United States
Environmental Protection
Agency
Off ice of Solid Waste
and emergency Response
May 1982
SW - 955
Solid Waste
c/EPA
Financial Assurance
for Closure
and Post-Closure Care:
Requirements for Owners and Operators
of Hazardous Waste Treatment, Storage
and Disposal Facilities
A Guidance Manual
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FINANCIAL ASSURANCE FOR CLOSURE AND
POST-CLOSURE CARE: REQUIREMENTS
FOR OWNERS AND OPERATORS OF
HAZARDOUS WASTE TREATMENT, STORAGE
AND DISPOSAL FACILITIES
A GUIDANCE MANUAL
This document (SW-955) was prepared £or the
Office of Solid Waste under contact no. 68-01-6491
U.S. Environmental Protection Agency
1982
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PREFACE
This manual was prepared by ICF, Inc., 1850 K Street,
N.W., Suite 950, Washington, DC 20006, under EPA Contract
No. 68-01-6491. The EPA project officer was Carole J.
Ansheles.
This document was compiled in order to provide guidance
to owners and operators in complying with the requirements
for financial assurance of closure and post-closure care; and
to EPA Regional staff in implementing the requirements.
This document has received Information Clearance No.
2000-0445 from the Office of Management and Budget, for use
through December 31, 1983.
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SUMMARY TABLE OF CONTENTS
.Page
I. INTRODUCTION I -1
II. OVERVIEW OF FINANCIAL REQUIREMENTS II-l
III. ESTABLISHING FINANCIAL RESPONSIBILITY USING TRUST FUNDS III-l
IV. ESTABLISHING-FINANCIAL RESPONSIBILITY USING SURETY BONDS IV-1
V. ESTABLISHING FINANCIAL RESPONSIBILITY USING LETTERS
OF CREDIT V-l
VI. ESTABLISHING FINANCIAL RESPONSIBILITY USING INSURANCE VI-1
VII. ESTABLISHING FINANCIAL RESPONSIBILITY USING THE
FINANCIAL TEST OR CORPORATE GUARANTEE ' VII -1
VIII. ESTABLISHING FINANCIAL RESPONSIBILITY USING STATE MECHANISMS . VIII-1
GLOSSARY OF TERMS
APPENDIX A: EPA Regional Office Financial Requirements Contacts and
Other Federal Regulatory Agencies A-l
APPENDIX B: State Agencies and Boards B-l
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'DETAILED TABLE OF CONTENTS
I. INTRODUCTION I -1
A. ORGANIZATION OF MANUAL 1-1
B. BACKGROUND 1-2
C. PURPOSE ' 1-3
D. OWNER OR OPERATOR RESPONSIBILITIES 1-3
E. EPA HEADQUARTERS ROLE 1-4
F. RELATIONSHIP BETWEEN STATE AND FEDERAL REQUIREMENTS 1-5
G. SOURCES OF FURTHER INFORMATION 1-9
II. OVERVIEW OF FINANCIAL REQUIREMENTS II-1
A. OVERVIEW OF RESPONSIBILITIES II-l
1. Owner or Operator Responsibilities II-l
2. Regional Office Responsibilities II-2
3. Financial Institution or Parent Guarantor II-3
B. FINANCIAL ASSURANCE OPTIONS II-3
1.. Summary of Different Mechanisms II-3
2. Using Combinations of Mechanisms and Covering
Multiple Facilities II-7
C. QUALIFICATIONS FOR FINANCIAL INSTITUTIONS AND
PARENT GUARANTORS II-8
D. INITIAL SUBMISSIONS II- 8
1. Form and Amount, of Financial Assurance. 11-10
2. Obtaining Financial Assurance 11-11
E. SUBSEQUENT RESPONSIBIITIES FOR UPDATING AND
MAINTAINING COVERAGE 11-12
1. Updating Coverage 11-12
2. Maintaining Assurance 11-13
3. Cancellations 11-13
4. Changing Mechanisms Voluntarily ' 11-14
F. DRAWING ON FUNDS 11-14
G. RELEASE FROM RCRA FINANCIAL REQUIREMENTS 11-15
vi 1
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DETAILED TABLE OF CONTENTS (continued)
Page
H. DIFFERENCES BETWEEN REQUIREMENTS FOR INTERIM STATUS
AND PERMITTED FACILITIES 11-16
I. USE OF THE HAZARDOUS WASTE DATA MANAGEMENT SYSTEM 11-17
J. ATTACHMENTS ....'. 11-20
Attachment II-l: Summary of Owner or
Operator Responsibilities 11-20
Attachment II-2: Summary of Regional
Office Responsibilities 11-21
III. ESTABLISHING FINANCIAL RESPONSIBILITY USING TRUST FUNDS III-l
A. INTRODUCTION III-l
B. RCRA TRUST FUND REQUIREMENTS Ill-2
Initial Responsibilities of the
Owner or.Operator 111-2
1. Qualifications for Trustee III-2
2. Wording and Amount of Assurance III-2
3. Establishing a Trust Fund Ill-4
4. Submission of Documents to EPA ...... III-6
Subsequent Responsibilities of the
Owner or Operator Ill-6
5. Updating the Trust Fund Ill-6
6. Maintaining Assurance III-7
7. Role of Trustee III-8
. 8. Drawing on the Trust Fund Ill-9
9. Termination of the Trust Fund III-9
Permitted Facilities ' III-9
C. REGIONAL OFFICE RESPONSIBILITIES 111-10
Reviewing Initial Submissions Ill-10
1. Qualifications of Trustee 111-10
2. Conformity to Other Requirements 111-10
3. Recordkeeping and Tracking Systems III-ll
Subsequent Responsibilities III-ll
vi i i
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DETAILED TABLE OF CONTENTS (continued)
Page
4. Updating the Trust Fund III-ll
5. Maintaining the Trust Fund III-12
6. Drawing on the Trust Fund Ill-12
7. Requests to Terminate the Trust Fund Ill-13
Permitted Facilities 111-13
D. SOURCES OF FURTHER INFORMATION 111-13
E. ATTACHMENTS 111-16
Attachment III-l: RCRA Trust Fund Checklist
for Owners or Operators Ill-16
Attachment III-2: RCRA Trust Fund Checklist
for Regional Offices Ill-18
Attachment III-3: Required Wording for RCRA
Trust Fund Agreement Ill-21
Attachment III-4: Sample Calculations of
Required Payments into RCRA Trust Fund Ill-31
IV. ESTABLISHING FINANCIAL RESPONSIBILITY USING SURETY BONDS IV-1
A. INTRODUCTION IV-1
B. RCRA SURETY BOND REQUIREMENTS IV-3
Initial Responsibilities of the
Owner or Operator IV-3
1. Qualifications for Surety Company IV-3
2. Wording and Amount of Assurance IV-3
3. Obtaining a Surety Bond '..... IV-4
4. Submission of Documents to EPA IV-5
Subsequent Responsibilities of the
Owner or Operator IV-5
5 . Updating Coverage , IV-5
6. Maintaining Assurance IV-6
7. Cancellation of the Surety Bond IV-6
8. Drawing on Funds for Closure and Post-Closure .... IV-6
9. Termination of Bond IV-7
Permitted Facilities '. IV-7
IX
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DETAILED TABLE OF CONTENTS (continued)
Page
C. REGIONAL OFFICE RESPONSIBILITIES IV-8
Reviewing Initial Submissions IV-8
1. Qualifications of Surety and Broker or Agent IV-8
2. Conformity to Other Requirements IV-9"
3. Recordkeeping and Tracking Systems IV-9
Subsequent Responsibilities IV-9
4. Updating Surety Bonds IV-9
5. Maintaining Assurance IV-10
6. Cancellation of the Surety Bond by the Issurer ... IV-10
7. Drawing on the Surety Bond IV-10
8. Request to Terminate the Surety Bond IV-11
Permitted Facilities IV-ll
D. SOURCES OF FURTHER INFORMATION IV-12
E. ATTACHMENTS- IV-14
Attachment IV-1: RCRA Surety Bond Checklist
for Owners or Operators IV-14
_ Attachment IV-2: RCRA Surety Bond Checklist -.
for Regional Offices . r IV-16
Attachment IV-3: Required Wording for RCRA
Financial Guarantee Bond IV-18
Attachment IV-4: Required Wording for RCRA
Performance Bond IV-22
ESTABLISHING FINANCIAL RESPONSIBILITY USING LETTERS
OF CREDIT V-1
A. INTRODUCTION ' V-1
B. REQUIREMENTS FOR USING RCRA LETTERS OF CREDIT V-2
Initial Responsibilities of the
Owner or Operator V-2
1. Qualifications for Issuing Institution V-2
2. Wording and Amount of Assurance V-2
3. Obtaining a Letter of Credit V-4
4. Submission of Documents to EPA V-5
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DETAILED TABLE OF CONTENTS (continued)
Page
Subsequent Responsibilities of the
Owner or Operator V-5
5. Updating Coverage V-5
6. Maintaining Assurance V-5
7. Cancellation or Non-Renewal of the Letter of
Credit by the Issuer V-6
8. Drawing on Funds for Closure or Post-Closure V-6
9. Termination of Letter of Credit V-6
Permitted Facility Requirements V-6
C. REGIONAL OFFICE RESPONSIBILITIES V-7
Reviewing Initial Submissions V-7
1. Qualifications of Issuers V-7
2. Conformity to Other Requirements V-7
3. Recordkeeping and Tracking Systems V-8
Subsequent Responsibilities V-8
4. Updating Coverage V-8
5. Maintaining Assurance V-8
6. Nonrenewal by Issuer V-9
7. Drawing on Funds for Closure or Post-Closure V-9
8. Request to Terminate the Letter o'f Credit V-10
Permitted Facility Requirements V-10
D. SOURCES OF FURTHER INFORMATION ;. V-10
E. ATTACHMENTS V-12
Attachment V-l: RCRA Letter of Credit Checklist
for Owners or Operators V-12
Attachment V-2: RCRA Letter of'Credit Checklist
for Regional Offices .....' V-14
Attachment V-3: Required Wording, for Irrevocable
RCRA Letter of Credit V-16
VI. ESTABLISHING FINANCIAL RESPONSIBILITY USING INSURANCE VI-1
A. INTRODUCTION VI-1
B. RCRA INSURANCE REQUIREMENTS VI-2
XI
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DETAILED TABLE OF CONTENTS (continued)
Initial Responsibilities of the
Owner or Operator VI-2
1. Qualifications of Insurer VI-2
2. Form and Amount of Assurance VI-2
3. Obtaining an Insurance Contract VI -3
4. Submission of Documents to EPA VI-3
Subsequent Responsibilities of the
Owner or Operator VI -4
S. Updating Coverage VI-4
6. Maintaining Coverage VI-4
7. Cancellation of the Insurance Policy VI-4
8. Drawing on Funds for Closure or Post-Closure VI-5
9. Termination of the Policy by the Owner
or Operator VI-5
Permitted Facilities VI-6
C. REGIONAL OFFICE RESPONSIBILITIES VI-6
Reviewing Initial Submissions VI-6
1. Qualifications of Insurer VI-6
2. Confor'mity to Other Requirements VI-6
3.' Recordkeeping and Tracking Systems VI-7
Subsequent Responsibilities VI-7
4.' Updating Coverage VI-7
5. Maintaining Assurance VI-7
6. Cancellation of Insurance Contracts
by the Insurer VI -8
7. Drawing on Funds for Closure or Post-Closure VI-9
8. Request to Terminate Insurance Coverage VI-9
Requirements for Permitted Facilities VI-9
D-. SOURCES OF FURTHER INFORMATION VI-9
E. ATTACHMENTS VI -12
xii
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DETAILED TABLE OF CONTENTS (continued)
Attachment VI-1: RCRA Insurance Contract
Checklist for Owners or Operators VI-12
Attachment VI-2: RCRA Insurance Contract
Checklist for Regional Offices VI-14
Attachment VI-3: Required Wording for RCRA
Insurance Certificate VI-16
VII. ESTABLISHING FINANCIAL RESPONSIBILITY USING THE
FINANCIAL TEST OR CORPORATE GUARANTEE VII-1
A. INTRODUCTION VII-1
B. REQUIREMENTS OF THE FINANCIAL TEST VII-2
Initial Responsibilities of the
Owner or Operator VII-2
1. Qualifications for the Financial Test VII-2
2. Obtaining the Financial Test and Corporate
Guarantee VII-3
3. Submission of Documents to EPA ' VII-3
Subsequent Responsibilities of the
Owner or Operator > VII -6
4. 'Updating Assurance VII-6
5. Maintaining Assurance VII-7
6. Cancelling Corporate Guarantee VII-8
7. Drawing on Funds for Closure or
Post-Closure VII-8.
8. Termination of the Corporate Guarantee VII-8
Permitted Facility Requirements VII-8
C. REGIONAL OFFICE RESPONSIBILITIES VII-9
Reviewing Initial Submissions VII-9
1. Qualifications of Accountant and Parent
Guarantor VII-9
2. Conformity to Other Requirements VII-9
3. Recordkeeping and Tracking Systems VII-12
Subsequent Responsibilities VII-15
xiii
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DETAILED TABLE OF CONTENTS (continued)
4. Updating Coverage VII-15
5. Maintaining Assurance VII-15
6. Cancelling the Corporate Guarantee VII-16
7. Drawing on Funds for Closure
Post-Closure VII-16
8. Requests to Terminate the Corporate Guarantee .... VII-16
D. SOURCES OF FURTHER INFORMATION VII-17
E. ATTACHMENTS VII-19
Attachment VII-1: RCRA Financial Test Checklist
for Owners or Operators VII-19
Attachment VII-2: Required Wording for Letter
from Chief Financial Officer VII-21
Attachment VII-3: Required Wording for Corporate
Guarantee VII-26
Attachment VII-4: RCRA Financial Test Checklist
for Regional Offices ' VII-29
Attachment VII-5: Examples of Unqualified
Opinions VII-31
Attachment VII-6: Example of an Adverse
Opinion VII-33
Attachment VII-7: Example of a Disclaimer of
Opinion VII-34
Attachment VII-8:. Examples of a ."Subject To"
Qualified Opinion Based on a "Going Concern"
Issue VII-35
Attachment VII-9: Example of an "Except For"
Qualified Opinion Due to a Scope Limitation VII-37
Attachment VII-10: Example of an "Except For"
Qualified Opinion Due to Variances"from
Generally Accepted Accounting Principles VII-38
Attachment VII-11: Examples of an "Except -For"
Qualified Opinion Due to Inconsistencies in a
Company's Application of Generally Accepted
Accounting Principles VII-39
Attachment VII-12: Example of a "Subject To"
Qualified Opinion Due to an Uncertainty
Regarding the Outcome of a Judicial Proceeding VII-40
Attachment VII-13: Example of a "Subject To"
Qualified Opinion Due to a Company Without
An Operating History VII-41
Attachment VII-14: Conditions Likely to Result
in a Qualified Opinion, Adverse Opinion, and
Disclaimer of Opinion VII-42
xiv
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DETAILED TABLE OF CONTENTS (continued)
Page
Attachment VII-IS: Example of Auditor's Special
Report, Confirmation of Chief Financial
Officer's Letter VII-43
VIII. ESTABLISHING FINANCIAL RESPONSIBILITY USING STATE MECHANISMS . VIII-1
A. INTRODUCTION VIII-1
B. REQUIREMENTS FOR USING STATE MECHANISMS AND STATE
ASSUMPTIONS OF RESPONSIBIITY TO SATISFY RCRA
REQUIREMENTS VIII-2
1. Satisfying State Requirements VIII-2
2. Submission of Required Information VIII-2
3. Satisfying Federal Requirements VIII-4
4. Maintaining Coverage VIII-4
. C. REGIONAL OFFICE RESPONSIBILITIES VIII-5
1. Evaluating Equivalency VIII-5
2. Reviewing Submissions VIII-7
3.' Verifying Conformity to Requirements VIII-8
4! Ensuring Maintenance of Coverage VIII-8
D. SOURCES OF FURTHER INFORMATION . . .' VIII-8
E. ATTACHMENTS VIII-9
Attachment VIII-1: RCRA State Mechanisms'
Checklist for Owners or Operators VIII-9
Attachment VIII-2: RCRA State Mechanisms
Checklist for 'Regional Offices VIII-10
Attachment VIII-3: Sample Owner or Operator
: Request Letter (I) .' VIII-13
Attachment VIII-4: Sample Owner or Operator
Request Letter (II) VIII-15
Attachment VIII-5: Sample Owner or Operator
Request Letter (III) VIII-16
GLOSSARY OF TERMS
APPENDIX A: EPA Regional Office Contacts A-l
APPENDIX B: State Regulatory Authorities B-l
XV
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LIST OF EXHIBITS
Page
I. INTRODUCTION
EXHIBIT 1-1: STATES WITH INTERIM AUTHORIZATION AS OF
MAY 10, 1982 1-6
EXHIBIT 1-2: WHERE TO SEND FINANCIAL REQUIREMENTS
DOCUMENTS FOR FACILITIES WITH INTERIM
STATUS 1-7
EXHIBIT 1-3: CLOSURE AND POST-CLOSURE REGULATIONS 1-9
EXHIBIT 1-4: FEDERAL REGISTER CITATIONS FOR
CLOSURE AND POST-CLOSURE REGULATIONS I-10
EXHIBIT 1-5: CURRENT BACKGROUND DOCUMENTS OR GUIDANCE 1-12
II. OVERVIEW OF FINANCIAL REQUIREMENTS
EXHIBIT II-l: FINANCIAL ASSURANCE MECHANISMS REGULATIONS ... II-4
EXHIBIT II-2: OVERVIEW OF FINANCIAL REQUIREMENTS
REGULATIONS 11 -5
EXHIBIT II-3: QUALIFICATIONS FOR FINANCIAL INSTITUTIONS
AND PARENT GUARANTORS II-9
III. ESTABLISHING FINANCIAL RESPONSIBILITY USING TRUST FUNDS
EXHIBIT III-l: RCRA TRUST FUND REGULATIONS III-l
EXHIBIT III-2: RCRA TRUST FUND: REGULATORY AUTHORITIES
FOR FINANCIAL INSTITUTIONS III-3
IV. ESTABLISHING FINANCIAL RESPONSIBILITY USING SUREfY BONDS
EXHIBIT IV-1: RCRA SURETY BOND REGULATIONS IV-2
V. ESTABLISHING FINANCIAL RESPONSIBILITY USING LETTERS
OF CREDIT
EXHIBIT V-l: RCRA LETTER OF CREDIT REGULATIONS V-l
EXHIBIT V-2: LETTER OF CREDIT: REGULATORY AUTHORITIES
FOR FINANCIAL INSTITUTIONS V-3
VI. ESTABLISHING FINANCIAL RESPONSIBILITY USING INSURANCE
EXHIBIT VI-1: RCRA INSURANCE REGULATIONS VI-1
.XVI
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LIST OF EXHIBITS (continued)
Page
VII. ESTABLISHING FINANCIAL RESPONSIBILITY USING THE
FINANCIAL TEST
EXHIBIT VII-1: RCRA FINANCIAL TEST REGULATIONS VII-2
EXHIBIT VII-2: ALTERNATIVE FINANCIAL TESTS VII-4
EXHIBIT VII-3: SAMPLE FILE ON OWNER, OPERATOR, OR
CORPORATE PARENT VII-13
VIII. ESTABLISHING FINANCIAL RESPONSIBILITY USING STATE
MECHANISMS
EXHIBIT VIII-1: RCRA STATE MECHANISM REGULATIONS VIII-1
EXHIBIT VIII-2: STATE FINANCIAL REQUIREMENTS AND
ASSUMPTIONS OF RESPONSIBILITY IN
STATES WITHOUT INTERIM AUTHORIZATION
AS OF MAY 10, 1982 VIII-3
xvn
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I. INTRODUCTION
A. ORGANIZATION OF MANUAL
This manual is organized to communicate information necessary to ensure
that adequate financial responsibility is provided for the proper closure and
post-closure care of hazardous waste facilities. This introduction provides a
general background for understanding the financial requirements and how the
manual is organized. It 'is followed by an overview of the requirements
themselves in Chapter II. The overview outlines general responsibilities
applicable to all financial assurance mechanisms. The following chapters
focus on the specific mechanisms in the order of their appearance in EPA
regulations:
Chapter III Trust Funds
Chapter IV Surety Bonds
Chapter V Letters of Credit
Chapter VI Insurance
Chapter VII Financial Test and Corporate Guarantee
Chapter VIII State-Required Mechanisms and State Assump-
tion of Responsibility
In each of the chapters, the discussion is organized as follows:
A. Overview--Introduces the financial assurance mecha-
nism, highlights key terms and special considera-
tions, and presents the applicable regulations.
B. Requirements of the Mechanism--Explains what must be
done by owners or operators and the financial community
for EPA to approve use of the mechanism.
C. Regional Office Responsibilities--Describes the
activities and functions which EPA Regional Offices
will perform.
D. Sources of Further Information--Provides references to
useful documents or other sources of information.
E. Attachments--Includes checklists and required wording
of instruments.
The manual focuses on the interim status financial requirements of 40 CFR
265 (Subpart H) and includes separate sections which discuss any special
requirements for permitted facilities (40 CFR 264).
The appendix to the manual contains a glossary of key terms. Terms
included in the glossary will be identified by the use of CAPITAL LETTERS in
the first use of the term within each chapter.
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1-2
B. BACKGROUND '
As part of the "cradle to grave" regulation of hazardous wastes under the
Resource Conservation and Recovery Act of 1976 (RCRA), EPA has developed
standards for:
proper closure of hazardous waste treatment, storage,
and disposal facilities;
post-closure care and monitoring of disposal
facilities such as landfills and surface impoundments;
and
assuring the availability of funds for closure and/or
post-closure activities.
These standards require the owner or operator of a hazardous waste
facility to develop plans for closure and (if applicable) post-closure, to
prepare cost estimates based on those plans, and finally, to demonstrate the
ability to pay for closure and/or post-closure. This demonstration must be
accomplished by using one or more financial assurance mechanisms specified by
EPA. This manual describes how thase mechanisms may be used. Other EPA
guidance addresses closure and post-closure plans and cost estimates.
The specific requirements which are applicable to an owner or operator
depend on:
(1) The type of facility involved, because not all
facilities have post-closure obligations and different
types of facilities may have different closure
requirements;
(2) The status of the facility involved, because the rules
distinguish between existing facilities with "interim
status" (40 CFR 265) and facilities which are
operating under a RCRA permit (40 CFR 264) and
(3) The state where the facility is located, because many
states are in the process of being authorized to
. administer their own hazardous waste programs and may
be promulgating rules that are not identical to
federal EPA requirements.
"Sources of Further Information" (included at the end of this chapter)
outlines how these rules appear in the Code of 'Federal Regulations (.CFR), the
dates of publication in the Federal Register, and the appropriate EPA
Guidance Manuals on RCRA closure and post-closure requirements (See Exhibits
1-3 through 1-5). This introduction includes a discussion of owner or
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1-3
operator responsibilities as well as an explanation of the relationship
between state and federal requirements.
C. PURPOSE
This manual has three primary purposes:
(1) To assist owners, operators, and the financial
community in understanding their responsibilities and
fulfilling requirements in a timely fashion;
(2) To assist Regional Administrators in developing
effective procedures to implement the requirements; and
(3) To promote uniform and coordinated implementation
within and among Regions to ease the burden on owners
or operators., the financial community, and EPA
personnel.
To accomplish these goals, the manual describes the responsibilities of
the regulated community, the tasks that must be performed, and the future
contingencies that may arise. Similarly, the manual outlines the functions
which Regional Offices must perform and future problems they may encounter.
Checklists and sample submissions are provided as well as sources of further
information.
D. OWNER OR OPERATOR RESPONSIBILITIES
All hazardous waste, management facilities are subject to closure
requirements (except for facilities that only store wastes for 90 days or
less). However, only disposal facilities where hazardous wastes are to remain
after closure are subject to post-closure requirements. (See 40 CFR
265.110.) To satisfy closure and post-closure requirements, owners and
operators of hazardous waste facilities must prepare closure and post-closure
plans, as applicable, and cost estimates based on those plans. States and the
federal government only are exempt from the standards for cost estimates and
financial assurance; all other owners and operators must satisfy those
requirements as well.
The RCRA financial requirements regulations apply to both the owner and
the operator of a hazardous waste management facility. The actual provision
of financial assurance, however, may be offered by either-the owner or
operator. EPA will consider both parties responsible for carrying out the
requirements, and leaves it up to the parties themselves to undertake, share,
or divide the actual provision of financial assurance.
Owners or operators should be sure to provide their financial institutions
with the name and telephone number of the EPA Regional contact, the required
wording of instruments included in this manual, as well as copies- of the
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1-4
regulations cited in Exhibit II-3. The regulations themselves may be obtained
by'contacting the RCRA Hotline (800) 424-9346 (toll free) or (202) 382-3000,
or the Superintendent of Documents, Washington, D.C. 20402. If financial
institutions have questions about specific procedures or issues not covered in
the regulations, they may contact the RCRA financial specialist in each EPA
Region. See Appendix A.
Until permits have been issued under RCRA, EXISTING FACILITIES are subject
to the INTERIM STATUS rules. When a facility receives a RCRA permit, the
rules for PERMITTED FACILITIES will apply (See Exhibit 1-3). In contrast to
other RCRA standards, the financial requirements for interim status and
permitted facilities are quite similar. Therefore, the chapters describing
the individual financial mechanisms are based on the interim status
requirements; however, each chapter includes subsections which detail any
provisions unique to permitted facilities.
This guidance document is based on the revised interim final rules on
financial requirements for closure and post-closure care published in the
Federal Register on April 7, 1982 and effective as of July 6, 1982. These
rules have been designed and revised to facilitate the goal of assuring that
funds will be available for proper closure and post-closure care of hazardous
waste management facilities. EPA Regional Offices have designated personnel
to answer questions and provide materials. (See Appendix A-l.) EPA
Headquarters may also be consulted through the RCRA HOTLINE (800-424-9346 toll
free or 202-382-3000). Appended to each chapter of this manual are other
useful sources of further information.
E. EPA HEADQUARTERS ROLE
Because this is a new program, problems may arise that either must be
resolved case-by-case or had not been anticipated by the regulations (or this
guidance). To assure uniformity of implementation, EPA Regional Offices
should communicate with EPA Headquarters to determine if such problems have
arisen elsewhere and to discuss options for resolving the questions. Further
guidance or memoranda will- be distributed by Headquarters as additional issues
are resolved. Owners or operators and financial community representatives are
also free to contact Headquarters but should initially discuss all questions
with the Regional Office staff (see Appendix A) or appropriate state agency
.(see Appendix B) who have primary responsibility for implementing the
requirements and overseeing'compliance. (See Section F below.)
As .administrative experience with the financial assurance standards
accumulates, allocation of responsibility between Headquarters and the
Regional Offices for review of compliance, may shift in certain circumstances
to exploit potential efficiencies. For example, the feasibility of
centralizing and automating annual review of financial test data is under
investigation. Headquarters currently envisions that the Regional Offices
will play the lead role in determining compliance with financial assurance
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standards. Headquarters will act as a clearinghouse of information and source
of technical assistance.
In order to foster unified implementation of the financial requirements,
Headquarters will be available to provide guidance on review of financial
assurance demonstrations which apply to more than one EPA Region; procedures
for coordination with Enforcement; and responses to bankruptcies of owners or
operators, their corporate guarantors,, and financial institutions:
F. RELATIONSHIP BETWEEN STATE AND FEDERAL REQUIREMENTS
The Resource Conservation and Recovery Act (RCRA) does not prevent states
from independently enacting closure or post-closure financial requirements,
and a number of states have done so. Moreover, under RCRA, states may apply
to EPA for the authority to administer a state hazardous waste management
program in lieu of federal implementation of such a program; these states must
have financial requirements equivalent to the federal rules to obtain such
authorization. Thus, hazardous waste facilities may be subject to state
financial requirements and must satisfy applicable rules, whether promulgated
as part of an EPA-authorized state program or independently.
In addition to determining what state financial requirements exist (if
any), owners or operators must also determine whether facilities are located
in states that have received EPA authorization to administer hazardous waste
programs in lieu of RCRA. State program authorization typically proceeds in
"Phases," prior to final authorization. Thus, as of May 10, 1982,' twenty-nine
states had received PHASE I INTERIM AUTHORIZATION, including three states
which-have also received PHASE II INTERIM AUTHORIZATION. See Exhibit 1-1.
Once a state has received either Phase I or II interim authorization, owners
or operators need comply only with whatever state financial assurance
requirements exist, if any.
t
Owners or operators should be aware of how the phases of the state
authorization process relate to the RCRA financial requirements. First, to
receive Phase I interim authorization, a state need not have established
financial assurance requirements. However, such requirements must be
established and subs-tantially equivalent to RCRA standards for a state to
receive Phase II interim authorization. In .either case, interim status
facilities are not subject to federal RCRA financial requirements, only such
state requirements as exist will apply. Owners or operators should note that
Phase-II authorization may well establish some additional financial
requirements for interim status facilities.
Beyond this, facilities need comply only with permit requirements, whether
a permit is State or Federally-issued. If a RCRA permit is issued to a
facility in a state that does not have Phase II authorization, federal
requirements (40 CFR 264) apply in addition to any independent state permit
requirements. States with Phase II authorization may issue permits in lieu of
RCRA permits for one or more categories of hazardous waste facilities; federal
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EXHIBIT I-I
STATES WITH INTERIM AUTHOR IZATI ON AS OF HAY 10. 1982
Al aba ma
"Arkansas
Ca 1 i i'ornia
Connect icut
lie Iowa re
Florida
Georij i a
1 own
Kansas
Kentucky
Lou i s iana
Ma i ne
Maryland
Massachusetts
M i ss i ss i pp 1
Montana
New Hampshl re
*North Carol ina
North Dakota
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Ca rol ina
Tennessee
"Texas
Utah
Vermont
V 1 rg i n i a
Wisconsin
I
o\
These states have received Phase II interim authorization in addition to
Phase I.
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1-7
requirements do not apply to permits issued by a state under Phase II
authorization. Of course, such a state must have financial assurance
requirements that are substantially equivalent to federal standards.
Exhibit 1-1 lists the states with interim authorization as of May 10,
1982. Since some "Phase I" and non-authorized states do have financial
requirements, owners and operators should contact the appropriate state agency
(see Appendix B) or the EPA Regional Office for more specific information. To
the extent that state requirements are similar to RCRA rules, Chapters II
through VII of this manual can be used to supplement materials available from
state agencies. However, no submissions to EPA Regional Offices are required,
and reference to Chapter VIII will not be necessary.
State and/or federal officials may and/or need to review the financial
assurance offered by the owner or operator to determine if it satisfies
applicable requirements. Whether it is a state and/or Federal agency that is
responsible for that determination depends on the authorization status of the
state program, and on whether the state has financial responsibility
requirements of its own. Exhibit 1-2 shows the appropriate authority for
review. The owner or operator should therefore ascertain which agency is
'responsible for review, and submit all documents for review to that agency.
EXHIBIT 1-2
WHERE TO' SEND FINANCIAL REQUIREMENTS DOCUMENTS
FOR FACILITIES WITH INTERIM STATUS
Status of State
Program Authorization
Does State Have Its Own Reauirements?
Yes
No
No Authorization
Send to state and
EPA. (Case 1)
Send financial
information to
EPA only.
(Case 2)
Phase I Interim Authorization
Send to state only.
(Case 3)
No submission
necessary.
(Case 4)
Phase II Interim Authorization Send to state only.
(Case 3)
Not applicable
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1-8
In states with financial requirements but neither Phase I nor Phase II
authorization (Case 1), the owner or operator must comply with state financial
assurance requirements and submit the assurance for review to the EPA Regional
Administrator by the effective date to determine whether the RCRA requirements
are satisfied. This is discussed in detail in Chapter VIII.
In states with no financial requirements and no state program
authorization (Case 2) the owner or operator need only submit documents to EPA
which satisfy federal RCRA requirements, as described in this manual.
In states with closure or post-closure financial requirements and either
Phase I or Phase II authorization (Case 3), owners or operators should submit
all required financial assurance information to the state program officials
only.
In a Phase I state without its own financial requirements (Case 4) owners
or operators are not required to submit any financial assurance information.
Any information that is required, however, would be submitted to the state. A
facility in a Phase I state that applies for a RCRA permit, however, must
comply with federal requirements.
In a state which has. not received authorization but has financial
requirements the satisfaction of state financial requirements may not always
satisfy the requirements of federal EPA rules. For example, a state may
establish financial requirements based on only ten-to-fifteen years of
post-closure care as opposed-to the up-to-thirty years (or more) which can be
required-under the'federal system. In these cases, owners or operators may
have to provide additional assurance to satisfy federal financial
requirements. Where state rules are stricter than federal EPA provisions, no
additional financial assurance demonstrations will ordinarily be required.
This situation is discussed in Chapter VIII.
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G. SOURCES OF FURTHER INFORMATION
EXHIBIT 1-3
CLOSURE AND POST-CLOSURE REGULATIONS
'lO CFR Parts 26'i and 263, Subparts G and H
Facility Status & Type Closure Plans
Storage
Treatment
and Disposal
Faci 1 i ties
Di sposa 1
Fac 1 1 i t ies
Only
Interim
Status 1)0 CFR 265. 1 12
Permitted i|0 CFR 26*1.112
Fact 1 i ty
Interim
Status l»0 CFR 265. 1 12
Permitted '10 CFR 26'4.II2
Fac i 1 i ty,
Post-Closure Financial
Plans Cost Estimates Requirements
N/A 1)0 CFR 265.HI2 I|0 CFR 265.l'l3
N/A 1(0 CFR 26l|.l»42 <|0 CFR 26'l.l'i3
1(0 CFR 265.M6 '10 CFR 265. l'4'l '10 CFR 265.l'l5
l|0 CFR 26'I.M8 MO CFR 26U.I'I<» MO CFR 26i|.IM5
I
VO
Source: Title 'lO, Code of Federal Regulations (CFR).
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1-10
EXHIBIT 1-4
FEDERAL REGISTER CITATIONS FOR LATEST
CLOSURE AND POST-CLOSURE REGULATIONS
Topic
(1) Closure and Post-Closure
Plans
Regulatory Status
(a) Permitted Facilities Interim Final
(b) Interim Status
(b) Interim Status
Amendment (Minor)
Revised Interim Final
(2) Cost Estimates
(a) Permitted Facilities Interim Final
Amendment (Minor)
Amendment (Minor)
Final
Amendment/Extens ion
of Time Period
Federal Register
46 FR 2849-2851
January 12, 1981
46 FR 7678
January 23, 1981
46 FR 2875-2877
January 12, 1981
46 FR 2802-2847
(Preamble)
46 FR 2851-2852,
2856 (Regulations)
January 12, 1981
46 FR 7666-7678
(Preamble)
46 FR 7678
(Regulations)
January 23, 1981
47 FR 15044
(Preamble)
47 FR 15047, 15052
(Regulations)
April 7, 1982
45 FR 33154-33220
(Preamble)
45 FR 33243-33244
(Regulations)
May 19, 1980
45 FR 72039-72040
October 30, 1980
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1-11
EXHIBIT 1-4 (continued)
FEDERAL REGISTER CITATIONS FOR LATEST
CLOSURE AND POST-CLOSURE REGULATIONS
Topic Regulatory Status Federal Register
(2) Cost Estimates Restated 46 FR 2802-2847
(b) Interim Status (Preamble)
(continued) 46 FR 2877-2878,
2880-2881
(Regulations)
January 12, 1981
Amendment (Minor) 47 FR 15044
(Preamble)
47 FR 15064, 15069
(Regulations)
April 7, 1982
(3) Financial
Responsibility
Requirements
(Permitted Facilities Revised Interim 47 FR 15032-47
and Interim Status) Final (Preamble)
47 FR 15047-74
(Regulations)
April 7, 1982
Corrections to 47 FR 19995
Trust Agreement May 10, 1982
Wording
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1-12
EXHIBIT 1-5
CURRENT BACKGROUND DOCUMENTS OR GUIDANCE
40 CFR Parts 264 and 265, Subparts G and H
(1) Closure and Post-Closure Plans
(2) Cost Estimates
(3) Financial Assurance
for Closure and
Post-Closure Care
Background Document, Interim Status
Standards and General Status Standards
for Closure and Post-Closure Care
(EPA, December 31, 1980).
Closure and Post-Closure: Interim
Status Standards (FINAL DRAFT
GUIDANCE, November 1981, General
Research Corp.).
Final Draft Guidance for Subpart H of
the Interim Status Standards for Owners
and Operators of Hazardous Waste Treat-
ment, Storage and Disposal Facilities
(FINAL DRAFT GUIDANCE, November 1981,
General Research Corporation).
Background Document, Parts 264 and 265,
Subpart H, Financial Requirements,
Final Regulations (EPA, December 31,
1980).
Background Document for the Financial
Test and Municipal Revenue Test (EPA,
November 30, 1981) .
Financial Assurance for Closure and
Post-Closure Care: Requirements for
Owners or Operators of Hazardous Waste
Treatment, Storage and Disposal Facili-
ties (GUIDANCE, 1982, ICF Incorporated)
See also documents cited in Chaoter VII.
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II. OVERVIEW OF FINANCIAL REQUIREMENTS
This chapter presents an overview of the RCRA financial assurance
requirements, including responsibilities common to all the mechanisms
acceptable for compliance. More detailed information about each mechanism is
contained in the chapter on that mechanism.
A. OVERVIEW OF RESPONSIBILITIES
This section briefly reviews the major responsibilities of the three
parties to most financial assurance mechanisms, the owner or operator, the
Regional Office, and the financial institution or parent guarantor. Each of
the steps described here is discussed in greater detail in the rest of this
chapter. Summary checklists are provided as Attachments II-1 and II-2 at the
end of this chapter.
1. Owner or Operator Responsibilities
To select a mechanism for complying with"closure and post-closure
financial assurance requirements, owners or operators will want to consider
such factors as the cost and availability of alternative mechanisms, tax
treatment of payments, and effects on balance sheets. Many owners or
operators would benefit from an initial discussion with their own bank,
accountant, or financial advisor regarding the relative advantages of the
different mechanisms for complying with the regulations.
Once the owner or operator decides upon a mechanism for complying with the
RCRA financial assurance regulations, it must approach a qualified financial
institution or parent and negotiate the terms of the assurance. The financial
institution may request detailed information from the owner or operator before
the financial assurance deal will be consummated. The owner or operator will
have to make sure that the financial assurance mechanism is in the amount and
form required by EPA, is signed as required, is in effect at the appropriate
time, and is submitted to the Regional Office when required.
During the operating life of the facility and while the financial
assurance mechanism is in force, the owner or operator will have to increase
the amount of the assurance to take into account cost estimate increases due
to inflation or any changes in closure or post-closure plans. The owner or
operator may also request from the Regional Administrator a reduction in
assurance when cost estimates decrease.
When the financial institution enters bankruptcy or otherwise loses its
qualifications to provide assurance under the regulations, the owner or
operator must obtain alternative means of financial assurance. When ownership
or operating responsibility for the facility is transferred,.or a change in
the method of assuran.ce is sought, termination of the existing assurance
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II-2
mechanism will only be permitted once substitute financial assurance has
otherwise been obtained. When the financial institution or parent guarantor
exercises its right to cancel assurance, the owner or operator may have only
90 days to obtain replacement assurance.
When closure begins, the owner or operator may begin submitting itemized
bills to the Regional Administrator for reimbursement. When closure is
complete and again when post-closure care is complete, the owner or operator
will want to apply to the Regional Administrator to be released from financial
assurance requirements.
The responsibilities of the owner or operator are summarized in Attachment
II-l.
2. Regional Office Responsibilities
The Regional Administrator has the lead responsibility for assisting the
owner or operator to understand and comply with the RCRA financial
responsibility requirements. The Regional Office must institute procedures
for reviewing and administering the financial assurance information submitted
by the owners and operators in its region. First, the Regional Office must be
certain that the financial institution qualifies to provide assurance under
the regulations. Second, the assurance must be provided in the proper amount
and form, it must be signed by both the owner or operator and the financial
institution (or someone properly acting on their behalf), and it must be in
effect and submitted to the Regional Administrator by the required dates. '
While financial assurance is in effect, the Regional Office will have to
make certain that -the assurance mechanism is updated during the operating life
of the facility to reflect adjustments to cost estimates due to inflation and
changes in cost estimates resulting from new plans. Increases in cost
estimates must be covered by additional assurance, while owners or operators
may request reduction in assurance when cost estimates decrease.
The Regional Office must also be sure that assurance is maintained in the
event of bankruptcy of the financial institution or if the institution or
parent guarantor ceases to remain qualified. The Regional Office must also
permit the owner or operator to terminate assurance only when alternate
assurance is being provided by the present or a new owner or operator. If the
financial institution or parent guarantor sends notice of cancellation, the
Regional Office must assure that either alternate financial assurance is
provided within 90 days or the mechanism is used to fund closure and/or
post-closure care.
The Regional Office should authorize reimbursement of closure and/or
post-closure care expenses only after itemized bills are submitted and it is
determined that the expenses are in accordance with the plan or otherwie
justifiable. When payment for closure is being made from a TRUST FUND or
pursuant to'INSURANCE, the Regional Administrator may withhold reimbursement
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II-3
until closure is completed if he believes that the cost of closure will be
significantly greater than the amount of assurance provided. Finally, the
Regional Office will need to release owners and operators from financial
assurance requirements once closure is complete and later, when post-closure
care is complete.
The responsibilities of the Regional Office are summarized in Attachment
II-2.
3. Financial Institution or Parent Guarantor
The financial institution or PARENT GUARANTOR becomes involved in the RCRA
Subpart H requirements only because of the agreement it enters into with the
owner or operator. As a result, the responsibilities of the financial
institution or parent guarantor are prescribed by the instrument itself and
its accompanying documentation and applicable state and federal regulations.
In all cases, the financial institution and the owner or operator are
responsible for ensuring that the wording of the instrument is identical to
the regulations. Most of the other major obligations of the financial
institution vary from mechanism to mechanism and are specified in the
instrument.
One important feature is common to most methods of financial assurance
involving a financial institution or a corporate guarantor -- cancellation.
Notice must be given to both the owner or operator and the Regional
Administrator .120 days before cancellation. If alternate assurance is not
provided by the owner or operator within 90 days, the financial institution or
parent guarantor will remain responsible according to the terms of the
mechanism. The Regional Administrator is authorized to draw upon or enforce
financial assurances prior to the .effective date of their cancellation^.
B. FINANCIAL ASSURANCE OPTIONS
This section is divided into two parts. The first describes the
individual financial assurance mechanisms that are available to owners and
operators under the RCRA financial assurance regulations. The second part
describes how and when several different financial assurance mechanisms can be
used together. Exhibit II-l lists the financial assurance regulations by
mechanism, while Exhibit II-2 gives an overview of these regulations by
subject area.
1. Summary of Different Mechanisms
TRUST FUNDS assure payment of closure or post-closure costs from a fund
held in trust by a bank or other qualified entity. The owner or operator
deposits money over time into the fund, which is invested by the financial
institution. Payments into the fund are generally made annually; the size of
the payments required depends on the value of the trust fund at that time, the
amount of cost estimates being assured, and the period over which payments are
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II-4
EXHIBIT II-l
FINANCIAL ASSURANCE MECHANISMS REGULATIONS
Mechanism
Interim Status
Permitted Facility
Trust Funds
Closure
Post-Closure
Financial Guarantee Bonds
Closure
Post-Closure
Performance Bonds
Closure
Post-Closure
Letters of Credit
Closure
Post-Closure
Insurance
Closure
Post-Closure
Financial Test and
Corporate Guarantee
Closure
Post-Closure
State-Required Mechanisms
State Assumption of
Responsibility
40 CFR 265.143(a)
40 CFR 265.145(a)
40 CFR 265.143(b)
40 CFR 265.145(b)
Not applicable
Not applicable
40 CFR 265.143(c)
40 CFR 265.145(c)
40 CFR 265.143(d)
40 CFR 265.145(d)
40 CFR 265.143(e)
40 CFR 265.145(e)
40 CFR 265.149
40 CFR 265.150
40 CFR 264.143(a)
40 CFR 264.145(a)
40 CFR 264.143(b)
40 CFR 264.145(b)
40 CFR 264.143(c)
40 CFR 264.145(c)
40 CFR 264.143(d)
40 CFR 264.145(d)
40 CFR 264.143(e)
40 CFR 264.145(e)
40 CFR 264.143(f)
40 CFR 264.145(f)
40 CFR 264.149
40 CFR 264.150
Source: Title 40, Code of Federal Regulations (CFR).
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II-S
EXHIBIT II-2
OVERVIEW OF FINANCIAL REQUIREMENTS REGULATIONS
Topic
Interim Status
Permitted
Facilities
Definitions
40 CFR 265.141
40 CFR 264.141
Adjusting cost estimates
for inflation
40 CFR 265.142(b)
40 CFR 264.142(b)
Use of multiple financial
mechanisms; Use of one
mechanism for multiple
facilities
40 CFR 265.143(f),(g)
(closure)
40 CFR 265.145(f),(g)
(post-closure)
40 CFR 264.143(g), 00
(closure)
40 CFR 264.145(g), 00
(post-closure)'
Release from Requirements
40 CFR 265.143(h)
(closure)
40 CFR 265.145(h)
(post-closure)
40 CFR 264.143(i)
(closure)
40 CFR 264.145(i)
(post-closure)
Combination of mechanisms
(closure and post-closure)
40 CFR 265.146
40 CFR 264.146
Incapacity of owner,
operator, guarantor, or
financial institution
40 CFR 265.148
40 CFR 264.148
Wording of Instruments
40 CFR 265.151
40 CFR 264.151
Source: Title 40, Code of Federal Regulations (CFR).
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II-6
to be made. A fee is usually charged for the institution's services. Through
the' payments into the fund and the income received on the investments, the
trust fund is expected to grow until it is large enough to cover the estimated
expenditures for closure and/or post-closure care. As these expenditures are
made, EPA authorizes reimbursement from the trust fund. See Chapter III for
details.
SURETY BONDS under RCRA are of two types: FINANCIAL GUARANTEE BONDS
(which are allowed at both interim status facilities and permitted facilities)
and PERFORMANCE BONDS (allowed only at permitted facilities). In a financial
guarantee bond, a SURETY guarantees that a specific amount of money will be
available for closure and/or post-closure care if the owner or operator fails
to fulfill its obligations. A PREMIUM is charged to the owner or operator for
this guarantee. In a performance bond, the surety .may either perform closure
and/or post-closure care or pay the PENAL SUM of the bond, if the owner or
operator fails to fulfill its obligations. Under either type of bond, the
owner or operator establishes a STANDBY TRUST FUND, into which any payments
from the surety will be made. If the surety is required to pay or perform
under the terms of the surety bond, the surety would probably seek to recover
its expenses from the owner or operator. See Chapter IV for details.
LETTERS OF CREDIT provide assurance of the availability of funds for
closure and/or post-closure expenses from a bank or other financial
institution. Firms with a good credit history with a financial institution
may find this mechanism desirable, since the bank's fee and interest rate are
negotiable and- are based on the firm's credit-worthiness. Under this
arrangement, EPA can direct the deposit of the funds into a STANDBY TRUST
FUND, to be used for closure and/or post-closure payments in case of
nonpayment or nonperformance by the owner or operator or if the letter were
being cancelled without the substitution of alternate assurance. The bank
would then require repayment from the owner or operator including an interest
charge. The owner or operator cannot draw upon the letter of-credit to
finance actual closure and/or post-closure activities (it must use other funds
or credit lines to pay for these activities). See Chapter V for details.
