v>EPA
             United States
             Environmental Protection
             Agency
          Office of
          Solid Waste and
          Emergency Response
DIRECTIVE NUMBER: 9541.QO-3A

TITLE; Equivalency of State Financial Responsibility Mechanisms


APPROVAL DATE: 09/01/82

EFFECTIVE DATE: 09/0i/82

ORIGINATING OFFICE:

0 FINAL

D DRAFT

 STATUS:



REFERENCE (other documents):
 OSWER     OSWER      OSWER
/£   DIRECTIVE   DIRECTIVE   Di

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                          United States Environmental Protection Agency
       ^^^ ^^^_ ^^^^ ^_             \^ I III W^f ^*«t^ W r^^4 ITMWIIIIII..IIVQI • IWlWWtlvi* r-iu^||^y
       V.CPA            .      Washington. DC 20460
      \/crM   QSWER Directive Initiation Request
                                 1. Directive Number
                                2. Originator Information
      Name of Contact Person
    j Mail Code
Office
                                               OSW/SPB
Telephone Code
   382-2210
      3. Title
        Equivalency  of  State  Financial  Responsibility Mechanisms
      4. Summary of Directive (include brief statement of purpose)
        This document describes  the  financial responsibility that a State
        must have to receive  final authorization.   The document is appended
        to  the  Final Authorization Guidance Manual.  The primary audience
        is  EPA  HQ and Regional offices  and  State Agencies.   Public requests
        have been received.
        State Authorization
      6a. Does This Directive Supersede Previous Directive(s) 1
                                                      What directive (number, title)
      b. Does It Supplement Previous Direcltve(s)?
                                         No
                    Yes   What directive (number, title)
      7. Draft Level
          A - Signed by AA/DAA
B - Signed by Office Director
      C - For Review & Comment
         0 - In Development
8. Document to be distributed to States by Headquarters?
^•l^^^H
Yes
/*

No
This Request Meets OSWER Directives System Format Standards.
9. Signature of Lead Office Directives Coordinator
1 0. Name and Title of Approving Official '
OSW/SPB v
Date
Date
09/01/82
     EPA Form 1315-17 (Rev. 5-87) Previous editions are obsolete.
   OSWER          OSWER              OSWER              O
VE     DIRECTIVE         DIRECTIVE        DIRECTIVE

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EQUIVALENCY OF STATE FINANCIAL
   RESPONSIBLITY MECHANISMS
        DRAFT DOCUMENT
    FOR AGENCY REVIEW ONLY
         Prepared by:
       ICF Incorporated
        September 1982
            8-3

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                                                        OSWER POLICY DlKECTiVE KC


                                                       9541  . 00-3A


                             Table of Contents .



                                                                        Page

 Introduction	    1

 Equivalence for Purposes of State Program Authorization 	    2

 Equivalence of State-Required Mechanisms CJsed to  Comply with the
 Federal Regulations	    3

 Fundamental Criteria for Equivalence Determinations	    4
    Certainty and Availability of the Funds 	    '+
    Amount of Funds 	    5
    Time Limits	    5
    Allowable Mechanisms	    7
    Cost Estimates .	   3

Further Information 	    3

Equivalency Criteria for Trust Funds 	    9

Equivalency Criteria for Surety Bonds.	   .11

Equivalency Criteria for Letters of Credit	   13

Equivalency Criteria for Standby Trust Funds 	   15

Equivalency Criteria for Closure or Post-Closure Insurance 	   1"

Equivalency Criteria for Financial Test,and Corporate Guarantee
for Closure or Post-Closure Care . . .'	   19

Equivalency Criteria for Cash Deposits and Certificates
of Deposit for Closure or Post-Closure Care 	   22

Equivalency Criteria for Escrows for Closure or
Post-Closure Care 	   23

Equivalency Criteria for Liability Insurance 	   25

Equivalency Criteria for Financial Test for Liability
Coverage	   27

Equivalency Criteria for State Assumptions of Responsibility
of Closure or Post-Closure Care or Liability Coverage  	   29

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                                                     OSWER POLICY DIRECTIVE MO.

                                                    9541.00-3A  4
        EQUIVALENCY OF STATE FINANCIAL RESPONSIBILITY REQUIREMENTS
                                           —i

 Introduction

    In issuing financial responsibility standards under RCRA,  the  Agency
 determined that such requirements are (1)^ necessary to assure  that funds  will
 b« available for proper closure of all hazardous waste management  facilities,
 and for 30 years of post-closure care of land disposal facilities,  and  (2)
 desirable, in the case of liability coverage, to assure that  funds will be
 available during the operating life of a facility from which  third parries  can
 be compensated for bodily injury and property damage arising  from  operation of
 the facility.  These determinations are based on extensive analysis and review
 of public comments and consequently define the scope, purpose, and function of
 any state financial responsibility regulations under RCRA.

    States seeking authorization to administer their hazardous wasta programs
 in lieu of the federal RCRA program either have or will .have  financial
 requirements.  States that are not seeking such authorization, however, may
 also enact financial responsibility requirements applicable to owners and
 operators of hazardous waste management facilities.  In either instance,  in
 reviewing state financial responsibility requirements, the key criterion  is
 equivalence to the federal requirements.                       •

    The review of equivalency of financial responsibility requirements  is
 necessarily somewhat more judgmental than is the case for other hazardous
 waste management standards.  While she federal regulations (40 CFR Parrs  264
 and 265, Subpart H) serve as a benchmark, the use of more flexible criteria is
 essential for two reasons:

         (1)  States often have more restrictive or curtailed
              enabling statutes with respect to financial
              responsibility that make it difficult to track the
              federal requirements; and

         (2)  Equivalency of outcome or performance of financial
              assurance is more important than equivalency of
              methods.

    Th« concept of equivalency originates in Section 3006 of RCRA.  That
 section provides for the authorization of state hazardous waste programs that
 are equivalent to the federal program.  It also provides  for the interim
 authorization of existing state programs that are  "substantially equivalent"
 to the federal program.  The concept of equivalence also  appears in the
Agency's financial responsibility regulations at 40 CTR 264/265.149 and
 264/265.150.  Those regulations permit owners or operators to use
 state-required mechanisms for 'financial responsibility or state assumptions of
 responsibility to meet federal requirements, in whole or  part, if  the
 state-required mechanisms are equivalent to the federal provisions.  Thus
 equivalence evaluations may be performed in two contexts:  (1) as  parr of  the
 review of state financial regulations for interim  or  final program
 authorization or (2) as part of the review of an owner's  or operator's

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                                   .7.
compliance wi&h federal requirements in states without authorization chat  have
financial requirements.l

    Therefore, this guidance has a dual purpose.   It addresses:

         (1)  determining equivalence of a state's regulatory scheme
              for financial responsibility in the RCRA program
              authorization context, and

         (2)  determining equivalence of individual mechanisms in
              the 264.149/150 and 265.149/150 context for the owner
              or operator who must comply with both federal-and
              state requirements.

