oEPA
United States
Environmental Protection
Agency
Office of
Solid Waste and
Emergency Response
Office of Underground
Storage Tanks (OUST)
DIRECTIVE NUMBER: 9650.7
TITLE: Supplemental Guidelines for FY89 LUST
Trust Fund Cooperative Agreements
APPROVAL DATE: April 7, 1988
EFFECTIVE DATE: April 7, 1988
ORIGINATING OFFICE:
& FINAL
D DRAFT
A
STATUS:
REFERENCE (other documents):
Guidelines for UST Trust Fund Cooperative
Agreements; OSWER DIR. 9650.6; April 2, 1987
Supplemental Requirements for LUST Trust Fund
Cooperative Agreements; OSWER DIR. 9650.6-1;
Anoiich m 1 Qfl7
OSWER OSWER OSWER
VE DIRECTIVE DIRECTIVE Dl
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c/EPA
united otates tnvironmemai protection Agency
Washington. DC 20460
OSWER Directive Initiation Request
1. Directive Number
9650.7
2. Originator Information
Name of Contact Person
John Heffelfinger
Mail Code
WH-562A
Office
OUST
Telephone Code
382-2199
3. Title
Supplemental Guidelines for FY89 LUST Trust Fund Cooperative Agreements.
4. Summary of Directive (include brief statement of purpose)
This guidance provides information to assist States and EPA Regional offices
in negotiating, awarding, and overseeing cooperative agreements containing FY89
monies from the Leaking Underground Storage Tank Trust Fund. . •
5. Keywords
Underground Storage Tanks, LUST Trust Fund, Cooperative Agreements, States, Regions
6a. Does This Directive Supersede Previous Directive(s)?
b. Does It Supplement Previous Directive(s)?
No
No
Yes What directive (number, title)
Yes What directive (number, title)
9650.6; 9650.6-1
7. Draft Level
A - Signed by AA/DAA X B - Signed by Office Director
C - For Review & Comment
D - In Development
8. Document to be distributed to States by Headquarters?
Yes
X
No
This Requestjjleets OSWER Directives System Format Standards.
9. Signature/Of Lead Office Directives Cqordinaigr
Nftevp>f'lv ,,Thnrfias./ OUST Pi receive Coordinator
Date
10. Naifce-an'd Title of Approving Offici
PeEerHubbalrd, OSWER Directives Officer
Date
EPA Form 1315-17 (Rev. 5-87) Previous editions are obsolete.
OSWER OSWER OSWER O
VE DIRECTIVE DIRECTIVE DIRECTIVE
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0 is;to Eft- -t) ±T< •- -
c/EPA
United States
Environmental Protection
Agency
Office of
Solid Waste and
Emergency Response
Office of Underground
Storage Tanks (OUST)
DIRECTIVE NUMBER: 9650.7
TITLE: Supplemental Guidelines for FY89 LUST
Trust Fund Cooperative Agreements
APPROVAL DATE: April 7, 1988
EFFECTIVE DATE: April 7, 1988
ORIGINATING OFFICE:
Q FINAL
D DRAFT
STATUS:
REFERENCE (other documents):
Guidelines for UST Trust Fund Cooperative
Agreements; OSWER DIR. 9650.6; April 2, 1987
Supplemental Requirements for LUST Trust Fund
Cooperative Agreements; OSWER DIR. 9650.6-1;
Aiioiig t- 1 ft 1 Qfi7
OSWER OSWER OSWER
rE DIRECTIVE DIRECTIVE Dl
-------
OSWER DIR. 9650.7
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
APR -7
OFFICE OF
SOLID WASTE AND EMERGENCY RESPONSE
MEMORANDUM
SUBJECT: Guidelines for LUST Trust Fund Cooperative Agreements
FROM: Ron Brand, Director
Office of .Underground Storage Tanks
TO: Waste Management Division Directors, Regions 1-II1,
V-IX
Water Management Division Directors, Regions IV and X
Attached is the final version of the Supplemental Guidelines
for FY89 Leaking Underground Storage Tanks (LUST) Trust Fund
Cooperative Agreements. The guidelines provide information to
assist EPA Regional offices and States in administering
cooperative agreements containing awards of FY89 Trust Fund
monies. Where appropriate, the principles contained in these
guidelines may be used in administering Trust Fund cooperative
agreements for the remainder of FY88.
These guidelines supplement the previous guidance issued by
EPA to support the Trust Fund program. The previous guidance
will be included in a compendium of Trust Fund information that
the Regional offices will receive during April. The Office of
Underground Storage Tanks (OUST) also plans to issue a
consolidated set of guidelines later this year.
A draft of the guidelines was distributed to all Regions on
March 16. The guidelines have since been revised as a result of
OUST's review of written comments and discussions with Regional
UST Coordinators. The most substantial changes have been in the
cost recovery section, where we have moved closer toward
establishing a final cost recovery policy for the Trust Fund.
The issue of whether States may keep recovered Trust Fund monies
should be resolved shortly. We will inform you as soon as a
decision is reached. In the meantime, the cost recovery policies
explained in the guidelines should be integrated into the
Region's Trust Fund program.