INSURANCE assures payment of closure or post-closure expenses whenever
needed by an insurance company regardless of the owner or operator's ability
to pay these costs. The insurer agrees to reimburse providers of closure
and/or post-closure care at the direction of the EPA. PREMIUMS must be paid
by the owner or operator. The owner or operator is essentially paying the
insurer to assume the liability of providing for closure and/or post-closure
expenses up to the FACE AMOUNT of the policy. This may be a desirable option
for firms with a good relationship with an insurer, or for use by small firms
for which after-tax trust fund payments may be relatively high compared to
insurance premiums. This type of insurance should not be confused with
liability insurance for sudden and non-sudden events. See Chapter VI for
details.
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II-7
THE FINANCIAL TEST and CORPORATE GUARANTEE provide assurance to EPA that
an'owner or operator or its PARENT CORPORATION is financially strong enough
to be able to pay the estimated costs for closure and/or post-closure care.
The specific requirements of two sets of financial test criteria are described
in detail in Chapter VII; at least one of these sets of criteria must be met.
In general, firms must have adequate NET INCOME, NET WORKING CAPITAL, ASSETS,
or NET WORTH relative to the total estimated closure and/or post-closure
expenses, or have ready access to capital. A high bond rating may be used to
satisfy some of the test criteria. This option will be attractive for many
large domestic firms in strong financial condition. The cost to the firm or
its parent company will almost certainly be less than the costs of payments to
financial institutions under the other alternatives, since the firm is neither
building a fund nor paying a (risk) premium.
STATE MECHANISMS are any financial assurance mechanism required or
offered by a state government that offers assurance of payment of closure or
post-closure care expenses equivalent to the federal RCRA assurance
mechanisms. EPA must approve the use of these mechanisms, in whole or part,
in satisfaction of federal requirements. Some states have established
provisions or funds which assume responsibility for closure and/or
post-closure care. While not necessarily relieving the owner or operator from
ultimate liability, a state's assumption of responsibility provides assurance
to EPA that closure and/or post-closure expenses will be met. Use of these
financial assurance options for facilities in states without INTERIM
AUTHORIZATION is discussed in Chapter VIII.
2. Using Combinations .of Mechanisms and
Covering Multiple Facilities
One financial mechanism may be used for both closure and post-closure care
of a facility. Owners or operators may also use one or more financial
mechanisms to cover multiple facilities,'or combine different mechanisms to
cover one facility. For example, when coverage must be increased due to
inflation or changes in plans, adding a different mechanism could be less
expensive or burdensome than increasing the coverage of existing mechanisms.
Combinations of mechanisms may be used for: (1) closure only, (2)
post-closure only, or (3) closure and post-closure.
Not all mechanisms may be used in combination. Combinations of trust
funds, financial gurantee bonds, letters of credit, and insurance are
permissible. Firms using the financial test, corporate parent guarantee, or
performance bond to provide assurance of closure and/or post-closure care at a
facility may not use other financial mechanisms to cover some of the costs
of the same facility, even if the cost estimate increases. The financial
test, parent guarantee, and performance bond may only be used to cover the
entire closure cost estimate and/or post-closure cost estimate of a facility.
A single facility could, however, utilize the financial test, corporate
guarantee, or performance bond for closure only and one of the other
mechanisms for post-closure care, or vice versa.
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II-8
If aii owner or operator wishes to use a trust fund in combination with a
financial guarantee bond or letter of credit, it need not establish a separate
standby trust fund, since the role of the standby trust fund is fulfilled by
the trust fund itself. Similarly, it need only establish one standby trust
fund for combinations of financial guarantee bonds and letters of credit.
Owners or operators must submit specific documentation of facilities and
amounts covered by each mechanism when assurance is being provided for
multiple facilities. If the facilities are located in more than one EPA
region, identical evidence of financial assurance must be submitted to the
Regional Administrator of each region. In any case, the total financial
assurance must equal at least the amount of the total cost estimates. This
assists EPA in verifying the adequacy of coverage for each site and
coordinating this verification process among regions.
When the Regional Administrator authorizes use of funds for closure or
post-closure care of a facility, he may direct payments from any or all
mechanisms used in combination to provide coverage for that facility. The
choice of which mechanism to draw upon first rests with the Regional
Administrator. For example, if a letter of credit and an insurance policy
cover a facility, the Regional Administrator may authorize withdrawal from
either instrument. In the case of multiple facilities covered by a single
mechanism, he may use only the amount of funds designated for that facility;
unless the owner or operator agrees to the use of additional funds available
under the mechanism. For example, if a trust fund covers three facilities and
the Regional Administrator must authorize funds for only one, he may continue
to draw upon the trust fund only up to the amount stipulated for that facility.
C. QUALIFICATIONS FOR FINANCIAL INSTITUTIONS AND
PARENT GUARANTORS
All of the financial assurance mechanisms except the financial test
require that a third party assure the payment of closure and post-closure
expenses. Exhibit II-3 shows the minimum qualifications for financial
institutions acting as trustees, or issuing letters of credit, surety bonds,
and insurance policies, and the minimum qualifications for a parent
corporation to act as a corporate guarantor.
D. INITIAL SUBMISSIONS
A-ll documents and correspondence to be submitted to the Regional
Administrator regarding financial assurance requirements should be marked
"Attention: RCRA Financial Requirements" as part of the address.
Use of certified mail is only required when financial institutions or
corporate guarantors submit notices of intent to cancel or terminate
mechanisms and when the owner or operator or corporate guarantor submit
notices of commencement of bankruptcy proceedings.
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II-9
EXHIBIT II-3
QUALIFICATIONS FOR FINANCIAL INSTITUTIONS
AND PARENT GUARANTORS
INSTITUTION
Banks, savings and loans,
other financial institu-
tions
Surety companies
MECHANISM
Trust Fund
Surety Bond
Banks, savings & loans,
mutual savings banks,
credit unions
Insurance companies
Letters of credit
Insurance
Parent Corporation
Corporate Guarantee
QUALIFICATIONS -.
Authority to' act- as a
trustee; trust opera-
tions regulated and
examined by a Federal or
State Agency
Listed as an acceptable
surety in Circular 570
of the U.S. Department
of Treasury and licensed
in the state where the
surety bond is executed
Authority to issue
letters of credit;
letter of credit
operations regulated and
examined by a Federal or
State Agency
Licensed to transact the
business of insurance in
one or more states; or
eligible to provide
insurance as an excess
or surplus lines
insurer, in one or more
states
Directly own at least 50
percent of the voting
stock of the owner or
operator; must also
satisfy financial test
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11-10
1. Form and Amount of Financial Assurance
The precise wording required for each mechanism is specified in the
regulations. Copies of the required wording for individual mechanisms are
included in the later chapters of this manual as Attachments. Both the owner
or operator and'the financial institution or parent guarantor must assure that
the wording of financial mechanisms conforms to the regulations.
The required documents will always include a list or letter identifying
the facilities covered. The information must include:
The facility's EPA Identification Number
The name and address of the facility
Identifying information on the financial instrument,
if any, including the name and address of the issuing
institution, and identification number of the
instrument itself.
Amount of funds for closure or post-closure assured
by each mechanism for each facility.
The owner or operator must be sure that the signatories are authorized to
act as representatives of the firm in transactions of that type. If the owner
or operator is a division of corporation, for example, an officer of the
corporation must usually sign on the division's behalf. If the owner or
operator is a partnership, the signatory must indicate that he is signing for
the partnership (i.e. with words such as "for the partnership" or "for ABC
Company"). If the owner or operator is an individual, he may sign himself.
In all cases, however, persons having an appropriate POWER OF ATTORNEY may
sign on behalf of the owner or operator; a copy of the power of attorney
should be attached to the document.
These documents must be in effect by the effective date of the regulations
(for facilities under interim status), or before the first receipt of
hazardous waste (for new permitted facilities). "The owner or operator is
responsible for verifying that the accountant, financial institution,
assurance mechanism, or corporate parent meets EPA requirements, which are
detailed in Chapters III through VIII of this manual.
The amount of the financial assurance must, at a minimum, equal the
CURRENT COST.ESTIMATES for closure and/or post-closure care. Of course, if
multiple mechanisms are used (see Section B of Chapter II), the combined
coverage must at least equal the cost estimate. The initial amount of
coverage may be larger than the cost estimate in order to accommodate expected
revisions in the estimate due to inflation.
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11-11
The owner or operator is responsible for ensuring that the mechanism(s)
cover(s) the entire estimated cost, with one exception. If the trust fund is
employed, then a pay-in period is allowed before the trust fund completely
covers the closure or post-closure cost estimates.
2. Obtaining Financial Assurance
If an owner or operator decides on a mechanism involving a credit or
insurance arrangement (surety bond, letter of credit, insurance policy), the
financial 'institution will request detailed information on the facility and
the firm itself. This information may include:
Historical financial data (balance sheets and profit
and loss statements) on the facility and the business
entity (corporation, partnership, etc.) owning or
operating it;
Current financial statements (probably the latest
interim statements will be required);
Projected financial information (income statements,
cash flows, and balance sheets) reflecting the expected
risks and profits associated with the future operation
of the facility;
the closure or. post-closure plans and cost estimates;
A description of the facility, its location, the
types and quantities of waste, and other information
reflecting the risks involved with the site;
A description of the business entity owning or
operating the facility and its other facilities and
lines of business;
The past operating experience of this facility and
others owned or operated by the same business entity;
and
A description of the principal individuals owning and
operating the facility, including their qualifications,
experience, and financial condition.
Initially, the availability of certain mechanisms (e.g., surety bond,
insurance) may be limited in some areas.
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E. SUBSEQUENT RESPONSIBILITIES FOR UPDATING AND MAINTAINING COVERAGE
1. Updating Coverage
EPA rules for estimating closure and post-closure costs require that
during the operating life of the facility cost estimates be adjusted annually
to take account of inflation and that new cost estimates be calculated each
time closure or post-closure plans are changed. In either instance, owners or
operators may need to increase the amount of financial assurance initially
provided.
Adjustment for inflation is calculated using the INFLATION FACTOR derived
from the Implicit Price Deflator for Gross National Product as published in
the U.S. Department of Commerce Survey of Current Business and in the
Economic Indicators published by the Council of Economic Advisors. The
inflation factor is calculated by dividing the latest published annual
deflator by the deflator for the previous year. Owners or operators may
contact local libraries or the appropriate Regional Office to obtain data on
deflators and the current inflation factor. The adjustment must be made
within 30 days after the anniversary of date on which the initial cost
estimate was prepared.
Whenever the CURRENT COST ESTIMATE exceeds the coverage of the financial
assurance mechanism(s) because of increases due to inflation or changes in
plans, the owner or operator must arrange for increased coverage using the
same mechanism or through a combination of mechanisms. The additional
coverage must be obtained and evidence of it submitted to the Regional
Administrator within 60 days after the cost estimate increase.
If during the operating life of the facility the cost estimate for closure
or post-closure should decrease due to a change in operating plans or other
factors, the'owner or operator may apply to the EPA Regional Administrator for
approval of a decrease in coverage. In certain instances, decreases in
assurance may be permitted during the post-closure period. Generally, the
Regional Administrator will require that the closure or post-closure plans and
cost estimates be submitted for review; requests for decreases in coverage
will be denied when plans or cost estimates are incomplete or if cost
estimates are unreasonably low. Potential effects of inflation will also be a
major consideration in evaluating requests for decreases in the amount of
post-closure funds assured. See Chapters III through VII for details.
Cost estimates, closure and post-closure plans,'and amount of financial
assurance-may be verified by the Regional Administrator. - The latest or latest
adjusted closure and post-closure cost estimates must be'kept with the latest
closure and post-closure plans at the facility.
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2. Maintaining Assur.ance
To maintain assurance, owners or operators are required to make required
payments and provide assurance at least equal in amount to current cost
estimates. In addition, an owner or operator must also change to an alternate
assurance mechanism:
In the event of bankruptcy of the institution acting
as trustee or issuing the letter of credit, surety
bond, or insurance contract;
Whenever the financial institution ceases to qualify
under the regulations; and
If the financial test or corporate guarantee is
disallowed.
In the first two of these cases, the owner or operator has 60 days to obtain
alternate assurance; in the last, it has 30 days.
In addition, the owner or operator or corporate guarantor must inform the
Regional Administrator within 10 days after being named as a debtor in a
bankruptcy proceeding.
Finally, if ownership or operating responsibility for the facility is
transferred, the Regional Administrator will not permit the previous owner or
operator to terminate financial assuranc'e until the new owner or operator has
obtained acceptable assurance.
3. Cancellations
Because the financial requirements have been developed to assure the
availability of funds for closure or post-closure care, the regulations impose
specific requirements on financial institutions or parent guarantors who wish
to cancel their RCRA financial mechanisms. An issuer of a surety bond, letter
of credit, insurance policy or corporate guarantee must notify both the owner
or operator and the Regional Administrator(s) by certified mail of its intent
to cancel or terminate the mechanism. Cancellation of a surety bond,
insurance contract, or corporate guarantee may not occur during the 120 days
beginning with the date of receipt of the notice by both the Regional
Administrator and the owner or operator, as- evidenced by the return receipts.
In the case of the letter of credit, notice must be given at least 120 days
before the current expiration date.
In general, the owner or operator is responsible for obtaining alternate
assurance if the financial institution or corporate guarantor intends to
cancel; however, the chapters on the individual mechanisms will need to be
consulted because the obligations and powers of the EPA Regional
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Administrator, the owner or operator, and the financial institution or
corporate guarantor may differ depending on the mechanism being used.
Of course, the owner or operator may request cancellation or termination
of a mechanism when alternate assurance has been substituted or when released
from the financial requirements. See Section G below.
4. Changing Mechanisms Voluntarily
Owners or operators may voluntarily change the mechanism being used to
provide assurance of financial responsibility with prior written approval from
the Regional Administrator. If the mechanism has been providing assurance for
facilities in more than one Region, the prior written approval of all the
affected Regional Administrators is needed.
To receive approval, the new mechanism must comply with EPA's regulations
for eligibility. The new mechanism, if approved,' must become effective before
or at the time that the previous mechanism expires. The Regional
Administrator must ensure continuity of coverage, but should strive for the
minimum necessary amount of overlap to reduce the cost to the owner or
operator. For example, if an owner or operator changes from a trust fund to
another financial assurance mechanism, the Regional Administrator should not
direct the trustee to release funds from the trust until the new mechanism is
effective.
Changing to a trust fund poses special problems. When an owner or
operator cancels other assurance to change to a trust fund, the amount of
money deposited into the trust fund must be equal to the amount that would
have had to be in the trust fund if the trust had been the original financial
assurance mechanism and payments to the trust had been made as specified in
the regulations. This is discussed in more detail in Chapter III.
F. DRAWING ON FUNDS
The conditions under which the owner or operator or the Regional
Administrator may draw on a financial assurance mechanism will vary with each
mechanism. These conditions are described in Chapters III through VII.
Regional Administrators may follow a common procedure, however, when
authorizing reimbursement of closure or post-closure expenses in certain
situations, including the following:
the owner or operator uses the trust fund mechanism
to satisfy financial requirements
the surety has placed funds in a standby trust
the Regional Administrator has directed the deposit
of funds through a letter of credit into a standby trust
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the owner or operator uses the insurance mechanism to
satisfy financial requirements
the corporate guarantor has placed funds in a trust
In these cases, reimbursement of expenses for closure or post-closure care
will be subject to the regulations governing trust funds (See Section C.5 of
Chapter III) and insurance (see Section C.5 of Chapter VI). The basic
requirements include:
(1) review of itemized bills;
(2) determination within 60 days whether the expenditures
are consistent with closure or post-closure plans, or
are otherwise justifiable;
(3) approval of requests for reimbursement and direction
of payment within 60 days unless there is reason to
believe that the cost of closure will be significantly
greater than available funds; in that case, complete
reimbursement should be withheld until certification
of proper closure is completed;
(4) approval of requests for reimbursement of post-closure
expenditures, if determined to be justifiable.
When assessing itemized bills submitted by owners or operators, the
Regional Administrator will need to decide if any extra expenditures, such as
the costs of responding a contingency not accounted for by the plan (bad
weather, liner failure, etc.) should be reimbursed by the trust or paid by the
owner or operator. Separate payment required of a financially troubled owner
or operator may cause it to go into bankruptcy. In this case, EPA might be
left responsible for completion of closure or post-closure care of the
facility. On the other hand, if the Regional Administrator agrees to
reimbursement, there is the possibility that the trust fund will run out of
funds before the completion of these activities. This dilemma will have to be
solved by the Regional Administrator on a case-by-case basis, in consultation
with Headquarters. The owner or operator, of course; remains responsible for
all closure and/or post-closure costs even if the financial assurance monies
are exhausted.
G. RELEASE FROM RCRA FINANCIAL REQUIREMENTS
An owner or operator of a hazardous waste facility is released by the
Regional Administrator (1) from the closure financial assurance requirements
when it satisfactorily certifies to EPA that closure has been completed in
accordance with the closure plan and (2) from the post-closure financial
assurance requirements when the post-closure care requirements have been
completed in accordance with the post-closure plan. The certification of
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closure must be provided by the owner or operator and by an independent
registered professional engineer.
In the case of financial assurance for closure, the Regional Administrator
will determine whether closure is satisfactory, and notify the owner or
operator within 60 days of receiving the certifications. For release from
post-closure assurance requirements, the Regional Administrator will approve
release at the end of the post-closure period specified in the post-closure
plan, upon request of the owner o-r operator, if post-closure care has been
satisfactorily provided in conformity with the plan.
Additionally, an owner or operator may be released from the federal RCRA
requirements if (1) the administration of the hazardous waste program is taken
over by an authorized state government or (2) ownership or operation of the
facility has been transferred, but only in accordance with the specific
conditions of such transfers. There should be no lapse in coverage allowed in
such circumstances.
H. DIFFERENCES BETWEEN REQUIREMENTS FOR INTERIM STATUS
AND PERMITTED FACILITIES
This manual contains guidance- for both interim status and permitted
facilities. Interim status facilities are existing facilities who have
submitted notifications and Part A'S and are awaiting final disposition of
permit applications. A permitted facility is one which has demonstrated
compliance with RCRA standards and has received a permit.
The guidance in this manual primarily addresses the financial
responsibility requirements for interim status facilities. The additional
requirements for permitted facilities are included in the chapters on the
mechanisms. It is useful to remember that there are only four differences
between interim status and permitted facility financial assurance requirements:
(1) While financial assurance mechanisms for interim
status facilities must generally be in force by the
effective date of the regulations, new permitted
facilities must provide assurance before the first
receipt of hazardous waste at the facility.
(2) The "pay-in" period for trust funds is defined
differently for permitted and interim status
facilities. The pay-in period is 20 years (interim
status) or the life of the initial RCRA permit
(permitted facilities) or the remaining life of the
facility (both interim status and permitted
facilities), whichever is shorter. (See Chapter III)
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(3) The receipt from the trustee for the initial payment
into the trust fund must be submitted by the owner or
operator to the Regional Administrator before the
first receipt of hazardous waste at a new permitted
facility. Interim status facilities need not submit a
receipt. (See Chapter III)
(4) Performance bonds are not a permissible form of surety
bond for interim status facilities under the
regulations, but are permissible for permitted
facilities. (See Chapter IV)
I. USE OF THE HAZARDOUS WASTE DATA MANAGEMENT SYSTEM
The Hazardous Waste Data Management System (HVDMS) is being developed to
aid -Regional Office staff in tracking enforcement activities, compliance
monitoring, and the status of permits. The HWDMS could prove particularly
valuable for management of the financial assurance programs in at least four
ways, outlined below.
(1) Recordkeeping. The HVDMS will have at a minimum a list of EPA
facilities in the region, indexed by name and by EPA Identification Number.
Each facility must have the following financial assurance information in its
file:
Type of instrument or guarantee
Name and address of issuer or guarantor
Amount of closure or post-closure costs currently
covered by.instrument Cboth in dollars and as a
percentage of total costs)
This information will enable Regional Office staff to identify the
facilities for which financial assurance has not been provided, as well as the
adequacy of the funds assured. In addition, the HVDMS can be used to track
other pieces of information such as:
' Number of instrument
Effective date of instrument
Date of expiration of instrument
If multifacility instrument, name and number of other
facilities in Region, name and number of facilities
outside Region
Authorized payments made from instrument
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Total closure and post-closure cost estimates
Narrative comments
A detailed, computerized recordkeeping function could reduce clerical
requirements and speed access to critical information.
(2) "Tickler" File. The RCRA financial assurance regulations specify
different timetables and deadlines that the Regional Administrator must
follow. The HWDMS could ease this burden considerably by automatically
tracking critical dates of submission, notifications, etc. and providing
computer readouts of facilities or owners and operators that require
attention. For example, the printouts of critical dates and required actions
could be ordered for a given owner, operator, or facilities. Alternatively,
the printouts could be weekly updates of actions required from all facilities,
owners, operators, or financial institutions within the next 30 days.
Two levels of tickler files could be established, one for regularly
scheduled events, and one for unscheduled events:
(A) Scheduled events such as expiration dates of
financial instruments and inflation adjustment dates
could be programmed into the file on the date of
submission, and at known intervals after submission.
(B)' Unscheduled events such as increases in cost due to
operating plan changes, cancellation notices, owner .or
operator bankruptcies, and issuer disqualifications
can be programmed in the file when notification is
received.
The HWDMS can be particularly useful in tracking th'e adequacy of financial
assurance with respect to annual adjustments in cost estimates due to
inflation.
(3) Financial Test and Corporate Guarantee. The Regional st'aff could
develop a filing system of data taken from the chief financial officer's
letter and auditor's opinion (see Exhibit VII-4 for an example of such a
file). If this filing system were automated, a simple computer program could
screen trends in the financial data and "red flag" any owner, operator or
corpo-rate parent that appears to be deteriorating.
(4) Trust Fund Payment Calculations. The Regional Administrator could
develop an audit system to ensure that the required payments are being made to
the trust fund, as explained in Chapter III. The calculation of the required
payments could become complex if multi-instrument or multi-facility financial
assurance mechanisms are employed. Automating these calculations would result
in a fast, error-free audit process.
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Undoubtedly, other applications of the HWDMS to managing financial
assurance programs could be developed. However, detailed discussion of the
HWDMS is outside the scope of this manual.
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ATTACHMENT II-1
SUMMARY OF OWNER OR OPERATOR RESPONSIBILITIES*
(1) Be certain that the financial assurance mechanism:
(a) Is worded as required;
(b) Is in the proper amount;
(c) Is signed as required;
Is issued by a qualifying institution;
(d) Is in effect at the appropriate time; and
(e) Is submitted to the Regional Office on time.
(2) Increase the amount of assurance when necessary during the operating
life of the facility due to:
(a) Annual adjustments for inflation; and
(b) Changes in plans and increases in cost estimates
Submit evidence of increase in coverage within 60 days.
(3) Apply for decreases in the amount of assurance when appropriate.
(4) Obtain new assurance:
(a) When the financial institution enters bankruptcy, ceases
operations, or ceases to qualify; or
(b) When the financial institution notifies its intent to cancel
the assurance.
(5) Notify the Regional Administrator by certified mail within 10 day's after
the commencement of a bankruptcy proceeding.
(6) Request termination of financial assurance when alternate assurance is
provided or when released from financial assurance requirements.
(7) Submit itemized bills for reimbursement for closure and post-closure
care.
(8) - Request release from financial assurance requirements when final closure
is properly completed and again when post-closure care is completed.
* NOTE: Responsibilities and rights may vary with the specific
financial assurance -mechanism used. For details, consult Chapters III through
VIII of this manual.
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ATTACHMENT II-2
SUMMARY OF REGIONAL OFFICE RESPONSIBILITIES-
(1) Check the qualifications of the financial institution, etc.
(2) Verify that the financial assurance mechanism:
(a) Is correctly worded;
(b) Is in the proper amount;
(c) Is complete;
(d) Is signed as required; and
(e) Is in effect and submitted to the Regional Office on time.
(3) Make sure that the amount of financial assurance is increased when
necessary during the operating life of the facility due to:
(a) Annual adjustments for inflation, and
(b) Changes in plans and increases in. cost estimates
(4) Allow decreases in the amount of financial assurance only when cost
estimates decrease and the amount of assurance will be adequate.
(5) Verify that new assurance is obtained:
(a) When the financial institution enters bankruptcy or ceases
operations;
(b) When the financial institution or parent guarantor ceases to
qualify; or *
(c) When the owner or operator requests termination of assurance
because a new mechanism is being used or ownership or
operating responsibility is being transferred.
(6) Approve requests for a change in mechanisms when no lapse in coverage
will result.
(7) When the financial institution or parent guarantor sends notice of
-cancellation, ensure that alternate assurance is provided or the
financial mechanism is used to .fund closure and/or post-closure care.
* NOTE: Responsibilities and rights may vary with the specific
financial assurance mechanism used. For details, consult Chapters III through
VIII of this manual.
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ATTACHMENT II-2 (continued)
SUMMARY OF REGIONAL OFFICE RESPONSIBILITIES*
(8) Approve requests for reimbursement for closure and/or post-closure
expenses only when itemized bills are submitted and the expenses are in
accordance with the plan or otherwise justified. Instruct the insurer
or trustee in writing to make reimbursement in the specified amounts.
If closure costs will significantly exceed the value of a trust fund or
remaining insurance, withhold a portion of reimbursement until
completion of closure.
(9) Permit release from financial assurance requirements only when closure
and/or post-closure care is properly completed.
(10) Approve requests to terminate financial assurance:
(a) When alternate assurance is substituted; or
(b) When the owner or operator is released from financial
assurance requirements.
(11) Record relevant information in HWDMS and monitor deadlines for
submissions
* NOTE: Responsibilities and rights may vary with the specific
financial assurance mechanism used. For details, consult Chapters III through
VIII of this manual.
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III. ESTABLISHING FINANCIAL RESPONSIBILITY USING TRUST FUNDS
A. INTRODUCTION
This chapter describes how owners or operators can fulfill their RCRA
financial requirements through TRUST FUNDS. A TRUST is a three-party
agreement whereby one party, called the GRANTOR (sometimes also called the
TRUSTOR), transfers some ass.ets (often money) to a second party, called the
TRUSTEE, to hold on behalf of a third party, called .the BENEFICIARY. In a
RCRA trust fund, the owner or operator is the grantor, a bank or other entity
that fulfills the RCRA requirements is the trustee, and EPA is the
beneficiary. The owner or operator, as grantor, pays into the trust fund
which is. held in trust by the trustee. The fund is used to pay for closure
and/or post-closure care. The entire arrangement is governed by a TRUST
AGREEMENT that sets out the responsibilities and rights of each party.
The trustee is empowered to invest the trust funds during the existence of
the trust. The investments which the trustee may make are limited by the RCRA
regulations (see Exhibit III-l below) and sometimes by state law. Any
investment income accrues to the trust, and reduces the required payments into
it by the owner or operator. Of course, the return on.the truste's assets
will vary depending on the investments made. The owner or operator usually
pays a fee for the trust services provided.
The regulations pertaining to RCRA trust funds are as follows:
EXHIBIT III-l
RCRA TRUST FUND REGULATIONS
Topic Interim Status Permitted Facilities
Closure trust 40 CFR §265. 143 (a)
Post-closure trust 40 CFR §265. 145 (a)
Wording of Trust Agreement 40 CFR §264. 151 (a)
40 CFR §264.143(a)
40 CFR §264. 145 (a)
40 CFR §264. 151 (a)
Source: Title 40, Code of Federal Regulations (CFR).
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III-2
B. RCRA TRUST FUND REQUIREMENTS
This section describes both the features of RCRA trust funds themselves
and the responsibilities of owners and operators using trust funds to
demonstrate financial assurance. A checklist of these responsibilities
appears in Attachment III-l at the end of this chapter.
INITIAL RESPONSIBILITIES OF THE OVNER OR OPERATOR
1. Qualifications for Trustee. The first step that an owner or operator
considering using a trust fund must take is to locate a qualified entity
willing to act as trustee. EPA requires that the trustee be an entity that
has the authority to act as trustee and whose trust operations are regulated
and examined by a federal or state agency. If the owner or operator has any
doubt about whether the entity is empowered to act as a trustee, he should ask
the entity what authority regulates it and then contact the authority to
determine whether the entity has the power to act as trustee. Exhibit III-2
at the end of this chapter indicates the primary regulatory authority for
different types of financial institutions. Appendix A-2 lists relevant
federal agencies; Appendix B includes a list of relevant state agencies.
2. Wording and Amount of Assurance. Several particular aspects of the
trust agreement merit special attention:
First, the trust is irrevocable; it cannot be changed or terminated
by the owner or operator except with written agreement of the trustee and the
Regional Administrator.
Second, unlike the surety bond, letter of credit, insurance contract,
or corporate guarantee, the trust agreement does not assure that the total
amount (i.e., the current cost estimate) for closure or posr-closure will be
made available at any time; the trustee need only provide the amount of funds
that has accumulated in the trust as of the time of closure. (See Section 4
of the Trust Agreement form, Attachment III-3.) Generally, annual payments
will be made into the fund based on the formula discussed in Section B, Part 5
below. Payments into the trust are based on a formula which should ensure
that the total amount needed will be available at the end of the planned
PAY-IN PERIOD. (See Attachment III-4 which shows how initial payments are
calculated.) The owner or operator may, however, choose to make payments to
the fund at an accelerated rate or deposit the full amount of the cost
estimates at the time the fund is established. The owner or operator remains
responsible at all times for the full amount of closure and post-closure
expenses even ifdue to early closure, for example the trust fund has not
accumulated sufficiently to reimburse the owner or operator for all required
expenses.
Finally, the text of the trust agreement itself does not identify the
facilities covered by the trust fund or the current cost estimates for these
facilities. The facilities and cost estimates are listed on a separate
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EXHIBIT I I 1-2
RCHA TRUST FUND: REGULATORY AUTHORITIES FOR FINANCIAL INSTITUTIONS
Type of Financial Institution Primary Regulatory Authority Whom to Ca I I
1. State-Chartered Mnaricial State Authority See Appendix B
Institutions, Including
Commercial Banks, Savings
and Loans, Mutual Savings
Banks, Credit Unions, State
Licensed Foreign Banks
2. Nationally-Chartered Coinmer- CoinptroHer of the Currency Trust Division
cial Banks, Nationally- (202) «4M7-I73I
Licensed Foreign Banks, all
Washington, U.C. coinine re I a I
banks
3. Nationally-Chartered Savings Federal Home Loan Bank Board General Counsel, (.202) 377-6000
and Loans
i|. Nationally-Chartered Mutual Federal Home Loan Bank Board, As Number 3, and see Appendix B
Savings Banks State Authorities
5. Nationally-Chartered Credit National Credit Union General Counsel, (202) 357-1030
Unions Administration
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Schedule A. This Schedule A must be updated within 60 days after each change
in'cost estimates, either because of adjustments due to inflation or because
new closure and/or post-closure plans or cost estimates have been prepared.
Attachment III-3 contains the required wording for RCRA trust agreements.
The trust agreement must be signed by both the owner or operator and the
trustee. These signatures certify that the wording of the trust agreement is
identical to the wording in the regulations. Attachment III-3 also provides
samples of Schedule A (identification of facilities and cost estimates) and
Schedule B (property used to establish trust fund).
The agreement must be properly "ACKNOWLEDGED." An ACKNOWLEDGMENT is a
formal declaration by persons entering into an agreement that they affirm
their obligations created in the agreement and are acting of their own free
will. See Attachment III-3 for an example. The requirements for acknowledg-
ments differ from state to state.
3. Establishing a Trust Fund. The wording of the agreement itself is
specified in the regulations, but the trustee will be able to tell the owner
or operator (1) the fees to be paid for its trust services, (2) the investment
strategy it plans to follow, and (3) whether the trust could qualify to be
invested together with other funds in a COMMON TRUST. Each of these topics
receives further discussion here.
(a) Fees and Taxes - Trustee's fees can be expected to vary
depending on the specific institution chosen, the amount of funds held in
trust, the extent to which the owner or operator uses other services of the
institution, and the extent and type of investment activity and trustee
involvement. The owner or operator should not only find out what fees the
institution itself will charge, but also the other applicable fees and
charges, including brokerage fees, -legal fees (such as those for setting up
the trust), accounting fees, and provisions for local,'state, and federal
income taxes. There is currently no provision in the U.S. Internal Revenue
Code that allows payments into the fund to be deducted from taxable income or
allows trust income to be exempt from taxation. EPA has asked the Internal
Revenue Service to render an opinion on the'tax aspects of RCRA trust funds.
Owners or operators may want to request private rulings on this matter from
the Internal Revenue Service under Revenue Procedure 80-20.
(b) Investment Strategy - Money held in a RCRA' trust fund must be
invested by the trustee in accordance with the general investment policies and
guidelines of the owner or operator and subject to the conditions listed in
the trust agreement. Trustees have reasonably broad discretion in investing
trust funds, but they are held to a legal standard called the "PRUDENT MAN"
STANDARD. This standard is stated in the trust agreement as requiring the
discharge of duties "with the care, skill, prudence, and diligence under the
circumstances then prevailing which persons of prudence, acting in a like
capacity and familiar with such matters, would use in the conduct of an
enterprise of a like character and with like aims" (Section 6). EPA has,
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however, provided severa-1 exceptions to the usual interpretation of this
standard. The reasons for these exceptions are discussed in the Background
Document cited in Exhibit 1-5 in Chapter I.
First, the trust agreement forbids the trustee to invest in SECURITIES OR
OTHER OBLIGATIONS of the grantor, or any other owner or operator of the
facilities for which the trust fund is established, or any of their affiliates
as defined in Section 6(i) of the Trust Agreement. Thus, even if the grantor
is owned by a very large, stable corporation that would be a sound, prudent
investment, the trust agreement specifically prohibits the trustee from
investing trust funds in the grantor's parent. This prohibition does not
apply, however, to securities or other obligations of the federal government
or state governments. Even if the federal government or a state government
owns a facility or the land on which it is situated, the trustee for the
operator may invest in. federal or state securities or other obligations.
The second exception to the prudent man standard contained in the trust
agreement applies to the usual rule requiring the trustee to keep trust
property segregated from the trustee's own funds and from other funds. The
trustee is allowed to invest in time or demand deposits of the trustee
institution, up to the amount, insured by law. The trustee is also permitted
to put trust fund assets into any appropriate "common, commingled, or
collective trust fund created by the Trustee," in other words, a common trust.
The third and final exemption to the prudent man standard is that the
trustee can hold cash for a reasonable period of time- while awaiting
investment or distribution and is not liable for paying interest on that cash.
It should be noted that individual states may impose stricter requirements
than the federal regulations concerning the investments in which trust funds
may be placed. Owners or operators will want to make sure that the trustee is
aware of any state requirements concerning hazardous waste site trust funds.
(c) Common Trust Funds - Finally, the owner or operator should
determine whether the trustee plans to invest the trust in a common trust
fund. Common-trust funds pool a number of trust accounts and invest them for
potentially higher yields and at some-times decreased fees and costs because of
the increase in investment size. Since smaller trusts can often benefit from
common trust funds, common trusts may make the trust-fund mechanism of
financial assurance more.attractive to owners or operators with small
financial assurance needs. iMot every financial institution will offer such a
trust fund due to the requirements of other federal and state agencies such as
the Securities and Exchange Commission.. The trustee need not establish a
special common trust for RCRA trust funds, but any common trust in 'which RCRA
trust funds participate would have to fulfill all the requirements of the
trust agreement.
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4. Submission of Documents to EPA. The owner or operator is required to
submit the following documents to the EPA Regional Administrator:
An ORIGINALLY SIGNED DUPLICATE of the trust agreement;
A formal certification of acknowledgement.
The trust agreement must be effective, the first payment into the trust fund
made, and an originally signed duplicate of the agreement delivered to the
Regional Administrator, all by the effective date of the regulations for
interim status facilities.
SUBSEQUENT RESPONSIBILITIES OF THE OWNER OR OPERATOR
5. Updating the Trust Fund. The owner or operator generally must make
annual payments into the trust fund. The trust agreement provides that,
during the "PAY-IN PERIOD," the trustee must notify the Regional Administrator-
(by certified mail, within 10 days) if the owner or operator fails to make an
annual payment into the trust fund within 30 days after the anniversary date
of the first payment. The pay-in period is defined as 20 years or the
remaining operating life of the facility as estimated in the closure plan,
wnichever is shorter. The amount of the payments is determined by the closure
and/or post-closure cost estimates, the amount already in the trust fund, and
the pay-in period. As already mentioned, the first payment must be made by
the effective date of the regulations.
The formula for computing the amount of payment is:
CE - CV
where
CE is the current closure cost estimate and/or the
current post-closure cost estimate,
CV equals the current value of the trust fund, and
Y equals the number of years remaining in the
pay-in period.
Each year, at least 30 days prior to the anniversary date of the establishment
of the trust fund, the trustee must value the assets in the trust fund and
send a statement of the valuation, detailing the results of investment
activity and the expenses levied against the fund, to the owner or operator
and the Regional Administrator. Securities in the trust fund must be valued
at their market value no more than 60'days prior to the anniversary date of
the fund.
The owner or operator may object, in writing, to the trustee's investment
activities or to expenses levied against the trust fund within 90 days of
receiving the valuation statement. Despite any objections, the owner or
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III-7
operator is obliged to make the required payments into the fund by the
appointed dates. EPA may object to any of the trustee's activities at any
time.
As mentioned previously, owners or operators may elect to make payments
into the trust fund at an accelerated rate or to deposit the full amount of
the cost estimates at the time the fund is established. The trustee must
still, however, value the fund annually and provide a statement to the grantor
and Regional Administrator confirming the value of the fund. The owner or
operator must maintain the value of the trust fund at no less than if payments
had been made according to the formula described above.
If the operating life of the facility extends beyond the original pay-in
period, the owner or operator continues to remain responsible for ensuring
that the value of the trust fund equals or exceeds the current cost estimate.
Thus, whenever the cost estimate changes and becomes greater than the most
recent annual valuation of the trust fund, an additional deposit must be made
into the trust fund or alternative financial assurance obtained within 60
days. The Trustee is not required to send the Regional Administrator a notice
of non-payment if the owner or operator fails to make a payment after the
pay-in period is completed, however.
During the operating life of the facility, the Regional Administrator may
approve a request by the owner or operator for release of funds from the trust
fund if the current value of the trust fund (according to the trustee's most
recent statement of value) exceeds the total of the applicable cost
estimates. Similarly, during the period of post-closure care, the Regional
Administrator may approve a release of funds if the owner or operator can
demonstrate that the value of the trust fund exceeds the remaining cost of
post-closure care. Such situations might occur, if the owner or operator had
made deposits higher than those required by these regulations, inflation was
lower than expected,1 investment earnings were higher than expected, or a
change in closure and/or post-closure plans lowered the cost estimates.
6. Maintaining Assurance. The owner or operator is responsible for
ensuring continuo.us compliance with the financial assurance regulations.
Specifically, if the trustee institution enters bankruptcy, ceases operations,
or loses its authority to act as a trustee, it no longer qualifies to act as a
RCRA trustee. Arrangements for a new trustee or other financial assurance
must be made by the owner or operator within 60 days after such an event.
*During the period of post-closure care, the post-closure cost estimates
will not be adjusted for inflation, but lower inflation may affect the value
of the trust fund or the cost of the remaining post-closure care.
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III-8
If the owner or operator sells or transfers operating responsibility for
the1 facility for which the trust fund provides financial assurance, the trust
fund will not automatically transfer to the next owner or operator. Instead,
the new owner or operator will have to provide new financial assurance for the
facility. Of course, the new owner or operator can enter into an agreement
with the old owner or operator by which the trust fund is transferred to the
new owner or operator. This will require amendments to the trust agreement
which must be approved by the trustee and the Regional Administrator. The
Regional Administrator will not allow a trustee to release funds from a trust
fund to an owner or operator until the new owner or operator meets the
applicable financial responsibility requirements and the facility is in
interim status or is issued a permit.
Finally, the owner or operator may substitute an alternate mechanism of
financial assurance so long as there is no lapse in coverage. See Section E.4
of Chapter II.
7. Role of Trustee. The Trustee will usually prepare the trust
agreement, Schedule A (according to the instructions of the owner or
operator), Schedule B, and the certificate of acknowledgment. The trustee has
control over the trust, can sue to protect it, and is responsible for its
preservation. The trustee -.is responsible for annual valuations of the trust,
for notifying the Regional Administrator if the owner or operator fails to
make an annual payment, and for making payments out of the trust fund at the
direction of the Regional Administrator. The trustee is .responsible for
errors in administering the trust resulting from not acting in good faith
(e.-g., willful negligence, gross misconduct, and violation of the prudent man
standard).
A change in trustees does not affect the existence of the trust itself.
The trustee may be changed if,the owner or operator is dissatisfied with the
performance of the trustee or if the trustee resigns; the trustee mus-t be
changed if the trustee institution enters bankruptcy or ceases to meet the
qualifications. In either case, the trustee can be changed only upon
agreement by the owner or operator, the trustee, and the Regional
Administrator. The present trustee may not unreasonably withhold its
permission to change trustees.2 The successor trustee must be appointed by
the owner or operator. If the owner or operator fails to do so, a trustee
wishing to resign may request a court to appoint a successor trustee. The
present trustee remains responsible until it has been replaced.
2See the discussion in Section B.2 of Chapter VI concerning when refusal
to consent to an assignment of a RCRA insurance contract would be
"unreasonable."
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III-9
8. Drawing on the Trust Fund. After the beginning of final closure, the
owner or operator may request reimbursement for closure expenditures by
submitting itemized bills to the Regional Administrator. Similarly, bills for
post-closure care may also be submitted for reimbursement. Within 60 days
after receiving the bills, the Regional Administrator will instruct the
trustee to make reimbursements, if the expenditures are in accordance with the
closure or post-closure, plan or are otherwise justifiable. The Regional
Administrator will exercise judgment in determining what expenses are
justifiable. Where the cost of closure appears to be significantly greater
than the value of the trust fund, the Regional Administrator is empowered to
withhold reimbursement from the trust fund until he has received satisfactory
certification of completion of closure. See Section G of Chapter II.
The owner or operator remains responsible for all closure or post-closure
costs and for the performance of closure and post-closure care, even if the
funds available through, the trust fund are exhausted.
9. Termination of the Trust Fund. The owner or operator should request
the approval of the Regional Administrator to terminate the trust fund in two
situations: (1) when alternate financial assurance has been substituted (see
Section E.4 of Chapter II) and (2) when released from applicable RCRA
financial requirements (see Section G of Chapter II). Upon receiving the
Regional Administrator's written consent, the owner or operator should forward
a copy of it to the trustee institution. The trust fund can only be
terminated with the written consent of the Regional Administrator. The owner
or operator should request the Regional Administrator to ins-truct the trustee
to terminate the trust and to forward the remaining funds (after subtraction
of fees and expenses) to the owner or operator. The owner or operator will
also have to instruct the trustee to terminate the trust.
PERMITTED FACILITIES - '
Permitted facilities are subject to trust fund rules almost identical to
those covering interim status. The major difference is in computing the
amount of required annual payments. The formula (CE-CV)/Y is still used and
CE is still the relevant current .cost estimate, CV is still the current value
of the trust fund, and Y is still the number of years remaining in the pay-in
period. The pay-in period is defined differently, however. For permitted
facilities, it is the term of the initial RCRA permit or the remaining
operating life of the facility as estimated in the closure plan, whichever is
shorter. Facilities that obtain permits after being in interim status will
become subject to this permitted facility- pay-in period; see example 4 in
Attachment III-4. The formula will take into account payments made into the
trusy fund while the facility was in interim status. For new permitted
facilities, this same permitted facility pay-in period applies.
The only other differences from interim status standards are (1) the trust
agreement.must be submitted to the Regional Administrator at least 60 days
before waste is first received at the facility; (2) the initial payment into
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111-10
the trust fund must be made before hazardous waste is first received at the
facility; and (3) a receipt from the trustee for this payment must be
submitted by the owner or operator to the Regional Administrator before the
initial receipt of hazardous waste.
C. REGIONAL OFFICE RESPONSIBILITIES
This section outlines the duties of the Regional Office in reviewing trust
funds for RCRA financial assurance and ensuring satisfaction of requirements.
A summary checklist appears in Attachment III-2 at the end of this chapter.
REVIEWING INITIAL SUBMISSIONS
1. Qualifications of Trustee. The first step that EPA Regional Office
staff must take is to ensure that the trustee is qualified. The easiest way
to do this may be to maintain a current list of the qualified entities in -the
region. This list can be initially compiled by simply checking the
qualifications of each trustee as trust agreements are submitted and compiling
a list of the trustees that qualify. Additions can be made to this list as
qualified entities are checked during the review of submissions. Necessary
deletions from this list--because entities fail to continue to qualify-can be
discovered by regular contact with the regulatory agencies listed in Exhibit
III-3 and Appendix B.
2. Conformity to Other Requirements. The Regional Administrator will
want to make certain that the following additional tasks have been
accomplished by the appropriate dates:
An originally signed duplicate of the trust
agreement, including Schedules A and B, is submitted to
the Regional Administrator;
The trust agreement is signed by the owner or
operator and the trustee and is properly acknowledged;
The amount of coverage is adequate; and
The first payment is made.
For facilities with interim status, all of this must be done by the effective
date of the regulations. For new permitted facilities, the initial payment
must be made and a receipt for this payment submitted, to the Regional
Administrator before hazardous waste is first received. The trust agreement
itself must be submitted to the Regiorial Administrator 60 days before that
date.
The wording of the trust agreement in all cases must be identical to that
in the regulations; Regional Offices should proofread the wording of trust
agreements to ensure conformity .to requirements. Tne required wording of the
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III-ll
trust agreement and examples of supporting documentation are given in
Attachment III-3 at the end of this chapter.
3. Recordkeeoing and Tracking Systems. As trust fund agreements are
received, relevant information should be recorded including the name, address,
and EPA Identification Number of the covered facilities; the name of the
financial institution; amount of coverage for each facility and the effective
date; and information verification procedures performed. Automatic data
processing systems can be used for this. A list of trust funds in effect
should be kept not only under the owner or operator's name, but also under the
name of each financial institution so that, in case of bankruptcy or
ineligibility or other reasons, it will be easy to determine which owners or
operators need to obtain financial assurance elsewhere. This sytem can be
used to keep track of mergers and changes in the names of financial
institutions.
SUBSEQUENT RESPONSIBILITIES
4. .Updating the Trust Fund. An important responsibility for the
Regional Administrator will be to ensure that annual payments to the trust
fund are being made during the pay-in period in the proper amount, no later
than 30 days after each anniversary date of the first payment. There are
three reasons for this: (1) the owner or operator is not required to submit
receipts for annual payments into the fund; (2) the trustee must notify the
Regional Administrator only of the failure of the owner or operator to make
annual payments (i.e., an absence of a payment), not a payment that is too
small; and (3) the trustee need not report failure to make payments due to
increases in cost estimates after the pay-in period is completed. Therefore,
the Regional Administrator will have to keep track of notifications of
failures to make the required payments and to spot check (audit) those trust
fund payments that have been made. To do such an audit, the Regional
Administrator should:
(1) Obtain the closure plan and the current closure and
post-closure cost estimates from the facility;
(2) Compute the value of each of the variables in the
payment formula, (CE-CV)/Y, by using the plans, the
cost estimates, and the most recent trus't fund
valuation;
(3) Determine the required payment from.the formula; and
(4) Contact the trustee to find out if the amount the
trustee actually received from the owner or operator
was at least as great as the required payment. Note,
however, that the trustee is not required to divulge
this information and may be unwilling to do so.
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111-12
Since the trustee is only required to send notice of non-payment during
the pay-in period, the Regional Administrator- may wish to notify trustees when
the pay-in period is completed. After completion of the pay-'in period, the
owner or operator must still make additional deposits into the trust fund or
obtain alternative financial assurance within 60 days after any change in the
current cost estimates that makes the current cost estimates exceed the value
of the trust. The Regional Administrator must ensure that these payments are
made or alternative assurance obtained. Spot-checking may again be required.
