&EPA
United States
Environmental Protection
Agency
Solid Waste And
Emergency Response
5403W
EPA510-F-94-003
August 1994
UST Program Facts
Financial Responsibility
What are financial responsibility
requirements?
When Congress amended Subtitle I of the Resource
Conservation and Recovery Act in 1986, it directed
the U.S. Environmental Protection Agency (EPA)
to develop financial responsibility regulations for
owners and operators of underground storage
tanks.
Congress wanted owners and operators of
underground storage tanks (USTs) to show that
they have the financial resources to clean up a site
if a release occurs, correct environmental damage,
and compensate third parties for injury to their
property or themselves. The amount of coverage
required depends on the type and size of the
business, as explained in the chart at the end of this
fact sheet.
How can owners and operators
demonstrate financial responsibility?
Owners and operators have several options: obtain
commercial environmental impairment liability
.insurance; demonstrate self-insurance; obtain
guarantees, surety bonds, or letters of credit; place
the required amount into a trust fund administered
by a third party; or rely on coverage provided by a
state financial assurance fund. Local governments
have four additional compliance mechanisms
tailored to their special characteristics: a bond
rating test, a financial test, a guarantee, and a
dedicated fund.
When is financial responsibility required?
The chart at the end of this fact sheet presents five
groups of UST owners and operators, compliance
deadlines for each group, and required coverage
amounts.
What is the cost of demonstrating financial
responsibility?
EPA acknowledges that the cost of complying with
the technical and financial responsibility
requirements will be a burden to some owners and
operators, especially those with older tanks.
Because underwriting criteria for most private
insurance and eligibility requirements for some
state assurance funds require that tanks be in
compliance with federal or state technical
standards, many owners and operators are faced
with the costs of meeting technical requirements at
the same time they meet financial responsibility
costs.
The cost of meeting technical requirements
generally accounts for the majority of regulatory
compliance costs incurred by UST owners and
operators. Some states have established financial
assistance programs that can provide funds or low-
interest loans to help owners meet technical
requirements.
In terms of the costs for meeting financial
responsibility requirements, insurance premiums
for a facility with three to five upgraded tanks
usually run about $1,500 per year. Owners and
operators who participate hi a state financial
assurance fund generally pay annual tank fees of
from $100 to $250 per tank.
In developing the regulations, EPA has been
sensitive to the financial impact of the regulations
on small business. EPA phased in compliance
deadlines, allowing the smallest businesses the
longest time to comply. It has since responded to
business owners' concerns by delaying compliance
dates for the smallest owners and operators. EPA
also has worked with states to develop state financial
assurance funds and grant and loan programs.
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How can state financial assurance funds
help?
States are developing financial assurance funds to
reduce1 the economic hardship of compliance with
financial responsibility requirements and to help
cover the costs of cleanups. State financial
assurance fund programs, which supplement or are
a substitute for private insurance, have been
especially useful for small-to-medium sized
petroleum marketers. Other characteristics of the
funds appear below:
• Financial assurance funds are created by state
legislation and must be submitted to EPA for
approval before they can be used as
compliance mechanisms.
• In most cases, slates generate money for the
funds with tank registration and petroleum
fees.
• Legislatures delegate authority for the fund to
a state agency addressing health,
environmental, or insurance issues.
• State assurance funds typically incorporate
eligibility requirements, such as
demonstrations that facilities are in
compliance with technical requirements and
evidence of satisfactory inventory control and
recordkeeping.
• Most state funds contain some deductible that
the owner or operator is responsible
for paying. Details on the funds are specific
to each state.
Nationwide, these state funds raise about $1 billion
annually.
How many states have financial assurance
funds?
As of July 1994, 33 states had state financial
assurance fund plans approved by EPA. Ten had
submitted fund plans for approval and three had
plans that they had not submitted for approval.
One additional state (Washington) has a reinsurance
program that enables insurance companies to offer
lower-cost premiums to the state's UST owners.
"Financial Responsibility" is one in a series of fact
sheets about underground storage tanks (USTs) and
leaking USTs. The series is designed to help EPA, other
federal officials, and state authorities answer the most
frequently asked questions about USTs with consistent,
accurate information in plain language. Keep the fact
sheets handy as a resource. This fact sheet addresses
federal regulations. You may need to refer to applicable
state or local regulations, as well. For more
information on UST publications, call the
RCRA/Superfund Hotline at 800 424-9346.
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Financial Responsibility Requirements
Of
And Operators
GROUP 1:
Petroleum marketers with
1,000 or more tanks
OR
Nonmarketers with net worth of
$20 million or more
(for nonmarketers, the "per
occurrence" amount is the
same as Group 4-B below)
GROUP 2:
Petroleum marketers with
100-999 tanks
Aggregate
Coverage
January
1989
$1 million
if you have
100 or
fewer tanks
October
1989
$2 million
if you have more
than 100 tanks
December
1993
$500,000
if throughput is
10,000 gallons
monthly or less
December
1993
February
1994
$1 million
if throughput is more
than 10,000 gallons
monthly
GROUP 5:
Indian tribes owning USTs on Indian
lands (USTs must be in compliance
with UST technical requirements )
December
1998
GROUP 3:
Petroleum marketers with
13-99 tanks
GROUP 4-A:
Petroleum marketers with
1-12 tanks
GROUP 4-B:
Nonmarketers with net worth of
less than $20 million
GROUP 4-C:
Local governments (including
Indian tribes not part of Group 5)
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