40 CFR Part 265 -- INTERIM STATUS
STANDARDS FOR OWNERS AND OPERATORS OF HAZARDOUS WASTE TREATMENT, STORAGE, AND DISPOSAL
FACILITIES
§265.143 Financial assurance for closure.
By the effective date of these regulations, an owner or operator of each facility must
establish financial assurance for closure of the facility. He must choose from the options
as specified in paragraphs (a) through (e) of this section.
(a) Closure trust fund. (1) An owner or operator may satisfy the requirements of this
section by establishing a closure trust fund which conforms to the requirements of this
paragraph and submitting an signed duplicate of the trust agreement to the Regional
Administrator. The trustee must be an entity which has the authority to act as a trustee
and whose trust operations are regulated and examined by a Federal or State agency.
(2) The wording of the trust agreement must be identical to the wording specified in
§264.151(a)(1), and the trust agreement must be accompanied by a formal certification of
acknowledgment (for example, see §264.151(a)(2)). Schedule A of the trust agreement must
be updated within 60 days after a change in the amount of the current closure cost
estimate covered by the agreement.
(3) Payments into the trust fund must be made annually by the owner or operator over the
20 years beginning with the effective date of these regulations or over the remaining
operating life of the facility as estimated in the closure plan, whichever period is
shorter; this period is hereafter referred to as the "pay-in period.'' The payments
into the closure trust fund must be made as follows:
(i) The first payment must be made by the effective date of these regulations, except as
provided in paragraph (a)(5) of this section. The first payment must be at least equal to
the current closure cost estimate, except as provided in §265.143(f), divided by the
number of years in the pay-in period.
(ii) Subsequent payments must be made no later than 30 days after each anniversary date of
the first payment. The amount of each subsequent payment must be determined by this
formula:
TABLE/GRAPH OMITTED
where CE is the current closure cost estimate, CV is the current value of the trust fund,
and Y is the number of years remaining in the pay-in period.
(4) The owner or operator may accelerate payments into the trust fund or he may deposit
the full amount of the current closure cost estimate at the time the fund is established.
However, he must maintain the value of the fund at no less than the value that the fund
would have if annual payments were made as specified in paragraph (a)(3) of this section.
(5) If the owner or operator establishes a closure trust fund after having used one or
more alternate mechanisms specified in this section, his first payment must be in at least
the amount that the fund would contain if the trust fund were established initially and
annual payments made as specified in paragraph (a)(3) of this section.
(6) After the pay-in period is completed, whenever the current closure cost estimate
changes, the owner or operator must compare the new estimate with the trustee's most
recent annual valuation of the trust fund. If the value of the fund is less than the
amount of the new estimate, the owner or operator, within 60 days after the change in the
cost estimate, must either deposit an amount into the fund so that its value after this
deposit at least equals the amount of the current closure cost estimate, or obtain other
financial assurance as specified in this section to cover the difference.
(7) If the value of the trust fund is greater than the total amount of the current closure
cost estimate, the owner or operator may submit a written request to the Regional
Administrator for release of the amount in excess of the current closure cost estimate.
(8) If an owner or operator substitutes other financial assurance as specified in this
section for all or part of the trust fund, he may submit a written request to the Regional
Administrator for release of the amount in excess of the current closure cost estimate
covered by the trust fund.
(9) Within 60 days after receiving a request from the owner or operator for release of
funds as specified in paragraph (a) (7) or (8) of this section, the Regional Administrator
will instruct the trustee to release to the owner or operator such funds as the Regional
Administrator specifies in writing.
(10) After beginning partial or final closure, an owner or operator or another person
authorized to conduct partial or final closure may request reimbursements for partial or
final closure expenditures by submitting itemized bills to the Regional Administrator. The
owner or operator may request reimbursements for partial closure only if sufficient funds
are remaining in the trust fund to cover the maximum costs of closing the facility over
its remaining operating life. No later than 60 days after receiving bills for partial or
final closure activities, the Regional Administrator will instruct the trustee to make
reimbursements in those amounts as the Regional Administrator specifies in writing, if the
Regional Administrator determines that the partial or final closure expenditures are in
accordance with the approved closure plan, or otherwise justified. If the Regional
Administrator has reason to believe that the maximum cost of closure over the remaining
life of the facility will be significantly greater than the value of the trust fund, he
may withhold reimbursements of such amounts as he deems prudent until he determines, in
accordance with §265.143(h) that the owner or operator is no longer required to maintain
financial assurance for final closure of the facility. If the Regional Administrator does
not instruct the trustee to make such reimbursements, he will provide to the owner or
operator a detailed written statement of reasons.