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OSWER DIR. 9650.7
-2-
As in the past, the Regions will be responsible for
negotiating, awarding, and overseeing the cooperative agreements
with States. 1 commend the Regions, and the UST Coordinators in
particular, for our remarkable success rate thus far, in awarding
cooperative agreements to 42 States and three territories. I
anticipate that all of the current grantees, plus a few
additional ones, will participate in the Trust Fund program in
FY89. he are committed to supporting you in making this happen.
Attachment
cc: Regional UST Coordinators
J. Winston Porter
Jack McGraw
Louise Wise
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OSWER DIR. 9650.7
SUPPLEMENTAL GUIDELINES
FOR
FY 89 LUST TRUST FUND COOPERATIVE AGREEMENTS
U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF UNDERGROUND STORAGE TANKS
APRIL 7, 1988
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OSWER DIR. 9650.7
SUPPLEMENTAL GUIDELINES FOR FY 89
LUST TRUST FUND COOPERATIVE AGREEMENTS
Table of Contents
I. OVERVIEW
A. Purpose
B. Previous Guidance
C. Revised EPA Grant Regulations
II. PROGRAM REQUIREMENTS, POLICY, AND GUIDANCE
A. State Cost Share Requirements
B. Allowable Costs
C. Trust Fund Use at Government Facilities
D. Solvency of Owners and Operators
E. Linking of Trust Fund with State Program Approval Process
F. Relationship of the Trust Fund to EPA's
Transition Strategy
G. Compliance with Corrective Action Regulations
H. Program Appraisal Reporting Requirements
I. Cost Recovery
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SUPPLEMENTAL GUIDELINES FOR FY 89
LUST TRUST FUND COOPERATIVE AGREEMENTS
I. OVERVIEW
A. PURPOSE
In October 1986, Congress amended Subtitle I of the Resource
Conservation and Recovery Act (RCRA) to provide a federal Trust
Fund to finance the cleanup of petroleum releases from
underground storage tanks (USTs). The Environmental Protection
Agency (EPA) has made money available, through cooperative
agreements, to 42 States and three Territories that have
acceptable plans for using Trust Fund resources.
The purpose of these guidelines is to provide information to
assist States and EPA Regional offices in negotiating cooperative
agreements containing awards of FY 89 Trust Fund monies. Where
appropriate, the principles contained in these guidelines may be
applied in administering Trust Fund cooperative agreements for
the remainder of FY 88.
B. PREVIOUS GUIDANCE
These guidelines supplement previous guidance issued by EPA
to support the Trust Fund cooperative agreement process. The
previous guidance generally remains operative, where appropriate.
The Office of Underground Storage Tanks (OUST) plans, in the
future, to consolidate these guidelines with the previous
guidance to make it easier for Regions and States to be aware of
the currently applicable requirements and policies.
Previous Trust Fund guidance includes:
1) Guidelines for UST Trust Fund Cooperative Agreements;
OSWER Directive 9650.6; April 2, 1987.
2) Interim Financial Policies and Procedures Governing Use
of the Leaking Underground Storage Tank (LUST) Trust
Fund; Comptroller Policy Announcement No. 87-13;
June 3, 1987.
3) Reporting and Recordkeeping Requirements for LUST
Cooperative Agreements; Memorandum from David P. Ryan
and Harvey G. Pippen; July 2, 1987.
4) Supplemental Requirements for LUST Trust Fund
Cooperative Agreements; OSWER Directive 9650.6-1;
August 10, 1987.
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OSWER DIR. 9650.7
5) Letter of Credit Drawdown Procedures for States
receiving LUST Trust Fund Cooperative Agreements;
Memorandum from David P. Ryan, Comptroller;
August 12, 1987.
6) LUST Cooperative Agreement Issues; memorandum from
Howard Corcoran, OGC, and Joe Retzer, OUST;
August 26, 1987.
7) Development of LUST Cost Recovery Policy and Financial
Management Guidance; Memorandum from David P. Ryan and
Ron Brand; March 25, 1988.
8) Interim Guidance for Conducting Federal Lead Underground
Storage Tank Corrective Actions;
OSWER Directive 9360.0-16; June 4, 1987.
These documents, as well as other previous Trust Fund-related
information, are part of a Trust Fund Compendium that EPA
Regional Offices will receive in April 1988.
C. REVISED EPA GRANT REGULATIONS
EPA, jointly with other Federal agencies, has recently
published revised common grant regulations that establish
consistency in the administration of grants and cooperative
agreements. The revised regulations were promulgated on
March 11, 1988, with an effective date of October 1, 1988.
EPA has decided to publish the common rule at 40 CFR Part 31.
It will supercede certain of EPA's general assistance regulations
currently contained in 40 CFR Parts 30 and 33. Specifically,
Part 31 will be applicable to State and local governments, and
federally recognized Indian tribal governments. Part 31 will,
therefore, apply to LUST Trust Fund cooperative agreements. Part
30 will be revised to consist of requirements applicable to
grantees other than State and local governments.
