LUST Trust Fund Compendium
U.S. Environmental Protection Agency
Office of Underground Storage Tanks
March
1991
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3
An Introduction to the
UST and LUST Trust Fund Compendiums
Why have a compendium? The Regional Program Managers
expressed the need for a tracking
system for Office of Underground
Storage Tanks (OUST) documents as
well as a central place to refer to
these documents. Historically, some
documents have not been received or
if received misplaced, destroyed or
not routed to all concerned parties.
We have developed compendiums and a
tracking system to resolve these
i ssues.
What is in these The compendiums contain major UST
compendiums? and LUST policy and guidance
documents which are two 3-ring
binders. One binder will house
documents related to UST activities.
A second binder will house documents
that relate to LUST activities.
Only OUST's major policy and
guidance documents will be included
in these compendiums. To conserve
space you may find documents that
address both UST and LUST issues in
only one binder. Acquaint yourself
with the compendiums by referring to
the table of contents.
The compendiums are for the Regional
UST program and the Regional Counsel
Who are these compendiums working on UST issues. There is one
for and who is compendiums coordinator in OUST and
responsible"' for them? one in each region to maintain the
region's compendiums.* One set of
the compendiums will be sent to the
Regional compendiums coordinator and
a second set will be sent to the
appropriate Regional Counsel.
* You will need to determine who
will update the Regional Counsel
compendiums.
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4
What about updating the
compendiums ?
Building upon the premise that every
new policy and guidance document is
immediately distributed to the
regions by the originator, the
compendiums would only provide
reference copies and thus should
only require updates on a quarterly
basis. If the flow of new additions
warrants it, we can send out updates
more frequently.
How can
that a
missing?
you determine
document is
A numbering system based upon
subject, calendar year and
sequential number is used to
integrate document identification
and tracking receipt of documents.
For example, a new addition to the
State Program Approval section,
Guidance subsection can be numbered
as such: SPA/G/90-1. This number
contains "SPA" for state Program
Approval section, "G" for guidance
subsection, "90" for calendar year
and "1" for sequential number within
this subsection. Using this example
if you next receive a document
numbered SPA/G/90-3, you will know
that document numbered SPA/G/90-2 is
miss ing.
Will these compendiums
replace the LUST Trust
Fund compendiums issued
in 1988?
To avoid
compendiums
replacement
compendiums.
confusion, the new
should be seen as a
of the existing
You should keep the
1988 compendiums as a reference
binder to archive infrequently used
and old policy and guidance
documents. Documents from the new
compendiums will be archived on an
annual basis. A memorandum will be
sent to you with instructions on
what documents to archive.
If you have any questions about the compendiums please direct them
to Lela Hagan at FTS 475-7261 and after April 12, 1991 at FTS 398-
8863.
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LUST TRUST FUND COMPENDIUM
Contents
Title Date
ALLOCATION
FY 1995 Final LUST Trust Allocation 12/2/94
FY 1994 LUST Trust Fund Allocation 7/16/93
FY 1991 LUST Trust Fund Carryover 5/22/92
FY 1993 LUST Trust Fund Allocation
Annual Tank Data for FY 1993 LUST 4/17/92
Trust Fund Allocation
Quarterly Data for FY 1993 LUST 4/16/92
Trust Fund Allocation
FY 1993, Trust Fund Allocation Sample Run 2/21/92
FY 1993 FY 1994 and FY 1995 LUST Trust 1/6/92
Fund Allocation Methodologies
Final FY 1992 LUST Trust Fund Allocation 11/21/91
FY 1992 LUST Trust Fund Allocation 6/4/91
Final FY 1991 LUST Trust Fund Allocation 11/19/90
FY 1990 Trust Fund Allocation 1/5/90
FY88 Trust Fund "Bonus Pool" Guidance 4/8/88
Final Fy 1989 Truat Fund Allocation 2/23/88
COOPERATIVE AQREEMBHTS
Financial Kanagamant
Financial Management of the LUST 11/2/90
Trust Fund Program
Leaking Underground Storage Tank 6/89
Trust Fund Fiscal Review Guide
l
(06/27/95)
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Title
Date
COOPERATIVE AGREEMENTS (continued)
Financial Management (continued)
LUST Trust Fund State Financial 3/89
Management Handbook
Letter of Credit Drawdown Procedures 8/12/87
for States Receiving LUST Trust Fund
Cooperative Agreements
Guidance
Revisions to LUST Trust Fund Policy 8/23/91
and Guidance
LUST Trust Fund Cooperative Agreement 2/8/89
Consolidated Guidelines
(OSWER Directive 9650.10)
COST RECOVERY — V/>>
Current Interest Rate for LUST Trust Fund 1/24/92
Expenditures
Interest Charge on 1990 Trust Fund 2/16/90
Expenditures
Cost Recovery Policy for the Leaking 10/7/88
Underground Storage Tank Trust Fund
(OSWER Directive 9610.10)
Developnant of LUST Cost Recovery 3/25/88
Policy and Financial Management Guide
2
(06/27/95)
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Title
Date
*
INDIAN LANDS
Final Indian Lands Implementation
Tool Kit
1/91
Final UST Program Indian Lands Strategy
3/14/88
REPORTING
Quarterly Activities and Clarifications of Trust Fund
Allocation Definitions
Program Definitions and Reporting Matrix
Final Definitions for Measures of National Program Progress
Trust Fund Reporting Requirements for FY 1990
3
(06/27/95)
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LUST TRUST FUND COMPENDIUM
Abstracts
ALLOCATION
FY 1995 Final LUST Trust Fund Allocation
[Provides the FY9S'final LUST Trust Fund
regional allocation based on the FY95
Programmatic Operating Plan]
12/2/94
FY 1994 LUST Trust Fund Allocation
(Provides data for Region LUST Trust Fund
distribution.]
7/16/93
FY 1991 LUST Trust Fund Carryover
[Summarizes available alternatives to Regions for
distributing carryover funds.]
FY 1993 LUST Trust Fund Allocation
(Provides formula to be used for the allocation
along with estimates for each Regiorv ]
Annual Tank Data for FY 1993 LUST Trust Fund Allocation
(Provides tank data for each Region to review for
accuracy. Data to be used for LUST Trust Fund
Allocation formula.]¦
5/22/92
5/20/92
4/17/92
Quarterly Data for FY 1993 LUST Trust Fund Allocation
[Explains which STARs quarterly data will be used for the
LUST Trust Fund allocation. Ask RPMs for documentation
on STARS data.]
4/16/92
FY 1993 Trust Fund Allocation Sample Run
(Provides a sample run-through the FY 1993 allocation
formula to give an indication of possible Regional
allocation amounts.)
2/21/92
FY 1993, FY 19.94, and FY 1995 LUST Trust Fund Allocation 1/6/92
[Presents the FY 1993, FY 1994, and FY 1995 allocation
methodologies.]
Final FY 1992 LOST Trust Fund Allocation 11/21/91
[Present the final FY 1992 Regional Trust Fund allocation.]
FY 1992 LOST Trust Fund Allocation 6/4/91
(Presents FY 1992 Regional Trust Fund allocation.)
Final FY 1991 LOST Trust Fund Allocation
(Presents FY 1990 Regional Tru9t Fund allocation.}
11/19/90
1
(06/28/95)
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Title fAbstract 1
Date
ALLOCATIONS (continued)
FY 1990 Trust Fund Al.Locati.on 1/5/90
[Presents FY 1990 Regional Trust Fund allocation. )
FY 1988 Trust Fund "Bonus Pool" Guidance 4/8/88
[Explains criteria and procedures Cor accessing the
bonus pool.]
Final FY 1989 Trust Fund Allocation 4/7/88
(Presents FY 1989 Regional Trust Fund allocation.]
Final FY 1988 Trust Fund Allocation 2/23/88
(Presents FY 1988 Regional Trust Fund allocation.]
COOPERATIVE AGREEMENTS
Financial Management
Financial Management of the LUST Trust Fund Program 11/2/90
(Describes the financial management and related
cost recovery responsibilities of States participating
in the LUST Trust Fund.J
Leaking Underground Storage Tank Trust Fund Fiscal Review 6/89
Guide
[Explains requirements and suggested procedures for
assessment of financial management of State programs.
Fiscal Policies and Procedures Branch, Financial
Management Division. ]
LUST Trust Fund State Pinancial Management Handbook 3/89
[Describe* the financial management and related cost
recovery responsibi.xiti.ee of C "?s participating in
the LUST1 Trust Fund. ]
Letter of Credit Drawdown Procedures for States S-j ;''.Ing 8/12/87
LUST Trust Fund Cooperative Agreements
(Describes inter- " jut- ' ~nent EPA Letter
of Cradle ^ manual. Office ... the Comptroller.]
Guidance
Revisions to LUST Trust Fund Policy and Gu 8/23/91
[Revisions for State money match requlremsnia..
(06/27/95)
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Title fAbstract 1 . Date
COOPERATIVE AGREEMENTS Continued
Guidance
LUST Trust Fund Cooperative Agreement Consolidated 2/8/89
Guidelines
[Consolidated guidelines for administering LUST Trust
Fund Cooperative Agreements.)
COST RECOVERY
Current Interest Rate for LUST Trust Fund Expenditures 1/24/92
(Recommends minimum interest rate to be used by States
to calculate interest charges on Trust Fund expenditures.)
Interest Charges on 1990 Trust Fund Expenditures 2/16/90
[Recommends minimum interest rate to be used by States
to calculate interest charges on Trust Fund expenditures.]
Cost Recovery Policy for the Leaking Underground Storage 10/7/88
Tank Trust Fund
[Outlines policies, priorities, and procedures for cost
recovery under the LUST Trust Fund.)
Development of LUST Cost. Recovery Policy and Financial 3/25/88
Management Guide
(Overview of key policy decisions for cost recovery.
Office of the Comptroller and OUST.]
INDIAN LANDS
Final Indian Lands Implementation Tool Kit 1/91
[Presents the final changes made to the Indian Lands
Implementation Tool Kit.)
Final UST Program Indian Lands Strategy 3/14/88
[Defines UST program activities regarding Indian lands
for FY 1988 and 1989.)
REPORTIMG
Quarterly Activities and Clarificationsof Trust Fund 12/21/90
Allocation Definitions
(Provides additional clarification of the definitions
used in the Quarterly Activities Report and the Trust
Fund allocation method for FY 1991.)
3
(06/27/95)
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Title fAbstract 1
Date
REPORTING (continued)
Program Definitions and Reporting Matrix 3/21/90
(Identifies source documents and corresponding reporting
forms for required reporting elements.)
Final Definitions for Measures of National Program Progress 9/26/89
[Defines measures used to evaluate program progress.)
Trust Fund Reporting Requirements for FY 1990 6/12/89
[Response to comments on the draft FY 1990 Trust Fund
Activities Reporting Requirements along with the final
requirements. )
(06/27/95)
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CL&t>T
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OSWER Directive 9610.10
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OCT OFFiCEOF
' SOLID WASTE AND EMERGENCY RESPONS:
MEMORANDUM
SUBJECT:
FROM:
TO:
ATTN:
USB
'*<¦ obO14'
LUST Trust Fund Cost Recovery Policy and Special
Conditions '2-^
J. Wtfiston ^Porter
Assistant Administrator
Regional Administrators
Regions I-X
Waste Management Division Directors,
Regions I-III, V-IX
Water Management Division Directors, Regions IV, X
Attached is the final Cost Recovery Policy for the Leaking
Underground Storage Tank (LUST) Trust Fund. Also attached is a
set of special conditions for LUST Trust Fund cooperative
agreements that reflect the policy. Both are products of an
intensive effort to develop a framework for cost recovery that
incorporates the State-centered design of the Underground Storage
Tank program.
The Office of Solid Waste and Emergency Response worked
closely with the Office of General Counsel tJhe Office of the
Comptroller, the Regional UST programs, and other Headquarters
offices over the last year to develop this innovative policy.
These offices wore also instrumental in helping us obtain
concurrences on our approach from the Depa tment of Justice
(DOJ), th® Office of Management and Budget, and Congressional
staff.
The two most inriovative aspeetaco'f fche policy should provide
States with t£e autonomy and incentive to pursue recoveries
aggressively end,.efficiently. First, to s'-reattling the recov&ry
process, States will generalise be. able. t6 litigat®- ahd settle
cost recovery claims without the i-nVolveafent of EP^ or DOJ\
Second, to provide "incentives for pursuingcost recovery, States
will ifetaih recovered Trust Fund' expenditures to perform
additional cleanups or to sat.Lsfy their -eGstt^share requirements.
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OSVER Directive 9610.10
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This policy replaces the cost recovery section (Section
II.I) of OSWER Directive 9650.7 (Supplemental Guidelines for FY
89 LUST Trust Fund Cooperative Agreements!, dated April 7, 1988.
This policy will also be incorporated into a set of consolidated
LUST Trust Fund Guidelines that will be released in the next few
weeks.
To encourage States to proceed with recoveries on cleanups
now underway, Regions should amend all existing LUST Trust Fund
cooperative agreements to include the attached special
conditions. This will also eliminate inconsistencies in
recordkeeping and recovery procedures that would otherwise make
oversight of the program unnecessarily complex.
I am certain that this policy will help us continue to build
strong State underground storage tank programs. I want to
congratulate everyone who contributed to the development of the
policy.
Attachments
cc: Charlie Grizzle
Larry Jensen
Dave Ryan
Harvey Pippen
Tony Musick
Ron Bachand
Howard Corcoran
Louise Wise
Regional UST Program Managers
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OSWER Directive 9610.10
COST RECOVERY POLICY FOR THE LEAKING UNDERGROUND
STORAGE TANK TRUST FUND
A. Overview
This is EPA's first complete statement of its policies on
cost recovery under the Leaking Underground Storage Tank (LUST)
Trust Fund. It has required a year of coordinated effort by
various EPA offices to develop and to secure necessary approvals
within the Agency and from other agencies and officials in the
executive and legislative branches of government. Working with
and through States to implement this policy, EPA expects that it
will help cost recovery to become a practical and effective tool
that States will use to both stimulate and fund more cleanups of
releases from underground storage tanks.
Objectives of Cost Recovery
The primary purpose of cost recovery under the LUST Trust
Fund is to provide incentives for owners and operators to comply
with technical and financial responsibility requirements, and
most importantly to clean up releases from their own tanks. EPA
expects that State-lead cleanups followed by cost recovery will
continue to occur in a minority of cases, because the majority of
cleanups are conducted by owners and operators. When cost
recovery is necessary, it will generate income for additional
cleanups.
Cost recovery as practiced under the LUST Trust Fund will
depart significantly from the approaches taken in other Federal
environmental response programs. Consistent with the State-
centered design of the underground storage tank program, States
will implement the cost recovery program, have considerable
discretion in operating it, and benefit directly from their
successful recoveries.
The two most innovative aspects of EPA's cost recovery
policy for the LUST Trust Fund should provide States with the
autonomy and the incentive necessary to pursue recoveries
aggressively and efficiently. First, States with cooperative
agreements will litigate and settle recovery claims without the
routine involvement or concurrence of EPA or the Department of
Justice. Second, States may retain any Trust Fund monies they
recover for use on additional Fund-eligible cleanups and
activities.
Legal Rationale
The legal rationale behind this approach was developed by
the Agency in consultation with the Department of Justice.
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OSWER Directive 9610.10
Under 28 U.S.C. Section 516, the Department of Justice
(DOJ) must conduct any litigation in which the United States has
an interest unless there is an exception authorized by law. EPA
interprets section 9003(h) of Subtitle I to be such an exception,
allowing States under cooperative agreements that have the
capabilities to carry out effective corrective actions and
enforcement activities to exercise various program authorities,
including the cost recovery authority provided in section
9003(h)(6). These States may also settle cost recovery litigation
as part of the exercise of enforcement discretion conveyed by
section 9003(h).
Additionally, EPA interprets section 9003(h) to provide
authority for States to administratively settle cost recovery
claims. EPA believes that this authority includes the ability to
compromise or terminate Trust Fund claims based on considerations
of equity as described in section 9003(h)(6)(B) (e.g., reducing
the claim to the amount of required financial responsibility).
Finally, EPA has determined that, consistent with the
"program income" concept described in OMB Circular A-102, that
States may retain recovered Trust Fund monies to perform
additional eligible activities under their cooperative
agreements. Thus, appropriate requirements in 40 C.F.R. Parts 30
and 31 on the documentation and use of program income apply to
recoveries of Trust Fund money.
Recovery Procedures
Variations in State recovery 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
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OSWER Directive 9610.10
o Litigation (when demand for payment and efforts to
reach an administrative settlement fail)
o Collection and case closure
States are encouraged to tailor the specifics of these
procedures to suit their individual programs and to save program
resources. In addition, the detailed policy guidance that
follows has been developed to help ensure that cost recovery
resources are used efficiently and stimulate compliance by owners
and operators.
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OSWER Directive 9610.10
B. State arid Federal Roles in Cost Recovery
Policy
Under their cooperative agreements, States are responsible
for all legal, programmatic, and administrative activities
necessary to recover their expenditures from the LUST Trust Fund.
This includes undertaking administrative and judicial recovery
actions and settling claims. They are responsible for required
reporting and recordkeeping including documenting that their
Trust Fund recoveries are used for additional eligible
activities under their cooperative agreements. EPA will provide
general policy guidelines to States and make funding available
for recovery programs through the States' cooperative agreements.
EPA will also assess the performance of State cost recovery
programs and provide support and assistance to States where they
are needed to improve performance. The Agency will generally be
bound by settlements and judgments reached in States, but
reserves the right to pursue recoveries independently in the
extreme case. Also, EPA may pursue recoveries in those rare
cases where the Agency has performed a federal-lead response.
Guidance
States are expected to have adequate legal authorities to
undertake cost recovery either by having or acquiring their own
authorities, or certifying that they are able to use federal
authorities. States with their own recovery authorities should
also cite Subtitle I in their recovery actions (i.e., demand
letters, administrative orders, and judicial complaints) to
establish the liability of owners/operators to the federal
government for Trust Fund expenditures.
EPA is currently formulating policies on a number of issues
related to recovery litigation. One major unresolved issue is
whether States should bring judicial recovery actions in State or
federal courts. Until these issues are resolved, States should,
within one week, notify EPA's Office of Regional Counsel when
filing judicial recovery actions for sites where they have used
Trust Fund money for cleanup or enforcement. This will give EPA
the opportunity to consult with the State, determine whether the
action might affect the scope of the Agency's Subtitle I
authorities, and if necessary, provide technical or legal
assistance to the State. However, EPA will not require States to
delay recovery litigation while the Agency reviews complaints
submitted by States.
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OSWER Directive 9610.10
States must maintain accounting and recordkeeping systems
that will document all Trust Fund expenditures, support cost
recovery with site-specific records, and demonstrate that
recovered funds are retained and used for additional eligible
activities or as matching funds under their cooperative
agreements. State recordkeeping and accounting must conform to
requirements in these guidelines and in the forthcoming LOST
Trust Fund State Financial Management Handbook, when it becomes
available.
States will have considerable discretion in prioritizing
cases for cost recovery and determining an appropriate level of
effort to devote to each case. At a minimum, in each case States
should make reasonable efforts to contact owners and operators
who are liable for releases, notify them of their liability for
enforcement and corrective action costs, and demand payment. In
those rare cases where equitable factors support compromise or
termination1 of the Trust Fund claim, States should ensure that
the bases for any compromise or termination are adequately
supported in the records of the State and reflect the efficient
use of Trust Fund resources. States may compromise Trust Fund
claims when, for example, an owner/operator demonstrates that
he/she lacks the financial resources to pay the claim; the State
determines that the likelihood of success on litigating the
claim as small because of the absence of proof of liability or
unavailability of required witnesses; or costs of judicial
collection is disproportionately high. States should note that
their ability to reduce claims based on the equities described in
section 9003h(6)(B) is limited to cases where owners/operators
have maintained required levels of financial assurance.
Because they are more cost effective, negotiated settlements
are generally preferred over litigation. In many cases, however,
EPA expects that it will be necessary for States to initiate and
pursue judicial action to compel recalcitrant owners and
operators to pay cleanup costs. In deciding whether to litigate
individual cases States should consider the solvency of the
owner/operator, the costs of cleanup, the likelihood of recovery,
the case's deterrence value and the opportunity costs (the
resources necessary to proceed that could otherwise be used in
pursuing other cases or in other parts of the State's Trust Fund
program).
1/ As used here, the term "compromise" means accepting less
than the full value of the claim. The term "termination"
means forgoing any cost recovery whatsoever.
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OSWER Directive 9610.10
Even where no administrative or judicial settlement is
reached, States must formally close out all cases and document
the reasons for deciding not to proceed further. Factors
justifying case closure include the situations where costs of
pursuing a case further will approach or exceed the potential
recovery, bankruptcy of the owner/operator, and other reasons.
States should not allow the statute of limitation (SOL) to run
and justify closure solely on that basis. States should
generally pursue cases promptly and file actions in a timely
manner to enhance the chances for recovery. States should revise
their priorities for individual recovery cases as SOL deadlines
approach. Until the issue is resolved by the courts, States
relying solely on Subtitle I cost recovery authorities should be
prudent and proceed assuming a three year limit applies, despite
the fact that EPA believes that a six year limit is applicable.
This is necessary because some courts have applied the three year
limit to similar cases.
When States make successful recoveries at sites where Trust
Fund monies were used, they may retain the Trust Fund share as
program income consistent with OMB Circular A-102 and 40 CFR
Parts 3 0.525 and 31.25. This means that States may use
recovered federal Trust Fund monies for additional Fund-eligible
cleanups and activities under their agreements. When States
choose to do so, they must inform EPA, and keep appropriate
records of how the recoveries were used. States may also use
LUST Trust Fund recoveries to meet their cost share requirement
under section 9003(h)(7)(B). If a State elects to do this, it
must be specified in their cooperative agreement. In
negotiating their cooperative agreements, States and Regions
should develop contingency plans that will allow States to
obligate their recoveries efficiently. States should calculate
the federal Trust Fund share of their recoveries on a site-by-
site, pro rata basis. For example, if a State spends 50
thousand dollars of LUST Trust Fund money at a site, and the
State ultimately recovers 50 percent of all Federal and State
money used at the site, it must redirect 25 thousand dollars of
"program income" into Fund-eligible activities.
EPA expects States with cooperative agreements to
adequately fund and staff recovery efforts to deal with
anticipated case loads. Cost recovery activities are allowable
costs under Subtitle I. Where the recovery program is dependent
on the Attorney General's Office, the State should consider the
need for formal funding arrangements (e.g., a memorandum of
agreement) to ensure legal staffing for cost recovery referrals.
When the Trust Fund is not used to pay for such legal staffing,
States may wish to investigate the possibility of counting these
legal services as "in-kind contributions" toward satisfying their
match requirements under 40 C.F.R. Part 31.24.
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OSWER Directive 9610.10
EPA's principal responsibilities in cost recovery are to
provide funding, policy, guidance, oversight, and assistance to
States. The Agency's operational role in cost recovery will
generally be limited to pursuing recoveries in those cases vhere
EPA responds directly to a release, and in rare cases of
overfiling.
EPA intends to make its expectations for the activities and
performance of cost recovery programs reasonable and clear to
States in advance. This will occur through policy, guidance,
routine communications, program appraisal and reviews, and the
negotiation of cooperative agreements. The oversight and
assistance functions of EPA's program, grants, and financial
management offices will accommodate variations in State
procedures and capabilities to the maximum extent possible. The
Agency's goals will be to help build State capabilities,
particularly in developing recovery programs and to improve
performance. At present, EPA has no numerical expectations for
the performance of State recovery programs. Early in the
recovery program it will focus on States' progress toward
putting basic systems, policies, and procedures in place that
will enable them to recover Trust Fund expenditures efficiently
and effectively.
EPA is working with several States on pilot projects to
develop realistic expectations for program performance, and to
identify effective recovery procedures. The results will help
EPA support State programs with tools and guidance. They will
also help the Agency formulate and communicate more precise
expectations for program performance.
Generally, EPA will be bound by States* judicial actions and
settlements. However if EPA finds that a State is not
effectively implementing cost recoveries, the Agency will offer
the State necessary assistance in correcting any problems. The
Office of Underground Storage Tanks will be most interested in
seeing that States have adequate accounting and recordkeeping
systems in place and that States identify, develop, and pursue
appropriate recovery cases in a timely and sound manner. If
problems in these or other areas persist, the Agency may take
appropriate action under regulations governing cooperative
agreements. In extreme cases, EPA may consider filing a recovery
action against the owner/operator even though the State has the
authority to initiate an action or has already done so.
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OSWER Directive 9610.10
C. Recoverable Costs
Policy
Owners and operators are liable for all costs of corrective
action and enforcement, including interest, indirect and
"management and support" costs associated with these activities
that are paid for by the Trust Fund. 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.
Interest charges should provide incentives for responsible
parties to settle cost recovery claims. Procedures for assessing
interest charges are described separately in this document.
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 and the number of cases is very large. Therefore, EPA
expects that States will exercise discretion in determining an
appropriate level of effort to devote to pursuing oversight
costs.
Guidance
In each case, States will exercise their discretion in
determining exactly which costs they will pursue. EPA is more
interested in a State's overall record in cost recovery than in
retrospectively examining decisions to pursue particular costs in
hundreds or thousands of cases. Direct costs are most easily
documented and defended in litigation. However, EPA is
developing, and will soon distribute a simple procedure which
will allocate all non-site Trust Fund costs including "management
and support" costs to individual sites. Using this methodology,
States will have available to them the full cost of a particular
site cleanup at the time of the cost recovery action. To the
extent th^"1" they are legally able, States should allocate all
Trust Fund expenditures to sites for the purpose of cost
recovery. States may also develop their own systems for
allocating non-site costs and/or include additional State
overhead costs that are beyond the scope of their cooperative
agreements.
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OSWER Directive 9610.10
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 not pursue these costs in
cases where this will provide valuable incentives for owners and
operators to clean up releases from their tanks.
In some 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 cost
recovery, protracted negotiations, issuance of cleanup orders and
litigation). These costs are recoverable. Presenting these costs
to liable owners and operators with the direct costs of cleanup
will give states additional leverage in their attempts to reach
agreements for responsible party cleanups and recovery of costs.
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OSWER Directive 9610.10
D. Interest Charges
Pol icy
Owners and operators are liable for interest charges on
Trust Fund expenditures at their sites. States should assess
interest on expenditures from the Fund in the cost recovery
process. States are allowed to retain recovered interest for
additional eligible activities.
Guidance
Section 9003(h) of the Resource Conservation and Recovery
Act (RCRA) describes the States' "role in reccJVering LtJST tfrust"
Fund expenditures - but does not specifically address the
collection of interest on those expenditures. However, EPA is
entitled under the Debt Collection Act and common law authorities
to collect interest on Trust Fund expenditures. Since States
will have responsibility for recovering Trust Fund expenditures
under section 9003(h), the States will also assess and are
encouraged to pursue interest charges. Because States are
permitted to retain recoverable Fund expenditures for additional
cleanups and recoveries, they can also retain recovered interest
for use on additional eligible activities. The States'
collection of interest will deter responsible parties from
resisting payment in order to gain an interest-free loan on the
uncollected expenditures.