As with any financial assurance mechanism, the closure and post-closure
estimates will be adjusted annually for inflation and new estimates will be
prepared when closure and/or post-closure plans are changed. Unlike most of
the other mechanisms, however, the amount of assurance (the amount in the
trust) will fluctuate depending upon the payments made into the trust and the
investments made by the trustee. Thus, it may happen that the value of the
trust exceeds the current cost estimates and the owner or operator will
request the Regional Administrator to have the excees returned to him. The .
Regional Administrator must act on such requests within 60 days after
receiving them. They should be granted and the trustee instructed to release
the appropriate amount of funds after the Regional Administrator has checked
that the current value of the trust exceeds the current cost estimates.
5. Maintaining the Trust Fund. The Regional Administrator will also be
called upon to approve changes in trustees. Authorizing new trustees is a
simple matter; the only requirement is that the new trustee be qualified.
The Regional Administrator will also want to check that existing trustees
continue to remain qualified and do not enter bankruptcy. This, too, is not
difficult since the financial status of qualified trustees can be checked
regularly. A list of the trustees holding RCRA trusts should be kept on the
HWDMS, not only under the owner or operator's name-, but also under the
trustee's name. This will make it easy to determine which owners or operators
need to obtain alternate assurance when a trustee ceases to qualify or enters
bankruptcy.
6. Drawing on the Trust Fund. A more difficult situation exists when .
release of funds is being requested as reimbursement for closure or post-
closure expenses. Owners or operators may begin submitting requests for
reimbursement of final closure expenses even while closure activities
continue; they need not wait until closure is complete. For reimbursement,
the Regional Administrator must insist upon itemized bills (as the regulations
provide) and stay abreast of closure activities and how much remains in the
trust fund. For both closure and post-closure care expenses, the Regional
Administrator should only authorize reimbursement when the expenditures were
in accordance with the plan or otherwise justifiable, but not even all
expenses properly incurred should be reimbursed when requested. The
regulations permit the Regional Administrator to withhold reimbursement until
closure is completed if there is reason to believe that the cost of closure
will significantly exceed the value of the trust fund. This allows financial
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111-13
assurance to be maintained until completion of closure and can give an
incentive to the owner or operator to complete closure. See Section G of
Chapter II for further discussion. Withholding of reimbursement is not
permitted for post-closure care expenses. Of course, the owner or operator
remains responsible for all closure and/or post-closure costs even if the fund
is exhausted.
The Regional Administrator must act on requests for release of funds
discussed in this section within 60 days after receipt of the request for
reimbursement.
7. Requests to Terminate the Trust Fund - The Regional Administrator may
consent to the termination of the trust fund only (1) if alternate assurance
is substituted .(see Section E.4 of Chapter II) or (2) if the owner or operator
is released from applicable RCRA financial requirements (see Section G of
Chapter II). Consent must be in writing and may accompany the Regional
Administrator's letter releasing the owner or operator from closure or
post-closure financial assurance requirements. The Regional Administrator
should instruct the trustee to terminate the trust and to forward the
remaining funds (after subtraction of fees and expenses) to the owner or
operator.
PERMITTED FACILITIES
There are two major areas in which interim status and permitted facilities
differ: (1) the definition of the pay-in period and (2) the dates by which
the first payment must: be made into the trust fund and the trust agreement
submitted to the Regional Administrator.
In calculating the required payments into the trust fund, the pay-in
period for permitted facilities is the shorter of the term of the initial RCRA
permit or the remaining operating life of the facility as estimated in the
closure plan.
For new permitted facilities, the initial payment must be made and a
receipt for this payment submitted to the Regional Administrator before
hazardous waste is first received. The trust agreement itself must be
submitted to the Regional Administrator 60 days before that date.
D. SOURCES OF FURTHER INFORMATION
Exhibit III-2 lists the regulatory authorities to contact if there is any
doubt that a financial institution qualifies to be trustee of a RCRA trust. A
copy of the regulations (see Exhibit III-l above) themselves may be obtained
from EPA Regional Administrators. Owners or operators are also encouraged to
contact their state hazardous waste agencies to determine whether the state
imposes any restrictions on trust funds as a means of establishing financial
responsibility for hazardous waste facilities. (See Appendix B.)
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National trade associations can supply information about financial
institutions in general. Major national -organizations include:
1. American Bankers Association
1120 Connecticut Avenue, N.W.
Washington, D.C. 20036
(202) 467-4000
Trade association of banks and trust companies.
2. Independent Bankers Association of America
P.O. Box 267
Sauk Centre, Minnesota 56378
(612) 352-6546
Association of medium size and smaller independent
banks.
3. National Association of Mutual Savings Banks
200 Park Avenue
New York, New York 10017
(212) 973-5432
Trade assocition of mutual savings banks.
4. United States League of Savings Associations
111 East Wacker Driver
Chicago, Illinois 60601
(312) 644-3100
Trade association of savings and loan associations,
cooperative banks, and state and local savings and loan
association leagues.
5. Credit Union National Association
5710 Mineral Point Road
Box 431
Madison, Wisconsin 53701
(608) 231-4000
Trade association of state credit union leagues.
6. Conference of State Bank Supervisors
1015 Eighteenth Street, N.W., Suite 606
Washington, D.C. 20036
(202) 296-2840
Organization of stape officials responsible for the
. supervision of state-chartered banking institutions.
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III-15
7. National Association of State Credit Union Supervisors
1499 Chain Bridge Road, Suite 201
McClean, Virginia 22101
(703) 821-2243
Organization of state credit union supervisors and
state-chartered-credit unions.
8. National Association of State Savings and Loan
Supervisors
1001 Connecticut Avenue, N.W., Suite 800
Washington, D.C. 20036
(202) 452-1523
Organization of state savings and loan supervisors.
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ATTACHMENT III-l
RCRA TRUST FUND CHECKLIST FOR OWNERS OR OPERATORS
Paragraph
Number *
(1) Locate a financial entity willing to act as trustee that has the
authority to act as trustee and is regulated and examined by a
. , federal or state agency.
(2) Make certain that the wording of the agreement is identical to
the wording in the regulations (See Attachment III-3), that
properly completed Schedules A and B are attached, and that the
agreement is acknowledged in accordance with state requirements.'
" Attach Schedule A to the trust agreement listing the facilities
and cost estimates covered by the trust fund and update Schedule
A within 60 days after each change in cost estimates.
(3) Discuss with the prospective trustee: (a) fees and taxes, (b)
investment strategy, and (c) any common trust funds for which the
trust fund qualifies.
(4) For interim status facilities, by the effective date of the
regulations, make the first payment into the trust -fund and
submit an originally signed duplicate of the trust agreement,
including Schedules ;A and B and a certification of acknowledgment
to the Regional Administrator.
" For new permittedjfacilities: (1) the trust agreement must be
submitted to the Regional Administrator at least 60 days before
hazardous waste is first received at the facility; (2) the
initial payment irito the trust fund must be made before hazardous
waste is first received at the facility; and (3) a receipt from
the trustee for this payment must be submitted by the owner or
operator to the Regional Administrator by this date.
(5) During the pay-in period, make the required payments into the
trust fund annually, no later than 30 days after the anniversary
date of the first payment.
The numbers correspond to the paragraph numbers in Section B.
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111-17
ATTACHMENT III-l (continued)
RCRA TRUST FUND CHECKLIST FOR OWNERS OR OPERATORS
Paragraph
Number *
" After the pay-in period is completed, make payment (or provide
alternative assurance) within 60 days after any change in cost
estimates that makes the current cost estimate exceed the value
of the trust fund.
" If the owner or operator wishes to object to the trustee's
annual valuation statement, object, in writing, to the trustee's
investment activities or to expenses levied against the trust
fund within 90 days after receiving the statement.
" Request a release of funds from the trust fund when .the value of
the trust fund exceeds the current cost estimates.
(6) When the trustee enters bankruptcy or -loses its .authority to act
as a trustee, obtain a new trustee or alternative financial
assurance within 60 days.
(7) If the owner or operator is dissatisfied with the performance of
the old trustee, the old trustee resigns, or the old trustee
ceases to qualify to act as trustee, appoint a new trustee,
subject to agreement by the old trustee and the Regional
Administrator.
(8) When the owner or operator begins paying for final closure,
submit itemized bills and request reimbursement from the trust
fund.
." When the owner of operator pays for post-closure care, submit
itemized bills and request reimbursement from the trust fund.
(9) __ Request approval to terminate the trust and release of remaining
funds '(1) when alternate assurance is substituted, and (2) when
released from closure or post-closure financial assurance
requirements by the Regional Administrator.
* The numbers correspond to the paragraph numbers in Section B.
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ATTACHMENT III-2
RCRA TRUST FUND CHECKLIST FOR REGIONAL OFFICES
The Regional Administrator should ensure that:
Paragraph
Number *
(1) The trustee financial institution is qualified.
(2) For interim status facilities, by the effective date of the
regulations:
An originally signed duplicate of the trust agreement,
including Schedules A and B, is submitted to the Regional
Administrator;
The trust agreement is signed by the owner or operator and
the trustee;
The trust agreement is properly acknowledged;
The amount of coverage is adequate; and
The first payment is made.
" For new permitted facilities: (1) the trust agreement must be
submitted to the;Regional Administrator at least 60 days before
hazardous waste is first received at the facility; (2) the
initial payment into the trust fund must be made before hazardous
waste is first received at the facility; and (3) a receipt from
the trustee for this payment must be submitted by the owner or
operator to the Regional Administrator by this date.
" The wording of -the trust agreement i$ identical to that in the
regulations.
(S) Relevant information is recorded.
The numbers correspond to the paragraph numbers in Section C.
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ATTACHMENT III-2 (continued)
RCRA TRUST FUND CHECKLIST FOR REGIONAL OFFICES
Paragraph
Number *
(4) Annual payments are being made during the pay-in period in the
proper amount and no later than 30 days after each anniversary
date of the first payment, using this auditing procedure:
Obtain the closure and/or post-closure cost estimates;
Compute the value of each variable in (CE-CV)/Y;
Determine the required payment;
Contact the trustee to allow a comparison of the actual
payment with the required payment.
After completion of the pay-in period, additional deposits are
made or alternative assurance obtained within 60 days after any
change in the current cost estimates that makes the current cost
estimates exceed the value of the trust.
" Within 60 days after receiving a request for release of funds
because the value of the trust exceeds the current cost
estimates, the request is approved, but only when the fund
actually exceeds the current cost estimates by the amount claimed.
(5) Authorization is granted for a change in trustees only when the
new trustee is qualified.
" If existing trustees enter bankruptcy or do not remain
qualified, alternate assurance is obtained within 60 days.
* The numbers correspond to the paragraph numbers in Section C.
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ATTACHMENT III-2 (continued)
RCRA TRUST FUND CHECKLIST FOR REGIONAL OFFICES
Paragraph
Number *
(6) Requests for reimbursement for closure and/or post-closure
expenses are approved within 60 days after they are received, but
only when itemized bills are submitted and the expenses are in
accordance with the plan or otherwise justified.
" If the Regional Administrator has reason to believe that the
closure costs will significantly exceed the value of the closure
trust fund, complete reimbursement is withheld until closure is
completed.
(7) Requests for termination of the trust and return of any funds
remaining in the trust are approved in writing when (1) alternate
financial assurance is substituted or (2) the owner or operator
has been released from closure or post-closure financial
requirements.
* The numbers correspond to the paragraph numbers in Section C.
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ATTACHMENT III-3
REQUIRED WORDING FOR RCRA TRUST FUND AGREEMENT
40 CFR 264.151(a)
TRUST AGREEMENT, the "Agreement," entered into as of [date] by and between
[name of the owner or operator], a [name of State] [insert "corporation,"
"partnership," "association," or "proprietorship"], the "Grantor," and [name
of corporate trustee], [insert "incorporated in the State of "
or "a national bank"], the "Trustee."
WHEREAS, the United States Environmental Protection Agency, "EPA," an
agency of the United States Government, has established certain regulations
applicable to the Grantor, requiring that an owner or operator of a hazardous
waste management facility shall provide assurance that funds will be available
when needed for closure and/or post-closure care of the facility,
WHEREAS, the Grantor has elected to establish a trust to provide all or
parr of such financial assurance for the facilities identified herein,
WHEREAS, the Grantor, acting through its duly authorized officers, has
selected the Trustee to be the trustee under this agreement, and the Trustee
is willing to act as trustee,
NOW, THEREFORE, the Grantor and the Trustee agree as follows:
Section 1. Definitions. As used in this Agreement:
(a) The term "Grantor" means the owner or operator who enters into this
Agreement and any successors or assigns of the Grantor.
(b) The term "Trustee" means the Trustee who enters into this Agreement
and any successor Trustee.
Section 2. Identification of Facilities and Cost Estimates. This
Agreement percains to the facilities and cost estimates identified on attached
Schedule A [on Schedule A, for each facility list the EPA Identification
Number, name, address, and the current closure and/or post-closure cost
estimates, or portions thereof, for .which financial assurance is demonstrated
by this Agreement].
Section 3. Establishment of Fund. The Grantor and the Trustee hereby
establish a'trust'fund, the "Fund," for the benefit of EPA. The Grantor and
the Trustee intend that no third party have access to the Fund except as
herein provided. The Fund is established initially as consisting of the
property, which is acceptable to the Trustee, described in Schedule B attached
hereto. Such property and any other property subsequently transferred to the
Trustee is referred to as the Fund, together with all earnings and profits
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ATTACHMENT III-3 (continued)
REQUIRED WORDING FOR RCRA TRUST FUND AGREEMENT
40 CFR 264.151(a)
thereon, less any payments or distributions made by the Trustee pursuant to
this Agreement. The Fund shall be held by the Trustee, IN TRUST, as
hereinafter provided. The Trustee shall not be responsible nor shall it
undertake any responsibility for the amount or adequacy of, nor any duty to
collect from the Grantor, any payments necessary to discharge any liabilities
of the Gran-tor established by EPA.
Section 4. Payment for Closure and Post-Closure Care. The Trustee
shall make payments from the Fund as the EPA Regional Administrator shall
direct, in writing, to provide for the payment of the costs of closure and/or
post-closure care of the facilities covered by this Agreement. The Trustee
shall reimburse the Grantor or other persons as specified by the EPA Regional
Administrator from the Fund for closure and post-closure expenditures in such
amounts as the EPA Regional Administrator shall direct in writing. In
addition, the Trustee shall refund to the Grantor such amounts as the EPA
Regonal Administrator specifies in writing. Upon refund, such funds shall no
longer constitute part of the Fund as defined herein.
Section 5. Payments Comprising -the Fund. Payments made to-the Trustee
for the Fund shall consist of cash or securities acceptable to the Trustee.
Section 6. Trustee Management. The Trustee shall invest and reinvest
the principal and income of the Fund and keep the Fund invested as a single
fund, without distinction between principal and income, in accordance with
general investment policies and guidelines which the grantor may communicate
in writing to the Trustee from time to time, subject, however, to the
provisions of this Section. In investing, reinvesting, exchanging, selling,
and managing the Fund, the Trustee shall discharge his duties with respect to
the trust fund solely in the interest of the beneficiary and with the care,
skill, prudence, and diligence under the circumstances then-prevailing which
persons of prudence, acting in a like capacity and familiar with such matters,
would use in the conduct of an enterprise of a like character and with like
aims;- except that:
(i) Securities or other obligations of the Grantor, or any other owner or
operator of the facilities, or any of their affiliates as defined in the
Investment Company Act of 1940, as amended, 15 U.S.C. 80a-2.(a), shall not be
acquired or held, unless they are securities or other obligations of the
Federal or a State government;
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ATTACHMENT III-3 (continued)
REQUIRED WORDING FOR RCRA TRUST FUND AGREEMENT
40 CFR 264.151(a)
(ii) The Trustee is authorized to invest the Fund in time or demand
deposits of the Trustee, to the extent insured by an agency of the Federal or
State government; and
(iii) The Trustee is authorized to hold cash awaiting investment or
distribution uninvested for a reasonable time and without liability for the
payment of interest thereon.
Section 7. Commingling and Investment. The Trustee is expressly
authorized in its discretion:
(a) To transfer from time to time any or all- of the assets of the Fund to
any common, commingled., or collective trust fund created by the Trustee in
which the Fund is eligible to participate, subject to all of the provisions
thereof, to be commingled with the assets of other trusts participating
therein; and
(b) To purchase shares in any investment company registered under the
Investment Company Act of 1940, 15 U.S.C. 80a-l et seq., including one which
may be created, managed, underwritten, or to which investment advice is
rendered or the shares of which are sold by the Trustee. The Trustee may vote
such shares in its discretion.
Section 8. Express Powers of Trustee. Without in any way limiting the
powers and discretions conferred upon the Trustee by the other provisions of
this Agreement or by law, the Trustee is expressly authorized and empowered:
(a) To sell, exchange, convey, transfer, or otherwise dispose of any
property held by it, by public or private sale. No person dealing with the
Trustee shall be bound to see to the application of the purchase money or to
inquire into the validity or expediency 'of any such sale or other disposition;
(b) To make, execute, acknowledge, and deliver any and all documents of
transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;
(c) To register any securitie-s held in the Fund in its own name or in the
name of "a nominee and -:o hold any security in bearer form or in book entry, or
to combine certificates representing such securities with certificates of the
same issue held by the Trustee in other fiduciary capacities, or to deposit or
arrange for the deposit of such securities in a qualified central depositary
even though, when so deposited, such securities may be merged and held in bulk
in the name of the nominee of such depositary with other securities deposited
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111-24
ATTACHMENT III-3 (continued)
REQUIRED WORDING FOR RCRA TRUST FUND AGREEMENT
40 CFR 264.151(a)
therein by another person, or to deposit or arrange for the deposit of any
securities issued by the United States Government, or any agency or
instrumentality thereof, with a Federal Reserve bank, but the books, and
records of the Trustee shall at all times show that all such securities are
part of the Fund;
(d) To deposit any cash in the Fund in interest-bearing accounts
maintained or savings certificates issued by the Trustee, in its separate
corporate capacity, or in any other banking institution affiliated with the
Trustee, to the extent insured by an agency of the Federal or State
government; and
(e) To compromise or otherwise adjust all claims in favor of or against
the Fund.
Section 9. Taxes and Expenses. All taxes of any kind that may be
assessed or levied against or in respect of the Fund- and all brokerage
commissions incurred by the Fund shall be paid from the Fund. All other
expenses incurred by the Trustee in connection with the administration of this
Trust, including fees for legal services rendered to the Trustee, the
compensation of the Trustee to the extent not paid directly by the Grantor,
and all other proper charges and disbursements of the Trustee -shall be paid
from the Fund.
Section 10. Annual Valuation. The Trustee shall annually, at least 30
days prior to the anniversary date of establishment of the Fund, furnish to
the Grantor and to the appropriate EPA Regional Administrator a statement
confirming the value of the Trust. Any securities in the Fund shall be valued
at market value as of no more than 60 days prior to the anniversary date of
establishment of the fund. The failure of the Grantor to object in writing to
the Trustee within.90 days after the statement has been furnished to the
Grantor and the EPA Regional Administrator shall constitute a conclusively
binding assent by the Grantor', barring the Grantor from asserting any claim or
liability against the Trustee with respect to matters disclosed in the
statement.
Section. 11. Advice of Counsel. 'The Trustee may from time to time
consult with counsel, who may be counsel to the Grantor, with respect to any
question arising as to the construction of this Agreement or any action to be
taken hereunder. The Trustee shall be fully protected, to the extent
permitted by law, in acting upon the advice of counsel.
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111-25
ATTACHMENT III-3 (continued)
REQUIRED WORDING FOR RCRA TRUST FUND AGREEMENT
40 CFR 264.151(a)
Section 12. Trustee Compensation. The Trustee shall be entitled to
reasonable compensation for its services as agreed upon in writing from time
to time with the Grantor.
Section 13. Successor Trustee. The Trustee may resign or the Grantor
may replace the Trustee, but such resignation or replacement shall not be
effective until the Grantor has appointed a successor Trustee and this
successor accepts the appointment. The successor trustee shall have the same
powers and duties as those conferred upon the Trustee hereunder. Upon the
successor trustee's acceptance of the appointment, the Trustee shall assign,
transfer, and pay over to the successor trustee the funds and properties then
constituting the Fund. If for any reason the Grantor cannot or does not act
in the event of the resignation of the Trustee, the Trustee may apply to a
court of competent jurisdiction for the appointment of a successor trustee or
for instructions. The successor trustee shall specify the date on which it
assumes administration of the trust in a writing sent to the Grantor, the EPA
Regional Administrator, and the present Trustee by certified mail 10 days
before such change becomes effective. Any expenses incurred by the Trustee as
a result of any of the acts contemplated by this Section shall be paid'as
provided in Section 9.
Section 14. Instructions to the Trustee. All orders, requests, and
instructions by the Grantor to the Trustee shall be in writing, signed by such
-persons as are designated in the attached Exhibit A or such other designees as
the Grantor may designate by amendment to Exhibit A. The Trustee shall be
fully protected in acting without inquiry in accordance with the Grantor's
orders, requests, and instructions. All orders, requests, and instructions by
the EPA Regional Administrator to the Trustee shall be in writing, signed by
the EPA Regional Administrators of the Regions in which-the facilities are
located, or their designees, and the Trustee shall act and shall be fully
protected in acting in accordance with such orders, requests, and
instructions. The Trustee shall have the right to assume, in the absence of
written notice to the contrary, that no event constituting a change or a
termination of the authority of-any person to act on behalf of the Grantor or
EPA hereunder has occurred. The Trustee shall have no duty to act in the
absence of such orders, requests, and instructions from the Grantor and/or
EPA, except as provided for herein.
Section 15. Notice of Nonpayment. The Trustee shall notify the Grantor
and the appropriate EPA Regional Administrator, by certified mail within 10
days following the expiration of the 30-day period after the anniversary of
the establishment of the Trust, if no payment is received from the Grantor '
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111-26
ATTACHMENT III-3 (continued)
REQUIRED WORDING FOR RCRA TRUST FUND AGREEMENT
40 CFR 264.151(a)
during that period. After the pay-in period is completed, the Trustee shall
not be required to send a'notice of nonpayment.
Section 16. Amendment of Agreement. This Agreement may be amended by
an instrument in writing executed by the Grantor, the Trustee, and the
appropriate EPA Regional Administrator, or by the Trustee and the appropriate
EPA Regional Administrator if the Grantor ceases to exist.
Section 17. Irrevocability and Termination. Subject to the right of
the parties to amend this Agreement as provided in Section 16, this Trust
shall be irrevocable and shall continue until terminated at the written
agreement of the Grantor, the Trustee, and the EPA Regional Administrator, or
by the Trustee and the EPA Regional Administrator, if the Grantor ceases to
exist. Upon termination of the Trust, all remaining trust property, less
final trust administration expenses; shall be delivered to the Grantor.
Section 18.- Immunity and Indemnification. The Trustee shall not incur
personal liability of any nature in connection with any act or omission, made
in good faith, in the administration of this Trust, or in carrying out any
directions by the Grantor or the EPA Regional Administrator issued in
accordance with this Agreement. The Trustee shall be indemnified and saved
harmless by the Grantor or from the Trust Fund, or both, from and against any
personal liability to which the'Trustee may be subjected by reason of any act
or conduct in its official capacity, including all expenses reasonably
incurred in its defense in the event the Grantor fails to provide such defense.
Section 19. Choice of Law. This Agreement shall be administered,
construed, and enforced according to the laws of the State of [insert name of
State].
Section 20. Interpretation. As used in this Agreement, words in the
singular include the plural and words in the plural include the singular. The
descriptive headings .for each Section of this Agreement shall not affect the
interpretation or the legal efficacy of this Agreement.
IN WITNESS WHEREOF-the' parties, have caused this Agreement to be executed
by their respective officers duly authorized and their corporate seals to be
hereunto affixed and attested as of the date first above written. The parties
below certify that the wording of this Agreement is identical to the wording
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111-27
ATTACHMENT III-3 (continued)
REQUIRED WORDING FOR RCRA TRUST FUND AGREEMENT
40 CFR 264.151(a)
specified in 40 CFR 264.151(a)(1) as such regulations were constituted on the
date first above written.
[Signature of. Grantor]
[Title]
Attest:
[Title]
[Seal]
[Signature of Trustee]
Attest:
[Title]
[Seal]
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111-28
ATTACHMENT III-3 (continued)
SAMPLE CERTIFICATION OF ACKNOWLEDGMENT
FOR RCRA TRUST FUND AGREEMENT
(FROM 40 CFR 264.151(a). EMPHASIS ADDED)
The following is' an example of the certification of acknowledgment which
must accompany the trust agreement for a trust fund as specified in
§§264.143(a) and 264.145(a) or §§265.143(a) or 265.145(a) of this chapter.
State requirements may differ on the proper content of this acknowledgment.
State of
County of
On this [date], before me personally came [owner or operator] to me known,
who, being by me duly sworn, did depose and say that she/he resides at
[address], that she/he is [title] of [corporation], the corporation described
in and which executed the above instrument; that she/he knows the seal of said
corporation; that the seal affixed to such instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation,
and that she/he signed her/his name thereto by like order.
[Signature of Notary Public]
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IIIr29
ATTACHMENT III-3 (continued)
SAMPLE SCHEDULE A
This Agreement demonstrates financial assurance for the following cost
estimate(s) for the following facility(ies):
U.S. Environmental
Protection Agency
Identification
Number of Facility
Name of
Facility
East Minor
Facility
Address
of Facility
42 Main Street
Los Tunas,
California 90006
Cost Estimates for
Which Financial
Assurance Being
Demonstrated
by This Agreement
Closure 5110,000
Post-
Closure $ 62,000
Total $172,000
The cost estimates listed here were last adjusted on July 1, 1982.
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111-30
ATTACHMENT III-3 (continued)
SAMPLE SCHEDULE B
The.Fund is established initially as consisting of the following property:
$17,200 (seventeen thousand, two hundred dollars), as
evidenced by Midtown National Bank Cashier's Check Number
14,282, dated August 1, 1982.
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111-31
ATTACHMENT III-4
SAMPLE CALCULATIONS OF REQUIRED PAYMENTS INTO RCRA TRUST FUND
This attachment shows how the first two required payments into a trust
fund are calculated for three sample facilities. Note that all calculations,
trust fund values, and inflation factors are hypothetical.
Example 1
Assumptions:
(1) The facility has interim status.
(2) The trust fund is designed to cover both closure and post-closure
care.
(3) The closure plan estimates that the remaining operating life of
the facility is 10 years.
(4) The total current closure and post-closure cost estimates is
5150,000.
(5) The inflation factor during the first year is 1.101
Calculations:
All payments are calculated using the formula:
CE-CV
Y
Where
CE is the current cost estimate
CV is the current value of the trust fund, and
Y is the number of years remaining in the pay-in period.
For the first payment here,
CE = $150,000
CV = 0 (No payments 'into the trust fund have yet been made.)
Y = 10 (The pay-in period for interim status facilities
is the shorter of 20 years or the remaining
operating life of the facility.)
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111-32
ATTACHMENT III-4 (continued)
SAMPLE CALCULATIONS OF REQUIRED PAYMENTS INTO RCRA TRUST FUND
Thus, the first payment is
CE-CV = $150.000-0 = $15,000
Y 10
The second payment calculation requires the value of the trust fund
after one year. Assume the trujstee valued the investments and other assets
comprising the trust at $16,500; (the value of the trust fund has increased
because the fund has been invented for one year). The values for the second
payment calculation are therefore:
CE = $150,000 x 1.10 (1.10 is the inflation factor.)
CV = $16,500
Y = 9 (One year has passed in the pay-in period.)
Tne second payment required is:
CE-CV - $165.000-16,500 = $16,500.
Y 9
Example 2
Assumptions:
(1) The facility has interim status.
(2) The trust fund cofers closure only.
I
(3) The remaining operating'life is 25 years.
(4) The current closure cost estimate is $80,000.
(5) The inflation factor during the first year is 1.15.
Calculations:
For the first payment,
CE = $80,000
CV = 0
Y = 20 (20 years< is shorter than the remaining operating life)
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111-33
ATTACHMENT III-4 (continued)
SAMPLE CALCULATIONS OF REQUIRED PAYMENTS INTO RCRA TRUST FUND
The first payment is:
CE-CV = $80.000-0 = $4,000
Y 20
To compute the second payment, assume that the value of the trust is
only $3,150 after the first year (the trust's investments were not very
successful). The second payment can be calculated as follows:
CE = 80,000 x 1.15 = $92,000
CV = $3,150
Y = 19
CE-CV = S92,000-$3.150 = $4,676
Y 19
Examole 3
and
Assumptions:
(1) The facility has a 10-year permit.
(2) The trust fund covers both closure and post-closure care.
(3) The remaining operating life of the facility is 15 years.
(4) The total current cost-estimate is $120,000.
(5) The inflation factor for the first year is 1.12.
Calculations:
For the first payment,
CE = 120,000
CV = 0
Y = 10
CE-CV = 5120,000-0 = $12,000
Y 10
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111-34
ATTACHMENT III-4 (continued)
SAMPLE CALCULATIONS.OF REQUIRED PAYMENTS INTO RCRA TRUST FUND
For the second payment, assume that the trust fund is worth $12,600. The
second payment can be calculated:
CE = $120,000 x 1.12 = $134,400
CV = $12,600
Y = 9 :
CE-CV = $134,400-$12,600 = $13,533
Y 9
Example 4
Assumptions:
(1) In year 1, the facility has interim status.
(2) By year 2, the facility obtains general status with a 10-year
permit. ' "
(3) The trust fund covers both closure and post-closure care.
(4) The remaining operating life of the facility is 15 years.
(5) The total current cost-estimate is $150,000.
(6) The inflation factor during the first year is .1.11.
Calculations:
For the first.payment,
CE = $150,000
CV = 0
Y = 15 "
Thus the first payment is:
CE-CV = $150,000-0 = $10,000
Y 15
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111-35
ATTACHMENT III-4 (continued)
SAMPLE CALCULATIONS OF REQUIRED PAYMENTS INTO RCRA TRUST FUND
In the second year, the facility is in general status, and a new pay-in
period will apply. The pay-in period is equal to the shorter of the remaining
operating life of the facility or the term of the initial permit. The
remaining operating life is equal to 14 years, while the permit term is 10
years; thus, the new pay-in period is 10 years.
To compute the second payment, assume that the trust fund is now valued at
$10,800. The second payment can be calculated as follows:
CE = $150,000 x 1.11 = $166,500
CV = $10,800
Y = 10
and CE-CV = $166,500-310,800 = $15,570
Y 10
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IV. ESTABLISHING FINANCIAL RESPONSIBILITY USING SURETY BONDS
A. INTRODUCTION
This chapter describes how owners or operators can fulfill their RCRA
financial requirements using SURETY BONDS. Surety bonds are common in
business when one party, in order to protect itself in a transaction, insists
that another party obtain such a bond. Only RCRA surety bonds are discussed
here, however. A surety bond is a contract which an owner or operator
(sometimes called the PRINCIPAL) can enter into with a qualified surety
company (called the SURETY) Under this contract, the surety guarantees to
EPA (sometimes called the OBLIGEE) that the closure and/or post-closure
obligations of the owner or operator will be fulfilled. Of course, the owner
or operator must pay the surety for this guarantee, because the surety will be
liable for these obligations should the owner or operator fail to fulfill them.
The RCRA regulations allow two types of surety bonds, FINANCIAL GUARANTEE
BONDS and PERFORMANCE BONDS, although this latter type of bond can be used
only at permitted facilities and can not be combined with other financial
assurance mechanisms. Financial guarantee bonds, as the name implies, simply
assure EPA that, if the owner or operator fails to fund the STANDBY TRUST FUND
or provide appropriate alternative financial assurance for closure and/or
post-closure care, the surety will fund the standby trust fund up to a stated
amount.. Performance bonds, on the other hand, may be carried out either by
paying for or actually providing closure and/or post-closure care. Both types
of bonds limit the liability of the surety to the face amount of the bond,
called the PENAL SUM. As cost estimates increase, this penal sum may be
increased upon agreement of the owner or operator and the surety. The bond
may provide, by way of an optional RIDER, that the penal sum can be increased
up to 20 percent in any year, without a new agreement between the parties.
EPA expects, on the basis of information received from sureties, that very
few sureties will be willing to write surety bonds, at least initially, and
that many of those sureties that will write them will do so only for their
largest, most creditworthy clients. The long-term nature of the obligation
guaranteed, the requirement that the surety pay the penal sum in the event the
surety attempts to cancel the bond and the owner cannot obtain alternate
assurance, and the un;:amiliarity of sureties with the hazardous waste industry
all make these bonds unattractive to-sureties. Nevertheless, owners and
operators have asked chat surety bonds be allowed as a financial assurance
mechanism. EPA believes that, in the future, the availability of RCRA surety
bonds may increase as more facilities are permitted, especially in instances
where remaining facility life is relatively brief and the time of closure is
highly predictable.
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IV-2
The -regulations pertaining to RCRA surety bonds are as follows:
EXHIBIT IV-1
RCRA SURETY BOND REGULATIONS
Topic
Interim Status
Permitted Facilities
Closure Bond
Financial Guarantee Bond
Performance Bond.
Post-Closure Bond
Financial Guarantee Bond
Performance Bond
Wording of Bonds
'Financial Guarantee Bond
. (closure and/or
post-closure)
Performance Bond
(closure and/or
post-closure)
40 CFR §265.143(b)
NA
40 CFR §265.145(b)
NA
NA
40 CFR §264.143(b)
40 CFR §264.143(c)
40 CFR §264.145(b)
40 CFR §264.145(c)
40 CFR §264.15.1 (b) 40 CFR §264.151(b)
40 CFR §264.151(c)
Source: Title 40, Code of Federal Regulations (CFR)
NA:. Not applicable.
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IV-3
B. RCRA SURETY BOND .REQUIREMENTS
This section describes the responsibilities of owners or operators in
fulfilling the surety bond requirements established under RCRA. Except for
the last part of this section dealing with permitted facilities, the
discussion here covers only financial guarantee bonds, since they are the only
type of bond allowed at interim status facilities. Apart from the few
differences noted in the last section, the requirements for financial
guarantee bonds also apply to performance bonds. A checklist of the
responsibilities of owne'rs or operators appears as Attachment IV-1 at the end
of this chapter.
INITIAL RESPONSIBILITIES OF THE OWNER OR OPERATOR
1. Qualifications for Surety Company. An owner or operator wishing to
use a surety bond to fulfill its RCRA closure and/or post-closure requirements
must enter into a contract with a qualified surety. Qualified sureties are
those listed by the U.S. Department of the Treasury in its CIRCULAR 570, which
is published annually on approximately July 1 and updated periodically in the
Federal Register. To obtain the most up-to-date information, owners or
operators can contact the Audit Staff of the Department of the Treasury
(telephone number: (202) 634-5010). Care should be used in consulting
Circular 570 since many sureties have similar names.
Circular 570 also lists the maximum amount which each surety can guarantee
in one bond, called the' UNDERWRITING LIMITATION. 'A surety may only issue a
surety bond exceeding' this amount when it brings another company into the
surety agreement to help share the risk. Even several sureties acting
together may not exceed the total of their individual underwriting
limitations, however. Finally, Circular 570 lists the states in which each
qualified surety is licensed to enter into a surety bond; a RCRA surety bond
must be signed in one of those states.
In addition, owners or operators must also identify a financial
institution qualified to establish a STANDBY TRUST FUND (discussed below).
The qualifications of trustee institutions are described in Section B.I of
Chapter III.
2. Wording and Amount of Assurance. The wording required for surety
bonds is specified in the regulations and both the owner or operator and the
surety must certify that the bond matches this wording exactly. The bonds are
shown, in Attachments IV-3 and IV-4 at the end of this chapter. The penal sum
of a RCRA surety bond, together with any amount being assured by other
mechanisms (see Section B of Chapter II for information on combinations of
mechanisms)i must be in an amount at least equal to the current closure and
post-closure cost estimates.
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IV-4
The owner or operator must also establish a standby trust fund1 to
accompany each RCRA surety bond. The moneys necessary to pay for closure
and/or post-closure care will be disbursed from this fund. The fund is often
initially established with a NOMINAL SUM, and must be funded in an amount
equal to the penal sum of the bond before the beginning of final closure of
the facility or within 15 days after an order by the Regional Administrator or
a U.S. court to begin closure (See Attachment IV-3). Any payments made under
the bond will be deposited by the surety directly into the standby trust fund
in accordance with instructions from the Regional Administrator. A standby
trust fund is not to be confused with an ordinary RCRA trust fund (described
in Chapter III), although a standby trust is subject to the same requirements
except that:
(a) annual payments into the standby trust fund are not
required (only the nominal initial payment mentioned
above is usually made);
(b) Schedule A of the trust agreement need not be updated;
(c) Annual valuations by the trustee are not required; and
(d) The trustee need not send notices of nonpayment.
A standby trust fund is also required with a letter of credit. The standby
trust fund is not a financial assurance mechanism under RCRA, it merely
facilitates drawing on surety bonds and letters of credit that are used as
financial assurance. ' The standby trust fund must, be worded exactly as
required for trust funds. See Attachment III-3 and discussion in Section B.2
of Chapter III.
3. Obtaining a Surety Bond. The first step an owner or operator should
take in approaching a broker or agent for a surety company is to check that
the broker or agent is authorized by a qualified surety to issue RCRA bonds in
the amount desired. (The owner or operator can check the qualifications of
sureties in CIRCULAR 570, as discussed above.) Sureties give brokers and
agents authority to sell surety bonds for them in a written document called a
POWER OF ATTORNEY. If the owner or operator has any doubt about the authority
of the broker to act on the surety's behalf, to issue RCRA bonds, or to issue
bonds in the amount needed, he should ask for a copy of the power of attorney.
lEven if a combination of financial .assurance mechanisms is used, only
one trust fund is necessary. If an owner or operator uses a trust fund
together with a surety bond, the trust fund may be used as the standby trust
fund. If a financial guarantee bond and letter of credit are both used, one
standby trust fund is sufficient. Remember, however, that a performance bond
may not be used in combination with other mechanisms.
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IV-5
The broker or agent will undoubtedly ask for detailed information on the
facility and the owner or operator applying for the surety bond. This
information may include any of the financial and operating data listed and the
facility visit mentioned in Section D of Chapter II.
Once the broker or agent evaluates this information, he will be able to
tell the owner or operator if a surety bond can be issued and if so, on what
terms. The terms may include not only the premiums required but also a
requirement that the owner or operator provide a certain amount of COLLATERAL
to reduce the surety's risk. Even if collateral is not required, the surety
may be willing to lower its premiums if collateral is provided voluntarily.
The owner or operator will probably also want the optional rider that is
permitted by the regulations. This could save it from having to renegotiate a
new surety bond each year that cost estimates increase.
4. Submission of Documents to EPA. To complete the surety bond, both
the surety and the owner or operator will have to sign it; someone properly
authorized to act on the behalf of either or both parties may sign instead.
The owner or operator must then submit the surety bond and an ORIGINALLY
SIGNED DUPLICATE of the standby trust agreement to the Regional Administrator
before the effective da.te of the regulations.
SUBSEQUENT RESPONSIBILITIES OF THE OWNER OR OPERATOR
5. Updating Coverage. During the operating life of the facility, when
closure or post-closure cost estimates .are adjusted due to inflation or new
estimates are prepared because of a change in closure and/or post-closure
plans, the owner or operator is responsible for ensuring either that the
bond's penal amount is increased sufficiently or that other financial
assurance is given. This must be done--and evidence of_the increase in the
penal sum submitted to the. Regional Administratorwithin 60 days after the
increase in cost estimates. Further increases in financial assurance are not
required after closure.
The bond may (but is not required to) provide for an optional RIDER to
permit increase in the penal sum by up to 20% per year. This rider allows an
owner or operator to increase the amount of its coverage without having to
renegotiate for additional surety bond coverage each time the closure or
post-closure cost estimates increase. If there is no rider or the rider is
not sufficiently large., the owner or operator may nevertheless agree with the
surety to increase the face amount. Alternatively, the owner or operator may
obtain another financial responsibility instrument to cover the increase
(combinations of instruments covering one facility are discussed in Section B
of Chapter II).
The regulations provide that the owner or operator may apply to the
Regional Administrator for a decrease in the amount of bond coverage if the
cost estimates decrease. The Regional Administrator will probably require
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IV-6
supporting documentation such as the closure and/or post-closure plans and
cost estimates in order to respond to a request to decrease-coverage. This is
further described in Section E.I of Chapter II.
6. Maintaining Assurance. The owner or operator is required to obtain
alternative financial responsibility assurance within 60 days after bankruptcy
of the surety or the removal of the surety's name from Circular 570.
In addition, assurance must be maintained until ownership of or operating
responsibility for the facility changes, and the new owner or operator has met
the applicable financial responsibility requirements.
Finally, the owner or operator may substitute an alternate mechanism of
financial assurance so long as there is no lapse in coverages. See Section
E.4 of Chapter II.
7. Cancellation of the Surety Bond by the Issuer. The surety company
may also cancel the bond. In order to exercise this right, a surety company
must send notices of cancellation to both the owner or operator and the
Regional Administrator. Cancellation may not occur during the 120 days
beginning on the date of receipt of these notices. The owners or operator
will have 90 days to provide alternate financial assurance and obtain written
approval from the Regional Administrator of the new assurance. See Section
E.3 of Chapter II. If the owner or operator fails to provide this assurance
and obtain such approval within the 90 days, the Regional Administrator will
direct .the surety to pay the penal sum into the standby trust..
8. Drawing on Funds for Closure and Post-Closure. Financial guarantee
bonds are designed to guarantee that funds will be available to pay for
closure and post-closure care. Thus, if the 'owner or operator does not
fulfill its obligation to fund the standby trust fund in"the amount of the
penal sum or to obtain alternative financial assurance when required, the
surety will be responsible for funding the standby trust fund. Specifically,
the surety will be required to pay the penal sum of the bond into the standby
trust in these circumstances:
a. The owner or operator has failed to fund the standby
- trust fund in the amount of the cost estimate for
closure and/or post-closure care before the beginning
of final closure of the facility;
b. The Regional Administrator or a court has ordered
closure to begin and the owner or operator has not
funded-the standby trust within 15 days; or
c. The surety has sent notice of cancellation of the bond
and the owner or operator has not obtained alternate
financial assurance within 90 days.
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IV-7
If the owner or operator properly funds the standby trust fund or
otherwise fulfills its obligations under the regulations, funds will not be
drawn from the surety bond.
9. Termination of Bond. The owner or operator should request the
approval of the Regional Administrator to terminate the bond in two
situations: (1) when alternate financial assurance has been.substituted (see
Section E.4 of Chapter II) and (2) when released fr.om applicable RCRA
requirements (see-Section G of Chapter II). Upon receiving the Regional
Administrator's written consent, the owner or operator should forward a copy
of it to surety along with a request that the bond be terminated. The surety
bond can only be terminated with the written consent of the Regional
Administrator. At the same time, the owner or operator should request the
Regional Administrator to approve the termination of the standby trust fund
unless the owner or operator is maintaining assurance with a letter of credit
and without a trust fund. Procedures for terminating the standby trust fund
are identical to the procedures for terminating trust funds, discussed in
Section B.9 of Chapter II.
PERMITTED FACILITIES
There are only a few differences between interim status and permitted
facilities with respect to financial assurance through surety bonds. The main
difference is the types of bonds allowed. Financial guarantee bonds may be
used at both interim status and permitted facilities and may be used in
combination with other financial assurance mechanisms; performance bonds,
however, may be used only for permitted faciliites, not for those with interim
status, and they may not be used in combination with other financial assurance
mechanisms.
Performance bonds assure performance in- accordance with closure and/or
post-closure plans and other permit requirements. Upon default by the owner
or operator, a surety may fulfill its obligations under such a bond by either
securing performance in accordance with the plans or by depositing the penal
sum into the standby trust.
In many respects, performance bonds are like financial guarantee bonds,
although there are some differences. The owner or operator may request a
reduction in the penal sum of a performance bond in the same manner as for a
financial guarantee bond. With a performance bond covering post-closure care,
such a request may 'even be made during the period of post-closure care.
Performance bonds state that the. surety will either have to perform
closure and/or post-closure care (in accordance with (1) the permit
requirements, (2) the plans, and (3) RCRA -regulations) or pay the penal sum
into the standby trust fund in the following circumstances:
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IV-8
a. The owner or operator fails to fulfill its closure
. and/or post-closure obligations, even though closure
may occur sooner than expected or the requirements in
the plans, regulations, and/or permit have changed; or
b. The surety has sent-notice of cancellation of the bond
and the owner or operator has not obtained alternate
financial assurance within 90 days.
The only other major difference between the surety bond requirements for
permitted facilities and those with interim status is that for new permitted
facilities, the surety bond must be submitted to the Regional Administrator at
least 60 days before the date on which hazardous waste is first received at
the site and the bond must be effective before the date on which hazardous
waste is first received.
C. REGIONAL OFFICE RESPONSIBILITIES
This section outlines the duties of the Regional Office in reviewing
surety bonds for RCRA financial assurance and ensuring satisfaction of
requirements. A summary checklist appears in Attachment IV-2.
REVIEWING INITIAL SUBMISSIONS
1. Qualifications of Surety and Broker or Agent. The first step that
the Regional Administrator must take is to ensure 'that the surety is
qualified. Circular 570 (published annually on approximately July 1) must be
reviewed to check that the surety is listed, is licensed to do business in the
stare in which the bond is signed, and has an underwriting limitation equal to
or larger than the bond amount. Because many sureties have similar names,
great care should be exercised in consulting Circular 570. The most recent
information can be obtained by contacting the Audit Staff of the Department of
the Treasury (telephone number: (202) 634-5010). The bond amount can exceed
the surety's underwriting limitation if the surety properly indicates that
other sureties are sharing the risk. In particular, if the surety is using
REINSURANCE, a Treasury reinsurance form must be submitted with the bond or
within 45 days thereafter. If COSURETIES are being used, the original bond
must reflect that fact. In.all cases, the Regional Administrator will want to
ensure that the total underwriting limitation of all sureties involved is not
exceeded.
For each surety bond submitted, the Regional Administrator should request
to see the broker or agent's POWER OF ATTORNEY and review it to make certain
that the broker or agent has authority to act for the surety on this type of
bond (hazardous waste) and in 'the amount of the bond.
The qualifications of the trustee institution for the standby trust fund
must also be verified. The qualifications required are the same as for the
RCRA trust fund. See Section C.I of Chapter III for procedures.
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IV-9
2. Conformity to Other Requirements. For interim status facilities, the
financial guarantee bond must establish financial assurance by the effective
date of the financial responsibility regulations. For permitted facilities,
the effective date of the bond must be no later than the date that hazardous
waste is first received at the site and the bond must be submitted to the
Regional Administrator at least 60 days before that date. In either case, the
wording of the surety bond must be identical to that specified in the
regulations and signed by the appropriate parties. It must also be
accompanied by an originally signed duplicate of the standby trust agreement
(See Section B, Part 2 of this chapter). The penal sum of the bond must at
least equal the closure and/or post-closure cost estimates unless additional
assurance has been properly submitted.
3. Recordkeeping and Tracking Systems. As surety bonds and standby
trust agreements are received, relevant information should be recorded
including the name, address, and EPA Identification Number of the covered
facilities; the name of the surety, bond number, and trustee; amount of
coverage for each facility and the effective date; and information
verification procedures performed. Automatic data processing systems can be
used for this. A list of surety bonds in effect should be kept- not only under
the owner or operator's name, but also under the name of each surety company
and trustee institution so that, in case of bankruptcy or ineligibility or
other reasons, it will be easy to determine which owners or operators need to
obtain financial assurance elsehwere. This system can be used to keep track
of mergers and changes in the names of sureties.
