40 CFR Part 264 -- STANDARDS FOR
OWNERS AND OPERATORS OF HAZARDOUS WASTE TREATMENT, STORAGE, AND DISPOSAL FACILITIES
§264.145 Financial assurance for post-closure care.
(f) Financial test and corporate guarantee for post-closure care. (1) An owner or operator
may satisfy the requirements of this section by demonstrating that he passes a financial
test as specified in this paragraph. To pass this test the owner or operator must meet the
criteria of either paragraph (f)(1)(i) or (ii) of this section:
(i) The owner or operator must have:
(A) Two of the following three ratios: a ratio of total liabilities to net worth less than
2.0; a ratio of the sum of net income plus depreciation, depletion, and amortization to
total liabilities greater than 0.1; and a ratio of current assets to current liabilities
greater than 1.5; and
(B) Net working capital and tangible net worth each at least six times the sum of the
current closure and post-closure cost estimates and the current plugging and abandonment
cost estimates; and
(C) Tangible net worth of at least $10 million; and
(D) Assets in the United States amounting to at least 90 percent of his total assets or at
least six times the sum of the current closure and post-closure cost estimates and the
current plugging and abandonment cost estimates.
(ii) The owner or operator must have:
(A) A current rating for his most recent bond issuance of AAA, AA, A, or BBB as issued by
Standard and Poor's or Aaa, Aa, A or Baa as issued by Moody's; and
(B) Tangible net worth at least six times the sum of the current closure and post-closure
cost estimates and the current plugging and abandonment cost estimates; and
(C) Tangible net worth of at least $10 million; and
(D) Assets located in the United States amounting to at least 90 percent of his total
assets or at least six times the sum of the current closure and post-closure cost
estimates and the current plugging and abandonment cost estimates.
(2) The phrase "current closure and post-closure cost estimates'' as used in
paragraph (f)(1) of this section refers to the cost estimates required to be shown in
paragraphs 1-4 of the letter from the owner's or operator's chief financial officer
(§264.151(f)). The phrase "current plugging and abandonment cost estimates'' as used
in paragraph (f)(1) of this section refers to the cost estimates required to be shown in
paragraphs 1-4 of the letter from the owner's or operator's chief financial officer
(§144.70(f) of this title).
(3) To demonstrate that he meets this test, the owner or operator must submit the
following items to the Regional Administrator:
(i) A letter signed by the owner's or operator's chief financial officer and worded as
specified in §264.151(f); and
(ii) A copy of the independent certified public accountant's report on examination of the
owner's or operator's financial statements for the latest completed fiscal year; and
(iii) A special report from the owner's or operator's independent certified public
accountant to the owner or operator stating that:
(A) He has compared the data which the letter from the chief financial officer specifies
as having been derived from the independently audited, year-end financial statements for
the latest fiscal year with the amounts in such financial statements; and
(B) In connection with that procedure, no matters came to his attention which caused him
to believe that the specified data should be adjusted.
(4) An owner or operator of a new facility must submit the items specified in paragraph
(f)(3) of this section to the Regional Administrator at least 60 days before the date on
which hazardous waste is first received for disposal.
(5) After the initial submission of items specified in paragraph (f)(3) of this section,
the owner or operator must send updated information to the Regional Administrator within
90 days after the close of each succeeding fiscal year. This information must consist of
all three items specified in paragraph (f)(3) of this section.
(6) If the owner or operator no longer meets the requirements of paragraph (f)(1) of this
section, he must send notice to the Regional Administrator of intent to establish
alternate financial assurance as specified in this section. The notice must be sent by
certified mail within 90 days after the end of the fiscal year for which the year-end
financial data show that the owner or operator no longer meets the requirements. The owner
or operator must provide the alternate financial assurance within 120 days after the end
of such fiscal year.
(7) The Regional Administrator may, based on a reasonable belief that the owner or
operator may no longer meet the requirements of paragraph (f)(1) of this section, require
reports of financial condition at any time from the owner or operator in addition to those
specified in paragraph (f)(3) of this section. If the Regional Administrator finds, on the
basis of such reports or other information, that the owner or operator no longer meets the
requirements of paragraph (f)(1) of this section, the owner or operator must provide
alternate financial assurance as specified in this section within 30 days after
notification of such a finding.
(8) The Regional Administrator may disallow use of this test on the basis of
qualifications in the opinion expressed by the independent certified public accountant in
his report on examination of the owner's or operator's financial statements (see paragraph
(f)(3)(ii) of this section). An adverse opinion or a disclaimer of opinion will be cause
for disallowance. The Regional Administrator will evaluate other qualifications on an
individual basis. The owner or operator must provide alternate financial assurance as
specified in this section within 30 days after notification of the disallowance.
