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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