SUBSEQUENT RESPONSIBILITIES
4. Updating Surety Bonds. As cost estimates for closure and
post-closure care are adjusted annually for inflation or revised based on new
plans, the Regional Administrator has several tasks. First', the Regional1
Administrator will need to check that increases in cost estimates are covered
within 60 days by increases in the penal sum of surety bonds or by other added
financial assurance and that owners and operators have submitted evidence of
any increases in the penal sum. Automated data processing can be used to
assist in this task. See Chapter II, Section I.
Second, while increases in coverage are mandatory when cost estimates
increase during the operating life of the facility, decreases in coverage -are
not required when cost: estimates decrease. The Regional Administrator should
allow-the amount of a performance bond for post-closure care to be decreased
after the facility is closed only if the owner or operator demonstrates that
the amount of the bond exceeds the remaining cost of post-closure care.
Future inflation rates; are uncertain and cost estimates are not subject to
increase due to inflation after closure. See Section E of Chapter II for a
more detailed discussion.
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IV-10
5. Maintaining Assurance. Regional Administrators will have to maintain
up-to-date lists of what sureties are currently listed on Circular 570, the
states where they are licensed,'and what their underwriting limitations are.
One person in the office should'be made responsible for regularly updating
information on qualifying sureties based on the notices regarding sureties
sent by EPA headquarters. In addition, a list of surety bonds in effect must
be kept on the HWDMS not only under the owner or operator's name, but also
under each surety's name so that in the case of bankruptcy or other reason for
a financial institution failing to continue to qualify under the RCRA
regulations, it is easy to determine which owners or operators need to obtain
financial assurance elsewhere. This system could also be used to keep track
of mergers and changes in the names of sureties. Automated data processing
can be used to assist these efforts and can be particularly useful in helping
the Regional Administrator assure that alternative assurance is obtained
within 60 days after the surety becomes bankrupt or otherwise ceases to
qualify. See Section I of Chapter II. .-~
' j
In the event of transfer of ownership or operation of a facility, the
Regional Administrator should verify that assurance maintained until the new
owner or operator satisfies the financial requirements.
The Regional Administrator should approve requests to use alternate-
assurance mechanisms if no lapse in coverage will result.
6. Cancellation of the Surety Bond by the Issuer. Sureties may not
cancel RCRA surety bonds until after they send notice of cancellation to both
the owner or operator and the Regional Administrator. Cancellation may not
occur during the 120 days beginning on the date of receipt of these notices.
The Regional Administrator will have to ensure that owners or operators obtain
acceptable alternative means of financial assurance within 90 days after
receipt of these notices. Cancellation will only be allowed if the owner or
operator provides other financial assurance within this period. If it is not
obtained, the surety must fulfill its obligations under the bond.
Upon receipt of a notice from a surety, Regional Office staff should
contact the owner or operator to determine (1) the date it received the notice
from the insurer an.d (2) its plans to provide alternate assurance or fund the
standby trust fund. Both pieces of information will be essential for
determining the nature and timing of future agency action.
7.- Drawing on the Surety Bond. The Regional Administrator will have to
make demand upon the surety to fulfill' its obligations under a financial
guarantee bond when:
a. The owner or operator has failed'to fund the standby
trust fund in the amount of the cost estimate for
closure and/or post-closure care before the beginning
of final closure of the facility;
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IV-11
b. The Regional Administrator or a court has ordered
closure to begin and the owner or operator has not
funded the standby trust within 15 days; or
c. The surety has sent notice of cancellation of the bond
and the' owner or operator has not obtained alternate
financial assurance within 90 days.
If possible, the Regional Administrator should notify the trustee of the
standby trust in advance of expected payments into the trust. Payments out of
the standby trust will be made as specified in Section C.5 of Chapter III on
trust funds.
8. Requests to Terminate the Surety Bond. The Regional Administrator
may consent to the termination of the surety bond only (1) if alternate
assurance is substituted (see Section E.4 of Chapter II) or (2) if the owner
or operator is released from applicable RCRA financial requirements (see
Section G of Chapter II). Consent must be in writing and may accompany the
Regional Administrator's letter releasing the owner or operator from closure
or post-closure financial assurance requirements.
At the same time, the Regional Administrator may consent to the
termination of the staixdby trust fund unless the owner or operator is
maintaining assurance with a letter of credit and without a trust fund.
Procedures for terminating the standby trust fund are identical to the
procedures for terminating trust funds, discussed in Section B.9 of Chapter
III.
PERMITTED FACILITIES
The two major differences between facilities with permits and with interim
status are (1) performance bonds are allowed for permitted facilities and (2)
surety bond for a new permitted facility must be submitted to the Regional
Administrator at least 60 days before the date on which hazardous waste is
first received at the site and must be effective before the date on which
hazardous waste is first received. Of course, performance bonds are
significantly different than financial guarantee bonds as explained in Section
B of this chapter. First of all, performance bonds may not be used together
with other financial assurance mechanisms to cover one cost estimate. Second,
a surety may fulfill its obligations under a performance bond either by
securing performance in accordance with the plans p_r by depositing the penal
.sum into the standby trust fund. The surety will have to fulfill its
obligations in the following circumstances:
a. The owner or operator fails to fulfill its closure
and/or post-closure obligations, even though closure
may occur sooner than expected or the requirements in
the plans, regulations, and/or permit have changed; or
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IV-12
b. The surety has sent notice of cancellation of the bond
and the owner or operator has not obtained alternate
financial assurance within 90 days.
Finally, with a financial guarantee bond, the Regional Administrator can
easily determine whether the surety has fulfilled its obligations -- the
surety has either funded the standby trust or it has not. With a performance
bond, the Regional Administrator's task is not so easy if the surety
undertakes performance instead of funding the standby trust. The Regional'-
Administrator will need to oversee the surety's performance in such cases; EPA
Headquarters guidance will be available for such purposes on a case-by-case
basis.
D. SOURCES OF FURTHER INFORMATION
Circular 570 (the June 30, 1981, version is at 46 Federal Register
33962), its updates available through the audit staff of the U.S. Department
of Treasury (telephone number: (202) 634-5010), and the Treasury Department
lists of sureties with deteriorating financial conditions are vital sources of
information that all Regional Offices should have.
Another, more technical, document is Circular 297 of the Treasury
Department that contains the Treasury regulations governing sureties doing
business with the United States. These regulations were promulgated pursuant
to Title 6 of the U.S. Code, Sections 6-13. They could be useful to answer
specific questions that may arise concerning sureties.
National trade associations are an additional source of information.
Major organizations concerned with surety bonds are:
1. National Association of Surety Bond Producers
5454 Wisconsin Avenue
Suite 1625
Chevy Chase, Maryland 20015
(301) 986-4166
Trade association of surety bond agents.
2. Surety Association of America
100 Wood Avenue, South
Iselin, New Jersey 08830
(201) 494-7600 '
Trade association of surety companies.
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IV-13
3. National Association of Insurance Commissioners
350 Bishops Way
Brookfield, Wisconsin 53005
(414) 784-9540
Organization of state insurance commissioners, who
are responsible for the state regulation of surety
companies and their agents.
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IV-14
ATTACHMENT IV-1
RCRA SURETY BOND CHECKLIST FOR OWNERS OR OPERATORS
..Paragraph
Number *
(1) Seek out an agent or a broker of a qualified surety, namely, a
surety that is listed on Circular 570, is licensed to transact
business in the state, and whose underwriting limit is sufficient
(either alone or acting with other sureties) to cover the cost
estimates for which assurance is sought.
" Identify a qualified trustee institution.
(2) Obtain the right type of bond--only financial guarantee bonds
are acceptable for interim status siteSj while both financial
guarantee bonds or performance bonds are allowed at permitted
facilities.
" Check that the penal sum is correct and that the wording of the
agreement is identical to the wording in the regulations.
" Establish a standby trust worded exactly as required by the
regulations.
(3) If there is any doubt about the agent's or broker's authority to
act for a qualified surety, check the agent or broker's power of
attorney to'-ensure that the agent or broker has authority to act
on behalf of"the surety, to issue RCRA surety bonds, and to issue
surety bonds in the amount needed.
(4) For interim status facilities, sign the bond and standby trust
papers, including Schedules A and B and the certification of
acknowledgment, and submit them to the Regional Administrator by
the effective date of the regulations,.
" For new permitted facilities, the bond must be submitted to the
Regional Administrator at least 60 days before the date on which
hazardous waste is first received at the site and the bond must
be effective before the date on which hazardous waste is first
received.
* The numbers correspond to the paragraphs in Section B.
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IV-15
ATTACHMENT IV-1 (continued)
RCRA SURETY BOND CHECKLIST FOR OWNERS' OR OPERATORS
Paragraph
Number *
(5) Within 60 days after cost estimates increase, obtain additional
coverage or an alternative method of assurance and submit
evidence to the Regional Administrator of the increase in
coverage.
" When cost estimates decrease, apply to the Regional
Administrator for a decrease in coverage.
(60 Within 60 days of bankruptcy of the surety or the surety ceasing
to be listed in Circular 570, obtain alternative coverage and
inform the Regional Administrator.
(7) Obtain alternative assurance within 90 days after receipt by
both the owner or operator and the Regional Administrator of
notice of cancellation..
(8) To avoid having funds drawn from the surety bond, either fund
the standby trust fund (before the beginning of final closure or
within IS days after an order to begin closure) or obtain
alternative financial assurance wirhin 90' days after receipt of
notice of cancellation from the surety.
(9) Request approval to terminate the bond (1) when alternate
assurance is substituted, and (2) when released from closure or
post-closure financ-ial assurance requirements by the Regional
Administrator.
The numbers correspond to the paragraphs in Section B.
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IV-16
ATTACHMENT IV-2
RCRA SURETY BOND CHECKLIST FOR REGIONAL OFFICES
The Regional Administrator.must ensure that:
Paragraph
Number *
(1) ^ At a minimum, the surety is listed in Circular 570, is licensed
in the state, and has a sufficiently large underwriting
limitation (or shares the risk with other sureties or reinsurers
and the combined underwriting limitation is not exceeded).
" The broker or agent's power of attorney is reviewed to be
certain that the broker or agent is authorized by the surety to
issue RCRA bonds in the amount needed.
r-
" . The trustee institution for the standby trust is qualified.
(2) For interim status facilities, the bond is received and
effective by the effective date of the regulations.
For new permitted facilities, the bond is submitted to the
Regional Administrator at least 60 days before the date on which
hazardous waste' is.first received at the site and the bond is
effective before the date on which hazardous waste is first.
received.
" The wording of the bond 'is identical,to the wording specified in
the regulations.
" An originally signed duplicate of the standby trust agreement,
including Schedules A and B and a certification of
acknowledgment, accompanies the bond.
; Only financial guarantee bonds are accepted for facilities with
interim status; either financial guarantee bonds or performance
bonds may be accepted for permitted facilities.
The penal sum equals or exceeds the cost estimates, or other
assurance is also provided.
(3) Relevant information is recorded.
* The numbers correspond to the paragraphs in Section C.
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IV-17
ATTACHMENT IV-2 (continued)
RCRA SURETY BOND CHECKLIST FOR REGIONAL OFFICES
Paragraph
Number *
(4)' Increases in cost estimates are covered within 60 days by
increases in the penal sum of surety bonds or other added
financial assurance.
" Decreases in surety bond penal sums are approved only when
sufficient coverage will remain.
(5) The Regional Office keeps track of which sureties enter
bankruptcy or cease to be listed in Circular 570 and ensures that
owners or operators obtain alternate assurance within 60 days
after such events.
(6) The owner or oprator is contacted following notice from the
surety of intent to cancel.
The owner or operator obtains alternative means of financial
assurance within 90 days after receipt by the owner or operator
and the Regional Administrator of notice of cancellation of a
surety bond by a surety.
(7) Demand is made upon the.surety to fulfill its obligation under
the surety bond when the conditions specified in the bond occur.
" If possible, the trustee of the standby trust is notified in
advance of expected payments into the trust.
(8) Requests 1:0 terminate the bond are approved in writing when (1)
alternate financial assurance is substituted or (2) the owner or
operator has been released from closure or post-closure financial
requirements.
The numbers correspond to the paragraphs in Section C.
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IV-18
ATTACHMENT IV-3
REQUIRED WORDING FOR RCRA FINANCIAL GUARANTEE BOND
(40 CFR 264.151(b))
Date bond executed:
Effective date:
Principal: [legal name and business address of owner or operator]
Type of organization: [insert "individual," "joint venture," "partnership,"
or "corporation"]
State of incorporation:
Surety(ies): [name(s) and business address(es)]
EPA Identification Number, name, address, and closure and/or post-closure
amount(s) for each facility guaranteed by this bond [indicate closure and
post-closure amounts separately]:
Total penal sum of bond: S
.Surety's bond number:
Know All Persons By These Presents, That we, the Principal and Surety(ies)
hereto are firmly bound to the U.S. Environmental Protection Agency (herein-
after calle'd EPA), in the above penal sum for the payment of which we bind
ourselves, our heirs, executors, administrators, successors, and assigns
jointly and severally; provided that, where the Surety(ies) are corporations
acting as co-sureties, we, the Sureties, bind ourselves in such sum "jointly
and severally" only for the purpose of allowing a joint action or actions
against any or all of us, and for all other purposes each Surety binds itself,
jointly and severally with the Principal, for the payment of such sum only as
is set forth opposite the name of such Surety, but if no limit of liability is
indicated, the limit of liability shall be full amount of the penal sura.
Whereas said Principal is required, under the Resource Conservation and
Recovery Act as amended (RCRA), to have a permit or interim status in order to
own or operate.each hazardous waste management facility identified above, and
Whereas said Principal is required to provide financial assurance for
closure, or closure and post-closure care, as a condition of the permit(s) or
interim status, and
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IV-19
ATTACHMENT IV-3 (continued)
REQUIRED WORDING FOR RCRA FINANCIAL GUARANTEE BOND
(40 CFR 264.151(b))
Whereas said Principal shall establish a standby trust fund as is required
when a surety bond is used to provide such financial assurance;
Now, Therefore, the conditions of the obligation are such that if the
Principal shall faithfully, before the beginning of final closure of each
facility identified above, fund the standby trust fund in the amount(s)
identified above for the facility,
Or, if the Principal shall fund the standby trust fund in such amount(s)
within 15 days after an order to begin closure is issued by an EPA Regional
Administrator or a U.S. district court or other court of competent
jurisdiction,
Or, if the Principal shall provide alternate financial assurance, as
specified in Subpart H. of 40 CFR Parts 264 or 265, as applicable, and obtain
the EPA Regional Administrator's written approval of such assurance, within 90
days after the date notice of cancellation is received by both the Principal
and the EPA Regional Administrator(s) from the Surety(ies), then this
obligation shall be null and void, otherwise it is to remain in full force and.
effect.
The Surety(ies) shall become liable on this bond obligation only when the
Principal has failed to fulfill the conditions described above. Upon
notification by an- EPA Regional Administrator that the Principal has failed to
perform as guaranteed by this bond, the Surety(ies) shall place funds in the
amount guaranteed for the facility(ies) into the standby trust fund as
directed by the EPA Regional Administrator.
The liability of the Surety(ies) shall not be discharged by any payment or
succession of payments hereunder, unless and until such payment or payments
shall amount in the aggregate to the penal sum of the bond, but in no event
shall the obligation of the Surety(ies) hereunder exceed the amount of said
penal sum.
The Surety(ies) may cancel the bond by sending notice of cancellation by
certified mail to the Principal and to the EPA Regional Administrator(s) for
the Region(s) in which the facility(ies) is (are) located, provided, however,
that cancellation shall not occur during the 120 days beginning on the date of
receipt of the notice of cancellation by both the Principal and the EPA
Regional Administrator(s), as evidenced by the return receipts.
The Principal may terminate this bond by sending written notice to the
Surety(ies), provided, however, that no such notice shall become effective
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IV-2.0
ATTACHMENT IV-3 (continued)
REQUIRED WORDING FOR RCRA FINANCIAL GUARANTEE BOND
(40 CFR 264.151(b))
until the Surety(ies) receive(s) written authorization for termination of the
bond by the EPA Regional Administrator(s) of the EPA Region(s) in which the
bonded facility(ies) is (are) located.
[The following paragraph is an optional rider that may be included but is
not required.]
Principal and Surety(ies) hereby agree to adjust the penal sum of the bond
yearly so that it guarantees a new closure and/or post-closure amount,
provided that the penal sum does not.increase by more than 20 percent in any
one year, and no decrease in the penal sum takes place without the written
permission of the EPA Regional Administrator(s).
In Witness Whereof, the Principal and Surety(ies) have executed this
Financial Guarantee Bond and have affixed their seals on the date set forth
above.
The persons whose signatures appear below hereby certify that they are
authorized to execute this surety bond on behalf of the Principal and
Surety(ies) and that the wording of this surety bond is identical to the
wording specified in 40 CFR 264.151(b) as such regulations were constituted on
the date this bond was executed.
Principal
[Signature(s)]
[Name(s)]
[Title(s)]
[Corporate seal]
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IV-21
ATTACHMENT IV-3 (continued)
REQUIRED WORDING FOR RCRA FINANCIAL GUARANTEE BOND
QO CFR 264.151(b))
Corporate Surety(ies)
[Name and address]
Stare of incorporation:
Liability limit: S
[Signature(s)]
[Name(s) and 'title(s) ]
[Corporate seal]
[For every co-surety, provide signature(s) , corporate seal, and other
information in the same manner as for Surety above.]
Bond premium: S
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IV-22
ATTACHMENT IV-4
REQUIRED WORDING FOR RCRA PERFORMANCE BOND
(40 CFR 264.151(0)
Date bond executed:
Effective date:
Principal: [legal name and business address of owner or operator]
Type of organization: [insert "individual," "joint venture," "partnership,"
or "corporation"]
State of incorporation:
Surety(ies): [name(s) and business address(es)]
EPA Identification Number, name, address, and closure and/or post-closure
amount(s) for each facility guaranteed by this bond [indicate closure and
post-closure amounts separately]:
Total penal sum of bond: S.
Surety's bond number:
Know All Persons By These Presents, That we, the Principal and Surety(ies)
hereto are firmly bound to the U.S. Environmental Protection Agency (herein-
after called EPA), in the above penal sum for the payment of which we bind
ourselves, our heirs, executors, administrators, successors, and assigns
jointly and severally; provided that, where the Surety(ies) are corporations
acting as co-sureties, we, the Sureties, bind ourselves in such sum "jointly
and severally" only for the .purpose of allowing a joint a.ction or actions
against any or all of us, and for all other purposes each Surety binds itself,
jointly and severally with the Principal, for the payment of such sum only as
is set forth opposite the name of such Surety, but if no limit of liability is
indicated, the limit of liability shall be the full amount of the penal sum.
Whereas said Principal is required, under the Resource Conservation and
Recovery Act as amended (RCRA), to have a permit in order to own or operate
each hazardous waste management facility identified above, and
Whereas said Principal is required to provide financial assurance for
closure, or closure and post-closure care, as a condition of the permit, and
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IV-23
ATTACHMENT IV-4 (continued)
REQUIRED WORDING FOR RCRA PERFORMANCE BOND
(40 CFR 264.151(c))
Whereas said Principal shall establish a standby "rust fund as is required
when a surety bond is used to provide such financial assurance;
Now, Therefore, the conditions of the obligation are such 'that if the
Principal shall faithfully perform closure, whenever required to do so, of
each facility for which this bond guarantees closure, in accordance with the
closure plan and other requirements of the permit as such plan and permit may
be amended, pursuant to all applicable laws, statutes, rules, and regulations,
as such laws, statutes, rules, and regulations may be amended.
And, if the Principal shall faithfully perform post-closure care of each
facility for which this bond guarantees post-closure care, in accordance with
the post-closure plan and other requirements of the permit, as such plan and
permit may be amended, pursuant to all applicable laws, statutes, rules, and
regulations, as such laws, statutes, rules, and regulations may be amended.
Or, if the Principal shall provide alternate financial assurance as
specified in Subpart H of 40 CFR Part 264, and obtain the EPA Regional
Administrator's written approval of such assurance, within 90 days after the
date notice of cancellation is received by both the Principal and the EPA
Regional Administrator(s) from the Surety(ies), then this obligation shall be
null and void, otherwise it is to remain in full force and effect.
The Surety(ies) shall become liable on this bond obligation only when the
Principal has failed to fulfill the conditions described above.
4
Upon notification by an EPA Regional Administrator that the Principal has
been found in violation of the closure requirements of 40 CFR Part 264, for a
facility for which this bond guarantees performance of closure, the
Surety(ies) shall either perform closure in accordance with the closure plan
and other permit requirements or place the closure amount guaranteed for the
facility into the-standby trust fund as directed by the EPA Regional
Administrator.
Upon notification by an EPA Regional Administrator that the Principal has
been found in violation of the post-closure requirements of 40 CFR Part 264,
for -a facility for which this bond guarantees performance of post-closure
.care, the Surety(ies) shall either perfornrpost-closure care in accordance .
with the post-closure plan and other permit requirements of place the
post-closure amount guaranteed for the facility into the standby trust fund as
directed by the EPA Regional Administrator.
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IV-24
ATTACHMENT IV-4 (continued)
REQUIRED WORDING FOR RCRA PERFORMANCE BOND
(40 CFR 264.151(c))
Upon notification by an EPA Regional Administrator that the Principal has
failed to provide alternate financial assurance as specified in Subpart H of
40 CFR Part 264, and obtain written approval of such assurance from the EPA
Regional Administrator(s) during the 90 days following receipt by both the
Principal and the EPA Regional Administrator(s) of a notice of cancellation of
the bond, the Surety(ies) shall place funds in the amount guaranteed for the
facility(ies) into the standby trust fund as directed by the EPA Regional
Administrator.
The Surety(ies) hereby waive(s) notification of amendments to closure
plans, permits, applicable laws, statutes, rules, and regulations and agrees
that no such amendment shall in any way alleviate its (their) obligation on
this bond.
The liability of the Surety(ies) shall not be discharged by any payment or
succession of payments hereunder, unless and until such payment or payments
shall amount in the aggregate to the penal sum of the bond, but in no event
shall the obligation of the Surety(ies) hereunder exceed the amount of said
penal sum.
The Surety(ies) may cancel the bond .by sending notice of cancellation by
certified mail to the owner or operator and to the EPA Regional Administra-
tor^) for the Region(s) in which the facility(ies) is (are) located,
provided, however, that cancellation shall not occur during the 120 days
beginning on the date of receipt of the notice of cancellation by both the
Principal and the EPA Regional Administrator(s), as evidenced by the return
receipts.
The Principal may terminate this bond by sending written notice to the
Surety(ies), provided, however, that-no such notice shall become effective
until the Surety(ies) receive(s) written authorization for termination of the
bond by the EPA Regipnal Administrator(s) of the EPA Region(s) in which the
bonded facility(ies) is (are) located.
[The following paragraph is an optional rider that may be included but is
not required. ].
Principal and Surety(ies) hereby agree to adjust the penal sum of the bond
yearly so that it guarantees a new closure and/or post-closure amount,
provided that the penal sum does not increase by more than 20 percent in any
one year, and no decrease in the penal sum takes place without the written
permission of the EPA Regional Administrator(s).
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IV-25
ATTACHMENT IV-4 (continued)
REQUIRED WORDING FOR RCRA PERFORMANCE BOND
(40 CFR 264.151(c))
In Witness Whereof, The Principal and Surety(ies) have executed this
Performance Bond and have affixed their seals on the date set forth above.
The persons whose signatures appear below hereby certify that they are
authorized to execute this surety bond on behalf of the Principal and
Surety(ies) and that the wording of this surety bond is identical to the
wording specified in 40 CFR 264.151(c) as such regulation was constituted on
the date this bond was executed.
Principal
[Signature(s)]
[Name(s)]
(Title(s)]
[Corporate seal]
Corporate Surety(ies)
[Name and address]
State of incorporation:
Liability limit: S
(Signature(s)]
[Name(s) and title(s)]
[Corporate seal]
[For every co-surety, provide signature(s), corporate seal, and other
information in the same manner as for Surety above.]
Bond premium: S . .
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V. ESTABLISHING FINANCIAL RESPONSIBILITY USING LETTERS'OF'CREDIT
A. INTRODUCTION
A LETTER OF CREDIT is a mechanism by which the credit of one party, such
as a bank, is extended on behalf of a second party, called the ACCOUNT PARTY,
to a third party, the BENEFICIARY. The first party, the ISSUER, allows the
beneficiary to draw funds upon the presentation of documents In accordance
with the terms of the letter of credit. In a RCRA letter of credit, the owner
or operator is the account party, the financial institution is the issuer, and
the EPA is the beneficiary.
The purpose of a RCRA letter of credit is to guarantee availability of
funds for closure and/or post-closure care. The issuer offers this assurance
in exchange for a fee paid by the owner or operator. The owner or operator
also undertakes to repay, with interest, any funds drawn through the letter of
credit. While EPA specifies the wording of the letter, the terms of the
credit arrangement between the owner or operator and the issuer will depend on
individual circumstances and negotiations. If an owner or operator has a good
relationship with a bank, a letter of credit may be a desirable method-of
establishing financial responsibility.under RCRA.
The regulations pertaining to RCRA letters of credit are as follows:
EXHIBIT V-l
RCRA LETTER OF CREDIT REGULATIONS
Tooic Interim Status Permitted Facilities
Closure Letter of Credit 40 CFR §265.143(c) 40 CFR §264.143(d)
Post-Closure Letter of Credit 40 CFR §265.145(c) 40 CFR §264.145(d)
Wording of Letter of Credit 40 CFR-§264.151(d) 40 CFR §264.151(d)
Source: Title 40, Code of Federal Regulations (CFR).
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V-2
B. REQUIREMENTS FOR USING RCRA LETTERS OF CREDIT
This section outlines the requirements for using letters of credit, laying
out the responsibilities of owners or operators. A checklist of these
responsibilities appears in Attachment V-l at the end of this chapter.
INITIAL RESPONSIBILITIES OF THE OWNER OR OPERATOR
1. Qualifications for Issuing Institution. The issuing institution must
be an entity which has the authority to issue a letter-of credit, and whose
letter of credit operations are regulated and examined by a federal or state
agency (e.g., a bank or other financial institution). All domestic commercial
banks and some mutual savings banks, foreign banks, credit unions, and savings
and loan associations satisfy this requirement. Owners or operators should
confirm qualifications of a prospective issuer with the appropriate regulatory
authority (see Exhibit V-2 and Appendix B).
In addition, owners or operators must also identify a financial
institution qualified to establish a STANDBY TRUST FUND (discussed below).
The qualifications of trustee institutions are described in Section B.I of
Chapter III;
2. Wording and Amount of Assurance. RCRA letters of credit must be
expressly IRREVOCABLE for an initial period of at least one year, and must
provide for AUTOMATIC EXTENSIONS of at least one year. The wording of the
letter of credit must be identical to that required by-the'regulations in
force on the date of issuance. The letter of credit must also be effective by
the effective date of the regulations. . Attachment V-3 shows the required
wording of a RCRA letter of credit.
The amount of the letter of credit must, at a minimum, equal the CURRENT
COST ESTIMATES for closure and/or post closure care. Of course, if the letter
of credit is combined with another mechanism (see Section 3 of Chapter II),
the combined coverage must at least equal the cost estimate. The initial
amount of coverage may be larger than the cost estimate in order to
accommodate expected revisions in the estimate due to inflation.
An owner or operator who us'es a letter of credit to satisfy RCRA
requirements must also establish a standby trust fund.l Under the terms of
the letter of credit, funds will be deposited by the issuing institution
if a combination of financial assurance mechanisms is used, only
one trust fund is necessary. If an owner or operator uses a trust fund
together with a letter of credit, the trust fund may be used as the standby
trust fund. If a letter of credit and a financial guarantee bond are both
used, one standby trust fund is sufficient.
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EXHIBIT V-2
LETTER OF CREDIT: REGULATORY AUTHORITIES FOR FINANCIAL INSTITUTIONS
Typo or Financial Institution Primary Regulatory Authority Whom to Ca I I
I. State-Chartered Financial State Authority See Appendix B.
Institutions: Commercial
Hanks, Savings and Loans,
Mutual Savings Banks,
Credit Unions. State-
licensed Foreign Banks
2. Nationally-Chartered Comptroller of the Currency Commercial Examinations Division
Commercial Banks. All (202) I|'l7-ll6't
Wash i rig toil, O.C.
Commercial Banks,
Nat ionaI Iy-Li censed
Foreign Banks
3. Nationally-Chartered Federal Home Loan Bank Board Regulatory Division Director,
Savings and Loans (202) 377-6000, ext. 6*410
i|. Nationally-Chartered Mutual Federal Home Loan Bank Board, As Number 3, and see Appendix B
Savings Banks State Authorities
5. Nationally-Chartered Credit National Credit Union General Counsel, (202) 357-1030
Unions Administration
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V-4
directly into the standby trust fund in accordance with instructions' from the
Regional Administrator if the owner or operator fails to (1) maintain
assurance or (2) perform closure-or post-closure care. (See Section B.8 below
for details.) The monies ne'cessary to pay for closure and/or post-closure
care will be disbursed from this trust fund. The trust fund is often
initially established with a NOMINAL SUM and further payments are not required
by EPA until it calls upon the letter of credit. A standby trust fund is net
to be confused with an ordinary RCRA trust fund (described in Chapter III),
although a standby trust is subject to the same requirements except that:
(a) annual payments into the standby trust fund are not
required (only the nominal initial payment mentioned
above is usually made);
(b) Schedule A of ;the trust agreement need not be updated;
(c) Annual valuations by the trustee are not required; and
(d) The trustee need not send notices of nonpayment.
The standby trust fund is nqt a financial assurance mechanism under RCRA, it
merely facilitates drawing dn letters of credit and surety bonds that are used
as financial assurance. The standby trust fund must be worded exactly as
required for trust funds. S:ee Attachment III-3 and discussion in Section B.2
of Chapter III.
3. Obtaining a Letter- cjf Credit. Qualified issuers include all
commercial banks and some multual savings banks, savings and loans, and credit
unions (see Exhibit V-2 for
more information on qualified issuers). The fee
for the..letter of credit may be negotiable, depending on the business history
of the parties and particularly on the COLLATERAL required to secure the
credit. Banks may provide letters of credit for certain owners or operators
who otherwise would not qualify, if collateral is.deposited with the bank.
Collateral may be required up to a value of 100 percent (or more) of the
letter of credit. The letter of credit mechanism,allowed for RCRA financial
assurance is different in two major respects from standard commercial
versions; (1) the RCRA version can onl'y be cancelled with 120 days notice
before the current expiration date, and (2) the RGRA version must be extended
automatically at least one year if it is not cancelled. Therefore, although
many financial institutions will be qualified, it is not clear how many will
be willing to provide a letter of credit for RCRA financial assurance.
As discussed above, an owner or operator will also need to arrange- for a
standby trust fund to accompany the RCRA letter of credit. Many institutions
qualified to issue a RCRA letter of credit will also be qualified to establish
the standby trust fund; however, not all financial institutions may be willing
to provide both mechanisms.
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V-5
4. Submission of Documents to EPA. Documents which must be submitted to
the EPA Regional Administrator include:
The letter of credit itself;
Ail ORIGINALLY SIGNED DUPLICATE of the standby trust
agreement.
A separate letter stating the amount of credit
applicable to each site covered by the letter of
credit. This letter must include the letter of credit
number, name of the issuer, date; EPA identification
number, -name, and address of each facility; and the
amount of funds assured for closure and/or post-closure
care of each facility.
These documents must be submitted by the effective date of the regulations.
SUBSEQUENT RESPONSIBILITIES OF THE OWNER OR OPERATOR
5. Updating Coverage. Within 60 days after an increase in the cost
estimates because of inflation or changes in plans, the owner or operator is
required to either (1) increase the amount of the letter if necessary to cover
the estimated cost and submit evidence to the Regional Administrator of that
increase or (2) obtain another form of financial assurance to cover the
increase. The amount need not be increased once a facility has been closed.
If closure or post-closure cost estimates decrease, the owner or operator
may reduce the amount of the letter of credit following written approval by
the Regional Administrator. This includes decreases during the period of
post-closure care. See Section E.I of Chapter II for more details regarding
documentation that should be provided with such requests.
6. Maintaining Assurance. The owner or operator is responsible for
maintaining the letter of credit until closure or post-closure care has been
completed. Thus, the owner or operator must substitute alternate financial
assurance if the authority of the institution to issue letters of credit is
revoked or suspended or in the event of bankruptcy of the issuing
institution. For example, a bank's charter or license may be suspended or
revoked, it could become bankrupt, or it could lose its authority to issue
letters of credit. In such cases, the owner or operator must establish other
financial assurance and submit .evidence.of this within 60 days after the
issuer's disqualification.
In addition, assurance must be maintained until ownership of or operating
responsibility for the facility changes, and the new owner or operator has met
the applicable financial responsibility requirements.
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V-6
Finally, the owner or operator may substitute an alternate mechanism of
financial assurance so long as there is no lapse in coverage. See Section E.4
of Chapter II.
7. Cancellation or Nonrenewal of the Letter of Credit by the Issuer. If
the issuer decides not to extend the letter of credit past the current
expiration date, it must notify both the owner or operator and the Regional
Administrator by certified mail at least.120 days before the current
expiration date. The 120 days will begin on the date when both the owner or
operator and the Regional Administrator have received the notice, as evidenced
by the return receipts. The owner or operator has 90 days in which to arrange
for new financial assurance. After 90 days, the Regional Administrator will
draw on the letter of credit unless alternate assurance is obtained and
approved or the issuer grants an extension of the term of credit. If an
extension is granted, the Regional Administrator will draw on the letter of
credit during the last 30 days of such an extension if the owner or operator
fails to provide alternate financial assurance and obtain written approval.
8. Drawing on Funds for Closure or Post-Closure. The owner or operator
is not authorized to draw on the RCRA letter of credit, only the Regional
Administrator may do this. The owner or operator is legally obligated to
repay any amounts drawn under the letter of credit with interest as agreed]
however. The owner or operator is free to negotiate a separate letter of
credit to finance its own closure or post-closure expenses. If the owner or
operator fulfills its closure and post-closure obligations, the Regional
Administrator, will not draw on the letter of credit.
9. Termination of Letter of Credit. The owner or operator should
request the .approval of the Regional Administrator to terminate the letter of
credit in two situation-s.: (1) when alternate financial assurance has been
substituted (see Section- E.4 of Chapter II) and (2) when released from
applicable RCRA financial requirements (see Section G of Chapter II). Upon
receiving the Regional Administrator's written consent, the owner or operator
should forward a copy of it to the institution issuing the letter of credit.
The letter of credit can only be terminated with the written consent of the
Regional Administrator..
At the same time, the owner or operator should request the Regional
Administrator to approve the termination-of the standby trust fund unless the
owner or operator is maintaining assurance with a financial guarantee bond.-
Procedures for terminating the standby trust fund are identical to the
procedures for terminating trust funds, discussed in Section B,9 of Chapter
III.
PERMITTED FACILITY REQUIREMENTS
The only additional permitted facility requirements are that the letter of
credit must be effective before hazardous wastes are first received at a new
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V-7
facility and the letter of credit must be submitted to the Regional
Administrator at least 60 days before the first receipt of such wastes.
C. REGIONAL OFFICE RESPONSIBILITIES
This section outlines the responsibilities of the Regional Office for
reviewing letters of credit used to establish financial assurance. A summary
checklist appears in Attachment V-2 at the end of this chapter.
REVIEWING INITIAL SUBMISSIONS
1. Qualifications of Issuers. Financial institutions must have
authority to issue letters of credit and their letter of credit operations
must be regulated by a Federal or State agency. Regional Office personnel
should check the issuer's qualification with the appropriate regulatory
authorities on a case by case basis. For a list of the proper regulatory
authorities to contact, see Exhibit V-2 and Appendix B.
The qualifications of the trustee institution for the standby trust fund
must also be verified. The qualifications required are the same as for the
RCRA trust fund. See Section C.I of Chapter III for procedures.
2. Conformity to Other Requirements. When a letter of credit arrives at
the EPA Regional Office, Regional Office personnel must verify that the letter
of credit is
effective by the effective date of the regulations;
worded exactly as in the regulations (see Attachment
V-3) in force on the date of signature;
signed by an authorized officer of the financial
institution;
in an amount at least equal to the current cost
estimate(s);
accompanied by a letter referring to the letter of
credit by number, issuing institution, and date which
provides the EPA Identification Number, name, and
address of each facility, and the amount of funds
assured by the letter of credit for closure and
post-closure care of each facility; and
accompanied by an originally signed duplicate of the
standby trust agreement worded exactly as required (see
Attachment III-3).
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V-8
3. Recordkeeping and Tracking Systems-. As letters of credit and standby
trust agreements are received, relevant information should be recorded,
including the name, address, and EPA Identification Number of the facility;
letter of credit number and financial institution name; amount of coverage for
each facility and effective date; and information verification procedures
performed. Automatic data processing systems can be used for this. A list of
letters of credit and standby trust funds in effect should be kept not only
under the owner or operator's name, but also under each financial
institution's name so that in the case of bankruptcy, de-licensing, or other
reasons, it is easy to determine which owners, or operators need to obtain
financial assurance elsewhere. This system could be used to keep track of
mergers and changes in the names of financial institutions.
SUBSEQUENT RESPONSIBILITIES
4. Updating Coverage. The Regional Office should ensure that if closure
or post-closure cost estimates increase, the owner or operator obtains
additional financial assurance, either by increasing the amount of the letter
of credit or adding a new mebhanism for financial responsibility within 60
days after the increase. ;
If cost estimates decrease, the owner or operator may apply for a
reduction in the letter of credit. The Regional Administrator should approve
the decrease in writing only if the owner or operator has demonstrated that
sufficient financial responsibility will remain to cover closure and/or
posr-closure expenses. Such a determination will require a review of the
closure or post-closure plan for technical adequacy and completeness as well
as a review of the reasonableness of the associated cost estimates. See
Section E of Chapter II for a more detailed discussion.
5. Maintaining Assurance. The Regional Administrator must verify that
the owner or operator provides' new financial assurance when the issuer ceases
to qualify under the regulations. Note that the issuing institution is not
required by RCRA regulations^ to notify the Regional Administrator or the owner
or operator regarding such an eventuality. Regional Offices are not expected
to develop surveillance systems to monitor for such events but should be
prepared to instruct owners or operators to obtain- alternate assurance in the
event the disqualification, bankruptcy, or termination of the issuer becomes
known. The HVDMS may prove useful for this, as discussed in Section I of
Chapter II.
In addition, Regional Office staff may want to periodically review the
qualifications of issuers to ensure that no owner or operator is using an
insurance policy from an unqualified insurer. The staff should check the
possibility of changes- in names of financial institutions so that genuinely
qualified issuers are not disqualified; this may involve no more than a
telephone call to the proper regulatory authority or the financial institution
itself.
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V-9
If the ownership of or operating responsibility for a facility has been
transferred, the Regional Administrator must not allow the letter of credit
for that facility to be terminated until the new owner or operator has met the
applicable financial responsibility requirements.
The Regional Administrator should approve requests to use alternate
assurance mechanisms when no lapse or coverage will result.
6. Nonrenewal by Issuer. The Regional Administrator must ensure that
(1) the owner or operator obtains alternate financial assurance and (2)
obtains written approval of such alternate assurance, within 90 days after
receipt of a notice from the issuing institution that it has decided not to
extend the letter of credit beyond its current expiration date. The 90-day
period begins after receipt by both the owner or operator and the Regional
Administrator of the notice; upon receiving such a notice the Regional Office
should contact the owner or operator to determine exactly when the 90-day
period commences. Nonrenewal will only be allowed if the owner or operator
provides other financial assurance.
Upon receipt of a notice from the issuer, Regional Office staff should
contact the owner or operator .to determine (1) the date it received the notice
and (2) its plans to provide alternate assurance. Both pieces of information
will be essential for determining the nature and timing of future agency
action.
7. Drawing on Funds for Closure or Post-Closure. The Regional
Administrator is authorized to draw funds for closure and/or post-closure:
(1) the owner or operator fails to provide alternate
assurance within 90 days after receipt of a notice
from the issuing institution that it has decided not
. to extend the letter of credit beyond its expiration
date, or
(2) following a determination pursuant to §3008 of RCRA
that the owner or operator has failed to perform
closure or post-closure care in accordance with
previously approved plans whenever required to do so.
In the first case, the Regional Administrator may delay the drawing if the
issuer grants an extension of the term of the credit. However, the Regional
Administrator must draw on the letter during the last 30 days of any extension
if the owner or operator fails to provide alternate assurance and obtain the
written approval of the Regional Administrator.
Funds drawn from the letter of credit must be deposited into the standby
trust fund. The Regional Administrator should instruct the issuing
institution in writing to deposit the funds. If possible, the Regional Office
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V-10
should notify the trustee of the standby trust in advance of expected payments
into the trust.
Requests from parties other than the owner or operator for reimbursement
from the trust should be handled as described in- Section C.8 of Chapter III.
8. Requests', to Terminate the Letter of Credit. The Regional
Administrator may consent to the termination of the letter of credit only (1)
if alternate assurance is substituted (see Section E.4 of Chapter II) or (2)
if the owner or operator is released from applicable RCRA financial
requirements. (See Section G of Chapter II.) Consent must be in writing and
may accompany the Regional Administrator's letter releasing the owner or
operator from closure or post-closure financial assurance requirements. The
Regional Administrator should return the letter of credit to the issuing
institution for termination.
At the same time, the Regional Administrator may consent to the
termination of the standby trust fund unless the owner or operator is
maintaining assurance with a financial guarantee bond. Procedures for
terminating the standby trust fund are identical to the procedures for
terminating trust funds, discussed in Section B.9 of Chapter III.
PERMITTED FACILITY REQUIREMENTS
The only differences for permitted facilities are that the letter of
credit must be effective before hazardous wastes are first received at a-new
facility, and the letter of credit must be submitted to the Regional
Administrator at least 60 days before the first receipt of those wastes.
D. SOURCES OF FURTHER INFORMATION -:
Further information on letters of credit may be found by contacting the
appropriate state or federal regulatory agency, or by consulting Article 5 of
the Uniform Commercial Code or the International Chamber of Commerce,
"Uniform Customs and Practices for Documentary. Credits."
Federal regulatory agencies are listed in Appendix A-2.
National trade associations can supply information about letters of-credit
and financial institutions in general. Major national organizations include:.
1. American Bankers Association
1120 Connecticut Avenue, N.W;
Washington, B.C. 20036
(202) 467-4000
Trade association of banks and trust companies.
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V-ll
2. Independent Bankers Association of America
P.O. Box 267
Sauk Centre, Minnesota 56378
(612) 352-6546
Association of medium size and smaller independent
banks.
3. National Association of Mutual Savings Banks
200 Park Avenue
New York, New York 10017
(212) 973-5432
Trade association of mutual savings banks.
4. United States League of Savings Associations
111 East Wacker Drive
Chicago, Illinois 60601
(312) 644-3100
Trade association of savings and loan associations,
cooperative banks, and state and local savings and loan
association leagues.
5. Credit Union National Association
5710 Mineral Point Road
Box 431
Madison, Wisconsin 53701
(608) 231-4000 ...
Trade association of state credit union leagues.
6. Conference of State Bank Supervisors
1015 Eighteenth Street, N.W., Suite 606
Washington, D.C. 20036
(202) 296-2840
Organization of state officials responsible for the
supervision of state-chartered banking institutions.
7. National Association of State Credit Union Supervisors
1499 Chain Bridge Road, Suite 201
McClean, Virginia 22101
(703) 821-2243
Organization of state credit union supervisors and
state-chartered credit unions.
8. 'National Association of State Savings and Loan
Supervisors
1001 Connecticut Avenue, N.W., Suite 800
Washington, D.C. 20036
(202) 452-1523
Organization of state savings and loan supervisors.
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V-12
ATTACHMENT V-l
RCRA LETTER OF CREDIT CHECKLIST FOR OWNERS OR OPERATORS
Paragraph
Number *
(1) Verify that the issuer is authorized to issue letters of credit,.
and its letter of credit operations are regulated by a state or
federal agency.
>
" Verify that the trustee institution for the standby trust fund
has the authority to act as a trustee and is regulated and
examined by a federal or state agency.
(2) Check that:
The letter of credit is irrevocable for at least 1 year
and provides for automatic extensions of at least one year.
The letter of credit is in force by the effective date of
the regulations (interim status) or before the first
receipt of hazardous waste (new permitted facilities).
__. The wording of the letter of credit is identical to the
regulations (see Attachment V-3).
The amount of coverage is at least equal to the current
cost estimate. .
" Establish a standby trust fund worded exactly as required by the
.regulations (see Attachment III-3) and acknowledged in accordance
with state requirements.
(4) Submit the letter of credit to the EPA Regional Administrator.
" Submit an originally signed duplicate of the standby trust
agreement. .
" Submit a separate letter identifying the facilities and the
amount of coverage for each facility provided under the letter of
credit.
* Numbers correspond to paragraphs in Section B.
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V-13
ATTACHMENT V-l (continued)
RCRA LETTER OF CREDIT CHECKLIST FOR OWNERS OR OPERATORS
Paragraph
Number *
(S) Submit evidence of increases in coverage within 60 days after
any increase in cost estimates.
(6) If issuer becomes disqualified, establish new assurance within
60 days.
(7) If issuer sends notice of nonrenewal of the letter of credit,
owner or operator has 90 days to obtain alternate assurance and
approval of Regional Administrator.
If issuer grants an extension, arrange for alternate assurance
prior to the last 30 days of the extension period.
(8) To avoid having funds drawn from the letter of credit, fulfill
closure or post-closure obligations or provide alternate
assurance after receipt of a notice of nonrenewal.
(9) Request approval to terminate the letter of credit (1) when
alternate assurance is substituted, and (2) when released from
closure or post-closure financial assurance requirements by the
Regional Administrator.
Request approval to terminate the standby trust fund
unless assurance is being provided through a financial
guarantee bond.
* Numbers correspond to paragraphs in Section B.
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V-14
ATTACHMENT V-2
RCRA LETTER OF CREDIT CHECKLIST FOR REGIONAL OFFICES
The Regional Administrator should ensure that:
Paragraph
Number
(1) The issuing institution is qualified.
" The trustee financial institution is qualified.
(2) The letter of credit is:
Effective by the appropriate dates.
Worded exactly .as in the regulations.
Signed by an authorized officer of the financial
institution.
Accompanied by a separate letter detailing the coverage.
for each facility. .
Accompanied by an originally signed duplicate of the
standby trust agreement.
(3) Relevant information is recorded. "-
(4) Evidence is submitted within 60 days that the amount of the
letter of credit is properly increased if necessary to cover
increases in cost estimates.
Decreases in the .amount of the credit are approved only when
sufficient coverage will remain.
(5) _^ Owners or operators obtain alternate assurance within 60 days if
' the issuing institution ceases to qualify, ceases operations, or
files for bankruptcy.
(6) The owner or operator is contacted after receipt of notice of
intent to cancel or nonrenew.
* Numbers correspond to paragraphs in Section C.
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V-15
ATTACHMENT V-2 (continued)
RCRA'LETTER OF CREDIT CHECKLIST FOR REGIONAL OFFICES
Paragraph
Number *
" Alternate financial assurance is obtained within 90 days after
notification of nonrenewal by the issuer.
(7) Letters of credit are drawn upon when:
Owner or operator has not obtained alternate financial
assurance within 90 days after notice of cancellation by
issuing institution or prior to the last 30 days of any
extension granted by the issuer, or
Following a determination pursuant to §3008 of RCRA that
the owner or operator had failed to perform closure and/or
post-closure care as required.
" Funds drawn from the letter of credit .are deposited by the
issuer into the standby .trust fund.
" The trustee of the standby trust fund is notified, if possible,
in advance of payments into the trust.
