to
cover the increase. Whenever the
current post-closure cost estimate
decreases, the penal sum may be ,
reduced to the amount of the current
post-closure cost estimate following
written approval by the Regional
Administrator.
(8) Under the terms of the bond, the
surety may cancel the bond by sending
notice of cancellation by certified mail
to the owner or operator and to the
Regional Administrator. Cancellation
may not occur, however, during the 120
days beginning on the date of receipt of
the notice of cancellation by both the
owner o j operator and the Regional
Administrator, as evidenced by the
return receipts.
(9) The owner or operator .may cancel
the bond if the Regional Administrator
has given prior written consent based on
his receipt of evidence of alternate
financial assurance as specified in this
section.
(c) Post-closure letter of credit. (1) An
owner or operator may satisfy the
requirements of this section by
obtaining an irrevocable standby letter
of credit which conforms to the
requirements of this paragraph and
submitting the letter to the Regional
Administrator. The issuing institution
must be an entity which has the
authority to issue letters of credit and
whose letter-of-credit operations are
regulated and examined.by a Federal or
State agency.
(2) The wording of the letter of credit
must be identical to the wording
specified in § 264.151(d).
(3) An owner or operator who uses a
letter of credit to satisfy the
requirements of this section must also
establish a standby trust fund. Under
the terms of the letter of credit, all
amounts paid pursuant to a draft by the
Regional Administrator will be
deposited by the issuing institution
directly into the standby trust fund in
accordance with instructions from the
Regional Administrator. This standby
trust fund must meet the requirements of
the trust fund specified in § 265.145(a),
except that:
(i) An originally signed duplicate of
the trust agreement must be submitted
to the Regional Administrator with the
letter of credit; and
(ii) Unless the standby trust fund is
funded pursuant to the requirements of
this section, the following are not
required by these regulations:
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Jtedera! Register / Vol. 47. No. 67 /.Wednesday, April 7. 1982 /.Rules .and Regulations'
15071
' (A) Payments into the trust fund as
specified in § 265.145[a);
(B) Updating of Schedule A of the
trust agreement (see § 264.151(a)) to
show current post-closure cost
estimates;
(C) Annual valuations as required by
the trust agreement; and
(D) Notices of nonpayment as
required by the trust agreement.
(4) The letter of credit must be
accompanied by a letter from the owner
or operator referring to the letter of
credit by number, issuing institution,
and date, and providing the following
information: the EPA Identification
Number, name, and address of the
facility, and the amount of funds
assured for post-closure care of the
facility by the letter of credit.
(5) The letter of credit must be
irrevocable and issued for a period of at
least 1 year. The letter of credit must
provide that the expiration date will be
automatically extended for a period of
- at least 1 year unless, at least 120 days
before the current expiration date, the .
issuing institution notifies both the
owner or operator and the Regional
Administrator by certified mail of a
decision.rfot to "extend the expiration '
date. Under the terms of the letter of
credit, the 120 days will begin oil the
date when both the owner or operator
and the Regional Administrator have
received the notice, as evidenced by the
return receipts.
{6} The letter of credit must be issued
in an amount at least equal to the
current post-closure cost estimate,
except as provided in § 265.145(fJ.
(7) Whenever the 'current post-closure
cost estimate increases to an amount .
greater than the .amount of the credit
during the operating life of the facility, *
the owner or operator, within 60 days
after the increase, must either cause the
amount of the credit to be increased so
that it at least equals the current post- '
closure cost estimate and submit
evidence of such increase to the
Regional Administrator, or obtain other
financial assurance as specified in this
section to cover the increase! Whenever
the current post-closure cost estimate
decreases during the operating life of the
facility, the amount of the credit may be
reduced to the amount of the current
post-closure cost estimate following
Written approval by the Regional
Administrator. .
(8) During title- period of post-closure
care, the Regional Administrator may
approve a decrease in the amount of the
letter of credit if the owner or operator
demonstrates to the Regional
Administrator that the amount exceeds
the remaining cost of post-closure care.
(9) Following a determination
pursuant to Section 3008 of RCRA that
the owner or operator has failed to
perform post-closure ca^e in accordance
with the post-closure plan and other
interim status requirements, the
Regional Administrator may draw on
the letter of credit.