(9) During the period of post-closure care, the Regional Administrator may approve a
decrease in the current post-closure cost estimate for which this test demonstrates
financial assurance if the owner or operator demonstrates to the Regional Administrator
that the amount of the cost estimate exceeds the remaining cost of post-closure care.
(10) The owner or operator is no longer required to submit the items specified in
paragraph (f)(3) of this section when:
(i) An owner or operator substitutes alternate financial assurance as specified in this
section; or
(ii) The Regional Administrator releases the owner or operator from the requirements of
this section in accordance with §264.145(i).
(11) An owner or operator may meet the requirements of this section by obtaining a written
guarantee, hereafter referred to as "corporate guarantee.'' The guarantor must be the
parent corporation of the owner or operator. The guarantor must meet the requirements for
owners or operators in paragraphs (f)(1) through (9) of this section and must comply with
the terms of the corporate guarantee. The wording of the corporate guarantee must be
identical to the wording specified in §264.151(h). The corporate guarantee must accompany
the items sent to the Regional Administrator as specified in paragraph (f)(3) of this
section. The terms of the corporate guarantee must provide that:
(i) If the owner or operator fails to perform post-closure care of a facility covered by
the corporate guarantee in accordance with the post-closure plan and other permit
requirements whenever required to do so, the guarantor will do so or establish a trust
fund as specified in §264.145(a) in the name of the owner or operator.
(ii) The corporate guarantee will remain in force unless the guarantor sends notice of
cancellation by certified mail to the owner or operator and to the Regional Administrator.
Cancellation may not occur, however, during the 120 days beginning on the date of receipt
of the notice of cancellation by both the owner or operator and the Regional
Administrator, as evidenced by the return receipts.
(iii) If the owner or operator fails to provide alternate financial assurance as specified
in this section and obtain the written approval of such alternate assurance from the
Regional Administrator within 90 days after receipt by both the owner or operator and the
Regional Administrator of a notice of cancellation of the corporate guarantee from the
guarantor, the guarantor will provide such alternate financial assurance in the name of
the owner or operator.
(g) Use of multiple financial mechanisms. An owner or operator may satisfy the
requirements of this section by establishing more than one financial mechanism per
facility. These mechanisms are limited to trust funds, surety bonds guaranteeing payment
into a trust fund, letters of credit, and insurance. The mechanisms must be as specified
in paragraphs (a), (b), (d), and (e), respectively, of this section, except that it is the
combination of mechanisms, rather than the single mechanism, which must provide financial
assurance for an amount at least equal to the current post-closure cost estimate. If an
owner or operator uses a trust fund in combination with a surety bond or a letter of
credit, he may use the trust fund as the standby trust fund for the other mechanisms. A
single standby trust fund may be established for two or more mechanisms. The Regional
Administrator may use any or all of the mechanisms to provide for post-closure care of the
facility.
(h) Use of a financial mechanism for multiple facilities. An owner or operator may use a
financial assurance mechanism specified in this section to meet the requirements of this
section for more than one facility. Evidence of financial assurance submitted to the
Regional Administrator must include a list showing, for each facility, the EPA
Identification Number, name, address, and the amount of funds for post-closure care
assured by the mechanism. If the facilities covered by the mechanism are in more than one
Region, identical evidence of financial assurance must be submitted to and maintained with
the Regional Administrators of all such Regions. The amount of funds available through the
mechanism must be no less than the sum of funds that would be available if a separate
mechanism had been established and maintained for each facility. In directing funds
available through the mechanism for post-closure care of any of the facilities covered by
the mechanism, the Regional Administrator may direct only the amount of funds designated
for that facility, unless the owner or operator agrees to the use of additional funds
available under the mechanism.
(i) Release of the owner or operator from the requirements of this section. Within 60 days
after receiving certifications from the owner or operator and an independent registered
professional engineer that the post-closure care period has been completed for a hazardous
waste disposal unit in accordance with the approved plan, the Regional Administrator will
notify the owner or operator that he is no longer required to maintain financial assurance
for post-closure care of that unit, unless the Regional Administrator has reason to
believe that post-closure care has not been in accordance with the approved post-closure
plan. The Regional Administrator shall provide the owner or operator with a detailed
written statement of any such reason to believe that post-closure care has not been in
accordance with the approved post-closure plan.
(47 FR 15047, Apr. 7, 1982, as amended at 51 FR 16449, May 2, 1986)
§264.146 Use of a mechanism for financial assurance of both closure and post-closure
care.