Awards involving FY 89 Trust Fund monies will need to
reference and adhere to the revised grant regulations. OUST's
review of the Red Border package for the revised regulations
identified a few particular items that are of interest to the
Trust Fund program. These include:
o State use of their own policies and procedures to acquire
goods and services.
o An increase in the dollar amount applicable to small
purchase procurement procedures from $10,000 to $25,000.
o An increase in the dollar amount applicable to formal
disposition of purchased equipment from $1,000 to $5,000.
o No requirement for EPA to approve equipment purchases by
the State.
Following review of the final grant regulations, OUST will
provide further guidance, if necessary, with regard to its
implications for Trust Fund cooperative agreements.
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OSWER DIR. 9650.7
II. PROGRAM REQUIREMENTS, POLICY, AND GUIDANCE
This section provides supplemental policy guidance to assist
in the negotiation of LUST Trust Fund cooperative agreements for
FY 89. This guidance, as well as previous Trust Fund guidance,
must be reflected in State cooperative agreements, as
appropriate. The policies discussed in this section are:
o State Cost Share Requirements;
o Allowable Costs;
o Trust Fund Use at Government Facilities;
o Solvency of Owners and Operators;
o Linking of Trust Fund with State Program Approval Process;
o Relationship of the Trust Fund to EPA's Transition
Strategy;
o Compliance with Corrective Action Regulations;
o Program Appraisal Reporting Requirements; and
o Cost Recovery.
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OSWER DIR. 9650.7
A. STATE COST SHARE REQUIREMENTS
Policy
In order to comply with Section 9003(h)(7)(B) of Subtitle I,
new or amended cooperative agreements that utilize FY 89 Trust
Fund monies must incorporate a minimum 10 percent State cost
share requirement for work done under the cooperative agreement.
Guidance
The State cost share requirement begins with any award of
FY 89 Trust Fund monies after October 1, 1988, or after the
effective date (not the "compliance" date) of the UST technical,
corrective action, and financial responsibility regulations,
whichever is later. The cost share requirement does not apply to
unspent FY 88 monies which the State will expend after the
effective date of the regulations.
The State cost share percentage should be applied to the
total allowable cost of the program covered by the State's
cooperative agreement. State cooperative agreement work plans
should reflect a total program budget, a minimum 10 percent of
which will be contributed by the State. All expenditures under
the cooperative agreement are presumed to be shared on the same
percentage basis as the overall ratio of federal to State monies
under the cooperative agreement.
The State cost share must be for Trust Fund allowable
expenditures. The manner in which States provide their cost
share is to be negotiated with the Region and must be in
compliance with the grant requirements of 40 CFR Part 31, when
effective. Acceptable methods for cost sharing include:
in-kind contributions, e.g., staff and
equipment; and
- direct, non-Federal funds expended or obligated
by the State, or a political subdivision of the
State, for cost-eligible activities.
State contributions should be negotiated in advance and
specified^in the State's cooperative agreement. The State's
contributions must be verifiable from its records, in accordance
with EPA's grant regulations.
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B. ALLOWABLE COSTS
Policy
Section 9003(h) of RCRA provides that Trust Fund monies may
be used for the following general activities: corrective action,
enforcement activities, cost recovery, exposure assessments,
provision of water supplies, and relocation of residents. The
Trust Fund may be used only for addressing petroleum releases
from underground storage tank systems subject to Subtitle I
jurisdiction, including tanks that are exempt or deferred from
regulation until a later date in accordance with 40 CFR Part 280.
The Trust Fund may not be used to address releases from tanks
that are statutorily exempt from Subtitle I jurisdiction,
although it may be used to investigate suspected releases up to
the time that a leak is determined to come from a statutorily
exempt source.
Section 9003(h) further provides that both temporary and
permanent alternative water supplies and relocation of residents
are eligible costs for Trust Fund expenditure, as discussed
below. Two additional categories of eligible costs for Trust
Fund monies are long-term operation and maintenance of corrective
action measures, and the purchase or lease of equipment. Both
are discussed below.
Guidance
Alternative Water Supplies
In the case of alternative water supplies, temporary
provision of water is clearly an allowable cost to protect human
health while awaiting corrective action measures to take effect,
or for responsible parties to provide permanent supplies where
needed. It is conceivable that, in some cases, the provision of
a permanent alternative water supply by the State will be
necessary, and more cost-effective than corrective action,
relocation, or even extended "temporary" provisions of bottled or
trucked-in water. Allowable costs for permanent water supplies
are limited to the initial capital costs, and do not include
operation and maintenance costs of the system.
As part of their decision-making process, States should
evaluate the cost-effectiveness of providing a permanent water
supply in comparison to other corrective action and clean-up
alternatives. When considering the cost of providing permanent
alternative water supplies the State should consider both the
total cost per site as well as the cost per affected household.
Relatively high total costs may be reasonable if large numbers of
households are affected.