    These two topics are addressed next in more detail.

Equivalence for Purposes  of  State Program Authorization

  •  Pursuant to RCRA §3006(b), for a state program to receive final
authorization, it must (1) be "equivalent" to the Federal program, (2) be
consistent with the Federal program and che programs of other authorized
states, and (3) provide adequate enforcement.  EPA has interpreted the terra
"equivalent" to mean "equal in effect."  (See 45 Fed. Reg. 6753; January 29,
1980).  Moreover, pursuant to RCRA §3009, states may impose "any requirements
... which are .-nore stringent Chan those imposed" by the Federal regulations,
but may not impose any requirements Less stringent than the Federal
requirements.  In the context of financial responsibility, EPA will make
judgments of the legal efficacy of the various financial mechanisms in a
state's program which owners and operators may use to demonstrate compliance;
the Agency intends that, for'a state program to receive final authorization,
the program include requirements no less than "equal in effect" to the Federal
requirements for financial assurance of closure and post-closure care, and the
accompanying requirements for closure and post-closure cost estimates,
promulgated at 47 Fed. Reg. 15047-74 (April 7, 1982), and liability-coverage
for third party claims, promulgated at 47 Fed. Reg. 16554-61  (April 16, 1932).

    Pursuant to RCRA §3006(c), for a state program to receive interim
authorization, it must be found to be "substantially equivalent" to the
Federal program.  The Agency has interpreted substantial equivalence  to mean
"to a large degree or in the main, equal in effect."   (See 45 Fed. Reg. 6754;
January 29, 1980).  Moreover, RCRA §3009 was clearly not intended to mandate
application of a "no lass stringent" standard to a state seeking only  interim
authorization.  (See 45 Fed. Reg. 33391; May 19, 1980).  Thus it is possible
that EPA could grant interim authorization to a state program where the
    lFor facilities in states without RCRA authorization  but with  financial
responsibility requirements applicable to hazardous waste management
facilities, owners or operators must comply with both  federal  and  state
regulations.

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                                   -3-
 financial mecttanisms allowed under che .program were less than "equal in
 effect"  co che April 1982 Federal regulacions cited above.

     For  boch  interim and final auchorizacion, a scace financial responsibility
 regulatory program should contain che following components:

         (1)  regulations concerning cost estimates  for  closure
              and post-closure care, and

         (2)  regulations describing allowable mechanisms  and che
              conditions of cheir use (e.g., combinations of
              mechanisms, eligibility of insurers, incapacicy of
              institutions).

     Below, equivalence criteria for cost estimate regulations are sec forth.
 Later  in this document, specific -equivalence criteria for individual scace
 financial mechanisms are provided.  These criceria are all based on che
 benchmarks provided by Subparc H of 40 CFR Parts 264 and 265.

     Where cha cypes of allowable mechanisms or cheir specific provisions
 (e.g., financial case criceria) are not defined by state statute, che state.
 regulations must define che specifics of each allowable mechanism in order
 that EPA can make a decertainacion of equivalence.  Also, where a scace program
 allows cypes of financial responsibilicy mechanisms chat are not allowed by
 che  federal program, che equivalence criceria included  in this docu.-r.enc should
 be consulced.  The Agency expects chac several scaces will seek to allcw
 mechanisms such as escrows, cash deposits, and certificates of deposit which
 are  not allowed in che federal program.  (For an explanation of why chese
 mechanisms haven'c been provided in che federal program, see che Preamble ac
 46 Fed.-Reg.  2327 (January 12, 1981).)

 Equivalence of State-Required Mechanisms Used to Comply
 with the Federal Regulations

    When an owner or operator wishes to use a scace-required mechanism or a
 state assumption of responsibility to comply with federal requirements, che
 determination of equivalence is the responsibility of the EPA Regional
 Administrator.  This situation will only occur in states that do not have
 authorization but do have state-required financial mechanisms or state
 assumptions of responsibility.  In these situations, equivalence should be
 determined using che criceria discussed below both  for  cost estimates and for
 the specific assurance mechanism being used for compliance.  These criteria
 are based on the benchmarks provided by Subpart H of 40 CFR Parts 264 and 265.

    In addition to evaluating the equivalency of the mechanism, the Regional
Administrator may only approve use of a state-required  mechanism  if the
 instrument has been executed.  To do otherwise would result  in a gap in
coverage which must be avoided.  This is in contrast to the program
 authorization context where financial responsibility requirements may be
determined to be equivalent or substantially equivalent prior  co  che effective
date of che requiremencs, alchough a Scate program  may  not be  granted
 authorization until che Scace's regulations are effective.

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                                   -4-
Fundamental Cptaria  for Equivalenca Determinations

    Inherent in the federal financial assurance regulations are two criteria
which are fundamental for.evaluating equivalence:

         (1)  Certainty of the availability of funds through a
              financial mechanism muse be at least equivalent, and

         (2)  The amount of funds assured by a financial
              mechanism must be at -least equivalent. .

    These criteria reflect the Agency's policy that the funds mist be
available in the appropriate amounts when needed.   The criteria are equally
applicable when evaluating equivalence in the program authorization context
and in th'e federal/state compliance context.  The first criterion is -tore
difficult to evaluate than the second.  Of key importance for cartainty
will be the protection of the funds against claias of creditors, the initial
qualifications of financial institutions providing the mechanises, ar.d
provisions required for future contingencies, including bankruptcy,
cancellation, or changing mechanisms.  With respect to amount of financial
assurance, both the total amount of funds assured as well as the amount
assured at different points, in time are crucial.  These criteria are outlined
next -3 thresholds that must be satisfied in addition  to criteria
appropriate for specific types of mechanisms which are provided  Later.

    Cartainty of Availability of  the  Funds.  To be deemed equivalent  in
terns of certainty, state financial requirements muse include minimal
qualifications for the parties'to mechanisms of financial responsibility and
other provisions, as follows:

         (1)  provision that Regional Administrator or State
              Director2 has the sole authority to direct the
              payment or use of funds assured whenever needed;
    *The phrase "Regional Administrator or State Director" is used in this
document because most state mechanisms are expected to nane a state agency  as
beneficiary.  Due to the variety in state agencies and their authorities, zhe
specific "State Director" may vary from state to state (e.g., Attorney
General, Director of Office of Environmental Protection, Public Health
Commissioner, State Treasury Department, ecc.)  The term "State Director" is
defined in 40 C7H 122.3.  As long as a state agency or official (or the EPA
Regional Administrator) is designated as having the power to direct or
authorize use of financial assurance, the mechanism should be deemed
equivalent, in that respect.  However, where two or more state agencies are
responsible for administration of financial assurance mechanisms, the "lead"
agency should consider establishing an inter-agency memorandum of
understanding to clearly delineate the respective roles and responsibilities
of each agency.