" Closure and/or post-closure care expenses of parties other than
the owner or operator are reimbursed within 60 days after
requests are received, but only when itemized bil,ls are submitted
and the expenses are in accordance with closure and/or
post-closure plans, or otherwise justifiable.
If the closure costs will significantly exceed the value of the
closure standby trust fund, complete reimbursement is withheld
until closure is completed.
(8) Requests to terminate the letter of credit are approved in
writing when (1) alternate assurance is provided' or (2) the owner
or operator has been released from closure or post-closure
financial requirements.
Requests to'terminate the standby trust, fund are approved
in writing unless assurance is being provided through a
financial guarantee bond.
Numbers correspond to paragraphs in Section C.
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V-16
ATTACHMENT V-3
REQUIRED WORDING FOR RCRA IRREVOCABLE OF CREDIT
40 CFR 264.151(d)
Regional Administrator(s)
Region(s) .
U.S. Environmental Protection Agency
Dear Sir or Madam:
We hereby establish our Irrevocable Standby Letter of,Credit No.
in your favor, at the request and for the account of [owner's or operator's
name and address] up to the aggregate .amount of [in words] U.S. dollars
S , available upon presentation [insert, if more than one Regional
Administrator is a beneficiary, "by any one of you"] of
/
(1) your sight draft, bearing reference to this letter of credit
No . , and
(2) your signed statement reading as follows: "I certify that the amount
of the draft is payable pursuant to regulations issued under authority
of the Resource Conservation and Recovery Act of 197-6 as amended."
This letter of credit is effective as of [date] and shall expire on [date
at least 1 year later], but such-expiration date shall be automatically
extended for a period of [at least 1 year] on [date] and on each successive
expiration date, unless, at least 120 days before the current expiration date,
we notify both you and [owner's, or operator's name] by certified mail that we
have decided not to extend this letter of credit beyond the current expiration
date. In the event you are so notified, any unused portion of the credit
shall be available upon presentation of your sight draft for 120 days after
the date of receipt by both you and [owner's or operator's name], as shown on
the signed return receipts.
Whenever this letter of credit is drawn on under and in. compliance with
the terms of this credit, we shall duly honor such draft upon presentation to
us, and we. shall deposit the amount of the draft directly into the standby
trust-fund of [owner's or operator's name].in accordance with your .
instructions.
We certify that the wording of this letter of credit is identical to the
wording, specified in 40 CFR 264.151(d) as such regulations were constituted on
the date shown immediately below.
[Signature(s) and title(s) of official(.s) of issuing institution] [Date]
This credit is subject to [insert "the most recent edition of the Uniform
Customs and Practice for Documentary Credits, published by the International
Chamber of Commerce," or "the Uniform Commercial Code"-].
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VI. ESTABLISHING FINANCIAL RESPONSIBILITY
USING INSURANCE
A. INTRODUCTION
Owners or operators may satisfy the RCRA financial responsibility
requirements by obtaining INSURANCE in which an insurance company promises
payment of closure or post-closure costs on behalf of the owner or operator.*
Such payment must be provided whenever necessary; total payments up .to the
FACE AMOUNT of the policy must be made to the party or parties in the amounts
specified by the Regional Administrator. A CERTIFICATE OF INSURANCE is a
separate document used as evidence that an insurance contract has been
arranged. Depending on the treatment of PREMIUM PAYMENTS for tax purposes,
insurance contracts may be a desirable means of complying with the RCRA
financial requirements for some firms. EPA has requested clarification of the
tax treatment from the Internal Revenue Service; owners or operators may want
to request private rulings on this matter from the Internal Revenue Service
under R-evenue Procedure 80-20. Companies may also wish to purchase insurance
because then the closure and post-closure costs need not appear as liabilities
on their financial statements. Finally, there is no defined PAY-IN PERIOD for
premium payments, as is the case with TRUST FUNDS.
The regulations pertaining to RCRA insurance are as follows:
EXHIBIT VI-1
RCRA INSURANCE REGULATIONS
Topic Interim Status Permitted Facilities
Closure Insurance 40 CFR §265.143(d) 40 CFR §264.143(e)
Post-Closure Insurance 40 CFR §265.143(d) 40 CFR §264.143(e)
Certificate of Insurance 40 CFR §264.151(e) 40 CFR §264.151(e)
Wording
Source: Title 40, Code of Federal Regulations .(CFR).
* Closure or post-closure insurance is different from liability insurance
which is discussed in a separate guidance manual.
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VI-2
B. . RCRA INSURANCE REQUIREMENTS
This section describes both the requirements for using RCRA insurance and
the responsibilities of owners or operators using insurance to demonstrate
financial assurance. A checklist of these responsibilities appears in
Attachment VI-1 at the end of this chapter.
INITIAL RESPONSIBILITIES OF THE OWNER OR OPERATOR ' .
1. Qualifications of Insurer. At a minimum, the insurance company must
be LICENSED to transact business as an insurer in one or more states, or
eligible to provide SURPLUS OR EXCESS LINES -INSURANCE in one or more states.
The license or eligibility need not be in the state in which the facility is
located. If there is any question about the qualifications of an insurer, the
owner or operator should contact the insurer about its licenses and then
confirm with the regulatory authorities of the appropriate state or states.
(See Appendix B) :
2. Form and Amount of Assurance. To comply with RCRA regulations, .
closure or post-closure insurance policies must
provide that funds will be available to close the
facility whenever 'final closure occurs or provide funds
for post-closure care whenever the post-closure period
begins
provide that the insurer will be responsible for
;. paying out funds, up to the face amount of the policy,
upon the direction of the Regional Administrator, to
such party or parties as the Regional Administrator
specifies '
be issued with a face amount at least equal to the
current cost estimate for closure or post-closure,
unless a combination of mechanisms is being used
provide an option for automatic renewal at the face ,
amount of the expiring policy
provide that the insurer may not cancel,- terminate,
. . or fail to renew the policy except for failure to pay
the premium
contain a provision allowing ASSIGNMENT of the policy
to'a successor owner or operator
. With respect to the assignment provision, the policy may specify that
assignment is conditional upon the consent of the insurer so long as the
policy also states that such consent will not be""unreasonably refused." This
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VI-3
is standard legal- language in many contracts.- Right of assignment enables an
owner or operator to redeem value from the policy if ownership or operation of
the facility covered is transferred to a new party. The insurer may want the
right to consent to or refuse assignment in order to protect itself against
transfers of ownership or operation that would unfairly prejudice the
interests of the insurer in a manner not contemplated originally (e.g.,
transfer of the facility to an insolvent owner). Refusal to consent to
assignment would be "unreasonable" where the interests of the insurer are not
prejudiced by a successor owner or operator "stepping into the shoes" of the
original insured party.
The face amount of the insurance policy must, at a minimum, equal the
CURRENT COST ESTIMATES for closure and/or post closure care. Of course, if
insurance is combined with another mechanism (see Section B of Chapter II),
the combined coverage must at least equal the cost estimate. The initial
amount of coverage may be larger than the cost estimate in order to
accommodate expected revisions in the estimate due to inflation.
The owner or operator who uses closure or post-closure insurance to assure
financial responsibility is not required to set up a STANDBY TRUST FUND.
3. Obtaining an insurance Contract. Initially, few insurance companies
may offer RCRA closure and/or post-closure contracts of insurance. Owners or
operators interested in this option are advised to contact Regional Office
staff about what companies are known to offer this financial assurance
mechanism. These companies are likely to ask for detailed information on the
facility and the owner or operator applying for the insurance contract. This
information may include any of the financial and operating data listed in
Chapter II, Section C. Insurers may insist on an on-site scientific/engineer-
ing assessment in addition to a review of recent financial.statements. Some
insurers may ask that EPA first review and approve closure and post-closure
plans for interim status facilities. The Regional Office might consider
providing such a review, especially of closure plans for storage facilities.
Because land disposal permit standards are not yet finalized, such reviews for
disposal facilities are not feasible at present.
4. Submission of Documents to "EPA. The owner or operator must submit to
the Regional Administrator by the effective date of the regulations either a
certificate of insurance or a letter from an insurer stating that the insurer
is considering issuance of insurance to the owner or operator which conforms
to RCRA requirements. Within 90 days after submission of such a letter, a
certificate of insurance must be submitted to the Regional Administrator or
evidence that other financial assurance has been established. The wording of
the certificate must be identical to that required by the regulations in force
at the time of submission (see Attachment VI-3 for current wording). The
policy itself need not be submitted at that time. However, the insurer must
submit a duplicate original of the policy, including all endorsements,
whenever requested by the Regional Administrator.
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VI-4
SUBSEQUENT RESPONSIBILITIES OF THE OWNER OR OPERATOR
5. Updating Coverage. Whenever the cost estimate increases during the
operating life of the facility, the owner or operator must arrange for
assurance of payment of the extra cost and submit evidence of that increase
(e.g., a new certificate) within 60 days.
Whenever the current closure or post-closure cost estimates decrease
during the operating life of the facility, the face amount may be reduced
.accordingly following written approval by the Regional Administrator. This is
further described in Section E.I of Chapter II.
The post-closure insurance policy, like closure insurance, is paid up by
the time of closure. However, during the post-closure'period, the face amount
of the post-closure policy will increase annually, on the anniverary of the
date that liability to make payments accrues, to reflect earnings of the funds
remaining under the policy. The increase must be equal to the face amount,
less any payments by the insurer for post-closure expenses, multiplied by an
amount equivalent to 85 percent of the most recent investment rate or the
equivalent coupon-issue yield announced by the U.S. Treasury for 26 week
Treasury securities. Reductions in the face amount of post-closure insurance
during the post-closure period are not authorized by the regulations even if
the face amount exceeds the post-closure cost estimate.
6. Maintaining Coverage. The owner or operator must maintain the
insurance policy in full force and effect by making required PREMIUM
PAYMENTS.' Failure to pay the premium will constitute a significant violation
of RCRA Subpart H regulations, warranting such remedy as the Regional
Administrator deems necessary. Such violation will be deemed to begin upon
receipt by the Regional Administrator of a notice of future cancellation,
termination, or failure to renew due to nonpayment of the premium.
The owner or operator is also responsible for maintaining coverage in
certain circumstances that are discussed- fully in Chapter 2, Section E.2,
including bankruptcy or ineligibility of the insurer.
If the owner or operator sells or transfers operating responsibility for
the facility covered by RCRA insurance, the policy may be assigned to the new
owner or operator to maintain assurance.
Finally, the owner or operator may substitute an alternate mechanism of
financial assurance.so long as there is no lapse in coverage. See Section E.4
of Chapter II-. -
7. Cancellation of the Insurance Policy by the Issuer. The insurer may
cancel, terminate, or fail to renew the policy only if the premium is not
paid. If that occurs, the insurer must provide notice to both the owner or
operator and the Regional Administrator by certified mail. Cancellation,
termination, or failure to rene.w may not occur, however, during "the 120 days
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beginning with the date of receipt of the notice by both the Regional
Administrator and the owner or operator, as evidenced by the return receipts.
See Section E.3 of Chapter II.
Cancellation, termination, or failure to renew may not occur -- and the
policy will remain in full force and effect -- in the event that on or before
the date of expiration:
The Regional Administrator deems the facility to be
abandoned;
The Regional Administrator terminates or revokes
interim status or revokes the permit;
Closure is ordered by the Regional Administrator, a
U.S. district court, or other court of competent
jurisdiction;
The owner or operator is named as a debtor in a
bankruptcy proceeding under Title 11 of the U.S. Code;
or
The premium due is paid.
8. Drawing on Funds for Closure or Post-Closure. As closure or
post-closure activities are conducted by the owner or operator, itemized bills
should be submitted to the Regional Administrator with requests for
reimbursement. Within 60 days after receiving the bills, the Regional
Administrator will determine if the expenditures are justified, and instruct
the insurer to make the reimbursement. Actual reimbursement payments by the
insurer do not reduce the face amount of the policy, although they do reduce
the future liability of the insurer by the amount of the payment.
The Regional Administrator may withhold authorization of a portion of
reimbursement payments for closure if there is reason to believe that the cost
of closure will be significantly greater than the face amount of the policy.
He may continue to withhold reimbursement until receipt of satisfactory
certification of proper closure. The purpose of this action is to assure the
extension of financial assurance until closure is completed.
Of course, the owner or operator remains 'responsible for all closure or
post-closure costs even if the funds available through insurance are exhausted.
9. Termination of the Policy by the Owner or Operator. The owner or
operator should request the approval of the Regional Administrator to
terminate the policy in two situations: (1) when alternative financial
assurance has been substituted (see Section E.4 of Chapter II) and (2) when
released from applicable RCRA requirements (see Section G of Chapter II).
Upon receiving the Regional Administrator's written consent, the owner or
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VI-6
operator should forward a copy of it to its insurer along with a request that
the policy be terminated. Depending on the terms-of the policy, the owner or
operator may be entitled to any funds up to the face amount which have not
been expended on closure or post-closure care.- Insurance coverage can only be
terminated with the written consent of the Regional Administrator.
PERMITTED FACILITIES . .
For new facilities, the insurance policy for closure or post-closure care
must be effective before the initial receipt of hazardous waste and the
certificate of insurance submitted to EPA 60 days before the initial receipt
of waste.
C. REGIONAL OFFICE RESPONSIBILITIES^
This section outlines the duties of the Regional Office in reviewing
insurance policies for RCRA financial assurance and.ensuring satisfaction of
requirements. A summary checklist appears in Attachment VI-2 at the end of
this chapter.
REVIEWING INITIAL SUBMISSIONS '
1. Qualifications of Insurer. Issuing institutions must be licensed to
transact the business of insurance or eligible to provide EXCESS OR SURPLUS
LINES INSURANCE in any of one or more states. EPA Regional Office personnel
should contact the insurer and appropriate state regulatory agencies, such as
insurance commissioners, 'to verify qualifications. See Appendix B. The
insurer need not be qualified in the state in which the covered facility is
located.
2. Conformity to Other Requirements. Owners or operators interested in
using closure or post-closure insurance may submit by the effective date a
letter from an insurer stating that the insurer is considering issuance of
insurance to the owner or operator. The letter should state that the "
insurance -- if issued -- will conform to RCRA requirements. For such
submittals, it is essential to verify that an insurance certificate is
provided within 90 days after the effective date or that alternate assurance
is established.
When an owner or operator submits a certificate of insurance to the EPA :
Regional Office, the Regional Administrator must verify that:
The wording of the certificate is exactly as required
by the regulations (see Attachment VI^3);
The certificate indicates that the policy is
effective by (1) the effective date of the regulations
(interim status) (2) 90 days after the effective date
if a letter from an insurer was submitted by the
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VI-7
effective date (interim status only), or (3) the first
receipt of hazardous waste (new permitted facilities).
The certificate indicates that the face amount is
adequate.
3. Recordkeeping and Tracking Systems. As certificates of insurance are
received, relevant information should be recorded, including the name,
address, and EPA identification number .of the facility; insurance policy
number and insurer name; amount of coverage for each facility and effective
dat-e; and information verification procedures performed. Similarly, if an
owner or operator submits a letter from a potential insurer, the name,
address, and EPA identification number of the facility should be logged and
provision made to track whether financial assurance is established within 90
days after the effective date. Automatic data processing systems can be used
for this. A list of insurance contracts in effect should be kept not only
under the owner or operator's name, but also under each insurer's name so that
in the case of bankruptcy, de-licensing, or other reasons, it will be easy to
determine which owners or operators need to obtain financial assurance
elsewhere. This system could also be used to keep track of mergers and
changes in the names of insurers.
SUBSEQUENT RESPONSIBILITIES
4. Updating Coverage. As cost estimates for closure and post-closure
are adjusted for inflation or recomputed due to change-s in plans, the Regional
Administrator will need to (1) ensure that the face amount of every insurance
contract is properly increased within 60 days of the increase in the cost
estimates and (2) respond to requests for reduction in coverage if the cost
estimates decrease.
The Regional Administrator will need to check that increases in cost
estimates are covered by increases in the face amount of insurance contracts
or by other added financial assurance and that owners and operators have
informed the Regional Office of such changes. See the discussion in Chapter
II, Section E.I.
The Regional Administrator should review requests for decreases in
coverage individually and should deny those requests unless the Regional
Administrator is convinced that sufficient coverage will remain. Such a
determination will require a review of the closure or post-closure plan for
technical adequacy and completeness as well as as review of the reasonableness
of the associated cost estimates. See the discussion in Chapter II, Section
E.I. No decreases in assurance for post-closure care should be allowed
following closure.
5. Maintaining Assurance. The Regional Administrator must ensure that
alternate financial assurance is provided by the owner or operator if the
insurance company becomes disqualified, ceases operations, or files for
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bankruptcy. Note that the insurer is not required to notify the Regional
Administrator or the owner or operator regarding such an eventuality.
Regional Offices are not expected to develop surveillance systems to monitor
for such events But should be prepared to instruct owners or operators to
obtain alternate assurance in the event of disqualification, bankruptcy, or
termination of the insurer. The HWDMS may prove useful for this, as discussed
in Section I of Chapter II.
; In addition, Regional Office staff may want to periodically review the
qualifications of insurers to ensure that no owner or operator is using an
insurance policy from an unqualified insurer. To avoid duplication of effort,
Regional Offices should contact EPA Headquarters before undertaking such
activities.
.In the event of 'transfer of ownership or operations of a facility, the
Regional Administrator should verify that the insurance policy has been
assigned to the new owner or operator or that alternate assurance has been
provided.
The Regional Administrator should approve requests to use alternate
assurance mechanisms if no lapse in coverage will result.
6. Cancellation of Insurance Contracts by the Insurer. The insurer may
cancel, terminate, or fail to renew the policy only if the premium is not
paid. If that occurs, the insurer must provide notice of its intent to cancel
to both the owner or operator and the Regional Administrator by certified
mail. Cancellation, termination, or failure to review may not occur, however,
during the 120 days beginning with the date of .receipt of the notice by both
the owner or operator and the Regional Administrator, as evidenced by the
return receipts. The insurer may not cancel a policy if by the expiration
date: _
The Regional Administrator deems the facility to be
abandoned;
- The Regional Administrator terminates interim status
or the RCRA permit;
Closure is ordered by the Regional Administrator, a
U.S. district court, or other court of competent
jurisdiction;
The owner or operator is named as a debtor in
bankruptcy proceedings; or '
The premium is paid.
. Upon receipt of a notice from an insurer, the Regional Administrator
should contact the owner or operator to determine (1) if it is willing and
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able to pay the premium and (2) the date it received the notice from the
instirer. Both pieces of information will be essential for determining the
nature and timing of further agency action.
7. Drawing on Funds for Closure and Post-Closure. Insurance contracts
are designed to assure that funds will be available at any time to pay for
closure and -post-closure care. As closure or post-closure activities are
conducted by the owner, operator, or other person authorized by the Regional
Administrator, itemized bills will be submitted to the Regional Administrator
with requests for reimbursement. Within 60 days after receipt of such
requests, the Regional Administrator must determine if the expenditures are
justified, and instruct the insurer in writing to make the reimbursement.
This is discussed in Section F of Chapter II.
The Regional Administrator may withhold authorization of a portion of
reimbursement payments for closure if there is reason to believe that the cost
of closure will be significantly greater than the face amount of the policy.
The Regional Administrator may continue to withhold reimbursement until
certification of proper closure is submitted. The purpose of this action is
to assure the extension of financial assurance, until closure is completed.
See Section F of Chapter II.
8. Requests to Terminate Insurance Coverage. The Regional Administrator
may consent to the termination of insurance coverage only (1) if alternate
assurance is substituted (see Section E.4 of Chapter II) or (2) if the owner
or operator is released from applicable RCRA financial requirements. Consent
must be in writing and may accompany the Regional Administrator's letter
releasing the owner or operator from closure or post-closure financial
assurance requirements.
REQUIREMENTS FOR PERMITTED FACILITIES
For new facilities, the insurance policy for closure or post-closure care
must be effective before the initial receipt of hazardous waste, and the
certificate of insurance submitted to EPA at least 60 days before the initial
receipt of waste.
D. SOURCES OF FURTHER INFORMATION
State agencies listed in Appendix B can advise whether an insurer is
licensed or eligible to provide insurance. In addition, national trade
associations can supply general information about the insurance industry.
Major national organizations include the following:
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1. American Insurance Association
85 John Street
New York, New York 10038
(212) 669-0400
Trade and service organization of the property and
casualty insurance industry.
2. Insurance Information Institute
110 William Street
New York, New York 10038
(212) 669-9200
Educational, fact-finding, and communications
organization for all lines of insurance except life and
health insurance.
3. Independent Insurance Agents of America
100 Church Street
New York, New York 10007
(212) 285-4250
Trade association of independent insurance agents.
4. Professional Insurance Agents
400 North Washington Street
Alexandria, Virginia 22314
(703) 836-9340
Trade association of insurance agents.
5. National Association of Insurance Commissioners
350 Bishops Way
Brookfield, Wisconsin 53005
(414) 784-9540
Organization of state insurance commissioners.
6. Alliance of American Insurers
20 North Wack'er Drive
Chicago, Illinois 60606
(312) 558-3700
Trade association of fire and casualty insurance
companies.
7. National Association of Insurance Brokers
311 First Street, N.W.
Suite 700
Washington, D.C. 20001
(202) 783-8880
Trade association of commercial insurance brokers.
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vi-ir
National Association of Independent Insurers
2600 River Road
Des Plaines, Illinois 60018
(312) 297-7800
Trade association of fire, casualty, and surety
insurers.
National Insurance Consumer Organization
344 Commerce Street
Alexandria, Virginia 22314
(703) 549-8050
Non-profit public interest membership organization.
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VI-12
ATTACHMENT VI-1
RCRA INSURANCE CONTRACT CHECKLIST FOR OWNERS OR OPERATORS
Paragraph
Number *
(1) Verify that the insurer is licensed to transact the business of
insurance or eligible as an excess or surplus lines insurer in
at least one state.
(2) ___ Check that:
the policy assures that funds will be available
whenever needed,
_-_i_ the insurer agrees to pay out funds at the direction of
the Regional Administrator,
the policy face amount is equal to the cost estimate,
__ the policy provides for an automatic renewal option at
. the face amount of the expiring policy,
assignment to a successor owne'r or operator'is
permifced, and
the insurer may not cancel, terminate, or fail to renew
the policy except for failure to pay the premium, and
must give 120 days notice to both the owner or operator
and the Regional Administrator.
(4) Submit a certificate -of insurance to EPA worded exactly as
specified (See Attachment VI-3) by effective date of regulations
for interim status facilities or 60 days before the initial
receipt of hazardous wastes for new facilities.
Interim status facilities may instead submit a letter from an
insurer stating that it is considering issuance of insurance to
- the owner or operator; the certificate of insurance or evidence
of alternate assurance must be submitted within.90 days after
the effective date. '
^Numbers correspond to paragraphs in Section B.
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VI-13
ATTACHMENT VI-1 (continued)
RCRA INSURANCE CONTRACT CHECKLIST FOR OWNERS OR OPERATORS
Paragraph
Number *
(5) Submit evidence of increases in face amount of policy within 60
days after any increase in cost estimates, due to annual
adjustments for inflation or changes in plans, during the
operating life of the facility.
(6) Pay premiums as due.
" Arrange for alternate assurance in the event of bankruptcy or
ineligibility of insurer within 60 days.
(7) If insurer gives notice to owner or operator of cancellation or
non-renewal, arrange for alternate assurance or pay premium.
(8) Present itemized bills and requests for reimbursement for
closure or post-closure, expenses to Regional Administrator, who
must respond within 60 days.
(9) Request approval to terminate the insurance policy (1) when
alternate assurance is substituted, and (2) when released from
closure or post-closure financial assurance requirements- by the
Regional Administrator.
^Numbers correspond to paragraphs in Section B.
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VI-14
ATTACHMENT VI-2
RCRA INSURANCE, CONTRACT CHECKLIST FOR REGIONAL OFFICES
The Regional Administrator! must ensure that:
Paragraph
Number *
(1) ' The insurer is licensed to transact the business of insurance
or eligible as a provider of excess or surplus lines insurance
in any of one or more states.
(2) The certificate of insurance:
is worded exactly as in the regulations (see Attachment
VI-3);
has an £dejquate face amount;
is received by EPA and effective by effective date of
regulations (interim status) or 60 days before the first
receipt of hazardous waste (general status); or
" The owner or operator of an interim status facility (1) submits
by the effective date a letter from an insurer stating that it
is considering issuance of a policy and (2) submits the
certificate of insurance or evidence of alternate assurance
within 90 days.
(3) Relevant information is recorded.
(4) Evidence of increases in face'amount of insurance is provided
within 60-days, if necessary to cover increases in cost estimates,
Decreases in face amount of insurance are approved only during
the operating life of the facility and only when sufficient
coverage will remain.
Face amount increases during post-closure.period in accordance
with 85% rule.
* Numbers correspond to paragraphs in Section C.
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VI-15
ATTACHMENT VI-2 (continued)
RCRA INSURANCE CONTRACT CHECKLIST FOR REGIONAL OFFICES
Paragraph
Number
(5) Alternate financial assurance is provided within 60 days if
insurance company becomes disqualified, ceases operations, or
files for bankruptcy.
" Insurance policies are assigned or other financial assurance is
provided in the event of transfer of ownership or operation.
(6) The owner or operator is contacted following notice from
insurer of intent to cancel insurance.
(7) Within 60 days after receiving bills, requests for reimburse-
ment of closure are approved in a manner that assures the
availability of funds until closure is completed. This may
require verification of closure cost estimates and plans, and
denial of a portion of the reimbursement request.
" Requests for reimbursement of post-closure expenses are
approved within 60 days after receiving bills if in accordance
with plan or otherwise justifiable.
The insurer is instructed in writing to make reimbursement in
the specified amounts
(8) Requests to terminate .insurance are approved in writing when
(1) alternate financial assurance is substituted or (2) the
owner or operator has been released from closure or post-closure
financial requirements.
Numbers correspond to paragraphs in Section C.
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VI-16
ATTACHMENT VI-3
REQUIRED WORDING FOR RCRA INSURANCE CERTIFICATE
40 CFR 264.151(e)
Name and Address of Insurer
(herein called the "Insurer")
Name and Address of Insured
(herein called the "insured")
Facilities Covered: [List for each facility: The EPA Identification Number,
name, address, and the amount of insurance for closure
and/or the amount for post-closure care (these amounts
for all facilities covered must total the face amount
shown below).]
Face Amount:
Policy Number:
Effective Date:
The Insurer hereby certifies that it has issued to the Insured the policy
of insurance identified above to provide financial assurance for [insert
"closure" or "closure and post-closure care" or "post-closure care"] for the
facilities identified above. The Insurer further warrants that such policy
conforms in all respects with the requirements of 40 CFR 264.143(e),
264.145(e), 265.143(d), and 265.145(d), as applicable and as such regulations
.were constituted on the' date shown immediately below. It is agreed that any
provision of the policy inconsistent with such regulations is hereby amended
to eliminate such inconsistency.
Whenever requested by the EPA Regional Administrator(s) of the U.S.
Environmental Protection Agemcy, the Insurer agrees to furnish to the EPA
Regional Administrator(s) a duplicate original of the policy listed above,
including all endorsements thereon.
I hereby certify that the wording of this certificate is identical to the
wording specified in 40 CFR 264.151(e) as such regulations were constituted on
the date shown immediately below.
[Authorized signature for Insurer]
[Name of person signing]
[Title of person signing]
Signature of witness or notary:
[Date]
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VII. ESTABLISHING FINANCIAL RESPONSIBILITY USING THE
FINANCIAL TEST OR CORPORATE GUARANTEE
A. INTRODUCTION
The RCRA financial assurance requirements may be satisfied by a test of
financial soundness. Rather than arranging for a third party to guarantee
payment of closure or post-closure costs, the owner or operator may
demonstrate his future ability to meet costs by passing one of two FINANCIAL
TESTS. Alternatively, the owner or operator may satisfy the financial
assurance requirements by the CORPORATE GUARANTEE, whereby the owner .or
operator's PARENT CORPORATION passes one of the same two financial tests and
agrees to guarantee the performance of or payment for closure or post-closure
care.
The financial tests demonstrate that the owner, operator or parent
corporation has adequate resources to cover closure and post-closure cost
estimates. The tests are stringent enough so that, even in the event of a
rapid deterioration in the firm.'s financial health, there is a reasonable
assurance that funds will be available to meet RCRA obligations.
The financial test or corporate guarantee offers those qualifying owners
or operators a particularly attractive mechanism to meet the RCRA financial
assurance requirements. Unlike the.surety bond, letter of credit, or -
insurance policy mechanisms, closure and post-closure costs are not
automatically covered by a responsible third party. Because it is offered by
the parent corporation of the owner or operator, the corporate guarantee does
not involve a third party. Unlike the trust fund mechanism, no funds have to
be set aside in anticipation of these costs; Thus, the owner or opera'tor does
not have to pay fees for third party guarantees, nor does it have to place
funds in a trust fund. While the wording of the corporate guarantee
stipulates that something of value be given to the corporate parent in
exchange for the guarantee, this is done primarily to ensure that the
guarantee agreement will be recognized as a valid legal contract. The amount
that actually passes from owner or operator to corporate parent is generally a
NOMINAL SUM that could be as little as one dollar.
Because of the lack of third party guarantees or set-aside funds, it is
particularly important that the financial test criteria are vigorously
enforced'. To this end, the Regional Offices must completely re-evaluate every
owner, operator, or corporate parent annually, even if there has been no
change in closure or post-closure cost estimates. No other financial
assurance mechanism requires this level of attention from the Regional Offices.
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VII-2
Owners, or operators that wish to satisfy both liability insurance and
fin'ancial assurance with the financial test should refer to Chapter II of the
Liability Insurance Guidance Manual.
The regulations pertaining to the RCRA financial test are. as follows:
EXHIBIT VII-1
RCRA FINANCIAL TEST REGULATIONS
Topic
Financial test for closure
Financial test for post-
closure
Required Wording of Letter
from Chief Financial
Officer
Required Wording of
Corporate -Guarantee
Interim Status
Permitted Facilities
40 CFR §265.143(e) 40 CFR §264.143(f)
40 CFR §265.145(e) 40 CFR §264.145(f)
40 CFR §264.151(f) 40 CFR §264.151(f)
40 CFR §264.151(h) . 40 CFR §264.151(h)
Source: Title 40, Code of Federal Regulations (CFR).
B. REQUIREMENTS OF THE FINANCIAL TEST
^ M '
This section specifies the requirements of the financial test for owners,
operators, or their parent corporations. A summary checklist is provided as
Attachment VII-1.
INITIAL RESPONSIBILITIES OF THE OWNER OR.OPERATOR
1. Qualifications for the Financial Test. The requirements of the
financial tests for the owner, operator, or corporate parent are identical.
Thus, when referring to the financial test criteria, the word "firm" will be
used interchangeably with owner, operator, or corporate parent. To qualify
for the corporate guarantee, however, the parent corporation must in addition
hold at least 50 percent of the voting stock of the owner or operator firm.
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VII-3
The firm's .financial statements must be AUDITED by an independent
CERTIFIED PUBLIC ACCOUNTANT. If the accountant gives an ADVERSE OPINION or a
DISCLAIMER OF OPINION of the financial statements, the firm can'not qualify
for the financial test. Furthermore, if the accountant gives a QUALIFIED
OPINION of the financial statements, the Regional Administrator may disallow
the use of the financial test. See Section VII-C, Regional Office
Responsibilities, for caore information on accountant's opinions, and under
what circumstances the Regional Administrator would disallow use of the
financial tests because of a Qualified Opinion.
The financial test requirements may be satisfied by meeting either of the
two alternative financial tests. Exhibit VII-2 shows the specific
requirements of the two alternative tests. The tests have a number of points
In common, but two important differences. First, Alternative I requires a
firm to demonstrate financial soundness by passing at least two of three
financial ratios, while Alternative II allows to firm to demonstrate financial
soundness with an INVESTMENT GRADE bond, rating. Second, Alternative I
requires the firm to have a large amount of working capital relative to
closure and post-closure cost estimates, while Alternative II has no such
requirements. Both tests require the owner, operator, or corporate parent to
have a large amount of tangible net worth and U.S. assets relative to closure
and post-closure estimates, and a minimum absolute level of tangible net worth
($10 million).
These two alternative tests were selected out of over 300 candidate tests,
after extensive analysis. The reasoning behind the financial tests and why
they were selected is thoroughly explained in the documents cited in Section
VII-D, Sources of Further Information.
2. Arranging for the Financial Test and Corporate Guarantee. The only
outside arrangements that must be made for the financial test or corporate
guarantee are with an independent certified public accountant. Because the
vast majority of owners or operators who will select the financial test or
corporate guarantee will already have their financial statements or their
corporate parent's financial statements independently audited, no explanation
of how to select an'independent accountant is necessary.
3. Submission of Documents to EPA. To use the financial test .as a means
of satisfying financial requirements, owners or operators must submit the
following:
a) Chief Financial Officer's Letter Including Cost Estimates and
Data.from Audited Financial Statements. The owner, operator, or corporate
parent must submit to the Regional Administrator a letter signed by its chief
financial officer. The wording must be as specified in the regulations in
force on the date of submittal. A copy of the required wording as it
currently appears in the regulations is included as Attachment VII-2. The
letter must address all facilities in the United States for which financial
assurance is demonstrated by:
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EXHIBIT VI1-2
ALTERNATIVE FINANCIAL TESTS
Different Provisions of Tests
Alternative I
(must meet A, B, C, and D)
AIternatIve Li
(must meet A, B, C, and 0)
A. Meet U/o of the following three ratios:
(^ ) TOTAL LIABILITIES/NET WORTH less than 2.0
(ii) The sum of net income plus depreciation, depletion,
and amortization/total liabilities greater than O.I
(Hi) CURRENT ASSETS/CURRENT LIABILITIES greater than 1.5
B. Meet both of the following requirements:
(i) NET WORKING CAPITAL at least 6 times the sum of
current closure and post-closure cost estimates
A. A current rating for the most recent bond
issuance of either:
(i) AAA, AA, A, BBB, as issued by Standard and
Poor's; or
(ii) Aaa, Aa, A, Baa as issued by Moody's
Identical Provisions of Tests
(ii) TANGIBLE NET WORTH at least 6 times the sum of
current closure and post-closure cost estimates
C. Tangible net worth of at least $10 million in the U.S.
D. Meet one of the following tests:
(i) ASSETS in the U.S. amounting to at least 90 per-
cent of total assets
(ii) ASSETS in the U.S. amounting to at least 6 times
the sum of current closure and post-closure cost
estimates
B. Tangible net worth at least 6 times the sum of
current closure and post-closure cost estimates
C. Tangible net worth of at least $10 million
D. Meet one of the following tests:
(i) assets in the U.S. amounting to at least 90
percent of total assets
(ii) assets in the U.S. amounting to at least 6
times the sum of current closure and
post-closure estimates
Note:
See glossary for definition of terms.
See Code of Federal Regulations. Title itO, Part 265.l'i3(e) and I
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VII-5
The financial test,
The corporate guarantee, and
An equivalent (or substantially equivalent) state
financial test.
The letter must also identify the facilities which are not demonstrating
financial assurance to EPA or a state; for example, facilities in states with
financial assurance requirements that have received PHASE I INTERIM
AUTHORIZATION. Facilities covered by alternative financial assurance
mechanisms such as.surety bonds or letters of credit do not have to be
included in the letter.
The amount of the closure and post-closure cost estimates must be provided
for all facilities mentioned in the letter. The financial test is applied to
the sum of all cost estimates included in the letter, even to facilities not
covered by any financial assurance mechanism.
The letter must include the financial test calculations in the appropriate
form (see Attachment VII-2).
In preparing the financial test calculations, the chief financial officer
of the firm may subtract closure or post-closure cost estimates included as
liabilities in the firm's financial statements from the total liabilities
figure and add the closure or post-closure cost estimates to the figures for
net worth and tangible net worth. This is allowed in order not to penalize '
firms which are already carrying closure and post-closure costs as liabilities.
b) ACCOUNTANT'S OPINION (same as REPORT ON EXAMINATION). The owner
or operator must submit a copy of the independent certified public
accountant's opinion of the owner, operator, or parent corporation's year-end
financial statements and footnotes for the latest complete fiscal year. There
is no EPA required form or wording for this opinion.
c) SPECIAL REPORT. The owner or operator must submit a special
report from an independent certified public accountant to the Regional
Administrator which contains the accountant's confirmation that the financial
data contained in the letter from the chief financial officer can be derived
from the independently audited year-end financial statements and footnotes for
the latest complete fiscal year. There is no EPA required wording for this
report, but a sample special report is shown in Attachment VII-14. The
special report must, also state that no matters came to the attention of the
independent certified public accountanc which caused him to believe that the
information in the chief financial officer's letter should be adjus'ted.
d) CORPORATE GUARANTEE. An owner or operator that employs the
corporate guarantee must submit a written guarantee agreement completed by the
corporate parent, using language exactly as specified in Attachment VII-3.
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VII-6
This is submitted along with the chief financial officer's letter completed by
the corporate parent, and the accountant's opinion and special report.
completed by the corporate parent. The written guarantee states the guarantor
meets or exceeds all the requirements of the financial test criteria,
including the submission of the accountant's opinion, the special report, and
the letter from the chief financial officer. The written guarantee specifies
that in the event the owner or operator fails to perform closure or
post-closure care, the guarantor must do so or set up a trust fund for the
amount of the current closure or post-closure estimates.
Although the initial cost and financial data must be submitted by the
effective date of the regulations, EPA may grant extensions to interim status
firms whose fiscal year ends in the 90 days prior to the effective date. The
chief financial officer of the firm may request an extension by sending a
letter to the EPA Regional Administrator requesting the extension. The chief
financial officer must certify in the letter that there are grounds to believe
that the owner or operator meets the criteria of the financial test, and
indicate the date ending the last complete fiscal year before .the effective
date of the regulations. The letter must also: '.
specify the facilities to be covered by the test,
including EPA identification number, name, address, and
current closure and post-closure cost estimates to be
covered by the test;
, indicate the date on which the required documents
will be submitted (within 90 days of the end of the
fiscal year);
certify that the year-end financial statements of the
firm will be audi-ted by an independent certified public
accountant.
SUBSEQUENT RESPONSIBILITIES OF THE OWNER OR OPERATOR .
4, Updating Assurance. For other financial assurance mechanisms,
updating of coverage simply involves providing additional amounts of assurance
when cost-estimates increase during the operating life of the facility or
reducing coverage when cost estimates decrease. When cost estimates increase
above the amounts assured by those mechanisms, no change in the instrument is
.required but either the amount assured must be increased for the original
mechanism or supplementary -assurance provided by an additional mechanism.
The financial test is somewhat different. If (1) cost estimates increase
beyond the maximum amount that 'can be assured by the firm using the financial
test, or (2) the amount that can be assured by the firm drops below the
current cost estimates for covered facilities, or (3) some combination of the
two, then the owner or operator can no longer use the financial test and must
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VII-7
provide alternate assurance. Procedures on options are discussed in Section 5
be low.
Of course, the owner or operator using the financial test remains
responsible for updating cost estimates due to changes in closure or
post-closure plans or adjustments for inflation during the operating life of
the facility even if these updates have no impact on the use of the financial
test. In addition, during the period of post-closure care, firms may apply to
the EPA Regional Administrator for approval or a decrease in the post-closure
cost estimate for which the financial test provides financial assurance.
Approval will only be granted if the owner or operator demonstrates that
amount of the cost estimate exceeds the remaining cost of post-closure care.
When applying for a decrease in the post closure cost estimate, the
post-closure plan and cost estimate should be submitted to the Regional
Administrator for review.
5. Maintaining Assurance. The owner or operator must submit updated
information annually within 90 days of the close of the firm's fiscal year.
The owner or operator must satisfy all of the financial test criteria at each
annual update. As with the initial submission, the updated information
consists of the letter from the chief financial officer, the accountant's
opinion, and the special report from an independent certified public
accountant. If the corporate guarantee is being used by the owner or
operator, the written guarantee form must also be submitted. Submissions must
be worded exactly as shown in Attachments VII-2 and VII-3.
If the year-end financial statements indicate that the firm is still
qualified to use the financial test, but can no longer cover all the closure
or post closure costs, it may supplement other mechanisms in combination with
the financial test to assure the balance of the costs (see Section B.2 of
Chapter II). This situation would occur if the firm could not meet
requirement B of Exhibit VII-2, but could meet all other financial assurance
requirements. However, if the year-end financial statements indicate that the
financial status of the firm has changed so that it is no longer qualifies to
use financial test, it is the responsibility of the owner, operator, or
corporate parent to notify EPA of intent to establish alternate financial
assurance. This situation would occur if the firm could not meet requirements
A or C or D of Exhibit VII-2, or any of the other financial assurance
requirements. The notice of intent must be sent to the EPA Regional
Administrator by certified mail within 90 days after the close of the firm's
fiscal year. -The owner or operator or parent must provide alternate financial
assurance within 120 days after the clos'e of the firm's fiscal year.
If at anytime the EPA Regional Administrator believes that an owner or
operator no longer satisfies the requirements of the financial test, he may
require a report of financial condition in addition to the required annual
reports. An explanation of why a Regional Administrator may believe that a
firm no longer satisfies the financial test, and what additional reports may
be required', is presented in Section C below. If the Regional Administrator
determines that the requirements are not met, the owner or operator must
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VII-8
alternate financial assurance to EPA within 30 days after notification of
EPA's finding.
The Regional Administrator must be notified by certified mail by the owner
or operator or parent guarantor within 10 days after the commencement of a
bankruptcy proceeding naming the owner, operator, or parent guarantor as
debtor.
Also, if either the owner or operator, or the corporate parent is sold or
merged, the new parent must meet all the criteria for the financial test, or
alternative-assurance must be provided.
6. Cancelling the Corporate Guarantee. A parent corporation wishing to
cancel its guarantee of financial assurance must notify EPA and the owner or
operator, by certified mail of its intent to cancel. Actual cancellation may
not occur during the 120 days beginning on the date of receipt of the notice
of cancellation by both the owner or operator and the Regional Administrator,
as evidenced by the return receipts. If the owner or operator fails to
provide alternate financial assurance and obtain written approval of the
assurance mechanism by the Regional Administrator within 90 days after receipt
of the notification of cancellation, the parent corporation must provide
alternate financial assurance in the name of the owner or operator.
7.- Drawing on Funds for Closure or Post-Closure. The owner or operator
must use its own funds to pay for final closure and post-closure care of
facilities covered by the financial test or corporate guarantee. The parent
guarantor agrees to either perform these obligations or establish a trust fund
in the name of the owner or operator if the owner or operator fails to fulfill
its .obligations when required to do so.
8. Termination of the Corporate Guarantee. The parent guarantor may
request the approval of the Regional Administrator to terminate the corporate
guarantee in two situations: (1) when alternate financial assurance has been
substituted (see Section E.4 of Chapter II) and (2). when the owner or operator
is released from applicable RCRA financial assurance requirements (see Section
G of Chapter II).
/
PERMITTED FACILITY REQUIREMENTS
. A new permitted facility must submit the letter from the chief financial
officer and the opinion and special report from an independent certified
public accountant at least 60 days before the date on which hazardous waste, is
first received for treatment, storage, or disposal. .There is no provision for
extending this deadline to-accommodate firms whose fiscal years end ninety-
days before.
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VII-9
C. REGIONAL OFFICE RESPONSIBILITIES
This section outlines the duties of the EPA Regional Office in reviewing
the submission of financial data ensuring satisfaction of requirements. A
summary checklist appears in Attachment VII-4 at the end of this-chapter.
REVIEWING INITIAL SUBMISSIONS
1. Qualifications of Accountant and Parent Guarantor
EPA personnel should first confirm that the independent certified public
accountant responsible for preparing the opinion and special report is
certified by an officially recognized accreditation organization. Staff can
check the credentials of the accountant by contacting the State Board of
Accountancy in the state where the accountant resides, if there is any doubt
about the accountant's qualifications. These are listed in Appendix B-4.
In addition to verifying financial data from parent corporations, Regional
personnel should determine whether the corporation qualifies as a parent
corporation. The parent must own at least 50 percent of the voting stock of
the subsidiary. If the parent files with the SEC, verification may be made by
checking the form 10-K filed with the SEC. If not, the independently audited
financial statements of the firm must be requested from the firm. Both the
10-K and the independently audited statements will list the subsidiaries of
the corporation in addition to other financial information. .
2. Conformity to Other Requirements
A. Chief Financial Officer's Letter
EPA personnel should review the letter from the chief financial officer
and verify that it is complete and accurate. The firm should be contacted to
verify that the signatory of the letter is the chief financial officer. If
any of the criteria for the financial test are not met, or if anything is
missing from the letter, the Regional Administrator should immediately notify
the submitter, and ensure that alternative financial assurance mechanisms are
provided o'r proper submissions are made.
The Regional Office should ensure that all relevant facilities of the
owner or operator are included in the Chief Financial Officer's letter. This
includes facilities covered by the financial test guarantee, facilities
covered by the corporate guarantee, facilities covered by an equivalent (or
substantially equivalent) state financial test, and.facilities for which no
financial assurance has been demonstrated. The Hazardous Waste Data
Management System (HVDMS) may include information that will be useful in
making this determination. See Chapter II, Section I for more details on the
HWDMS.
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VII-10
If there is any reason to suspect the validity of the financial data, for
example if the firm barely passes the test criteria, the Regional
Administrator may want to request the audited financial statements from the
firm, or obtain the FORM 10K from the SEC (see Section VII-D, Sources of
Further Information), and recalculate the financial ratios. Moody's or
Standard"and Poor's bond guides may be checked to verify the bond ratings are
as claimed. Major libraries (public and university) as well as libraries in
Regional Offices of the U.S. Securities and Exchange Commission (SEC) should
have current editions of the guides. The reference staff of any library will
know where the nearest copies are held.
To assist in future evaluations of the submitter, it is strongly
recommended that the Regional staff establish a file of data taken directly
from the chief financial officer's letter for each owner, operator or
corporate parent. Exhibit VII-4 is an example of such a file. The use of the
file will be described below. . .
B. Review of the Accountant's Opinion of
the Financial Statements
EPA personnel should next determine what kind of opinion was expressed by
the accountant: Unqualified Opinion, Qualified Opinion, Adverse Opinion, or
Disclaimer of Opinion.
An Unqualified Opinion can be recognized because it usually consists of
two short paragraphs expressing no doubts about the financial statements. ' See
Attachment VII-5 for two examples of Unqualified Opinions.
Qualified Opinions express some reservations by the accountant that the
financial statements fairly or completely represent the financial condition
and operating results of the firm. Qualified Opinions are ea_sily recognized
because the final paragraph of the opinion will usually begin with "In our
opinion, subject to ...", or "In our opinion, except for ...".
"Except for" Qualified Opinions are given when the accountant believes the
financial statements, except for certain qualifications, represent fairly .the
economic condition of the firm. The phrase "except for" appears somewhere in
the opinion. Examples of "Except for" Qualified Opinions are given in
Attachments VII-9, VII-10, and VII-11.
"Subject to" Qualified Opinions are' given when the accountant believes the
financial statements only represent fairly the economic .condition of the firm
subject to .the.outcome of certain unforeseeable events. Examples of "Subject .
to" Qualified Opinions are given in Attachments VII-8, VII-12, and VII-13.
An Adverse Opinion is given when the accountant believes that the
financial statements do not present fairly the financial condition of the
firm. The auditor will clearly state this in the final paragraph of the
opinion. An examle of. an adverse opinion is given in Attachment VIII-6.
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VII-11
A Disclaimer of Opinion means that the accountant cannot express an
opinion on the financial statements of the firm. A report or examination will
still be given, but the final paragraph will state that an opinion could not
be expressed on the financial statements. An example of a disclaimer of
opinion is given in Attachment VII-7.