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OSWER DIR. 9650.7
Relocation Of Residents
Temporary relocation of residents is an allowable cost only
where it is necessary to protect human health. States should
evaluate the cost effectiveness of this measure versus other
measures, such as a temporary water supply or in-house air
filtration or venting units. Temporary relocation is an
allowable cost where corrective action activities cannot be
undertaken safely while residents remain in their homes.
Permanent relocation, although eligible, should be
considered an allowable cost only under the extremely unlikely
circumstances that it is the only available option for protecting
human health or is the most cost-effective option. If permanent
relocation must be undertaken, States must comply with the
Uniform Relocation Act (42 U.S.C. 4610 et. seq.) regarding
property acquisition and relocation of residents.
Operation and Maintenance
Operation and maintenance (O&M) costs of corrective action
measures, other than permanent water supplies, are allowable
costs under the Trust Fund. States will use discretion as to
whether to fund O&M costs out of the Trust Fund or through other
means, e.g., responsible party contributions and State or local
funds.
States will be responsible for setting priorities between
initiating cleanups at new sites or funding continuing O&M at old
sites. EPA's commitment is to provide money only for the work
identified in the cooperative agreement, and not to fund fully
sites where the State may choose to continue O&M. Further, EPA
cannot commit monies to States beyond the budget period.
Purchase or Lease of Equipment
Trust Fund monies may be used to purchase equipment if the
equipment is necessary for LUST Trust Fund corrective action or
enforcement activities, and if it is more cost effective to
purchase rather than lease the equipment. A formal lease versus
purchase analysis of the decision is needed only when the cost is
more than $10,000. This analysis should be retained by the State
and be available for EPA review, upon request.
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A State's purchase versus lease analysis should include the
following alternatives to direct purchasing using the Trust Fund:
- lease the equipment;
- State purchase or lease of equipment and
pro-rate charges to the Trust Fund for the
equipment's use while performing Trust Fund
eligible work; or
- hire a contractor to perform the desired work.
Where corrective action equipment is purchased for use at a
single site, its cost should be attributed only to that site.
Equipment may be used at multiple sites, however. Where this
occurs, the costs of equipment that cost over $10,000 and is
used for corrective action should be allocated among sites where
the equipment is used. An exception to this is for equipment
used at a large number of sites (e.g., response vehicles, field
test equipment) for which it would be impractical to allocate
costs to individual sites.
States should consult EPA's grant regulations,
40 CFR Part 30 (or 40 CFR Part 31, when effective), for guidance
in final disposition of equipment purchased with Trust Fund
monies.
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OSWER DIR. 9650.7
C. TRUST FUND USE AT GOVERNMENT FACILITIES
I
Policy
The Trust Fund ordinarily will not be used to address
petroleum UST releases from government facilities. Governmental
entities exist partly for the purpose of providing for and
protecting public health and welfare and, thus, should be
expected to meet their obligation of addressing environmental
hazards for which they are the source.
The Trust Fund may be used if necessary, however, at
Federal, State, or local government UST facilities (subject to
Subtitle I jurisdiction) in the following limited situations:
- emergencies, including the mitigation of
imminent hazards, and
- site investigations, enforcement actions, and oversight
of RP-lead cleanups
This policy does not convey additional authorities to the State
with regard to access to governmental facilities nor is it
intended to alter State policies with regard to intergovernmental
relations.
The Trust Fund may not be used for cleanups at Federal or
State UST facilities. The Trust Fund may be used for cleanups at
local government facilities, if the State determines that the
local entity is incapable of carrying out corrective action
properly.
Guidance
Use of the Trust Fund for emergencies and mitigation of
imminent hazards is allowable because human health and the
environment should not be endangered if actions can be taken to
minimize it. The State, however, should pursue recovery of such
expenditures from the responsible government entity.
As with other RPs, use of the Trust Fund for site
investigations, enforcement, and oversight of government entity-
lead cleanups results in desirable leveraging of Trust Fund
monies. Cost recovery of these expenditures should be consistent
with the cost recovery policy contained in section II. I. of
these guidelines.
The Trust Fund may not be used for cleanups at Federal or
State UST facilities. EPA considers these entities (by
definition) to have the requisite financial strength to cover the
costs of taking corrective action and compensating third parties
in the event of a release. The State should look to these
entities to undertake and pay for the cost of cleanup, through
enforcement action if necessary.
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3 'J J u'
The Trust Fund may be used for cleanups at local government
facilities, if the State determines they are incapable of
carrying out corrective action properly, and if the State decides
they are high priorities compared to other eligible sites. The
State should treat these entities as they would other responsible
parties. The State should look first to the government entity to
undertake and pay for the cleanup, and expect the entity to have
the required level of financial assurance. If the Trust Fund is
used, cost recovery should follow.
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OSWER DIR. 9650.7
D. SOLVENCY OF OWNERS AND OPERATORS
Policy
Solvent responsible parties (RPs) are expected to undertake
and pay for corrective action, either voluntarily or in response
to corrective action orders, without use of the Trust Fund for
cleanup. The level of financial responsibility required to be
maintained by owners and operators is not a limitation of their
liability. When a release is discovered, States first should
seek to identify the tank's owner or operator and direct him to
perform the cleanup at his expense. Where time and circumstances
permit, States should pursue RP cleanups through enforcement
mechanisms. States may rely on the Trust Fund for cleanup when
they cannot identify an RP who will undertake action properly and
promptly.