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          C2)  .qualifications for participating financial
            •  "institutions, surety companies, and insurers -- these
              institutions and their relevant activities (i.e.,
              trust  fund operations) must be subject to some
              regulatory oversight or licensing procedures

          (3)  qualifications for guarantors -- .including
              satisfaction of a financial test and being the
              corporate parent of the owner or operator

          (4)  qualifications for owners or operators using a
              financial test -- including independently audited
              financial statements

          (5)  substitution of alternate financial assurance within a
              defined time period in the event the required
              qualifications are no longer satisfied (for example,
              including the bankruptcy of the financial institution,
              corporate guarantor, or insurer);

          (6)  notification within a limited time period after the
              commencement of a bankruptcy proceeding naming the
              owner or operator as debtor;

          (7)  notification within a liaited tiae period of intent ~s
              cancel, terainate, or a-ilow to lapse a financial
              assurance mechanism;

          (3)  provision that an existing mechanism will not be
              cancelled, terminated, or allowed to lapse until a
              defined time period has elapsed, or alternate
              assurance has been provided, or the owner or operator
              has .been released from financial requirements;

          (9)  provision that the mechanisms cannot be cancelled or
              terminated upon commencement of a compliance action;
             . and
     •

          (10) no restrictions on order of use of mechanisms if more
              than o'ne mechanism provides assurance for a given
              facility.

These provisions are further specified in the equivalency criteria  for
specific  financial responsibility mechanisms.

    Amount of Funds.   In  general,  the  amount of funds assured for closure
and/or post-closure care must be equal to the current cost estimate(s) and  the
liability coverage demonstrated must be -at least equal to the amounts required
by RCRA liability requirements, exclusive of legal defense costs.   An
exception can be made for owners and operators using trust funds  for
closure/post-closure assurance; the full amount need not be available if  the

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                                    -6-
 owner  or  operator,  is  in the pay-in period for the trust fund.  (See, e.g
 264/263.143(a) (3).)   In that case, an increasing amount will be assured eau.i
 year.  For  all other  mechanisms alone or in combination, the amounts assured
 must always  meet the  total RCRA requirements at all times.

    Thus, with respect to the amount, of funds  assured,  the following
 criteria  must be met:

          (1)  The  amount assured must equal the latest cost estimate
               for  closure and/or post-closure care in full, unless
              the  trust fund mechanism  is being used.

          (2)   If a trust fund is used,  the initial and subsequent
              payments must assure an amount of closure and/or
              post-closure funds each year that in the aggregate' is
              no less than that required by the federal formula.

          (3)   If a trust fund pay-in period is used, it must not be •
               longer  than that allowed  under the federal regulations.

          (4)  The  amounts of funds assured for different identified
               facilities and purposes (i.e., closure, post-closure
              care, liability) must be  specifically identified in
              the  instrument or by an attachment to the instrument.

          (5)  The  Regional Administrator or State Director must have
              exclusive authority over  disbursements of funds.

          (6)  The  funds cannot be used  for other purposes  (e.g.,
              payment of fines).

          (7)  The  Regional Administrator or State Director must
              approve in writing any decreases in the amounts of
              assurance provided.

          (3)  The  Regional Administrator or State Director must have
              the  authority to withhold a portion of the
              reimbursement for closure expenses if deemed necessary.

    The federal regulations allow owners or operators to use combinations  of
mechanisms to provide the required amount of assurance.  States can do
likewise.   So long as each* mechanism is equivalent in terms of certainty of
the funds, the focus  is properly on the total amount assured by the
mechanisms.  See 40 CFR 264/265.143(g).

    Time  Limits.   Time limits in state  financial mechanisms may not  always
parallel  the federal  requirements.  This does not necessarily mean  that  the
state mechanisms are  not equivalent.  However, the federal regulations  are
based on  considerations of the legal and "practical implications of  deadlines
that cannot be ignored by state mechanisms.  The ultimate  aim must  be  to

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 ensure  chat  chere  is no gap in  financial coverage.  This means chat sufficient
 cirae muse be tfilowed for:

         •   providing an alternate mechanism in the event of the
             incapacity, disqualification, or.bankruptcy of issuers,
             insurers, and guarantors (e.g., 60 days).

         •   responding to a notice of cancellation or termination
             (e.g., at least 30-60 days)

         •   alternate assurance of funds before a cancellation
             could become e-ffective (e.g., at least 60-90 days)

         •   notifying the Regional Administrator or State
             Director of the commencement of a bankruptcy proceeding
             naming the owner or operator as debtor (e.g., no more
             than  10 days but probably no less)

         •   review by the Regional Administrator or State
             Director of financial assurance submissions for new
             facilities (e.g., at least 10-IS days before first
             receipt of wastes)

    States should be encouraged to follow the deadlines in federal system but
some flexibility may be allowed when determining equivalence.  The period cf
post-closure care, however, must be a< least thirty years.

    Allowable Mechanisms.   Current  federal  regulations allow use of crust
funds, surety bonds, letters of credit, insurance, a financial test, corporate
guarantees, and state assumptions of responsibility.  Some states may allow
owners or operators to demonstrate financial responsibility using mechanisms
not currently allowed under RCRA standards.   Specifically, these might includa:

         •   cash deposits .
         •   certificates of deposit
         •   escrow accounts

    The equivalency of cash deposits or certificates-of deposit can be
assessed using the federal trust fund requirements as a touchstone.  Thus,
pay-in periods, payment formulae, and rules for reimbursement of expenses must
be ac least as stringent as under the federal regulations.  Where state
regulations require immediate deposit of the full amount, the focus should
shift to whether further payments are required to keep pace with later
increases in cost estimates.  Equivalency criteria for cash deposits and
certificates of deposit are presented later in this document.

    An escrow is similar to a trust arrangement but it has 'a somewhat
different legal effect.  Although the depositary institution is not a trustee,
it is a fiduciary (as is a trustee) and its actions are governed by an escrow
agreement that should resemble the trust agreement.  The key-terms  and
responsibilities oust be spelled out in. the agreement; an escrow agent has  no

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                                   -3-
discrecion and must  follow the instructions of the escrow agreement co the
letter.  Equivalency criteria for escrows are presented later in this document.

    Cost Estimates.  To be equivalent to federal requirements, state
financial responsibility programs and mechanisms must incorporate equivalent
rules  for estimating the costs of closure and post-closure care that are to be
assured.  The evaluation of equivalency will depend on affirmative answers to
the following questions:

         (1)  Muse cost estimates for closure and post-closure be
              based on closure .and post-closure plans?

         (2)  Must cost estimates be revised accordingly whenever
              changes in closure or post-closure plans would
              increase cost estimates?

         (3)  Must the closure cos't estimate equal the cost of
              closure at the point in 'the facility's operating life
              when closure would be the most expensive?

         (4)  Must the cost estimates be adjusted for.inflation at
              least annually during the operating lifa of the
              facility using a specifiad inflation factor?