(10) If the owner or operator does not;
establish alternate financial assurance".
as specified in this section and obtain
written approval of such alternate
assurance from the Regional
.Administrator within 90 days after
receipt by both the owner or operator .
and the Regional Administrator of a
notice from the issuing institution that it
has decided not to extend the letter of
credit beyond the current expiration
date, the Regional Administrator will
draw on the letter of credit. The
Regional Administrator may delay the
drawing if the issuing institution grants
an extension of the term of the credit. -
During the last 30 days of any such
extension the Regional Administrator
will draw on the letter of credit if the
owner or operator has failed to provide
alternate financial assurance as .
specified in this section and obtain
written approval of such assurance from
the Regional Administrator.
(11) The Regional Administrator will
return the letter of credit to the issuing
mstitution.for termination when:
(i) An owner or operator substitutes
alternate financial assurance as
specified in this section; or
(ii) The Regional Administrator
. releases the owner or operator from the
requirements of this section in
accordance with § 265.145[h}. ^
(d) Post-closure insurance. (1) An
owner or operator may satisfy the
requirements of this section by
obtaining post-closure insurance which
conforms to the requirements of this
paragraph and submitting a certificate of
such insurance to the Regional
Administrator. By the effective.date of
these regulations the owner or operator
must submit to the Regional
Administrator a letter from an insurer
statingithat the insurer is considering
issuance of post-closure insurance
conforming to the requirements of this
paragraph to the owner or operator.
Within 90 days after the effective date
of these regulations, the owner or
operator must submit the certificate of
insurance to the Regional Administrator
or establish other financial assurance as
specified in this section. At a minimum,
the insurer must be licensed to transact
the business of insurance, or eligible to
provide insurance as an excess or
surplus lines insurer, hi one or,more
States.
(2) The wording of the certificate of
insurance must be identical to the
wording specified in § 264.151fej.
(3) The post-closure insurance policy
must be issued for a face amount at
least equal tqi the current post-closure
cost estimate, except as provided in
§ 265.145[fJ. The term "face amount"
means the tolal amount the insurer is
obligated to piay under the policy. Actual
^payments by the insurer will1 not change
the face amoiirit, although the insurer's
future liability will be lowered by the
amount of the payments. ',.---
(4) Thejposli-closure insurance policy
must guarantee that funds will be
available to provide post-closure care of
the facility whenever the post-closure
period begins. The policy must also
guarantee tha t once post-closure care
begins the insurer will be responsible for
paying out funds, up to an amount equal
to the face amount of the policy, upon
the direction of the Regional
Administrator, to such party or parties
as the Regional Administrator specifies.
(5) An owner or operator or any other
person authorized to perform post-
closure care may request reimbursement
for post-closure expenditures by
submitting itemized bills to the Regional
Administrator; Within 60 days after
receiving bills for post-closure activities,
the Regional Administrator will
determine wheither the post-closure -
expenditures are in accordance with the
post-closure plan or otherwise justified,
and if so, he will instruct the insurer to
make reimbursement in such amounts as
the Regional Administrator specifies hi
writing. j ,' . "' ;' .
(6) The owner or operator must
maintain the policy in full force and
effect until the Regional Administrator
consents to termination of the policy by
the owner or operator as specified in
paragraph (dj[ll) of this section. Failure
to pay the premium, without substitution
of alternate financial assurance as
specified in the section, will constitute a
significant violation of these regulations,
warranting such remedy as the Regional
Administrator deems necessary. Such
violation will be deemed to begin upon
receipt by the Regional Administrator of
a notice of future cancellation, -.
termination, or failure to renew due to
nonpayment of the premium, rather than
upon the date of expiration.
(7) Each policy most contain a-
provision allowing assignment of the
policy to a successor owner or operator.
Such assignment may be conditional
upon consent of, the insurer, provided .
such consent is not unreasonably
refused. \
(8) The policy must provide that the
insurer may not ^cancel,,terminate, or fail
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1982 / Rules and Regulations
67 / Wednesday, April
"Federal Register-/ Vol. 47, No.
to renew the policy except for failure to
pay the premium. The automatic
renewal of the policy must, at a
minimum, provide the insured with the
option of renewal at the face amount of
the expiring policy." If there is a failure to
pay the premium, the insurer may elect
to cancel, terminate, or fail to renew the
policy by sending notice by certified
mail to the owner or operator and the
Regional Administrator. Cancellation,
termination, or failure to renew may not
occur, however, during the 120 days ,
beginning with the date of receipt of the
notice by both the Regional
Administrator and the owner or
operator, as evidenced by the return
receipts. Cancellation, termination, or
failure to renew may not occur and the
policy will remain in full force and effect
in the event that on or before the date of
expiration:
(I) The Regional Administrator deems
the facility abandoned; or
(Ii) Interim status is terminated or
revoked; or .