Solvency becomes a consideration when undertaking cost
recovery. With regard to the financial condition of responsible
parties, solvency is defined as the ability to pay financial
obligations as they become due, including the costs of corrective
action and cost recovery. In cost recovery situations, States
should view solvency in terms of how much an RP can afford to pay
without becoming insolvent. In pursuing cost recovery, States
should not impair the ability of RPs to continue in business if
the RP complied with financial responsibility requirements and
there was no negligence or misconduct by the responsible party.
Guidance
Although Congress intended that solvent owners and operators
take responsibility for releases from their tanks, it is not
necessary to make a determination of the RP's insolvency in
order to access the Trust Fund for cleanup. The statute allows
for Trust Fund use if the State determines that an RP is
incapable "... of carrying out such corrective action properly."
Several conditions may give rise to this determination. For
example, an RP may be reluctant or refuse to comply with a
request or order to take corrective action, or the RP may claim
he cannot afford the cost of cleanup. Another example is the
situation where the costs of corrective action provided by the RP
exceed the. level of financial responsibility required to be
maintained, and the State determines that expenditures from the
Trust Fund are necessary to assure an effective corrective
action. If such sites are among the State's priorities, the
Trust Fund may be used for cleanup, with a more detailed analysis
of the RP's ability to pay performed later as part of the cost
recovery process.
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OSWER DIR. 9650.7
For cost recovery, when a State is deciding whether and for
what dollar amount to pursue the RP, more scrutiny should be
given to solvency. In these cases, the State should view
solvency in terms of how much an RP can afford to pay without
becoming insolvent. (Pursuant to RCRA Section 9003(h)(11),
however, States may not consider the RP's solvency, and are
directed by the statute to seek full cost recovery if the RP has
not complied with applicable financial responsibility
requirements.) The State may view the RP's ability to pay in
terms of a lump sum payment or on an installment basis, depending
on State preference.
The rationale for not forcing RP's to become insolvent is
found in the Congressional Conference Report for the Trust Fund
legislation:
"A full cost recovery is not intended where the owner or
operator has maintained financial responsibility as
required ... and the financial resources of the owner or
operator (including the insurance or other methods of
financial responsibility which was maintained) are not
adequate to pay for the costs of a response without
significantly impairing the ability of the owner or
operator to continue in business."
This provision is not a legal defense for RPs against
further cost recovery where deemed appropriate, but it provides
an indication of Congressional intent, particularly when small
businesses are concerned.
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E. LINKING OF TRUST FUND WITH STATE PROGRAM APPROVAL PROCESS
Policy
States are expected to make reasonable progress during FY 89
toward submitting a completed application to EPA for approval of
their UST prevention, corrective action, and financial
responsibility programs under Section 9004 of RCRA. A State's
success in making reasonable progress toward submitting a
complete application may be grounds for increasing State access
to the Trust Fund in FY 90.
Guidance
The long-term objectives of the Trust Fund clean-up and the
UST regulatory programs are to protect human health and the
environment due primarily to releases to groundwater caused by
leaking USTs. Cleaning up releases using the Trust Fund is an
immediate need, but by itself is a short-term and temporary
solution. The long-term solution is for States to develop
prevention programs which, over time, will result in fewer
leaking tanks. States must also develop financial assurance
requirements or programs that will provide funds for future
cleanups.
Regions are encouraged to use the Trust Fund as an incentive
for States to run prevention programs and apply for State program
approval. Regions should develop criteria to measure State
progress and_.evaluate progress for each State. They should
consider adequate progress in allocating Trust Fund monies to
States in FY 90.
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iX JiK.
F. RELATIONSHIP OF THE TRUST FUND TO EPA'S TRANSITION STRATEGY
Policy
Following promulgation of EPA's corrective action
regulations for underground storage tanks, States with
cooperative agreements will be asked to carry out an acceptable
level of activities to implement the federal regulations during
the transition period prior to State program approval. There are
no plans for EPA to conduct corrective action activities for
petroleum UST releases in,these States, except in emergency
situations where a State requests EPA involvement in accordance
with OSWER Directive 9360.0-16A, Guidance for Conducting Federal-
Lead Underground Storage Tank Corrective Actions.
Guidance
EPA has developed a Transition Strategy that identifies
roles for EPA and the States during the period of time between
the effective date of the federal UST regulations and the dates
State programs are authorized by EPA to operate in lieu of the
federal program. This strategy emphasizes program implementation
by State and local programs, with federal resources in a support
role. The transition period will be characterized by the
continued development of State and local programs.
Activities that States carry out under their Trust Fund
cooperative agreements generally will provide adequate
implementation of the federal corrective action regulations
during the transition period. The minimum site-specific
activities necessary to implement the federal corrective action
program for petroleum USTs, as specified in 40 CFR Parts 280.60 -
280.66, are allowable costs for States to incur using the Trust
Fund.
