Underground Storage Tank Program Grant guidelines                 Financial Responsibility
                 Draft For Public Comment Only -5/24/O6
              Grant Guidelines To States
                 For Implementing The
 Financial Responsibility And Certification Provision
           Of The Energy Policy Act Of 2005
              U.S. Environmental Protection Agency
              Office of Underground Storage Tanks
                       Washington, DC
                      www. epa.gov/oust

                       EPA-510-D-06-002
                          May 2006

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Underground Storage Tank Program Grant guidelines                     Financial Responsibility
                     Draft For Public Comment Only -5/24/O6
                                Contents
Overview Of Financial Responsibility And Installer Certification
Guidelines	1
      Why Is EPA Issuing These Guidelines?	1
      What Is In These Guidelines?	2
      When Do These Guidelines Take Effect?	2

Requirements For Financial Responsibility And Installer Certification . 3
      What Tanks Do These Guidelines Apply To?	3
      What Provisions Must A State Program Include To Meet These Requirements?... 3
      What Enforcement Authority Must States Have For Financial
          Responsibility And Installer Certification?	6
      How Will States Demonstrate Compliance With These Guidelines?	6
      How Will EPA Enforce States' Compliance With These Guidelines?	7

For More Information On The Financial Responsibility And Installer
Certification Grant Guidelines	8
      Background About The Energy Policy Act Of 2005	8

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Underground Storage Tank Program Grant guidelines                        Financial Responsibility
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                Overview Of Financial Responsibility And
                     Installer Certification Guidelines
Why Is EPA Issuing These Guidelines?

      The U.S. Environmental Protection Agency (EPA), in consultation with states,
underground storage tank owners, and the tank industry, has developed these grant
guidelines to implement the financial responsibility and installer certification provision in
Section 9003(i) of the Solid Waste Disposal Act (SWDA), enacted by the Underground
Storage Tank Compliance Act, part of the Energy Policy Act of 2005 signed by
President Bush on August 8, 2005.

      Section 1530 of the Energy Policy Act amends Section 9003 in Subtitle I of the
Solid Waste Disposal Act to add requirements for additional measures to protect
groundwater from contamination. In order to be in compliance with statutory
requirements applicable to Subtitle I, state underground storage tank (UST) programs
must, at a minimum, implement either ihe financial responsibility and installer
certification requirements in these guidelines or the secondary containment and under-
dispenser containment requirements described in separate guidelines.  EPA must
require each state that receives funding under Subtitle I meet, at a minimum, one of the
following:

      1. Tank And Piping Secondary Containment- Each new underground storage
      tank, or piping connected to any such new tank, that is within 1,000 feet of any
      existing community water system or any existing potable drinking water well must
      be secondarily contained and monitored for leaks.  In the case of a replacement
      of an existing underground storage tank or existing piping connected to the
      underground storage tank, the secondary containment and monitoring shall apply
      only to the specific underground storage tank or piping being replaced, not to
      other underground storage tanks and connected pipes comprising such system.
      In addition, each new motor fuel dispenser system installed within 1,000 feet of
      any existing community water system or any existing potable drinking water well
      must have under-dispenser containment.  These requirements do not apply to
      repairs meant to restore an underground storage tank, piping, or dispenser to
      operating condition.

      Or,

      2. Evidence Of Financial Responsibility And Certification - A person that
      manufactures an underground storage tank or piping for an underground storage
      tank system or installs an underground storage tank system must maintain
      evidence of financial responsibility under Section 9003(d) of Subtitle I in order to

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      provide for the costs of corrective actions directly related to releases caused by
      improper manufacture or installation unless the person can demonstrate
      themselves to be already covered as an owner or operator of an underground
      storage tank under Section 9003 of Subtitle I.  In addition, installers must be
      certified,  or they must certify the installation of underground storage tank systems
      they install. These provisions do not affect or alter the liability of any owner or
      operator of an underground storage tank.  Owners and operators must still
      comply with all technical regulations.  For example, they must comply with the
      requirements to report a release and perform all necessary corrective action and
      to maintain financial responsibility to pay for corrective action and compensate
      third parties.

      EPA's Office  of Underground Storage Tanks (OUST) is issuing these grant
guidelines to establish the minimum requirements states must meet in order to comply
with the financial responsibility and  installer certification requirements in the Energy
Policy Act.

What Is In These Guidelines?

      These guidelines describe the minimum requirements for financial responsibility
and installer certification that a state's underground storage tank program must contain
in order for a state to comply with statutory requirements for Subtitle I. These guidelines
include definitions, requirements, criteria, and options for states choosing to implement
the financial responsibility and installer certification provisions.

When Do These Guidelines Take Effect?

      States must implement e/Yfterthe financial responsibility and installer certification
requirements described in these guidelines or the secondary containment requirements
(described  in separate guidelines) by February 8, 2007.