         (3)  Muse the latest cost estimate based on the closure
              and/or post-closure ?laa(s) and the latest adjusted
              cost estiaate(s) be kept at the facility?

    The rest of this document sets forth a series of criteria for determining
the equivalency of individual state financial assurance mechanisms.  Closure
or post-closure mechanisms allowed by the federal regulations are addressed
first, followed by mechanisms not allowed in the current federal regulations,
concluding with liability coverage mechanisms and state assumptions of
responsibility.

Further Information

    Readers- desiring further information should consult the Guidance
Manuals on Financial Assurance for Closure and Post-Closure  Care and
Liability Coverage and the  Background Documents  citad there.

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                                   -9-
                EQUIVALENCY CRITERIA FOR STATE  TRUST FUNDS
              .«*

     EPA will  consider che following factors in determining whether a. state-
 requirad  crust  fund is "equivalent" or "substantially equivalent" to the
 financial mechanisms prescribed in the federal regulations.  As  a general
 rule, most, if  not all of the following questions muse be answered "yes" for
 the  state-required trust fund to be considered "equivalent" or "substantially
 equivalent."

     1.  Is the  trustee required to be an entity that has authority to act as a
 trustee and whose trust operations are regulated and examined by a federal or
 state agency?

     2.  Does  the trust agreement or an attached schedule list and identify the
 facilities and  the amount of the closure and/or post-closure cost estimates
 covered for each facility?

    •3.  Is the  owner or operator required to update the list of  facilities and
 closure and/or  post-closure cost estimates after each change in  cost estimates?

     4.  Does  the owner or operator remain liable at all tines for the full
 amount of closure and/or post-closure expenses?

     5.  Is the  trust irrevocable  except upon agreement  of  the owner  cr
 operator, the trustee, and the Regions! Administrator or State Director?

  .   5.  Does  the trust agreement prohibit trustees from investing in
 securities of the owner or operator or parent corporations or their
 affiliates?   (federal regulations include this prohibition in addition to che
 general "prudent man" standard.   See 40 CFR 264". 151 (a) (1).)

     7.  For new facilities to be permitted, muse the trust agreement be
 submitted to the Regional Administrator or State Director before hazardous
waste is first received?

    3.  Must the initial payment be made before hazardous waste  is first
 received for new permitted facilities?

    9.  For new permitted facilities,  oust a receipt from the trustee for the
 first payment  be submitted to the Regional Administrator or State Director
before hazardous waste is first received at the facility?

    10.   Are the required initial and annual payments at least as great as
those required by the federal RCRA regulations?  (covers pay-in period or
other formulae)*
    * For details on the pay-in period and payment formula, see Chapter III in
the Guidance  Manual:  Financial Assurance for Closure and Post-Closure Care
(1982).

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                                   -10-
     11.  Does the crust agreement require the trustee, during the pay-in
period, to notify the Regional Administrator or State Director if the owner or
operator fails to make an annual payment into the trust fund?.

     12.  Does the trust agreement require the trustee to value the assets in
the  trust fund each year and send a statement of valuation and trust activity
to the owner or .operator and the Regional Administrator or State Director?

     13.  Is the.owner or operator given at least 90 days following the
trustee's valuation report to object to the trust investment activity?

     14.  May EPA or State Director object at any time to the trust investment
activity?

     15.  Once the pay-in period has expired, must the owner or operator-make
additional payments into the trust fund or obtain alternate assurance -vhenever
the  cost estimate changes and becomes greater than the value of the trust fur.c
during the operating life of the facility?

     16.  Must the owner or operator make arrangements for a new trustee or
obtain other financial assurance vhen the existing trustee enters bankruptcy,
ceases operations, or loses its authority to act as a trustee?

     17.  Can the trustee only be changed upon agreement by the owr.er or
operator, the trustee, and the Regional Administrator cr Stata Director?

     13.  Can funds be released from the trust fund only upon instruction of
the Regional Administrator or State Director and only for the following
reasons:   (1) the value of the trust fund is greater than the current cost
estimate(s); (2) alternate financial assurance is provided; (3) the owner or
operator is released from financial responsibility requirements.

     19.  Must itemized bills for closure and/or post-closure care be submitted
to the Regional Administrator or State Director before reimbursement will be
authorized?

    20.  Vhere the cost of closure appears to be significantly greater than
the value of the trust fund, is the Regional Administrator or State Director
empowered to withhold reimbursement from the trust until satisfactory
certification of completion of closure is received?

    21.  May the trust be terminated only upon written instruction of the
Regional Administrator or State Director?

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                                    -11-
                    EQUIVALENCY  CRITERIA FOR SURETY BONOS
           • _  «*            .

     EPA will  consider  the  following  factors in determining whether a state-
 required surety  bond is  "equivalent" or "substantially equivalent" to the
 financial mechanisms prescribed  in the federal regulations.  As a general
 rule,  most, if not  all of  the  following questions must be answered "yes" for
 the state-required  surety  bond to be considered "equivalent" or "substantially
 equivalent."

     1.   Is  the surety  company"1 required to be listed in Circular 570 or
 licensed to do business  as a surety  in the state?

     2.   Does  the underwriting  limitation in Circular 570.apply?

     3.   Must  the s.urety  company  be licensed in the state where the surety bond
 is  s igned?

    • 4.   Are the  terns  of a required  standby trust fund (if any) at least
 equivalent  to a  standby  trust  fund under the federal RCRA regulations?  (see,
 e.g.,  40  CFH  264.143(b)(3) and the equivalency criteria for standby crust
 funds,  below.)

     5.   Must  the penal sum of  the bond, together with any amount being assured
 by  other  mechanisms be at  least  equal to the current closure and/or
 post-closure  cost estimates?

    6.  Must  any surety  bond that is used at an interim status facility be a
 financial guarantee bond?  (performance bonds may not be used under 40 C7R 255
 regulations.)

    7.  For new  facilities to  be permitted, must the surety bond be submitted
 to  the  Regional  Administrator  or State Director before hazardous waste is.
 first  received for treatment,  storage or disposal?

    8.  For new  permitted  facilities, must the surety bond be effective before
 hazardous waste  is  first received for treatment, storage or disposal?

    9.  Vh«n cose estimates increase, must the penal sum of the bond be
 increased (and evidence  of the increase submitted to the Regional
 Administrator or State Director) or alternate financial assurance obtained
 within  a  defined period  of time?  (federal regulations allow 60 days)

    10.   Can the penal sum b«  reduced only if cost estimates decrease and
 following written approval of  the Regional Administrator or State Director?

    11.   Must the owner  or operator obtain alternative financial assurance
within  a  defined time period after bankruptcy of the surety or removal of the
 surety's  name from Circular 570?

