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.
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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.
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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:
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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.
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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)
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