xvEPA United States Environmental Protection Agency Office of Water & Waste Management Washington, D.C. 20460 SW-900 December 1980 2d printing January 1981 Solid Waste Hazardous Waste Facilities Financial Responsibilities A Summary of the Regulations Standards for Owners and Operators of Hazardous Waste Facilities Financial Responsibilities The Resource Conservation and Recovery Act of 1976 (RCRA) calls for a national program to control hazardous waste. All wastes identified as hazardous in the regulations issued under Subtitle C of RCRA are tracked by manifests from where they originate to their final disposition at a facility having authority from the U.S. Environmental Protection Agency (EPA) or an authorized State to treat, store, or dispose of hazardous waste. Regulations for carrying out Subtitle C of RCRA are set forth in the Code of Federal Regulations (40 CFR Parts 260 to 266 and 122 to 124). The Federal hazardous waste program became effective November 19, 1980. Among other things, EPA's regulatory program contains standards for the owners and operators of hazardous waste treatment, storage, or disposal facilities. There are two types of standards: Interim Status Standards, which must be complied with by all facilities in Interim Status (those that are in existence, have notified EPA, and applied for a permit) (Part 265); and General Standards, which will be the basis for the issuance of permits over time to both existing and new facilities (Part 264). One part of the EPA regulations establishes financial responsibility requirements for owners and operators of hazardous waste management facilities. The standards are intended to protect human health and the environment by assuring that funds are available to: o close properly facilities that treat, store, or dispose of hazardous waste and to care for disposal facilities after they have closed. The need for this provision is indicated by the many instances of environmental damage resulting from abandonment of hazardous waste facilities and other failure by owners and operators to provide adequately for closure and postclosure care. The fact that the economic value of the facility is either at a minimum or nonexistent when closure and postclosure care are expected to start increases the likelihood of such failure. o compensate for injuries to people and property resulting from operation of the facilities. Liability requirements are necessary because of the potential for injury, as indicated by actual damage cases and by the inherent risks associated with hazardous wastes. ------- EPA proposed regulations on financial responsibility on December 18, 1978, reproposed them on May 19, 1980, held public hearings on the proposals, analyzed the many comments from the public, and carried out a number of investigations of issues raised. Final regulations were promulgated in January 1981, and will become effective 6 months later. The financial requirements are necessarily lengthy and complex to provide maximum flexibility to the firms having to comply. Facilities operated by States or the Federal Government are exempt from the financial responsibilities. The Agency is considering additional regulations that would allow municipalities to provide financial assurance on the basis of revenues or other financial measures, and would allow financially secure firms to meet the requirements on the basis of a financial test. ' This publication summarizes the major features of the final regulations t as they appeared in January 1981 in the Federal Register. Those who must comply with the regulations should read them in full. The earlier proposals may also be of interest: 43 FR 58995, 59006-7, and 45 FR 33260-78. The regulations covering hazardous waste management facilities—of which the financial requirements are a part--apply to two types of facilities operating under the RCRA program for controlling hazardous waste: o those with Interim Status. These facilities were in existence on November 19, 1980 (the effective date of the regulations). They have notified EPA of their hazardous waste activities and have applied for permits, but processing of their applications has not been completed. During the processing period, they must comply with the Interim Status Standards set forth in Part 265 of Title 40 of the Code of Federal Regulations. These selected minimum requirements will move their operations toward RCRA's goal of protecting human health and the environment. o those with a permit either from EPA or a State authorized to permit hazardous waste management facilities under RCRA. These facilities must comply with the General (Permit) Standards (Part 264)/whTch are intended to ensure full accomplishment of RCRA's goal. All new facilities are covered by the General Standards. The financial requirements for the two types of facilities are almost identical substantively but differ in certain procedural and scheduling details. Closure The owner or operator of a hazardous waste facility must keep at the facility a written estimate of the cost of closing his facility in accordance with the approved closure plan required by Sections 264.112 and 265.112 of the facility standards. For facilities with Interim Status, the estimate must be available by May 19, 1981. The estimate will also be specified in a permit granted to the facility. ------- Postclosure Combined Assurance Liability The estimate must be based on costs at the time when closure would be the most expensive. For example, the estimate for a landfill planned to have a maximum of 20 acres in operation at one time would be based on closing the full 20 acres. If, on the other hand, only 5 acres of a 20-acre site are to be in operation at any one time, then the closure cost estimate is based on 5 acres. The estimate must be changed whenever a change in the closure plan affects the cost of closure and must be adjusted annually for inflation. The owner or operator can choose from a number of options to assure that the funds needed to close a facility are available: o trust fund. Payments are made annually over the life of the permit, which is 10 years or less. In a facility with Interim Status, payments are over its remaining operating life as estimated in the closure plan, or over 20 years, whichever is less. o surety bond (with a standby trust fund), guaranteeing payment into a trust fund o surety bond (with a standby trust fund), guaranteeing performance of closure (not applicable to facilities with Interim Status) o