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                                   -12-
    12.  Muse che surety give both the owner or operator and  che  Regional
Administrator or State Director ample notice before.cancellation  of  che  surety
bond_will be allowed?  (federal regulations require ac least  120  days)

    13.  Will the owner or operator have sufficient time after  receipt of
notice of cancellation to provide alternative financial assurance and obtain
written approval of the new assurance from the Regional 'Administrator or State
Director?  (federal regulations require at least 90 days)

    14.  Is the surety required to pay the penal sum of a financial  guarantee
bond in ac lease these circumstances:

         a.  The owner or operator has failed to provide funds  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, State Director,  or a court
             has ordered closure to begin and the owner or operator
             has not provided funds 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 a defined time period?
             (federal regulations allow 90 days)

    15.  Must the surety perform closure and/or post-closure  care or pay chs
penal sum of a performance bond in at lease the following circumstances:

         a.  The owner or operator fails to fulfill its closure
             and/or pose-closure obligations, even though closure
             may occur sooner than expected or the requirements in
             che plans, regulations, and/or permit have changed;  or

         b.  The surecy has senc nocice of cancellacion of che bond
             and che owner or operacor has noc obcained alternate
             financial assurance wichin 90 days?

    16.  May a surecy bond only be terminaced wich che written consent of the
Regional Adminiscrator or Scace Oireccor?

    17.  Muat itemized bills for closure and/or pose-closure care be submitted
Co ehe Regional Adminiscracor or Scace Director before payment will be
authorized?

    18.  Vhere ehe cose of closure appears co be significancly greacer than
the amoune of available funds, is che Regional Adminiscracor or State Director
empowered to withhold reimbursement until satisfactory certification of
complecion of closure is received?

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                                   -13-
                EQUIVALENCY CRITERIA FOR LETTERS OF  CREDIT
             .<*

    EPA will consider the following factors in determining whether a stata-
 required  letter of credit is "equivalent" or "substantially equivalent" to the
 financial mechanisms prescribed in the federal'regulations.   As a general
 rule, most, if not all of the following questions must be answered "yes" for
 the state-required letter of credit to be considered "equivalent" or
 "substantially equivalent."                :
                                        ••
    1.  Is the issuer required to be authorized to issue letters of credit,
 and must  its letter of credit operations,be regulated by a state or federal
 agency?

    2.  Are the terms of a required standby trust fund (if any) at least
 equivalent to the required standby trust fund under the federal RCRA
 regulations?  (see, e.g., *0 CF3.2a».143(d)(3) and the equivalency criteria
 for standby crust funds, belcw.)                    :
                                                  *

    3.  Must che letter of credit be irrevocable  for  at least a year  and
 provide for automatic extensions?                                    •'  '.'•

    :*.  Does tha letter of credit- have to be accompanied by a letter or
 schedule detailing the coverage for each facility?      •

    5.  Must the owner or operator suirait evidence within a reasonable perice
 that any cost increases are covered by alternate mechanisms or increases in
 the face amount of the latter of credit?  (federal regulations' allow up to 50
 days.)                 :

    6.  Must owners or operators obtain alternate financial assurance within a
 specified time if the issuing institution ceases operations,  fiias for
 bankruptcy,  or otherwise ceases to qualify?  (federal regulations allow up to
 60 days.)

    7.  Must alternate assurance be obtained within a specified time if the
 issuer gives notice of r.onrenewal of the letter?  (federal regulations allow
 up to 90 days.)

    3.  Must tha face amount of the letter of credit, together with any amount
 being assured by other mechanisms be at  least equal to the currant closure and
 post-closure cose estimates?

    9.  Must the letter of credit be submitted to the Regional Administrator
or State Director by a specified time before hazardous waste is first received
 for new permitted facilities?  (federal  regulations require at least 60 days.)

    10.   For new facilities to be permitted, must the  letter of credit be
 effective before hazardous waste is first received for treatment, storage or
disposal?

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                                   -ti-
    ll.  Con Che amount be reduced only if cose estimates decrease and
following written approval of. the Regional Administrator or State Director?

    12.  Must itemized bills for closure and/or post-closure care be submitted
to the Regional Administrator or State Director before reimbursement will be
authorized?

    13.  Where the cost of closure appears to be significantly greater than
the amount of funds available under the letter of credit, is the Regional
Administrator or State Director empowered to withhold reimbursement until
satisfactory certification of completion of closure is received?

    14.  Is termination of the letter of credit only allowed if (1) alternate
assurance is provided, or (2) the owner or operator has been released frcrs
closure or post-closure financial requirements?

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                                    -13-
                EQUIVALENCY  CRITERIA FOR STANDBY TRUST  FUNDS
              **

     Thara La  an important difference between state and federal legal
 authorities 'which may affect scace mechanisms.  Because the U.S.  EPA does noc
 have cha authority  Co collect, hold or disburse financial assurance funds
 itself,  the RCRA regulations require the use of a standby trust fund in
 conjunction with surety bonds  and letters of credit.  Some states, on the
 other hand, may not have this  restriction, thus they may noc need to require
 standby  trust funds.  The lack of standby trust provisions does not
 necessarily mean that the state mechanism is not equivalent.  If the state
 does require  standby crusts, they must meet the equivalency criteria set out
 below.   .

     EPA  will  consider the following factors in determining whether a state-
 required standby trust fund is "equivalent" or "substantially equivalent" to
 the  financial mechanisms prescribed in the federal regulations.  As a general
 rule,  most, if not all of the  following questions must be answered "yes" for
 the'state-required standby trust fund to be considered "equivalent" or
 "substantially equivalent."

     1.   Is the trustee required to be an entity that has authority to acr as a
 trustee  and whose crust operations are regulated and examined by a federal or
 state  agency?

     2.   Does  the trust agreement or a* attached schedule list the facilities
 and  the  amount of the closure  and/or post-closure cost estimates covered for
 each facility?                                                    .

     3.   Is the trust irrevocable  except  upon agreement of the owner or
 operator, the  trustee, and the Regional Administrator or State Director?

     4.   Does  the trust agreement, prohibit trustees .frsnr investing in
 securities of  the owner or operator or parent corporations?  (federal
 regulations include this prohibition in addition to the general "prudent man"
 standard.)                              ••;•'        .

     3.   If closure is not performed, does the crust have to be funded by the
 letter of credit, surety bond, or other mechanisms (a) before final closure or
 (b.)  within a  specified period  after the Regional Administrator, Scate
Director, or  a court orders closure?  (federal regulations allow 15 days.)

     6.  For new facilities to be permitted, must the trust agreement be
submitted to  the Regional Administrator or State Diractor before hazardous
waste is  first  received for treatment, storage or disposal?

     7.   Is the owner or operator given at least 90 days to object .to che trust
 investment activity?

     3.  May EPA or State Director object at any time to the  trust  investment
activity?

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    9.  Muse che owner or operator make arrangements for a new trustee or
obtain other financial assurance when the existing trustee enters  bankruptcy,
ceases operations, or loses its authority to ace as a trustee?