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OSWER DIR. 9650.7
G. COMPLIANCE WITH CORRECTIVE ACTION REGULATIONS
Policy
Corrective actions taken after the effective date of the
federal corrective action regulations (40 CFR Parts 280.60-
280.66) must be performed in a manner that is consistent with the
substantive requirements of the federal regulations.
Guidance
This policy pertains to the actual performance of UST
cleanups. It is not intended to supplant the State program
approval process for corrective action. For example, States need
not have, at time of award, their own statutes and regulations in
place that are no less stringent than the federal regulations.
Rather, States need to assure that the actual cleanups performed,
either by RPs or the State, reflect the substantive requirements
of the federal corrective action regulations, until approval of
the State's program to operate in lieu of the federal program.
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OSWER DIR. 9650.7
H. PROGRAM APPRAISAL REPORTING REQUIREMENTS
Program Appraisal Strategy
In FY 89, EPA will begin to implement a formal program
appraisal system. The program appraisals will focus on balancing
oversight of State UST programs with service to the State's
needs. Guidance on the FY 89 appraisal process is contained in
the Program Appraisal Strategy. The types of reports that will
continue to be part of EPA's appraisal process are summarized
below.
Reporting Requirements
States will be required to submit two types of reports in
FY 89:
1) Quarterly Progress Reports, including:
a) Exception Reports,
b) Trust Fund Usage Forecasts, and
c) Financial Reports
2) Financial Status Report SF 269 (year end), and Federal
Cash Transactions Report SF 272 (quarterly).
Quarterly Progress. Exception, and Trust Fund Usage
Forecast Reports
In quarterly progress reports for State cooperative
agreements, EPA is requesting that each State submit data on
activities that are supported by Trust Fund monies as well as
comparable information on the accomplishments of the State's
program as a whole. The FY 89 reports contain minor changes and
additions from FY 88 reports, and the Trust Fund usage forecasts
are mandatory in FY 89. Exhibit 1 lists the data elements that
are contained in the quarterly progress reports.
All States should report in a timely and accurate fashion
the data needed for the quarterly activities report and the
Strategic Planning and Management System (SPMS) report for the
EPA UST program. Regions will need to relay this data to OUST/HQ
within 10 working days of the end of each federal fiscal quarter.
Regions and States may develop reporting schedules that allow
them to meet these deadlines.
Financial Status Reports
The Office of the Comptroller is responsible for issuing
Agency financial policies and procedures for tracking the LUST
Trust Fund in the Agency's Financial Management System (FMS).
State UST Programs will be required to comply with the
Comptroller's policies and directives concerning cost accounting
and Letter of Credit drawdown procedures for the LUST Trust Fund.
OUST will be coordinating its program appraisals with the
Comptroller's fiscal review procedures as they are developed for
FY 89.
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OSWER DIR. 9650.7
EXHIBIT 1
FY 89 ACTIVITIES REPORTING FOR U.S. EPA OFFICE OF
UNDERGROUND STORAGE TANKS
1. Number of Site Investigations Completed
2. Number of Emergency Responses Taken
3. Number of Sites Where Enforcement Actions Taken to Complete
Clean-Up
4. Number of Sites Where Cost Recovery Initiated
5. Site Clean-Ups for Petroleum Releases—Initiated
a. Responsible Party lead
b. State lead with Trust Fund money
c. State lead with no Trust Fund money
6. Site Clean-Ups for Petroleum Releases—Under Control
a. Responsible Party lead
b. State lead with Trust Fund money
c. State lead with no Trust Fund money
7. Site Clean-Ups for Petroleum Releases—Completed
a. Responsible Party lead
b. State lead with Trust Fund money
c. State lead with no Trust Fund money
8. Exceptions Report (Identify by site where:)
a. State plans to use innovative or experimental
technology at the site
b. State plans to provide permanent alternative water
supply
c. State plans to permanently relocate residents
9. Forecasting Trust Fund Use
Number of Sites with Confirmed Releases Where:
a. Owner/Operator has been identified
b. Owner/Operator is insolvent/incapable of conducting
timely clean-up
c. Responsible Party search not completed
J&-. Search for Responsible Party unsuccessful
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OSWER DIR. 9650.7
EXHIBIT 1 (Cont.)
10. Financial Report
State plans to spend over $100,000 of Trust Fund
money at site; include amount
State has obligated over $100,000 of Trust Fund
money at a site; include amount
State actually spent over $100,000 of Trust Fund
money at a site; include amount
For any site, State reached a cost recovery
settlement; include amount
For any site, cumulative cost recovery payments
received; include amount
Optional. Aggregate State dollars outlayed for site
responses
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OSWER DIR. 9650.7
I. COST RECOVERY
The primary purpose of cost recovery under the LUST Trust
Fund is to serve as an incentive for responsible parties to
comply with technical and financial responsibility requirements,
and to be responsible for cleaning up releases from their own
tanks. Thus, State-lead cleanups followed by cost recovery
should occur in a minority of cases. When cost recovery is
necessary, it will provide income for additional cleanups.