(iii) Closure is ordered by the Regional
Administrator or a U.S. district court or
other court of competent jurisdiction; or
(iv) The owner or operator is named
as debtor in a voluntary or involuntary
proceeding under Title 11 (Bankruptcy),
U.S. Code; or
(v) The premium due is paid.
(9) Whenever the current post-closure
cost estimate increases to an amount
greater than the face amount of the
policy during the operating life of the
facility, the owner or operator, within 60
days after the increase, must either
cause the face amount to be increased to
an amount at least equal to the current
post-closure cost estimate and submit
evidence of such increase to the
Regional Administrator, or obtain other
financial assurance as specified in this
section to cover the increase. Whenever
the current post-closure cost estimate
decreases during the operating life of the
facility, the face ampunt may be reduced
to the amount of.the current post-closure
cost estimate following written approval
bythe Regional Administrator.
(10) Commencing on the date that
liability to make payments pursuant to
the policy accrues, the Insurer will
thereafter annually increase the face
amount of the policy. Such increase
must be equivalent to the face amounts
of the policy, less any payments made,
multiplied by an amount equivalent to
85 percent of the most recent investment
rate or of the equivalent coupon-issue
yield announced by the U.S. Treasury
for 26-week Treasury securities.
(11) The Regional Administrator will
give written consent to the owner or
operator that he may terminate the
insurance policy when:
(i) An owner or operator substitutes
alternate financial assurance as
specified hi this section; or
(ii) The Regional Administrator '
releases the owner or operator from the
requirements of this section in
accordance with § 265.145(h).
(e) Financial test and corporate.
guarantee for post-closure care. (1) An
owner or operator may satisfy the
requirements of this section by
demonstrating that he passes a financial
test as specified hi this paragraph. To
pass this test the owner or operator
must meet the criteria either of
paragraph (e)(l)(i) or (e)(l)(ii) of this
section:
(i) The owner, or operator'must have:
(A) Two of the following three ratios:
a ratio of total liabilities to net worth
less than 2.0; a ratio of the sum of net
income plus depreciation, depletion, and
amortization to total liabilities greater
than 0.1; and a ratio of current assets to
current liabilities greater than 1.5; and
(B) Net working capital and tangible
net worth each at least six times the
sum of the current closure and post-
closure cost estimates; and
(C) Tangible net worth of at least $10
million; and
(D) Assets hi the United States
amounting to a least 90 percent of his
total assets or at least six tunes the sum
of the current closure and post-closure
cost estimates. , .
(ii) The owner or operator must have:
(A) A current rating for his most
recent bond issuance of AAA, AA, A, or
BBB as issued by Standard and Poor's or
Aaa, Aa, A, or Baa as issued by ~~
Moody's; and
(B) Tangible net worth at least six
times the sum of the current closure and
post-closure cost estimates; and
(C) Tangible net worth of at least $10
million; and
(D} Assets located in the United
States amounting to at le.ast 90 percent
of his total assets or at least six tunes
the sum of the current closure and post-
closure cost estimates.
(2) The phrase "current closure and
post-closure cost estimates" as used in
paragraph (e)(l) of tins section refers to
the cost estimates required to be shown
hi paragraphs 1-4 of the letter from the
owner's or operator's chief financial
officer (§ 264.151ffl). :
(3) To demonstrate that he meets this
test, the owner or operator must submit
the following items to the Regional
- Administrator:
(i) A letter signed by the owner's or
operator's chief financial officer and
worded as specified in § 264,151(f); and
(ii) A copy of the independent
certified public accountant's report on
examination of the owner's or operator1!
financial statements for the latest
completed fiscal year; and
(iii) A special report from the owner's
or operator's independent certified
public accountant to the owner or
operator stating that:
(A) He has compared the data which
the letter from the,chief financial officer
specifies as having been derived from
the independently auditedvyear-end
financial statements for the latest fiscal
year with the amounts in such financial
statements; and
(B) In connection with that procedure,
no matters came to his attention which
caused him to believe that the specified
data should, be adjusted.