    10.  Can the trustee only be changed upon agreement by the owner or
operator, the trustee, and the Regional Administrator or State Director?

    11.  Where the cost of closure appears to be significantly greater than
the amount of funds in: the trust, is the Regional Administrator or State
Director authorized to withhold reimbursement until satisfactory certification
of completion of closure is received?

    12.  Must itemized bills for closure and/or post-closure care be submitted
to the Regional Administrator or State Director before payment will be
authorized?

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                                    -17-
         EQUIVALENCY CRITERIA FOR CLOSURE OR POST-CLOSURE INSURANC
             . '•**

     EPA will consider  Che following factors in. determining whether state-
 required closure or  post-closure insurance is "equivalent" or "substantially
 equivalent"  to the financial mechanisms prescribed in the federal
 regulations.  As a general rule, most, if not all of the following questions
 muse be answered "/as"  for the state-required closure or post-closure      * .
 insurance to be considered "equivalent" or "substantially equivalent."

     1.   Is the insurer  required to be licensed to transact the business  of
 insurance or eligible as a provider of excess or surplus lines insurance in
 otx«  or  more  states?

     2.   Muse the insurance cerrificate, policy, or endorsement List the
 facilities covered and  the 'amounts of insurance for closure and/or
 post-closure care assured for each facility?

    •3.   Muse an insurance.certificate or endorsement be submitted as evidence
 of insurance?

     4.   Does the insurance policy provide that closure and/or post-closure
 funds will be provided whenever closure occurs?

  .   5.   Does the insurance policy, certificate, sr endorsement provide  -hat
 the  insurer will be  responsible for paying out funds to parties specified upon
.the  direction of .the Regional Administrator or Scate Director?

     6.  Tor new facilities to be permitted, must the insurance policy,
 certificate, or endorsement be submitted to the Regional Administrator  or
 State Director before hazardous waste is first received for treatment,  storage
 or disposal?

     7.   For new facilities to be permitted, muse the insurance policy be
 effective before hazardous waste is first received?

     3.   Muse the face amount of the policy, together with any amount being
 assured  by other mechanisms, be at least equal to the current closure and/or
post-closure cose estimates?

    9.  (fuse the insurance policy provide for automatic renewal at least at
the  face amount of che expiring policy?

     10.   When cose estimates increase, muse the face amount of the policy be
 increased accordingly (and evidence of the increase submitted to the Regional
Administrator or State Director) or alternate assurance obtained within a
defined  time period?  (federal regulations allow 60 days)

     11.   Can the face amount only be reduced when cost estimates decrease and
 following written approval of the Regional Administrator or State Director?

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                                   -13-
    12.  Must che owner or operator obtain alternative financial assurance
within a defined ciaie period .following disqualification or liquidation of the
insurer?

    13.  Must the insurer give both the owner or operator and the Regional
Administrator or State Director sufficient notice before cancellation of the
insurance policy will be allowed?  (federal regulations require at least 120
days notice)

    14.  Muse cancellation, termination, or failure to renew not occur and
the policy remain in full force and effect in the event that on or before the
date of expiration at least one of the following has occurred:  CD the
Regional Administrator or State Director has deemed the facility abandoned; or
(2) the permit is removed or terminated or a new permit is denied; or (3)
closure is 'ordered by a competent authority (court, Regional Administrator, or
State Director); or (4) the premium overdue is paid?

    15.  Must itemized bills for closure and/or post-closure care be submitted
to- the Regional Administrator or State Director before reimbursement will be
authorized?

    16.  Where the cost of closure.appears to be significantly greater than
the face amount of the policy, is the Regional Administrator or State Director
authorized to withhold reimbursement until satisfactory certification of
completion of closure is received?

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                                   •19-
               EQUIVALENCY CRITERIA  FOR  FINANCIAL  TEST AND
          CORPORATE GUARANTEE FO.R CLOSURE AND POST-CLOSURE  CARE


    EPA will consider the following factors  in determining whether a state-
required financial test or corporate guarantee is  "equivalent"  or
"substantially equivalent" to the financial  mechanisms  prescribed in the
federal regulations.   As a general rule,  most,  if  not all  of  the following
questions must be answered "yes" for the  state-required financial test or
corporate guarantee to be considered "equivalent"  or "substantially
equivalent."

    1.  Are the owner's, operator's or corporate parent's  financial  statements
required to be independently audited?

    2.  Does the independent public accountant have to  be  certified  by a Scace
Board of Accountancy or otherwise eligible to  practice  public accounting in
the state?                                         -.
                                                  T '

    3.  Are the state's financial test criteria at least as stringent as the
federal criteria?  Specifically:

         A.   Do bond ratings of the fim  have  to be at  least
             investment grade;  or does net working capital have
             to be- six tines the sum of closure and post-closure
             cost estimates, and do -.-o of the following three
             conditions have to be satisfied:                    :

              .i)  total liabilities to net  worth  have  to  be  less
                   than 2.0,

              ii)  net income plus non-cash  expenses (i.e.,
                   depreciation,  depletion,  and amortization) to
                   total liabilities have to be greater than  0.1, or
                                      •

             iii)  current assets to current liabilities greater
                   than 1.3?

         3.   Does the tangible net worth  of  the firm have  to  be at
             least S10 million and at  least  six times the  sum of
             closure  and post-closure  estimates?

         C.   Do assets in the United States  amount to

               i)  90 percent of the total assets, or

              ii)  six times the sum of closure and post-closure
                   estimates?         '  •

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                                   -20-
    &.  Are fisms whose financial statements receive an adverse opinion or
a disclaimer of opinion in auditor's standard report disallowed from the
financial test?

    5.  Is the Regional Administrator or State Director granted discretion to
accepc or reject qualified opinions on a firm's financial statements?

    6.  Must the corporate parent own at lease 50 percent of the voting stock
of the subsidiary owner or operator?

    7.  Must the financial test criteria be applied to the closure or
post-closure cost estimates of all facilities for vhich there is no third
party guarantee or funding of financial assurance?  (federal regulations
require the inclusion of facilities covered by the financial test guarantee, •
the corporate guarantee, facilities covered by state financial tests or
corporate guarantees, and sitas for which no financial assurance has been
demonstrated.)

    8.  Must the owner, operator, or corporate parent continue to satisfy the
test requirements, or supply alternate assurance, if closure or post-closure
cose estimates increase?

    9.  Must the owner-, operator, or corporate parent submit updated
information a short time after the close of the firm's fiscal year?  (federal
regulations allow up to 90 days -- see iO CJR 25*.143(f)(5).)
                                      *
    10.  If the financial statements indicate the firm no longer qualifies to
use the financial test, must the owner or operator:

         a)  Notify the Regional Administrator or State Director
             within a specified period?  (federal regulations allow
             no more than 90 days after the close of the fiscal
             year), and

         b)  Provide alternate financial assurance shortly
             thereafter?  (federal regulations allow up to 120 days
             after close of the fiscal year).