Before assessing interest, the State should notify the
debtor through a written notice (demand letter explaining the
agency's requirements concerning the debt and the interest).
Interest shall accrue from the date on which notice of the debt
and interest requirements is mailed or hand-delivered to the
responsible party.
The minimum recommended rate of interest that States should
assess for the current year is 6.00 percent. It is found in the
Yearly Percentage Bulletin printed every December with the rate
for the following fiscal year. The rate is equal to the average
investment rate for the Treasury tax and loan accounts. It
represents the current value of funds to the United States
Treasury, and is published by the Treasury's Financial Management
Service. EPA will notify States of the new rates each year.
EPA is examining the possibility of calculating a minimum
interest rate that more closely approximates the yield on Trust
Fund investments. The Agency will notify States if and when they
are to use this type of minimum rate.
-10-
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OSWER Directive 9610.10
A State may assess a higher rate of interest if it
reasonably determines that this is necessary to protect the
expenditures from the Trust Fund. The rate of interest as
initially assessed will remain fixed for the duration of the
indebtedness, except where a debtor has defaulted on a repayment
agreement and seeks to enter into a new agreement. New
agreements should reflect the current value of funds to the
Treasury at the time the new agreement is executed.
Interest should not be recovered if the amount due (Trust
Fund expenditures) is paid within 3 0 days after the date from
which the written notice was delivered to the responsible party.
However, the State may decide, on a case-by-case basis, to extend
the 3 0-day period for payment.
As part of their responsibility for settling claims, States
may decide not to pursue the collection of interest on a debt
entirely or in part once it has been assessed when they determine
it is in the best interest of the program. States may decide
not to pursue interest if the collection of interest puts the
responsible party in financial distress, or the cost of
collecting the interest will be more than the amount collected.
-11-
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OSWER Directive 9610.10
E. Priorities For Cost Recovery
Pol icy
Under their cooperative agreements States should have or
should develop systems to set priorities for cost recovery cases.
They should devote greatest efforts to cases where owners or
operators are solvent but recalcitrant, and to cases where they
fail to comply with applicable financial responsibility
requirements. 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, and "action thresholds" (see section "F")
have triggered site-specific accounting, 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 case should be based on a weighing of
the resources necessary to recover the claim 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
deterrent value of the case, and the opportunity costs (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 impracticable because 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.
-12-
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OSWER Directive 9610.10
High 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.
Low priority - States should generally commit fewer
resources to insolvent or financially distressed RPs,
although selective pursuit within the class should be
undertaken where the RP could afford lesser amounts,
is hiding assets, fails to cooperate, or was negligent
in allowing the release to occur. 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. Where cooperative owners and operators perform
cleanups, States may wish to make recovery of
oversight costs a low priority, to encourage voluntary
cleanups.
Impracticable - Sites where a liable owner or operator
cannot be identified will require expenditures from
the Trust Fund for cleanup. Efforts to recover costs
expended at these sites will 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.
-13-
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OSWER Directive 9610.10
F. Documentation Of Costs
Policy
States are required to document all Trust Fund expenditures
and all corrective action and enforcement costs on a site-
specific basis at each site where they have met any one of the
following "action thresholds": 1) performed an emergency
response; 2) begun a detailed site investigation; or 3)
determined that an owner or operator is or is likely to be
recalcitrant.
Guidance
States must establish a financial cost accounting system
that tracks the costs of cleanup and enforcement activities on a
site-specific basis when any one of the specified "action,
"thresholds" is met. States are normally not required to begin
, site-specific accounting until States or their contractors begin
Oops Ca_Tru"st Fupd^finance^), aetaiiea site investigation or an^
(emergencyresponS~AC an attempt to determine tne source, extent and severity of a
v/ i release. An initial site visit (e.g., to determine if a release
RP has occurred) should generally not trigger site-specific
^ accounting because not all sites will be candidates for
jk- l, significant Trust Fund expenditures and cost recovery. If an RP
clearly recalcitrant, however, site-specific accounting
should begin as soon as costs are incurred. Generally,
c contractor activity at a site will trigger site-specific
accounting.
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 including contractor invoices
Enforcement costs include all expenditures reasonably
related to inducing a recalcitrant RP to comply and to recovering
clean-up expenditures. They include the salaries and other
expenses associated with case development, negotiations, and
litigation.
/toe Adcv- j0(f/
!r\ scA-etfl -
-------
OSWER Directive 9610.10
States should establish cost-effective accounting systems
to support recovery of Trust Fund monies in courts. Features of
cost documentation that are essential to recovering costs in
court include:
Systems that are adequate for both cost recovery purposes
(i.e., will support the State's claim in administrative or
judicial action to recover) and audit purposes. At a
minimum, the system should provide proof that the work or
purchase was authorized by the State; the work or purchase
was completed; the State was billed; and the bill was
paid.
In many cases, States may have to respond to arguments
that the costs claimed are unreasonable and unnecessary.
The Financial Management Division of EPA's Office of the
Comptroller is developing more detailed guidance for State
accounting and recordkeeping. The LUST Trust Fund State
Financial Management Handbook will be made available by early FY
1989 to help States meet these accounting requirements.
-15-
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OSWER Directive 9610.10
Special Conditions
REQUIREMENTS FOR INCLUSION
IN LOST STATE COOPERATIVE AGREEMENTS
1. State agrees to maintain a financial cost accounting system
which meets the requirements of 40 CFR 3 0.510 or 40 CFR
31.20. For this and other requirements on grantees, Part
31 applies to all cooperative agreements with budget or
project periods beginning on or after October 1, 1988.
Part 31 also applies to all amendments of existing
agreements in which all of the activities in the
amendment's scope of work will be performed after October
1, 1988. Parts 30 and 3 3 (for procurement) apply to other
cooperative agreements and amendments.
2. State agrees to organize and maintain site-specific
information consistent with accounting thresholds and
policies described in the Supplemental Guidelines for FY
89 LUST Trust Fund Cooperative Agreements (OSWER Directive
9650.7) where Trust Fund monies are used. Prior to making
expenditures of Trust Fund monies for corrective and
enforcement actions, a system must be in place to record
these types of costs on a site-specific basis. When site-
specific accounting is required, all costs that can be
identified to a particular site should be charged
accordingly and State contractors must bill costs on a
site-specific basis for corrective action and enforcement
work performed at those sites.
3. The State acknowledges that expenditures from the LUST
Trust Fund constitute a liability of the owner/operator to
the United States. The State agrees to retain recoveries
of any LUST Trust Fund expenditures as program income, as
described in OMB Directive A-102 and 40 C.F.R. Parts
30.525(a) or 31.25(g)(2), to be used for additional
eligible Trust Fund activities. The State may also use
LUST Trust Fund recoveries to meet its cost share
requirements under RCRA Section 9003 (h)(7)(B), in
accordance with 40 CRF 31.25 (g)(3).
1
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OSWER Directive 9610.10
(CONTINUATION OF SPECIAL CONDITION 3 —
INSERT 1 OR 2 BELOW)
(INSERT 1. for States which have State authoritv consistent with
those in RCRA Section 9003(h) to recover response expenditures
The State therefore agrees that:
(a) It will make reasonable efforts to recover these costs,
including interest, from liable owners/operators.
States must send a copy of their complaint to EPA's
Office of Regional Counsel within one week of filing
judicial recovery actions for Trust Fund expenditures.
(b) It will report on any amounts received from the
owner/operator as recovered costs, or agreed or
adjudged to be owed by the owner/operator as
settlements for site clean-up, in accordance with
applicable guidance on Trust Fund Financial and
Quarterly reporting; and
(c) To the extent the State is successful in recovering
these costs, it will dedicate and use these funds for
additional Trust-Fund-eligible activities or for State
cost share requirements, and maintain appropriate
accounting of recovered funds in order to document the
reuse of recovered funds in accordance with the
requirements of 40 CFR 30.525 or 31.25, as
appropriate, and in accordance with applicable
requirements of this Cooperative Agreement.
(d) If the State has not yet done so, the State will submit
certification of its authorities to EPA within 120 days
after the award of this Cooperative Agreement. The
certification will be signed by: (1) the State's
Attorney General, (2) someone designated by the
Attorney General to sign such documents, or (3) the
State's or Governor's General Counsel or other such
official who is responsible for advising all executive
branch agencies on the scope of their authority.
(e) It will notify EPA promptly of any reduction in its
authority to recover response expenditures (e.g.,
successful challenge to its State statutory authority) .
(INSERT 2. for States lacking State authorities consistent with
those in Section 9003(h) of RCRA to recover response expenditures
2
-------
OSWER Directive 9610.10
The State therefore agrees that to the extent the State lacks the
authority or procedure to recover response expenditures on
behalf of the LUST Trust Fund (i.e.. the authority to recover
such costs from owners/operators and retain such monies for
additional LUST Trust Fund corrective action and enforcement),
the State will delay taking cost recovery action until the State:
(a) Obtains legislative authority for cost recovery which is
consistent with Section 9003(h)(6) of RCRA and provides to
EPA certification of such authority from: (1) the State's
Attorney General, (2) someone designated by the Attorney
General to sign such certifications, or (3) the State's or
Governor's General Counsel, or other such official who is
responsible for advising all executive branch agencies on
the scope of their authority. This certification should be
provided by the end of the next legislative session. (The
State understands that if it has not made a good faith
effort to obtain this authority, EPA may decline to enter
into subsequent cooperative agreements.)
OR
Provides EPA with certification from the State officials
described above that State law permits it to exercise the
authorities in Sections 9003(h)(6) of RCRA. (The State
understands that if it has not provided this certification
to EPA within 120 days after the award of this Cooperative
Agreement EPA may withhold payment of LUST Trust Fund money
consistent with 40 C.F.R. 30.902 or 31.43).
Once the State has obtained the legislative authority or made a
certification under paragraph (a) above, the State agrees that:
(i) It will make reasonable efforts to recover these costs,
including interest, from liable owners/operators.
States must send a copy of their complaint to EPA's
Office of Regional Counsel within one week of filing
judicial recovery actions for Trust Fund expenditures.
(ii) It will report any amounts received from the
owner/operator as recovered costs, or agreed or
adjudged to be owed by the owner/operator as
settlements for site clean-up in accordance with
applicable guidance on Trust Fund Financial and
Quarterly Reporting; and
3
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.vTt° S^t
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UNITED STATES ENVIRONMENTAL PROTECTION.AGENCY
WASHINGTON. D.C. 204&T:
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Re cycle d/Recydable
Printed with SoyiCanol* Ink on paper thr
contalna at least 50*>. recycled iber
-------
The intent of this and related sections of the cost recovery
policy are discussed in more detail below.
The cost recovery policy distinguishes between sites where
formal enforcement and/or state-lead corrective action occurs and
sites involving use of LUST Trust Fund monies to oversee
responsible party (RP)-lead cleanups. As the policy states on
page nine "...States may wish to exercise their discretion and
not pursue these [oversight] costs in cases where this will
provide valuable incentives for owners and operators to clean up
releases from their tanks." Thus, states are not required to
send demand letters for payment to RPs where the LUST Trust Fund
has been used for corrective action oversight.
The cost recovery policy establishes "action thresholds"
that require site-specific accounting for the costs of cleanup
and enforcement only when one of the following actions occurs at
a site:
o State performs a LUST Trust Fund-financed emergency
response,
o State initiates a LUST Trust Fund-financed detailed
site investigation or cleanup, or
o State determines that the RP is likely to be
recalcitrant and that the use of LUST Trust Fund
monies is likely.
Thus, cost recovery is anticipated in situations limited to
those meeting these action thresholds. Some cost recovery effort
should be devoted to all cases that meet the action thresholds,
except as described below. Consistent with the cost recovery
policy this means, at a minimum, a search for an RP and a demand
for payment if the RP is located.
1) Cost Recovery and the Unknown Responsible Party
Cost recovery is difficult or impossible to pursue in cases
wh^re an owner or operator is unknown. EPA does encourage states
to identify responsible parties through research, hydrogeologic
means and, where appropriate, enforcement, when the state
believes the effort would represent an efficient use of Trust
Fund monies (for example, where the state anticipates that the
cost of cleanup will substantially exceed the cost to identify a
responsible party). If an owner or operator cannot be
identified, a demand letter (and the pursuit of cost recovery) is
not required.
If a responsible owner or operator is ever identified, the
state should then assess whether a complete cost recovery action
is an efficient use of Trust Fund resources. Under the cost
recovery policy, when a responsible party is identified after
Trust Fund monies are expended, it is necessary to issue a demand
2
-------
letter for payment, at a minimum. After this point, states have
considerable discretion in assigning priorities to individual
cost recovery cases and in determining the appropriate level of
effort to devote to each case. The state also has discretion to
compromise or terminate the claim based on case-specific factors.
2) Cost Recovery and the Unwilling/Recalcitrant Responsible Party
EPA strongly encourages states to aggressively pursue cost
recovery in cases where a recalcitrant owner or operator is
unwilling to take corrective action and LUST Trust Fund monies
are used for cleanup. In these situations, state issuance of a
demand letter for payment would always be a part of the state's
cost recovery action. States are encouraged to take a strong
position in negotiating settlements with these responsible
parties.
3) Cost Recovery and the Financially Unable Responsible Party
Many states utilize Trust Fund monies for cleanup primarily
where owners and operators are unable (including financially
unable) to carry out corrective actions. In some of these cases,
if a formal determination of insolvency is made (either prior to
or after the use of Trust Fund monies) this determination may be
used to document that a demand letter, and the pursuit of cost
recovery, is not necessary. A more formal determination of
insolvency than is required for state access to the Trust Fund
for cleanup would be required to dispense with a demand letter
and pursuit of cost recovery.
The LUST Trust Fund Cooperative Agreement Guidelines (OSWER
Directive 9650.10A) allow for use of the Trust Fund for cleanup
in cases where the state "...cannot identify an RP who will
undertake action properly and promptly." This includes
situations where "...the RP may claim he cannot afford the cost
of cleanup." In such instances, where Trust Fund monies are used
for cleanup based on an informal or anecdotal determination of
financial ability, and no further determination of solvency is
made, a demand letter for payment should be a part of the cost
recovery process.
Other Issues
Documenting Cost Recovery Decisions
It should be stressed that regardless of the action taken by
the state in exercising its discretion in cost recovery cases,
the state is required to fullv document its decisions and to
formally close out all cases. The Cost Recovery Policy
encourages states to make decisions that are in the best
interests of their overall program and that reflect efficient use
of Trust Fund monies.
3
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Site-Specific Accounting
A related question is whether site-specific accounting is
required for a site that meets an action threshold, when the
state decides in advance not to pursue cost recovery. EPA
requires states to continue site-specific accounting in these
situations, both to assure that LUST Trust Fund monies are used
for their intended purpose and for financial auditing purposes.
Further, the responsible party's financial condition could
improve during the conduct of the cleanup or additional assets
nay be identified, in which case the state would have adequate
data to support a cost recovery action.
Cost Recovery of LUST Trust Fund Monies Used for Releases Caused
bv Natural Disasters
The Mid-vest Floods of 1993 raised the separate question of
whether cost recovery is required for LUST Trust Fund monies
expended to address releases caused by natural disasters, such as
floods, hurricanes, and earthquakes. While Subtitle I of RCRA
provides no explicit waiver of the cost recovery provisions when
LUST Trust Fund monies are spent to address releases caused by
natural disasters, we believe that it may be inappropriate to
pursue cost recovery in these circumstances.
The rationale for OUST's position is that under the cost
recovery provisions of Subtitle I, section 9003(h)(6), UST owners
and operators are liable for cost recovery under the same
standard of liability that applies under section 311 of the Clean
Water Act. Section 311 provides a defense to liability where the
discharge or release was caused by "an act of God." OUST
believes that releases caused by natural disasters are within the
defense as "an act of God." Therefore, section 311 would relieve
an owner or operator from liability for cost recovery and, thus,
would relieve the state from pursuing recovery of those
particular monies. The state, under a cooperative agreement, has
the discretion to determine whether a release was caused by an
"act of God," and whether or not to pursue cost recovery in any
particular case. As with other cost recovery situations,
however, the state is required to fully document its decision and
formally close out all cases.
The more difficult questions are the factual one of whether
the "act of God" or natural disaster was the sole cause of a
given UST release, and the procedural one of who has the burden
of proving this fact. The section 311 "defense to liability"
language states that the owner or operator must prove that the
"act of God" was the sole cause of the release, i.e.. generally
the state LUST programs should put the burden on the UST
owner/operator to document their defense. However, in any
litigation, a plaintiff, i.e.. the state, can decide for itself
that the defendant has such a strong defense that it is not worth
4
-------
pressing a given claim. In some cases, a state Bight be
justified in not requiring the owner/operator to document
causation, as long as the state itself has sufficiently
documented the fact that the "act of God" or natural disaster was
the sole cause of the release.
I hope this clarifies the LUST Trust Fund Cost Recovery
Policy regarding the need for a demand letter for payment and
pursuit of cost recovery in general. If you have any questions
or would like to discuss these issues further, please feel free
to contact either John Heffelfinger at (703) 308-8881, or Amy
Haseltine at (703) 308-8898.
cc: UST Regional Branch Chiefs
Regional UST Attorneys
State UST/LUST Program Managers
Jane Souzon, OGC
Lee Tyner, OGC
Dawn Messier, OGC
OUST Management Team
OUST Desk Officers
5
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^tos% •
? \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
USUi WASHINGTON, D.C. 20460"' ' ^0- / k p/f
Pnolt
NOV -g ;c?i
ATLaHi'^"
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OFFCE OF
SOLID WASTE AND EMERGENCY
RESPONSE
MEMORANDUM
SUBJECTS LUST Trust Fund Cost Recovery Policy
FROM? Lisa Lund, Acting DirectorrT^jT,
Office of Underground Storage Tanks
TO: UST Regional Program Managers
This memorandum is in response to a number of requests from
EPA regions that the Office of Underground Storage Tanks (OUST)
clarify the Cost Recovery Policy for the Leaking Underground
Storage Tank (LUST) Trust Fund with regard to when states are
required to issue demand letters to initiate cost recovery
proceedings against a responsible party, or to pursue cost
recovery in general. It is not necessary for a state to issue a
demand letter in situations where the decision to forgo cost
recovery for allowable reasons has been made. This memorandum
describes a variety of situations that might occur where a
decision regarding the need for a either a demand letter or
pursuit of cost recovery may arise.
The memorandum also considers separate questions raised to
OUST regarding: cost recovery documentation, site-specific
accounting, and whether or not cost recovery is required for LUST
Trust Fund monies expended to address releases caused by natural
disasters.
Cost Recovery and the Issuance of Demand Letters
The relevant section in the Cost Recovery Policy for the
LUST Trust Fund (OSWER Directive 9610.10A) occurs on page five
and states:
"At a minimum, in each case States should make reasonable
efforts to contact owners and operators who are liable for
releases, notify them of their liability for enforcement and
corrective action costs, and demand payment. In those rare
cases where equitable factors support compromise or
termination of the Trust Fund claim, States should ensure
that the bases for any compromise or termination are
adequately supported in the records of the State and reflect
the efficient use of Trust Fund resources.*1
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contains ai least SON recycled fiber
-------
The intent of this and related sections of the cost recovery
policy are discussed in more detail below.
The cost recovery policy distinguishes between sites where
formal enforcement and/or state-lead corrective action occurs and
sites involving use of LUST Trust Fund monies to oversee
responsible party (RP)-lead cleanups. As the policy states on
page nine "...States may wish to exercise their discretion and
not pursue these [oversight] costs in cases where this will
provide valuable incentives for owners and operators to clean up
releases from their tanks." Thus, states are not required to
send demand letters for payment to RPs where the LUST Trust Fund
has been used for corrective action oversight.
The cost recovery policy establishes "action thresholds"
that require site-specific accounting for the costs of cleanup
and enforcement only when one of the following actions occurs at
a site:
o State performs a LUST Trust Fund-financed emergency
response,
o State initiates a LUST Trust Fund-financed detailed
site investigation or cleanup, or
o State determines that the RP is likely to be
recalcitrant and that the use of LUST Trust Fund
monies is likely.
Thus, cost recovery is anticipated in situations limited to
those meeting these action thresholds. Some cost recovery effort
should be devoted to all cases that meet the action thresholds,
except as described below. Consistent with the cost recovery
policy this means, at a minimum, a search for an RP and a demand
for payment if the RP is located.
1) Cost Recovery and the Unknown Responsible Party
Cost recovery is difficult or impossible to pursue in cases
where an owner or operator is unknown. EPA does encourage states
to identify responsible parties through research, hydrogeologic
means and, where appropriate, enforcement, when the state
believes the effort would represent an efficient use of Trust
Fund monies (for example, where the state anticipates that the
cost of cleanup will substantially exceed the cost to identify a
responsible party). If an owner or operator cannot be
identified, a demand letter (and the pursuit of cost recovery) is
not required.
If a responsible owner or operator is ever identified, the
state should then assess whether a complete cost recovery action
is an efficient use of Trust Fund resources. Under the cost
recovery policy, when a responsible party is identified after
Trust Fund monies are expended, it is necessary to issue a demand
2
-------
letter for payment, at a minimum. After this point, states have
considerable discretion in assigning priorities to individual
cost recovery cases and in determining the appropriate level of
effort to devote to each case. The state also has discretion to
compromise or terminate the claim based on case-specific factors.
2) Cost Recovery and the Unwilling/Recalcitrant Responsible Party
EPA strongly encourages states to aggressively pursue cost
recovery in cases where a recalcitrant owner or operator is
unwilling to take corrective action and LUST Trust Fund monies
are used for cleanup. In these situations, state issuance of a
demand letter for payment would always be a part of the state's
cost recovery action. States are encouraged to take a strong
position in negotiating settlements with these responsible
parties.
3) Cost Recovery and the Financially Unable Responsible Party
Many states utilize Trust Fund monies for cleanup primarily
where owners and operators are unable (including financially
unable) to carry out corrective actions. In some of these cases,
if a formal determination of insolvency is made (either prior to
or after the use of Trust Fund monies) this determination may be
used to document that a demand letter, and the pursuit of cost
recovery, is not necessary. A more formal determination of
insolvency than is required for state access to the Trust Fund
for cleanup would be required to dispense with a demand letter
and pursuit of cost recovery.
The LUST Trust Fund Cooperative Agreement Guidelines (OSWER
Directive 9650.10A) allow for use of the Trust Fund for cleanup
in cases where the state "...cannot identify an RP who will
undertake action properly and promptly.H This includes
situations where "...the RP may claim he cannot afford the cost
of cleanup." In such instances, where Trust Fund monies are used
for cleanup based on an informal or anecdotal determination of
financial ability, and no further determination of solvency is
made, a demand letter for payment should be a part of the cost
recovery process.
Other Issues
Documenting Cost Recovery Decisions
It should be stressed that regardless of the action taken by
the state in exercising its discretion in cost recovery cases,
the state is required to fully document its decisions and to
formally close out all cases. The Cost Recovery Policy
encourages states to make decisions that are in the best
interests of their overall program and that reflect efficient use
of Trust Fund monies.
3
-------
Site-Specific Accounting
A related question Is whether Bite-specific accounting is
required for a site that meets an action threshold, when the
state decides in advance not to pursue cost recovery. EPA
requires states to continue site-specific accounting in these
situations, both to assure that LUST Trust Fund * on lea are used
for their intended purpose and for financial auditing purposes.
Further, the responsible party's financial condition could
improve during the conduct of the cleanup or additional assets
may be identified, in which case the state would have adequate
data to support a cost recovery action.
Cost Recovery of LUST Trust Fund Monies Used for Releases Caused
bv Natural Disasters
The Mid-west Floods of 1993 raised the separate question of
whether cost recovery is required for LUST Trust Fund monies
expended to address releases caused by natural disasters, such as
floods, hurricanes, and earthquakes. While Subtitle I of RCRA
provides no explicit waiver of the cost recovery provisions when
LUST Trust Fund monies are spent to address releases caused by
natural disasters, we believe that it may be inappropriate to
pursue cost recovery in these circumstances.
The rationale for OUST's position is that under the cost
recovery provisions of Subtitle I, section 9003(h)(6), UST owners
and operators are liable for cost recovery under the same
standard of liability that applies under section 311 of the Clean
Water Act. Section 311 provides a defense to liability where the
discharge or release was caused by "an act of God." OUST
believes that releases caused by natural disasters are within the
defense as "an act of God.M Therefore, section 311 would relieve
an owner or operator from liability for cost recovery and, thus,
would relieve the state from pursuing recovery of those
particular monies. The state, under a cooperative agreement, has
the discretion to determine whether a release was caused by an
"act of God," and whether or not to pursue cost recovery in any
particular case. As with other cost recovery situations,
however, the state is required to fully document its decision and
formally close out all cases.
The more difficult questions are the factual one of whether
the "act of God" or natural disaster was the sole cause of a
given UST release, and the procedural one of who has the burden
of proving this fact. The section 311 "defense to liability"
language states that the owner or operator must prove that the
"act of God" was the sole cause of the release, i.e.. generally
the state LUST programs should put the burden on the UST
owner/operator to document their defense. However, in any
litigation, a plaintiff, i.e.. the state, can decide for itself
that the defendant has such a strong defense that it is not worth
4
-------
pressing a given claim. In some cases, a state night be
justified in not requiring the owner/operator to document
causation, as long as the state itself has sufficiently
documented the fact that the "act of God" or natural disaster was
the sole cause of the release.
I hope this clarifies the LUST Trust Fund Cost Recovery
Policy regarding the need for a demand letter for payment and
pursuit of cost recovery in general. If you have any questions
or would like to discuss these issues further, please feel free
to contact either John Heffelfinger at (703) 308-8881, or Amy
Haseltine at (703) 308-8898.
cc: UST Regional Branch Chiefs
Regional UST Attorneys
State UST/LUST Program Managers
Jane Souzon, OGC
Lee Tyner, OGC
Dawn Messier, OGC
OUST Management Team
OUST Desk Officers
5
-------
i
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
MAR 7 1995
OFFICE OF
SOLID WASTE AND EMERGENCY
RESPONSE
MEMORANDUM
SUBJECT: Current Interest Rate for LUST Trust Fund Cost Recovery
This is to provide notice that for cost recovery actions
initiated or ongoing during calendar year 1995, the minimum
recommended interest rate to be assessed on funds from the Leaking
Underground Storage Tank (LUST) Trust Fund is three (3.0) percent.
Please see that appropriate individuals in each of your States
receive written notice of this change.