(4) Jhe owner or operator may obtain
an extension of the-time allowed for
submission of the documents specified
in paragraph (e)(3) of this section if the
fiscal year of the owner or operator ends ,
during the 90 days prior to the effective
date of these regulations and if the year-
end financial statements for that fiscal
year will be audited by an independent
certified public accountant. The
extension will end no later than 90 days
after the end of the owner's or
operator's fiscal year. To obtain the
extension, the owner's or operator's
chief financial officer must send, by the
effective date of these regulations, a
letter to the Regional Administrator of
each Region hi which the owner's or
operator's facilities to bexovered by the
financial test are located. This letter
from the chief financial officer must:
(i) Request the extension;
(ii) Certify that he has grounds to
believe that the owner or operator meets
the criteria of the financial test;
'(iii) Specify for each facility to be
covered by the test, the EPA
' Identification Number, name, address,
and the current closure and post-closure
cost estimates to be covered by the test;
(iv) Specify the date ending the ,
owner's or operator's latest complete
fiscal year before the effective date of
these regulations;
(v) Specify the date, no later than 90
days after the end of such fiscal yearf
when he will submit the documents
specified in paragraph (e)(3) of this
' section; and
(vi) Certify that the year-end financial
statements of the owner or operator for
such fiscal year will be audited by an -
independent certified public accountant.
(5) After the initial submission of '
items specified hi paragraph (e)(3) of
this section, the owner or operator must
send updated information to the
Regional Administrator within 90 days
after the close of each succeeding fiscal
year Tliis information must consist of
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Federal Register /.Vol. 47, No. 67 /Wednesday, April 7, 1982 /Rules and: Regulati
ons
15073
all three items specified in paragraph
fe)(3) of this section.
(6) If tlie owner or operator no longer
1 "meets the requirements of paragraph
(e)(l) of this section, he must send notice
to the Regional Administrator of intent
to establish alternate financial
assurance as specified in this section.
The notice must be sent by certified mail
within 90 days after the end of the fiscal
year for which the year-end financial
data show that the owner or operator no
longer meets the requirements. The
owner or operator must provide the
alternate financial assurance within 120
days after the end of such fiscal year.
(7) The Regional Administrator may,
based on a reasonable belief that the .,
owner or operator may no longer meet
the requirements of paragraph (e)(l) of
this section, require reports of financial
condition at any time from the owner or
operator in addition to those specified in
paragraph (e)(3) of this section. If the
Regional Administrator finds, on the
basis of such reports or other
information, that the owner or operator
no longer meets the requirements of
paragraph (e)(l) of this section, the
owner or operator must provide
alternate financial assurance as
specified in this section within 30 days
after notification of such a finding.
(8) The Regional Administrator may
disallow use of this test on the basis of
qualifications in the opinion expressed
by the independent'certified public -.
accountant in his report on examination
of the owner's or operator's financial
statements (see paragraph (e)(3)(ii) of
this section). An adverse opinion or a
disclaimer of opinion will be cause for
disallowance. The Regional
Administrator will evaluate other.
qualifications on an individual basis.
The owner or operator must provide
alternate financial assurance as
specified in this section within 30 days
after notification of the disallowance.
(9) During the period of post-closure
. care, the Regional Administrator may
approve a decrease in the current post-
closure cost estimate for which this test
, demonstrates financial assurance if the
owner or operator demonstrates to the
Regional Administrator that the amount
of the cost estimate exceeds the
remaining cost of post-closure care.
(10) The owner or operator is no
longer required to submit the items
specified in paragraph (e)(3) of this
section when: -
(i) An owner or operator substitutes
alternate financial assurance as
. specified in this section; or
(ii) The Regional Administrator
releases the owner or operator from the
requirements of this section in
accordance with § 265.145(h).
(11) An owner or operator may meet
the requirements of this section by
obtaining a written guarantee, hereafter
referred to as "corporate guarantee."
The guarantor must be the parent
corporation of the owner or operator.
The guarantor must meet the
requirements for owners or operators in
paragraphs (e)(l) through (e)[9) of- this
section and must comply with the terms
of the corporate guarantee. The wording
__ of the corporate guarantee must be
identical to the wording specified in
§ 264.151(h). The corporate guarantee
must accompany the items sent to the
Regional Administrator as specified in
paragraph (e)(3) of this section. The
terms of the corporate guarantee must
provide that:
(i) If the owner or operator fails to
perform post-closure care of a facility
covered by the corporate guarantee in
accordance with the post-closure plan
and other interim status requirements
whenever required to do so, the
guarantor will do so or establish a trust
fund as specified in § 265.145(a) in the
name of die owner or operator.