    11.  Does  the Regional Administrator or State counterpart have  the
authority to request additional financial reports from the owner, operator,  or
corporate parent, and disqualify the firm at any time on the basis  of such.
reports or other information?

    12.  Must satisfaction of the financial test criteria be demonstrated at a
specified period before wastes are received at a new facility?   (federal
regulations require at least 60 days for new permitted facilities  -- see *0
CFR 264.143(f)(4).)

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                                   -21-
    13.   Is the parent guarantor held responsible for die closure or
post-closuro «*sts until:

         a.  The owner or operator has been released from the
             financial assurance requirements,  or

         b.  The owner or operator has obtained, alternate assurance
             within a specified period after notice of cancellation
             of the guarantee has been received?   (federal
             regulations require no more than 90  days.)

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                                    -22-
               ,.   EQUIVALENCY  CRITERIA FOR CASH  DEPOSITS
                         AND  CERTIFICATES OF DEPOSIT


     EPA will consider the  following  factors in determining whether a state-
 required cash deposit or certificate of deposit is "equivalent" or
 "substantially equivalent"-to  the  financial mechanisms prescribed in the
.federal regulations.   As a general rule, most, if not all of the following
 questions must be answered "yes"  for the state-required cash deposit or
 certificate"'of deposit to  be considered "equivalent" or "substantially
 equivalent."

     1.   Must the  bank or financial institution holding the cash deposit or
 certificate  of deposit be  regulated  and examined by a federal or state agcr.cv?

     2.   Must the  Regional  Administrator or State Director be the beneficiary
 and be  empowered  to draw upon  or direct payment from the funds if the owner cr
 operator fails to perform  closure  or post-closure care?

     2.   For  new facilities to  be permitted, must the cash deposit or
 certificate  of deposit be  established before hazardous waste is first received
 for treatment, storage or  disposal?

     4.   Must payments be made  pursuant to a pay-in period and formula at laastf
 equivalent to federal .RCRA trust  fund requirements?

     5.   Must advance  notice be provided to the Regional Administrator or State
 Director in  a.defined time period  prior to termination by the owner or
 operator?

     6.   Must at least one  of the  following conditions be met for the cash
 deposit or certificate of  deposit  to be terminated:  (1) the owner or operator
 has performed closure/post-closure to the State Director's or Regional
 Administrator's satisfaction,  or  (2) alternate assurance has been established
 (a) in  accordance with state regulations or Co) that would be acceptable under
 40  CFR  254/265.149?

     7.   Can  funds be  released  only upon written instruction of the Regional
 Administrator or  State Director?

     3.   Muse itemized bills for closure and/or post-closure care be submitted
 to  the  Regional Administrator  or State Director before payment will be
 authorized?

     9.   Where the cost of  closure  appears significantly greater than the
 amount  of available funds, is  the  Regional Administrator or State Director
 empowered to withhold reimbursement  until satisfactory  certification of
 closure is received?

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                                    •23-
                     EQUIVALENCY  CRITERIA FOR ESCROWS


     EPA will  consider the following  factors in decertnining whether a stat.e-
 required  escrow  is  "equivalent" or "substantially equivalent" to the financial
 mechanisms  prescribed in the federal regulations.  As a general rule, most, if
 npc  all of  the following questions must be answered "yes" for the
 state-required escrow to be considered "equivalent" or "substantially
 equivalent."

     1.  Is  the depositary institution licensed or authorized Co act as a
 fiduciary or  escrow agent and subject to state or federal regulatory oversight?

     2.  Does  the escrow agreement or an attached schedule list the facilities
 and  the amount of the closure and/or post-closure cost estimates covered for
 each facility?
                                 •
     3.  Is  the owner or operator required to update the list of facilities and
 closure and/or post-closure cost estimates after each change in cost estimates?

     <*.  Does  the- owner or operator remain liable at all times for the full
 amount of closure and/or post-closure expenses?

     5.  Does  the escrow agreement prohibit the depositary . from investing in
 securities of the owner or operator or parent corporations?

     6.  Is  the escrow agreement irrevocable  except  upon the  mutual consent
 of the owner or operator and the Regional Administrator or State Director?

     7.  For new facilities to be permitted,  must the escrow agreement be
 submitted to the Regional Administrator or State Director before hazardous
 waste is first received for treatment, storage or disposal?

     3.  Must the initial payment be made before hazardous waste is first
 received for new permitted facilities?

     9.  Are the required initial and annual payments at least as great as
 those required by the federal RCRA trust fund regulations?

     10.   Dots the escrow agreement require the depositary to notify che
Regional Administrator or State Director if the owner or operator fails to
make a required deposit?

     11.   Does the escrow agreement require the depositary to value the assets
 in the escrow each year and send a statement of valuation to the owner or
operator and the Regional Administrator or State Director?

     12.   May the owner or operator and the Regional Administrator or State
Director object at any time to escrow activity?

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                                   -24-
     13.  If the^pay-in period' is less than the operating life of the facility,
must the owner or operator make additional payments to the escrow or obtain
alternate assurance whenever the cost estimate(s) became(s) greater than the
value of the escrow?

     14.  Must the owner or operator make arrangements for a new depositary or
obtain other financial assurance when the existing depositary enters
bankruptcy, ceases operations,  or loses its authority to act as an escrow
agent?

     15.  Can the depositary only be changed by mutual agreement of the owner
or operator and the Regional Administrator or State Director?

     15.  Can funds be released from escrow only upon instruction of the
Regional Administrator or.State Director?

     17.  Must itemized bills for closure and/or post-closure care be submitted
to the Regional Administrator or State Director before payment will be
authorized?

     13.  Where the cost of closure appears significantly, greater than the
value of the escrow, is the Regional Administrator or State Director empowered
to withhold reimbursement from the escrow until satisfactory certification of
closure is received?      'v

     19.  May the escrow agreement be terminated only upon instruction of the
Regional Administrator or State Director?

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                                    -25-
                EQUIVALENCY  CRITERIA FOR LIABILITY  INSURANCE
              r*

     EPA will consider  che  following factors in decermining whether state-
 requircd  liability  insurance is "equivalent" or "substantially equivalent" co
 the  financial mechanisms prescribed in the federal regulations.  As a general
 rule,  most, if  not  all of  the  following questions must be answered "yes" for
 the  state-required  liability insurance to be considered "equivalent" or
 "substantially  equivalent."

     1.  Is the  insurer required to be licensed to transact the business of
 insurance or eligible  as a provider of excess or surplus lines insurance in
 one  or store states?