Some examples of conditions likely to result in a Qualified Opinion,
Adverse Opinion, and Disclaimer of Opinion are given in Attachment VII-14
When evaluating accountants' opinions, EPA personnel should:
1. Immediately "pass" an'owner or operator if it has received an
Unqualified Opinion and meets all the other requirements. Most owners or
operators, at least 90%, will probably have Unqualified Opinions. Accountants
generally render Unqualified Opinions to most large companies. Since owners
or operators must have a tangible net worth of at least S10 million to qualify
for the financial test, most applicants should fall into this category. See
Attachment VII-5 'for two examples of an Unqualified Opinion.
2. Immediately disqualify an owner or operator from the financial
test if he has received either (1) an Adverse Opinion, (2) a Disclaimer of
Opinion. None of the owners or operators should have these types of
opinions. The regulations explicitly disqualify owners or operators from the
financial test if they have either of first two types of opinions. In
addition, although not specifically addressed in the regulation, a "subject
to" type of Qualified Opinion based on a "going concern" issue is generally
considered so serious that any firm receiving one should be immediately
disqualified from the financial test. See Attachment VII-8 for an example of
a "subject to" Qualified Opinion based on a "going concern" issue.
3. Conduct further investigations if an owner or operator received
any other type of Qualified Opinion (either an "except for" or a "subject
to"). A small number of owners or operators, approximately 10%, will probably
have Qualified Opinions. Most of the review effort should be directed toward
owners or operators- falling into this category.
EPA Staff should undertake the following four steps whenever an owner or
operator has a Qualified Opinion (either an "except for" or "subject to,"
excluding those rendered on the'basis of a "going concern" issue).
1. The owner, operator, or corporate parent should be asked to
submit a copy of the latest, financial statements. Alternatively, a copy of
the latest Form 10-K could be obtained from the SEC.
2. The opinion rendered by the accountant should be thoroughly
understood in the context of the financial statements:
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VII-12
If it is an "except for" opinion, the EPA staff
should determine if the part of the statements which
give rise to the "except for" qualification have any
bearing on the firm's ability to pass the financial
test.
If it is a "subject to" opinion, EPA staff should
determine the likelihood of the occurrence of the event
the accuracy of the financial statements are "subject
to," and the importance of the unforeseeable event's
occurrence or nonoccurrence on the firm's ability to
pass the financial test.
3. If not enough information is available in the opinion or the
financial statements to make a satisfactory decision, the firm should be
required to submit a written explanation as to why the qualification should
not be grounds for disqualification from the financial test.
4. If the matter is still unresolved, contact- EPA headquarters for
additional assistance.
C. Special Report from Auditor
EPA personnel should review the auditor's confirmation of the letter from
the Chief Financial Officer, and verify that the auditor has reviewed the data
specified in the Chief Financial Officer's letter and was able to trace the
data back to amounts found in the owner's or operator's independently audited,
year-end financial statements for the latest fiscal year. It should be noted
that uhe auditor's confirmation does not pass judgment on whether the owner,
operator, or corporate parent is economically viable, nor does it assess the
value of the financial data contained in the letter. See Attachment VII-15
for an example of an auditor's confirmation.
D. Corporate Guarantee
The written guarantee form should be verified for completeness and
accuracy. The wording .should be identical to that prescribed in the
regulations. (See Attachment VII-3.)
3. Recordkeeping and Tracking Systems. As financial information and
corporate guarantees are received, relevant information- should be recorded
including the name, address, and EPA Identification Number of the covered
facilities; name of the corporate guarantor; amount of coverage for each
facility and effective date; and information verification procedures
performed. Regional Office staff could' keep a file on each submitting firm,
such as the one shown in Exhibit VII-4, which keeps track of key financial
data.
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VII-13
EXHIBIT VII-3
SAMPLE FILE ON OWNER. OPERATOR. OR CORPORATE PARENT
DATE OF
CLOSE OF FISCAL YEAR
Owner/Operator
Corporate Parent
Initial Second
Year Year
1. Sum of total closure and post-closure
cost estimates
2. Bond Rating
-3. Total Liabilities
-4. Tangible Net Worth
*5. Net Worth
*6. Current Assets
-7. Current Liabilities ":
*8. Net Working Capital
*9. Sum of Net Income, Depreciation,
Depletion, and Amortization
*10. Total assets in U.S.
11. Line 4 divided by Line 1
12. -Line 8 divided by Line 1
13. Line.10 divided by Line 1
Denotes figures derived from financial statements.
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VII-14
EXHIBIT VII-3 (continued)
SAMPLE FILE ON OWNER, OPERATOR, OR CORPORATE PARENT
14. Line 9 divided by Line 3
15. Line 6 divided by Line 7 _
16. Line 3 divided by Line 5
17. Qualified Auditor's Opinion?
18. Cost estimates changed because of
chang-es in operating plans?
initial
Year
Second
Year
NOTES:
[Adverse Business Press Releases, Competitive Problems, Drop in Bond Ratings^
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VII-15
SUBSEQUENT RESPONSIBILITIES
4. Updating Coverage. As cost estimates for closure and post-closure
are adjusted for inflation or revised due to changes in plans, the Regional
Administrator will need, to (1) ensure that the financial test criteria are
still satisifed if closure or post-closure cost estimates increase and (2)
respond to requests for reduction if post-closure cost estimates decrease.
5. Maintaining Assurance. The Regional Administrator must re-evaluate
each owner or operator every year. Thus, the same procedures should be
followed that were outlined for Initial Responsibilities:
Reviewing Annual Submissions. The owner, operator, or corporate
parent must resubmit updated information, that is, the letter from the Chief
Financial Officer, the accountants' opinion and special audit report, and the
written guarantee within 90 days after the close of every fiscal year.
Failure to do so could be an indication of financial deterioration in' the
submitting firm, so late submitters should be watched closely. All the
financial test criteria must be met; if not the Regional Administrator should
issue a notice of disallowance.
If the firm barely passes any of financial test criteria, it should be -
subjected to further investigation. In addition, further investigation should
be made into firms whose bond rating or net worth has fallen from previous
submissions (lines 2, 4 and 5 in Exhibit VII-2) or where the required
financial ratios have deteriorated significantly (i.e. if lines 11-15 fall, or
if line 16 rises).
On-going Monitoring. The Regional Office staff can monitor the
business press for adverse news about owners, operators, or corporate
parents. Ideally, an online computerized business data base service such as
DIALOG could be used for this purpose. Through the computerized data base, or
manually, the Business Periodical Index and the F&S Corporate Index should
be searched using the firm's name as a "keyword," for:
Omission of a dividend
Delisting from an exchange, Suspended trading
Mergers, Acquisitions, Divestitures,
Financial losses, Competitive problems,
Bankruptcy proceedings,
Decreases in bond ratings, and
Sharp stock price decreases.
If any of the above or other inauspicious events occur, the firm should be
.singled out for further investigation. Regional Offices should coordinate
their review efforts with EPA Headquarters. Approaches to centralize review
procedures for the financial test are currently under investigation.
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VII-16
Further Investigation. The Regional Administrator has broad
powers to obtain reports of financial condition from the owner, operator, or
corporate parent, if he believes that the firm may no longer meet the
financial test criteria. At a minimum, if there is any suspicion of
non-compliance the latest quarterly financial report should be obtained from
the firms, or the FORM 10-Q obtained from the SEC. See Section D below.
Ratios from the quarterly financial report or Form 10-Q should be
calculated to see if the firm still meets the test requirements. The Standard
and Poor's or Moody's bond guides should be checked, if relevant, to verify
that the latest bond ratings are still investment grade. Firms singled out
for further investigation should be monitored more frequently than annually.
The Regional Administrator, based on the owner, operator, or parent's
reports of financial condition or any other materials, may at any time find
that the owner, operator or corporate parent no longer meets the financial
test criteria. If so, the owner, operator, or corporate parent must provide
alternative financial assurance within 30 days after receiving notification of
this finding.
In addition, the Regional Office should ensure that assurance is
maintained by the owner, operator or corporate guarantor:
following receipt of notice of intent to establish
alternate assurance because the owner or operator or
guarantor no longer meets the financial test
requirements -- such assurance must be provided within
120 days after the end of the fiscal year; and
whenever the owner or operator fails to perform final
closure or post-closure care in accordance with the
plans or othe'f requirements, the guarantor must perform
or establish a trust fund in the name of the owner or
operator.
In the latter case, the RCRA trust fund.rules, will apply. See Chapter III
for details.
6. Cancelling the Corporate Guarantee. The corporate parent may cancel
its guarantee of financial!assurance, although actual cancellation may not
occur-during the 120 days after receipt of notification by both EPA and the
owner or operator. The Regional Administrator should ensure that the owner,
operator, or corporate parent supplies alternative financial assurance with
the approval of the Regional Administrator within 90 days. If not, the
Regional Administrator must draw on the corporate guarantee before the 120
days have passed and the guarantee is cancelled.
7. Drawing on Funds For Closure or Post-Closure. The Regional
Administrator is authorized to draw upon the corporate guarantee for closure
and/or post-closure when:
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VII-17
1) the owner or operator fails to provide alternate
assurance within 90 days after they and the Regional
Administrator receive notice of cancellation from the
parent guarantor, or
2) following a determination pursuant to §3008 of RCRA
that the owner or operator has failed to perform
closure or post-closure care in accordance with
previously approved plans whenever required to do so.
In the second case, the parent guarantor must perform closure or
post-closure care, or set up a trust fund as specified in §265.145(a) in the
name of the owner or operator.
-8. Requests to Terminate the Corporate Guarantee. The Regional
Administrator may consent to the termination of the corporate guarantee only
(1) if alternate assurance is provided (.see Section E.4 of Chapter II) or (2)
if the owner or operator is released from applicable RCRA financial
requirements (see Section G of Chapter II).
D. SOURCES OF FURTHER INFORMATION
For further information on the financial test, see General Research
Corporation Background. Document for the Financial Test and Municipal Revenue
Test, 11/30/81 including Appendix A and Appendix B.
Standard reference, books include:
American Institute of Certified Public Accountants."- AICPA
Professional Standards - Volume 1, June 1, 1981."
Burton, Palmer, and Kay. Handbook of Accounting and
Auditing, Boston: Warren, Gorham and Lament, 1981.
Kohler, Eric L. A Dictionary for Accountants, New
Jersey: Prentice Hall, Inc. (Fourth edition 1970).
Lev, Baruch. Financial Statement Analysis - A New
Approach, New Jersey: Prentice-Hall, Inc., 1974.
Merrill Lynch Pierce Fenner & Smith, Inc. How to Read a
Financial Report, May 1979.
Myer, -John N. Understanding Financial Statements, American
Research Council, Inc., 1964.
Myer, John N. Accounting for Non-Accountants, New York:
New York University Press, 1957.
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VII-18
Myer, John N. Financial Statement Analysis, Englewood
Cliffs: Prentice Hall Inc., 1969. .
To obtain Form 10-K or 10-Q reports from the SEC, contact: The U.S.
Securities and Exchange Commission's Public Reference Room, located at 1100 L
Street, N.W., Washington, D.C. (telephone: (202) 523-5506).
State Boards of Accountancy are listed in Appendix B-4.
Finally, the American Institute of Certified Public Accountants, 1620 Eye
Street, N.W.-, Washington, D.C. 20006, (202) 872-8190 may be of assistance.
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VII-19
ATTACHMENT VII-1
RCRA FINANCIAL TEST CHECKLIST FOR OWNERS OR OPERATORS
Paragraph
Number *
(1) Owner, operator, or corporate parent's financial statements are
independently audited.
(2) Owner, operator, or corporate parent meets requirements of
Alternative I or Alternative II.
Corporate parent holds at least 50 percent of the voting stock
of the owner or operator firm.
(3) Submit letter from chief financial officer.
Submit independent CPA's report on examination of year-end
financial statements.
" Submit independent CPA's Special Report confirming data in chief
financial officer's letter.
Submit written corporate guarantee if parent corporation is
meeting financial test.
Request extension of initial reporting deadline if fiscal year -
ends less than 90 days before effective date of regulations.
Numbers correspond to the paragraphs in Section B.
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VII-20
ATTACHMENT VII-1 (continued)
RCRA FINANCIAL TEST CHECKLIST FOR OWNERS OR OPERATORS
Paragraph
Number *
(4) Update closure or post-closure cost estimates when increased by
inflation or revisions in closure/post-closure plans during the
operating life of the facility.
(5) ^ .Submit no later than 90 days after the end of every fiscal year
an updated:
" . Chief financial officer's Letter .
" Independent CPA's report on examination of year-end
financial statements
" ._ Independent CPA's confirmation of data in Chief
Financial Officer's letter .
Notify EPA if firm or parent corporation no longer meets.
requirements of financial test or if .parent corporation no longer
meets ownership requirements. Provide alternate assurance.
(6) Provide alternate financial assurance and obtain written
approval by the Regional Administrator of the as-surance within 90
days after notification by parent corporation of cancellation of
the corporate guarantee.
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VII-21
ATTACHMENT VII-2
REQUIRED WORDING FOR LETTER FROM CHIEF FINANCIAL OFFICER
40 CFR 264.151(f)
[Address to Regional Administrator of every region in which facilities for
which financial responsibility is to be demonstrated through the financial
test are located.]
I am the chief financial officer of [name and address of firm]. This
letter is in support of this firm's use of the .financial test to demonstrate
financial assurance, as specified in Subpart H of 40 CFR Parts 264 and 265.
[Fill out the following four paragraphs regarding facilities and
associated cost estimates. If your firm has no facilities that belong in a
particular paragraph, write "None" in the space indicated. For each facility,
include its EPA Identification Number, name, address, and current closure
and/or post-closure cost estimates. Identify each cost estimate as to whether
it is for closure or post-closure care.]
1. This firm is the owner or operator of the following facilities for
which financial assurance for closure or post-closure care is
demonstrated through the financial test specified in Subpart H of 40
CFR Parts 264 and 265. The current closure and/or pest-closure cost
estimates covered by the test are shown for each facility:
2. This firm guarantees, through the corporate guarantee specified in
Subpart H of 40 CFR Parts 264 and 265, the closure or post-closure
care of the following facilities owned or operated by subsidiaries of
this firm. The current cost estimates for the closure or
post-closure care so guaranteed are shown for each facility:
3. In States where EPA is not administering the financial requirements
of Subpart H of 40 CFR Parts 264 and 265, this firm, as owner or
operator or guarantor, is demonstrating financial assurance for the
closure or post-closure care of the following facilities through the
use of a test equivalent or substantially equivalent to the financial
test specified in Subpart H of 40 CFR Parts 264 and 265. The current
closure and/or post-closure cost estimates covered by such a test are
shown for each facility:
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VII-22
ATTACHMENT VII-2 (continued)
REQUIRED WORDING FOR LETTER FROM^CHIEF FINANCIAL OFFICER
40 CFR 264.151(f)
4. This firm is the -ownar or operator of the following hazardous waste
management facilities for which financial assurance for closure or,
if a disposal facility, post-closure care, is not demonstrated
either to EPA or a State through the financial test or any other
financial assurance mechanism specified in Subpart H of 40 CFR Parts
264 and 265 or equivalent or substantially equivalent State
mechanisms. The current closure and/or post-closure cost estimates
not covered by such financial assurance are shown for each facility:
This firm [insert "is required" or "is not required"] to file a Form 10K
with the Securities and Exchange Commission (SEC) for the latest fiscal year.
This fiscal year of this firm ends on.' [month, day] . The figures for the
following items marked with an asterisk are derived from this firm's
independently audited, year-end financial statements and footnotes for the
latest completed fiscal year, ended [date].
[Fill in Alternative I if the criteria of paragraph (f)(l)(i) of §§264.143
or 264.145, or'of paragraph (e)(l).(i) of §§265.143 or 265.145 of this chapter
are used. Fill in Alternative II if the criteria of paragraph (f)(l)(ii) of
§§264.143 or 264.145, or of paragraph (e)(l)(ii) of §§265.143 or 265.145 of
this chapter are used.]
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VII-23
ATTACHMENT VII-2 (continued)
REQUIRED WORDING FOR LETTER FROM CHIEF FINANCIAL OFFICER
40 CFR 264.151(f)
ALTERNATIVE I
1. Sum of current closure and post-closure cost estimates S
[total of all cost estimates shown in the four para-
graphs above]
*2. Total liabilities [if any portion of the closure or S
post-closure cos1: estimates is included in total
liabilities, you may deduct the amount of that
portion from this line and add that amount to lines
3 and 4]
o
-3. Tangible net worth . S
*4 Net worth S
*5. Current assets S
*6. Current liabilities ' S
*7. Net working capital [line 5 minus line 6] S
*8. The sum of net income plus depreciation, depletion, S
and amortization
*9. Total assets in U.S. (required only if less than 90 S
percent of firm's assets are located in the U.S:)
Yes No
10. Is line 3 at least $10 million?
11. Is line 3 at least 6 times line 1?
12. Is line 7 at least 6 times line 1?
Denotes figures derived from financial statements.
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VII-24
. ATTACHMENT VII-2 (continued)
REQUIRED WORDING FOR LETTER FROM CHIEF FINANCIAL OFFICER
40 CFR 264.151(f)
ALTERNATIVE I (continued)
13. Are at least 90 percent of firm's assets located
in the U.S.? If not, complete line 14.
14. Is line 9 at least 6 times line 1?
15.. Is line 2 divided by line 4 less than 2.0?
16. Is line 8 divided by line 2 greater than 0.1?
17. Is line 5 divided by line 6 greater than 1.5?
Denotes figures derived from financial statements.
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VII-25
ATTACHMENT VII-2 (continued)
REQUIRED WORDING FOR LETTER FROM CHIEF FINANCIAL OFFICER
40 CFR 264.151(f)
ALTERNATIVE II
1. Sum of current closure and post-closure cost estimates S
[total of all cost estimates shown in the four para-
graphs above]
2. Current bond rating of most recent issuance of this
firm and name of rating service
3. Date of issuance of bond
4 Date of maturity of bond
*5. Tangible net worth [if any portion of the closure and J
post-closure cost estimates is included in "total
liabilities" on your firm's financial statements, you may
add the amount of that portion to this line]
*6. Total assets in U.S. (required only if less than 90 S
percent of firm's assets are located in the U.S.)
Yes No
7. Is line 5 at least $10 million?
8. Is line 5 at least 6 times line 1?
*9. Are at least 90 percent of firm's assets located
in the U.S.? If not, complete line 10.
10. Is line 6 at least 6 times line 1? '
I hereby certify that the wording of this letter is identical to the
wording specified in 40 CFR 264.151(f) as such regulations were constituted on
the date shown immediately below.
[Signature]
[Name]
[Title]
[Date] .
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VII-26
ATTACHMENT VII-3
REQUIRED WORDING FOR CORPORATE GUARANTEE
40 CFR 264.151(g)
Guarantee made this [date] by [name of guaranteeing entity], a business
corporation organized under the laws of the State of [insert name of
State], herein referred to as guarantor, to the United States
Environmental Protection Agency (EPA), obligee, on behalf of our
subsidiary [owner or operator] of [business address].
Recitals
1. Guarantor meets or exceeds the financial test criteria and agrees to
comply with the reporting requirements for guarantors as specified in
40 CFR 264.143(f), 264.145(f), 265.143(e), and 265.145(e).
2. [Owner or operator] owns or operates the following hazardous waste
management facility(ies) covered by this guarantee: [List for each
facility: EPA Identification Number, name, and address. Indicate
for each whether guarantee is for closure, post-closure care, or
both. ]
3. "Closure plans" and "post-closure plans" as used below refer to the
plans maintained as required by Subpart G of 40 CFR Parts 264 and 265
for the closure and post-closure care of facilities as identified
above.
4. For value received from [owner or operator], guarantor guarantees to
EPA that in the event, that [owner or operator] fails to perform
[insert "closure," "post-closure care" or "closure and post-closure
care"] of the above facility(ies) in accordance with the closure or
post-closure plans and other permit or interim status requirements
whenever required to do so, the guarantor shall do so or establish a
trust fund as specified in Subpart H of 40 CFR Parts 264 or 265, as
' applicable, in the name of [owner or operator] in the amount of the
current closure or post-closure cost estimates as specified in
Subpart H of 40 CFR Parts 264 and 265..
5-. Guarantor agrees that if, at the end of any fiscal year before
termination of this guarantee, the guarantor fails to meet the
financial test criteria, guarantor shall send within 90 days, by
certified mail, notice to the EPA Regional Administrator(s) for the
Region(s) in which the faciLity(ies) is (are) located and to [owner
or operator] that he intends to provide alternate financial assurance
as specified in Subpart H of 40 CFR Parts 264 or 265, as applicable,
in the name of [owner or operator]. Within 120 days after the end of
such fiscal year, the guarantor shall establish such financial
assurance unless [owner or operator] has done so.
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VII-27
ATTACHMENT VII-3 (continued)
REQUIRED WORDING FOR CORPORATE GUARANTEE
40 CFR 264.151(g)
6. The guarantor agrees to notify the EPA Regional Administrator by
certified mail, of a voluntary or involuntary proceeding under Title
11 (Bankruptcy), U.S. Code, naming guarantor as debtor, within 10
days after commencement of the proceeding.
7. Guarantor agrees that within 30 days after being notified by an EPA
Regional Administrator of a determination that guarantor no longer
meets the financial test criteria or that he is disallowed from
continuing as a guarantor of closure or post-closure care, he shall
establish alternate financial assurance as specified in Subpart H of
40 CFR Parts 264 or 265, as applicable, in the name of [owner or
operator] unless [owner or operator] has done so.
8. Guarantor agrees to remain bound under this guarantee notwithstanding
any or all of the following: amendment or modification of the
closure or post-closure plan, amendment or modification of the
permit, the extension or reduction of the time of performance of
closure or post-closure, or any other modification or alteration of
an obligation of the owner or operator pursuant to 40 CFR Parts 264
or 265.
9. Guarantor agrees to remain bound under this guarantee for so long as
[owner or operator] must comply with the applicable financial
assurance requirements of Subpart H of 40 CFR Parts 264 and 265 for
the above-listed facilities, except that guarantor may cancel this
guarantee by sending notice by certified mail to the EPA Regional
Administrator(s) for the Region(s) in which the facility(ies) is
(are) located and to [owner or operator], such cancellation to become
effective no earlier than 120 days after receipt of such' notice by
both EPA and [owner or operator], as evidenced by the return receipts.
10. Guarantor agrees that if [owner or operator] fails to provide
alternate financial assurance as specified in Subpart K of 40 CFR
Parts 264 or 265, as applicable, and obtain written approval of such
assurance from the.EPA Regional Administrator(s) within 90 days after
a ndtice of cancellation by the guarantor is received by an EPA
'Regional Administrator from guarantor, guarantor shall provide such
alternate financial assurance in the name of [owner or operator].
11. Guarantor expressly waives notice of acceptance of this guarantee by
the EPA or by [owner or operator]. Guarantor also expressly waives
notice of amendments or modifications of the closure and/or
post-closure plan and of amendments or modifications of the facility
permit(s).
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VII-28
ATTACHMENT VII-3 (continued)
REQUIRED WORDING FOR CORPORATE GUARANTEE
40 CFR 264.151(g)
I hereby certify that the wording of this guarantee is identical to the
wording specified in. 40 CFR 264.151(h) as such regulations were constituted on
the date first above written.
Effective date:
[Name of guarantor]
[Authorized signature for guarantor]
[Name of person signing]
[Title of person signing]
Signature of witness or notary:
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VII-29
ATTACHMENT VII-4
RCRA FINANCIAL TEST CHECKLIST FOR REGIONAL OFFICES
The Regional Administrator should ensure that:
Paragraph
Number *
(1) . Credentials of the independent certified public accountant are
valid.
Corporate guarantor qualifies as a corporate parent of the owner
or operator.
(2) The required criteria are satisfied in the chief financial
officer's letter.
" The signature of chief financial officer is verified.
" Independent auditor's report on examination of year-end
financial statements is reviewed:
"Pass" firms with unqualified opinions who otherwise
qualify.
" Immediately disqualify firms with disclaimers of
opinion, or adverse opinions, or "subject to" qualified
opinions based on a "going concern" issue, regardless of
other qualifications.
" Submit to further investigation firms with any other
type of qualified opinion.
Independent auditor's special report, confirming chief financial
officer's letter is acceptable.
. The wording of the written guarantee of corporate parent is
identical to that required by RCRA regulations.
Numbers correspond to paragraphs in Section C.
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VII-30
ATTACHMENT VII-4 .(continued)
RCRA FINANCIAL TEST CHECKLIST FOR REGIONAL OFFICES
Paragraph
Number *
(2) All facilities are accounted for in chief financial officer's
letter.
(4) Subsequent submissions account for changes in cost estimates due
to either inflation or revised closure/post-closure plans.
(5) The following are submitted no later than 90 days after the
close of the fiscal year:
" Updated chief financial officer's letter
" Independent auditor's report on examination of
year end financial statements.
" Updated special report
" Updated written guarantee
Firms are subjected to further, investigation if:
" Firm barely passes financial test criteria
" Firm is late to submit updated information
" Bond ratings, have fallen
" Financial ratios have deteriorated
Adverse business reports in media
._ If financial submissions do not satisfy the tests and
notification of disallowance is issued, the firm is monitored to
ensure provision of alternate assurance within 30 days after
notification.
(6) If parent corporation indicates intent to cancel its guarantee,
the owner or operator is monitored to ensure provision of
alternate assurance within 90 days after they and EPA are
notified by the parent of cancellation.
(6) If alternate assurance is not provided by the owner or operator
within 90 days after notification of cancellation, the Regional
Administrator has 30 more days in which to draw upon the
corporate guarantee before it lapses.
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VII-31
ATTACHMENT VII-5
EXAMPLES OF UNQUALIFIED OPINIONS
The following is an unqualified report covering .two years of a corporation's
statements. It is prepared in this form when the accountant has no
limitations on scope, no reservations as to his opinion and feels no
supplemental information is needed in a middle paragraph:
Example 1: Unqualified Two-Year Opinion
"We have examined the balance sheets of XYZ Company, Inc. as of
December 31, 19X1 and 19X0, and the related statements of earnings,
stockholders' equity* and changes in financial position for the years
then ended. Our examinations were made in accordance with generally
accepted auditing standards and, accordingly, included such tests of
the accounting records and such other auditing procedures as we
considered necessary in the circumstances.
In our opinion, the financial statements referred to above present
fairly the financial position of XYZ Company, Inc. as of December 31,
19X1 and 19X0. and the results of its operations and the changes in
its financial position for the years then ended, in conformity with
generally accepted accounting principles applied on a consistent
basis."
Based on accounting practice, it is preferable to present comparative
financial statements and to cover two or. three years'. However, for non-public
companies, it is still acceptable to present and report on only the current
year. In those situations, the report is modified to cover only that one
year. Where the prior year's financials are presented, but are unaudited or
were examined by another auditor, the current report 'must acknowledge that
fact.
* When appropriate, the terms "retained earnings" and "additional paid-in
capital" are substituted for "stockholders' equity."
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VII-32
ATTACHMENT VII-5 (continued)
EXAMPLES OF UNQUALIFIED OPINIONS
Example 2: Unqualified Three-Year Opinion for SEC Registrants
"We have examined the balance sheets of ABC Company at December 31,
19X3 and 19X2, and the related statements of income, retained
earnings and changes in financial position for each of the three
years in the period ended December 31, 19X3. Our examinations were
made in accordance with generally accepted auditing standards and,
accordingly, included such tests of the accounting records and such
other auditing procedurs as we considered necessary in the
circumstances.
In our opinion, the financial statements referred to above present
fairly the financial position of ABC Company at December 31, 19X3 and
19X2, and the results of its operations and the changes in its
financial position for each of the three years in the period ended
December 31, 19X3, in conformity with generally accepted accounting
principles applied on a consistent basis."
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VII-33
ATTACHMENT VII-6
EXAMPLE .OF AN ADVERSE OPINION
An Adverse Opinion is a extreme form of an "except for" Qualified Opinion in
the case of a generally accepted accounting principles (GAAP.) violation.
"As discussed in Note X to the financial statements, the Company
carries its property, plant and equipment accounts at appraisal
values and provides depreciation on the basis of such values.
Further, the Company does not provide for income taxes with respect
to differences between financial income and taxable income arising
because of the use, for income tax purposes, of the installment
method of reporting gross profit from certain types of sales.
Generally accepted accounting principles, in our opinion, require
that property, plant and equipment be stated at an amount not in
excess of cost, reduced by depreciation based on such amount and that
deferred income taxes be provided. Because of the departures from
generally accepted accounting principles identified above, as of
December 31, 19XX, inventories have been increased $ by
inclusion in manufacturing overhead of depreciation in excess of that
based on cost; property, plant and equipment, less accumulated
depreciation, ,is carried at $ in excess of an amount based on
the cost to the Company; and allocated income tax of S has not
been recorded, resulting in an .increase of $ in retained
earnings and in appraisal surplus of $ For the year ended
December 31, 19XX, cost of goods sold has been increased $
because of the effects of the depreciation accounting referred to
above, and deferred income taxes of $ have not been provided,
resulting in an increase in net income and earnings per share of
$ and $ , respectively.
In our opinion, because of the effects of the matters discussed in
the preceding paragraph, the financial statements referred to above
do not present fairly, in conformity with generally accepted
accounting principles, the financial position of X Company as of
December 31, 19XX, or the results of its operations and changes in
its financial position for the year then ended."
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VII-34
ATTACHMENT VII-7
EXAMPLE OF A DISCLAIMER OF OPINION
A disclaimer of opinion mean that the accountant can not express an
opinion on the financial statements of the firm. An example of a disclaimer
resulting from an extreme form of a scope restriction follows:
"... Except as set forth in the following paragraph, our examination
was made in accordance with generally accepted auditing standards
and, accordingly, included such tests of the accounting records and
such other auditing procedures as we considered necessary in the
circumstances.
The Company did not take a physical inventory of merchandise, stated
at $ in the accompanying financial statements as of December 31,
19XX, and at $ as of December 31, 19X1. Further, evidence
supporting the cost of property and equipment acquired prior to
December 31, 19XX, is no longer available. The Company's records do
not permit the application of adequate alternative procedures
regarding the inventories or the cost of property and equipment.
Since the Company did not take physical inventories and we were
unable to apply adequate alternative procedures regarding inventories
and the cost of property and equipment, as noted in the preceding
paragraph, the scope of our work was not sufficient to enable us to
express, and we do not express, an opinion on the financial
statements referred to above."
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VII-35
ATTACHMENT VII-8
EXAMPLES OF A "SUBJECT TO" QUALIFIED OPINION
BASED ON A "GOING CONCERN" ISSUE
The following are "subject to" Qualified Opinions based on a "going
concern" issue. In both instances, the survival of the firm is uncertain.
Example 1
"The financial statements referred to previously have been prepared
using generally accepted accounting principles applicable to a going
concern which contemplates the realization of assets and the
liquidation of liabilities in the normal course of business.
However, continuation of the Company as a going concern is dependent
upon its obtaining additional financing and achieving profitable
operations. At December 31, 19X1, adverse operating results had
reduced the Company's working capital below the amounts required
under long-term debt agreements. As explained in.Note , the
working capital requirements under the debt agreements have been
waived until December 31, 19X2. Should losses continue and the
lenders exercise their rights under the debt agreements to accelerate
the maturities of long-term debt, the order of maturity of the
liabilities and the carrying values of assets would be significantly
affected.
In our opinion, subject to the possible effects of such adjustments,
if any, as might have been required had the outcome of the
uncertainties relating to the Company's continuance as a going
concern been known, the financial statements referred to above
present fairly the financial position of ABC Corporation, Inc. at
December 31, .19X2 and 19X1." *
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VII-36
ATTACHMENT VII-8 (continued)
EXAMPLES OF A "SUBJECT TO" QUALIFIED OPINION
BASED ON A "GOING CONCERN" ISSUE
Example 2
"The financial statements referred to above have been prepared on a
going concern basis and do not reflect any downward adjustments
(prsently not determinable) to the carrying value of assets which
could be required in the event of disposal other than in the ordinary
course of business. Continuation of the business is dependent on (1)
consummation of debt restructuring agreements as discussed in Note ,
(2) maintaining adequate financing arrangements with all lenders (3)
achieving profitable operations. Should any of these circumstances
interrupt the continuity of the business, the realization of assets
and order of maturity of liabilities may be adversely affected.
In our opinion, subject to the possible effects of such adjustments,
if any, as might have been required had the outcome of the
uncertainties relating to the Company's continuance as a going
concern been known, the financial statements referred to above
present fairly the financial position of ABC Corporation, Inc. at
December 31, 19X2 and 19X1."
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VII-37
ATTACHMENT VII-9
EXAMPLE OF AN "EXCEPT FOR" QUALIFIED OPINION DUE TO A SCOPE LIMITATION
We were not able to observe the taking of the physical inventories of
cut timber, which were necessarily taken as of September 30, in 19X2
and 19X1, since those dates were prior to the time we are initially
engaged as auditors for the Company. The cut timber inventory was
stated at $ and $ at September 30, 19X2 and 19X1,
respectively. Due to the nature of the Company's records, we were
unable to satisfy ourselves as to the inventory quantities by means
of other auditing procedures.
In our opinion, except for the effects of such adjustments, if any,
as might have been determined to be necessary had we been able to
observe the physical inventories of cut timber...."
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VII-38
ATTACHMENT VII-10
EXAMPLE OF AN "EXCEPT FOR" QUALIFIED OPINION DUE TO VARIANCES
FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
"The Company has excluded from property and debt in the accompanying
balance sheet certain lease obligations, which, in our opinion,
should be capitalized in order to conform with generally accepted
accounting principles. If these lease obligations were capitalized,
property would be increased by S , long-term debt by $ and
retained earnings by $ as of December 31, 19XX, and net income
and earnings per share would be increased (decreased) by $ and
$ , respectively, for the year then ended.
In our opinion, except for the effects of not capitalizing lease
obligations, as discussed in the preceding paragraph, the financial
statements present fairly...."
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VII-39
ATTACHMENT VII-11
EXAMPLES OF AN "EXCEPT FOR" QUALIFIED OPINION DUE TO INCONSISTENCIES
IN A COMPANY'S APPLICATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The following two examples illustrate how a similar "except for" situation
might be reported differently by different accountants.
Example 1
"in our opinion ... generally accepted accounting principles
consistently applied during the period except for the change, with
which we concur, in the method of computing depreciation as described
in Note A to the financial statements."
Example 2
"As disclosed in Note A to the financial statements, the Company has
adopted the sum-of-the-years digits method for computing
depreciation, whereas it previously used the straight-line method.
In our opinion the Company has provided reasonable justification for
making a change as required by the generally accepted accounting
principles.
In our opinion, except for the change in accounting principles as
stated above, the financial statements referred to above present
fairly the financial position of X Company as of October 31, 19 ,
and the results of its operations and the changes in its financial
position for the year the ended, in conformity with generally
accepted accounting principles."
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VII-40
ATTACHMENT VII-12
EXAMPLE OF "SUBJECT TO" QUALIFIED OPINION DUE TO AN
UNCERTAINTY REGARDING THE OUTCOME OF A JUDICIAL PROCEEDING
"As discussed in Note X to the financial statements, the Company is
defendant in a lawsuit alleging infringement of certain patent rights
and claiming royalties and punitive damages. The Company has filed a
counteraction, and preliminary hearings and discovery proceedings on
both, actions are in progress. Company officers and counsel believe
the Company has a good chance of prevailing,-but the ultimate outcome
of the lawsuits cannot presently be determined, and no provision for
any liability that may result has been made in the financial
statements.
In our opinion, subject to the effects of such adjustments, if any,
as might have been required had the outcome of the uncertainty
referred to in the preceding paragraph been known, the financial
statements referred to above present fairly the financial position of
ABC Company as of (current year-end) and the results of its
operations and the changes in its financial position, in conformity
with generally accepted accounting principles."
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VII-41
ATTACHMENT VII-13
EXAMPLE OF A "SUBJECT TO" QUALIFIED OPINION DUE TO A COMPANY
WITHOUT AN OPERATING HISTORY
Often there is uncertainty about the ability of a new enterprise to
establish a profitable level of operations. It has become accepted practice
to render "subject to" opinions in these "development stage" situations. The
middle paragraph must recite all of the uncertainties facing the company and
that recitation is frequently quite extensive.
"We have examined the balance sheet of ABC Corporation, Inc., as of
December 31, 19X2 and 19X1, and the related statements of operations,
changes in stockholders' equity and changes in financial position for
the years then ended. Our examination was made in accordance with
generally accepted auditing standards and, accordingly, included such
tests of the accounting records and such other auditing procedures as
we considered necessary in the circumstances.
The Corporation is in the development stage as of December 31, 19X2.
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles applicable
to a going concern which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.
However, recovery of the Corporation's assets is dependent upon
future events, the outcome of which is currently indeterminable.
Additionally, successful completion of the Corporation's development
program and its transition, ultimately, to attaining profitable
operations is dependent upon obtaining financing adequate to fulfill
its development activities and achieving a level of sales adequate to
support the Corporation's cost structure. Should any of these events
not occur, the accompanying financial statements may be affected
materially. .
In our opinion, subject to the ultimate resolution of the
uncertainties described in the preceding paragraph, the financial
statements referred to above present fairly-the financial position of
ABS Corporation, Inc. at December 31, 19X2 and 19X1, and the results
of its operations, changes in its stockholders' equity and changes in
its financial -position for the years then ended, in conformity with
generally accepted accounting principles applied on a consistent
basis. "
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ATTACHMENT VI l-l«4
CONDITIONS LIKELY TO RESULT IN A QUALIFIED OPINION. ADVERSE OPINION AND DISCLAIMER OF OPINION
VIOLATION OF GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CAAP>
CONDITION
"Except Tor" Qua I I Tied Opinion -
Violation is not overwhelming
or pervasive to financial
statements as a whole.
o Lease obligations that were
not capitalized that auditor
thinks should have been
capi taIized
o Omission or disclosure that
the auditor thinks should be
included
Adverse Opinion - Violation is
overwhelming or pervasive to
financial statements as a whole.
o A large company uses the cash
basis rather than the accrual
basis of accounting and thus,
does not match expenses with
revenues for the accounting
period.
UNCERTAINTY
"Subject To" Qualified Opinion
InternaI Matters External Matters
o Loss of- manage-
ment or other
key personnel
o Negative trends
recurring
operating loss-
es, negative
cash flow
o Work stoppages
o Unecono.ro ica I
long-term
commitments
o Legal proceed-
ings
o Legislation
o Loss of key
franchi se,
I icense, or
patent
o Loss of a
princ ipaI
customer or
supplier
o Uninsured
catastrophes
Disclaimer of Opinion
o It is impossible to determine the
future operational activity of
company or the effect of materiaI
uncerta inties.
SCOPE LIMITATIONS
"Except for" Qualified Opinion
o Segments of inventory not observed at
beginning or end of year (not so
significant as to require a disclaimer).
o Joint ventures were not audited.
Disclaimer of Opinion
o The accounting/operating systems are so
unreliable that an audit cannot be
performed.
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VII-43
ATTACHMENT VII-15
EXAMPLE OF AUDITOR'S SPECIAL REPORT,
CONFIRMATION OF CHIEF FINANCIAL OFFICER'S LETTER
We have examined the financial statements of XYZ Company for the year
ended December 31, 19X1, and have issued our report thereon dated March 15,
19X2. Our examination was made in accordance with generally accepted auditing
standards and, accordingly, included such tests of the accounting records and
such other auditing procedures as we considered necessary in the circumstances.
The Company has prepared documents to demonstrate its financial
responsibility under the Environmental Protection Agency's financial assurance
regulations, in compliance with 40 CFR 264 and 255, Subpart H. This letter is
furnished to assist the Company in complying with these regulations and should
not be used for other purposes.
The attached schedule reconciles the specified information furnished in
the Chief Financial Officer's Letter in response to the regulations with the
Company's financial statements. In connection therewith, we have:
1. Agreed the amounts in the column "per financial
statements" with amounts contained in the Company's-
financial statements for the year ended December 31,
19X1.
2. Agreed the amounts in the column "per Chief Financial
Officer's Letter" to the Letter prepared in response to
the regulations.
3. Agreed the amounts in the column "reconciling items" to
analyses prepared by the Company setting forth the
indicated items.
4. Recomputed the totals and percentages.
Because the above procedures do not constitute an examination made in
accordance with generally accepted auditing standards, we do not express an
opinion on any amounts or items referred to above. In connection with the
procedures referred to above, no matters came to our attention chat caused us
to believe the Schedule should be adjusted.
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VII-44
Line number
in
CFO's Letter
ATTACHMENT VII-15 (continued)
XYZ COMPANY
YEAR ENDED DECEMBER 31. 19X1
SCHEDULE RECONCILING AMOUNTS CONTAINED IN THE
CHIEF FINANCIAL OFFICER'S LETTER FURNISHED IN
RESPONSE TO 40 CFR 264 AND 265, SUBPART H TO
AMOUNTS CONTAINED IN THE FINANCIAL STATEMENTS
Per Recon-
Financial ciling
Statements Items
Total current liabilities
Long-term debt
Deferred income taxes
Accrued post-closure
costs included in current
liabilities
Total liabilities (less
accrued post-closure
costs)
Net Worth
Less: Cost in excess of
value of tangible
assets acquired
Accrued post-closure
costs included in current
liabilities
Tangible net worth (plus
accrued post-closure
costs)
[balance of schedule not
illustrated]
[This illustrates the
form of schedule which is
contemplated. Details
and reconciling items
will differ in a specific
situation.]
X
X
JC
XX
XX
JC
XX
XX
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VIII. ESTABLISHING FINANCIAL RESPONSIBILITY
USING STATE MECHANISMS
A. INTRODUCTION
As discussed in Section F of Chapter 1, owners or operators are subject to
applicable state laws or regulations pertaining to financial responsibility
for closure or post-closure care in addition to the RCRA financial require-
ments. This chapter only applies to facilities located in states where EPA is
administering financial assurance requirements.* The chapter explains how
owners or operators of facilities in these states may satisfy federal
requirements by demonstrating assurance using state laws.
Owners or operators may satisfy the RCRA financial assurance requirements
by arranging for assurance under the authority of a state government in two
ways. First, an owner or operator may provide assurance through a state-
required financial mechanism equivalent to RCRA requirements. Many states are
expected to adopt the federal requirements discussed in this manual or
equivalent rules; in those cases, satisfaction of state requirements may be
used to demonstrate compliance with RCRA requirements. Second, a state
government or state fund may assume legal or financial responsibility for all
or part of the closure and/or post-closure care of a facility. Such an
assumption, similarly, may satisfy all or a part of the RCRA financial
requirements; the specific terms and applicability of the state assumption
will determine how much of the RCRA responsibility remains, if any.
Pertinent EPA regulations are listed below:
EXHIBIT VIII-1
RCRA STATE MECHANISM REGULATIONS
Topic Interim Status Permitted Facilities
State-Required Mechanisms 40 CFR 265.149 40 CFR 264.149
State Assumption of 40 CFR 265.150 40 CFR 264.150
Responsibility
Source: Title 40, Code of Federal Regulations (CFR).
* EPA interim status financial assurance regulations (40 CFR 265) do not
apply in states that have received PHASE I interim authorization, although
RCRA standards (40 CFR 264) must be satisfied to receive a RCRA permit.
States with PHASE II interim authorization administer their own financial
requirements for both interim status and permitted facilities. See Chapter 1,
Section F for a discussion of the applicability of federal and state
requirements.
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VIII-2
B. REQUIREMENTS 'FOR USING STATE MECHANISMS'AND STATE ASSUMPTIONS
' OF RESPONSIBILITY TO SATISFY RCRA REQUIREMENTS
This section outlines the requirements for using state mechanisms to
satisfy federal rules and the responsibilities of owners or operators.
Included as Attachment VIII-1 is a checklist summarizing the requirements for
owners or operators.
1, Satisfying State Requirements. Owners or operators must initially
identify what state financial requirements apply and whether or not the state
itself assumes responsibility for closure or post'-closure care. State
financial requirements may not be identical to RCRA requirements, although the
allowable mechanisms typically include trust funds and bonds. Other states
may have different requirements, as well as assumptions of closure or
post-closure responsibility through funds or other provisions. (See Exhibit
VIII-2.) The characterization of state laws and regulations included in
Exhibit VIII-2 represents the opinions of ICF Incorporated and are not
official EPA determinations of equivalence or acceptability.
Because state laws and regulations are still being developed or
promulgated, it is strongly suggested that owners and operators check with the
appropriate state agency for the requirements in any particular state. See
Appendix B for a list of state agencies. An owner or operator whose facility
is located in any state with financial requirements must satisfy both the
state and federal requirements. State and federal officials encourage early
and frequent contacts with agency staffs to discuss requirements. Similarly,
an owner or operator will need to determine whether it is eligible for a state-
assumption of responsibility for closure or post-closure care.
2. Submission of Required Information. To use a state-required
mechanism to satisfy RCRA requirements, the owner or operator must submit to
the Regional Office evidence of the establishment of the mechanism, such as a
letter from the appropriate state agency, a copy of the bond or trust fund,
etc. The submission of evidence must be accompanied by a request that the
State-required mechanism be considered acceptable for meeting the RCRA
financial assurance requirements. (See Attachments VIII-3 through VIII-5'.)
The submission must include the amount of coverage assured through the state
mechanism and identification information on each facility to be covered
including the facility's EPA Identification Number, name, and address.
Additional information may be requested by the Regional Administrator in order
to dertermine the mechanism's'acceptability.
Some state laws provide assurance of payment or performance of all or part
of closure and/or post-closure responsibilities. In order to take advantage
of such laws to demonstrate compliance with RCRA financial assurance
requirements, the owner or operator must submit two letters: (1) a letter
from the appropriate state agency describing the nature of the state's
assumption of responsibility, together with (2) a letter requesting that the
state's assumption of responsibility be considered acceptable for fulfilling
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VIII-3
EXHIBIT VIII-2
STATE FINANCIAL REQUIREMENTS AND ASSUMPTIONS
OF RESPONSIBILITY IN STATES WITHOUT INTERIM
AUTHORIZATION AS OF MAY 10, 1982
Has Financial Provides Assumption
Requirements of Responsibility
Alaska
Colorado 3/
District of Columbia *
Florida I/
Hawaii
Idaho
Illinois *
Indiana *
Michigan *
Minnesota * 2/
Missouri *
Nebraska *
Nevada 3/
New Jersey *
New Mexico I/
New York *
Ohio *
Puerto Rico » 2/
South Dakota
Virgin Islands *
Washington *
West Virginia 3_/
Wyoming
* State has some provision for the item in question.
_!/ Requirements have been proposed but not yet adopted.
2/ Some financial assurance mechanism is required but the nature of the
mechanism has not'been specified.
3_/ No regulations have yet been issued but. some mechanism is required by
state statute.
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VIII-4
the RCRA financial assurance requirements. (See Attachments VIII-3 through
VItI-5.) -The letter from the state must include,-or have attached, the
following information: the facility's EPA Identification Number, name,
address, and the amount of funds for closure or post-closure care guaranteed
by the state. The owner or operator may be required to submit additional
information requested by the Regional Administrator.
3. Satisfying Federal Requirements. The owner or operator may need to
combine the State mechanism or guarantee with RCRA assurance mechanisms in
order to provide complete coverage of the estimated closure and/or
post-closure costs. For example, if a state fund or mechanism for
post-closure only provides for fifteen years of care, it may need to be
supplemented to provide for the full thirty-year RCRA post-closure period. A
state fund assuming all responsibility for post-closure care beginning 20
years after closure would need to be supplemented by some mechanism assuring
the first 20 years of post-closure care as well as by.a mechanism assuring
closure itself. The owner or operator has the option of either increasing the
amount of funds available through the state-required mechanism or using
additional RCRA financial mechanisms; only the latter choice will usually be
available where a state fund assuming responsibility for post-closure is
involved. If a combination of mechanisms is required, the owner or operator
should follow the procedures for approval of combinations of RCRA mechanisms
(discussed in Section B.2 of Chapter II). The total amount of funds available
through the State and Federal mechanisms must at least equal the amount
required under RCRA.
