United States
                         Environmental Protection
Solid Waste and Emergency
(OS-420 WF)
April 1993
oEPA            UST  Program   Facts
                         Financial  Responsibility
                         Purpose of financial responsibility

                         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

                               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
              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

                              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

                              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
                                                           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

                                                    Number of state financial assurance

                                                    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
Marketers with
1 ,000 Tanks
April 1991
Marketers with
13-99 Tanks
Oct. 1989
Marketers with
1 00-999 Tanks
Dec. 1993
Marketers with
1-1 2 Tanks
   Jan. 1989
 with Net Worth
  of $20 Million
  Dec. 1993
with Net Worth
 of Less Than
  $20 Million
     Estimated Early 1994*
      Local Governments
                       Throughput of
Per Occurrence
                                      10,000 Gallons
                                         or Less
                         More than
                       10,000 Gallons
                       $1 Million
                         if You
                       Have 100
                       or Fewer


                       $2 Million
                         if You
                      Have More
                       Than 100
'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

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

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

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

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.