To the extent that they are legally able, States should assess
and pursue recovery of interest from tank owners and operators,
particularly where States have performed corrective actions using
the LUST Trust Fund. Interest charges can provide owners and
operators with important incentives to settle recovery claims. In
many cases, they also provide States with significant income which
they may retain along with other LUST Trust Fund recoveries for use
on other eligible sites and activities. The Cost Recovery Policy
for the LUST Trust Fund (OSWER Directive 9610.10A) contains a more
complete discussion of interest charges on Trust Fund expenditures.
The suggested minimum interest rate for Trust Fund recoveries
is equal to the U.S. Treasury Current Value of Funds Rate. We will
notify you of yearly future changes in this rate.
cc: Dave Webster - Region I
Stanley Siegel - Region II
Robert Greaves - Region III
Mary Kay Lynch - Region IV
Norman Niedergang - Region V
Guanita Reiter - Region VI
Actions
FROM:
Lisa Lund, Acting Director
Office of Underground Storage Tanks
Regional UST Program Managers
TO:
Recycled/Recyclable
Printed with Soy/Canola Ink on paper that
£jC_/ contain* at least 50% recycled fiber
F~' / c < ^ Cf) '¦-¦y"' Jl ^
-------
—(j-ror, ^
N
\ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
M3Z2,
OFFICE OF
SOLID WASTE AND EMERGENCY
RESPONSE
MEMORANDUM
SUBJECT: Current Interest Rate for LUST Trust Fund Cost Recovery
Actions
FROM: Lisa Lund, Acting Director
Office of Underground Storage Tanks
TO: Regional UST Program Managers
This is to provide notice that for cost recovery actions
initiated or ongoing during calendar year 1995, the minimum
recommended interest rate to be assessed on funds from the Leaking
Underground Storage Tank (LUST) Trust Fund is three (3.0) percent.
Please see that appropriate individuals in each of your States
receive written notice of this change.
To the extent that they are legally able, States should assess
and pursue recovery of interest from tank owners and operators,
particularly where States have performed corrective actions using
the LUST Trust Fund. Interest charges can provide owners and
operators with important incentives to settle recovery claims. In
many cases, they also provide States with significant income which
they may retain along with other LUST Trust Fund recoveries for use
on other eligible sites and activities. The Cost Recovery Policy
for the LUST Trust Fund (OSWER Directive 9610.10A) contains a more
complete discussion of interest charges on Trust Fund expenditures.
The suggested minimum interest rate for Trust Fund recoveries
is equal to the U.S. Treasury Current Value of Funds Rate. We will
notify you of yearly future changes in this rate.
cc: Dave Webster - Region I
Stanley Siegel - Region II
Robert Greaves - Region III
Mary Kay Lynch - Region IV
Norman Niedergang - Region V
Guanita Reiter - Region VI
MAR 7 1995
Recycled/Recyclable
Printed with Soy/Csnola Ink on paper mat
contains at lean 50% recycled fiber
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION IV
345 COURTLAND STREET. N.E.
ATLANTA. GEORGIA 30365
m 10 1995
Mr. Doyle Mills, Manager
Underground Storage Tank Branch
Kentucky Department of Environmental
Protection
14 Reilly Road
Frankfort, Kentucky 40601-1190
Dear Mr. Mills:
Enclosed is a copy of the guidance manual titled "COST
RECOVERY PROCEDURES FOR STATE UST. PROGRAMS TO RECOVER LUST TRUST
FUND EXPENDITURES," prepared by the Region IV UST Attorney's
Workgroup and dated January 1995. The manual is designed to be a
practical guide to carrying out successful cost recovery actions.
I have also enclosed a copy of a memorandum dated November 8,
1994, from Lisa Lund, Acting Director of the Office of
Underground Storage Tanks (OUST), which speaks to a number of
questions raised to OUST on the subject of cost recovery.
Ms. Lund's memorandum should be interpreted as an extension of
EPA's Cost Recovery Policy for the LUST Trust Fund (OSWER
Directive 9610.10A). The Attorney Workgroup's Cost Recovery
Manual should be used as a guide to carry out the OSWER policy
contained in Directive 9610.10A.
To date, Region IV has awarded $62,852,093 in LUST Trust Fund
grants. Our records indicate that as of the end of the first
quarter FY 1995, the Region IV grantees had recovered $513,577.16
of their LUST Trust Fund expenditures. This is less than one
percent of the total funds awarded.
I bring this to your attention because as time goes on we
should expect an increased emphasis on the issue of cost
recovery, from both OUST and the Office of the Inspector General.
As you know, the OSWER guidance provides great flexibility to the
states in making specific LUST Trust Fund cost recovery
decisions. Therefore, in the event of an audit, I don't foresee
the quantity of funds recovered becoming an issue if the state's
cost accounting and cost recovery procedures are above reproach.
The Cost Recovery Procedures Manual should be helpful in
improving your cost recovery process which will in turn increase
your cost recovery rate. I encourage you to utilize the manual
as the practical tool it was designed to be.
TX'r -C* y- ^ ~ ^r r* V
-------
2
I greatly appreciate the time and effort the Attorney
Workgroup devoted to developing the Procedures Manual. I am
confident it will prove to be a very helpful document.
Sincerely,
John K. Mason, Chief
Underground Storage Tank Section
Enclosures
-------
United States
Environmental Protect'On
Agency
OHice of
Solid Waste and
Emergency Resoonse
SEPA DfRECTIVE NUMBER: 9610.10A
TITLE: Cost Recovery Policy for the Leaking Underground
Storage Tank Trust Fund
APPROVAL DATE: May 24, 1994
EFFECTIVE DATE: May 24, 1994
ORIGINATING OFFICE*. Office of Underground Storage
~ DRAFT
STATUS:
REFERENCE (other documents): Cost Recovery Policy
for the Leaking Underground Storage Tank Trust Fund, OSWER
Dir 9610.10, October 7, 1988
LUST Trust Fund Cooperative Agreement Guidelines, OSWER
Dir 9650.10A, May 24, 1994
Leaking. Underground Storage Tank Trust Fund State Financial
Management Handbook, Financial Management Division - Fiscal
Policies and Procedures Branch, march 1989
OSWER OSWER OSWER
'E DIRECTIVE DIRECTIVE D
-------
AEFA
Washington. DC 20460
OSWER Directive Initiation Request
1. Directs® Numb*
9610.10A
a. Originator Information
Nam* of Contact Person
Lisa Hunter
Mail Cod*
5403W
Office
OUST
Taiaphona Coda
703-308-8896
3 TlB* Cost Recovery Policy for the Leaking Underground Storage Tank Trust Fund
4. Summary of Directive (Include bne< statement of purpose)
This Directive consolidates and updates previously issued cost recovery guidelines for
the Leaking Underground Storage Tank Trust Fund. Special conditions that incorporate the
policy into Trust Fund cooperative agreements are included.
5.Keywords Cost Recovery, LUST Trust Fund, Underground Storage Tanks, Special Conditions
6a. Does T"hls Directive Supersede Previous DlreetNeis)? i ~ i i i
I |No L2LI
b. Doee It Supplement Previous Ofceettve(s)7 ( 1 I |
I X lNo 1 I
Yea What directive (number, tide)
9610.10
Yee What dkeettve (number, tide)
7. Draft Level
[ [ A - Signed by AA/DAA | ^ | 8 - Signed by Office Director | | C - For Review & Comment | | 0 - In Development
8. Document to be distributed to States by Headquarters?
~
No
Thla Request Meets OSWER Olrectlvee System Format Standards. -
9. Signature of Lead Office Directives Coordinator
7 , ov L '
Shonee Clark, OUST Directives Coordinator
Date
f' ¦/
10. Name and Title ol Approving Offldal
David W. Ziegele, OUST Office Director
UriL fwU.
OSWER OSWER OSWER O
VE DIRECTIVE DIRECTIVE DIRECTIVE
-------
OSWER Directive 9610.10A
COST RECOVERY POLICY FOR THE LEAKING UNDERGROUND
STORAGE TANK TRUST FUND
A. Overview
This is EPA's first complete statement of its policies on
cost recovery under the Leaking Underground Storage Tank (LUST)
Trust Fund. It has required a year of coordinated effort by
various EPA offices to develop and to secure necessary approvals
wi1_hin the Ag;ncy and from other agencies and official ; in the
executive and legislative branches of government. Wording with
and through States to implement this policy, EPA expects that it
will help cost recovery to become a practical and effective tool
that States will use to both stimulate and fund more cleanups of
releases from underground storage tanks.
Objectives of Cost Recovery
The primary purpose of cost recovery under the LUST Trust
Fund is to provide incentives for owners and operators to comply
with technical and financial responsibility requirements, and
most importantly to clean up releases from their own tanks. EPA
expects that State-lead cleanups followed by cost recovery will
continue to occur in a minority of cases, because the majority of
cleanups are conducted by owners and operators. When cost
recovery is necessary, it will generate income for additional
cleanups.
Cost recovery as practiced under the LUST Trust Fund will
depart significantly from the approaches taken in other Federal
environmental response programs. Consistent with the State-
centered design of the underground storage tank program, States
will implement the cost recovery program, have considerable
discretion in operating it, and benefit directly from their
successful recoveries.
The two most innovative aspects of EPA's cost recovery
policy for the LUST Trust Fund should provide States with the
autonomy and the incentive necessary to pursue recoveries
aggressively and efficiently. First, States with cooperative
agreements will litigate and settle recovery claims without the
routine involvement or concurrence of EPA or the Department of
Justice. Second, States may retain any Trust Fund monies they
recover for use on additional Fund-eligible cleanups and
activities.
Legal Rationale
The legal rationale behind this approach was developed by
the Agency in consultation with the Department of Justice.
1-
-------
OSWER Directive 9610.10A
Under 28 U.S.C. Section 516, the Department of Justice (DOJ)
must conduct any litigation in which the United States has an
interest unless there is an exception authorized by law. EPA
interprets section 9003(h) of Subtitle I to be such an exception,
allowing States under cooperative agreements that have the
capabilities to carry out effective corrective actions and
enforcement activities to exercise various program authorities,
including the cost recovery authority provided in section
9003(h)(6). These States may also settle cost recovery litigation
as part of the exercise of enforcement discretion conveyed by
section 9003(h).
Additionally, EPA interprets section 9003(h) to provide
authority for States to administratively settle cost recovery
claims. EPA believes that this authority includes the ability to
compromise or terminate Trust Fund claims based on considerations
of equity as described in section 9003(h)(6)(B) (e.g., reducing
the claim to the amount of required financial responsibility).
Finally, EPA has determined that, consistent with the
"program income" concept described in OMB Circular A-102, that
States may retain recovered Trust Fund monies to perform
additional eligible activities under their cooperative
agreements. Thus, appropriate requirements in 4 0 C.F.R. Parts 3 0
and 31 on the documentation and use of program income apply to
recoveries of Trust Fund money.
Recovery Procedures
Variations in State recovery 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
-2-
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OSWER Directive 9610.10A
o Litigation (when demand for payment and efforts to
reach an administrative settlement fail)
o Collection and case closure
States are encouraged to tailor the specifics of these
procedures to suit their individual programs and to save program
resources. In addition, the detailed policy guidance that
follows has been developed to help ensure that cost recovery
resources are used efficiently and stimulate compliance by owners
and operators.
-3-
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OSWER Directive 9610.ioa
B. State and Federal Roles in Cost Recovery
Policy
Under their cooperative agreements, States are responsible
for all legal, programmatic, and administrative activities
necessary to recover their expenditures from the LUST Trust Fund.
This includes undertaking administrative and judicial recovery
actions and settling claims. They are responsible for required
reporting and recordkeeping including documenting that their
Trust Fund recoveries are used for additional eligible activities
under their cooperative agreements. EPA will provide general
policy guidelines to States and make funding available for
recovery programs through the States' cooperative agreements.
EPA will also assess the performance of State cost recovery
programs and provide support and assistance to States where they
are needed to improve performance. The Agency will generally be
bound by settlements and judgments reached in States, but
reserves the right to pursue recoveries independently in the
extreme case. Also, EPA may pursue recoveries in those rare
cases where the Agency has performed a federal-lead response.
Guidance
States are expected to have adequate legal authorities to
undertake cost recovery either by having or acquiring their own
authorities, or certifying that they are able to use federal
authorities. States with their own recovery authorities should
also cite Subtitle I in their recovery actions (i.e., demand
letters, administrative orders, and judicial complaints) to
establish the liability of owners/operators to the federal
government for Trust Fund expenditures.
EPA is currently formulating policies on a number of issues
related to recovery litigation. One major unresolved issue is
whether States should bring judicial recovery actions in State or
federal courts. Until these issues are resolved, States should,
within one week, notify EPA's Office of Regional Counsel when
filing judicial recovery actions for sites where they have used
Trust Fund money for cleanup or enforcement. This will give EPA
the opportunity to consult with the State, determine whether the
action might affect the scope of the Agency's Subtitle I
authorities, and if necessary, provide technical or legal
assistance to the State. However, EPA will not require States to
delay recovery litigation while the Agency reviews complaints
submitted by States.
-4-
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OSWER Directive 9610.10A
States must maintain accounting and recordkeeping systems
that will document all Trust Fund expenditures, support cost
recovery with site-specific records, and demonstrate that
recovered funds are retained and used for additional eligible
activities under their cooperative agreements. State
recordkeeping and accounting must conform to requirements in
these guidelines and the Leaking Underground Storage Tank Trust
Fund State Financial Management Handbook (March 1989).
States will have considerable discretion in prioritizing
cases for cost recovery and determining an appropriate level of
effort to devote to each case. At a minimum, in each case States
should make reasonable efforts to contact owners and operators
who are liable for releases, notify them of their liability for
enforcement and corrective action costs, and demand payment. In
those rare pases where equitable factors support compromise or
termination of the Trust Fund claim, States should ensure that
the bases for any compromise or termination are adequately
supported in the records of the State and reflect the efficient
use of Trust Fund resources. States may compromise Trust Fund
claims when, for example, an owner/operator demonstrates that
he/she lacks the financial resources to pay the claim; the State
determines that the likelihood of success on litigating the claim
as small because of the absence of proof of liability or
unavailability of required witnesses; or costs of judicial
collection is disproportionately high. States should note that
their ability to reduce claims based on the equities described in
section 9003h(6)(B) is limited to cases where owners/operators
have maintained required levels of financial assurance.
Because they are more cost effective, negotiated settlements
are generally preferred over litigation. In many cases, however,
EPA expects that it will be necessary for States to initiate and
pursue judicial action to compel recalcitrant owners and
operators to pay cleanup costs. In deciding whether to litigate
individual cases States should consider the solvency of the
owner/operator, the costs of cleanup, the likelihood of recovery,
the case's deterrence value and the opportunity costs (the
resources necessary to proceed that could otherwise be used in
pursuing other cases or in other parts of the State's Trust Fund
program).
1/ As used here, the term "compromise" means accepting less
than the full value of the claim. The term "termination"
means forgoing any cost recovery whatsoever.
-5-
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OSWER Directive 9610.10A
Even where no administrative or judicial settlement is
reached, States must formally close out all cases and document
the reasons for deciding not to proceed further. Factors
justifying case closure include the situations where costs of
pursuing a case further will approach or exceed the potential
recovery, bankruptcy of the owner/operator, and other reasons.
States should not allow the statute of limitation (SOL) to run
and justify closure solely on that basis. States should
generally pursue cases promptly and file actions in a timely
manner to enhance the chances for recovery. States should revise
their priorities for individual recovery cases as SOL deadlines
approach. Until the issue is resolved by the courts, States
relying solely on Subtitle I cost recovery authorities should be
prudent and proceed assuming a three year limit applies, despite
the fact that EPA believes that a six year limit is applicable.
This is necessary because some courts have applied the three year
limit to similar cases.
When States make successful recoveries at sites where Trust
Fund monies were used, they may retain the Trust Fund share as
program income consistent with OMB Circular A-102 and 40 CFR
Parts 30.525 and 31.25. This means that States may use recovered
federal Trust Fund monies for additional Fund-eligible cleanups
and activities under their agreements. When States choose to do
so, they must inform EPA, and keep appropriate records of how the
recoveries were used. In negotiating their cooperative
agreements, States and Regions should develop contingency plans
that will allow States to obligate their recoveries efficiently.
States should calculate the federal Trust Fund share of their
recoveries on a site-by-site, pro rata basis. For example, if a
State spends 50 thousand dollars of LUST Trust Fund money at a
site, and the State ultimately recovers 50 percent of all Federal
and State money used at the site, it must redirect 2 5 thousand
dollars of "program income" into Fund-eligible activities.
EPA expects States with cooperative agreements to adequately
fund and staff recovery efforts to deal with anticipated case
loads. Cost recovery activities are allowable costs under
Subtitle I. Where the recovery program is dependent on the
Attorney General's Office, the State should consider the need for
formal funding arrangements (e.g., a memorandum of agreement) to
ensure legal staffing for cost recovery referrals. When the
Trust Fund is not used to pay for such legal staffing, States may
wish to investigate the possibility of counting these legal
services as "in-kind contributions" toward satisfying their match
requirements under 40 C.F.R. Part 31.24.
-6-
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OSWER Directive 9610.10A
EPA's principal responsibilities in cost recovery are to
provide funding, policy, guidance, oversight, and assistance to
States. The Agency's operational role in cost recovery will
generally be limited to pursuing recoveries in those cases where
EPA responds directly to a release, and in rare cases of
overfiling.
EPA intends to make its expectations for the activities and
performance of cost recovery programs reasonable and clear to
States in advance. This will occur through policy, guidance,
routine communications, program appraisal and reviews, and the
negotiation of cooperative agreements. The oversight and
assistance functions of EPA's program, grants, and financial
management offices will accommodate variations in State
procedures and capabilities to the maximum extent possible. The
Agency's goals will be to help build State capabilities,
particularly in developing recovery programs and to improve
performance. At present, EPA has no numerical expectations for
the performance of State recovery programs. Early in the
recovery program it will focus on States' progress toward putting
basic systems, policies, and procedures in place that will enable
them to recover Trust Fund expenditures efficiently and
effectively.
EPA is working with several States on pilot projects to
develop realistic expectations for program performance, and to
identify effective recovery procedures. The results will help
EPA support State programs with tools and guidance. They will
also help the Agency formulate and communicate more precise
expectations for program performance.
Generally, EPA will be bound by States' judicial actions and
settlements. However if EPA finds that a State is not
effectively implementing cost recoveries, the Agency will offer
the State necessary assistance in correcting any problems. The
Office of Underground Storage Tanks will be most interested in
seeing that States have adequate accounting and recordkeeping
systems in place and that States identify, develop, and pursue
appropriate recovery cases in a timely and sound manner. If
problems in these or other areas persist, the Agency may take
appropriate action under regulations governing cooperative
agreements. In extreme cases, EPA may consider filing a recovery
action against the owner/operator even though' the State has the
authority to initiate an action or has already done so.
-7-
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OSWER Directive 9610.10A
C. Recoverable Costs
Pol icy
Owners and operators are liable for all costs of corrective
action and enforcement, including interest, indirect and
"management and support" costs associated with these activities
that are paid for by the Trust Fund. 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.
Interest charges should provide incentives for responsible
parties to settle cost recovery claims. Procedures for assessing
interest charges are described separately in this document.
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 and the number of cases is very large. Therefore, EPA
expects that States will exercise discretion in determining an
appropriate level of effort to devote to pursuing oversight
costs.
Guidance
In each case, States will exercise their discretion in
determining exactly which costs they will pursue. EPA is more
interested in a State's overall record in cost recovery than in
retrospectively examining decisions to pursue particular costs in
hundreds or thousands of cases. Direct costs are most easily
documented and defended in litigation. However, the Leaking
Underground Storage Tank Trust Fund State Financial Management
Handbook (March 1989) contains a procedure that States can use to
allocate all non-site Trust Fund costs including "management and
support" costs to individual sites. Using this methodology,
States will have available to them the full cost of a particular
site cleanup at the time of the cost recovery action. To the
extent that they are legally able, States should allocate all
Trust Fund expenditures to sites for the purpose of cost
recovery. States may also develop their own systems for
allocating non-site costs and/or include additional State
overhead costs that are beyond the scope of their cooperative
agreements.
-8-
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OSWER Directive 9610.10A
D. Interest Charges
Policv
Owners and operators are liable for interest charges on
Trust Fund expenditures at their sites. States should assess
interest on expenditures from the Fund in the cost recovery
process. States are allowed to retain recovered interest for
additional eligible activities.
Guidance
Section 9003(h) of the Resource Conservation and Recovery
Act (RCRA) describes the States' role in recovering LUST Trust
Fund expenditures - but does not specifically address the
collection of interest on those expenditures. However, EPA is
entitled under the Debt Collection Act and common law authorities
to collect interest on Trust Fund expenditures. Since States
will have responsibility for recovering Trust Fund expenditures
under section 9003(h), the States will also assess and are
encouraged to pursue interest charges. Because States are
permitted to retain recoverable Fund expenditures for additional
cleanups and recoveries, they can also retain recovered interest
for use on additional eligible activities. The States'
collection of interest will deter responsible parties from
resisting payment in order to gain an interest-free loan on the
uncollected expenditures.
Before assessing interest, the State should notify the
debtor through a written notice (demand letter explaining the
agency's requirements concerning the debt and the interest).
Interest shall accrue from the date on which notice of the debt
and interest requirements is mailed or hand-delivered to the
responsible party.
The minimum recommended rate of interest that States should
assess is found in the Yearly Percentage Bulletin printed every
December with the rate for the following fiscal year. The rate
is equal to the average investment rate for the Treasury tax and
loan accounts. It represents the current value of funds to the
United States Treasury, and is published by the Treasury's
Financial Management Service. EPA will notify States of the new
rates each year.
EPA is examining the possibility of calculating a minimum
interest rate that more closely approximates the yield on Trust
Fund investments. The Agency will notify States if and when they
are to use this type of minimum rate.
-10-
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OSWER Directive 9610.10A
A State may assess a higher rate of interest if it
reasonably determines that this is necessary to protect the
expenditures from the Trust Fund. The rate of interest as
initially assessed will remain fixed for the duration of the
indebtedness, except where a debtor has defaulted on a repayment
agreement and seeks to enter into a new agreement. New
agreements should reflect the current value of funds to the
Treasury at the time the new agreement is executed.
Interest should not be recovered if the amount due (Trust
Fund expenditures) is paid within 30 days after the date from
which the written notice was delivered to the responsible party.
However, the State may decide, on a case-by-case basis, to extend
the 30-day period for payment.
As part of their responsibility for settling claims, States
may decide not to pursue the collection of interest on a debt
entirely or in part once it has been assessed when they determine
it is in the best interest of the program. States may decide not
to pursue interest if the collection of interest puts the
responsible party in financial distress, or the cost of
collecting the interest will be more than the amount collected.
-11-
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OSWER Directive 9610.10A
E. Priorities For Cost Recovery
Policy
Under their cooperative agreements States should have or
should develop systems to set priorities for cost recovery cases.
They should devote greatest efforts to cases where owners or
operators are solvent but recalcitrant, and to cases where they
fail to comply with applicable financial responsibility
requirements. 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, and "action thresholds" (see section "F")
have triggered site-specific accounting, 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 case should be based on a weighing of
the resources necessary to recover the claim 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
deterrent value of the case, and the opportunity costs (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 impracticable because 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.
-12-
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OSWER Directive 9610.10A
High 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
rot complied with financial responsibility requirements
j.n effect at the time.
Low priority - States should generally commit fewer
resources to insolvent or financially distressed RPs,
although selective pursuit within the class should be
undertaken where the RP could afford lesser amounts, is
hiding assets, fails to cooperate, or was negligent in
allowing the release to occur. 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.
Where cooperative owners and operators perform
cleanups, States may wish to make recovery of oversight
costs a low priority, to encourage voluntary cleanups.
Impracticable - Sites where a liable .owner or operator
cannot be identified will require expenditures from the
Trust Fund for cleanup. Efforts to recover costs
expended at these sites will 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.
-13-
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F. Documentation Of Costs
OSWER Directive 9610.10A
Policy
States are required to document all Trust Fund expenditures
and all corrective action and enforcement costs on a site-
specific basis at each site where they have met any one of the
following "action thresholds": 1) performed an emergency
response; 2) begun a detailed site investigation; or 3)
determined that an owner or operator is or is likely to be
recalcitrant.
Guidance
States must establish a financial cost accounting system
that tracks the costs of cleanup and enforcement activities on a
site-specific basis when any one of the specified "action
thresholds" is met. States are normally not required to begin
site-specific accounting until States or their contractors begin
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
significant Trust Fund expenditures and cost recovery. If an RP
is clearly recalcitrant, however, site-specific accounting should
begin as soon as costs are incurred. Generally, contractor
activity at a site will trigger site-specific accounting.
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 including contractor invoices
Enforcement costs include all expenditures reasonably
related to inducing a recalcitrant RP to comply and to recovering
clean-up expenditures. They include the salaries and other
expenses associated with case development, negotiations, and
litigation.
-14-
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OSWER Directive 9610.10A
States should establish cost-effective accounting systems to
support recovery of Trust Fund monies in courts. Features of
cost documentation that are essential to recovering costs in
court include:
Systems that are adequate for both cost recovery
purposes (i.e., will support the State's claim in
administrative or judicial action to recover) and audit
purposes. At a minimum, the system should provide proof
that the work or purchase was authorized by the State;
the work or purchase was completed; the State was
billed; and the bill was paid.
In many cases, States may have to respond to arguments
that the costs claimed are unreasonable and unnecessary.
The Financial Management Division of EPA's Office of the
Comptroller has developed more detailed guidance for State
accounting and recordkeeping. The Leaking Underground Storage
Tank Trust Fund State Financial Management Handbook was published
in March 1989 to help States meet these accounting requirements.
-15-
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OSWER Directive 9610.10A
Special Conditions
REQUIREMENTS FOR INCLUSION
IN LUST STATE COOPERATIVE AGREEMENTS
1. State agrees to maintain a financial cost accounting system
which meets the requirements of 40 CFR 30.510 or 40 CFR
31.20. For this and other requirements on grantees, Part
31 applies to all cooperative agreements with budget or
project periods beginning on or after October 1, 1988.
Part 31 also applies to all amendments of existing
agreements in which all of the activities in the
amendment's scope of work will be performed after October
1, 1988. Parts 30 and 33 (for procurement) apply to other
cooperative agreements and amendments.
2. State agrees to organize and maintain site-specific
information consistent with accounting thresholds and
policies described in the Cost Recovery Policy for the
Leaking Underground Storage Tank Trust Fund (OSWER
Directive 9610.10A, May 1994), where Trust Fund monies area
used. Prior to making expenditures of Trust Fund monies
for corrective and enforcement actions, a system must be in
place to record these types of costs on a site-specific
basis. When site-specific accounting is required, all
costs that can be identified to a particular site should be
charged accordingly and State contractors must bill costs
on a site-specific basis for corrective action and
enforcement work performed at those sites.