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Underground Storage Tank Program Grant guidelines                        Financial Responsibility
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                Requirements For Financial Responsibility
                         And Installer Certification
What Tanks Do These Guidelines Apply To?

      For purposes of this document, the term "underground storage tank" means
those tanks that store petroleum products that satisfy the definition of underground
storage tank in 40 Part  280.12, except for those tanks identified in 40 Part 280.10(b)
and 280.10(c) as excluded or deferred underground storage tanks.

What Provisions Must A State Program Include To Meet These Requirements?

      State requirements must, at a minimum, include the following provisions. States
may choose to be more stringent than the minimum requirements described in these
guidelines.

      A. Persons Affected

      State requirements must clearly define who will be covered. At a minimum, the
      following persons must be covered.

         •   A person that manufactures an underground storage tank or piping for an
             underground storage tank system that is installed in the state.
         •   A person that installs an underground storage tank system in the state.
         •   A person that installs tank components that modify the existing
             underground storage tank system (if different from the installer described
             above).

      For the purposes of these guidelines, an "underground storage tank system" is
      defined as "an underground storage tank (defined above), connected
      underground piping, underground ancillary equipment, and containment system,
      if any"; "ancillary equipment" is defined as "any devices including, but not limited
      to, such devices as piping, fittings, flanges, valves, and pumps used to distribute,
      meter, or control the flow of regulated substances to and from an underground
      storage tank." These definitions are the same as those contained in 40 CFR Part
      280.12.

      In states where a single installer of an underground storage tank system is
      required to obtain an installation permit, that person is the one required to
      maintain financial responsibility for that installation.  Where there is not a single
      installer of record, states must define those who must maintain evidence of

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Underground Storage Tank Program Grant guidelines                        Financial Responsibility
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      financial responsibility and meet the certification requirements described in these
      guidelines.

      B.  Amount And Scope Of Coverage

      States must require a minimum of $1 million per occurrence and $2 million
      annual aggregate for manufacturers to cover the costs of corrective action of a
      release from a regulated underground storage tank caused by improper
      manufacture and $1  million per occurrence and $2 million annual aggregate for
      installers to cover the costs of corrective action of a release from a regulated tank
      system due to improper installation. These limits do not include legal defense
      costs.

      C.  Length Of Coverage

      States must require that manufacturers and installers maintain evidence of
      financial responsibility for as long as their existing component(s) is (are) still in
      service.

      Note: EPA is seeking input from commenters on an alternative time frame
      for coverage. Please provide any input you might have on this alternative:
      State requirements must indicate how long manufacturers and installers must
      maintain evidence of financial responsibility for a specific tank, piping, or
      installation.

      D.  Allowable Mechanisms

      States may allow manufacturers and installers to use a variety of financial
      mechanisms as long as these mechanisms meet the following criteria:

            1.  The mechanism must be valid and enforceable;
            2.  The mechanism must be issued by a provider that is legally authorized
                to provide such coverage in the state;
            3.  The mechanism must pay for the costs of corrective action (up to the
                coverage limits described above) of a release from a regulated
                underground storage tank or tank system caused by improper
                manufacture or installation,  as appropriate; and
            4.  Within a time frame determined to be reasonable by each  state, the
                mechanism must require that the provider notify the insured  and the
                state of cancellation or nonrenewal of the mechanism.

      These mechanisms may include the ones currently used by tank owners and
      operators  to meet their financial responsibility requirements under 40 Part 280.94
      to 280.103.  Not all of these mechanisms may be appropriate for use to meet the
      manufacturer and installer financial responsibility  requirement, and some may
      have to  be modified to meet this new requirement.

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Underground Storage Tank Program Grant guidelines                        Financial Responsibility
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      EPA is aware that state funds (funds created by states to provide financial
      responsibility coverage for tank owners and operators) have historically taken
      very different approaches to situations where releases may have been caused by
      improper manufacture or installation. In some states, the state fund has
      subrogated against the manufacturer or installer to recover costs when the state
      believes improper manufacture or installation caused or contributed to the
      release that was covered by the state fund.  In a few other states, the state fund
      is already providing coverage to installers by charging them a fee similar to an
      insurance premium for that coverage.

      If a state is going to allow manufacturers and/or installers to meet their financial
      responsibility requirements by using its state fund, the state must ensure that the
      state fund has adequate revenue to cover this added risk and should charge
      manufacturers and installers an appropriate and separate fee in return for this
      coverage. Unless this is done, EPA is concerned that a loss of potential revenue
      by the state fund can negatively affect the fund's ability to pay for cleanups and
      jeopardize the fund's viability as a financial responsibility mechanism.

      E. Notification And Record Keeping

      State requirements must contain a provision or provisions requiring a system of
      notification and record keeping to and by the manufacturer, installer, owner,
      operator, and/or the state program.