Variations in State procedures can be expected, but
generally States will be responsible for all of the following
activities in cases that they deem to be high priorities:
o Determination of a release
o Notification of responsibility to the owner or
operator
o Negotiation for corrective action (in non-emergency
situations)
o Cleanup (if the owner or operator is incapable or
unwilling to clean up)
o Demand for payment
o Negotiation for a settlement of the recovery claim
o Litigation (when demand for payment and negotiations
fail)
States are encouraged to tailor these procedures to suit
their individual programs and to save program resources. For
example, States are encouraged to investigate and make use of
alternative methods of dispute resolution (e.g., arbitration).
In addition, the specific policy guidance that follows has been
developed to insure that cost recovery resources are used
efficiently and stimulate compliance by responsible parties.
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OSWER DIR. 9650.7
State And Federal Roles In Cost Recovery
Policy
States are responsible for undertaking judicial cost-
recovery actions, settling claims, and compromising cost recovery
claims for expenditures from the Trust Fund. The Federal
government will be bound by these actions but will exercise
general oversight over the State's activities. At this time,
States are responsible for returning recovered Trust Fund monies
to the Trust Fund.
Guidance
As part of their responsibility for operating the cost
recovery program, the States will need to exercise authority to
recover Trust Fund expenditures, namely, to litigate, settle and
compromise claims-against RPs. Compromising claims means
accepting less than the full value of the settlement. States may
compromise claims under the conditions described in the Federal
Claims Collection Standards (4 C.F.R. Ch. II 103) which includes
an RP's inability to pay, the likelihood of unsuccessful
litigation, the cost of collecting the claim, and enforcement
policy. Although EPA and the Department of Justice are currently
attempting to resolve the issue of the States' legal authority to
bring judicial recovery actions and reach settlements without
Federal involvement, this policy assumes that sufficient grounds
for this authority exists under Section 9003(h) of RCRA. Thus,
States with cooperative agreements will exercise enforcement
discretion, litigate and settle cases, and, where necessary,
compromise claims. In general, States will be encouraged to seek
negotiated settlements to facilitate recovery of Trust Fund
monies and minimize State resource expenditures. The factors to
be considered, when deciding whether to litigate include the
solvency of the RP, the cost of cleanup, the likelihood of
recovery, the case's deterrence value, and the opportunity costs
(State resources that could be used in pursuing other cases or in
other parts of the State's Trust Fund program).
Generally, EPA will be bound by State judicial actions and
settlements. However, if EPA finds in the oversight process that
a State is mismanaging cost recoveries, the Agency will offer the
State appropriate assistance in correcting any problems. If
mismanagement persists, the Agency may take appropriate action
under regulations governing cooperative agreements.
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OSWER DIR. 9650.7
At the present time, States will be required to return
monies attributable to Trust Fund expenditures to the U.S.
Treasury. At a minimum, EPA plans to provide additional funds to
States in some proportion to their success in recovering Federal
expenditures, in the future, States might be able to keep
recovered funds for use on additional Trust Fund eligible
activities. EPA expects to resolve this issue within the next
few months and will promptly inform States of any changes in
current policies.
If State recovery actions are based on Subtitle I rather
than on State authorities, States should notify the EPA Regional
Office at the time the action is filed. This will allow EPA to
determine whether the action might affect the scope of the
Agency's Subtitle I authorities.
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OSWER DIR. 9650.7
Priorities For Cost Recovery
Policy
States should establish priorities for cost recovery cases
that devote greatest efforts to responsible parties who are
solvent but recalcitrant, and RPs who fail to comply with
financial responsibility requirements. In addition, some effort
should be devoted to all cases involving Trust Fund cleanups or
enforcement actions. This means, at a minimum, a search for
responsible parties (RPs) and a demand for payment if an RP is
located.
Guidance
Where the State expends Trust Fund money for corrective
action or enforcement, the State will pursue recovery of costs
from responsible parties. Timely processing of cases (and
litigation where necessary) increases the chances of successful
recovery. However, the level of recovery effort that should be
devoted to any RP should be based on a weighing of the resource?
necessary to conduct negotiations and pursue litigation against
the amount that may be recovered and the prospects for recovery.
The determination should be based on factors such as: the
solvency of the RP, the cost of cleanup, the likelihood of
recovery, the deterrence value of the case, and opportunity costs
(State resources that could be used in pursuing other cases or in
other parts of the State's Trust Fund program).
States will develop their own priority systems based on
these and other relevant considerations, but there are general
circumstances where cost recovery should be assigned a high
priority, low priority, or is impractical where owners or
operators cannot be located.
High priority - Solvent RPs who refuse to comply with
corrective action orders or are otherwise
recalcitrant should be pursued aggressively, to serve
as a warning to the regulated community and to
stimulate compliance by other RPs.
priority - Owners and operators who do not comply
with financial responsibility requirements should be
pursued vigorously. Although Section 9003 of RCRA
generally allows consideration of whether pursuit of
full cost recovery will significantly impair an RP's
ability to continue in business, States are precluded
by statute from considering this factor if the RP has
not complied with financial responsibility
requirements in effect at the time.