(ii) The corporate guarantee will,
remain in force unless the guarantor
sends notice of cancellation by certified
mail to the owner or operator and to the
Regional Administrator. Cancellation
may not occur, however, during the 120
days beginning on the date of receipt of
the notice of cancellation by both the
owner or operator and the Regional
Administrator, as evidenced by the
return receipts.
(Sii) If the owner or operator fails to
provide alternate financial assurance as
specified in this section and obtain the
written approval of such alternate
assurance from the Regional -
Administrator within 90 days after
receipt by both the owner or operator
and the Regional Administrator of a
notice of cancellation of the corporate
guarantee from the guarantor, the
guarantor will provide such alternate
financial assurance in the name of the
owner or operator.
(^Useof multiple financial
mechanisms. An owner or operator may
satisfy the requirements of this section
by establishing more than one financial
mechanism per facility. These
mechanisms are limited to trust funds,
surety bonds, letters of credit, and
insurance. The mechanisms must be as
specified in paragraphs (a) through (d),
respectively, of this section, -except that
it is the combination of mechanisms,
rather than the single mechanism, which
must provide financial assurance for an
amount at least equal to the current
post-closure cost estimate. If an owner
or operator uses a trust fund in
combination with a surety bond or a ^
letter of credit, he may use the trust fund
as the standby trust fund for the other
mechanisms. A single standby .trust fund
may be established for two or more
methahisms. The Regional ' -
Administrator may use any or all of the
mechanisms to provide for post-closure
care of the facility,
(g) Use of a financial mechanism for
multiple facilities. An owner or operator
may use a financial assurance
mechanism specified in this section to
meet the requirements of this section for
- more than one facility. Evidence of
financial assurance submitted to the
Regional Administrator must include a
list showing, far each facility, the EPA
Identification Dumber, name, address,
and the amount of funds for post-closure
care assured by the mechanism, If the
facilities covered by the mechanism are
in more than one Region, identical
evidence of financial assurance must be
submitted to and maintained with the
Regional Administrators of all such
Regions. The amount of funds available
through the mechanism must be no less
than the sum olf funds that would be
available if a separate mechanism had
been established and maintained for
each facility. Im directing funds '
available through the mechanism for
post-closure care of any of the facilities
covered by the mechanism, the Regional
Administrator may direct only the
amount of funds designated for that
facility, unless 'the owner or operator
agrees to the us;e of additional funds
available under the mechanism.
(h) Release of the owner or operator
from the requirements of this section.
When an owner or operator has
completed, to the satisfaction pf the
Regional Administrator, all post-closure
care requirements in accordance with
the post-closure: plan, the Regional
Administrator will, at the request of the
owner or operator, notify him in writing
that he is no longer required by this
section to maintain financial assurance
" for post-closure care of the particular
facility.. ' * ; .
§ 265.146 Use of a mechanism for
financial assurance of both closure and
post-closure caret.
An owner or operator may satisfy the
requirements foir financial assurance for
both closure and post-closure care for
one or more facilities by using a trust
fund, surety bond, letter of credit,
insurance, financial test, or corporate
guarantee that meets the specifications x
for the mechanism in both §§ 265.143
and 265.145. The amount of funds
available through the mechanism must
be ijo less than the sum of funds that
would be available if a separate -
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15074 Federal Register / Vol. 47. No. 67 / Wednesday. April 7, 1982
and Regulations^
mechanism had been established and
maintained for financial assurance of
closure and of post-closure care.
§265.148 Incapacity of owners or c
operators, guarantors, or financial
Institutions.
(a) An owner or operator must notify
the Regional Administrator by certified
mail of the commencement of a
voluntary or involuntary proceeding
under Title 11 (Bankruptcy), U.S. Code,
naming the owner or operator as debtor,
within 10 days after commencement of
the proceeding. A guarantor of a
corporate guarantee as specified in
§§ 265.143(e) and 265.145{e) must make
such a notification if he is named as
debtor, as required under the terms of
the coqjorate guarantee (§ 264.151(h)).
tb) An owner or operator who fulfills
the requirements of §§ 285.143,265.145,
or 265.147 by obtaining a trust fund,
surety bond, letter of credit, or insurance
policy will be deemed to be without the
required financial assurance or liability
coverage in the event of bankruptcy of
the trustee or issuing institution, or a
suspension or revocation of the
authority of the trustee institution to act
as trustee or of the institution issuing the
surely bond, letter of credit, or insurance
policy to issue such instruments. The
owner or operator must establish other
financial assurance or liability coverage
within 60 days after such an event.