3. The State acknowledges that expenditures from the LUST
Trust Fund constitute a liability of the owner/operator to
the United States. The State agrees to retain recoveries
of any LUST Trust Fund expenditures as program income, as
described in 0MB Directive A-102 and 40 C.F.R. Parts
30.525(a) or 31.25(g)(2), to be used for additional
eligible Trust Fund activities.
1
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OSWER Directive 9610.10A
(CONTINUATION OF SPECIAL CONDITION 3 —
INSERT 1 OR 2 BELOW)
(INSERT 1. for States which have State authority consistent with
those in RCRA Section 9003fh) to recover response expenditures
The State therefore agrees that:
(a) It will make reasonable efforts to recover these costs,
including interest, from liable owners/operators.
States must send a copy of their complaint to EPA's
Office of Regional Counsel within one week of filing
judicial recovery actions for Trust Fund expenditures.
(b) It will report on any amounts received from the
owner/operator as recovered costs, or agreed or
adjudged to be owed by the owner/operator as
settlements for site clean-up, in accordance with
applicable guidance on Trust Fund Financial and
Quarterly reporting; and
(c) To the extent the State is successful in recovering
these costs, it will dedicate and use these funds for
additional Trust-Fund-eligible activities, and maintain
appropriate accounting of recovered funds in order to
document the reuse of recovered funds in accordance
with the requirements of 40 CFR 30.525 or 31.25, as
appropriate, and in accordance with applicable
requirements of this Cooperative Agreement.
(d) If the State has not yet done so, the State will submit
certification of its authorities to EPA within 120 days
after the award of this Cooperative Agreement. The
certification will be signed by: (1) the State's
Attorney General, (2) someone designated by the
Attorney General to sign such documents, or (3) the
State's or Governor's General Counsel or other such
official who is responsible for advising all executive
branch agencies on the scope of their authority.
(e) It will notify EPA promptly of any reduction in its
authority to recover response expenditures (e.g.,
successful challenge to its State statutory authority).
riNSERT 2. for States lacking State authorities consistent with
those in Section 9003(h) of RCRA to recover response expenditures
2
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OSWER Directive 9610.10A
The State therefore agrees that to the extent the State lacks the
authority or procedure to recover response expenditures on behalf
of the LUST Trust Fund (i.e.. the authority to recover such costs
from owners/operators and retain such monies for additional LUST
Trust Fund corrective action and enforcement), the State will
delay taking cost recovery action until the State:
(a) Obtains legislative authority for cost recovery which is
consistent with Section 9003(h)(6) of RCRA and provides to
EPA certification of such authority from: (1) the State's
Attorney General, (2) someone designated by the Attorney
General to sign such certifications, or (3) the State's or
Governor's General Counsel, or other such official who is
responsible for advising all executive branch agencies on
the scope of their authority. This certification should be
provided by the end of the next legislative session. (The
State understands that if it has not made a good faith
effort to obtain this authority, EPA may decline to enter
into subsequent cooperative agreements.)
OR
Provides EPA with certification from the State officials
described above that State law permits it to exercise the
authorities in Sections 9003(h)(6) of RCRA. (The State
understands that if it has not provided this certification
to EPA within 120 days after the award of this Cooperative
Agreement EPA may withhold payment of LUST Trust Fund money
consistent with 40 C.F.R. 30.902 or 31.43).
Once the State has obtained the legislative authority or made a
certification under paragraph (a) above, the State agrees that:
(i) It will make reasonable efforts to recover these costs,
including interest, from liable owners/operators.
States must send a copy of their complaint to EPA's
Office of Regional Counsel within one week of filing
judicial recovery actions for Trust Fund expenditures.
(ii) It will report any amounts received from the
owner/operator as recovered costs, or agreed or
adjudged to be owed by the owner/operator as
settlements for site clean-up in accordance with
applicable guidance on Trust Fund Financial and
Quarterly Reporting; and
3
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OSWER Directive 9610.10A
(iii) To the extent the State is successful in recovering
these costs, it will dedicate these funds for
additional Trust-Fund-eligible activities, and maintain
appropriate accounting of recovered funds in order to
document the reuse of recovered funds in accordance
with the requirements of 40 CFR 30.525 or 31.25, as
appropriate, and in accordance with applicable
requirements of this cooperative agreement.
(iv) It will notify EPA promptly of any reduction in its
authority to recover response expenditures (e.g.,
successful challenge to its State statutory authority).
[END OF INSERT 2]
4. State agrees to maintain supporting documentation and
appropriate records in support of any future cost
recovery efforts. The State shall adhere to the
principles of documentation and records retention
specified in the Cost Recovery Policy for the Leaking
Underground Storage Tank Trust Fund (OSWER Directive
9610.10A, May 1994). On topics not addressed by these
guidelines, the State agrees to adhere to the
principles of documentation and record retention
specified in the Leaking Underground Storage Tank Trust
Fund State Financial Management Handbook (March 1989).
The State agrees to make these records available to the
federal government, as needed, on a case-by-case basis.
5. State agrees to provide reports as outlined in the LUST
Trust Fund Cooperative Agreement Guidelines (OSWER
Directive 9650.10A, May 1994). These reports consist
of Quarterly Progress Reports, Financial Status Reports
(SF 269), Federal Cash Transactions Report (SF 272),
and Exception Reports.
6. State agrees to identify Letter of Credit drawdowns
under EPA's three major activity codes. The three
codes are: "7'1 — General Support and Management, "E"—
Site Cleanup Actions, and "4" — Enforcement.
4
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Un>t«4 Siatas
Environmental Protection
Agtncv
Office of
SoiwJ Watte end
Emergency Aetpant*
&EPA
DfRECTIVE NUMBER: 9650.10A
TITLE: LUST Trust Fund Cooperative Agreement Guidelines
APPROVAL DATE: May 24, 1994
EFFECTIVE DATE: May 24, 1994
ORIGINATING OFFICE: Office of Underground Storage I
Tanks
0 FINAL
~ DRAFT
STATUS:
REFERENCE (other documents): lust Trust Fund
Cooperative Agreement Guidelines, OSWER Dir 9650.10,
February 8, 1989
Cost Recovery Policy for the Leaking Underground Storage
Tank Trust Fund, OSWER "Dir 9610.10A, May 24, 1994
Leaking Underground Storage Tank Trust Fund State Financial
Management Handbook, Financial Management Division - Fiscal
Policies and Procedures Branch, March 1989
OSWER OSWER OSWER
'E DIRECTIVE DIRECTIVE D,
lu ST
-------
S CDA Washinglon. DC 20460
^fcrM OSWER Directive Initiation Request
1. Directive Number
9650.10A
2. Orlalnator Information
Name of Contact Person Mail Code Office
John Heffelfinger 5403W OUST
Telephone Code
703-308-8881 §
3. Title LUST Trust Fund Cooperative Agreement Guidelines
4. Summary of Directive (include brief statement of purpose)
This Directive consolidates and updates all previously issued program policy guidelines
for the Leaking Underground Storage Tank Trust Fund. It provides information to assist
states and EPA Regional offices in negotiating, awarding, and overseeing Trust Fund
Cooperative Agreements.
5.Keywords Cooperative Agreement, LUST Trust Fund, Cost Recovery, Underground Storage
Tanks, States. Regions ^
6a. Does This Directive Supersede Previous Directive(s)7
b. Does It Supplement Previous Dtrective(s)?
| | No | X | Y®* What directive (number, title)
9650.10
| X 1 No | | Yes What directive (number, title)
7. Draft Level
J | A - Signed by AA/DAA
8 - Signed by Office Director
~
C - For Review & Comment
~ o-h
Development
8. Document to be distributed to States by Headquarters?
Yet
~
No
This Request Meets OSWER Directives System Format Standards.
9. Signature of Lea
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OSWER DIRECTIVE 9650.10A
LOST TRUST FUND
COOPERATIVE AGREEMENT GUIDELINES
U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF UNDERGROUND STORAGE TANKS
-------
OSWER DIRECTIVE 9650.10A
TABLE OF CONTENTS
ISSUE SECTION
OVERVxrw OF THE LUST TRUST FUND I
APPLICABILITY 40 CFR "iT't ?r GRANT REGULATIONS
STATE COST SHAKt "TMENTS Ill
ALLOWABLE COSTS IV
TRUST FUND USE AT GOVERNMENT FACILITIES
OF OWNERS AND OPERATORS VI
IBOBnVJT. *XTT> rvma VII
A. Linking of Trust Fund with State Program
Approval Process
B. Rel*-1-A or the Trust Fund to EPA's
Transi n Strategy
STATE UST PROGRAMS AND COOPERATIVE AGREEMENTS VIII
A. State Capabilities
B. State Certification of Authority
C. State Program Work Plan
D. Federal Oversight
Exhibit 1: Activities Reporting Requirements
for U.S. EPA Office of Underground
Storage Tanks
ii
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OSWER DIRECTIVE 9650.10A
-TABLE OF CONTENTS (continued)
ISSUE SECTION
CORRECTIVE ACTION IX
A. Compliance with Corrective Action Regulations
B. Guidance for Conducting Federal-Lead Underground
Storage Tank Corrective Actions
C. State's Priority System for Addressing UST Releases
PUBLIC PARTICIPATION X
STATE'S QUALITY ASSURANCE PROGRAM XI
ADMINISTRATIVE REQUIREMENTS FOR A STATE COOPERATIVE
AGREEMENT APPLICATION XII
COST RECOVERY POLICY FOR THE LEAKING UNDERGROUND STORAGE
TANK TRUST FUND (OSWER DIRECTIVE 9 610.10A) APPENDIX A
111
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OSWER DIRECTIVE 9650.10A
I. OVERVIEW OF THE LUST TRUST FUND
In October 1986, Congress amended Subtitle I of the
Resource Conservation and Recovery Act (RCRA) to provide EPA, and
States with Cooperative Agreements, new enforcement and
corrective action authorities to respond to actual or suspected
releases from petroleum USTs. Under the amendments, EPA, or
States with Cooperative Agreements, may undertake any of the
following actions, or direct tank owners and operators to do so:
o Test tanks for leaks when a leak is
suspected;
o Investigate a site to evaluate the
source and extent of petroleum
contamination;
o Assess how many individuals may have
been exposed to petroleum contaminants
and the seriousness of exposure, and
estimate resulting health risks;
o Clean up contaminated soil and water;
o Provide safe drinking water to
residents at the site of a tank leak;
and
o Provide for temporary or permanent
relocation of residents.
The 1986 amendments to RCRA also provide a Federal Trust
Fund to finance the cleanup of petroleum releases from
underground storage tanks (USTs). This Trust Fund, financed
through an excise tax of 1/10 of one cent per gallon on motor /
fuels, is expected to raise $500 million over a five year period.
However, there are some guidelines that a State must follow
before using Trust Fund dollars. When a leak or spill is
discovered, the States should first seek to identify the tank's
owner or operator and direct him to perform the cleanup at his
expense. A State should only rely on Trust Fund dollars to clean
up a site when they cannot identify a responsible tank owner or
operator who will undertake corrective action properly and
promptly. Even when the Trust Fund is used, tank owners or
operators are liable to the State for costs incurred, and are
subject to cost recovery actions.
1-1
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OSWER DIRECTIVE 9650.10A
II. APPLICABILITY OF 40 CFR PART 31 GRANT REGULATIONS
In a joint effort with other Federal agencies, EPA has
recently revised and published common grant regulations that
provide consistency in the administration of grants and
Cooperative Agreements. The revised regulations, promulgated on
March 11, 1988, have an effective date of October l, 1988.
The common rule, 40 CFR Part 31, published in the Federal
Register on March 11, 1988, supersedes certain EPA general
assistance regulations currently contained in 40 CFR Parts 30 and
33. Specifically, Part 31 is applicable to State and local
governments and Federally recognized Indian tribal governments
and supersedes all regulations pertaining to these entities in 40
CFR Parts 30 and 33. Parts 30 and 33 have been revised to
consist of requirements applicable to grantees other than State
and local governments.
Part 31 is intended to further Federalism principles by
reducing Federal "controls" over State governments. Part 31 will
diminish the Federal role/presence in the States' conduct of
certain LUST Trust Fund related activities because it allows
States to use their own procedures in such areas as procurement
and financial management.
Awards involving FY 89 Trust Fund monies will need to
reference and adhere to the revised grant regulations. EPA's
Grants Administration Division has established the following
general policy regarding the applicability of Part 31:
o Part 31 applies to all Cooperative
Agreements whose budget or project
periods began on or after October 1,
1988;
o Part 31 applies to all amendments of
existing agreements in which all of the
activities in the amendment's scope of
work will be performed after October 1,
1988; and
o Parts 30 and 33 apply to all
Cooperative Agreements and amendments
whose budget or project periods began
before October 1, 1988.
II-l
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OSWER DIRECTIVE 9650.10A
III. 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.
The cost share requirement applies to FY 89 monies that are
awarded after January 24, 1989 (the effective date of the
"Technical Standards and Corrective Action Requirements for
Owners and Operators of Underground Storage Tanks — Subpart H,
Financial Responsibility"). Awards of Trust Fund Monies prior to
January 24, 1989 are not required to incorporate the cost share
provisions.
Guidance
The State cost share requirement begins with any award of
FY 89 Trust Fund monies after January 24, 1989, the effective
date (not the "compliance" date) of the "Technical Standards and
Corrective Action Requirements for Owners and Operators of
Underground Storage Tanks — Subpart H, Financial
Responsibility." The date of the award is the date on which the
Regional Administrator makes a Cooperative Agreement offer to the
State. .The cost share requirement does not apply to unspent FY
88 monies which the State may expend after January 24, 1989.
The State cost share percentage should be applied to the
total allowable cost (see Section IV, Allowable Costs) 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 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 4 0 CFR Part 31. Acceptable methods for
cost sharing include:
o contributions, e.g., staff and equipment; and
o direct, non-Federal funds expended or obligated by
the State, or a political subdivision of the State,
for cost-allowable activities.
III-l
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OSWER DIRECTIVE 9650.10A
The amount of the State's contribution should be
negotiated in advance and specified in the State's Cooperative
Agreement. Regardless of the source of funds the State uses to
satisfy it cost share requirement, the State's contributions must
be verifiable from its records, in accordance with applicable
grant regulations.
III-2
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OSWER DIRECTIVE 9650.10A
IV. ALLOWABLE COSTS
Policy
Section 9003(h) of RCRA provides that Trust Fund monies
may be used for the following general categories of activities,
both before and after the promulgation of EPA's regulations for
underground storage tanks:
o corrective action;
o enforcement;
o cost recovery;
o exposure assessment;
o provision of temporary and permanent alternate water
supplies; and
o relocation of residents.
These general categories include the following specific
allowable activities:
o emergency response and initial site
hazard mitigation;
o investigation of suspected leaks and
source identification up to the time
that a leak is determined to come from
an unregulated source;
o exposure assessments to determine
potential health effects of a leak and
the establishment of corrective action
priorities;
o development, issuance, and oversight of
enforcement actions directed to
responsible owners/operators;
o cleanup of releases;
o long-term operation and maintenance of
corrective action measures;
o purchase and/or lease of equipment;
IV-1
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OSWER DIRECTIVE 9650.10A
o recovery of costs from liable tank
owners and operators; and
o reasonable and necessary administrative
and planning expenses directly related
to these activities.
The Trust Fund may only be used for addressing actual or
suspected petroleum releases from underground storage tank
systems subject to Subtitle I jurisdiction. This includes tanks
that EPA has exempted 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.
Allowable activities are limited to actions in response to
an existing or suspected release of petroleum from an UST. Thus,
an inspection and investigation to assess the site of a reported
leak would be an allowable activity, but an inspection conducted
as part of a routine or random inspection scheme would not be
allowable.
In addition, as noted in the Conference Report to the 1986
Subtitle I Amendments, staff or activities that enhance the
general technical or legal capabilities of a State and that are
not directly related to leaking petroleum USTs are not allowable.
Furthermore, Trust Fund money cannot be used to lobby the State
legislature to pass LUST legislation.
Costs incurred by States prior to the award of the
Cooperative Agreement with EPA will not be covered by the Trust
Fund and are not eligible for reimbursement.
Guidance
Alternative Water Supplies:
Temporary or permanent provision of water to protect
human health while waiting for corrective action measures to take
effect is clearly an allowable cost. 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"
provision 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.
IV-2
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OSWER DIRECTIVE 9650.10A
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.
Relocation of Residents:
Temporary relocation of residents is an allowable cost
where it is necessary to protect human health or where corrective
action activities cannot be undertaken safely while residents
remain in their homes. 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.
Permanent relocation should be considered an allowable
cost only under extreme circumstances in which permanent
relocation 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 for corrective
action measures, other than permanent water supplies, are
allowable costs under the Trust Fund. States will use discretion
in deciding 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 continuing O&M at old sites.
EPA's commitment is limited to providing money only for the work
identified in the Cooperative Agreement, and not to fully fund
sites where the State may choose to continue O&M. Further, EPA
cannot commit monies to States beyond the budget period.
IV-3
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OSWER DIRECTIVE 9650.10A
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. EPA generally approves equipment
purchases through the award of Cooperative Agreements. Planned
purchases of equipment should be included in the State's proposed
work plan, negotiated and agreed to by EPA and the State, and
reflected in the "Equipment" budget item under the Cooperative
Agreement. Thus, EPA does not anticipate the need for routine
approval by EPA of individual equipment purchases made by the
State that are reflected in the Cooperative Agreement budget.
However, any purchases of equipment that represent a substantial
change from the approved budget or work plan in the Cooperative
Agreement require prior approval from EPA.
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
Dccurs, the costs of equipment that is over $10,000 should be
allocated among sites where the equipment is used for corrective
action. An exception to this rule may be made for equipment used
it 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 for guidance
Ln final disposition of equipment and supplies purchased with
Crust Fund monies.
IV-4
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OSWER DIRECTIVE 9650.10A
V. TRUST FUND USE AT GOVERNMENT FACILITIES
Policy
The Trust Fund ordinarily will not be used to address
petroleum UST releases from government facilities. Governmental
entities should be expected to meet their own obligations 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:
o emergencies, including the mitigation of imminent
hazards, and
o site investigations, enforcement actions, and
oversight of responsible party (RP)-lead cleanups.
The Trust Fund may not be used for cleanups at Federal or State
UST facilities. The Trust Fund may, however, be used for
cleanups at local government facilities, if the State determines
that the local entity is incapable of carrying out corrective
action properly. 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.
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 Appendix A of these
guidelines.
V-l
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OSWER DIRECTIVE 9650.10A
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 require these
entities to undertake and pay for the cost of cleanup, and should
take enforcement action if necessary.
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 first try to have the
government entity 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.
V-2
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OSWER DIRECTIVE 9650.10A
VI. 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. 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 should first 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 cleanups 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, if
the State determines that an RP is incapable "... of carrying out
such corrective action properly," it may use Trust Fund monies to
take corrective action. Several conditions may give rise to this
determination. For example, an RP may 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 wheri
the costs of corrective action to be provided by the RP exceed
the required level of financial responsibility 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.
VI-l
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OSWER DIRECTIVE 9650.10A
For cost recovery, when a State is deciding whether and
for what dollar airiount 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.
See Appendix A, the LUST Trust Fund cost recovery policy,
for additional information.
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OSWER DIRECTIVE 9650.10A
VII. STATE PROGRAM APPROVAL AND COOPERATIVE AGREEMENTS
A. Linking of Trust Fund With State Program Approval Process
Policy
States are expected to make reasonable progress 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.
Guidance
The long-term objectives of the Trust Fund clean-up and
the UST regulatory programs are to protect human health and the
environment from releases 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 develop prevention programs and apply for
State program approval. Regions should develop criteria to
measure and evaluate State progress. They should consider the
degree of progress in allocating Trust Fund monies to States.
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OSWER DIRECTIVE 9650.10A
VII. STATE PROGRAM APPROVAL AND COOPERATIVE AGREEMENTS
B. 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 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 Section IX.B.,
Guidance for Conducting Federal-Lead Underground Storage Tank
Corrective Actions.
Guidance
EPA has developed a Transition Strategy (OSWER Directive
9610.5,* FY 1989-1990 Transition Strategy for the Underground
Storage Tank Program) and Transition Tasks List (OSWER Directive
9610.5-1) that identify 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 supporting 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 will provide 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 280.60-280.67, are allowable costs for
States to incur using the Trust Fund. It should be noted,
however, that conduct of these transition period tasks in no way
implies that a State's own program meets the "no less stringent"
or "adequate enforcement" requirements of the State program
approval process under Section 9004 of RCRA.
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OSWER DIRECTIVE 9650.10A
VIII. STATE UST PROGRAMS AND COOPERATIVE AGREEMENTS
A. State Capabilities
Policy
The legislation establishing the UST Trust Fund requires
that in order for States to participate in the program, EPA must
determine that they have "the capabilities to carry, out effective
corrective action and enforcement activities" to protect human
health and the environment (Section 9003(h)(7)(A)(i)).
The State must have or obtain both the authority and
capability to carry out effective corrective action and
enforcement activities. The State must also establish corrective
action and enforcement policies and procedures that can be
applied to known or suspected releases from regulated underground
storage tanks.
Guidance
EPA Regions will evaluate State capabilities as part of
the Cooperative Agreement negotiating process. EPA's intent is
to be flexible in its determination of capability. States must
certify that they have the authority to carry out enforcement
activities, corrective actions, and cost recovery or provide a
schedule and plans for obtaining the necessary authority.
However, a State does not have to have authority to conduct all
the activities of the LUST Trust Fund Program in order to receive
a Cooperative Agreement. A State can receive a Cooperative
Agreement if it certifies that it has authority to conduct the
activities committed to in the work plan.
The Regions will evaluate the States' existing or
potential capabilities in these and other relevant areas. Given
the widely varying level of development of State UST cleanup
programs, the capabilities that will be expected immediately
versus those that can be developed over time will vary from State
to State.
Enforcement:
To demonstrate its enforcement capabilities, the State
should describe its existing capabilities in this area, or a plan
for obtaining such capabilities in the Cooperative Agreement.
The description should include, at a minimum, identification of
existing or potential staff capabilities, technical as well as
legal, to pursue enforcement activities, and that staff's
previous experience in UST-related enforcement activities, as
well as ownership of or access to necessary equipment or
facilities.
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OSWER DIRECTIVE 9650.10A
The State should have a set of clearly defined enforcement
policies and procedures for addressing releases from petroleum
USTs, or a plan for developing such policies and procedures. The
policy and procedures should reflect the underlying philosophy of
the Trust Fund to first seek corrective action by the responsible
party, unless there is an imminent and substantial endangerment
of human health and the environment. EPA will consider items
such as proper identification of releases and responsible
parties, proper documentation of enforcement actions, and timely
and appropriate enforcement activity, in evaluating the State's
enforcement policy and procedures.
The State may use its best professional judgment and
enforcement discretion as long as they result in an effective
enforcement program.
Corrective Action:
The State should describe its existing corrective action
capabilities, or a plan for establishing such capabilities. The
description should include, at a minimum, the identification of
existing or potential staff capabilities, and ownership of or
access to necessary equipment or facilities. The description may
include capabilities such as:
o Emergency response and hazard mitigation;
o Investigation of suspected leaks and identification
of the source;
o Comprehensive site investigations;
o Exposure assessmentjs to determine potential health
effects;
o Provision of alternative water supplies;
o Temporary or permanent relocation of residents;
o Development of corrective action plans; and
o Site cleanup, including removal, treatment, and
disposal of surface and subsurface contamination.
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OSWER DIRECTIVE 9650.10A
Corrective actions are often carried out by contractors,
at the direction c3f the State. As part of its capability
discussion, where applicable, the State should describe its plan
for securing the services of such contracting firms. This plan
should include types of activities, estimated funding, and time
frame for obtaining contractor services.
The State should describe its corrective action policies
and procedures, or plans, with milestones, for developing such
policies and procedures. This may include such items as a
generic response plan or decision-making framework for corrective
action, criteria for provision of alternative water supplies or
relocation of residents, exposure assessment procedures,
procedures for evaluation and selection of remedies, and any
cleanup standards that the State may wish to impose. The State's
corrective action policy should consider the relationship between
corrective actions that may be taken and the need to protect
human health and the environment.
Cost Recovery:
See Appendix A — Cost Recovery Policy for the Leaking
Underground Storage Tank Trust Fund.
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OSWER DIRECTIVE 9650.10A
VIII. STATE UST PROGRAMS AND COOPERATIVE AGREEMENTS
B. State Certification of Authority
Policy
There are three ways that a State can certify that it has
legal authority to carry out the activities committed to in the
work plan. First, the State can certify that it has specific
authorities similar to Section 9003(h) of RCRA. Secondly, the
State can certify that it has general state law authority
sufficient to carry out the work plan activities, (e.g..
authority to protect public health, to protect the environment,
or to protect any State interest). Thirdly, the State can
certify that it will use the authorities in RCRA Section 9003(h)
to perform and require corrective action and Section
9003(h)(6)(A) to perform cost recovery. In making this type of
certification, the State must assure that use of the RCRA
authorities will not conflict with State law.
Guidance
In view of the State's expertise in interpreting State
law, EPA's role in review of the certification is not to "second
guess" a State interpretation of State law but rather only to
assure that major legal issues have not been overlooked.
The attorney general, or someone designated by the
attorney general, should either sign or concur in the
certification , preferably before the Cooperative Agreement is
awarded. If a signature or concurrence would significantly delay
the awarding of the Cooperative Agreement (i.e.. there are no
other issues holding up the award), it is acceptable for someone
other than the AG/designee to sign the certification. In this
case, the agreement must contain a special condition requiring
submission of the AG/designee's concurrence to EPA within a
reasonable time, not to exceed 120 days after the award of the
agreement. The person who signs at the time of award could be:
1) the head or general counsel of the State environmental agency;
2) the head of the division within the environmental agency that
has direct responsibility for administering the program; 3) the
head of any separate entity that may be responsible for
administering the program, such as the director of the State
water control board.
* The assumption is that the Attorney General is the
ultimate interpreter of State law in the executive branch of the
State. In at least one State, however, the Attorney General is
primarily responsible for litigation, while there is also a
General Counsel to the Governor, who has responsibility for
advising all executive branch agencies on the scope of their
authority. In this situation, the State General Counsel could
substitute for the Attorney General.
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OSWER DIRECTIVE 9650.10A
If the concurrence of the AG/designee is not obtained
within the time specified in the Cooperative Agreement, payments
of Trust Fund money may be withheld, consistent with the
requirements of 40 CFR Part 31.
A State should notify EPA promptly of any reduction in its
authorities (e.g., successful challenge to its State statutory
authority) that may significantly inhibit its ability to carry
out the activities committed to in the Cooperative Agreement.
Amendment of the Cooperative Agreement or recertification may be
necessary in such circumstances.