     2.  Must the insurance certificate, policy, or endorsement list the
 facilities covered?

     3.  Must an insurance certificate or endorsement be submitted as evidence
 of insurance?

     4.  Must the policy cover both bodily injury and property damage claims?

     5.  Must the policy provide -- exclusive of legal defense costs -- at
 least:  (1) 51 million coverage per occurrence, vLch an annual aggregate
 amount, of 52 million,  for sudden accidental occurrences?; and (2) 53 million
 coverage per occurrence, with an annual aggregate amount of 56 million, for
 nonsudden accidental occurrences?  (the ncrnsudden accidental coverage aust be
 required of surface impoundaents, landfills, and land treatment facilities.)

     6.  Must the coverage be on a "first dollar" basis?-"

     7.  For sudden accidental occurrences,  must the insurance policy be
 effective before initial receipt of waste at a new permitted facility?

     3.  For nonsudden accidental occurrences, must coverage be demonstrated by
 the  following dates depending on the sales  or revenues of the owner or
operator?

         (*).  Sales or revenues over S10 million    January 15, 1983

         (b)   Sales or revenues greater than        January 15, 1934
              $5 million and up to S10 million

         (c)   Sales or revenues 55 million and      January 15, 1935
              less
    * For details, see Chapter 2 of the Guidance Manual:  Liability
Coverage (1982).

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                                   -25-
    9.  Muse th£ owner or operator maintain the policy in full forca and
effect' ac lease until released from financial requirements or alternate
coverage is substituted?

    10.  Must the owner or operator provide alternate coverage within a
defined time period in the event of liquidation or insolvency of the insurer?
(federal regulations allow 60 days)
                                                       '>
    11.  Must the insurer give ample notice of its intent to cancel,
terminate,  or r.oc to renew the insurance?

    12-.  Must cancellation or termination not occur during a defined tine
period following the date of receipt of the notice by the Regional
Administrator or State Director?  (federal regulations require =0 days for
cancellation and 30 aays for termination)

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                                    -27-
                   EQUIVALENCY  CRITERIA FOR FINANCIAL tEST
              **           FOR LIABILITY  COVERAGE
                                                     -s

     EPA  will  consider  the following factors in, determining whether a scats-
 required financial test for liability coverage is "equivalent" or
 "substantially  equivalent" to the financial mechanisms prescribed in the
 federal  regulations.   As a general rule, most, if nbt all of the following
 questions must  be  answered "yes"  for the state-required financial test for
 liability coverage to  be considered "equivalent" or "substantially equivalent."

     1.   Must  the owner's or operator's financial statements be independently
 audited?

     2.   Does  the independent public accountant have to be certified by a State
 Board of Accountancy?

     3.   Are the financial test criteria at least as:stringent as -he-federal
 RCRA criteria?

         A.   Do bond ratings of the firm havs to be at least
              investment grade; or does net working capital have
              to be at  least six times the amount aggregate liability
              requirements?

         3.   Does the  tangible net worth of the firm have to be at
              least SLG million and at least six times the annual
              aggregate liability requirements?

         C.   Do assets in the United States amount to at least

               i)  90 percent of total assets, or
              ii)  six times the annual aggregate liability
                   requirements?

     "*.  Are firms whose financial statements have received adverse opinions
or disclaimers of opinions disallowed from the financial test?

     5.  Is che Regional Administrator or State Director granted discretion to
accept or: reject qualified opinions on a firm's financial statements?

     6.  Muse  evidence of insurance be provided in a specified period if a
notice of disallowance has been issued because of an adverse, qualified, or
disclaimer of opinion?  (federal regulations allow up to 30 days.)

     7.  Must  the financial test criteria cover •- exclusive of legal defense
costs -• at least (1) SI million coverage per occurrence, with an annual
aggregate amount of 52 million, for sudden accidental occurrences?;  (2) S3
million coverage per occurrence, with an annual aggregate amount of  S6
million, for nonsudden accidental occurrences?; and (3) all closure  or

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                                   -23-
post-closure cast estimates of facilities noc covered by third party
guarantees or funded mechanisms?  (federal regulations require the inclusion
of facilities covered by the financial test, the corporate guarantee, and
facilities without any coverage at all.)

    3.  For sudden accidental occurrences, must the financial test criteria be
satisfied before initial receipt of waste by new permitted facilities?

    9.  For nonsudden occurrences, must coverage be demonstrated by the
following dates depending on the sales or revenues of the owner or operator?

         (a)  Sales or revenues over 310 million    January 15, 1933

         (b)  Sales or revenues greater than        January 15, 1934
              $5 million and up to 310 million

         (c)  Sales or revenues 55 million and      January 15, 1935
              less

    .10.  Must the owner or operator completely satisfy the test criteria at
lease until released from financial requirements or alternate coverage is
substituted?

    11.  Muse the owner or operator submit updated financial test  ir.fcr-ac.cr.
a short time after the close of the firm's fiscal year?  (federal  ragulatisr.s
allow up to 90 days.)

    12.  If the year-end financial statements indicate the firm no longer
qualifies to use the financidl test, must the owner or operator supply
evidence of liability insurance within a limited period?  (federal regulatisr.s
allow up to 90 days.)

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                                    -29-
                 EQUIVALENCY  CRITERIA FOR STATE ASSUMPTIONS
              *~              OF RESPONSIBILITY


     EPA will  consider  che -following factors in determining whether a state's
 assumption of responsibility for an owner's or operator's closure,
 pose-closure  care, or  liability coverage is "equivalent" or "substantially
 equivalent" to  the financial mechanisms prescribed in the .federal
 regulations.  As a general rule, most, if not all, of the following questions
 must be answered "yes" for the state's assumption of responsibility to be
 considered "equivalent" or "substantially equivalent."

     1.  Does  the letter from the State include, or have attached to it,
 identifying information for the facilities and the amounts of funds for
 closure, or post-closure care, or liability coverage that are guaranteed by
 the  State?

     2.  Is the  assumption of responsibility non-contingant  and
 irrevocable;  in other words,  are there no  conditions  which would void the
 state's guarantee?''*

     3.  Does  the assumption cover the costs of. all activities required for
 proper closure?

     •*.  Does  the assumption cover the costs of all activities required for.
 post-closure  care for'a period of thi*ty years?

     5.  Does  the assumption provide liability coverage for bodily injury in  a~
 least the amounts required by federal standards per occurrence and in an
 annual aggregate, exclusive of legal defense costs?

     6.  Does  the assumption provide liability coverage for property carnage  _r.
 at Least the  amounts required by federal standards per occurrence and in an
 annual aggregate, exclusive of legal defense costs?

     7.  Does  the assumption provide liability coverage in the an-.ounts required
 by federal -standards for sudden accidental occurrences?
         •'•'??*-'.•• •             •
    3.  Doisrthe assumption provide liability coverage for  Landfil.ls, surface
 impoundments-; and land treatment facilities in the amounts  required by federal
 standards^ for non-sudden accidental occurrences?
    * Note:  The Agency is aware of some state post-closure  funds that are
available only to owners or operators of facilities that have been  issued'
permits under RCRA; these funds would not be non-contingent  with respect  to
interim status or non-permitted facilities.

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