§ 265.149 Use of State-required
mechanisms.
(a) For a faculty located in a State
where EPA is administering the
requirements of this Subpart but where
the State has hazardous waste
regulations that include requirements for
financial assurance of closure or post-
closure care or liability coverage, an
owner or operator may use State-
required financial mechanisms to meet
the requirements of §§ 265.143,265.145,
or 265,147 if the Regional Administrator
determines that the State mechanisms
are at least equivalent to the financial
mechanisms specified in this Subpart.
The Regional Administrator will
evaluate the equivalency of the
mechanisms principally hi terms of (1)
certainty of the availability of funds for
the required closure or post-closure care
activities or liability coverage and (2)
the amount of funds that will be made
available. The Regional Administrator
may also consider other factors as he
deems appropriate. The owner or
operator must submit to the Regional
Administrator evidence of the
establishment of the mechanism
together with a letter requesting that the
State-required mechanism be considered
acceptable for meeting the requirements
of this Subpart. The submission must
include the following information: The
facility's EPA Identification Number, .
name, and address, and the amount of
funds for closure or post-closure care or
liability coverage assured by the
mechanism. The Regional Administrator
will notify the owner or operator of his
determination regarding the
mechanism's acceptability in lieu of
financial mechanisms specified in'this
Subpart. The Regional Administrator
may require the owner or operator to
submit additional information as is
' deemed necessary to make this
determination. Pending this
determination, the owner or operator
will be deemed to be in compliance with
the requirements of §§ 265.143, 265.145,
or 265.147, as applicable.
(b) if a State-required mechanism is
found acceptable as specified in
paragraph (a) of this section except for
the amount of funds available, the
owner or operator may satisfy the
requirements of this Subpart by
increasing the funds available through
the State-required mechanism or using
additional financial mechanisms as
specified in this Subpart. The amount of
" funds available through the State and
Federal mechanisms must at least equal
the amount required by this Subpart.
§ 265.150 State assumption of
responsibility. '
(a) If a State either assumes legal
responsibility for an owner's or
operator's compliance with the closure,
post-closure care, or liability
requirements of this Part or assures .that
funds will be available from State
sources to cover those requirements, the
owner or operator will be in compliance
with the requirements of § § 265.143,
265.145, or 265.147 if the Regional
Administrator determines that the
State's assumption of responsibility is at
least equivalent to the financial
mechanisms specified in this Subpart.
The Regional Administrator will
evaluate the equivalency of State
guarantees principally in terms of (1)
certainty of the availability of funds for -
the required closure or post-closure care
activities or liability, coverage and (2)
the amount of funds that will be made
available. The Regional Administrator
may also consider other factors as he
deems appropriate. The owner or
operator must submit to the Regional
Administrator a letter from the State
describing the nature of the State's
assumption of responsibility together
with a letter from the owner or operator
requesting that the State's assumption of
responsibility be considered acceptable
for meeting the requirements of this
Subpart. The letter from the State must
include, or have attached to it, the
following information: the facility's EPA
Identification Number, name, and
address, and the amount of funds for
closure or post-closure care or liability
coverage that are guaranteed by the \
State. The Regional Administrator will
notify the owner or operator of his
determination regarding the
acceptability of the State's guarantee in
lieu of financial mechanisms specified in
this Subpart. The Regional
Administrator may require the owner or
operator to submit additional
information as is deemed necessary to
make this determination. Pending this
determination, the owner or operator
will be deemed to be in compliance with
the requirements of §§' 265.143, 265.145,
or 265.147, as applicable.
(b) If a State's assumption of
responsibility is found acceptable as
specified in paragraph (a) of this section
except for the amount of funds
available, the owner or operator may
satisfy the requirements of this Subpart
by use of both the State's assurance and
additional financial mechanisms as
specified in this Subpart. The amount of
funds available through the State and
Federal mechanisms must, at least equal
the amount required by this Subpart.
[FR Doc. 82-9202 Filed 4-6-62; 8:45 am]
BILLING CODE 6E60-50-H
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Postage and
Fees paid
Environmental
Protection
Agency
EPA 335
Fourth-Class
United States
Environmental Protection
Agency
Washington DC 20460
Official Business
Penalty for Private Use $300
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