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OSWER DIR. 9650.7
Low priority - Insolvent or financially distressed RPs
should be given lesser emphasis as a class, although
selective pursuit within the class should be
undertaken where the RP could afford lesser amounts,
is hiding assets, fails to cooperate, or is negligent.
Whenever States perform corrective actions using the
Trust Fund, the RP should, at a minimum, be sent a
demand for payment. The level of additional State
effort beyond this point should be based on an
evaluation of the factors listed above.
Minimum priority - Sites where a liable owner or
operator cannot be identified will reguire
expenditures from the Trust Fund for cleanup.
Efforts to recover costs expended at these sites will
only rarely result in recovery of funds. However,
States should make reasonable efforts to locate a
liable owner or operator before assigning a low
priority to cost recovery in these cases.
States must formally close out all cases, including those
of low priority or not pursued, and document the reasons for the
decision. Factors justifying close out include consideration of.
strength of evidence, the nature of the release, cost of further
pursuit in relation to potential recovery, and bankruptcy or
other low priority status. States should not allow the statute
of limitations (SOL) to run and justify case closure solely on
that basis. Cases generally should be pursued promptly and
priorities revised as SOL deadlines approach.
States bringing recovery actions using their own
authorities should consult their statutes and case law to
determine the applicable statutes of limitations. EPA believes
that the statute of limitations applicable to the Subtitle I
recovery authorities is six years, however some courts have
applied three year limits in similar cases. To be prudent any
States using Federal authorities should proceed assuming the
three year limit applies, at least until the courts have
clarified the issue.
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OSWER DIR. 9650.7
Recoverable Costs
Policy
Owners and operators are liable for all costs of corrective
action and enforcement, including interest and the indirect costs
associated with these activities that are paid for by the Trust
Fund. To calculate indirect costs States will apply the indirect
cost rates that are negotiated annually with federal agencies
under the terms of the Office of Management and Budget Circular
A-87. States are not required to pursue Trust Fund expenditures
for program management costs incurred by the U.S. E.P.A.
States will assess and may collect interest on Trust Fund
expenditures used for corrective action and enforcement pursuant
to 31 U.S.C. 3717 and the Federal Claims Collection Standards
(4 CFR Ch. II 102.13). Interest charges should provide
incentives for responsible parties to settle cost recovery
claims. Forthcoming guidance will include more detailed
information on how to assess interest charges.
Owners and operators are also liable for Trust Fund
expenditures made by States in overseeing responsible party
cleanups. Generally, the costs of oversight are comparatively
low. Therefore, EPA expects that States will exercise discretion
in determining an appropriate level of effort to devote to
pursuing oversight costs.
Guidance
States should focus their efforts on recovering the direct
costs of corrective actions and enforcement. These costs are
most easily documented and defended in litigation. EPA expects
that the costs of overseeing cleanups by cooperative owners and
operators will usually be a lower priority for recovery because
Fund expenditures for oversight of a typical cleanup will be
comparatively small. In addition, States may wish to exercise
their discretion and waive these costs in cases where this will
provide valuable incentives for owners and operators to clean up
releases from their tanks.
In seme cases States will expend significant enforcement
resources to compel reluctant owners or operators to cleanup or
to pay cleanup costs (e.g., legal costs associated with
protracted negotiations, issuance of cleanup orders and
litigation). These costs are recoverable. Accounting for them
will give States additional leverage in their attempts to reach
agreements for RP cleanups and settlements for cost recovery.
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•OSWER DIR. 9650.7
Documentation Of Costs
Policy
States are required to document corrective action and
enforcement costs on a site-specific basis.
Guidance
States must establish a financial cost accounting system
that tracks the costs of cleanup and enforcement activities on a
site-specific basis. States are normally not required to begin
site-specific accounting until a Trust Fund-financed, detailed
site investigation or an emergency response has begun. A
detailed site investigation is an attempt to determine the
source, extent and severity of a release. An initial site visit
(e.g., to determine if a release has occurred) should generally
not trigger site-specific accounting because not all sites will
be candidates for Trust Fund expenditures and cost recovery. If
an RP is clearly recalcitrant, however, site-specific accounting
should begin as soon as costs are incurred. Site-specific
information needed on corrective action activities and costs for
sites where Trust Fund monies are used includes:
Site location and description
Results of site investigations (including
identification of responsible parties)
Enforcement actions taken
Documentation of responses taken and time frames
Documentation of all costs, identifying Trust Fund
monies expended.
Enforcement costs include all expenditures reasonably
related to inducing a recalcitrant RP to comply and to recovering
clean-up expenditures.
States should establish cost-effective accounting systems
to support recovery of Trust Fund monies in state courts.
Features of cost documentation that are essential to recovering
costs in court include:
Expenditures are reasonable and necessary
""Expenditures are documented (i.e., record includes
proof that work or purchase was authorized by the
State; the work or purchase was completed; the State
was billed; and the bill was paid).
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