An owner or operator may satisfy the requirements for financial assurance for both closure
and post-closure care for one or more facilities by using a trust fund, surety bond,
letter of credit, insurance, financial test, or corporate guarantee that meets the
specifications for the mechanism in both §§264.143 and 264.145. The amount of funds
available through the mechanism must be no less than the sum of funds that would be
available if a separate mechanism had been established and maintained for financial
assurance of closure and of post-closure care.
§264.147 Liability requirements.
(a) Coverage for sudden accidental occurrences. An owner or operator of a hazardous waste
treatment, storage, or disposal facility, or a group of such facilities, must demonstrate
financial responsibility for bodily injury and property damage to third parties caused by
sudden accidental occurrences arising from operations of the facility or group of
facilities. The owner or operator must have and maintain liability coverage for sudden
accidental occurrences in the amount of at least $1 million per occurrence with an annual
aggregate of at least $2 million, exclusive of legal defense costs. This liability
coverage may be demonstrated as specified in paragraphs (a) (1), (2), (3), (4), (5), or
(6) of this section:
(1) An owner or operator may demonstrate the required liability coverage by having
liability insurance as specified in this paragraph.
(i) Each insurance policy must be amended by attachment of the Hazardous Waste Facility
Liability Endorsement or evidenced by a Certificate of Liability Insurance. The wording of
the endorsement must be identical to the wording specified in §264.151(i). The wording of
the certificate of insurance must be identical to the wording specified in §264.151(j).
The owner or operator must submit a signed duplicate original of the endorsement or the
certificate of insurance to the Regional Administrator, or Regional Administrators if the
facilities are located in more than one Region. If requested by a Regional Administrator,
the owner or operator must provide a signed duplicate original of the insurance policy. An
owner or operator of a new facility must submit the signed duplicate original of the
Hazardous Waste Facility Liability Endorsement or the Certificate of Liability Insurance
to the Regional Administrator at least 60 days before the date on which hazardous waste is
first received for treatment, storage, or disposal. The insurance must be effective before
this initial receipt of hazardous waste.
(ii) Each insurance policy must be issued by an insurer which, at a minimum, is licensed
to transact the business of insurance, or eligible to provide insurance as an excess or
surplus lines insurer, in one or more States.
(2) An owner or operator may meet the requirements of this section by passing a financial
test or using the guarantee for liability coverage as specified in paragraphs (f) and (g)
of this section.
(3) An owner or operator may meet the requirements of this section by obtaining a letter
of credit for liability coverage as specified in paragraph (h) of this section.
(4) An owner or operator may meet the requirements of this section by obtaining a surety
bond for liability coverage as specified in paragraph (i) of this section.
(5) An owner or operator may meet the requirements of this section by obtaining a trust
fund for liability coverage as specified in paragraph (j) of this section.
(6) An owner or operator may demonstrate the required liability coverage through the use
of combinations of insurance, financial test, guarantee, letter of credit, surety bond,
and trust fund, except that the owner or operator may not combine a financial test
covering part of the liability coverage requirement with a guarantee unless the financial
statement of the owner or operator is not consolidated with the financial statement of the
guarantor. The amounts of coverage demonstrated must total at least the minimum amounts
required by this section. If the owner or operator demonstrates the required coverage
through the use of a combination of financial assurances under this paragraph, the owner
or operator shall specify at least one such assurance as "primary'' coverage and
shall specify other assurance as "excess'' coverage.
(7) An owner or operator shall notify the Regional Administrator in writing within 30 days
(i) whenever a claim for bodily injury or property damages caused by the operation of a
hazardous waste treatment, storage, or disposal facility is made against the owner or
operator or an instrument providing financial assurance for liability coverage under this
section and (ii) whenever the amount of financial assurance for liability coverage under
this section provided by a financial instrument authorized by paragraphs (a)(1) through
(a)(6) of this section is reduced.
(b) Coverage for nonsudden accidental occurrences. An owner or operator of a surface
impoundment, landfill, land treatment facility, or disposal miscellaneous unit that is
used to manage hazardous waste, or a group of such facilities, must demonstrate financial
responsibility for bodily injury and property damage to third parties caused by nonsudden
accidental occurrences arising from operations of the facility or group of facilities. The
owner or operator must have and maintain liability coverage for nonsudden accidental
occurrences in the amount of at least $3 million per occurrence with an annual aggregate
of at least $6 million, exclusive of legal defense costs. An owner or operator who must
meet the requirements of this section may combine the required per-occurrence coverage
levels for sudden and nonsudden accidental occurrences into a single per-occurrence level,
and combine the required annual aggregate coverage levels for sudden and nonsudden
accidental occurrences into a single annual aggregate level. Owners or operators who
combine coverage levels for sudden and nonsudden accidental occurrences must maintain
liability coverage in the amount of at least $4 million per occurrence and $8 million
annual aggregate. This liability coverage may be demonstrated as specified in paragraphs
(b) (1), (2), (3), (4), (5), or (6), of this section:
(1) An owner or operator may demonstrate the required liability coverage by having
liability insurance as specified in this paragraph.
