Underground Storage Tank Program Grant Guidelines             Financial Responsibility
              Grant Guidelines To States
                 For Implementing The
                Financial  Responsibility
        And Installer 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

                      EPA510-R-07-002
                        January 2007

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Underground Storage Tank Program Grant Guidelines                Financial Responsibility
                                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
      How Does A State Implement These Guidelines?	3
      What Requirements Must A State Program Include To Meet The Financial
           Responsibility and Installer Certification Provision? 	3
      How Is The Liability Of Owners And Operators Affected? 	6
      What Enforcement Authority Must States Have For Financial
           Responsibility And Installer Certification?	7
      How Will States Demonstrate Compliance With These Guidelines? 	7
      How Will EPA Enforce States' Compliance With The Requirements
           In These Guidelines?	7

For More Information About 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
                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 and
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, which is 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. State underground storage tank (UST) programs that
receive funding under Subtitle I must meet, at a minimum, one of the following:

1. Evidence Of Financial Responsibility And Certification - A person that
manufactures an underground 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 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, Subtitle I.  In addition, underground storage tank installers must: be certified or
licensed; have the installation certified or approved; install the  underground storage tank
system compliant with a code of practice and in accordance with the  manufacturer's
instructions; or use another method determined to be no less protective of human health
and the environment.

2. Tank And Piping Secondary Containment- Each new or replaced
underground tank, or piping connected to any such new or replaced 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 tank or existing piping
connected to the underground tank,  the secondary containment and monitoring
shall apply only to the specific underground tank or piping being replaced, not to
other underground  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 tank, pipe, or dispenser to operating condition.
(These requirements  are described in the secondary containment guidelines, EPA 510-
R-06-001, published on November 15, 2006, http://www.epa.gov/oust/fedlaws/finaLsc.htm.)

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Underground Storage Tank Program Grant Guidelines                  Financial Responsibility
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 funding. These
guidelines include definitions, requirements, criteria, and options for states choosing to
implement the financial responsibility and installer certification provision.

When Do These Guidelines Take Effect?

      States receiving Subtitle I funding must implement either the financial
responsibility and installer certification requirements described in these guidelines or the
secondary containment requirements (EPA 510-R-06-001, published on November 15,
2006, http://www.epa.gov/oust/fedlaws/final_sc.htm) by February 8, 2007.

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Underground Storage Tank Program Grant Guidelines                 Financial Responsibility
                Requirements For Financial Responsibility
                         And Installer Certification

What Tanks Do These Guidelines Apply To?

      These guidelines apply to underground storage tank systems regulated under
Subtitle I, except those excluded by regulation at 40 CFR Part 280.10(b) and those
deferred by regulation at 40 CFR 280.10(c).

How Does A State Implement These Guidelines?

      A state implements these guidelines by:
           Requiring financial responsibility for all manufacturers of underground
            storage tanks or piping for an underground storage tank system that is
            installed in  the state,
           Requiring financial responsibility and installer certification for all installers
            of underground storage tank systems in the state, and
           Developing processes and procedures for financial responsibility and
            installer certification provisions that, at a minimum, meet the requirements
            in these guidelines.

      The state must meet these guidelines by February 8, 2007. States may choose
to be more stringent than these minimum requirements.

What Requirements Must A State Program Include To Meet The Financial
Responsibility And Installer Certification Provision?

      State requirements must, at a minimum, include the following provisions:

      A. Persons Affected

      State financial responsibility and installer certification requirements must clearly
      define who will be covered by them. 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
            (manufacturer).1
           A person that installs part or all of an underground storage tank system in
            the state (installer).

      The term "underground storage tank system" has the same definition as
      contained in 40 CFR Part 280.12.
1 This requirement does not apply to manufacturing of underground ancillary equipment or containment systems.

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Underground Storage Tank Program Grant Guidelines                  Financial Responsibility
      Manufacturers or installers that demonstrate to the state that they already
      maintain financial responsibility as the owner or operator of an underground
      storage tank do not need to maintain financial responsibility as a manufacturer or
      installer for that same underground storage tank.

      In states where a single installer of an underground storage tank system is
      identified by the state (e.g., for purposes of obtaining a permit), that person is the
      one required to maintain financial responsibility for that installation and meet the
      certification requirements described in these guidelines. Where there is not a
      single installer on record, states must define those who must maintain evidence
      of 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 or piping, as appropriate, caused by
            improper manufacturing, 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
            underground storage tank system due to improper installation.

      These limits do not include legal defense costs.

      C.  Length Of Coverage

      States must require that:
           Manufacturers of tanks and piping maintain financial responsibility
            coverage for 30 years after installation, or until the underground storage
            tank system is permanently closed,  in accordance with 40 CFR 280.71,
            whichever  of these events comes first.
           Installers of underground storage tank systems maintain financial
            responsibility for ten years after installation, or until the underground
            storage tank system is permanently closed, in accordance with 40 CFR
            280.71, or  whichever of these events comes first.

      States may allow  manufacturers and installers to obtain financial responsibility
      mechanisms with annual or other limited policy periods, as long as the
      manufacturer/installer maintains uninterrupted coverage for the full period
      required by these guidelines (30 years or ten years, as appropriate).  These
      types of mechanisms are currently available. For example, insurance is currently
      available in various forms, including occurrence-based with annual policy periods
      or claims-made with annual policy periods  coupled with appropriate retroactive
      and extended reporting periods.