VIII-5
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OSWER DIRECTIVE 9650.10A
VIII. STATE OST PROGRAMS AND COOPERATIVE AGREEMENTS
C. State Program Work Plan
States are to submit a program work plan to EPA, which is
commensurate with the level of development of the State's
corrective action program for petroleum USTs. The work plan
shall include a budget and a description of proposed activities
and outputs to be accomplished with Trust Fund monies during the
State's Cooperative Agreement period. The budget should include
a breakdown of associated costs of each planned activity and
output. A proposed schedule for accomplishing each activity
should be included. Activities may include, but are not limited
to those mentioned in the following sections.
1. Core Program
Where certain basic program items do not currently exist,
the Cooperative Agreement may provide for their development.
Examples include:
o Develop a system for assigning priorities to sites;
o Establish enforcement policies and procedures;
o Secure contractor services to perform corrective
action;
o Establish cost recovery policies and procedures;
o Establish a site-by-site tracking system for
activities, decisions, and site-specific costs;
o Develop public participation procedures; and
o Develop quality assurance practices.
2. Site-Specific Activities
The Cooperative Agreement should include a description of
and associated budget for those activities that States plan to
undertake at sites. It may include an estimate of the number of
sites at which the State intends to undertake the various
specific activities, and/or identification of individual sites at
which specific work is contemplated. Examples of site-specific
activities include:
o Emergency response;
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OSWER DIRECTIVE 9650.10A
Source identification;
Site investigation;
Exposure Assessment;
Soil and ground-water remediation;
Provision of alternate water supplies;
Resident relocation (temporary or permanent);
Treatment, storage, and/or disposal of wastes and
recovered materials; and
Oversight of cleanups, including those performed by
responsible parties.
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OSWER DIRECTIVE 9650.10A
VIII. STATE UST PROGRAMS AMD COOPERATIVE AGREEMENTS
D. Federal Oversight
Federal Oversight
EPA will oversee State programs, both formally and
informally, in order to:
o Ensure adequate environmental protection through
sound administration and use of the Trust Fund;
o Enhance State capabilities through effective
communication, evaluation, and support; and
o Describe and analyze the progress of programs on a
regional and national scale.
EPA's Regional staff will have the primary responsibility
for oversight of State programs. Regions and States should
maintain a continuous dialogue so that States can communicate
problems encountered in meeting their commitments and Regions can
be responsive to State needs.
The Regions will formally review State programs at least
once a year. They will rely on required reports, State records,
and visits to the States to identify the successes and problems
encountered in State programs. Formal program reviews should
focus on overall performance rather than individual actions. To
the greatest possible extent, reviews should be based on
objective measures, standards, and expectations that are agreed
to in advance in the Cooperative Agreement.
Effective oversight entails the joint analysis of
identified problems to determine their nature, causes, and
appropriate solutions. It also requires that the Regions
identify and facilitate the transfer of successful approaches to
other States and Regions. Finally, information and insights
gathered in oversight activities should be used to refine
subsequent Cooperative Agreements.
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OSWER DIRECTIVE 9650.10A
Program Oversight strategy
In FY 89, EPA began to implement a formal program
oversight system. The program oversight focuses on balancing
oversight of State UST programs with service to the State's
needs. The types of reports that will.continue to be part of
EPA's oversight process are summarized below.
1) Quarterly Progress Reports, including:
a) Exception Reports;
b) Trust Fund Usage Forecasts; and
c) Financial 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. Exhibit 1 lists the data elements that are
contained in the quarterly progress reports. The
required forms and instruction for the quarterly
progress reports are issued separately from these
guidelines, and will be updated and revised as
necessary in the future.
All States should report in a timely and accurate fashion
the data needed for the quarterly activities report and
the Strategic Targeted Activities for Results System
(STARS) 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.
2) Financial Status Report SF 269 or 269A (year end)
and Federal Cash Transactions Report SF 272
(quarterly).
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 are required to comply
with the provisions of the Leaking Underground Storage
Tank Trust Fund State Financial Management Handbook (March
1989) .
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OSWER DIRECTIVE 9650.10A
Exhibit l
ACTIVITIES REPORTING REQUIREMENTS FOR U.S. EPA OFFICE OF
UNDERGROUND STORAGE TANKS
1. Number of Confirmed Releases
2. Number of Emergency Responses Taken
3. Number of Sites Where Enforcement Actions Taken to Compel
Cleanup
4. Number of Sites Where Cost Recovery Initiated
5. Site Cleanups 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 Cleanups for Petroleum Releases—Completed
a. Responsible Party-lead
b. State-lead with Trust Fund money
c. State-lead with no Trust Fund money
7. Exceptions Report (Identify by site where:)
a. State plans to provide permanent alternative water
supply
b. State plans to permanently relocate residents
8. 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
d. Search for Responsible Party unsuccessful
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OSWER DIRECTIVE 9650.10A
EXHIBIT 1 (cont'd)
ACTIVITIES REPORTING REQUIREMENTS FOR U.S. EPA OFFICE OF
UNDERGROUND STORAGE TANKS
9. Financial Report
a. State plans to spend over $100,000 of Trust Fund
money at site; include amount
b. State has obligated over $100,000 of Trust Fund
money at a site; include amount
c. State actually spent over $100,000 of Trust Fund
money at a site; include amount
d. For any site, State reached a cost recovery
settlement; include amount
e. For any site, cumulative cost recovery payments
received; include amount
f. Optional: Aggregate State dollars outlayed for site
responses
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OSWER DIRECTIVE 9650.10A
IX. CORRECTIVE ACTION
A. Compliance vith Corrective Action Regulations
Policy
Corrective actions taken after the effective date of the
Federal corrective action regulations (40 CFR Parts 280.60-
280.67) 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 DIRECTIVE 9650.10A
IX. CORRECTIVE ACTION
B. Guidance for Conducting Federal-Lead Underground Storage
Tank Corrective Actions
Policy
It is EPA's policy that, except in rare circumstances,
Fund-financed responses at underground storage tank petroleum
releases will be conducted by States under Cooperative Agreement
with EPA. Most States will have broad programmatic Cooperative
Agreements to address emergency response and perform cleanups.
In the absence of such agreements, the Region and State should
develop site-specific Cooperative Agreements under which the
State will conduct corrective actions at individual sites. EPA
will undertake a corrective action only in instances where:
o there is a major public health or environmental
emergency;
o the State is unable to respond; and
o no responsible party is able or willing to provide
an adequate and timely response.
Federal-lead corrective action will be limited to stabilization
of the immediate situation, with the expectation that further
cleanup will be conducted by the State under an appropriate
Cooperative Agreement.
In addition to the criteria presented above, Federal-lead
response should also depend on the existence of one or more of
the following conditions indicative of a major public health or
environmental emergency:
o The release poses an immediate and substantial
threat of direct human, animal, or food chain
exposure to petroleum;
o The release poses an immediate threat of fire or
explosion;
o The release poses an immediate and substantial
threat to public drinking water supplies; or
o The release immediately threatens a significant
population or substantial amounts of property, or
poses substantial threats to natural resources.
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OSWER DIRECTIVE 9650.10A
Obtaining Approval For Federal Response:
As specified in the OSWER Directive 9360.0-16A, Guidance
for Conducting Federal-Lead Underground Storage Tank Corrective
Actions. Federal UST corrective actions that initially cost over
$250,000, and ceiling increases that bring the cost of an action
over $250,000, require approval of the Assistant Administrator
(AA), Office of Solid Waste and Emergency Response (OSWER). The
Office Director (OD) of the Office of Emergency and Remedial
Response (OERR) will approve actions that initially cost up to
$250,000 and ceiling increases that bring the cost of an action
up to $250,000, with concurrence from the OD, Office of
Underground Storage Tanks (OUST). In addition, Regional
Administrators (RAs) may approve actions costing up to $50,000 in
acute, imminently life-threatening situations where response must
be initiated before Headquarters can be contacted. This
authority may be redelegated to Division Directors and On-Scene
Coordinators (OSCs).
Depending upon the nature of the emergency that exists,
response time requirements, and other relevant circumstances,
either a formal written approval process or an oral process (with
written follow-up) should be implemented. Headquarters approval
must be obtained prior to initiating corrective action whenever
possible. No Federal-lead corrective action will be approved
unless an appropriate request is received from the State.
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OSWER DIRECTIVE 9650.10A
IX. CORRECTIVE ACTION
C. State's Priority System for Addressing UST Releases
Policy
The State will ensure that a priority system for
addressing UST petroleum release sites is established and
maintained which incorporates the two priorities set forth in
Section 9003(h) of RCRA. These priorities are:
o releases which pose the greatest threat to human
health and the environment; and
o sites where the State cannot identify a solvent
owner or operator of the tank who will undertake
action properly.
The Cooperative Agreement will include a description of this
system or a schedule, with milestones, for developing one.
Guidance
The purpose of the State priority system requirement is to
ensure that sites addressed with Trust Fund monies provide the
greatest impact on protection of human health and the environment
and respond where private sector resources are inadequate. The
system does not have to be extensive, complex or numerical in
nature. Instead, it can use readily available information to
establish broad, general classes of priority. States may address
the "threat to human health and environment" criteria by
considering factors such as total population exposed, proportion
of the population affected in a community, number of drinking
water wells contaminated, proximity to a major aquifer, and
impact on sensitive populations or environmental areas. States
also should develop methods for establishing capability and
solvency of owner/operators.
This requirement does not necessarily presume the need to
rank all UST releases in the State. Rather, it is a priority
system or scheme that should be used as a screening device to
assure that sites considered to be addressed with Trust Fund
monies are within the higher priority classes established by the
State.
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OSWER DIRECTIVE 9650.10A
X. PUBLIC PARTICIPATION
Policy
Section 7004(b)(1) of RCRA requires that public
participation be provided for and encouraged by the States. In
accordance with this requirement, the State will take lead
responsibility for public notices, public meetings, and other
public participation activities that are related to State actions
funded by the LUST Trust Fund. Further, where corrective action
is undertaken, public participation activities must reflect the
public participation requirements of the Federal corrective
action regulations, 40 CFR Part 280.67.
The State also will have or will develop a public
participation policy for the State's LUST Trust Fund program.
The Cooperative Agreement will include a statement of this policy
or a schedule for developing one.
Guidance
The purpose of the requirement for public participation is
to promote two-way communication between the implementing agency
and the affected public by:
o Facilitating public understanding of State response
procedures and actions; and
o Encouraging public input into State response
decisions and schedules.
It is EPA policy that public participation activities be
appropriate to the circumstances of a release.
The States may address the public participation
requirement by developing a policy for public involvement that
recognizes the nature of the Trust Fund program, that is,
relatively numerous, short-term and small-scale responses. This
is in contrast to programs involving far more complex facilities
and decision making such as the RCRA Subtitle C permitting
program for hazardous waste facilities, or the Superfund remedial
action program. Also, the State should consider the public's
willingness to allow emergency actions without prior
consultation, but understand that the public may demand
information on and input into long-term responses to health
threats. Thus, a State's public participation policy should be
based on the severity of the threat to human health and the
environment posed by a release, the scale and duration of the
response, and the level of public interest.
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OSWER DIRECTIVE 9650.10A
At a minimum, the State's public participation policy must
reflect the requirements of 40 CFR Part 280.67. For each
confirmed release that requires a Corrective Action Plan (as
directed by the State), the State must notify the public and
provide access to site release information. The State must also
provide public notice if implementation of the Corrective Action
Plan does not achieve the established cleanup levels and the
State is considering terminating the plan.
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OSWER DIRECTIVE 9650.10A
XI. STATE'S QUALITY ASSURANCE PROGRAM
Policy
The State will develop and implement quality assurance
practices in accordance with.EPA's Uniform Administrative
Requirements for Grants and Cooperative Agreements, 40 CFR Part
31.45. The regulation requires the development and
implementation of quality assurance practices that will "produce
data of quality adequate to meet project objectives and to
minimize loss of data due to out-of-control conditions or
malfunctions."
Guidance
The purpose of a quality assurance (QA) program is to
ensure that procedures for data collection and analysis are
appropriate for the uses of that data, and, in particular, for
environmentally related measurements, to provide data that are
scientifically valid, defensible, and of adequate and known
precision and accuracy.
Because the underground storage tank program deals with a
known substance (petroleum), quality assurance procedures and
methodologies normally should not have to be as extensive or as
complex as those for a program where the pollutants can be of
many types, often initially unknown. In the vast majority of
situations, as opposed to the Superfund remedial action program,
UST cleanups will deal with known petroleum materials and
established procedures for corrective action. Accordingly, the
details of the State's QA procedures should be appropriate to the
circumstances of the releases for which the QA procedures will be
applied, and should be designed to meet State program objectives.
For States desiring additional information, guidance on
quality assurance is provided in EPA document QAMS-004/80;
"Guidelines and Specifications for Preparing Quality Assurance
Program Plans" (EPA 600/8-83-024). This is available from the
National Technical Information Service, NTIS Publication No.
PB 83-219667.
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OSWER DIRECTIVE 9650.10A
XII. ADMINISTRATIVE REQUIREMENTS FOR STATE COOPERATIVE AGREEMENT
APPLICATION
This section summarizes the basic administrative
requirements for a State Cooperative Agreement application. The
regulations discussed in this section are:
A. Nondiscrimination in EPA Assistance Programs - 40
CFR Part 7;
B. Intergovernmental Review - 4 0 CFR Part 29;
C. Uniform Administrative Requirements for Grants and
Cooperative Agreements to State and Local
Governments - 4 0 CFR Part 31; and
D. Debarment and Suspension under EPA Assistance
Program - 40 CFR Part 32.
The discussion that follows provides a brief description of the
requirements contained in each of the above regulations that are
most pertinent to Trust Fund Cooperative Agreements. For
additional guidance and a comprehensive review of EPA's
administrative requirements for assistance under a Cooperative
Agreement, refer to EPA's Assistance Administration Manual
(available through the EPA Grants Administration Division).
A. NONDISCRIMINATION IN EPA ASSISTANCE PROGRAMS - 4 0 CFR PART 7
Prohibits discrimination based on race, color, sex, or
handicap. Requires applicants to submit an assurance of non-
discrimination (compliance with Part 7) with a Cooperative
Agreement application. The current Part 7 has incorporated the
requirements previously under Part 12 (The Clean Water Act).
B. INTERGOVERNMENTAL REVIEW - 40 CFR PART 2 9
Gives States the option of setting up a State process to
review and comment upon applications for Federal assistance. May
involve comment by State, area-wide, or local governmental units.
EPA must respond to comments. Requires 60 day comment period
before award. Part 29 implements Executive Order 12 372.
C. UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND
COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS
Provides numerous basic requirements concerning application
for award and management of assistance agreements. The most
relevant of these, at this stage of- program development are:
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OSWER DIRECTIVE 9650.10A
31.20 Provides that States expend and account for grant
fund^ in accordance with State laws and procedures
for expending and accounting for its own funds;
31.21 Discusses methods of making payments to recipients;
31.22 Discusses applicable cost principles and limitations
on use of Federal funds;
31.23 Discusses period of availability of funds;
31.24 Discusses State match and cost sharing provisions;
31.25 Discusses use of program income (this section is
particularly relevant to cost recoveries of Trust
Fund expenditures);
31.32 Specifies that a State will use, manage, and dispose
of equipment in accordance with State laws and
procedures;
31.36 Specifies that for procurement, a State will follow
the same policies and procedures it uses for
procurements from its non-Federal funds;
31.40 Details grantees responsibility to monitor grant and
subgrant supported activities and report program
performance;
31.41 Provides basic requirements for financial reports.
Reports may be required no more frequently than
quarterly, per OMB Circular. Standard forms for
Financial Status Reports (SF-269 or SF-269A) must be
submitted to EPA within 90 days after the end of the
budget period. Final reports are due 90 days after
the expiration or termination of the Cooperative
Agreement; and
31.45 Discusses Quality Assurance requirements.
D. DEBARMENT AND SUSPENSION UNDER EPA ASSISTANCE PROGRAMS -
40 CFR PART 32
Provides rules for suspension and debarment of contractors
from utilization under EPA assistance programs (also direct
procurement). If a contractor is suspended or debarred, he may
not participate in an EPA assistance program. EPA's Grants
Administration Division maintains a list of such contractors.
XII-2
-------
OSWER DIRECTIVE 9650.10A
LUST TRUST FUND
COOPERATIVE AGREEMENT GUIDELINES
APPENDIX A
Cost Recovery Policy for
the Leaking Underground Storage Tank Trust Fund
(OSWER Directive 9610.IDA)
A-l
-------
i \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY ¦ < 7 "Tr
£ WASHINGTON, D.C. 20460
^ -1 cr
i
i ' !
Hi--
OFFICE OF
SOLID WASTE AND EMERGENCY
RESPONSE
MEMORANDUM
SUBJECT: Current Interest Rate for LUST Trust Fund Expenditures
FROM: David Ziegele, Directorl U*1
Office of Underground Storage Tanks
TO: Regional UST Program Managers
This is to provide notice that for expenditures made during
calendar year 1994, the minimum recommended interest rate to be
assessed on funds from the Leaking Underground Storage Tank
(LUST) Trust Fund is three and three tenths (3.3) percent.
Please see that appropriate individuals in each of your States
receive written notice of this change.
To the extent that they are legally able, States should
assess and pursue recovery of interest from tank owners and
operators, particularly where States have performed corrective
actions. Interest charges can provide owners and operators with
important incentives to settle recovery claims. In many cases,
they also provide States with significant income which they may
retain along with other LUST Trust Fund recoveries for use on
other eligible sites and activities. The Cost Recovery Policy
for the LUST Trust Fund (OSWER Directive 9610.10) contains a more
complete discussion of interest charges on Trust Fund
expenditures.
The suggested minimum interest rate for Trust Fund
recoveries is equal to the U.S. Treasury Current Value of Funds
Rate. We will notify you yearly of future changes in this rate.
cc: Regional UST Branch Chiefs
Dana Tulis
Doug Barrett, FMD
Maureen Ross, GAD
Jane Souzon, OGC
OUST Desk Officers
Recycled/Recyclable
Printed with Soy/Canola Ink on paper that
contains «1 least 50% recycled fiber
-------
y
SN>.
Km-j
UNITED STATES ENVIRONMENTAL PROTECTION A
WASHINGTON, O.C. 20460
m 11 ^
.j
FE3 I 2 [993
. - IcUL.
H3M'-
13
OFc'CEOF
SOLIOWASTE ANO EWEPGENCv BESPONS
MEMORANDUM
SUBJECT: UST Cost Recovery Policy.
FROM: David Ziegele, Director
Office of Underground Storage
TO: UST Regional Branch Chiefs
At the June meeting between OUST and the UST Regional Branch
Chiefs in Minneapolis, there was a discussion of a possible
revision of the UST cost recovery policy by OUST. This was
discussed in view of concerns regarding the general inactivity in
cost recovery and the lack of consistency between states.
OUST has reviewed the policy in light of these concerns. We
believe that the policy still adequately reflects the program
philosophy towards cost recovery. That philosophy is built
around several important assumptions:
o The majority of cleanups will be accomplished by
responsible parties.
o State-lead actions are likely to be taken at orphan
sites or sites where the owners and operators are
financially incapable of financing a corrective action.
o In many cases, the use of state assurance funds will
diminish the importance of cost recovery of LUST Trust
Fund monies from owners and operators beyond deductible
amounts.
Consistent with the above assumptions, the policy
acknowledges that, at many sites where states perform corrective
actions utilizing federal LUST Trust funds, the prospects for
significant recoveries will be limited and cost recovery will not
be pursued. In those instances, it is extremely important that
formal documentation of the decision to not co9t recover be
maintained in each site-specific file. Clearly, there are other
scenarios (such as emergency responses or unwilling responsible
parties) where cost recovery is warranted and should be actively
sought. Again, in these situations, adequate records of
negotiated settlements or compromised claims must be maintained.
Pnnte<3 on Recycfee °3.
-------
OSWER Directive 9610.10
(iii) To the extent the State is successful in recovering
these costs, it will dedicate these funds for
additional Trust-Fund-eligible activities fog Otietee
tcubL iliitM-yequlroacntar and maintain appropriate
accounting of recovered funds in order to document the
reuse of recovered funds in accordance with ths
requirements of 40 CFR 30.525 or 31.25, as
appropriate, and in accordance with applicable
requirements of this cooperative agreement.
(iv) It will notify EPA promptly of any reduction in it»
authority to recover response expenditure* (e.g.,
successful challenge to it# State statutory authority).
[END OF INSERT 2]
4. State agrees to maintain supporting documentation and
appropriate records in support of any future coat
recovery efforts. The State shall adhere to the
principles of documentation and records retention
specified in the OSWER Directive 9610.10 Cost Recovery
Policy for the LUST Trust Fund (October, 1988). On
topics not addressed by these guidelines, the Stats
agrees to adhere to the principles of documentation and
record retention specified in The State Superfund
Financial Management and Recordkeeping Guidance untill
such time as the State and EPA agree to implement the
requirements of The Leaking Underground Storage Tanks
Trust Fund State Financial Management Handbook. The
State agrees to make these records available to the
federal government, as needed, on a case-by-casa basis.
5. State agrees to provide reports as outlined in the
Supplemental Guidelines for FY 89 LUST Trust Fund
Cooperative Agreements: (April 7, 1988). These reports
consist of Quarterly Progress Reports, Financial Status
Reports (SF 269) Federal Cash Transactions Report (SF
222}, and Exception Reports.
6. Stats agrses to identify Letter of Credit drawdowns
under EPA's thras major activity codes. The thrse
codss arc: m7m — General Support and Management,
Sits Cleanup Actions, and •M" — Enforcement.
4
-------
OSWER Directive 9610.10
The State therefore agrees that to the extent the State lacks the
authority or procedure to recover response expenditures on
behalf of the LUST Trust Fund (i.e.. the authority to recover
such co61s from owners/operators and retain such monies for
additional LUST Trust Fund corrective action and enforcement),
the State will delay taking cost recovery action until the State:
(a) Obtains legislative authority for cost recovery which is
consistent with Section 9003(h)(6) of RCRA and provides to
EPA certification of such authority from: (1) the State's
Attorney General, (2) someone designated by the Attorney
General to sign such certifications, or (3) the State's or
Governor's General Counsel, or other such official who is
responsible for advising all executive branch agencies on
the scope of their authority. This certification should be
provided by the end of the next legislative session. (The
State understands that if it has not made a good faith
effort to obtain this authority, EPA may decline to enter
into subsequent cooperative agreements.)
OR
Provides EPA with certification from the State officials
described above that State law permits it to exercise the
authorities in Sections 9003(h)(6) of RCRA. (The State
understands that if it has not provided this certification
to EPA within 120 days after the award of this Cooperative
Agreement EPA may withhold payment of LUST Trust Fund money
consistent with 40 C.F.R. 30.902 or 31.43).
once the State has obtained the legislative authority or made a
certification under paragraph (a) above, the State agrees that:
(i) It will make reasonable efforts to recover these costs,
including interest, from liable owners/operators.
_£&ates aust send a copy of their complaint to EPA's
Office of Regional Counsel within one week of filing
judicial recovery actions for Trust Fund expenditures.
(ii) It will report any amounts received from the
owner/operator as recovered costs, or agreed or
adjudged to be owed by the owner/operator as
settlements for sits clean-up in accordance with
applicable guidance on Trust Fund Financial and
Quarterly Reporting; and
3
-------
OSWER Directive 9610.10
(CONTINUATION OF SPECIAL CONDITION 3 --
INSERT 1 OR 2 BELOW)
(INSERT 1, for States which have State authority conalatent vlth
those in RCRA Section 9003 fh) to recover response expenditures
The State therefore agrees that:
(a) It will make reasonable efforts to recover these costs,
including interest, from liable owners/operators.
States oust send a copy of their complaint to EPA's
Office of Regional Counsel within one week of filing
judicial recovery actions for Trust Fund expenditures.
(b) It will report on any amounts received from the
owner/operator as recovered costs, or agreed or
adjudged to be owed by the owner/operator as
settlements for site clean-up, in accordance with
applicable guidance on Trust Fund Financial and
Quarterly reporting; and
(c) To the extent the State is successful in recovering
these costs, it will dedicate and use these funds for
additional Trust-Fund-eligible activities op for 3tafe»
eea» eha>a.saquireaentfry and maintain appropriate
accounting of recovered funds in order to document tl^
reuse of recovered funds in accordance with the
requirements of 40 CFR 30.525 or 31.25, as
appropriate, and in accordance with applicable
requirements of this Cooperative Agreement.
(d) If the State has not yet done so, the State will submit
certification of its authorities to EPA within 120 days
after the award of this Cooperative Agreement. The
certification will be signed by: (1) the State*¦
Attorney General, (2) someone designated by the
Attorney General to sign such docuaents, or (3) the
State's or Governor's General Counsel or other such
official who is responsible for advising all executive
branch agencies on the scope of their authority.
(e) It will notify EPA promptly of any reduction in its
authority to recover response expenditure* {e.g.,
successful challenge to its State statutory authority).
riNSERT 2. for States lacking State authorities consistent with
those in Section 9003(h) of RCRA to recover response expenditures
2
-------
OSWER Directive 9610.10
Special Conditions
REQUIREMENTS FOR INCLOSIOH
IM LOST STATS COOPERATIVE AGREEMENTS
1. State agrees to maintain a financial cost accounting system
which meets the requirements of 40 CFR 30.510 or 40 CFR
31.20. For this and other requirements on grantees, Part
31 applies to all cooperative agreements vith budget or
project periods beginning on or after October 1/ 1988.
Fart 31 also applies to all amendments of existing
agreements in which all of the activities in the
amendment's scope of work will be performed after October
1, 1988. Parts 30 and 33 (for procurement) apply to other
cooperative agreements and amendments.
2. State agrees to organize and maintain site-specific
information consistent with accounting thresholds and
policies described in the Supplemental Guidelines for FY
89 LUST Trust Fund Cooperative Agreements (OSWER Directive
9650.7) where Trust Fund monies are used. Prior to making
expenditures of Trust Fund monies for corrective and
enforcement actions, a system must ba in placa to record
these types of costs on a site-specific basis. When site-
specific accounting is required, all costs that can be
identified to a particular site should be charged
accordingly and State contractors must bill costs on a
site-specific basis for corrective action and enforcement
work performed at those sites.
3. The State acknowledges that expenditures from the LOST
Trust Fund constitute a liability of the owner/operator to
the United Statas. The state agrees to retain recoveries
anv LOST Trust Fund expenditures as program income, as
described in OMB Directive A-102 and 40 C.F.R. Parts
30.529(a) or 31.25(g)(2), to be used for additional
•ligibl# Trust Fund activities, -flha- Gfcatee may also use
TrtfffT Tiant P n 11 iT~ i H-* ** " ** 1 * ~ "v>"
mrpMr~rtrtr vrJT 1 fwj fn^
aooordUwfli with 10 CT>r 31. 29-(f) Q) r
1
-------
third party liability costs, and should not be used in the case
of solvent RPs who can afford the cost of corrective action.
Thus, State funds used for this purpose would not be used in a
LUST Trust Fund eligible manner and would not qualify towarjj
satisfying the State match requirement.