letter of credit (with a standby trust fund) The funds assured must be at least equal to the adjusted cost estimates. For existing facilities, financial assurance must be established by July 1981. For new facilities, it must be established at least 60 days before hazardous waste is first received at the facility. In meeting the financial assurance requirements, a facility owner or operator may use more than one of the options, except for the surety bond guaranteeing closure. In addition, the owner or operator of several facilities may use one option to cover all facilities; however, a letter of credit may not be used to assure funds for facilities in more than one EPA Region. The owner or operator is released from the financial assurance requirement for closure within 60 days of notifying the EPA Regional Administrator that the closure has been completed according to the plan. The financial assurance requirements relating to postclosure monitoring and maintenance of a hazardous waste disposal facility are generally similar to those of closure: a written plan (Sections 264.118, 265.118), a cost estimate (including adjustments), financial assurance (for 30 years, unless otherwise specified in the permit) by any of four options or combina- tions, and release of owners or operators from the need to maintain financial assurance. An owner or operator may use either a trust fund or letter of credit to provide assurance for both closure and postclosure care of one or more facilities. An owner or operator of a hazardous waste treatment, storage, or disposal facility must demonstrate financial responsibility for claims arising from its operations that accidentally injure persons or property. EPA is considering allowing facilities to insure themselves. But for now, the regulations set the following liability requirements: ------- Sudden Occurrences Nonsudden Occurrences Combined Insurance State Requirements o sudden occurrences: maintain liability insurance of at least $1 million per occurrence, with an annual total of at least $2 million, exclusive of legal defense costs. Facilities with Interim Status must have insurance by July 1981; new facilities must have insurance 60 days before hazardous waste is first received. o nonsudden occurrences: surface impoundments, landfills, or land treatment facilities, which have the potential to pollute groundwater must maintain liability insurance of at least $3 million per occurrence, with an annual total of at least $6 million, exclusive of legal defense costs. The following schedule has been set for existing facilities: — those with sales totalling $10 million or more in 1980: January 1982 — those with annual sales of $5 to $10 million in 1980: January 1983 — all others: January 1984 For new facilities, the date is: —60 days before hazardous waste is first received. Insurance for sudden and nonsudden occurrences may be combined in one policy covering at least $4 million per occurrence, with an annual total of at least $8 million. An owner or operator who can demonstrate the levels of liability insurance are higher than necessary for his facility may request a variance from the Regional Administrator. On the other hand, the Regional Admin- istrator can request higher levels if he feels they are necessary or he may extend the requirement for nonsudden occurrences to treatment and storage facilities. Should the institution providing liability insurance—and financial assurance as well—fail, the owner or operator has 60 days to obtain the needed coverage elsewhere. The hazardous waste regulations of some States include requirements for financial assurance for closure and postclosure care and liability coverage. An owner or operator whose facility is located in such a State may use the financial mechanisms required by the State if they provide financial assurances or liability coverage equivalent to or greater than requirements of the Federal regulations. State guarantees may also be used to satisfy the financial requirements if they provide assurances that are at least equivalent. An owner or operator must obtain additional financial assurance or liability coverage to meet Federal requirements if the amount of the assurance/coverage of State-required mechanisms or guarantees is less than that required in the Federal regulations. This provision is intended to reduce unnecessary duplication and costs in States that are not authorized to operate a hazardous waste management program but have some financial responsibility regulations. ------- If a State assumes legal responsibility for an owner's or operator's compliance with the closure, postclosure, or liability requirements of the Federal regulations or assures that State funds will be available to cover the requirements, an owner or operator will be complying with Federal regulations to the extent that the State's assurances are equivalent to or exceed those required by the Federal regulations. The owner or operator must send to the Regional Administrator a letter from the State describing the nature of the State's responsibility. Impact After a necessary phase-in period, the financial responsibility requirements will assure that owners and operators of hazardous waste facilities will have adequate financial resources to pay for closure, postclosure care, and damages. Thus, individuals or government will not have to bear these costs, as they have on occasion in the past. Together with the rest of the facility standards, financial responsibility requirements will ensure that hazardous waste facilities will be operated so as to meet RCRA's goal of protecting human health and the environment. Major Features Where to Find Them in the Regulations 40 CFR Parts 264/265, Subpart H o Applicability (Sections 264.140, 265.140) o Definitions (264.141, 265.141) o Cost Estimate for Closure (264.142, 265.142) o Financial Assurance for Closure (264.143, 265.143) o Cost Estimate for Postclosure Monitoring and Maintenance (264.144, 265.144) o Financial Assurance for Postclosure Monitoring and Maintenance (264.145, 265.145) o Use of a Mechanism for Financial Assurance of Both Closure and Postclosure Care (264.146, 265.146) o Liability Requirement (264.147, 265.147) o Incapacity of Institutions Issuing Letters of Credit, Surety Bonds, or Insurance Policies (264.148, 265.148) o Applicability of State Financial Requirements (264.149, 265.149) o State Assumption of Responsibility (264.150, 265.150) o Wording of the Instruments (264.151, 265.151) ------- |