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Underground Storage Tank Program Grant Guidelines                 Financial Responsibility
      D. Allowable Mechanisms

      States may allow manufacturers and installers to use a variety of financial
      mechanisms as long as these mechanisms meet all of the following four criteria:
      1.     The mechanism must be valid and enforceable;
      2.     The mechanism must be issued by a provider that is licensed, registered,
            and/or otherwise qualified 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, resulting from a release from a regulated
            underground storage tank or tank system caused by improper
            manufacture or installation,  as appropriate; and
      4.     The mechanism must require that the provider notify the insured and the
            state of cancellation or non-renewal of the mechanism, within a time frame
            determined to be reasonable by each state.

      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. However, not all of these current mechanisms may be appropriate
      for use in all instances to meet the new manufacturer and installer financial
      responsibility  requirement,  and some may have to be modified to meet this new
      requirement and be consistent with state regulations.

      In developing their requirements, states are encouraged to consider, as a model,
      provisions in 40 CFR Part 280, Subpart H, that reasonably prevent gaps in
      coverage, such as in cases of cancellation or non-renewal by the financial
      responsibility  provider, bankruptcy of the installer/manufacturer, or incapacity or
      liquidation of the financial responsibility provider.

      If a state chooses to use a state assurance fund to provide financial responsibility
      for manufacturers and/or installers, the state must develop a  separate fund,
      independent from  its existing state assurance fund (i.e., state fund used to
      provide financial responsibility for underground storage tank owners and
      operators). This requirement for a separate fund is to ensure the financial
      integrity of existing state assurance funds.

      If a state allows a  mechanism  that includes a deductible, the  state must either
      require first dollar  coverage or that manufacturers and installers maintain
      separate financial responsibility coverage for the deductible amount.

      E. Notification And Record Keeping

      State requirements must contain a provision or provisions requiring a system of
      notification and record keeping to and/or by the manufacturer, installer, owner,
      operator, and/or the state program. These  provisions must reasonably address,
      at a minimum, the following questions:

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Underground Storage Tank Program Grant Guidelines                 Financial Responsibility
           To whom and when must the evidence of financial responsibility be
            provided?
           How and where must manufacturers and installers maintain evidence of
            financial responsibility?
           If an underground storage tank system is permanently closed, in
            accordance with 40 CFR 280.71, who needs to notify the
            manufacturer/installer?
           If the manufacturer or installer files for bankruptcy or ceases operation for
            any other reason, whom should they notify and when?
           Any other question(s) that the state may deem appropriate.

      F. Installer Certification

      The state must require that a person that installs an underground storage tank
      system meet one of the following:
           Be certified or licensed by the tank and piping manufacturer;
           Be certified or licensed by the EPA Administrator or a state, as
            appropriate;
           Have their underground storage tank system installation certified by a
            registered professional engineer with education and experience in
            underground storage tank system installation;
           Have their installation of the underground storage tank inspected and
            approved by the Administrator or the state, as appropriate;
           Be compliant with a code of practice developed by a nationally-recognized
            association or independent testing laboratory and in accordance with the
            manufacturer's instructions; or
           Be compliant with another method that is determined by the Administrator
            or a state, as appropriate, to be no less  protective of human health and
            the environment.

      NOTE: These  requirements are similar to the requirements already found under
      40 CFR Parts 280.20(d), 280.20(e), and 280.33(a). Most, if not all, state
      underground storage tank regulations already cover these  requirements for new
      installations and repairs. However, states must also require that persons who
      replace or add equipment after the initial installation of the  underground storage
      tank system meet the installer certification requirements.

How Is The Liability Of Owners And Operators Affected?

      These provisions do not affect or alter the liability of any owner or
operator of an underground storage tank system. Owners and operators must still
comply with all applicable technical regulations. For example, they must comply with
the requirements to report releases, perform necessary corrective action, and maintain
financial responsibility to pay for corrective action and for compensation of third parties
for bodily injury  and property damage.

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Underground Storage Tank Program Grant Guidelines                 Financial Responsibility
What Enforcement Authority Must States Have For Financial Responsibility And
Installer Certification?

      At a minimum, states must have comparable 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 and
installer certification 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 and installer
      certification,  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 and
      installer certification, 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.

      EPA may verify state certification of compliance through site visits, record
reviews, or audits, as authorized by 40 CFR Part 31.

How Will EPA Enforce States'  Compliance With The Requirements In 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 certain underground storage tank requirements of Subtitle I.  EPA
anticipates State and Tribal Assistance Grants (STAG) funds will be available for
inspection and other underground storage tank compliance activities.  EPA will also
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
         For More Information About 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 (LIST) program. These amendments significantly affect
federal and state underground storage tank programs, will require major changes to the programs, and are aimed at
reducing underground storage tank releases to our environment.

The amendments focus on preventing releases. Among other things, they expand eligible uses of the Leaking
Underground Storage Tank (LUST) Trust Fund and include 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.qov/oust/fedlaws/nrq05  01 .htm

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