An added rationale for not permitting States' traditional
method of using their funds to qualify as match is that Congress
intended that owners and operators be held responsible for
releases from their tanks, and required them to obtain financial
responsibility. The LUST Trust Fund was intended to be used as a
backup source of funding, after funds were provided by the tank
owner's financial assurance mechanism, which in these cases is
the State fund.
A general rule of thumb that can be used is that if the
circumstances of the case are such that the criteria for using
the LUST Trust Fund are met, then State UST fund expenditures
should generally qualify for matching purposes. For those States
that desire to use their UST fund toward satisfying the LUST
Trust Fund State match requirement, this provision should be
incorporated into the State's LUST Trust Fund cooperative
agreement with the Agency.
3. states are not required to cost recover their State match
funds.
While EPA's LUST Trust Fund cost recovery policy requires
States to pursue recovery of Trust Fund expenditures, this
provision applies only to Federal monies that are expended,
to funds supplied by the State as part of the State's cost share
requirement. The rationale for this conclusion is found in EPA's
LUST Trust Fund Cost Recovery Policy, which states that
expenditures from the LUST Trust Fund constitute a debt and a
liability of the owner/operator to the united states. While this
provision clearly applies to the Federal portion of Trust Fund
expenditures, it does not apply to the State's cost share
contribution.
Attachment
cc: Hovard Corcoran, OGC
Jail* Souzon, OGC
Tyner, OGC
Harvey Pippen, GAD
Bruce Feldman, GAD
Maureen Ross, GAD
Sallyanne Harper, FMD
Liz Milstead, FMD
Elissa Karpf, OIG
-------
Consistent with our existing cost recovery policy, States
may still retain recovered Trust Fund monies to perform
additional eligible activities under their cooperative
agreements.
2. Some expenditures from State financial assurance funds can be
used to meet State match requirements.
Another question we addressed in Atlanta was whether
expenditures from State UST funds could be used toward satisfying
the ten percent State match requirement under the State's LUST
Trust Fund cooperative agreement. We concluded that State UST
fund monies can be applied toward the match, provided thev are
Spent on LUST Trust Fund allowable activities. The use of State
funds in this mariner should be approached with caution, however,
because many expenditures from State funds (e.g., reimbursement
of cleanup costs at sites owned by solvent tanlc owners) would not
be allowable costs under the LUST Trust Fund. This issue is
discussed in more detail below.
There may be a limited number of situations where State UST
funds could be used in a manner that would be considered
allowable under the LUST Trust Fund. Some examples of qualified
uses of State funds for match purposes include, but are not
limited to, the following:
o Oversee RP-lead cleanups, under the State fund program.
Since oversight of RP-lead cleanups is a LUST Trust
Fund allowable activity, regardless of the solvency of
the RP or presence of other methods of financial
responsibility, state funds used for this purpose would
be used in a LUST Trust Fund allowable manner.
o State-lead cleanups that meet LUST Trust Fund criteria.
For States that allow themselves direct access to their
UST fund, several situations may arise where State
funds could be expended in a LUST Trust Fund allowable
manner. These situations include:
— emergencies
— abandoned tanks (no identifiable RP)
— recalcitrant RPs (despite the presence of the
State fund)
— investigation of a release to determine its
source
In contrast to the situations described above, the
traditional method of expending monies from most State UST funds
would generally not be considered LUST Trust Fund allowable and,
thus, such expenditures would not be considered eligible for use
in satisfying the State match requirement. For instance, most
state funds are set up to pay for or reimburse a tanX owner for
the cost of corrective action and/or third party liability after
payment of a deductible. The LUST Trust Fund cannot be used for
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20480
AUG 2 3 1991
Off'CE OF
SOLiO '
-------
I apologize for any confusion that may have resulted from
the February 12 memo.
Attachment
cc: Regional Program Managers
OUST Management Team
John Heffelfinger
David Hamnett
-------
OSb)
UNITED STATES ENVIRONMENTAL PROTECTION AGEN
WASHINGTON, O.C. 20460
FES 2 & 1993
'6 m
off ice 6t' • ...
SOLiO WASTE AND EMERGENCY RESPONJ
MEMORANDUM
SUBJECT: Correction of February W. Memo on Cost Recovery
FROM: David Ziegele, Director
Office of Underground Storage Tames 4
TO: UST Regional Branch Chiefs
I am writing to correct a minor misstatement of our current
policy on LUST Trust Fund cost recovery that was contained in a
memo I sent you on February 12, 1993. That memo explained our
decision to retain the current cost recovery policy without
modifications.
Page two of the memo summarizes some basic precepts and
requirements of the policy including those governing management
of recovered federal funds. The memo incorrectly says that
states may use recovered federal Trust Fund monies to meet
requirements for matching funds under their cooperative
agreements. In fact, OUST withdrew that option for use of
recovered federal funds at the request of the Office of the
Inspector General and the Office of General Counsel. This
decision was announced in 1990 and confirmed in writing to our
Regional UST Program Managers in a memo dated August 23, 1991.
I have attached a copy of the August 23, 1991 memorandum
which was written before we were routinely sending all program
correspondence to you. It summarizes three changes in Trust Fund
policy and includes required language for special conditions that
reflect the current policy. This language should have been
incorporated into all cooperative agreements involving FY 1991
Trust Fund monies as well as all subsequent agreements. OUST
developed the special conditions (along with the cost recovery
policy) in cooperation with the Offices of General Counsel and
the Comptroller to incorporate the minimum requirements for cost
recovery into each cooperative agreement. The Regional UST
programs should continue to use appropriate sections of these
special conditions until further notice.
Printed on Recycled
-------
SB,j
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION IV
345 COURTLAND STREET. N.E.
ATLANTA. GEORGIA 30365
hmj i <1 m
MEMORANDUM
John K. Mason, Chief
Underground Storage Tank Section
FROM
TO
Addressees
I am attaching a copy of two memos from David Ziegele, one
(February 12, 1993) is regarding the possibilty of revision to the
UST cost recovery policy. The other (February 24, 1993) is a
correction to the previous memo with supporting documentation
attached.
OUST review finds the cost recovery policy still adequately
relects the program philsophy towards cost recovery. The attached
memo outlines the minimal requirements to which states must conform
with the cost recovery policy.
If you have any questions, please contact me at 404/347-3866
Attachments
Addressees:
ALABAMA, Sonja Massey
FLORIDA, Marshall Mott-Smith
GEORGIA, Randy Williams
KENTUCKY, Doyle Mills
MISSISSIPPI, Walter Huff
NORTH CAROLINA, Burrie Boshoff
SOUTH CAROLINA, Stan Clark
TENNESSEE, Chuck Head
Printed on Recycled P.
-------
W
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
^ WASHINGTON, D.C. 20460
FEB 2 5 1993 off1CeOF
SOLID WASTE AND EMERGENCY RESPONSE
MEMORANDUM
SUBJECT: Current Interest Rate far\LUST Trust Fund Expenditures
FROM: David Ziegele, Director
Office of Underground Storage Tanks ,j ^
TO: Regional UST Program Managers
This is to provide notice that for expenditures made during
calendar year 1993, the minimum recommended interest rate to be
assessed on funds from the Leaking Underground Storage Tank
(LUST) Trust Fund is four (4) percent. Please see that
appropriate individuals in each of your States receive written
notice of this change.
To the extent that they are legally able, States should
assess and pursue recovery of interest from tank owners and
operators, particularly where States have performed corrective
actions. Interest charges can provide owners and operators with
important incentives to settle recovery claims. In many cases,
they also provide States with significant income which they may
retain along with other LUST Trust Fund recoveries for use on
other eligible sites and activities. The Cost Recovery Policy
for the LUST Trust Fund (OSWER Directive 9610.10) contains a more
complete discussion of interest charges on Trust Fund
expenditures.
The suggested minimum interest rate for Trust Fund
recoveries is equal to the U.S. Treasury Current Value of Funds
Rate. We will notify you of future changes in this rate.
cc: Regional UST Branch Chiefs
Dana Tulis
Liz Milstead
Maureen Ross
Jane Souzon
Desk Officers
GROUND-*A~rR
PROTECTION3RANCK
^ i
jjJLl
am
MAR 0 1 1993 |i
SEGuT-Tdj.J
EPA REGION IV
ATLANTA. G'.i
Printed on Recycled Paper
-------
,1*0 Sr4
1SB. 5 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
S. REGION IV
©R0^t
MAR 1 1 m
MEMORANDUM
345 COURTLAND STREET. N.E.
ATLANTA. GEORGIA 30365
SUBJECT:
FROM:
Current Interest Rate for
LUST Trust Fund Expenditures
John K. Mason, Chief v
Underground Storage Tank Section
TO:
Addressees
The attached memo from David Ziegele, dated February 25, 1993,
informs us of the minimum recommended interest rate to assess on
the Leaking Underground Storage Tanks (LUST) Trust Fund's
expenditures. The rate for expenditures made during calendar year
199 3 from the LUST Trust Fund is four (4) percent.
If you have any questions, please call me at 404/347-3866.
Attachments
Addressees:
ALABAMA, Sonja Massey
FLORIDA, Marshall Mott-Smith
GEORGIA, Randy Williams
KENTUCKY, Doyle Mills
MISSISSIPPI, Walter Huff
NORTH CAROLINA, Burrie Boshoff
SOUTH CAROLINA, Stan Clark
TENNESSEE, Chuck Head
Printed on Recycled Paper
-------
y*
tm,
\
g UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
of pice of
solid waste and emergency response
JAN 24 1992
MEMORANDUM
SUBJECT: Current Interest Rate for LUST TrustxFund Expenditures
FROM: V^pavid Ziegele, Director*^5' ^
j Office of Underground Storage Tanks
TO: Regional UST Program Managers
This is to provide notice that for expenditures made during
calendar year 1992, the minimum recommended interest rate to be
assessed on funds from the Leaking Underground Storage Tank
(LUST) Trust Fund is six (6) percent. Please see that
appropriate individuals in each of your States receive written
notice of this change.
To the extent that they are legally able. States should
assess and pursue recovery of interest from tank owners and
operators, particularly where States have performed corrective
actions. Interest charges can provide owners and operators with
important incentives to settle recovery claims. In many cases,
they also provide States with significant income which they may
retain along with other LUST Trust Fund recoveries for use on
other eligible sites and activities. The Cost Recovery Policy
for the LUST Trust Fund (OSWER Directive 9610.10) contains a more
complete discussion of interest charges on Trust Fund
expenditures.
The suggested minimum interest rate for Trust Fund
recoveries is equal to the U.S. Treasury Current Value of Funds
Rate. We will notify you of future changes in this rate.
cc: Dana Tulis
Liz Milstead
Maureen Ross
Jane Souzon
Desk Officers
LUST/CR/92-l
Printed on Recycled Paoe'
-------
£ i
'SB?
ls
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
APR | 0 1991
on F 'C E OF
SOLID WASTE AND EMERGENCY RESPONSE
MEMORANDUM
SUBJECT: Trust Fund Expenditures
This is to provide notice that for expenditures made during
calendar year 1991, the minimum recommended interest rate to be
assessed on funds from the Leaking Underground Storage Tank
(LUST) Trust Fund is eight (8) percent. Please see that
appropriate individuals in your States receive written notice of
this change.
To the extent that they are legally able, States should
assess and pursue recovery of interest from tank owners and
operators, particularly where States have performed corrective
actions. Interest charges can provide owners and operators with
important incentives to settle recovery claims. In many cases,
they also provide States with significant income which they may
retain along with other LUST Trust Fund recoveries for use on
other eligible sites and activities. The Cost Recovery Policy
for the LUST Trust Fund (OSWER Directive 9610.10) contains a more
complete discussion of interest charges on Trust Fund
expenditures.
The suggested minimum interest rate for Trust Fund
recoveries is equal to the U.S. Treasury Current Value of Funds
Rate. We will notify you of future changes in this rate.
cc: Mike Williams
Liz Milstead
Marshall Schy
Jane Souzon
Desk Officers
FROM:
\ \l1 '
David Zi&geie, Acting Director
Office of Underground Storage Tanks
TO:
Regional UST Program Managers
LUST/CR/91-1
PrtAUd on Recycled Paper
-------
U^'ied Siaies
p^ctec:
Aqe^cv
¦on
QM.ce o>
So"a Waste anc
E~>e'qe"Cv Besoor.je
4>E PA
DIRECTIVE NUMBER: 9610.10
TITLE: Cost Recovery Policy for the Leaking
Underground Storage Tank Trust Fund
APPROVAL DATE: October 7, 1983
EFFECTIVE DATE: October 7, 1988
ORIGINATING OFFICE. Office of Underground
0 FINAL Storage Tanks (OUST)
~ DRAFT
STATUS:
REFERENCE (other documents):
Supplemental Guidelines for FY89 LUST Trust Fund
Cooperative Agreements; OSWER Directive 9650.7:
April 7, 19SS.
OSWER OSWER OSWER
F DIRECTIVE DIRECTIVE D,
LUST/CR/88-2
-------
- :ec i:a:es r'cteci.cn A-e--:,
^ »Vasnir.g:cr DC 20*^60
otrM OSWER Directive Initiation Request
w*ec:;.e Nu~cer
9610.10
2. Originator Information
-arr->e ci Ccr.iac: ^ersc^
'avic Ha-r.e: t
v-aM L.cce
os—. 1")
ICf.ce
OUST
'siecnone Ccce
-75-937 7
¦ ¦: e
Cose Recover;.' Folic;.' for the Leaking Underground Scorase Tank Trust Fund
A Si.r-.na-,' ol Ci.-ec: -e rc.wCe cne' suierrigni ol 3u.-Dose)
This Directive is the first full statement for States and EPA Regional Offices of the
policies, priorities, ana procedures for cost recovery under the LUST Trust Fund.
Special conditions that will incorporate the policy mlo Trust Fund cooperative
agreements are included.
5. Keyxoras
Cost Recovery. LUST Tnjst Fund. Underground Storage Tanks. Cooperative Agreements 5frpma1
6a. Ooes This Directive Sucerj .e Previous Grrectr.eiS)
0. Ooes It Supoiemen; Previous Directive(s)?
! X !no
Yes What Oireeuve (numeer. title)
Qjrtirims
1 ' | X | What directive (nurrb«r. «*•) 9650.7;
Supplemental Guidelines for FY 89 LUST Trust Fund Cooperative Agreements (Replaces Cost
7 Draft Level
U A - Signec 5y AA'CAA
: X i B - S g^eC 5v Office Director j i C - For Review & Comment
Recovery Sectio
D - In O«r«iopment
8. Document to be distributed to States by Headquarters? [[H Yw 13 No
This Request Mteta OSWER Qlrcctlvts System Formit Standards.
3. Signature ot Leao Office 0"»c!ives Cocrcmator
^14 "-*i- *—"
Beverlv Thorrv^
Date
¦* r> v
Sharon Foote. OSWER Directives Officer ' \0 - 1 - ^ o
EPA Form 1315-17 (R«v. S-87) Previous eaitions are oosoiete.
OSWER OSWER OSWER O
VE DIRECTIVE DIRECTIVE DIRECTIVE
-------
UNITEO STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D C. 20460
0CI ¦ OFF,CE 0F
SO'.iO waste ANO EME^GENCV SES°ONS-:
MEMORANDUM
SUBJECT:
FROM:
LUST Trust Fund Cost Recovery Policy and Special
Conditions -'1^-¦
J. winston'Porter
Assistant Administrator
TO:
Regional Administrators
Regions I-X
ATTN: Waste Management Division Directors,
Regions I-III, V-IX
Water Management Division Directors, Regions IV, X
Attached is the final Cost Recovery Policy for the Leaking
Underground Storage Tank (LUST) Trust Fund. Also attached is a
set of special conditions for LUST Trust Fund cooperative
agreements that reflect the policy. Both are products of an
intensive effort to develop a framework for cost recovery that
incorporates the State-centered design of the Underground Storage
Tank program.
The Office of Solid Waste and Emergency Response worked
closely with the Office of General Counsel, the Office of the
Comptroller, the Regional UST programs and other Headquarters
offices over the last year to develop this innovative policy.
These offices were also instrumental in helping us obtain
concurrences on our approach from the Department of Justice
(DOJ), the Office of Management and Budget, and Congressional
staff.
The two most innovative aspects of the policy should provide
States with the autonomy and incentive to pursue recoveries
aggressively and efficiently. First, to streamline the recovery
process, States will generally be able to litigate and settle
cost recovery claims without the involvement of EPA or DOJ.
Second, to provide incentives for pursuing cost recovery, States
will retain recovered Trust Fund expenditures to perform
additional cleanups or to satisfy their cost share requirements.
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This policy replaces the cost recovery section (Section
II.I) of OSWER Directive 9650.7 (Supplemental Guidelines for FY
89 LUST Trust Fund Cooperative Agreements') . dated April 7, 1988.
This policy will also be incorporated into a set of consolidated
LUST Trust Fund Guidelines that will be released in the next few
weeks.
To encourage States to proceed with recoveries on cleanups
now underway, Regions should amend all existing LUST Trust Fund
cooperative agreements to include the attached special
conditions. This will also eliminate inconsistencies in
recordkeeping and recovery procedures that would otherwise make
oversight of the program unnecessarily complex.
I am certain that this policy will help us continue to build
strong State underground storage tank programs. I want to
congratulate everyone who contributed to the development of the
policy.
Attachments
cc: Charlie Grizzle
Larry Jensen
Dave Ryan
Harvey Pippen
Tor.y Musick
Ron Bachand
Howard Corcoran
Louise Wise
Regional UST Program Managers
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OSWER Directive 9610.10
COST RECOVERY POLICY FOR THE LEAKING UNDERGROUND
STORAGE TANK TRUST FUND
A. Overview
This is EPA's first complete statement of its policies on
cost recovery under the Leaking Underground Storage TanX (LUST)
Trust Fund. It has required a year of coordinated effort by
various EPA offices to develop and to secure necessary approvals
within the Agency and from other agencies and officials in the
executive and legislative branches of government. Working with
and through States to implement this policy, EPA expects that it
will help cost recovery to become a practical and effective tool
that States will use to both stimulate and fund more cleanups of
releases from underground storage tanks.
Objectives of Cost Recovery
The primary purpose of cost recovery under the LUST Trust
Fund is to provide incentives for owners and operators to comply
with technical and financial responsibility requirements, and
most importantly to clean up releases from their own tanks. EPA
expects that State-lead cleanups followed by cost recovery will
continue to occur in a minority of cases, because the majority of
cleanups are conducted by owners and operators. When cost
recovery is necessary, it will generate income for additional
cleanups.
Cost recovery as practiced under the LUST Trust Fund will
depart significantly from the approaches taken in other Federal
environmental response programs. Consistent with the State-
centered design of the underground storage tank program, States
will implement the cost recovery program, have considerable
discretion in operating it, and benefit directly from their
successful recoveries.
The two most innovative aspects of EPA's cost recovery
policy for the LUST Trust Fund should provide States with the
autonomy and the incentive necessary to pursue recoveries
aggressively and efficiently. First, States with cooperative
agreements will litigate and settle recovery claims without the
routine involvement or concurrence of EPA or the Department of
Justice. Second, States may retain any Trust Fund monies they
recover for use on additional Fund-eligible cleanups and
activities.
Legal Rationale
The legal rationale behind this approach was developed by
the Agency in consultation with the Department of Justice.
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OSWER Directive 9610.10
Under 28 U.S.C. Section 516, the Department of Justice
(DOJ} oust conduct any litigation in which the United States has
an interest unless there is an exception authorized by law. EPA
interprets section 9003(h) of Subtitle I to be such an exception,
allowing States under cooperative agreements that have the
capabilities to carry out effective corrective actions and
enforcement activities to exercise various program authorities,
including the cost recovery authority provided in section
9003(h)(6). These States may also settle cost recovery litigation
as part of the exercise of enforcement discretion conveyed by
section 9003(h).
Additionally, EPA interprets section 9003(h) to provide
authority for States to administratively settle cost recovery
claims. EPA believes that this authority includes the ability to
compromise or terminate Trust Fund claims based on considerations
of equity as described in section 9003(h)(6)(B) (e.g., reducing
the claim to the amount of required financial responsibility).
Finally, EPA has determined that, consistent with the
"program income" concept described in OMB Circular A-102, that
States may retain recovered Trust Fund monies to perform
additional eligible activities under their cooperative
agreements. Thus, appropriate requirements in 40 C.F.R. Parts 30
and 31 on the documentation and use of program income apply to
recoveries of Trust Fund money.
Recovery Procedures
Variations in State recovery 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
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OSWER Directive 9610.10
o Litigation (when demand for payment and efforts to
reach an administrative settlement fail)
o Collection and case closure
States are encouraged to tailor the specifics of these
procedures to suit their individual programs and to save program
resources. In addition, the detailed policy guidance that
follows has been developed to help ensure that cost recovery
resources are used efficiently and stimulate compliance by owners
and operators.
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OSWER Directive 9610.10
B. State and Federal Roles in Cost Recovery
Po1i cv
Under their cooperative agreements, States are responsible
for all legal, programmatic, and administrative activities
necessary to recover their expenditures from the LOST Trust Fund.
This includes undertaking administrative and judicial recovery
actions and settling claims. They are responsible for required
reporting and recordkeeping including documenting that their
Trust Fund recoveries are used for additional eligible
activities under their cooperative agreements. EPA will provide
general policy guidelines to States and make funding available
for recovery programs .through the States' cooperative agreements.
EPA will also assess the performance of State cost recovery
programs and provide support and assistance to States where they
are needed to improve performance. The Agency will generally be
bound by settlements and judgments reached in States, but
reserves the right to pursue recoveries independently in the
extreme case. Also, EPA may pursue recoveries in those rare
cases where the Agency has performed a federal-lead response.
Guidance
States are expected to have adequate legal authorities to
undertake cost recovery either by having or acquiring their own
authorities, or certifying that they are able to use federal
authorities. States with their own recovery authorities should
also cite Subtitle I in their recovery actions (i.e., demand
letters, administrative orders, and judicial complaints) to
establish the liability of owners/operators to the federal
government for Trust Fund expenditures.
EPA is currently formulating policies on a number of issues
related to recovery litigation. One major unresolved issue is
whether States should bring judicial recovery actions in State or
federal courts. Until these issues are resolved, States should,
within one week, notify EPA's Office of Regional Counsel when
filing judicial recovery actions for sites where they have used
Trust Fund money for cleanup or enforcement. This will give EPA
the opportunity to consult with the State, determine whether the
action might affect the scope of the Agency's Subtitle I
authorities, and if necessary, provide technical or legal
assistance to the State. However, EPA will not require States to
delay recovery litigation while the Agency reviews complaints
submitted by States.
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OSWER Directive 9610.10
States must maintain accounting and recordkeeping systems
that will document all Trust Fund expenditures, support cost
recovery with site-specific records, and demonstrate that
recovered funds are retained and used for additional eligible
activities or as matching funds under their cooperative
agreements. State recordkeeping and accounting must conform to
requirements in these guidelines and in the forthcoming LOST
Trust Fund State Financial Management Handbook, when it becomes
available.
States will have considerable discretion in prioritizing
cases for cost recovery and determining an appropriate level of
effort to devote to each case. At a minimum, in each case States
should make reasonable efforts to contact owners and operators
who are liable for releases, notify them of their liability for
enforcement and corrective action costs, and demand payment. In
those rare cases where equitable factors support compromise or
termination1 of the Trust Fund claim. States should ensure that
the bases for any compromise or termination are adequately
supported in the records of the State and reflect the efficient .
use of Trust Fund resources, states may compromise Trust Fund
claims when, for example, an owner/operator demonstrates that
he/she lacks the financial resources to pay the claim; the State
determines that the likelihood of success on litigating the
claim as small because of the absence of proof of liability or
unavailability of required witnesses; or costs of judicial
collection is disproportionately high. States should note that
their ability to reduce claims based on the equities described in
section 9003h(6)(B) is limited to cases where owners/operators
have maintained required levels of financial assurance.
Because they are more cost effective, negotiated settlements
are generally preferred over litigation. In many cases, however,
EPA expects that it will be necessary for States to initiate and
pursue judicial action to compel recalcitrant owners and
operators to pay cleanup costs. In deciding whether to Litigate
individual cases States should consider the solvency of the
owner/operator, the costs of cleanup, the likelihood of recovery,
the case's deterrence value and the opportunity costs (the
resources necessary to proceed that could otherwise be used in
pursuing other cases or in other parts of the State's Trust Fund
program).
1/ As used here, the term "compromise" means accepting less
than the full value of the claim. The term "termination"
means forgoing any cost recovery whatsoever.
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OSWER Directive 9610.10
Even where no administrative or judicial settlement is
reached, States must formally close out all cases and document
the reasons for deciding not to proceed further. Factors
justifying case closure include the situations where costs of
pursuing a case further will approach or exceed the potential
recovery, bankruptcy of the owner/operator, and other reasons.
States should not allow the statute of limitation (SOL) to run
and justify closure 6olely on that basis. States should
generally pursue cases promptly and file actions in a timely
manner to enhance the chances for recovery. States should revise
their priorities for individual recovery cases as SOL deadlines
approach. Until the issue is resolved by the courts, States
relying solely on Subtitle I cost recovery authorities should be
prudent and proceed assuming a three year limit applies, despite
the fact that EPA believes that a six year limit is applicable.
This is necessary because some courts have applied the three year
limit to similar cases.
When States make successful recoveries at sites where Trust
Fund monies were used, they may retain the Trust Fund share as
program income consistent with 0MB Circular A-102 and 40 CFR
Parts 30.525 and 31.25. This means that States may use
recovered federal Trust Fund monies for additional Fund-eligible
cleanups and activities under their agreements. When States
choose to do so, they must inform EPA, and keep appropriate
records of how the recoveries were used. States may also use
LUST Trust Fund recoveries to meet their cost share requirement
under section 9003(h)(7)(B). If a State elects to do this, it
must be specified in their cooperative agreement. In
negotiating their cooperative agreements, States and Regions
should develop contingency plans that will allow States to
obligate their recoveries efficiently. States should calculate
the federal Trust Fund share of their recoveries on a site-by-
site, pro rata basis. For example, if a State spends 50
thousand dollars of LUST Trust Fund money at a site, and the
State ultimately recovers 50 percent of all Federal and State
money used at the site, it must redirect 25 thousand dollars of
"program income" into Fund-eligible activities.
EPA expects States with cooperative agreements to
adequately fund and staff recovery efforts to deal with
anticipated case loads. Cost recovery activities are allowable
costs under Subtitle I. Where the recovery program is dependent
on the Attorney General's Office, the State should consider the
need for formal funding arrangements (e.g., a memorandum of
agreement) to ensure legal staffing for cost recovery referrals.
When the Trust Fund is not used to pay for such legal staffing,
States may wish to investigate the possibility of counting these
legal services as "in-kind contributions*1 toward satisfying their
match requirements under 40 C.F.R. Part 31.24.