(i) Each insurance policy must be amended by attachment of the Hazardous Waste Facility
Liability Endorsement or evidenced by a Certificate of Liability Insurance. The wording of
the endorsement must be identical to the wording specified in §264.151(i). The wording of
the certificate of insurance must be identical to the wording specified in §264.151(j).
The owner or operator must submit a signed duplicate original of the endorsement or the
certificate of insurance to the Regional Administrator, or Regional Administrators if the
facilities are located in more than one Region. If requested by a Regional Administrator,
the owner or operator must provide a signed duplicate original of the insurance policy. An
owner or operator of a new facility must submit the signed duplicate original of the
Hazardous Waste Facility Liability Endorsement or the Certificate of Liability Insurance
to the Regional Administrator at least 60 days before the date on which hazardous waste is
first received for treatment, storage, or disposal. The insurance must be effective before
this initial receipt of hazardous waste.
(ii) Each insurance policy must be issued by an insurer which, at a minimum, is licensed
to transact the business of insurance, or eligible to provide insurance as an excess or
surplus lines insurer, in one or more States.
(2) An owner or operator may meet the requirements of this section by passing a financial
test or using the guarantee for liability coverage as specified in paragraphs (f) and (g)
of this section.
(3) An owner or operator may meet the requirements of this section by obtaining a letter
of credit for liability coverage as specified in paragraph (h) of this section.
(4) An owner or operator may meet the requirements of this section by obtaining a surety
bond for liability coverage as specified in paragraph (i) of this section.
(5) An owner or operator may meet the requirements of this section by obtaining a trust
fund for liability coverage as specified in paragraph (j) of this section.
(6) An owner or operator may demonstrate the required liability coverage through the use
of combinations of insurance, financial test, guarantee, letter of credit, surety bond,
and trust fund, except that the owner or operator may not combine a financial test
covering part of the liability coverage requirement with a guarantee unless the financial
statement of the owner or operator is not consolidated with the financial statement of the
guarantor. The amounts of coverage demonstrated must total at least the minimum amount
required by this section. If the owner or operator demonstrates the required coverage
through the use of a combination of financial assurances under this paragraph, the owner
or operator shall specify at least one such assurance as "primary'' coverage and
shall specify other assurance as "excess'' coverage.
(7) An owner or operator shall notify the Regional Administrator in writing within 30 days
(i) whenever a claim for bodily injury or property damages caused by the operation of a
hazardous waste treatment, storage, or disposal facility is made against the owner or
operator or an instrument providing financial assurance for liability coverage under this
section and (ii) whenever the amount of financial assurance for liability coverage under
this section provided by a financial instrument authorized by paragraphs (a)(1) through
(a)(6) of this section is reduced.
(c) Request for variance. If an owner or operator can demonstrate to the satisfaction of
the Regional Administrator that the levels of financial responsibility required by
paragraph (a) or (b) of this section are not consistent with the degree and duration of
risk associated with treatment, storage, or disposal at the facility or group of
facilities, the owner or operator may obtain a variance from the Regional Administrator.
The request for a variance must be submitted to the Regional Administrator as part of the
application under §270.14 of this chapter for a facility that does not have a permit, or
pursuant to the procedures for permit modification under v124.5 of this chapter for a
facility that has a permit. If granted, the variance will take the form of an adjusted
level of required liability coverage, such level to be based on the Regional
Administrator's assessment of the degree and duration of risk associated with the
ownership or operation of the facility or group of facilities. The Regional Administrator
may require an owner or operator who requests a variance to provide such technical and
engineering information as is deemed necessary by the Regional Administrator to determine
a level of financial responsibility other than that required by paragraph (a) or (b) of
this section. Any request for a variance for a permitted facility will be treated as a
request for a permit modification under §§270.41(a)(5) and 124.5 of this chapter.
