United States
Environmental Protection
Agency
Solid Waste and Emergency
Response
(OS-420 WF)
EPA510-F-93-002
April 1993
oEPA UST Program Facts
Financial Responsibility
Purpose of financial responsibility
requirements
Under Subtitle I of the Resource
Conservation and Recovery Act (RCRA),
Congress directed the U.S. Environmental
Protection Agency (EPA) to develop
financial responsibility regulations. The
regulations:
arc designed to make sure owners
and operators of underground
storage tanks (USTs) can pay to
address the repercussions of a leak,
spill, or overfill;
require owners of USTs to show that
they have the financial resources to
clean up the site, correct
environmental damage, and
compensate third parties for injury
to their property or themselves; and
• set standards both for the minimum
amount that must be available in
case of a single release and on an
annual basis in the event of multiple
releases.
Amount of coverage required
Under the Superfund Amendments and
Reauthorization Act (SARA) which
amended Subtitle I, Congress directed
EPA to set the required amount of per
occurrence coverage at $500,000 to $1
million, depending on the type and size
of the business. (See illustration.)
How can owners and operators
demonstrate financial responsibility?
Owners and operators must obtain
commercial environmental impairment
liability insurance; demonstrate self-
insurance; obtain guarantees, surety
bonds, or letters of credit; place the
required amount into a trust fund
administered by a third party; or rely on
coverage provided by a state financial
assurance fund.
State financial assurance funds
States arc developing financial assurance
funds to reduce the economic hardship of
compliance with financial responsibility
requirements and to help cover the costs
of cleanups. State financial assurance
fund programs, which supplement or
substitute for private insurance, have
been especially useful for small-to-
medium sized petroleum marketers.
Other characteristics of the funds:
• Financial assurance funds are
created by state legislation and
must be approved by EPA before
they can be used as compliance
mechanisms.
-------
In most cases, states generate money
for the funds with tank registration
and petroleum fees.
Legislatures delegate authority for
the fund to a state agency addressing
health, environmental, or insurance
issues.
State assurance funds typically
incorporate eligibility requirements,
such as demonstrations that facilities
are in compliance with technical
requirements and evidence of
satisfactory inventory control and
recordkeeping.
• Most state funds contain some
deductible that the owner or
operator is responsible for
paying. Details on the funds are
specific to each state.
State financial assurance funds also
provide money to pay for corrective
action.
Number of state financial assurance
funds
As of June 1, 1992, 29 states had state
financial assurance fund plans approved
by EPA. Seven had submitted fund
plans for approval and seven had plans
Requirements and Deadlines for Financial Responsibility
Deadlines for Compliance
Jan. 1989
Petroleum
Marketers with
1 ,000 Tanks
April 1991
Petroleum
Marketers with
13-99 Tanks
Oct. 1989
Petroleum
Marketers with
1 00-999 Tanks
Dec. 1993
Petroleum
Marketers with
1-1 2 Tanks
Jan. 1989
Non-Marketers
with Net Worth
of $20 Million
Dec. 1993
Non-Marketers
with Net Worth
of Less Than
$20 Million
Estimated Early 1994*
Local Governments
Throughput of
Facility
Per Occurrence
Coverage
10,000 Gallons
or Less
Monthly
More than
10,000 Gallons
Monthly
Aggregate
Coverage
$1 Million
if You
Have 100
or Fewer
Tanks
OR
$2 Million
if You
Have More
Than 100
Tanks
'Deadline will be one year following publication of the final rule on additional mechanisms for local governments, still
under EPA review as of January 1, 1993.
-------
that they had not submitted for approval.
Seven states and the District of Columbia
had no program.
Deadlines to comply with financial
responsibility requirements
EPA adopted a phase-in schedule that
requires larger owners and operators -
with relatively greater financial resources
- to comply with requirements before
smaller businesses. The schedule has
been adjusted twice to respond to smaller
businesses' concerns about the
availability of assurance mechanisms.
The deadline for Group 4, which
represents the smallest owners and
operators, for example, has been
extended to December 31, 1993. (See
chart.)
Level of compliance with financial
responsibility regulations
EPA estimates almost all Group 1 firms
are in compliance because they generally
have sufficient net worth to self insure.
After surveying gasoline marketers, a
trade association estimated that about 85
percent of owners and operators in
Groups 2 and 3 are in compliance.
Cost of demonstrating financial
responsibility
EPA acknowledges that the cost of
complying with the technical and
financial responsibility requirements will
be a burden to some owners and
operators, especially those with older
tanks. The cost of complying with the
regulations may have exacerbated an
existing trend for retail petroleum
marketers - especially small, rural
marketers - to close.
• Because underwriting criteria for
most private insurance and
eligibility requirements for some
state assurance funds require that
tanks be in compliance with
federal or state technical standards,
many owners and operators are
faced with the costs of meeting
technical requirements at the same
time they meet financial
responsibility costs.
• The cost of meeting technical
requirements generally accounts for
the majority of regulatory
compliance costs incurred by UST
owners and operators.
• In terms of the costs for meeting
financial responsibility requirements,
insurance premiums for a facility
with three to five upgraded tanks
usually run about $3,000 per year.
Owners and operators who
participate in a state, financial
assurance fund generally pay annual
tank fees of from $100 to $250 per
tank.
In developing the regulations, EPA has
made an effort to be sensitive to the
financial impact of the regulations on small
business. EPA phased in compliance
deadlines, allowing the smallest businesses
the longest time to comply. It has since
responded to business owners' concerns by
delaying compliance dates for the smallest
owners and operators. EPA also has worked
with states to develop state financial
assurance funds and grant and loan
programs.
Financial Responsibility is one in a series of fact
sheets about underground storage tanks (USTs)
and leaking USTs. The series is designed to
help EPA, other federal officials, and stale
authorities answer the most frequently asked
questions about USTs with consistent, accurate
information in language the layperson can
understand. Keep the fact sheets handy as a
resource. This fact sheet addresses federal
regulations. You may need to refer to applicable
state or local regulations, as well. For more
information on UST publications, call the
RCRAISuperfund Hotline at 800 424-9346.
------- |