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OSWER Directive 9610.10
EPA's principal responsibilities in cost recovery are to
provide funding, policy, guidance, oversight, and assistance to
States. The Agency's operational role in cost recovery will
generally be limited to pursuing recoveries in those cases where
EPA responds directly to a release, and in rare cases of
overfiling.
EPA intends to make its expectations for the activities and
performance of cost recovery programs reasonable and clear to
States in advance. This will occur through policy, guidance,
routine communications, program appraisal and reviews, and the
negotiation of cooperative agreements. The oversight and
assistance functions of EPA's program, grants, and financial
management offices will accommodate variations in State
procedures and capabilities to the maximum extent possible. The
Agency's goals will be to help build State capabilities,
particularly in developing recovery programs and to improve
performance. At present, EPA has no numerical expectations for
the performance of State recovery•programs. Early in the
recovery program it will focus on States' progress toward
putting basic systems, policies, and procedures in place that
will enable them to recover Trust Fund expenditures efficiently
and effectively.
EPA is working with several States on pilot projects to
develop realistic expectations for program performance, and to
identify effective recovery procedures. The results will help
EPA support State programs with tools and guidance. They will
also help the Agency formulate and communicate more precise
expectations for program performance.
Generally, EPA will be bound by States' judicial actions and
settlements. However if EPA finds that a State is not
effectively implementing cost recoveries, the Agency will offer
the State necessary assistance in correcting any problems. The
office of Underground Storage Tanks will be most interested in
seeing that States have adequate accounting and recordkeeping
systems in place and that States identify, develop, and pursue
appropriate recovery cases in a timely and sound manner. If
problems in these or other areas persist, the Agency may take
appropriate action under regulations governing cooperative
agreements. In extreme cases, EPA may consider filing a recovery
action against the ovner/operator even though the State has the
authority to initiate an action or has already done so.
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OSWZR Directive 9610.10
C. Recoverable Costs
Owners and operators are liable for all costs of corrective
action and enforcement, including interest, indirect and
"management and support" costs associated with these activities
that are paid for by the Trust Fund. 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.
Interest charges should provide incentives for responsible
parties to settle cost recovery claims. Procedures for assessing
interest charges are described separately in this document.
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 and the number of cases is very large. Therefore, EPA
expects that States will exercise discretion in determining an
appropriate level of effort to devote to pursuing oversight
costs.
Guidance
In each case, States will exercise their discretion in
determining exactly which costs they will pursue. EPA is more
interested in a State's overall record in cost recovery than in
retrospectively examining decisions to pursue particular costs in
hundreds or thousands of cases. Direct costs are most easily
documented and defended in litigation. However, EPA is
developing, and will soon distribute a simple procedure which
will allocate all non-site Trust Fund costs including "management
and support" costs to individual sites. Using this methodology,
States will have available to them the full cost of a particular
site cleanup at the time of the cost recovery action. To the
extent that they are legally able, States should allocate all
Trust Fund expenditures to sites for the purpose of cost
recovery. States may also develop their own systems for
allocating non-site costs and/or include additional State
overhead costs that are beyond the scope of their cooperative
agreements.
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OSWER Directive 9610.10
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 not pursue these costs in
cases where this will provide valuable incentives for owners and
operators to clean up releases from their tanks.
In some 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 cost
recovery, protracted negotiations, issuance of cleanup orders and
litigation). These costs are recoverable. Presenting these costs
to liable owners and operators with the direct costs of cleanup
will give States additional leverage in their attempts to reach
agreements for responsible party cleanups and recovery of costs.
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OSWiR Directive 9610.10
D. Interest Charges
Pa1i cv
Owners and operators are liable for interest charges on
Trust Fund expenditures at their sites. States should assess
interest on expenditures from the Fund in the cost recovery
process. States are allowed to retain recovered interest for
additional eligible activities.
Guidance
Section 9003(h) of the Resource Conservation and Recovery
Act (RCRA) describes the States1 role in recovering LUST Trust
Fund expenditures - but does not specifically address the
collection of interest on those expenditures. However, EPA is
entitled under the Debt Collection Act and common law authorities
to collect interest on Trust Fund expenditures. Since States
will have responsibility for recovering Trust Fund expenditures,
under section 9003(h), the States will also assess and are
encouraged to pursue interest charges. Because States are
permitted to retain recoverable Fund expenditures for additional
cleanups and recoveries, they can also retain recovered interest
for use on additional eligible activities. The States'
collection of interest will deter responsible parties from
resisting payment in order to gain an interest-free loan on the
uncollected expenditures.
Before assessing interest, the State should notify the
debtor through a written notice (demand letter explaining the
agency's requirements concerning the debt and the interest).
Interest shall accrue from the date on which notice of the debt
and interest requirements is mailed or hand-delivered to the
responsible party.
The minimum recommended rate of interest that States should
assess for the current year is 6.00 percent. It is found in the
Yearly Percentage Bulletin printed every December with the rate
for the following fiscal year. The rate is equal to the average
investment rate for the Treasury tax and loan accounts. It
represents the current value of funds to the United States
Treasury, and is published by the Treasury's Financial Management
Service. EPA will notify States of the new rates each year.
EPA is examining the possibility of calculating a minimum
interest rate that more closely approximates the yield on Trust
Fund investments. The Agency will notify States if and when they
are to use this type of minimum rate.
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OSWER Directive 9610.10
A State may assess a higher rate of interest if it
reasonably determines that this is necessary to protect the
expenditures from the Trust Fund. The rate of interest as
initially assessed will remain fixed for the duration of the
indebtedness, except where a debtor has defaulted on a repayment
agreement and seeks to enter into a new agreement. Hew
agreements should reflect the current value of funds to the
Treasury at the time the new agreement is executed.
Interest should not be recovered if the amount due (Trust
Fund expenditures) is paid within 30 days after the date from
which the written notice was delivered to the responsible party.
However, the State may decide, on a case-by-case basis, to extend
the 3 0-day period for payment.
As part of their responsibility for settling claims, States
may decide not to pursue the collection of interest on a debt
entirely or in part once it has been assessed when they determine
it is in the best interest of the program. States may decide
not to pursue interest if the collection of interest puts the
responsible party in financial distress, or the cost of
collecting the interest will be more than the amount collected.
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OSWER Directive 9610.10
E. Priorities For Cost Recovery
Po1 icy
Under their cooperative agreements States should have or
should develop systems to set priorities for cost recovery cases.
They should devote greatest efforts to cases where owners or
operators are solvent but recalcitrant, and to cases where they
fail to comply with applicable financial responsibility
requirements. 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, and "action thresholds" (see section MF")
have triggered site-specific accounting, 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 case should be based on a weighing of
the resources necessary to recover the claim 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
deterrent value of the case, and the opportunity costs (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 impracticable because 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.
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OSWER Directive 9610.10
High 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
fuli cost recovery will significantly impair an RP'a
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.
Low priority - States should generally commit fewer
resources to insolvent or financially distressed RPs,
although selective pursuit within the class should be
undertaken where the RP could afford lesser amounts,
is hiding assets, fails to cooperate, or was negligent
in allowing the release to occur. 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. Where cooperative owners and operators perforin
cleanups, States may wish to make recovery of
oversight costs a low priority, to encourage voluntary
cleanups.
Impracticable - Sites where a liable owner or operator
cannot be identified will require expenditures from
the Trust Fund for cleanup. Efforts to recover costs
expended at these sites will 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.
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OSWER Directive 9610.10
F. Documentation Of Costs
Pol icy
States are required to document all Trust Fund expenditures
and all corrective action and enforcement costs on a site-
specific basis at each site where they have met any one of the
following "action thresholds": l) performed an emergency
response; 2} begun a detailed site investigation; or 3)
determined that an owner or operator is or is likely to be
recalcitrant.
Guidance
States must establish a financial cost accounting system
that tracks the costs of cleanup and enforcement activities on a
site-specific basis when any one of the specified "action
thresholds" is met. States are normally not required to begin
site-specific accounting until States or their contractors begin
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
significant Trust Fund expenditures and cost recovery. If an RP
is clearly recalcitrant, however, site-specific accounting
should begin as soon as costs are incurred. Generally,
contractor activity at a site will trigger site-specific
accounting.
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 including contractor invoices
Enforcement costs include all expenditures reasonably
related to inducing a recalcitrant RP to comply and to recovering
clean-up expenditures. They include the salaries and other
expenses associated with case development, negotiations, and
litigation.
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OSWER Directive 9610.10
States should establish cost-effective accounting systems
to support recovery of Trust Fund monies in courts. Features of
cost documentation that are essential to recovering costs in
court include:
Systems that are adequate for both cost recovery purposes
(i.e., will support the State's claim in administrative or
judicial action to recover) and audit purposes. At a
minimum, the system should provide proof that the work or
purchase was authorized by the State; the work or purchase
was completed; the State was billed; and the bill was
paid.
In many cases, States may have to respond to arguments
that the costs claimed are unreasonable and unnecessary.
The Financial Management Division of EPA's Office of the
Comptroller is developing more detailed guidance for State
accounting and recordkeeping. The LUST Trust Fund State
Financial Management Handbook will be made available by early FY
1989 to help States meet these accounting requirements.
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QSWER Directive 9 610.10
Special Conditions
REQUIREMENTS FOR INCLUSION
IN LUST STATE COOPERATIVE AGREEMENTS
State agrees to maintain a financial cost accounting system
which meets the requirements of 40 CFR 30.510 or 40 CFR
3 1.20. For this and other requirements on grantees, Part
31 applies to all cooperative agreements with budget or
project periods beginning on or after October 1, 1988.
Part 31 also applies to all amendments of existing
agreements in which all of the activities in the
amendment's scope of work will be performed after October
1, 1988. Parts 30 and 33 (for procurement) apply to other
cooperative agreements and amendments.
?. State agrees to organize and maintain site-specific
information consistent with accounting thresholds and
policies described in the Supplemental Guidelines for FY
89 LUST Trust Fund Cooperative Agreements (OSWER Directive
9650.7) where Trust Fund monies are used. Prior to making
expenditures of Trust Fund monies for corrective and
enforcement actions, a system must be in place to record
these types of costs on a site-specific basis. When site-
specific accounting is required, all costs that can be
identified to a particular site should be charged
accordingly and State contractors must bill costs on a
site-specific basis for corrective action and enforcement
work performed at those sites.
3. The State acknowledges that expenditures from the LOST
Trust Fund constitute a liability of the owner/operator to
the United States. The State agrees to retain recoveries
of any LUST Trust Fund expenditures as program income, as
described in 0MB Directive A-102 and 40 C.F.R. Parts
30.525(a) or 31.25(g)(2), to be used for additional
eligible Trust Fund activities. The State may also use
LUST Trust Fund recoveries to meet its cost share
requirements under RCRA Section 9003 (h)(7)(B), in
accordance with 40 CRT 31.25 (g)(3).
1
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OSWER Directive 9610.10
(CONTINUATION OF SPECIAL CONDITION 3 --
INSERT 1 OR 2 BELOW)
(INSERT 1. for States which have State authority consistent vith
those in RCRA Section 9003(hn to recover response expenditures
The State therefore agrees that:
(a) It will make reasonable efforts to recover these costs,
including interest, from liable owners/operators.
States must send a copy of their complaint to EPA's
Office of Regional Counsel within one week of filing
judicial recovery actions for Trust Fund expenditures.
(b) It will report on any amounts received from the
owner/operator as recovered costs, or agreed or
adjudged to be owed by the owner/operator as
settlements for site clean-up, in accordance with
applicable guidance on Trust Fund Financial and
Quarterly reporting; and
(c) To the extent the State is successful in recovering
these costs, it will dedicate and use these funds for
additional Trust-Fund-eligible activities or for State
cost share requirements, and maintain appropriate
accounting of recovered funds in order to document the
reuse of recovered funds in accordance with the
requirements of 40 CFR 30.525 or 31.25, as
appropriate, and in accordance with applicable
requirements of this Cooperative Agreement.
(d) If the State has not yet done so, the State will submit
certification of its authorities to EPA within 120 days
after the award of this Cooperative Agreement. The
certification will be signed by: (1) the State's
Attorney General, (2) someone designated by the
Attorney General to sign such documents, or (3) the
State's or Governor's General Counsel or other such
official who is responsible for advising all executive
branch agencies on the scope of their authority.
(e) It will notify EPA promptly of any reduction in its
authority to recover response expenditures (e.g.,
successful challenge to its state statutory authority).
(INSERT 2. for States lacking State authorities consistent with
those in Section 9003(h) of RCRA to recover response expenditures
2
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OSWER Directive 9610.10
The State therefore agrees that to the extent the State lacks the
authority or procedure to recover response expenditures on
behalf of the LUST Trust Fund (i.e., the authority to recover
such costs from owners/operators and retain such monies for
additional LUST Trust Fund corrective action and enforcement),
the State will delay taking cost recovery action until the State:
(a) Obtains legislative authority for cost recovery which is
consistent with Section 9003(h)(6) of RCRA and provides to
EPA certification of such authority from: (1) the State's
Attorney General, (2) someone designated by the Attorney
General to sign such certifications, or (3) the State's or
Governor's General Counsel, or other such official who is
responsible for advising all executive branch agencies on
the scope of their authority. This certification should be
provided by the end of the next legislative session. (The
State understands that if it has not made a good faith
effort to obtain this authority, EPA may decline to enter
into subsequent cooperative agreements.)
OR
Provides EPA with certification from the State officials
described above that State law permits it to exercise the
authorities in Sections 9003(h)(6) of RCRA. (The State
understands that if it has not provided this certification
to EPA within 12 0 days after the award of this Cooperative
Agreement EPA may withhold payment of LUST Trust Fund money
consistent with 40 C.F.R. 30.902 or 31.43).
Once the State has obtained the legislative authority or made a
certification under paragraph (a) above, the State agrees that:
(i) It will make reasonable efforts to recover these costs,
including interest, frotn liable owners/operators.
States must send a copy of their complaint to EPA's
Office of Regional Counsel within one week of filing
judicial recovery actions for Trust Fund expenditures.
(ii) It will report any amounts received from the
owner/operator as recovered costs, or agreed or
adjudged to be owed by the owner/operator as
settlements for site clean-up in accordance with
applicable guidance on Trust Fund Financial and
Quarterly Reporting; and
3
-------
OSWER D;-
•live 9610 . 10
(iii) To the extent the State is sue. sful in recovering
these costs, it will dedicate •:.)¦: se funds for
additional Trust-Fund-eligibl- aiivities or for State
cost share requirements, and na.i n^-ain appropriate
accounting of recovered funds in order to document the
reuse of recovered funds in accoidance with the
requirements of 40 CFR 30.525 or 31.25, as
appropriate, and in accordance with applicable
requirements of this cooperati- _ agreement.
(iv) It will notify EPA promptly of any reduction in its
authority to recover response expenditures (e.g.,
successful challenge to its State statutory authority) .
[END OF INSERT 2]
4. State agrees to maintain supporting documentation and
appropriate records in support of any future cost
recovery efforts. The State shall adhere to the
principles of documentation and vecords retention
specified in the OSWER Directive 9610.10 Cost Recovery
Policy for the LUST Trust Fund (October, 1988). On
topics not addressed by these guidelines, the State
agrees to adhere to the principles of documentation and
record retention specified in The State Superfund
Financial Management and Recordkeeping Guidance until
such time as the State and EPA agree to implement the
requirements of The Leaking Underground Storage Tanks
Trust Fund State Financial Management Handbook. The
State agrees to make these records available to the
federal government, as needed, on a case-by-case basis.
5. State agrees to provide reports as outlined in the
Supplemental Guidelines for FY 89 LUST Trust Fund
Cooperative Agreements: (April 7, 1988). These reports
consist of Quarterly Progress Reports, Financial Status
Reports (SF 269) Federal Cash Transactions Report (SF
272), and Exception Reports.
6. State agrees to identify Letter of Credit drawdowns
under EPA's three major activity codes. The three
codes are: "7" — General Support and Management, "E"—
Site Cleanup Actions, and "4" -- Enforcement.
4
-------
.40
^ r
sffiz
i
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. O.C. 20460
MAR 2 5 1988
Q» * ICI O*
solio <
»ONSi
MtMORANDLM
SUBJECT: Development o
.l&nagenen
FROM:
overy Policy and Financial
David P.
Ron Brand, Director
Office of Underground Storage Tanks (OUST)
TO:
Addressees
Since last fall our offices have been working on several
policy and guidance documents relating to cost recovery, and
financial management and accounting for state and regional
underground storage tanks programs. This memo summarizes key
policy decisions made thus far which will be reflected in formal
guidance documents we are preparing for you and the states and
will distribute the next few weeks.
SUMMARY OF THE TRUST. FUND COST RECOVERY POLICY
The Office of Underground Storage Tanks has shaped its
proposed policy with four objectives in mind:
1. In cost recovery as in other parts of the UST program,
EPA is committed to building a state-centered program.
2. The policy will provide incentives for responsible
parties to clean up their releases and comply with
regulations.
3. The polioy will encourag* states to manage their cost
recovery program wisely by setting priorities among
sites and making cost recovery efforts proportional to
factors such as the cost of cleanup, the likelihood of
recovery and the deterrent value of each case.
4. Recoveries will provide funds for additional cleanups•
LUST/CR/88-1
-------
-2-
The policy takes into account our mandate from Congress, the
nature of the regulated community and the large number of sites
requiring cleanups. The major characteristics of the policy are:
States are expected to set priorities for recovery cases,
concentrating their efforts on owner/operators who are solvent
but unwilling to undertake cleanup at their own expense. States
should also consider the size of the potential recovery, the
likelihood of recovery and the deterrent value of cases in
setting their priorities. Higher priority case* will be pursued
moat aggressively, through litigation if necessary. States will
generally pursue lower priority cases with less resource-
intensive methods (e.g., billings). States are expected to close
every case eventually and document the decisions to do so.
In order to provide an incentive for responsible party
cleanups, states may exercise discretion in deciding whether to
pursue the oversight costs associated with cleanups conducted by
cooperative owner/operators. States will usually begin site-
specific accounting once a detailed site investigation or an
emergency response is begun. State accounting systems and
recovery efforts are to focus primarily on the direct costs of
cleanup and enforcement actions.
REMAINING ISSUES
Our staff managers have worked together to craft this
policy. However, our work is not finished. We are now preparing
to seek the Administrator's concurrence on our policy.
There are two key areas of the proposed policy which yet
remain unresolved. They arm: the states' legal authority to
bring Judicial reoovery actions and reach settlements without
Federal involvement and whether states can retain recovered funds
for use on additional eligible activities. At present, we are
examining the legal and policy implications of these proposals
and will b« conferring with various organisations inside and
outside SPA.
SCHEDULE FOB POLICY AND QUI DANCE DOCUMENTS
OUST plans to use its 1989 Trumt Fund Cooperstive Agreement
Guidelines to inform you about all aspects of the policy that ass
approved when the guidelines are issued. The guidelines will
distributed by April 1. When discussions with DOJ and OMB
conclude OUST will issue a comprehensive cost recovery policy
that will resolve the remaining issues. The Financial Management
Division of the Comptroller's Office will complete and distribute
their guidance after the LUST Cost Recovery Policy is final.
-------
-3-
Ll'ST Co3t Recovery Policy: This OSWER directive will explain the
t'inal EPA policies on cost recovery, including disposition of
recovered funds. Release is scheduled for late April 1988.
State Handbook: This two-part guidance will describe for the
states how to deal with EPA on fiscal matters and how to meet
cost documentation requirements. Publication is planned during
the summer of 1988.
Comptroller's Directive: This directive will outline for the
Regions EPA's policies and procedures relating to cost
documentation and the financial management of the Trust Fund. It
will be released during the summer of 1988.
Review Protocol: This guide for the Regions will set out the
steps they should follow when performing fiscal reviews of state
programs. It is also due during the sumaer of 1988.
We hope you find this update informative and useful. Vie
will keep you informed of our progress in getting final approval
for the proposed policy. Until then, existing policies on these
issues must reaain in force.
If you have any questions regarding the proposed policy or
our planned products please call us. Our staff members working
on these issues are:
David Haanett - OUST (475-9377)
Nikos Singelis - Budget Division/Coaptroller's Office
(382-4198)
Liz Milstead - Financial Mgat. Div./Comptroller's Office
(382-4205)
Addressees
Regional Coaptrollers, Regions 1-10
Hazardous Waste Division Directors Regions 1-3, 5-9
Water Division Directors Regions 4, 10
Regional UST Coordinators
-------
im)
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
- 'CE o-
SOLID Wis". EM-PGiNCv RESPONSE
MEMORANDUM:
SUBJECT: Interest Charges on 1990 Trust Fund Expenditures
FROM: Ron Brand, Director /original signed by/
Office of Underground Storage Tanks
TO: Regional Program Managers
Each year OUST recommends a mininum interest rate that
States can use to calculate interest charges on expenditures from
the Leaking Underground Storage Tank Trust Fund. The rate for
expenditures made during calendar year 1990 is nine (9.00)
percent. It is equal to the Treasury's Current Value of Funds
Rate.
Tank owners and operators are liable for interest as well as
associated corrective action and enforcement costs. In our cost
recovery policy, we encourage States to pursue interest charges
as an incentive for quick settlements. States may retain any
interest that they recover.
Please notify the appropriate individuals in each of your
States of the new rate.
cc: Liz Milstead (FMD)
FILE COPY
LUST/CR/90-1
Printed on RtcycUd Papei
-------
JE/VD/&-/V J-j9/UOjS
-------
i UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
MEMORANDUM
SUBJECT: Final Indian Lands Implementation Tool Kit
TO: UST Regional Program Managers
FROM: Pat Eklund, Chief
Office of Underground Storage Tanks, Region 9
HJosh Baylson
Office of Underground Storage Tanks
Enclosed is a final copy of the Indian Lands Implementation
Tool Kit. We would like to highlight several changes that have
been made since the second draft was circulated in September:
• Format - The majority of the Regions preferred having the
text, tools, and appendices in one document. Three ring
binders were chosen so that tools and other materials could
be updated easily.
• Notification - Detailed information on the UST Data
Management System has been removed from the tool kit because
few Regions expressed an intent to use the system. Instead,
a contact for information has been listed.
• Release Reporting. Investigation, and Confirmation - Tools
8.1 and 8.2, for use by Regional staff for receiving release
information, have been combined into one tool that is easier
to use.
• Release Response - Chapter 9, covering corrective action,
remains in draft form and will be revised and finalized over
the next few months. Chapter 9 currently reflects the
traditional way of conducting corrective action. It will be
revised to reflect the "new" way of conducting and
overseeing corrective action that the UST program is
promoting, i.e., eliminating, consolidating, and hastening
steps in the corrective action process so that corrective
action decision-making occurs in significantly shorter time
frames than today, and with lower costs. When the revised
chapter is finalized, it will be distributed to all Regions.
LUST/IL/91-1
-------
• Appendices - All appendices mentioned in previous drafts are
included in this tool kit.
We want to thank you and your staff for your interest in
this project and the comments which were very helpful in revising
earlier drafts. If you have any questions please contact Pat at
(415) 744-2079 (FTS 484-2079), or Josh at FTS 475-9725.
Attachment
cc: David Ziegele
Jim Mccormick
Mike Williams
2
-------
INDIAN LANDS
IMPLEMENTATION TOOL KIT
January 1991
Prepared for:
U.S. Environmental Protection Agency
Office of Underground Storage Tanks
and
U.S. Environmental Protection Agency
Region IX
Prepared by:
ICF Incorporated
-------
Acknowledgements
The development of this tool kit was a cooperative effort co-managed by
U.S. EPA Region IX and U.S. EPA Headquarters. The cool kit could not have
been completed without the input of tools and written comments from Regions V,
VI, VIII, IX, and X. Several tools were prepared by Midwest Research
Institute. ICF Incorporated completed the development and packaging of the
tool kit. Editorial suggestions were provided by Jay Evans.
-------
INDIAN LANDS IMPLEMENTATION TOOL KIT
TABLE OF CONTENTS
1.0 INTRODUCTION 1-1
1.1 EPA's Relationship with Indian Tribes 1-2
1.2 Questions and Answers about Indian Lands 1-4
1.3 Relationship Between States and Indian Tribes 1-10
1.4 Role of Other Federal Agencies on Indian Lands 1-11
2.0 NOTIFICATION 2-1
2.1 Sample letter for requesting notification from
an owner or operator 2-4
2.2 Federal Notification Form for Underground Storage Tanks 2-5
3.0 INSTALLATION 3-1
3.1 Sample letter informing Indian land owner or operator of the
installation requirements 3-3
3.2 Brochures on proper installation procedures 3-4
3.3 Tank installation procedure checklists 3-18
4.0 GENERAL OPERATING REQUIREMENTS 4-1
4.1 Sample letter explaining recordkeeping requirements 4-3
4.2 Sample letter explaining options and procedures that meet general
operating requirements 4-5
5.0 RELEASE DETECTION 5-1
5.1 General letter describing release detection requirements 5-3
5.2 Letter to owners and operators out of compliance with
requirements and/or deadlines 5-5
6.0 FINANCIAL RESPONSIBILITY 6-1
6.1 Sample letter for assessing compliance 6-4
6.2 Draft Interim Enforcement Response Strategy for Violations of
Financial Responsibility Requirements 6-7
-------
INDIAN LANDS IMPLEMENTATION TOOL KIT
TABLE OF CONTENTS (cont.)
7.0 UPGRADING 7-1
7.1 Sample letter informing Indian land owner or operator of
the upgrading requirements 7-2
8.0 RELEASE REPORTING, INVESTIGATION, AND CONFIRMATION 8-1
8.1 Telephone record for initial report of a petroleum release 8-3
8.2 Steps to follow in reporting a release 8-5
9.0 RELEASE RESPONSE 9-1
9.1 Racing scheme for establishing priorities for federal
response sites 9-9
9.2 A sample letter informing Indian land owners and operators of
emergency response procedures summarized in EPA's outreach
publication Oh No ! 9-12
9.3 Innovative site assessment and remediation techniques 9-13
9.4 Sample site assessment request letter and guidance for
conducting a site assessment 9-23
9.5 Checklist for reviewing site assessments 9-33
9.6 Checklist for reviewing corrective action plans 9-34
9.7 Sample Corrective Plan Approval/Modification Letter 9-36
9.8 Summary of soil cleanup standards 9-38
9.9 Summary of public participation requirements 9-39
9.10 Sample letters for taking cost recovery actions 9-43
10.0 CLOSURE 10-1
10.1 Telephone record for initial report of tank system closure
or change - in-service ... 10-4
10.2 Letter explaining closure requirements and procedures for
conducting closure 10-5
10.3 Letter explaining site assessment requirements and procedures
for conducting a closure site assessment 10-12
10.4 Checklist for reviewing closure site assessments 10-19
-------
INDIAN LANDS IMPLEMENTATION TOOL KIT
TABLE OF CONTENTS (cont.)