(d) Adjustments by the Regional Administrator. If the Regional Administrator determines
that the levels of financial responsibility required by paragraph (a) or (b) of this
section are not consistent with the degree and duration of risk associated with treatment,
storage, or disposal at the facility or group of facilities, the Regional Administrator
may adjust the level of financial responsibility required under paragraph (a) or (b) of
this section as may be necessary to protect human health and the environment. This
adjusted level will be based on the Regional Administrator's assessment of the degree and
duration of risk associated with the ownership or operation of the facility or group of
facilities. In addition, if the Regional Administrator determines that there is a
significant risk to human health and the environment from nonsudden accidental occurrences
resulting from the operations of a facility that is not a surface impoundment, landfill,
or land treatment facility, he may require that an owner or operator of the facility
comply with paragraph (b) of this section. An owner or operator must furnish to the
Regional Administrator, within a reasonable time, any information which the Regional
Administrator requests to determine whether cause exists for such adjustments of level or
type of coverage. Any adjustment of the level or type of coverage for a facility that has
a permit will be treated as a permit modification under §§270.41(a)(5) and 124.5 of this
chapter.
(e) Period of coverage. Within 60 days after receiving certifications from the owner or
operator and an independent registered professional engineer that final closure has been
completed in accordance with the approved closure plan, the Regional Administrator will
notify the owner or operator in writing that he is no longer required by this section to
maintain liability coverage for that facility, unless the Regional Administrator has
reason to believe closure has not been in accordance with the approved closure plan.
(f) Financial test for liability coverage. (1) An owner or operator may satisfy the
requirements of this section by demonstrating that he passes a financial test as specified
in this paragraph. To pass this test the owner or operator must meet the criteria of
paragraph (f)(1)(i) or (ii):
(i) The owner or operator must have:
(A) Net working capital and tangible net worth each at least six times the amount of
liability coverage to be demonstrated by this test; and
(B) Tangible net worth of at least $10 million; and
(C) Assets in the United States amounting to either: (1) At least 90 percent of his total
assets; or (2) at least six times the amount of liability coverage to be demonstrated by
this test.
(ii) The owner or operator must have:
(A) A current rating for his most recent bond issuance of AAA, AA, or BBB as issued by
Standard and Poor's, or Aaa, Aa, A, or Baa as issued by Moody's; and
(B) Tangible net worth of at least $10 million; and
(C) Tangible net worth at least six times the amount of liability coverage to be
demonstrated by this test; and
(D) Assets in the United States amounting to either: (1) At least 90 percent of his total
assets; or (2) at least six times the amount of liability coverage to be demonstrated by
this test.
(2) The phrase "amount of liability coverage'' as used in paragraph (f)(1) of this
section refers to the annual aggregate amounts for which coverage is required under
paragraphs (a) and (b) of this section.
(3) To demonstrate that he meets this test, the owner or operator must submit the
following three items to the Regional Administrator:
(i) A letter signed by the owner's or operator's chief financial officer and worded as
specified in §264.151(g). If an owner or operator is using the financial test to
demonstrate both assurance for closure or post-closure care, as specified by
§§264.143(f), 264.145(f), 265.143(e), and 265.145(e), and liability coverage, he must
submit the letter specified in §264.151(g) to cover both forms of financial
responsibility; a separate letter as specified in §264.151(f) is not required.
(ii) A copy of the independent certified public accountant's report on examination of the
owner's or operator's financial statements for the latest completed fiscal year.
(iii) A special report from the owner's or operator's independent certified public
accountant to the owner or operator stating that:
(A) He has compared the data which the letter from the chief financial officer specifies
as having been derived from the independently audited, year-end financial statements for
the latest fiscal year with the amounts in such financial statements; and
(B) In connection with that procedure, no matters came to his attention which caused him
to believe that the specified data should be adjusted.
(4) An owner or operator of a new facility must submit the items specified in paragraph
(f)(3) of this section to the Regional Administrator at least 60 days before the date on
which hazardous waste is first received for treatment, storage, or disposal.
(5) After the initial submission of items specified in paragraph (f)(3) of this section,
the owner or operator must send updated information to the Regional Administrator within
90 days after the close of each succeeding fiscal year. This information must consist of
all three items specified in paragraph (f)(3) of this section.
(6) If the owner or operator no longer meets the requirements of paragraph (f)(1) of this
section, he must obtain insurance for the entire amount of required liability coverage as
specified in this section. Evidence of insurance must be submitted to the Regional
Administrator within 90 days after the end of the fiscal year for which the year-end
financial data show that the owner or operator no longer meets the test requirements.
(7) The Regional Administrator may disallow use of this test on the basis of
qualifications in the opinion expressed by the independent certified public accountant in
his report on examination of the owner's or operator's financial statements (see paragraph
(f)(3)(ii) of this section). An adverse opinion or a disclaimer of opinion will be cause
for disallowance. The Regional Administrator will evaluate other qualifications on an
individual basis. The owner or operator must provide evidence of insurance for the entire
amount of required liability coverage as specified in this section within 30 days after
notification of disallowance.