      These provisions should reasonably address, at a minimum, the following
      questions:

         •    To whom and when must the evidence of financial responsibility be
              provided?

         •    How and where must manufacturers and installers maintain the evidence
              of financial responsibility?

         •    If an event (for example, if the underground storage tank system is taken
              out of service and no leak is discovered) negates a manufacturer or
              installer's financial responsibility for a certain component or installation,
              who will notify the manufacturer and installer of that fact?

         •    If the manufacturer or installer files for bankruptcy or ceases operation
              for any other reason, whom should they notify and when?

         •    Other questions that the state may deem appropriate.

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Underground Storage Tank Program Grant guidelines                        Financial Responsibility
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      F. installer Certification

      The requirements found in the Act [described under Section 1530(a)(2)(B)] are
      identical to the requirements already found under 40 Part 280.20(e) and Part
      280.33(a) of the Technical Standards and Corrective Action Requirements for
      Owners and Operators of Underground Storage Tanks promulgated on
      September 23, 1988.  Most, if not all, state underground storage tank regulations
      already cover these requirements in these two provisions.  If a state does not
      have such provisions, that state must modify its regulations to include these two
      provisions.

      However, when a state expands its definition of "installer" to include persons who
      replace or add equipment at a point of time after the initial installation of the
      underground storage tank system (stated above), then state regulations
      regarding the certification of such persons will have to be amended and
      expanded to include such persons.  In other words, under the Energy Policy Act
      of 2005, all persons who are subject to the "installer financial responsibility
      requirement" are also subject to the "instaHer certification requirement," and a
      state's regulations regarding certification must apply to that universe of persons.

What Enforcement Authority Must States Have For Financial Responsibility And
Installer Certification?

      At a minimum, states must have the same enforcement authorities for violations
of their financial responsibility and installer certification requirements as they have for
violations of current underground storage tank  requirements.

How Will States Demonstrate Compliance With These Guidelines?

      After February 8, 2007, the  effective date of the financial responsibility
requirements, and before receiving future grant funding, states must provide one of the
following to EPA:

   •  For a state that has met the requirements for financial responsibility, the state
      must submit a certification indicating that the state meets the requirements in the
      guidelines.

   •  For a state that has not yet met the requirements for financial responsibility, the
      state must provide a document that describes the state's efforts to meet the
      requirements.  This document must include:
                A description of the state's activities to date to meet the requirements
                in the guidelines;
                A description of the state's planned activities to meet the
                requirements; and
                The date by which the state expects to meet the requirements.

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Underground Storage Tank Program 6rant guidelines                        Financial Responsibility
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How Will EPA Enforce States'Compliance With These Guidelines?

      As a matter of law, each state that receives funding under Subtitle I, which would
include a Leaking Underground Storage Tank (LUST) Cooperative Agreement, must
comply with the underground storage tank requirements of the Energy Policy Act. EPA
anticipates State and Tribal Assistance Grants (STAG) funds will be available under the
2007 Appropriations Act for certain purposes authorized by the Energy Policy Act, and
EPA will condition STAG grants with compliance with these guidelines. Absent a
compelling reason to the contrary, EPA expects to address noncompliance with these
STAG grant conditions by utilizing EPA's grant enforcement authorities under 40 CFR
Part 31.43, as necessary and appropriate.

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Underground Storage Tank Program Grant guidelines                            Financial Responsibility
                          Draft For Public Comment Only -5/24/O6
           For More Information On The Financial Responsibility
                  And Installer Certification Grant Guidelines

Visit the EPA Office of Underground Storage Tanks' web site at www.epa.gov/oust or
call 703-603-9900.
                     Background About The Energy Policy Act Of 2005


       On August 8, 2005, President Bush signed the Energy Policy Act of 2005. Title XV, Subtitle B of this
       act (entitled the Underground Storage Tank Compliance Act) contains amendments to Subtitle I  of the
       Solid Waste Disposal Act - the original legislation that created the underground storage tank (UST)
       program. This new law significantly affects federal and state underground storage tank programs, will
       require major changes to the programs, and is aimed at reducing underground storage tank releases
       to our environment

       The underground storage tank provisions of the Energy Policy Act focus on preventing releases.
       Among other things, it expands eligible uses of the Leaking Underground Storage Tank (LUST) Trust
       Fund and includes provisions regarding inspections, operator training, delivery prohibition, secondary
       containment and financial responsibility, and cleanup of releases that contain oxygenated fuel
       additives.

       Some of these provisions require implementation by August 2006; others will require implementation
       in subsequent years. To implement the new law, EPA and states will work closely with tribes, other
       federal agencies, tank owners and operators,  and other stakeholders to bring about the mandated
       changes affecting underground storage tank facilities.

       To see the full text of this new legislation and  for more information about EPA's work to implement the
       underground storage tank provisions of the law, see: http://www.epa.gov/oustffedlaws/nrg05  01 .htm

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