11.0 ENFORCEMENT 11-1
11.1 Memorandum from Edward Reich regarding EPA's enforcement policy. . .11 - 5
on Indian lands
11.2 Summary of UST/LUST Enforcement Procedures Guidance Manual 11-9
11.3 Summary of U.S. EPA Penalty Guidance for Violations of UST
Regulations 11-11
11.4 Sample enforcement forms 11-13
11.5 Options for determining inspection priorities 11-23
11.6 General procedures for conducting compliance inspections 11-25
11.7 Health and safety training tools for inspectors 11-35
11.8 Inspection checklists 11-45
12.0 OUTREACH AND TRAINING 12-1
12.1 List of training resources for Indian lands 12-3
12.2 List of UST videotapes and other outreach materials 12-17
13.0 APPENDICES
A. EPA Regional Indian Work Group Coordinators
B. Presidential Indian policy
C. EPA Indian lands memo
D. EPA strategy for implementing the Indian lands memo
E. BIA list of federally recognized Indian tribes
F. List of contacts at IHS and BIA
G. Agency Indian communication plan
H. Interim Guidance for Conducting Federal-Lead UST Corrective Actions on
Indian Lands
I. Acknowledgement procedures for becoming a federally recognized tribe
J. Who to contact for further information
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
MAR I 4 1988
QPClC£ 2'
SOLiO WASM 4N0 EWE»G£NCV
MEMORANDUM
SUBJECT: Final UST Program Indian Lands Strategy
FROM: Ron Brand, Director 41^/'
Office of underground Storage Tanks
TO:
UST Regional Program Managers, Regions 5-6, 8-10
Attached please find the final "UST Program Indian Lands
Strategy for FY 88 and FY 89 and Guidance for Regional Pilot
Projects." This document defines UST Program activities on
Indian Lands for the remainder of this fiscal year and for the
next fiscal year. This strategy has evolved froa tvo earlier
draft strategies: the first was distributed by Ellie McCann,
dated June 1987; and the second was distributed by Melanie Field,
dated October 1987.
The focus of this strategy is on assessing ths extent of
UST-related human health and environmental problems on Indian
Lands by conducting regional pilot projects in Regions 8 and 9.
My decision to employ tvo pilots is based on resource
constraints. These constraints involve not only resources to
fund the pilots themselves, but also resources adequate to
address the environmental problems that are likely to be
uncovered as a result of the pilots. OUST is committed to seeing
that releases from UST systems on Indian Lands will be addressed
properly aad vith adequate resources.
Tfcla?.-strategy vill be revisited after the completion of the
pilot pcv^eets in late-FY 89. At that time, a longer term UST
Program Tnrtlan Lands strategy vill be developed.
Ths next step is for Regions 8 and 9 to submit short (2-3
pages) revised pilot proposals, based on the information
presented in this strategy. Revised proposals are dus by April
23, 1988. The regional staff assigned to plan and manage these
pilots should vork closely vith Josh Baylson of my staff (FTS
475-9723).
LUST/IL/88-1
-------
2
I am looking forward to seeing the results and lessons
learned from these two pilot projects on Indian Lands.
cc: Martin Topper, OFA
Carrie Wehling, OGC
Joe Retzer, OUST
Ellie McCann, OUST
Helga Butler, OUST
Charles Mooar, OUST
Claudia Goforth, OUST
Oana Tulis, OUST
Marfc Waiwada, OUST
Josh Baylson, OUST
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MAR I 4 1968
UST Program Indian Lands Strategy
for FY 88 & FY 89 and
Guidance for Regional Pilot Pro-^eeta
I. Abstract
XI. Problem Statement
III. Strategy
A. Scope
B. Objectives
IV. Inpleaentatlon Plan: Pilot Projects Guidance
A. Purposs
B. Structure
c. Priority Activities
V. LOST Trust Fund
VI. Schedule
-------
I. Abstract
This document identifies ptoblems associated with
implementing federal regulatory and clean-up requirements for US"^
systems on Indian Lands. A two-year strategy and implementation
plan, utilizing two regional pilots, are defined. A schedule for
the plan is then presented.
II. Problem Statement
Indian Tribes are sovereign governments subject to federal
lavs, but not necessarily stats lavs. Most states lack
jurisdiction on Indian Lands and, therefore, do not provide
environmental protection services on Indian Lands vithin their
borders. Some tribes have chosen to enter into agreements with
state governments to accept state regulatory authority and
services for environmental protection. Most tribes, however,
prefer to vorlc directly with the federal government on most
issues and do not recognize state authority on their lands.
A major goal of EPA's UST program is for states to
effectively regulate UST systems and to ensure that releases from
UST systems are cleaned up. However, since most state programs
do not have jurisdiction on Indian Lands, a strategy for cleaning
up releases and for regulating UST systems on Indian Lands is
needed.
Based on current notification data, there are an estimated
3,000-4,000 UST systems on Indian Lands nationvide — about 0.2%
of the regulated universe. This information, however, is limited
and incomplete. The lack of complete and accurate information is
a stumbling blocX to developing an effective, long-term strategy
for addressing UST systems on Indian Lands. In addition, because
there is a great deal of variation among tribes in terms of their
relations with federal and state governments, and their interests
and capabilities to operate environmental programs, a range of
program options and responses need to be considered in the
development of a long-term strategy for UST Program
implementation on Indian Lands.
III. Strategy
A. Scope
This strategy covers the remainder of FY 88 and FY 89.
Based on the information gathered as a result of the regional
pilot projects described below, and other relevant
considerations, a longer term UST program Indian Lands strategy
also vill be developed.
2
-------
B. objectives
The objective* of this two-year strategy are to:
o maximize involvement of Indian Tribes in all
activities;
o provide compliance assistance, education, and outreach
to owners/operators;
o assess the extent of the problem: data collection on
number, location, and types of UST systems;
o identify opportunities for Indian run regulatory and
clean-up programs: willingness, authorities, and
funding ?
o identify potential problems: leaking and abandoned
tanks;
o clean up sites: oversight of responsible party financed
cleanups and, if neceesary, selected tribal- and/or
federal-lead cleanups using the LCJST Trust Fund; and
o promote the involvement of other agencies/organizations
to leverage their resources on site.
IV. Implementation Plan: Pilot Projects Guidance
A. Purpose
The regional pilot project* are designed to determine the
extent of UST-related human health and environmental problems on
Indian Lands throughout each region, and to provide EPA's
national program office with information on the level of
work/resources necessary to address these problems nation-vide.
B. structure
There will be two regional pilot projects, each utilizing
one Circuit Rider to carry out the activities identified in
Section C, belov. Regions 8 and 9 have been chosen for the pilot
projects based on the following information:
Region 9: has 23% of the Indian population and 123
reservations, a larger Indian population and greater number
of reservations than any other region.
Region 8: has 14% of the Indian population, 24 reservations,
is the EPA lead region on Indian Lands, and has identified
environmental problems related to DSTs (including en
endangered major aquifer, the Ogallala).
3
-------
The two pilot projects will be funded by grants, which will
be overseen by Regions 8 and 9Regions a and 9 will be
responsible to identify and develop specific allocation
mechanisms (for example grants to IHS, BIA, or Indian
organizations). The grants will be for up to S50X per pilot for
the 12 month period July 1988 to June 1989.
Regions a and 9 will need to BUbmit brief (2-3 pages}
revised pilot proposals that identify the specific allocation
mechanism to be used, the proposed budget, and a plan outlining
how the Circuit Rider will carry out the activities listed below.
As part of the pilot projects, Regions 8 and 9 will submit
to OUST/Headquarters brief quarterly progress reports and a final
report/evaluat ion.
The pilots will be monitored by a newly formed Pilot
Projects Review Committee. The committee will be chaired by Josh
Baylson (OUST) and composed of representatives of Regions 5, 6,
8, 9, 10, OGC, and OFA. The committee will review, quarterly,
the progress and direction of the pilot projects.
C. Priority Activities
The table on page 5 portrays the priority activities for the
pilot projects (including the Circuit Riders) for FY 88 and FY
89. Note that these activities are presented in priority order.
If an activity has already been conducted, for example by
regional staff, there is no need for it to be carried out again
Should all of the activities listed be completed before the end!
of the pilot projects, Regions 8 and 9 may determine what other
activities will be performed during FY 89.
4
-------
Priority Activities for Indian Lands — FY 88 & FY 89
Activities(in priority orders
1. Provide compliance assistance,
information outreach, and build
communication network
2. Locate USTs and characterize
regulated universe on all
Indian Land* in the Region *
3. Identify opportunities for Indian
run programs (including Indian
tribes, organizations, and
associations)
4. Identify leaking t abandoned
tanks needing corrective action
5. Pursue RP cleanups (including
oversight)
6. Monitor new tank installations
7. Monitor tank closures
8. Clean up selected sites using
the LUST Trust Fund in accordance
vith guidance on Trust Fund
corrective actions on Indian Lands
9. Investigate potential violations
of federal DST regulations
Actor/s
Regional circuit Indian
Staff Riders IcifefiS
yes
yes
**
yss
**
yes
yes
yes
yes
yes
yes
yes
yes
yss
yes
yes
yes
yss
yes
yes
yee
* Including: nuaber of tanks, types of tanks, contents of
tanks, ages and conditions of tanks, nuaber of tank
owners, number of abandoned tanks, identify responsible
parties, number of tanks per owner, and number of tanks
per facility (i.e., "notification*" data plus data on
abandoned tanks).
** Regions may back up the efforts of tribes and circuit
riders as necessary, resources permitting.
5
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V.
LUST Trust Fund
OUST will develop specific guidance on federal-lead
corrective action on Indian Lands and on tribal access to the
Trust Fund. This guidance will be issued in June 1988, before
the pilot projects begin in July.
VI.
Schedule
4/25/88
5/9/88
7/11/88
7/15/88
7/15/88
10/15/88
1/15/89
4/15/89
4/15/89
7/15/89
8/15/89
10/1/89
Regions 8 6 9 submit revised pilot proposals
OUST approves pilots and funding
Grants awarded
Issue guidance on federal-lead corrective
action and tribal access to the Trust Fund
Pilot projects begin
First quarterly report due from regions
Second quarterly report due from regions
Third quarterly report due froa regions
Begin developaent of strategy for FY 90 —>
Pilot projects completed
Final report/evaluation due froa regions
Issue final strategy for FY 90 —>
6
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IS3S]
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
m? a l m>
0P e ic E O*
SOliO nv a s r 6 anO £M£fG£NCv a£SpONSS
MEMORANDUM
FROM
TO:
Regional Program Managers
In response to requests from the February 21-22, 1990, RPMs
meeting for clarifications of the interrelationship of all
program reporting definitions we have developed the enclosed
matrix. The attached matrix identifies the source document and
the corresponding reporting form for each required reporting
element for the UST program.
This matrix also identifies changes in the level of detail
required for future reporting elements (those marked with ** are
due in FY91) . This matrix should be a useful tool and can be usee/
when explaining our reporting requirements to your states. If
you have any comments or require additional information, please
contact Steven McNeely at (202) 475-7262.
Enclosures
LUST/R/90-1
Prinitd a* Rtcycitd Pcx
-------
NATIONAL PROGRAM PROGRES>v_*£ASURES CORRESPONDING TO
STATE CRANTS, TRUST FUND, QUARTERLY ACTIVITIES. AND SPMS REPORTING REQUIREMENTS
National Program State Trust Quarterly
Progress Measure: 1 Grants2 Fund1 Activities* SPHS5*
A. Crantg
G-1 SPA Application
C-2 States with Approved
Programs
Section III:
"Priority Tasks"
P. 3, Task 2 N/A
P. 3, Task 2 N/A
N/A UST-1A
N/A UST-1B
G-3 Transition Requirements
P. 3, Task 4
N/A
N/A
UST-3
G-4 UST Closures
Section VI:
"Grant Negotiations"
P.
N/A
UST-4A1
UST-4A2'
N/A
B. Trust Fund
TF-1 Confirmed Releases N/A 1 UST-4B N/A
TF-2 Emergency Responses N/A
TF-3 Site Investigations N/A
2A UST-ACl" N/A
2fl UST-AC2**
3A UST-4D1" N/A
3B UST-4D2"
3C UST-4D3"
Relerences:
1. OUST Memorandum, "Final Definition* (or Measures of National Program Progreis," Septertxr 26, 1989, Section II, "State Reporting," pp.4 • 11.
2. OSUER Directive 9630.5, "ft-90 State USI Program Grant Guidance,1* April 1, 1909.
3. OUST Memorandun, MIruit Fund Reporting Requirement* for FT 90," June 12, 1989.
-------
NATIONAL PKjCRAM PROGRESS ....ASURES CORRESPONDING TO
STATE Cl-ANTS, TRUST FUND, QUAR'iliRLV ACTIVITIES, AND SPMS REPORTING REQUIREMENTS (cont inued)
National Program State Trust Quarterly
Progress Measures Grants Fund Activities SPHS*
TF-4 Sice Cleanups Initiated N/A
TF-5 Petroleum Releases N/A
Under Control
TF-6 Cleanups Completed N/A
TF-7 Enforcement Actions P. 3, Task 4
TF-8 TF Expenditures N/A
TF-9 Cost Recovery N/A
TF-10 Exception Sites N/A
4A N/A UST-2A1
4B UST-2A2
<*C UST-2A3
5A N/A UST-2BL
5B UST-2B2
5C UST- 2 B3
6A N/A UST-2C1
6B UST-2C2
6C UST-2C3
7 UST-4E N/A
8A Exception N/A
SB Site Report
6C
8D
(Exceptions)
9A Exception N/A
9B Site Report
9C
(Exceptions)
10A Exception N/A
10B Site Report
IOC
(Exceptions)
* Soon to be called
*• Breakout not etfei
Ihl• element will
STAR
11ve untit fr 91
be deleted In fr 91
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NATIONAL PROGRAM PROGRESS—flEASURES CORRESPONDING TO
STATE GRANTS. TRUST FUND, QUARTERLY ACTIVITIES, AND SPHS REPORTING REQUIREMENTS (continued)
National Program
Progress Measures
State
Crants
Trust
Fund
Quarterly
Activities
SPMS
iL Stace Notification Data
SN-1 Number of USTs
Section III:
"Priority Tasks"
Page 3, Task 1 &
Section VI:
"Grant Negotiations"
Page 4.
N/A
N/A
N/A
SN-2 Age Distribution of USTs P.3, Task 1 and P.A N/A
N/A
N/A
SN-3 UST Installations
P.3, Task 1 and P.A
N/A
N/A
N/A
SN-4 Financial Assurance
Coverage
P.3, Task 1 and P.U N/A
N/A
N/A
* Soon to be catted STAR
** Breakout not effeitlvt until FY 91
••• Ihl« element will be deleted in fl 91
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
AUG 2 3 1991
OFFICE OF
SOLlO WASTE ANO EMERGENCY RESPONSE
MEMORANDUM
SUBJECT: Revisions to LUST
This memo provides written notice of changes in our policies
on allowable sources of State matching funds for satisfying the
cost share requirement under LUST Trust Fund cooperative
agreements. These policies were presented to you last year at
the Regional Program Managers' meeting, in Atlanta, and have been
applicable since that time. We apologize for the length of time
it has taken us to commit them to writing. They will be formally
incorporated into the LUST Trust Fund Guidelines (OSWER Directive
9650.10) in the future. The policies and this memo have been
reviewed and agreed to by the Office of General counsel, Office
of the Inspector General, the Grants Administration Division, and
the Financial Management Division.
l. Recovered Federal LUST Trust Fund money may no longer be used
as matching funds.
In the past, our written Trust Fund policy and special
conditions allowed States to use recovered Federal funds to meet
their cost share ("match") requirement, if specific provisions
were made for such an arrangement in their cooperative
agreements. At the request of the Office of the Inspector
General, and in consultation with the Office of General counsel,
we decided to withdraw this option from future cooperative
agreements.
As we discussed in Atlanta, and with many of you
individually since then, there was no need to modify any
cooperative agreements that were then in existence, even if they
allowed States to use cost recovered monies as State matching
funds. However, any cooperative agreements involving FY 1991
(and beyond) LUST Trust Fund monies were required to delete this
option from the standard special conditions. You were encouraged
to notify your States of this change at that time, particularly
if their existing agreements contained this option. Attached is
a marked-up copy of the special conditions, which show the
necessary revisions.
FROM:
David W. Ziegele,
Office of Undergro
TO:
UST Regional Program Managers, Regions 1-10
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Consistent with our existing cost recovery policy, States
may still retain recovered Trust Fund monies to perform
additional eligible activities under their cooperative
agreements.
2. Some expenditures from State financial assurance funds can be
used to meet State match requirements.
Another question we addressed in Atlanta was whether
expenditures from State UST funds could be used toward satisfying
the ten percent State match requirement under the State's LUST
Trust Fund cooperative agreement. We concluded that State UST
fund monies can be applied toward the match, provided thev are
spent on LUST Trust Fund allowable activities. The use of State
funds in this manner should be approached with caution, however,
because many expenditures from State funds (e.g., reimbursement
of cleanup costs at sites owned by solvent tank owners) would not
be allowable costs under the LUST Trust Fund. This issue is
discussed in more detail below.
There may be a limited number of situations where state UST
funds could be used in a manner that would be considered
allowable under the LUST Trust Fund. Some examples of qualified
uses of State funds for match purposes include, but are not
limited to, the following:
o Oversee RP-lead cleanups, under tne State fund program.
Since oversight of RP-lead cleanups is a LUST Trust
Fund allowable activity, regardless of the solvency of
the RP or presence of other methods of financial
responsibility, State funds used for this purpose would
be used in a LUST Trust Fund allowable manner.
o State-lead cleanups that meet LUST Trust Fund criteria.
For States that allow themselves direct access to their
UST fund, several situations may arise where State
funds could be expended in a LUST Trust Fund allowable
manner. These situations include:
— emergencies
— abandoned tanks (no identifiable RP)
— recalcitrant RPs (despite the presence of the
State fund)
— investigation of a release to determine its
source
In contrast to the situations described above, the
traditional method of expending monies from most State UST funds
would generally not be considered LUST Trust Fund allowable and,
thus, such expenditures would not be considered eligible for use
in satisfying the State match requirement. For instance, most
State funds are set up to pay for or reimburse a tank owner for
the cost of corrective action and/or third party liability after
payment of a deductible. The LUST Trust Fund cannot be used for
-------
third party liability costs, and should not be used in the case
of solvent RPs who can afford the cost of corrective action.
Thus, State funds used for this purpose would not be used in a
LUST Trust Fund eligible manner and would not qualify toward
satisfying the State match requirement.
An added rationale for not permitting States' traditional
method of using their funds to qualify as match is that Congress
intended that owners and operators be held responsible for
releases from their tanks, and required them to obtain financial
responsibility. The LUST Trust Fund was intended to be used as a
backup source of funding, after funds were provided by the tank
owner's financial assurance mechanism, which in these cases is
the State fund.
A general rule of thumb that can be used is that if the
circumstances of the case are such that the criteria for using
the LUST Trust Fund are met, then state UST fund expenditures
should generally qualify for matching purposes. For those States
that desire to use their UST fund toward satisfying the LUST
Trust Fund State match requirement, this provision should be
incorporated into the State's LUST Trust Fund cooperative
agreement with the Agency.
3. States are not: required to cost recover their State match
funds.
While EPA's LUST Trust Fund cost recovery policy requires
States to pursue recovery of Trust Fund expenditures, this
provision applies only to Federal monies that are expended, not
to funds supplied by the State as part of the State's cost share
requirement. The rationale for this conclusion is found in EPA's
LUST Trust Fund Cost Recovery Policy, which states that
expenditures from the LUST Trust Fund constitute a debt and a
liability of the owner/operator to the United States. While this
provision clearly applies to the Federal portion of Trust Fund
expenditures, it does not apply to the State's cost share
contribution.
Attachment
cc: Howard Corcoran, OGC
Jane Souzon, OGC
Lee Tyner, OGC
Harvey Pippen, GAD
Bruce Feldman, GAD
Maureen Ross, GAD
Sallyanne Harper, FMD
Liz Milstead, FMD
Elissa Karpf, OIG
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OSWER Directive 9610.10
Special Conditions
REQUIREMENTS FOR INCLUSION
IN LOST STATE COOPERATIVE AGREEMENTS
1. State agrees to maintain a financial cost accounting system
which meets the requirements of 40 CFR 30.510 or 40 CFR
31.20. For this and other requirements on grantees, Part
31 applies to all cooperative agreements with budget or
project periods beginning on or after October 1, 1988.
Part 31 also applies to all amendments of existing
agreements in which all of the activities in the
amendment's scope of work will be performed after October
1, 1988. Parts 3 0 and 3 3 (for procurement:) apply to other
cooperative agreements and amendments.
2. State agrees to organize and maintain site-specific
information consistent with accounting thresholds and
policies described in the Supplemental Guidelines for FY
89 LUST Trust Fund Cooperative Agreements (OSWER Directive
9650.7) where Trust Fund monies are used. Prior to making
expenditures of Trust Fund monies for corrective and
enforcement actions, a system must be in place to record
these types of costs on a site-specific basis. When site-
specific accounting is required, all costs that can be
identified to a particular site should be charged
accordingly and State contractors must bill costs on a
site-specific basis for corrective action and enforcement
work performed at those sites.
3. The State acknowledges that expenditures from the LUST
Trust Fund constitute a liability of the owner/operator to
the United States. The State agrees to retain recoveries
of any LUST Trust Fund expenditures as program income, as
described in 0MB Directive A-102 and 40 C.F.R. Parts
30.525(a) or 31.25(g)(2), to be used for additional
eligible Trust Fund activities. -The- Gfeatee nay also use¦
T-Tlf.rn trim,,,* Pimrt < mmm* i t~n mint" rlinn
i irn»nnt-n PPT?* i Qfim—(h) (7 ) (Dfr j—
¦ aooordanea with 10 CRr
1
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OSWER Directive 9610.10
(CONTINUATION OF SPECIAL CONDITION 3 —
INSERT 1 OR 2 BELOW)
(INSERT 1. for States which have State authority consistent with
those in RCRA Section 9003(h) to recover response expenditures
The State therefore agrees that:
(a) It will make reasonable efforts to recover these costs,
including interest, from liable owners/operators.
States must send a copy of their complaint to EPA's
Office of Regional Counsel within one week of filing
judicial recovery actions for Trust Fund expenditures.
(b) It will report on any amounts received from the
owner/operator as recovered costs, or agreed or
adjudged to be owed by the owner/operator as
settlements for site clean-up, in accordance with
applicable guidance on Trust Fund Financial and
Quarterly reporting; and
(c) To the extent the State is successful in recovering
these costs, it will dedicate and use these funds for
additional Trust-Fund-eligible activities ov for Qfcafec
oeate chafe jpoqujgeacnto, and maintain appropriate
accounting of recovered funds in order to document the
reuse of recovered funds in accordance with the
requirements of 40 CFR 30.525 or 31.25, as
appropriate, and in accordance with applicable
requirements of this Cooperative Agreement.
(d) If the State has not yet done so, the State will submit
certification of its authorities to EPA within 120 days
after the award of this Cooperative Agreement. The
certification will be signed by: (1) the State's
Attorney General, (2) someone designated by the
Attorney General to sign such documents, or (3) the
State's or Governor's General Counsel or other such
official who is responsible for advising all executive
branch agencies on the scope of their authority.
(e) It will notify EPA promptly of any reduction in its
authority to recover response expenditures (e.g.,
successful challenge to its State statutory authority) .
(INSERT 2.. for States lacking State authorities consistent with
those in Section 9003(h) of RCRA to recover response expenditures
2
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OSWER Directive 9610.10
The state therefore agrees that to the extent the State lacks the
authority or procedure to recover response expenditures on
behalf of the LUST Trust Fund fi.e.. the authority to recover
such costs from owners/operators and retain such monies for
additional LUST Trust Fund corrective action and enforcement:},
the state will delay taking cost recovery action until the State:
(a) Obtains legislative authority for cost recovery which is
consistent with Section 9003(h)(6) of RCRA and provides to
EPA certification of such authority from: (1) the State's
Attorney General, (2) someone designated by the Attorney
General to sign such certifications, or (3) the State's or
Governor's General Counsel, or other such official who is
responsible for advising all executive branch agencies on
the scope of their authority. This certification should be
provided by the end of the next legislative session. (The
State understands that if it has not made a good faith
effort to obtain this authority, EPA may decline to enter
into subsequent cooperative agreements.)
OR
Provides EPA with certification from the State officials
described above that State law permits it to exercise the
authorities in Sections 9003(h)(6) of RCRA. (The State
understands that if it has not provided this certification
to EPA within 120 days after the award of this Cooperative
Agreement EPA may withhold payment of LUST Trust Fund money
consistent with 40 C.F.R. 30.902 or 31.43).
Once the State has obtained the legislative authority or made a
certification under paragraph (a) above, the State agrees that:
(i) It will make reasonable efforts to recover these costs,
including interest, from liable owners/operators.
States must send a copy of their complaint to EPA's
Office of Regional Counsel within one week of filing
judicial recovery actions for Trust Fund expenditures.
(ii) It will report any amounts received from the
owner/operator as recovered costs, or agreed or
adjudged to be owed by the owner/operator as
settlements for site clean-up in accordance with
applicable guidance on Trust Fund Financial and
Quarterly Reporting; and
3
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OSWER Directive 9610.10
(iii) To the extent the State is successful in recovering
these costs, it will dedicate these funds for
additional Trust-Fund-eligible activities og fog Ofeatee
fceobt nhdiM-yaquircBcntor and maintain appropriate
accounting of recovered funds in order to document the
reuse of recovered funds in accordance with the
requirements of 40 CFR 30.525 or 31.25, as
appropriate, and in accordance with applicable
requirements of this cooperative agreement.
(iv) it will notify EPA promptly of any reduction in its
authority to recover response expenditures (e.g.,
successful challenge to its State statutory authority).
[END OF INSERT 2]
4. state agrees to maintain supporting documentation and
appropriate records in support of any future cost
recovery efforts. The State shall adhere to the
principles of documentation and records retention
specified in the OSWER Directive 9610.10 Cost Recovery
Policy for the LUST Trust Fund (October/ 1988). On
topics not addressed by these guidelines, the State
agrees to adhere to the principles of documentation and
record retention specified in The State Superfund
Financial Management and Recordkeeping Guidance until
such time as the State and EPA agree to implement the
requirements of The Leaking Underground Storage Tanks
Trust Fund State Financial Management Handbook. The
State agrees to make these records available to the
federal government, as needed, on a case-by-case basis.
5. State agrees to provide reports as outlined in the
Supplemental Guidelines for FY 89 LUST Trust Fund
Cooperative Agreements: (April 7, 1988). These reports
consist of Quarterly Progress Reports, Financial Status
Reports (SF 269) Federal Cash Transactions Report (SF
272), and Exception Reports.
6. State agrees to identify Letter of Credit drawdowns
under EPA's three major activity codes. The three
codes are: '•7" — General Support and Management, "E"—
Site Cleanup Actions, and "4" — Enforcement.
4
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