4. Maintaining Coverage. Owners or operators have a continuing
responsibility to maintain adequate financial assurance. Thus, whenever
closure or post-closure plans change, or when making annual adjustments to
cost estimates for inflation, owners or operators must provide increased
coverage if revised cost estimates exceed the amount of financial
responsibility previously assured. Procedures for doing this will vary with
rhe type of mechanism being used; owners or operators should consult the other
chapters in this manual for details.
PERMITTED FACILITIES
To receive a RCRA permit, new and existing facilities must satisfy RCRA
financial requirements for permitted facilities. If the facility is located
in a state without interim authorization or with Phase I authorization only,
financial assurance must be demonstrated to the appropriate Regional
Administrator as described in the other chapters of this manual.
State-required mechanisms or assumptions of responsibility may be used to
fulfill RCRA requirements in whole or part as discussed previously. The main
point to remember is that unless the facility is located in a state with Phase
II interim authorization (see Exhibit 1-1), it must satisfy RCRA standards to
receive a RCRA permit and may comply by using state-required mechanisms or
state assumptions of responsibility, if any.
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VIII-5
C. REGIONAL OFFICE RESPONSIBILITIES
This section presents the responsibilities for Regional Administrators in
reviewing state mechanisms for equivalency. A summary checklist is provided
as Attachment VIII-2.
1. Evaluating Equivalency. The Regional Administrator must determine
whether the state mechanism or assumption of responsibility provides financial
assurance at least equivalent to the RCRA financial mechanisms. Equivalency
should be evaluated principally in terms of two criteria:
(1) Certainty of the availability of funds for the
required closure or post-closure care activities.
For example, the state mechanism must demonstrate a
minimal risk of defaulting or lapsing due to
bankruptcy, change in ownership, or cancellation of
guarantee, without the provision of alternate
assurance.
(2) The amount of funds that will be made available. The
owner or operator must demonstrate that the state
mechanism will assure payment of estimated closure
and/or post-closure costs, including future cost
increases due to inflation or changes in the closure
and/or post-closure plan.
Regional Administrators must evaluate state mechanisms and compare them to
the allowable federal mechanisms principally on the basis of the two criteria
of certainty and amount of funds. This could be a very complex task, and the
Regional Administrator must be careful to consider many factors. These
factors include:
Qualifications required of participating financial
institutions;
Provision for increases in amount"of financial
assurance due to inflation or changes in plans;
Time periods and closure and post-closure activities
covered by the state mechanism;
The amount of funds assured as compared to the cost
estimates;
Provision for future contingencies, including
bankruptcy, cancellation, or changing mechanisms; and
The future taxation and budgetary constraints that
could affect a state's ability to assure future
payment of closure and/or post-closure costs.
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VIII-6
In general, Regional Offices should first analyze the state mechanism
itself for adequacy before reviewing the. amount of coverage offered. State
financial assurance mechanisms typically include trust funds, bonds, letters
of credit, and, in some cases, financial tests. This means that Regional
Offices can use federal requirements as a benchmark for evaluating these
instruments. In reviewing the components of a mechanism, Regional Offices
should distinguish requirements that are stricter than the RCRA rules from
requirements that are more lax. For example, Wisconsin places strict limits
on the type of investments allowed for trust funds. Unless these restrictions
prevent the accumulation of reasonable returns, the mechanism should be
qualified to satisfy RCRA requirements. Where states have adopted the federal
requirements by reference, detailed evaluation will not be necessary.
Regional Offices should carefully review state financial tests against
federal financial test criteria because this mechanism does not involve the
advance financing of a fund for later use (e.g., trust fund or insurance
contract), the dedication of a line of credit, nor the underwriting of the
risk of failure to satisfy requirements (e.g., surety bond, insurance).
The checklists provided throughout this manual may be used for evaluating
equivalency. Questions such as the following should be asked:
(1) Must the financial institution or corporate parent be
adequately qualified? Are insurers required to be
licensed? Must surety companies be state-approved?
(2) What circumstances will allow the state or EPA' to
collect a corporate parent guarantee? Or draw on
funds held in trust? Or pursuant to a letter of
credit? Are insurance contracts cancellable if the
, owner or operator is found in violation of performance
- standards unrelated- to financial requirements?
(3) Could cancellation of a third-party .guarantee become
effective before the state or EPA could legally
collect funds for closure and post-'closure? Will the
original guarantor honor the commitment and provide
the necessary funds if the owner or operator is unable
to find another financial responsibility mechanism
satisfactory to the Regional Administrator?
Regional Offices may wish to consult with EPA Headquarters to discuss
questions and options for evaluating equivalency.
State assumptions of responsibility may be more difficult to review in the
absence of federal benchmarks for comparison. Regional Offices should review
exactly which activities are covered by such an assumption (e.g., closure,
post-closure care, groundwater monitoring, security systems). Most states
providing for assumption of responsibility usually limit this to post-closure
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VIII-7
care, commencing either immediately after closure or following a term of
years. Regional Offices should not attempt to evaluate the future adequacy of
state funds but may ask to review any such studies prepared by the responsible
state agency.
The Regional Administrator must also determine which required closure or
post-closure activities are covered neither by the state mechanism nor by the
state assumption (if any) in order to identify additional assurances needed to
satisfy federal requirements. Similarly, the dollar amount of coverage must
be reviewed to determine equivalency. Because estimates of the cost of
closure and/or post-closure care may vary, 'Regional Administrators should
employ rough guidelines for assessing whether the dollar amount of coverage
falls into the acceptable range, for facilities of the type covered. If the
amount provided is clearly inadequate, the owner or operator should be
required either to increase coverage afforded by the state mechanisms or
establish an additional federal mechanism.
2. Reviewing Submissions. The Regional Administrator should review the
information submitted by the owner or operator to verify that all the required
information is included. In addition to the facility's EPA Identification
Number, name, address, and the amount of funds assured, the following should
be included:
evidence of the establishment of a state-required
mechanism, such as- a copy of the trust agreement,
surety bond, letter of credit, insurance contract, or
corporate parent guarantee with the state listed as a
beneficiary, including all required attachments, such
as Attachment A for the trust fund, acknowledgements,
power of attorney, etc.;
a letter from the state describing the nature of the
state's assumption of responsibility, if any, signed by
an appropriate state-agency official; and
a cover letter requesting that the state mechanism
and/or assumption of responsibility be considered
acceptable for meeting, in whole or part, RCRA
financial requirements.
Three sample owner or operator request letters are included as attachments.
They represent situations where:
(1) a combination of a state-required mechanism-and
assumption of responsibility are requested to fully
satisfy RCRA requirements (Attachment VIII-3);
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VIII-8
(2) state-required mechanisms equivalent to RCRA
assurances are requested to fully satisfy RCRA
requirements (Attachment VIII-4); and
(3) a state-required mechanism not equivalent to RCRA
assurances is requested to fully or partially satisfy
RCRA requirements (Attachment VIII-5).
Resort to state law as a means of fulfilling applicable RCRA requirements
will fall into one of these three typical situations.
3. Verifying Conformity to Requirements. Regional Administrators must
advise owners or operators concerning the acceptability of state mechanisms
and assumptions of responsibility. Pending this determination, the owner or
operator will be deemed to be in compliance with the applicable RCRA financial
assurance requirements. Any additional coverage needed for the assurance to
be at least equivalent to RCRA requirements should be specified. Additional
assurances may be provided by increasing the amounts available under state
mechanisms or using additional mechanisms meeting RCRA requirements.
4. Ensuring Maintenance of Coverage. Regional Offices should determine
whether state mechanisms provide for later adjustments in coverage consistent
with federal requirements. If not, the owner or operator will have to-satisfy
its ongoing responsibility by using additional federal mechanisms. Use of
those mechanisms for maintaining coverage is discussed in the preceding
chapters of this manual. In addition, should the state receive interim
authorization to administer its own hazardous waste management program, the
Regional Administrator should consent to the termination of financial
assurance mechanisms only when no lapse in coverage will result.
PERMITTED FACILIITIES p '
Owner or operators may use state-required mechanisms or state assumptions
of responsibility to satisfy federal financial assurance standards for
permitted facilities in states which have not received applicable Phase II
interim authorization. The guidance in this chapter applies to such
situations.
D. SOURCES OF FURTHER INFORMATION
Because many state laws and regulations are currently in a state of flux,
owners or. operators 'are advised to contact the appropriate state agency to
determine applicable requirements. State agency contacts are listed in
Appendix B. EPA Regional Office contacts can also advise regarding the
authorization status of state programs (see Appendix A).
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VIII-9
ATTACHMENT VIII-1
RCRA STATE MECHANISMS CHECKLIST FOR OWNERS OR OPERATORS
Paragraph
Number *
(1) Identify pertinent state laws and requirements which can be used
to satisfy RCRA regulations.
(2) Submit:
Letter requesting consideration of state mechanism and/or
assumption of responsibility to apply for RCRA requirements
Signed copies of financial instruments (with associated
attachments, acknowledgements, or certificates) naming
state agency as beneficiary
Letter from state agency acknowledging completion of state
requirements, if available
Letter from state agency describing the nature of the
State's assumption of responsibility
EPA Identification Number and informal:ion on each
facility, including amount of funds assured for closure or
post-closure
(3) Satisfy, federal requirements by providing additional assurances
as necessary.
(4) Maintain coverage throughout operating life of facility,
including
Assurance of cost increases due to plan changes
Assurance of cost increases due to annual inflation
adjustments
Change of mechanisms as required to maintain assurance in
the event of incapacity, disallowance, or ineligibility of
financial institution or parent guarantor
* Numbers correspond to paragraphs in Section B.
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VIII-10
ATTACHMENT VIII-2
RCRA STATE MECHANISMS CHECKLIST FOR REGIONAL OFFICES
The Regional Administrator should ensure that:
Paragraph
Number *
(1) Equivalency of State Mechanisms or Assumptions of Responsibility
is determined principally on the basis of:
" Certainty of Availability of Funds, including:
Qualifications for financial institutions, parent
guarantors, or financial test
Irrevocability of trust fund and letter of credit
Adequate notice prior to termination/ cancellation, or
non-renewal of financial mechanism and provisions for
obtaining alternate assurance or drawing upon mechanisms
prior to termination, cancellation, or non-renewal
Requirements of financial test (e.g., assets, ratios) .
Provisions for maintenance of assurance in the event of
bankruptcy of parent guarantor or financial institution,
incapacity, transfer of ownership'.or operation, change in
mechanism
Source of funds to be used by states assuming
responsibility for closure or post-closure care
" Amount of Funds Available, including:
Closure or post-closure activities covered
Time period covered
Amount of funds provided compared to cost estimates
Numbers correspond to paragraphs in Section B.
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* VIII-11
ATTACHMENT VIII-2 (continued)
RCRA STATE MECHANISMS CHECKLIST FOR REGIONAL OFFICES
Paragraph
Number *
Provisions for increases in coverage due to inflation or
changes in closure or post-closure plans
Amount of funds available through state accounts or
revolving funds
Additional assurances needed
(2) The initial submission is complete, including:
Owner or operator request letter
Evidence of establishment of state mechanism, such as
copies of executed (i.e., signed) financial instruments,
letter of acknowledgment from state agency, etc.
Identifying information for covered facilities and amount
of coverage
Copy of letter from state agency describing assumption of
responsibility
The owner or operator is notified of the equivalency
determination.
(3) The amount of funds available at least equals the amount
required by RCRA standards
State mechanisms and/or assurance completely fulfill RCRA
requirements
Assurance provided by additional mechanisms is consistent
with RCRA requirements
Numbers correspond to-paragraphs in Section B.
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VIII-12
ATTACHMENT VIII-2 (continued)
RCRA STATE MECHANISMS CHECKLIST FOR REGIONAL OFFICES
Paragraph
Number *
Amount of funds available under state mechanisms is
increased as required
(4) Coverage is maintained
State mechanisms provide for maintenance of assurance and
owner or operator is in compliance
Owner or operator uses additional mechanism to provide for
adjustments to financial assurance
There is no lapse in coverage if the State receives
interim authorization
Numbers correspond to paragraphs in Section B.
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VIII-13
ATTACHMENT VIII-3
SAMPLE OWNER OR OPERATOR REQUEST LETTER (I)
HazWaste Corp.
Address
Date
EPA Regional Administrator
U.S. EPA Region
Street Address
City, State, Zip Code
Dear Sir/Madam:
This letter is submitted to request that RCRA financial requirements (40
CFR 265) be deemed satisfied, in whole or part, by state mechanisms and/or
assumptions of responsibility with which HazWaste Corp. is in compliance.
HazWaste Corp. owns and operates three (3) facilities in State 'X whose EPA
Identification Numbers and addresses are as follows:
[Insert identifying information]
State X requires financial responsibility demonstrations to cover the
costs of closure and up to 15 years of_post-closure care. See Rules 26.02 and
26.07 of the State X Department of Environmental Protection. HazWaste Corp.
has established the required trust funds, as evidenced by the following
documents which are attached:
(A) Copy of trust agreement and Schedule A (Attachment A)
and
(B) Letter from State X Department of Environmental
Protection acknowledging satisfaction of state
requirements (Attachment B).
In addition, State X has established a Perpetual Care and Monitoring Fund
to provide for sites which, have been closed for fifteen years. See Rules
30.50 through 30.70. ' We request that the state assumption of post-closure
care responsibility be deemed to partially satisfy .federal RCRA requirements.
We have attached a letter from the state agency acknowledging the inclusion of
our facilities under the state assumption. (See Attachment C).
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VIII-14
ATTACHMENT VIII-3 (continued)
SAMPLE OWNER OR OPERATOR REQUEST LETTER (I)
In conclusion, we request that the combination of our state-required
financial responsibility demonstrations and the state assumption of
post-closure care be deemed to completely satisfy federal RCRA requirements.
We will be pleased to provide any further information you may need.
Sincerely,
President, HazWaste Corp.
Attachments
A. Trust Fund Agreement (Closure and Post-Closure)
B. State agency acknowledgement
C. State assumption of responsibility
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VIII-15
ATTACHMENT VIII-4
SAMPLE OWNER OR OPERATOR REQUEST LETTER (II)
Waste Control Inc.
Address
Date
EPA Regional Administrator
U.S. EPA Region
Street Address
City, State, Zip Code
Dear Sir/Madam:
This letter is submitted to request that RCRA financial requirements be
deemed satisfied by state rules with which Waste Control Inc. has complied.
Waste Control Inc. owns and operates one (1) facility in State Y located
at [insert address] assigned EPA Identification Number .
State Y has adopted by reference the RCRA financial requirements of 40 CFR
264 and 265, as amended. See Rule 70Y(1) of the State Department of Natural
Resources. Waste Control Inc. has secured an irrevocable letter of credit to
assure the availability of funds for both closure and post-closure, a copy of
which is attached. The State Y [insert appropriate agency] has accepted this
letter of credit'as fulfilling the requirements of Rule-70Y(l). .
Accordingly, we request that the establishment of this financial assurance
mechanism be determined acceptable for meeting the requirements of 40 CFR
265. Further information, if needed, will be supplied at your request.
Thank you,
Comptroller, Waste Control Inc.
Attachments
A. Irrevocable Letter of Credit (copy)
B. State agency acknowledgement
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VIII-16
ATTACHMENT VIII-4
SAMPLE OWNER OR OPERATOR REQUEST LETTER (III)
Synthetic Chemical Industries
Address
Date
EPA Regional Administrator
U.S. EPA Region
Street Address
City, State, Zip Code
Subject: Financial Requirements
Synthetic Chemical Industries ("SCI") owns two hazardous waste facilities
in the State of Z, both of which are in interim status and subject to the
financial requirements of 40 CFR 265. The EPA Identification Numbers and
addresses are:
[Insert identifying information] .
SCI has complied with Section 3S4B of the Public Health Code of State Z by
posting two bonds to assure the closing and covering of our landfills in a
manner which prevents erosion, health and safety hazards, nuisances, and
pollution. As required by state law, these bonds must be in the amount of
$1,000 per acre of land for which a State Z permit is required, but in no
event for less than 525,000. SCI has posted bonds of 525,000 and 542,000,
respectively, for the two sites identified above. Pursuant to state law,
liability for the bond is to extend until five (5) years after the closure of
the landfill. This obligation is binding on the heirs, representatives,
successors, and assignees o'f SCI.
SCI requests that this State-required mechanism be determined acceptable
for meeting the financial requirements of 40 CFR 265, in whole or in part.
Pending this determination, SCI understands that it will be deemed to be in
compliance with such requirements (40 CFR 265.149(b)). SCI intends to provide
whatever additional assurances are determined necessary.
-------
VIII-17
ATTACHMENT VIII-4 (continued)
SAMPLE OWNER OR OPERATOR REQUEST LETTER (III)
We have enclosed copies of our closure and post-closure plans, facsimiles
of the above-referenced bonds, and a copy of the letter of acknowledgement
receive by SCI from State Z. SCI will provide such additional information as
may be deemed necessary to make this determination.
Sincerely,
General Counsel, SCI
Attachments
-------
GLOSSARY OF TERMS
Term
ACCOUNT PARTY
ACCOUNTANTS OPINION
ACKNOWLEDGE, ACKNOWLEDGEMENT
(OF AN INSTRUMENT)
ADJUSTED COST ESTIMATE
ADVERSE OPINION
ALIEN INSURER
AMORTIZATION
Definition
One who purchases or arranges for a
letter of credit from a financial
institution.
See REPORT ON EXAMINATION.
Formal declaration bef-ore an authorized
official such as a notary, by the
person who executed the instrument,
that it is his free act and deed.
A cost estimate which has been updated
using the appropriate inflation factor
within 30 days of the anniversary date
on which the first cost estimate was
prepared.
Statement by an accountant that the
financial statements of the firm do not
present fairly the financial condition
of the firm in conformity with
generally accepted accounting
principles. This type of opinion will
cause the EPA to disallow the use of
the financial test for the firm.
An insurance company incorporated under
the laws of a foreign country.
Gradually reducing the accounting or
"book" value of a fixed asset by
allocating part of the cost of the
asset over time to individual
accounting periods. The term is used
to refer to assets whose life is
limited but which do not physically .
wear out. 'Examples include copyrights,
patents, and leases. See DEPRECIATION.
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-2-
Term
ASSET
ASSIGNMENT
AUDIT
AUTOMATIC EXTENSION,
AUTOMATIC RENEWAL
BENEFICIARY
BOND RATING
CAPTIVE INSURER
CASH FLOW
Definition
All existing and all probable future
economic benefits obtained or
controlled by a particular entity. Any
right or physical property that is
owned and has a monetary value.
A transfer by one party to a contract
of some or all of the rights of the
contract to a third party. In this
case, the contract is the liability
insurance policy.
Systematic inspection of accounting
records involving analyses, tests, and
confirmations.
Continuation of an insurance policy or
letter of credit without the need for
renegotiation.
One for whose benefit a trust or letter
of credit is established.
An assessment of the credit-worthiness
of an obligor with respect to a
specific debt obligation (bond).
Ratings take the form of letters--e.g.
AA, A, B, etc. For purposes of these
regulations, Moody's and Standard &
Poor's are the only two acceptable
bond-rating corporations. See also
INVESTMENT GRADE.
An insurance company set up by a
company or group of companies to insure
their own-risks, or risks common to the
group.
In accounting, a company's net income
(sales minus operating expenses) plus
allowances for depreciation, depletion,
and amortization. Represents the funds
available as working capital and for
expansion.
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-3-
Term
CERTIFIED PUBLIC ACCOUNTANT (CPA)
CIRCULAR 570
COLLATERAL
COMMON TRUST FUND
CORPORATE GUARANTEE
COSURETY
CLOSURE OR POST-CLOSURE
INSURANCE
Definition
An accountant with a special state
license indicating that he or she meets
certain requirements for the public
practice of accounting. Although
requirements vary from state to state,
all must pass a rigorous examination
administered by the American Institute
of Certified Public Accountants.
Circular of the U.S. Department of the
Treasury, published annually in the
Federal Register on July 1. The surety
company issuing the surety bond must be
among those listed as acceptable
sureties on federal bonds in Circular
570.
A tangible security or property,
usually readily convertible into cash,
that is deposited with a creditor to
guarantee payment of an obligation.
Either the property itself or a
document or title to it is held by the
creditor until the loan is repaid.
A trust fund into which funds from
several individual trusts may be placed.
A guarantee by the owner or operator's
parent corporation that it will meet
all financial assurance obligations
specified in the regulations.
Two or more sureties who share one
surety bond obligation.
A type of insurance coverage that
provides funds for final closure or
post-closure care whenever required.
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-4-
Term
CURRENT ASSETS
CURRENT COST ESTIMATE
CURRENT LIABILITIES
DEPLETION
DEPRECIATION
DISCLAIMER OF OPINION
Definition
Cash or other assets or resources
commonly identified as those which are
reasonably expected to be realized in
cash or sold or consumed during the
normal operating cycle of the business.
The most recent cost estimate which
includes any revisions due to changes
in plans or inflation adjustments.
Obligations whose liquidation is
reasonably expected to require the use
of existing resources properly
classifiable as current assets or the
creation of other current liabilities
or those expected to be satisfied
within a relatively short period of
time, usually one year.
In accounting, an allowance made for
the shrinkage or exhaustion of a
natural resource.
In accounting,, the method of allocating
part of the cost of an asset that will
be used up over.time to individual '
accounting periods. The number of
accounting periods does not necessarily
correspond to the actual life of the
asset, i.e., a building that lasts 40
yeas may be depreciated over 10 years.
See AMORTIZATION.
Statement that the auditor does not
express an opinion on the financial
statements of the firm. This statement
will cause EPA to disallow the use of
the financial test for the firm.
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-5-
Term
EXCESS OR SURPLUS LINES
EXISTING FACILITY
FACE AMOUNT OF POLICY
FACE VALUE
Definition
The designation that a state gives to
insurance companies which are not
licensed to transact business in that
state. Because such companies, also
known as "non-admitted insurers,"
cannot be regulated, states include
specific regulations for agents and
brokers of excess or surplus lines in
the broker or agent's license. The
state of New York, for example,
requires a broker or agent to submit
declamations from five licensed (or
admitted) insurers stating that the
service(s) provided by a particular
excess or surplus line cannot be
obtained from their firm. Most states
also maintain either "black lists" of
non-admitted insurers which a broker or
agent cannot take on as an excess or
surplus line or"white lists"of eligible
providers. The Non-Admitted Insurers
Information Office (NAIIO) of the
National Association of Insurance
Commissioners (NAIC) publishes its own
"Non-Admitted Insurer's Quarterly List."
A facility that was in operation, or
for which construction commenced on or
before November 19, 1980. A facility
has commenced construction if the owner
or operator has obtained Federal,
state, and local approval to begin
construction; and physical construction
has begun, or contracts for physical
construction have been signed.
Face value of an insurance policy; the
total amount the insurer is obligated
to pay under the policy.
The value of a security, insurance
policy, or letter of credit, expressed
as a specific sum of money, which is
printed, stamped, or otherwise marked
on its face. The face value of a bond
is usually the amount the issuer
promises to pay at maturity.
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-6-
Term
FIDUCIARY
FINAL AUTHORIZATION
FINANCIAL GUARANTEE BONDS
FINANCIAL RATINGS OF INSURERS
FINANCIAL STATEMENTS
FINANCIAL TEST
FORM 10-K, FORM 10-Q
Definition
A person whose duty is to act on behalf
of another or to protect the interests
of another. A trustee is a fiduciary.
Approval by EPA of a state program
which has met the requirements of
§3006(b) of RCRA and the applicable
requirements of Part 123, Subparts A
and B.
A type of surety bond under which the
surety agrees to pay the penal sum of
the bond if the owner or operator fails
to fulfill his closure and/or post-
closure obligations. Financial
guarantee bonds may be used by
facilities with interim or general
status. l
Similar to a bond rating, an assessment
of the credit-worthiness of an
insurance company with respect to its
future obligations.
Formal reports of the status of
accounts at a particular time, prepared
to show the operating results and
financial condition of the firm. The
statements include the balance sheet,
income statement, and statement of
changes in financial position.
Criteria specified in regulations which
an owner, operator, or corporate parent
must pass to establish financial
assurance.
A type of report that U.S. corporations
file with the Securities and Exchange
Commission. It frequently contains
more information than the annual report
distributed to stockholders. The 10-K
is submitted annually; the 10-Q
quarterly.
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-7-
Term
GNP DEFLATOR
GRANTOR
INFLATION FACTOR
INTERIM AUTHORIZATION
Definition
Weighted price index which reflects the
rate of inflation. It is derived by
dividing current-doliar Gross National
Product (GNP) by constant-doliar GNP.
See also INFLATION FACTOR.
One who creates a trust.
trustor.
Also called a
The price index used to update cost
estimates for closure and post-closure
care, in order to account for
inflation. The index used is the GNP
deflator.
Approval by EPA of a state hazardous
waste program which has met the
requirements of §3006(c) of RCRA and .
applicable requirements of Part 123,
Subpart F. See also PHASE I and PHASE
II.
INTERIM STATUS FACILITIES
INVESTMENT GRADE
Existing hazardous waste management
facilities for which notification under
RCRA Section 3010 and Part A of the
RCRA permit application have been
submitted. Facility owners and
operators with interim status are
treated as having been issued a permit
until EPA or a State with interim
authorization for Phase II or final
authorization under Part 123 makes a
final determination on the permit
application. Facility owners and
operators with interim status are not
.relieved from complying with other
State requirements.
A bond or other debt instrument with a
rating from Moody's of Aaa, Aa, A, or
Baa; or a rating from Standard & Poor's
of AAA, AA, A, or BBB.
-------
-8-
Term
IRREVOCABLE
ISSUER
JOINTLY AND SEVERALLY RESPONSIBLE
LETTER OF CREDIT
LIABILITIES
MOODY'S
MET INCOME
NET WORKING CAPITAL
NET WORTH
Definition
That which cannot be revoked or
recalled. All RCRAtrusts must be
irrevocable. A RCRA irrevocable letter
of credit cannot be cancelled unless
alternate assurance is substituted or
the account party is released from
financial requirements.
The party who issues an insurance
policy, letter of credit, or surety
bond.
A liability is said to be joint and
several when the creditor may sue one
or more of the parties to such
liability separately, or all of them
together at his option. Any one of
these parties may be liable for the
entire amount.
A letter or instrument authorizing that
credit up to a particular amount be
extended to the person named therein.
Probable future sacrifices of economic
benefits arising from present
obligations to transfer assets or
provide services to other entities in
the future as a result of past
transactions or events.
One of the two bond-rating agencies
acceptable for purposes of these
regulations. Address: Moody's .
Investors Service, Inc., 99 Church
Street, New York, New York 10007.
The difference between total sales and
total costs of goods sold plus expenses
over the fiscal year.
Current assets minus current
liabilities.
Total assets minus total liabilities
and is equivalent to owner's equity.
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-9-
Term
NOMINAL SUM
Definition
A small amount of money, such as $1.00
or §10.00, with which a standby trust
fund is often started.
OBLIGEE
ORIGINALLY SIGNED DUPLICATE
PARENT CORPORATION
PARENT GUARANTOR
PAY-IN PERIOD
PENAL SUM
PERFORMANCE 'BONDS
One in favor of whom the surety is
obliged in a surety bond. In RCRA
surety bonds, EPA is the obligee.
A copy of a document with an original
signature.
A corporation which directly owns at
least 50 percent of the voting stock of
the corporation which is the facility
owner or operator; the latter
corporation is deemed a "subsidiary" of
the parent corporation.
A parent corporation which provides a
corporate guarantee.
Period of time during which the owner
or operator must make payments into the
trust fund. For facilities with
interim status, the pay-in period is 20
years or the remaining operating life
of the facility as estimated in the
closure plan, whichever is shorter.
For facilities with general status,.the
pay-in period is the term of the
initial RCRA permit or the remaining
operating life of the facility as
estimated in the closure plan,
whichever is shorter.
An amount agreed upon in a bond, to be
forfeited if the condition of the bond
is not fulfilled. It represents the
maximum liability of the surety.
A type.of surety bond under which the
surety agrees to either pay the penal
sum of the bond or perform the required
actions if the owner or operator fails
to fulfill his obligation. Performance
bonds may only be used for facilities
with general status.
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-10-
Term
PERMITTED FACILITIES
PHASE I INTERIM AUTHORIZATION
PHASE II INTERIM AUTHORIZATION
POWER OF ATTORNEY
PREMIUM PAYMENTS
PRINCIPAL
Definition
Facilities which have demonstrated
compliance with RCRA standards and have
received permits.
The first, phase of interim
authorization of state programs by
EPA. It allows states to administer a
hazardous waste program in lieu of and
corresponding to that portion of the
federal program which covers
identification and listing of hazardous
waste, generators and transporters of
hazardous waste, and establishes
preliminary standards for hazardous
waste treatment, storage, and disposal
facilities. States need not have
established financial assurance
requirements to receive PHASE I interim
authorization.
The second phase of interim
authorization of state programs by
EPA. It allows states to establish a
permit program for hazardous waste
treatment, storage, and disposal
facilities in lieu of and corresponding
to the federal hazardous waste permit
program, including financial assurance
requirements for both interim status
and permitted facilities. Phase II
interim authorization may be granted
for treatment and storage facilities
only; Phase II authorization is not
currently available for disposal
operations.
A written authorization authorizing
another to act as one's agent or
attorney.
The periodic- payments of money which
the policy-holder agrees to pay the
insurer for an insurance policy.
One who establishes a surety bond.
RCRA surety bonds, the owner or
operator is the principal.
In
-------
-11-
Term
PRUDENT MAN STANDARD
QUALIFIED OPINION
REINSURANCE
REPORT ON EXAMINATION
Definition
An investment rule according to which a
trustee may invest in a security only
if it is one that a "prudent man" of
discretion and intelligence, seeking
reasonable income and preservation of
capital, would buy.
Statement by an accountant that the
financial statements of a firm present
fairly the financial condition of the
firm, subject to certain conditions, or
except for certain limitations.
A contract between an insurer or surety
and another party, called the
reinsurer, in which the reinsurer
agrees to protect (reinsure) the
insurer or surety against loss on some
of its insurance. Reinsurance allows
an insurer or surety to share the risk
among more parties and issue more
policies or bonds within its allowable
limits.
The independent certified public
account's report on the financial
statements, support schedules, and
footnotes. Often referred to as the
accountant's report or the' auditor's
opinion. The report on examination
usually contains two paragraphs --a
scope paragraph and an opinion
paragraph. The scope paragraph
indicates the financial presentations
covered by the opinion and affirms that
generally accepted auditing standards
and practices have been followed by the
auditors. The opinion paragraph
contains the accountant's opinion of
the financial statements, schedules and
footnotes. The opinion can be
unqualified, qualified, or adverse; or
there can be a disclaimer of opinion.
See QUALIFIED OPINION, UNQUALIFIED
OPINION, ADVERSE OPINION, and
DISCLAIMER OF OPINION.
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-12-
Tenn
RIDER
SECURITIES OR OTHER OBLIGATIONS
SHARE THE RISK
SPECIAL REPORT
STANDARD & ROOR'S
STANDBY TRUST FUND
SURETY
Definition
In insurance, a form adding special
provisions to a policy. For RCRA
bonds, an optional rider allows the
owner or operator to increase the penal
sum by up to 20 percent per year
without renegotiating the bond.
Written instruments showing evidence o-f
indebtedness of a business or
government or equity ownership of a
business. Bonds are securities which
bear interest.
An action in which a surety company or
insurance company enters into an
agreement with other companies to share
a potential obligation. Also called a
co-surety agreement, co-insurance, or
re-insurance.
The independent certified public
accountant's confirmation that the
financial data in the letter from the .
Chief Financial Officer were derived
from the annual report and need no
adjustment.
One of the two bond-rating agencies
acceptable for purposes of these
regulations. Address: Standard i
Poor's Corp., 25 Broadway, New York,
New York 10004 or P.O. Box 992, New
York, New York 1G275.
A trust fund which must be established
by an owner or operator who obtains a
RCRA letter of credit or surety bond.
The institution issuing the letter of
credit or surety bond will deposit into
the standby trust fund any drawings by
the Regional Administrator on the
credit or bond'.
A person who undertakes to pay money or
do any other act in the event that
another party fails therein.
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-13-
Term
SURETY BOND
TANGIBLE ?>JET WORTH
TOTAL LIABILITIES
TRUST
TRUST AGREEMENT
TRUST FUND
TRUSTEE
TRUSTOR
UNDERWRITE (A RISK)
Definition
A contract in which a party called the
"surety", guarantees that certan
obligations, such as the payment of
money, will be paid if another party
fails to perform his obligations.
Net worth minus intangible assets, such
as goodwill and rights to patents or
royalties.
Total debts owed by a business or
individual including all liabilities.
A right of property, real or personal,
held by one party for the benefit of
another. The grantor or trustor
creates the trust; the trustee holds
the property held in trust; and the
beneficiary is the party for whose
benefit the trust is created.
The document which establishes a trust.
A trust fund establishes a reserve of
capital to pay claims for the
completion of closure and/or post-
closure obligations.
The person appointed, or required by
law, to execute a trust, i.e., to hold
and protect trust assets and invest
them according to the "prudent-man
standard" and the terms of the trust
agreement for the benefit of the
beneficiary.
One who creates a trust by depositing
assets into it. Also called a grantor.
To insure life or property; to assume a
risk. In insurance, a person or
company undertakes all or part of the
risk against theft, fire, death, or
whatever the policy stipulates, in
exchange for a payment called a premium.
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-14-
Term
UNDERWRITING LIMITATION
UNQUALIFIED OPINION
Definition
The maximum amount allowed by law for
which a surety can issue a surety
bond. The limit may be exceeded if the
surety "shares the risk" of the
obligation, and then still may not
exceed the combined underwriting
limitation of those companies.
Statement by an accountant that the
financial statements of a firm present
fairly the financial position, results
of operations, and changes in financial
position in conformity with generally
accepted accounting principles
consistently applied.
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APPENDIX A
FEDERAL REGULATORY AUTHORITIES
Page
APPENDIX A-l: EPA FINANCIAL ASSURANCE REGIONAL OFFICE CONTACTS A-l
APPENDIX A-2: FEDERAL REGULATORY AUTHORITIES FOR FINANCIAL
INSTITUTIONS AND" MARKETS A-3
-------
APPENDIX A-l
For information on implementation of the financial assurance regulations,
contact the EPA regional offices below:
Region I (Connecticut, Maine, Massachusetts, New Hampshire,
Rhode Island, Vermont)
Gary Gosbee
Waste Management Branch
John F. Kennedy Building
Boston, Massachusetts 02203
(617) 223-1591
Region II (New Jersey, New York, Puerto Rico, U.S. Virgin Islands)
Helen S. Beggun, Chief
Grants Administration Branch
26 Federal Plaza
New York, New York 10007
(212) 264-9860
Region III (Delaware, District of Columbia, Maryland,
Pennsylvania, Virginia, West Virginia)
Anthony Donatoni
Hazardous Materials Branch
6th and Walnut Streets
Philadelphia, Pennsylvania 19106
(215) 597-7937
Region IV (Alabama, Florida, Georgia, Kentucky, Mississippi,
North Carolina, South Carolina, Tennessee)
Micky Hartnett
Residuals Management Branch
345 Courtland Street, N.E.
Atlanta, Georgia 30308
(404) 881-3016
Region V- (Illinois, Indiana, Michigan, Minnesota, Ohio,.
Wisconsin)
Thomas Golz
Waste Management Branch
230 South Dearborn Street
Chicago, Illinois 60604
(312) 886-4023
-------
A-2
Region VI (Arkansas, Louisiana, New Mexico, Oklahoma, Texas)
Henry Onsgard
Attention: RCRA Financial Requirements
1201 Elm Street
First International Building
Dallas, Texas 75270
(214) 767-2630
Region VII (Iowa, Kansas, Missouri, Nebraska)
Robert L. Morby, Chief
Hazardous Materials Branch
324 East llth Street
Kansas City, Missouri 64106
(816) 374-3307
Region VIII (Colorado, Montana, North Dakota, South Dakota, Utah,
Wyoming)
Carol Lee
Waste Management Branch
1860 Lincoln Street
Denver, Colorado 80203
(303) 837-6258
Region IX (American Samoa, Arizona, California, Commonwealth of
the Northern Marianas Islands, Guam, Hawaii, Nevada)
Richard Procunier
Hazardous Materials Branch
215 Fremont Street
San Francisco, California 94105
(415) 974-8157
Region X (Alaska, Idaho, Oregoa, Washington)
Kenneth D. Feigner, Chief
Waste Management Branch
1200 Sixth Avenue
Seattle, Washington 98101
(206) 442-1260 '
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A-3
APPENDIX A-2
FEDERAL REGULATORY AUTHORITIES
FOR FINANCIAL INSTITUTIONS
AND FINANCIAL MARKETS
I. Regulatory Authorities for Banks
1. Comptroller of the.Currency
Department of the Treasury
490 L'Enfant Plaza East, S.W.
Washington, D.C. 20219
(202) 447-1810
2. Board of Governors of the
Federal Reserve System
20th and Constitution Avenue, N.W.
Washington, D.C. 20551
(202) 452-3000
3. Federal Deposit Insurance Corporation
550 Seventeenth Street, N.W.
Washington, D.C. 20429
(202) 393-5400
II. Regulatory Authorities for Savings and Loan Institutions
1. Federal Home Loan Bank Board
1700 G Street, N.W.
Washington, D.C. 20552
(202) 377-6000
2. Federal Savings and Loan Insurance Corporation
1700 G Street, N.W.
Washington, D.C. 20552
(202) 377-6600
III. Regulatory Authority for Credit Unions
- 1. National Credit Union Administration
1776 G Street, N.W.-
Washington, D.C. 20456
(202) 357-1050
-------
A-4
IV. Regulatory Authority for Financial Markets
1. U.S. Securities and Exchange Commission
500 N. Capitol Street, N.W.
Washington, D.C. 20549
(202) 272-2650
2. Copies of corporate financial reports may be obtained by
written request (marked Attn: Public Reference) or may be
x^V\^^^*s*^y^ -i r\ v\ «* « e> A m «a + »
obtained in person at:
Public Reference Room
U.S. Securities St Exchange Commission
1100 L Street, N.W.
Washington, D.C.
(202) 523-5506
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APPENDIX B
STATE REGULATORY AUTHORITIES
(Compiled March 1982)
Page
APPENDIX B-l: STATE AUTHORITIES WHICH REGULATE HAZARDOUS WASTE
MANAGEMENT B-l"
APPENDIX 3-2: -STATE AUTHORITIES WHICH REGULATE FINANCIAL
INSTITUTIONS WHICH MAY ACT AS TRUSTEE OR ISSUE
LETTERS OF CREDIT B-9
APPENDIX B-3: STATE AUTHORITIES WHICH REGULATE THE ISSUANCE 'OF
SURETY BONDS AND INSURANCE B-20
APPENDIX B-4: STATE BOARDS OF ACCOUNTANCY B-26
-------
APPENDIX B-l
STATE AUTHORITIES WHICH REGULATE
HAZARDOUS WASTE MANAGEMENT
This Appendix lists the names, addresses, and telephone numbers of state
officials to contact for further information about state financial assurance
requirements.
Alabama
Alfred S. Chipley, Director
Division of Solid Waste & Vector Control
Environmental Health Administration
Department of Public Health
Union Bank Building, Room 1212
Montgomery, Alabama 36130
(205) 834-1303
Alaska
Thomas R. Hanna
Air & Solid Waste Management
Department of Environmental -Conservation
Pouch 0
Juneau, Alaska 99811
(907) 465-2666
American Samoa
Pati Faiai, Executive Secretary
Environmental Quality Commission
American Samoa Government
Pago Pago, American Samoa 96799
Overseas Operator (Commercial Call
633-4116)
Arizona
Tilbaldo Canez, Bureau Chief
Bureau of Waste Control
Department of Health Services
1740 West Adams Street
Phoenix, Arizona 85007
(602) 255-1160
Arkansas
Jim Bearden, R.S., Acting Chief
Solid Waste Management Division
Department of Pollution Control
and Ecology
P.O. Box 9583
8001 National Drive
Little Rock, Arkansas 72219
(501) 562-7444
California
Dr. Harvey Collins, Chief
Environmental Health Branch
..Department of Health Services
744 ? Street
Sacramento, California 95814
(916) 322-2308
Colorado
Dr. James Martin, Section Chief
Solid & Hazardous Waste Section
Department of. Health
4210 East llth Avenue
Denver, Colorado 80220
(303) 320-8333
Commonwealth of the Northern Marianas
Islands
Carl Goldstein
Division of Environmental Quality
Department of Public Health and
Environmental Services
Saipan, Mariana Islands 96950
Overseas Operator (Commercial Call
6984/6114)
-------
B-2
Connecticut
Stephen Hitchcock, Director
Hazardous Waste Management Unit
Department of Environmental Protection
State Office Building
165 Capitol Avenue
Hartford, Connecticut 06115
(203) 566-5148
Pat Bowe, Chief
Hazardous Materials Management Unit
Department of Environmental Protection
State Office Building
165 Capitol Avenue
Hartford, Connecticut 06115
(203) 566-5712
Delaware
Kenneth Weiss, Supervisor
Solid Waste Management Section
Department of Natural Resources and
Environmental Control
Edward Tatnall Building
P.O. Box 1401
Dover, Delaware 19901
(302) 736-4781
District of Columbia
James McDermott, Acting Administrator
Office of Environmental Standards
and Quality Assurance
Departmen't of Environmental Services
5000 Overlook Avenue, S.W. -
Washington, D.C. 20032
(202) 767-8181
Florida
Robert McVety
Environmental Administrator
Solid Waste Section
Department of Environmental Regulation
Twin Towers Office Building, Room 421
2600 Blair Stone Road
Tallahassee, Florida 32301
(904) 488-0300
Florida (cont'd)
Robert Hawfield
Hazardous Waste Division
Department of Environmental
Regulation
Twin Towers Office Building
2600 Blair Stone Road
Tallahassee, Florida 32301
(904) 488-0300
Georgia
Moses McCall, III, Chief
Land Protection Branch
Environmental Protection Division
Department of Natural Resources
Room 822
270 Washington Street, S.W.
Atlanta, Georgia 30334
(404) 656-2833
John Taylor, Program Manager
Industrial & Hazardous Waste
Management Program
Land Protection' Branch
Environmental Protection Division
270 Washington Street, S.W.
Atlanta, Georgia 30334
(404) 656-2833
Guam
James Branch, Deputy Administrator
EPA, Government of Guam
P.O. Box 2999
Agana, Guam 96910
Overasea Operator (Commercial Call
646-3863)
Hawaii
Melvin Koizumi, Deputy Director
Environmental Health Division
Department of Health
P.O. Box 3378
Honolulu, Hawaii 96801
(808) 548-4139
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B-3
Idaho
Robert Olson, Supervisor
Solid/Hazardous Materials Section
Department of Health and Welfare
State House
Boise, Idaho 83720
(208) 334-4107
Illinois
John Moore, Manager
Division of Land and Noise Pollution
Control
Environmental Protection Agency
2200 Churchill Road, Room A104
Springfield, Illinois 62706
(217) 782-6760
Indiana
David Lamm, Chief
Solid Waste Management Section
Division of Sanitary Engineering
State Board of Health
1330 West Michigan Street
Room A304
Indianapolis, Indiana 46206
(317) 633-0176
Iowa
Charles Miller, Director
Air and Land Quality Division
Department of Environmental Quality
Henry A. Wallace Building
900 East Grant Street, 3rd Floor
Des Moines, Iowa 50319
(515) 281-8853
Kansas
John Paul Goetz, P.E., Chief
Hazardous Waste Management Unit
Department of Health & Environment
Forbes Field
Topeka, Kansas 66620
(913) 862-9360
Kentucky
Roger Blair, Director
Division of Hazardous Materials
and Waste Management
Department of Natural Resources
and Environmental Protection
1121 Louisville Road
Pineville Plaza
Frankfort, Kentucky 40601
(502) 564-6716
Louisiana
James Hutchinson, Deputy Secretary
Department of Natural Resources
P.O. Box 44396
Baton Rouge, Louisiana 70804
(504) 342-4506
Gerald Healy, Jr., Administrator
Hazardous Waste Management
Division
Office of Environmental Affairs
P.O. Box 44066
Baton Rouge, Louisiana 70804
(504) 342-1227
Maine
John Brochu, Director
Bureau of Oil & Hazardous Waste
Materials
Department of Environmental
Protection
State House -- Station 17
Augusta, Maine 04333
(207) 289-3355
Maryland
Ronald.Nelson, Director
Waste Management Administration
Office of Environmental Programs
Department of Health & Mental
Hygiene
201 West Preston Street, Room 212
Baltimore, Maryland 21201
.(301) 383-2771
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B-4
Massachusetts
Glen Gilmore, Chief
Hazardous Waste Section
Division of Hazardous Waste
Department of Environmental Quality
Engineering
600 Washington Street
Boston, Massachusetts 02108
(617) 727-5431
Michigan
Delbert Rector, Acting Chief
Office of Hazardous Waste Management
Environmental Services Division
Department of Natural Resources
P.O. Box 30028
Lansing, Michigan 48909
(517) 373-3560
David Dennis, Chief
Oil & Hazardous Materials Control
Section
Water Quality Division
Department of Natural Resources
P.O. Box 30028
Lansing, Michigan 48909
(517) 373-2794
Minnesota
Dale Wikre, Director
Division of Solid & Hazardous Waste
Pollution Control Agency
1935 West Country Road, B-2
Roseville, Minnesota 55113
(612) 297-2735
Mississippi
Jack McMillan, Director
Division of Solid Waste Management
State Board of Health
P.O. Box 1700
Jackson, Mississippi 39205
(601) 982-6317
Bureau of Pollution Control
Department of Natural Resources
P.O. Box 10385
Jackson, Mississippi ' 39209
(601)..961-5171
Missouri
Robert Robinson, P.E., Director
Solid Waste Management Program
Department of Natural Resources
P.O. Box 1368
Jefferson City, Missouri 65102
(314) 751-3241
Montana
Duane Robertson, Chief
Solid Waste Management Bureau
Department of Health &
Environmental Sciences
Cogswell Building, Room A201
Helena, Montana 59601
(406) 449-2821
Nebraska
Maurice W. (Bill) Sheil, Deputy
Chief
Water & Waste Management Division
Department of Environmental
Control
Box 94877 Statehouse Station
Lincoln, Nebraska 68509
(402) 471-2186
Nevada
Lewis Dodgin, Administrator
Division of Environmental
Protection
Department of Conservation &
Natural Resources
Capital Complex
Carson City, Nevada 89710
(702) 885-4670
New Hampshire
Thomas Sweeney, Chief
Bureau of Solid Waste
Department of Health and Welfare
Hazen Drive
Concord, New Hampshire 03301
(603) 271-4610 .
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B-5
New Jersey .
Lee Pereira, Administrator
Solid Waste Administration
Division of Environmental Quality
P.O. Box CN027
Trenton, New Jersey 08625
(609) 292-9120
New Mexico
Dr. Raymond Krehoff, Program Manager
Solid & Hazardous Waste Management
Program
Community Support Services Section
Health & Environment Department
P.O. Box 968, Crown Building
Santa Fe, New Mexico 97503
(505) 457-5271, ext. 282
New York
Norman H. Nosenchuck, P.E., Director
Division of Solid Waste
Department of Environmental Conservation
50 Wolf Road
Room 415
Albany, New York 12233
(518) 457.-6603
William WijLkie, Assistant Director
Division of Solid Waste
Department of Environmental Conservation
50 Wolf Road
Albany, New York 12233
(518) 457-6603
North Carolina
0. W. Strickland, Head
Solid' & Hazardous Waste Management
Branch
Division of Health Services
Department of Human Resources
P.O. Box 2091
Raleigh, North Carolina 27602
(919) 733-2178
North Dakota
Jay Crawford, Director
Division of Environmental Waste
Management & Research
Department of Health
1200 Missouri Avenue, 3rd Floor
Bismarck, North Dakota 58505
(701) 224-2392
Ohio
Ernest Neal
Office of Hazardous Materials
Management
Ohio EPA
361 East Broad Street
Columbus, Ohio 43215
(614) 466-8934
Ken Schultz
Office of Emergency Response
Ohio EPA
361 East Broad Street
Columbus, Ohio 43215
(614) 466-8934
Oklahoma
H. A. Caves, Chief
Industrial & Solid Waste Services
Department of Health
P.O. Box 53551
1000 N.E. 10th Street, Room 803
Oklahoma City, Oklahoma 73152
(405) 271-5338
Oregon
Ernest Schmidt, Administrator
Solid Waste Management Division
Department of Environmental
Quality
P.O: Box 1760
522 S.W. 5th Avenue
Portland, Oregon 97207
(503) 229-5913
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B-6
Pennsylvania
Donald Lazarchik, P.E., Director
Bureau of Solid Waste Management
Department of Environmental Resources
Fulton Building, 8th Floor
P.O. Box 2063
Harrisburg, Pennsylvania 17120
(717) 787-9870
Gary Galida, Chief
Division of Hazardous Waste Management
Bureau of Solid Waste Management
Department of Environmental Resources
Fulton Building, 8th Floor
P.O. Box 2063
Harrisburg, Pennsylvania 17120
(717) 787-7381
Puerto Rico
Santos Rohena, Associate Director
Environmental Quality Board
Office of the Governor
P.O. Box 11488
San Juan, Puerto Rico 00910
(809) 725-2062
Rhode Island
John Quinn, Jr., Chief
Solid Waste Management Program
Department of Environmental Management
204 Cannon Building
75 Davis Street
Providence, Rhode-Island 02908
(401) 277-2808
Louis David, Jr., Executive Director
Rhode Island Solid Waste Corporation
39 Pike .Street
Providence, Rhode Island 02903
(401) 277-2808
South Carolina
Robert Malpass, P.E., Chief
Bureau of Solid & Hazardous Waste
Management
Department of Health &
Environmental Control
J. Marion Simms Building
2600 Bull Street
Columbia, South Carolina 29201
(803) 758-5544
South Dakota
Kevin Tveddt
Environmental Specialist II
Solid Waste Program
Division of Environmental Health
Department of Health
Joe Foss Building
Pierre, South Dakota 57501
(605) 773-3329
Tennessee
Tom Tiesler, Director
Division of Solid Waste Management
Bureau of Environmental Services
Department of Public Health
Capitol Hill Building, Suite 326
Nashville, Tennessee 37219
(615) 741-3424
Texas
Wiley Osborne, P.E.
Hazardous Waste and Resource
Recovery Programs Management
Division
Bureau of Solid Waste Management
Department of Health
1100 West 49th Street'
Austin, Texas 78756
(512) 458-7271 -
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B-7
Texas (cont'd.)
Jay Snow, P.E. , Chief
Industrial Solid Waste Unit
Department of Water Resources
P.O. Box 13087, Capitol Station
Austin, Texas 78711
(512) 475-2041
Utah
Dale Parker, Director
Bureau of Solid Waste Management
Division of Health
P.O. Box 2500
150 West North Temple
Salt Lake City, Utah 84101
(801) 533-4145
Vermont
Richard Valentinetti, Chief
Air and Solid Waste Programs
Agency of Environmental Conservation
State Office Building
Montpelier, Vermont 05602
(802) 828-3395
John Malter, Chief
Hazardous Materials Management Section
Agency of Environmental Conservation
State Office Building
Montpelier, Vermont 05602
(802) 828-3395
Virgin Islands
Francine Lang
Department of Cultural Affairs
Government of the Virgin Islands
Natural Resources Management Building
2nd Floor, Sub Base
St. Thomas, Virgin Islands 00801
(809) 774-6420
Virginia
William Gilley, Director
Bureau of Solid & Hazardous Waste
Management
Department of Health
Madison Building, Room 927
109 Governor Street
Richmond, Virginia 23219
(804) 786-5271
Washington
Earl Tower, Supervisor
Solid Waste Management Division
Office of Land Programs
Department of Ecology
Mail Stop PV-11
Olympia, Washington 98504
(206) 753-6833
Tom Cook, Section Head
Hazardous Waste Section
Department of Ecology
Olympia, Washington 98504
(206) 753-4276
West Virginia
Dale Parsons, Director
Solid Waste Division
Department of Health
1800 Washington Street, East
Room 520
Charleston, West Virginia 25305
(304) 348-2987
John Northeimer
Division of Water Resources
Department of Natural Resources
1.201 Greenbrier Street, 2nd Floor
Charleston, West 'Virginia 25311
(304) 348-5935
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B-8
Wisconsin
Robert Krill, Director
Solid Waste Management
Department of Natural Resources
P.O. Box 7921
Madison, Wisconsin 53707
(608) 266-1327
Wyoming
David Finley, Supervisor
Hazardous Waste Management
Department of Environmental
Quality
Solid/Hazardous Waste Management
401 West 19th Street
Cheyenne, Wyoming 82002
(307) 777-7752
Source: National Conference of State Legislators, Hazardous Waste M-anagement:
A Survey of State Laws, 1976-1980 (Update), April 1980.
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B-9
APPENDIX B-2
STATE AUTHORITIES WHICH REGULATE FINANCIAL INSTITUTIONS
WHICH MAY ACT AS TRUSTEE OR ISSUE LETTERS OF CREDIT
This Appendix lists the regulatory authorities which oversee
state-chartered financial institutions (banks, savings and loan associations,
and credit unions). Some or all of these institutions may be empowered to act
as trustee or issue letters of-credit in their state. In the list below, the
type of institution regulated by each state authority is indicated to the left
of that agency (B = banks, including mutual savings banks; S&L = savings and
loan associations; CU = credit unions).
ALABAMA
B, Kenneth R. McCartha
S&L Superintendent of Banks; Savings
and Loan Commissioner
State Banking Department
651 Administration Building
Montgomery, Alabama 36104
(205) 832-6255
CU C. W. Sauls, Jr.
Bureau of Credit Unions
State Banking Department
State Administration Building
Montgomery, Alabama 36104
(205) 269-6255
ALASKA
B, Willis F. Kirkpatrick, Director
S&L Division of Banking, Securities,
and Corporations
Department of Commerce
Pouch D
Juneau, Alaska 99811
(907) 465-2521
ARIZONA
B, Walter C. Madsen
S&L Superintendent of Banks
CU State Banking Department
101 Commerce Building
1601 West Jefferson Street
Phoenix, Arizona 85007
(602) 255-4421
ARKANSAS
B Beverly J. Lambert, Jr.
Bank Commissioner
Bank Department
1 Capitol Mall, 4B-210
Little Rock, Arkansas 72201
(501) 371-1117
S&L, Lee Thalheiraer
CU Securities Commissioner
Arkansas Securities
Department
Department of Commerce
1 Capitol Mall, 4B-206
Little Rock, Arkansas 72201
(501) 371-1011
CALIFORNIA
B Richard M. Dominguez
Superintendent of Banks
State Banking Department
Suite 750
235 Montgomery Street
San Francisco, California 94104
(415) 557-3535 [S.F.]
(213) 736-2479 [L.A.]
S&L Linda. Tsao Yang, Commissioner
Department of Savings and Loan
350 Sansome Street, 2nd Floor
San Francisco, California 94104
(415) 557-3666 [S.F.]
(213) 736-2791 [L.A.]
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B-10
CALIFORNIA (cont'd.)
CU Jack Carlson, Assistant Commissioner
Licensing and Examination Division
Department of Corporations
600 South Commonwealth Avenue
Los Angeles, California 90005
(213) 736-2741
COLORADO
B, Richard B. Doby
CU State Bank Commissioner
Division of Banking
325 State Office Building
Denver, Colorado 80203
(303) 866-3131
S&L David L. Paul
Savings and Loan Commissioner
Division of Savings and Loan
1525 Sherman Street, Room 110
Denver, Colorado 80203
(303) 866-2384
COMMONWEALTH OF THE NORTHERN
MARIANAS ISLANDS
B, Peter Van Nam Esser
S&L Acting Attorney General
Office of the Governor
Commonwealth of the Northern
Marianas Islands
Saipan, Marianas Islands 96950
Overseas Operator (Commercial
Call 7111)
CONNECTICUT
B, Brian Woo If
S&L Acting Bank Commissioner
Department of Banking
State Office Building
165 Capitol Avenue
Hartford, Connecticut 06115
(203) 566-7580
CU Joseph D. Tirinzoni, Director
Credit Union Division
Banking Department
State Office Building, #234
Hartford, Connecticut 06115
(203) 566-7282
DELAWARE
B, John E. Malarkey
S&L State Bank Commissioner
Kirk Building
15 The Green
Dover, Delaware 19901
(302) 736--,4235
FLORIDA
B, Gerald A. Lewis
CU State Comptroller
Office of the Comptroller
Capitol Building
Tallahassee, Florida 32301
(904) 488-0370
S&L Walton S. Kensey
Deputy Comptroller
Department of. Banking and
Finance
Capitol Buiding
Tallahassee, Florida 32301
(904) 488-0195
GEORGIA
B Edward D. Dunn, Commissioner
Department of Banking and
Finance
2990 Brandywine Road, #200
Atlanta, Georgia 30341
(404) 393-7330
S&L, Charles W. Burge
CU Division Director
Department of Banking and
Finance
2990 Brandywine Road, #200
Atlanta, Georgia 30341
(404) 393-7330
GUAM
B Jose R. Rivera
Banking Commissioner
P.O. Box 2796
Agana, Guam 96910
(671) 472-6440
-------
B-ll
GUAM (cont'd.)
S&L Joseph Bamba
Deputy Director
Department of Revenue and Taxation
P.O. Box 2396
Agana, Guam 96910
HAWAII
B, Lester G. L. Wee
S&L, Executive Bank Examiner
CU Bank Examination Division
Department of Regulatory Agencies
P.O. Box 2054
Honolulu, Hawaii 96805
(808) 548-5855
IDAHO
B, Tom D. McEldowney, Director
S&L, Department of Finance
CU 700 West State Street, 2nd Floor
Boise, Idaho 83720
(208) 334-3313
ILLINOIS
B William C. Harris, Commissioner
of Banking and Trust Companies
400 Reisch Building
4 West Old State Capitol Plaza
Springfield, Illinois 62701
(217) 782-7966 [Springfield]
(312) 793-2043 [Chicago]
S&L Warren Wilson, Acting Commissioner
Savings and Loan Commission
160 North LaSalle Street, Room 526
Chicago, Illinois 60601
- (312) 793-2030
CU Charles Filson
Credit Union Division
Department of Financial Institutions
160 North LaSalle Street
Chicago, Illinois 60601
(312) 793-2010
INDIANA
B, William T. Ray, Director
S&L Department of Financial
Institutions
1024 State Office Building
Indianapolis, Indiana 46204
(317) 232-3960
CU John E. Simmons, Supervisor
S&L Credit Union Division
Department of Financial
Institutions
1024 State Office Building
Indianapolis, Indiana 46204
(317) 232-3955
IOWA
B Thomas H. Huston
Superintendent of Banking
Banking Department
530 Liberty Building
418 Sixth Avenue
Des Moines, Iowa 50309
(515) 281-4014
S&L John Pringle, Director
Financial Institutions Division
Lucas State Office Building
Des Moines, Iowa 50319
(515) 281-5491
CU Betty Minor
Credit Union Department
300 Fourth Street, 1st Floor
Des Moines, Iowa 50319
(515) 281-8514
KANSAS
B Roy P. Britton
State Bank Commissioner
Banking Department
818 Kansas Avenue, Suite 600
Topeka, Kansas 66612
(913) 296-2266
S&L Marvin Steinert, Commissioner
Savings and Loan Department
503 Kansas Avenue, Room 220
Topeka, Kansas 66603
(913) 296-.S739
-------
B-12
KANSAS (cont'd.)
CU John B. Rucker, Administrator B,
Department of Credit Unions CU
535 Kansas Avenue, Room 1005
Topeka, Kansas 66603
(913) 296-3021
KENTUCKY
B, Morris R. Smith
S&L, Commissioner of Banking and
CU Securities S&L
Department of Banking and
Securities
Public Protection and Regulation
Cabinet
911 Leawood Drive
Frankfort, Kentucky 40601
(502) 564-3390
LOUISIANA
B, Hunter 0. Wagner B,
S&L Commissioner of Financial S&L
Institutions
Department of Commerce
P.O. Box 44095, Capitol Station
Baton Rouge, Louisiana 70804
(504) 925-4660
CU Gerald Thompson, Staff Examiner
Credit Union Division CU,
Office of Financial Institutions
Department of -Commerce ' i
P.O. Box 44095, Capitol Station
Baton Rouge, Louisiana 70804 i
(504) 925-4660
MAINE
B, H. Donald DeMatteis, Superintendent
S&L, Bureau of Banking
CU Department of Business Regulation
State House Station 36
Augusta, Maine 04333
(207) 289-3231
MARYLAND
Joseph R. -Grouse
Bank Commissioner
Financial Regulation Division
Department of Licensing and
Regulation
1 North Charles Street,
Room 2005
Baltimore, Maryland 21201
(301) 659-6262
Charles H. Brown, Jr., Director
Division of Building, Savings
and Loan Associations
Department of Licensing and
Regulation
1 South Calvert Street, Room 60
Baltimore, Maryland 21202
(301) 659-6330
MASSACHUSETTS
Gerald T. Mulligan, Commissioner
Banks Division
Executive Office of Consumer
Affairs
State Office Building
100 Cambridge Street
Boston, Massachusetts 02202
(617) 727-3120
Edward Welch
Deputy Commissioner of Credit
Unions
Banks Division
Executive Office of Consumer
Affairs
100 Cambridge Street
Boston, Massachusetts 02202
(617) 727-9520
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B-13
MICHIGAN
Dr. Martha R. Seger B,
Commissioner of Finance CU
Financial Institutions Bureau
Department of Commerce
P.O. Box 30224
Lansing, Michigan 48909
(517) 373-3460
S&L
S&L Richard D. Lake, Director
Savings and Loan Division
Financial Institutions Bureau
Department of Commerce
P.O. Box 30224
Lansing, Michigan 48909
(517) 373-6940
CU Michael Fitzgerald, Director
Credit Union Division
Financial Institutions Bureau
Department of Commerce
P.O. Box 30224
Lansing, Michigan 48909
(517) 373-6930
MINNESOTA
S&L
B Michael J. Pint
Commissioner of Banks
Banking Division
Department of Commerce
Metro Square Building, 5th Floor
St. Paul, Minnesota' 55101
(612) 296-2135 CU
S&L, James 6" Miller
CU Assistant Commissioner
Department of Commerce
Metro Square Building, 5th Floor
-St. Paul, Minnesota 55101
(612) 296-2297
MISSISSIPPI
Glenn Smith, Commissioner
Department of Banking and
Consumer Finance
P.O. Box 731
Jackson, Mississippi 39205
(601) 354-6106
0. B. Marshall, Commissioner
Savings Associations
State Street Building, Suite 201
633 North State Street
Jackson, Mississippi 39201
(601) 354-6135
MISSOURI
Kenneth W. Littlefield
Commissioner of Finance
Division of Finance
515 East High Street
Jefferson City, Missouri 65101
(314) 751-3397
George McGuire, Director
Division of Savings and Loan
Supervision
Department of Consumer Affairs,
Regulation, & Licensing
308 East High Street, Room 303
Jefferson City, Missouri 65101
(314) 751-4243
Doyle Brown, Director
Division of Credit Unions
P.O. Box 1607
Jefferson City, Missouri 65102
(314) 751-3419
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B-14
MONTANA
B Gary Buchanan, Director S&L,
Department of Commerce CU
805 North Main Street
Helena, Montana 59601
(406) 449-3494
S&L Kent Kleinkopf, Director
Department of Business Regulation
805 North Main Street
Helena, Montana 59601
(406) 449-3163
B
CU L. W. Alke
Financial Division
Department of Business Regulations
805 North Main Street
Helena, Montana 59601
(406) 449-3163
S&L,
CU
NEBRASKA
B, Paul J. Amen, Director
S&L Department of Banking and Finance
301 Centennial Mall, South
Lincoln, Nebraska 68509
(402) 471-2171
CU John Foley, Assistant Director
Department of Banking and Finance
301 Centennial Mall, South
Lincoln, Nebraska 68509
(402) 471-2171
NEVADA
James W. Johnson
Superintendent of Banks S&L
Banking Division
Department of Commerce
406 East Second Street
Carson City, Nevada 89710
(702) 885-4260
NEVADA (cont'd.)
Norman T. Okada
Commissioner of Savings
Associations, Credit Unions
Savings and Loan Division
Department of Commerce
406 East Second Street
Carson City, Nevada 89710
(702) 885-4259
NEW HAMPSHIRE
A. Roland Roberge
Bank Commissioner
Banking Department
97 North Main Street
Concord, New Hampshire 03301
(603) 271-3561
Arlan S. McKnight
Deputy Bank Commissioner
Banking Department
97 North Main Street
Concord, New Hampshire 03301
(603) 271-3561
NEV JERSEY
Michael Horn
Commissioner of Banking
Department of Banking
36 West State Street
Trenton, New Jersey 08625
(609) 292-3420 [Trenton]
(201) 648-6113 [Newark]
William B. Lewis
Deputy Commissioner
Division of Savings and Loan
Associations
Department of Banking
36 West State Street
Trenton, New Jersey 08625
(609) 292-5494
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B-15
NEW JERSEY (cont'd.-)
CU John J. Minton
Consumer Credit Bureau
Department of Banking
36 West State Street
Trenton, New Jersey 08625
(609) 292-5466
NEW MEXICO
B Andrew M. Swarthout, Director
Financial Institutions Division
Commerce and Industry Department
Lew Wallace Building
Santa Fe, New Mexico 87503
(505) 827-2217
S&.L Snider Campbell
Savings and Loan Supervisor
Department of Banking
Lew Wallace Building
Santa Fe, New Mexico 87503
(505) 827-2217
CU Snider Campbell
Credit Union Division
Department of Banking
Lew Wallace Building
Santa Fe, New Mexico 87503
(505) 827-2217
NEW YORK
B Muriel F. Siebert
Superintendent of Banks
Department of Banking
2 World Trade Center, 32nd Floor
New York, New York 10047
(212) 488-2310
S&L, Alan Cohen
CU Deputy Superintendent
Thrift Institution Division
Department of Banking
2 World Trade Center, 32nd Floor
New York, New York 10047
(212) 488-2380
NORTH CAROLINA
James S. Currie
Commissioner of Banks
Department of Commerce
P.O. Box 951
Raleigh, North Carolina
(919) 733-3016
27602
S&L George King
Acting Administrator
Office of Savings and Loans
Department of Commerce
P.O. Box 27945
Raleigh, North Carolina 27611
(919) 733-3525
CU Roy High, Administrator
Credit Union Division
Department of Commerce
P.O. Box 25249
Raleigh, North Carolina 27611
(919) 829-7501
NORTH DAKOTA
B, L. M. Stenehjem, Jr.
S&L, Commissioner
CU Department of Banking and
Financial Institutions
1301 State Capitol
Bismarck, North Dakota 58505
(701) 224-2256
OHIO
B Frederick E. Mills
Superintendent of Banks
Division of Banks
Department of Commerce
2 Nationwide Plaza'
Columbus, Ohio 43215
(614) 466r2932
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B-16
OHIO (cont'd.)
S&L Clark W. Wideman, Superintendent
Division of Building and Loan
Associations
Department of Commerce
2 Nationwide Plaza
Columbus, Ohio 43215
(614) 466-3723
CU Eugene F. Conkle, Superintendent
Division of Credit Unions
Department of Commerce
2 Nationwide Plaza
Columbus, Ohio 43215
(614) 466-2384
OKLAHOMA
B Robert Y. Empie
Bank Commissioner
State Banking Department
Malco Building, 2nd Floor
4100 Lincoln Boulevard
Oklahoma City, Oklahoma 73105
(405) 521-2783
S&L, Wayne Osborn
CU Deputy Commissioner
State Banking Department
Malco Building, 2nd Floor
4100 Lincoln Boulevard
Oklahoma City, Oklahoma 73105
(405) 521-2783
OREGON
B, John B. Olin
CU Superintendent of Banks
Banking Division
'Department of Commerce
Busick Building
Salem, Oregon 97310
(503) 378-4140
OREGON (cont'd.)
S&L Quintin Hess
Corporation Division, Savings
and Loan Section
Department of Commerce
State Office Building
1400 S.W. 5th Avenue, Room 206
Portland, Oregon 97201
(503) 229-5530
PENNSYLVANIA
B Ben McEnteer
Secretary of Banking
Department of Banking
P.O. Box 2155
Harrisburg, Pennsylvania 17120
(717) 787-6991
S&L Walter L. Brenneman, Director
Savings Association Bureau
Department of Banking
P.O. Box 2155
Harrisburg,.Pennsylvania 17120
(717) 787-7333
CU Robert Sarsfield, Director
Consumer Credit Bureau
Department of Banking
P.O. Box 2155
Harrisburg, Pennsylvania 17120
(717) 787-3717
PUERTO RICO
B Carmen Ana Culpeper
Acting Secretary of the
Treasury
Commonwealth'of Puerto Rico
P.O. Box 4515
San Juan, Puerto Rico 00905
(809) 725-4815
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B-17
RHODE ISLAND
B, Edward L.- Blue
S&L Bank Commissioner
Department of Business Regulation
100 North Main Street
Providence, Rhode Island 02903
(401) 277-2405
CU Peter Nevola
Deputy Banking Commissioner
Department of Business Regulation
100 North Main Street
Providence, Rhode Island 02903
(401) 277-2405
SOUTH CAROLINA
B, Robert C. Cleveland
CU Commissioner of Banking
State Board of Bank Control
1026 Sumter Street, Room 217
Columbia, South Carolina 29201
(803) 758-2186
S&L Samuel F. Free
Supervising Examiner, Building
and Loan Associations
1026 Sumter Street, Room 217
Columbia, South Carolina 29201
(803) 758-2186
SOUTH DAKOTA
B, Glen F. Ritterbusch, Director
S&L Banking and Finance Division
Department of Commerce
State Capitol
Pierre, South Dakota 57501
(605) 773-3421
TENNESSEE
B Thomas C. Mottern
Commissioner of Banking
Department of Banking
James K. Polk State Office Building
505 Deaderick Street
Nashville, Tennessee 37219
(615) 741-2236
TENNESSEE (cont'd.)
S&L John Neff, Director
Building and Loan Division
Department of Insurance
114 State Office Building
Nashville, Tennessee 37219
(615) 741-3186
CU . Oliver G. Barnett
Assistant Commissioner
Division of Credit Unions
Department of Banking
James K. Polk State Office
Building
505 Deaderick Street
Nashville, Tennessee 37219
(615) 741-2236
TEXAS
B Robert E. Stewart
Banking Commissioner
Banking Department
2601 North Lamar
Austin, Texas 78705
(512) 475-4451
S&L L. Alvis Vandygriff
Commissioner
Department of Savings and Loan
1010 Lavaca Street, Box 1089
Austin, Texas 78767
(512) 475-7991
CU John P. Parsons
Credit Union Department
914 East Anderson Lane
Austin, Texas 78753
(512) 837-9236
UTAH
B, Richard L. Burt
S&L, Acting Commissioner
CU Department of Financial
Institutions
10 West 3rd South, Suite 331
Salt Lake City, Utah 84110
(801) 533-5461
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B-18
VERMONT
B, George A. Chaffee, Commissioner S&L,
S&L, Department of Banking and Insurance
CU State Office Building
Montpelier, Vermont 05602
(802) 828-3301
VIRGIN ISLANDS
B Henry A. Millin
Commissioner of Banking
Office of the Lieutenant Governor
Government Hill B,
P.O. Box 450 S&L
St. Thomas, U.S. Virgin
Islands 00801
(809) 774-2991
VIRGINIA
B Sidney A. Bailey CU
Commissioner of Financial
Institutions
Bureau of Financial
Institutions
701 East Byrd Street, Suite 1600
Richmond, Virginia 23219
(804) 786-3657
S&L, Lewis S. Trueheart
CU Supervisor of Savings and Loans B
Suite 1600 :
701 East Byrd Street
Richmond, Virginia 23219
(804) 786-3658
WASHINGTON
3 Michael D. Edwards
Supervisor of Banking . S&L
Banking'and Small Loans Division
Deparmtent of General.
Administration
General Administration-Building
Olympia, Washington 98504
(206) 753-6520
WASHINGTON (cont'd.)
R. H. Lewis, Supervisor
Division of Savings and Loan
Associations
Department of General
Administration
General Administration Building
Olympia, Washington 98504
(206) 753-5597
WEST VIRGINIA
Phyllis Huff Arnold
Commissioner of Banking
Department of Banking
State Office Building 6
Room B-406
Charleston, W.est Virginia 25305
(304) 348-2294
E. W. Turley
Deputy Commissioner
Department of Banking
State Office Building 6
Room B-406
Charleston, West Virginia 25305
(304) 348-2294
WISCONSIN
Thomas E. Pederson
Commissioner
Office of the Commissioner of
Banking '
30 West Mifflin Street
Room 401
Madison, Wisconsin 53703
(608) 266-1621
R.- J. McMahon
Savings and Loan Commission
131 West Wilson Street
Suite 401
Madison, Wisconsin 53702
(608) 266-1821
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B-19
WEST VIRGINIA (cont'd.)
CU William Hughes, Commissioner
Credit Unions
310 North Midvale Boulevard
P.O. Box 7960
Madison, Wisconsin 53707
(608) 266-0438
WYOMING
B, Dwight D. Bonham
S&L, State Examiner
CU Office of the State Examiner
819 West Pershing Boulevard
Cheyenne, Wyoming 82202
(307) 777-7797
Source: Adapted from information from the Conference of State Bank Supervisors,
National Association of State Savings and Loan Supervisors, and the
National Credit Union Administration.
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B-20
APPENDIX B-3
STATE AUTHORITIES WHICH REGULATE THE ISSUANCE
OF SURETY BONDS AND INSURANCE
Surety companies, insurance companies, and their agents are regulated by
state insurance departments. This Appendix lists the name, address, and
telephone number of the insurance commissioner in each state.
ALABAMA
Tharpe Forrester
Commissioner of Insurance
Department of Insurance
453 Administration Building
64 North Union Street
Montgomery, Alabama 36130
(205) 832-6140
ALASKA
Kenneth C. Moore
Director of Insurance
Division of Insurance
Department of Commerce
Pouch D
Juneau, Alaska 99811
(907) 465-2515
AMERICAN SAMOA
Patricia'G. Trammel
Commissioner of Insurance
Office of the Governor
Pago Pago, American Samoa 96797
ARIZONA
ARKANSAS
William H. L. Woodyard, III
Insurance Commissioner
Insurance Commission
Department of Commerce
400-18 University Tower Building
Little Rock, Arkansas 72204
(501) 371-1325
CALIFORNIA
Rbbert C. Quinn
Insurance Commissioner
Department of Insurance
lOjO Jan Ness Avenue
Sjab francisco, California 94102
557-3245
or
Robert C. Quinn
Insurance Commissioner
Department of Insurance
600 South Commonwealth Avenue
14th Floor
Los Angeles, California 90005
(213) 736-2551
COLORADO
J. Michael Low
Director of Insurance
Department of Insurance
1601 West Jefferson
.Phoenix, Arizona 85007
(6.02) 255-4862
J. Richard Barnes
Commissioner of Insurance.
Division of Insurance
Department'of Regulatory Agencies
106 State Office Building
Denver, Colorado 80203
'(303) 866-3201
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B-21
COMMONWEALTH OF THE NORTHERN MARIANAS
ISLANDS
Peter Van Nam Esser
Acting Attorney General
Office of the Governor
Commonwealth of the Northern Marianas
Islands
Saipan, Marianas Islands 96950
Overseas Operator (Commercial Call
7111)
CONNECTICUT
Joseph C. Mike
Insurance Commissioner
Department of Insurance
Room 425, State Office Building
Hartford, Connecticut 06115
(203) 566-5275
DELAWARE
David Elliott
Insurance Commissioner
Office of the Insurance Commissioner
21 The Green
Dover, Delaware 19901
(302) 736-4251
DISTRICT OF COLUMBIA
James R. Montgomery, III
Acting Superintendent of Insurance
Department of Insurance
614 H Street, N.W., Suite 512
Washington, D.C. 20001
'(202) 727-1273
FLORIDA
Bill Gunter
Insurance Commissioner
Department of Insurance and Treasury
State Capitol, Plaza Level 2
Tallahassee, Florida 32301
(904) 488-3440
GEORGIA
Johnnie L. Caldwell
Insurance Commissioner
Office of the Comptroller General
238 State Capitol
Atlanta, Georgia 30334
(404) 656-2056
GUAM
Jose R. Rivera
Insurance Commissioner
P.O. Box 2796
Agana, Guam 96910
(671) 472-6440
HAWAII
Clifford J. Miyoi, Administrator
Insurance Division
Department of Regulatory Agencies
1010 Richards Street
Honolulu, Hawaii 98611
(808) 548-6522
IDAHO
Trent M. Woods
Director of Insurance
Department of Insurance
700 West State Street, 2nd Floor
Boise, Idaho 33720
(208) 334-2250
ILLINOIS
Philip R. O'Connor
Director of Insurance
Department of Insurance
320 West Washington Street
4th Floor
Springfield, Illinois 62767
(217) 782-4515
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B-22
INDIANA
Donald H. Miller
Commissioner of Insurance
Department of Insurance
509 State Office Building
Indianapolis, Indiana 46204
(317) 232-2386
IOWA
Bruce W. Foudree
Commissioner of Insurance
Insurance Department of Iowa
State Office Building
G23 Ground Floor
Des Moines, Iowa 50319
(515) 281-5705
KANSAS
Fletcher Bell
Commissioner of Insurance
Insurance Department
State Office Building, 1st Floor
Topeka, Kansas 66612
.(913) 296-3071
KENTUCKY
Daniel D. Briscoe
Insurance Commissioner
Department of Insurance
151 Elkhorn Court
Frankfort, Kentucky 40601
(502) 564-3630
LOUISIANA
Sherman A. Bernard
Commissioner of Insurance
Department of Insurance
950 North 5th Street
Baton Rouge, Louisiana 70801
(504) 342-5328
MAINE
Theodore T. Briggs
Superintendent of Insurance
Department of Business Regulation
State Office Building
Augusta, Maine 04333
(207) 289-3101
MARYLAND
Edward J. Birrane, Jr.
Insurance Commissioner
Insurance Division
Department of Licensing and
Regulation
1 South Calvert Street
Baltimore, Maryland 21202
(301) 659-4027
MASSACHUSETTS
Michael J. Sabbagh
Commissioner of Insurance
Insurance Division
Executive Office of Consumer
Affairs
100 Cambridge Street
Boston, Massachusetts 02202
(617) 727-3357
MICHIGAN
Nancy A. Baerwaldt
Commissioner of Insurance
Insurance Bureau
Department of Licensing and
Regulations
1048 Pierpont Street
P.O. Box 30220
Lansing, Michigan 48909
'(517) 374-9724
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B-23
MINNESOTA
Michael D. Markman
Commissioner of Insurance
Insurance Division
Department of Commerce
500 Metro Square Building
St. Paul, Minnesota 55101
(612) 296-6907
MISSISSIPPI
George Dale
Commissioner of Insurance
Insurance Department
1804 Walter Sillers Building
P.O. Box 79
Jackson, Mississippi 39205
(601) 354-7711
MISSOURI
C. Donald Ainsworth
Director of Insurance
Division of Insurance
Department-of Consumer Affairs,
Regulation, and Licensing
515 East High Street
P.O. Box 690
Jefferson City, Missouri 65102
(314) 751-2451
MONTANA
Elmer V. Omholt
Commissioner of Insurance
State Auditor's Office
Mitchell Building
P.O. Box 4009
Helena, Montana 59601
(406)- 449-2996
NEBRASKA
Walter D. Weaver
Director of Insurance
Department of Insurance
301 Centennial Mall South
.Lincoln, Nebraska 68509
(402) 471-2201
NEVADA
Patsy Redmond
Insurance Commissioner
Insurance Division
Department of Commerce
Nye Building
Carson City, Nevada 89710
(702) 885-4270
NEW HAMPSHIRE
Frank E. Whaland
Insurance Commissioner
Insurance Department
169 Manchester Street
Concord, New Hampshire 03301
(603) 271-2261
NEW JERSEY
James J. Sheeran
Commissioner of Insurance
Department of Insurance
201 East State Street
Trenton, New Jersey 08625
(60S) 292-5363
NEW MEXICO
Vincente Jasso
Superintendent of Insurance
Insurance Department
P.O. Drawer 1269
Santa Fe, New Mexico 87501
(505) 827-2451
NEW YORK
Albert B. Lewis
Superintendent of Insurance
Insurance Department
2 World Trade Center
New York, New York 10047
(212) 488-4124
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B-24
NORTH CAROLINA
John R. Ingram
Commissioner of Insurance
Department of Insurance
P.O. Box 26387
Raleigh, North Carolina 27611
(919) 733-7343
NORTH DAKOTA
J. 0. Wigen
Commissioner of Insurance
Insurance Department
Capitol Building, 5th Floor
Bismarck, North Dakota 58505
(701) 224-2440
OHIO
Robert L. Ratchford
Director of Insurance
Department of Insurance
2100 Stella Court
Columbus, Ohio 43215
(614) 466-2691
OKLAHOMA
Gerald Grimes
Insurance Commissioner
Insurance Department
408 Will Rogers Memorial Building
Oklahoma City, Oklahoma 73105
(405) 521-2828
OREGON
Josephine M. Driscoll
Insurance Commissioner
Insurance Division
Department of Commerce
158 Twelfth Street, N.E.
Salem, Oregon 97310
(503) 378-4271
PENNSYLVANIA
Michael L. Browne
Commissioner of Insurance
Insurance Department
1326 Strawberry Square
Harrisburg, Pennsylvania 17120
(717) 787-5173
PUERTO RICO
Rolando Cruz
Commissioner of Insurance
Old San Juan Station
P.O. Box 3508
San Juan, Puerto Rico 00904
(809) 724-6565
RHODE ISLAND
Thomas J. Caldarone, Jr.
Insurance Commissioner
Insurance Division
Department of'Business Regulations
100 North Main Street
Providence, Rhode Island 02903
(401) 277-2246
SOUTH CAROLINA
Rogers T. Smith
Chief Insurance Commissioner
Department of Insurance
2711 Middleburg Drive
Columbia, South Carolina 29240
(803) 758-3266
SOUTH DAKOTA
Henry J. Lussem, Jr.
Director of Insurance
Commerce Department
Insurance .Building
Pierre, South Dakota 57501
(605) 773-3563
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B-25
TENNESSEE
John C. Neff
Commissioner of Insurance
Department of Insurance
114 State Office Building
Nashville, Tennessee 37219
(615) 741-2241
TEXAS
E. J. Voorhis
Commissioner of Insurance
State Board of Insurance
1110 San Jacinto Boulevard
Austin, Texas 78786
(512) 475-2273
UTAH
Roger C. Day
Commissioner of Insurance
Insurance Department
Commissioner
326 South 5th East
Salt Lake City, Utah 841Q2
(801) 533-5611
VERMONT
George A. Chaffee
Commissioner of Insurance
Department of Banking and Insurance
State Office Building
Montpelier, Vermont 05602
(802) 828-3301
VIRGIN ISLANDS
Henry A. Millin
Commissioner of Insurance
Office of the Lieutenant Governor
P.O. Box 450
Charlotte Amalie
St. Thomas, Virgin Islands 00801
(809) 774-2991
VIRGINIA
James M. Thomson
Commissioner of Insurance
Bureau of Insurance
State Corporation Commission
700 Blanton Building
P.O. Box 1157
Richmond, Virginia 23209
(804) 786-3741
WASHINGTON
Dick Marquardt
Insurance Commissioner
Office of the Insurance
Insurance .Building AQ21
Olyrapia, Washington 98504
'(206) 753-7301
WEST VIRGINIA
Richard G. Shaw
Insurance Commissioner
Insurance Department
2100 Washington Street, East
Charleston, West Virginia 25305
(304) 348-3394
WISCONSIN
Susan Mitchell
Commissioner of Insurance
Office of the Insurance
Commissioner
123 West Washington Avenue
Madison, Wisconsin 53702
(608) 266-3585
WYOMING
John T. Langdon
Insurance Commissioner
Insurance Department
2424 Pioneer Avenue
Cheyenne, Wyoming 82002
(307) 777-7401
Source: Insurance Information Institute, Insurance Facts, 1981-82 Edition,
pp. 73-75.
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B-26
APPENDIX B-4
STATE BOARDS OF ACCOUNTANCY
Alabama State Board of Public Accountancy
424 Bell Building
Montgomery, Alabama 36104
Attn: Joseph G. Robertson
Executive Director
Telephone: (205) 265-8976
Alaska State Board of Public Accountancy
Department of Commerce
Division of Occupational Licensing
Pouch D
Juneau, Alaska 99811
Attn: Mrs. Pat Temple
Telephone: (907) 465-2548
Arkansas State Board of Accountancy
980 Plaza West
Little Rock, Arkansas 72205
Attn: William Yarbrough
Executive Director
Telephone: (501) 371-1520
Arizona State Board of Accountancy
1645 West Jefferson Street
Phoenix, Arizona 85007
Attn: Mrs. Alta F. Gushing
Administrative Assistant
Telephone: (602) 271-4134
California State Board of Accountancy
1021 0 Street, Room A-596
Sacramento, California 95814
Attn: Donald 0. Otten
Executive Secretary
Telephone: (916) 445-5347
Colorado State.-Board of'Accountancy
117 State Service Building
Denver, Colorado 80203
Attn: Mrs. Evelyn Brundage
Executive Secretary
Telephone: (303) 892-2369
Connecticut State Board of Accountancy
11 Asylum Street
Hartford, Connecticut 06103
Attn: Pasquale R. Siclari, Secretary
Telephone: (203) 247-6106
Delaware State Board of Accountancy
P.O.. Box 121
Newark, Delaware 19711
Attn: William Markell
Administrative Secretary
Telephone: (302) 738-2554
D.C. Board of Accountancy
Occupational and Professional Licensing
Division
614 H Street, N.W., Room 109
Washington, D.C. 20001
Attn: William T. Barnes, Secretary
Telephone: (202) 727-3673
Florida State Board of Accountancy
3131 N...W. 13th Street
Gainesville, Florida 32601
Telephone: (904) 372-2032
Georgia State Board of Accountancy
166 Pryor Street, S.W.
Atlanta, Georgia 30303
Attn: C. L. Clifton
Joint-Secretary
Telephone: (404) 556-3941
Guam Terr. Board of Public Accountancy
P.O. Box 2996
Agana, Guam 96910
Attn: George Lee Palmer
Secretary
Hawaii Board of Accountancy
Department of Regulatory Agencies
P.O. Box 3469
Honolulu, Hawaii 96801
Attn: Herbert Chun
Executive Secretarv
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B-27
Idaho State Board of Accountancy
P.O. Box 2896
Boise, Idaho 83701
Attn: Mrs. Jeanette B. Drury
Executive Secretary
Telephone: (208) 384-2490
Illinois
Committee on Accountancy
408 Metallurgy & Mining Building
University of Illinois
Urbana, Illinois 61801
Attn: E. J. Smith, Secretary
Telephone: (217) 333-1565
Committee on Public Accountancy Comm.
Ronald E. Stackler
Director
Department of Reg. & Educ., Room 112
Capitol Building
Springfield, Illinois 62706
Indiana State Board of Public Accountancy
912 State Office Building
Indianapolis, Indiana 46204
Attn: Charles W. Stout, Secretary
Telephone: (317) 633-6619
Iowa Board of Accountancy
627 Insurance .Exchange Building
Des Moines, Iowa 50309
Attn: Mrs. Thelma Crittenden
Executive Secretary
Telephone: (515) 288-8319
Kansas Board of Accountancy
325-K First National Bank Tower
Topeka, Kansas 66603
Attn: Mrs. Glenda Sherman, Secretary
Telephone: (913) 357-4113
Kentucky State Board of Accountancy
310 West Liberty .
Louisville, Kentucky 40202
Attn: Bernard W. Gratzer
Executive Secretary
Telephone: (502) 589-9239
State Board of CPAs of Louisiana
1109 Masonic Temple Building
333 St. Charles Avenue
New Orleans, Louisiana 70130
Attn: Mrs. Lydia F. Parek
Executive Secretary
Telephone: (504) 522-4940
Maine Board of Accountancy
84 Harlow Street
Bangor, Maine 04401
Attn: Lawrence E. Parker, Jr.
Secretary
Telephone: (207) 942-6702
Maryland Board of Public Accountancy
One South Calvert Building, 8th Floor
Baltimore, Maryland 21202
Attn: Mrs. Margaret M. Wilmer
Executive Secretary
Telephone: (301) 383-2134
Massachusetts Board of Public
Accountancy
100 Cambridge Street, Room 1524
Boston, Massachusetts 02202
Attn: Rocco J. Antonelli
Executive Secretary
Telephone: (617) 727-3078
Michigan Board of Accountancy
Department of Licensing & Regulation
1116 South Washington Avenue
Lansing, Michigan 48926
Attn: Wayne D. Cunningham
Administrative Secretary
Telephone: (517) 373-0682
Minnesota State Board of Accountancy
1102 Wesley Temple Building
Minneapolis, Minnesota 55403
Attn: Leonard A. Rapaport
Secretary-Treasurer
Telephone: (612) 339-2781
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B-28
Mississippi State Board of Public
Accountancy
4915 1-55 North
Bailey & Bailey Plaza, Suite 208B
Jackson, Mississippi 39206
Attn: John W. Morgan, Secretary
Telephone: (601) 981-3933
Missouri State Board of Accountancy
P.O. Box 613
Jefferson City, Missouri 65101
Attn: Mrs. Ruth Woodson
Executive Secretary
Telephone: (314) 751-2767
Montana State Board of Public Accountancy
Lalonde Building, Room 7
Helena, Montana 59601
Attn: Joan DeBorde
Administrative Assistant
Telephone: (406) 449-3737
Nebraska State Board of Public Accountancy
100 North 56th Street, Suite 314
Lincoln, Nebraska 68504
Attn: Ray A. C. Johnson, Secretary
Telephone: (402) 466-8481
Nevada State Board of Accountancy
290 South Arlington Avenue
Reno, Nevada 89501
Attn: Mrs. Marguerite M. Callahan
Executive Secretary
Telephone: (702) 786-0231
New Hampshire Board of Accountancy
One Elm Street
Milford, New Hampshire 03055
Attn: Mervin D. Newton
Secretary-Treasurer
Telephone: (603) 673-6500
New Jersey Board of CPAs
1100 Raymond Boulevard, Room 420
Newark, New Jersey 07102
Attn: Mrs. Mary R. Lannon
Secretary
Telephone: (201) 648-3240
New Mexico State Board of Public
Accountancy
6101 Marble, N.E., Suite 7 & 8
Albuquerque, New Mexico 87110
Attn: L.A.B. Parker, Executive
Secretary
Telephone: (505) 265-7709
New York State Board for Public
Accountancy
State Education Department
Room 1839, Twin Tower Building
99 Washington Avenue
Albany, New York 12210
Attn: Robert G. Allyn
Executive Secretary
Telephone: (518) 474-3836
North Carolina State Board of CPA
Examiners
P.O. Box 2248
209 Lennox Building
Chapel Hill, North Carolina 27514
Attn: Mrs. Katherine D. Guthrie
Executive Director
Telephone: (919) 968-4449
North Dakota State Board of Accountancy
Box 8104 University Station
Grand Forks, North Dakota 58201
Attn: R. D. Koppenhaven
Secretary-Treasurer
Telephone: (701) 777-2923
Accountancy Board of Ohio
180 East Broad Street, Suite 414
Columbus, Ohio 43215
Attn: Dan Joseph, Jr. Director
Telephone: (614) 466-4135
Oklahoma Stare Board of Public
Accountancy
265 West Court '.
Oklahoma Cipy, Oklahoma 73105
Attn: Mrs. Retha Duggan
Executive Assistant
Telephone: (405) 521-2397
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B-29
Oregon Board of Accountancy
Labor & Industries Building, 14th Floor
Salem, Oregon 97310
Attn: Mrs. Helen Garrett, Administrator
Telephone: (503) 378-4181
Pennsylvania State Board of Examiners
of Public Accountants
279 Boas Street, Room 406
Harrisburg, Pennsylvania 17120
Attn: Irving Yaverbaum, Secretary
Telephone: (717) 787-3024
Puerto Rico Board of Accountancy
Box 3271
San Juan, Puerto Rico 00904
Attn: Justino Valles
Administrative Officer
Telephone: (809) 725-0142
Rhode Island Board of Accountancy
1429 Warwick Avenue
Warwick, Rhode Island 02888
Attn: Howard J. Swanson, Secretary
Telephone: (401) 463-8900
South Carolina Board of Accountancy
P.O. Box 11376
Columbia, South Carolina 29211
Attn: John S. Herin, Administrator
Telephone: (803) 777-3178
South Dakota Board of Accountancy
.141 North Main Avenue, Suite 308
Sioux'Falls, South Dakota 57102
Attn: John E. Page, Executive-Director
Telephone: (605) 336-1858
Tennessee State Board of Accountancy
1717 West End Building, Suite 300-A -
Nashville, Tennessee 37203
Attn: Clyde R. Watson, Secretary
Telephone: (615) 741-2550
Texas State Board of Public Accountancy
940 American Bank Tower
221 West Sixth Street
Austin, Texas 78701
Attn: Mrs. Pauline Thomas
Administrative Director
Telephone: (512) 451-0241
Utah Committee for Public Accountancy
330 East Fourth South Street
Salt Lake City, Utah 84111
Attn: Floy W. McGinn, Director
Telephone: (801) 328-5711
Vermont State Board of Accountancy
Two Linden Street
Brattleboro, Vermont 05301
Attn: James C. Plumpton, Secretary
Telephone: (802) 257-0551
Virginia State Board of Accountancy
Department of Professional and
Occupational Registration
P.O. Box 1-X
Richmond, Virginia 23202
Attn: Mrs. Ruth J. Herrink
Secretary-Treasurer
Telephone: (804) 786-2161
Virgin Islands State Board of
Accountancy
Box 511, Charlotte Amalie
St. Thomas, Virgin Islands 00801
Attn: Ezra A. Gomez, Secretary
Washington State Board of Accountancy
210 East Union, Suite H
Olympia, Washington 98504
Attn: Mrs. Helen Z. Peterson
Administrative Assistant
Telephone: (206) 753-2585
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B-30
West Virginia Board of Accountancy Wisconsin Accounting Examining Board
1800 Washington Street, East, Room 463 201 East Washington Avenue
Charleston, West'Virginia 25305 Madison, Wisconsin 53702
Attn: Willard H. Erwin, Jr., Secretary Attn: James E. Bower, Secretary
Telephone: (304) 348-3557 Telephone: (608) 266-3020
Wyoming State Board of Accountancy
Capitol Complex
200 W. 25th Street
Cheyenne, Wyoming 82002
Attn: .Mrs. R. Marion Davis,
. ' Executive Secretary
Telephone: (307) 777-7551
Source: American Institute of Certified Public Accountants.
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