(11) The Regional Administrator will agree to termination of the trust 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 §265.143(h).
(b) Surety bond guaranteeing payment into a closure trust fund. (1) An owner or operator
may satisfy the requirements of this section by obtaining a surety bond which conforms to
the requirements of this paragraph and submitting the bond to the Regional Administrator.
The surety company issuing the bond must, at a minimum, be among those listed as
acceptable sureties on Federal bonds in Circular 570 of the U.S. Department of the
Treasury.
(2) The wording of the surety bond must be identical to the wording specified in
§264.151(b).
(3) The owner or operator who uses a surety bond to satisfy the requirements of this
section must also establish a standby trust fund. Under the terms of the bond, all
payments made thereunder will be deposited by the surety directly into the standby trust
fund in accordance with instructions from the Regional Administrator. This standby trust
fund must meet the requirements specified in §265.143(a), except that:
(i) An originally signed duplicate of the trust agreement must be submitted to the
Regional Administrator with the surety bond; and
(ii) Until the standby trust fund is funded pursuant to the requirements of this section,
the following are not required by these regulations:
(A) Payments into the trust fund as specified in §265.143(a);
(B) Updating of Schedule A of the trust agreement (see §264.151(a)) to show current
closure cost estimates;
(C) Annual valuations as required by the trust agreement; and
(D) Notices of nonpayment as required by the trust agreement.
(4) The bond must guarantee that the owner or operator will:
(i) Fund the standby trust fund in an amount equal to the penal sum of the bond before the
beginning of final closure of the facility; or
(ii) Fund the standby trust fund in an amount equal to the penal sum within 15 days after
an administrative order to begin final closure issued by the Regional Administrator
becomes final, or within 15 days after an order to begin final closure is issued by a U.S.
district court or other court of competent jurisdiction; or
(iii) Provide alternate financial assurance as specified in this section, and obtain the
Regional Administrator's written approval of the assurance provided, within 90 days after
receipt by both the owner or operator and the Regional Administrator of a notice of
cancellation the bond from the surety.
(5) Under the terms of the bond, the surety will become liable on the bond obligation when
the owner or operator fails to perform as guaranteed by the bond.
(6) The penal sum of the bond must be in an amount at least equal to the current closure
cost estimate, except as provided in §265.143(f).
(7) Whenever the current closure cost estimate increases to an amount greater than the
penal sum, the owner or operator, within 60 days after the increase, must either cause the
penal sum to be increased to an amount at least equal to the current closure cost estimate
and submit evidence of such increase to the Regional Administrator, or obtain other
financial assurance as specified in this section to cover the increase. Whenever the
current closure cost estimate decreases, the penal sum may be reduced to the amount of the
current closure cost estimate following written approval by the Regional Administrator.
(8) Under the terms of the bond, the surety may cancel the bond by sending 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.
(9) The owner or operator may cancel the bond if the Regional Administrator has given
prior written consent based on his receipt of evidence of alternate financial assurance as
specified in this section.
(c) Closure letter of credit. (1) An owner or operator may satisfy the requirements of
this section by obtaining an irrevocable standby letter of credit which conforms to the
requirements of this paragraph and submitting the letter to the Regional Administrator.
The issuing institution must be an entity which has the authority to issue letters of
credit and whose letter-of-credit operations are regulated and examined by a Federal or
State agency.
(2) The wording of the letter of credit must be identical to the wording specified in
§264.151(d).
(3) An owner or operator who uses a letter of credit to satisfy the requirements of this
section must also establish a standby trust fund. Under the terms of the letter of credit,
all amounts paid pursuant to a draft by the Regional Administrator will be deposited by
issuing institution directly into the standby trust fund in accordance with instructions
from the Regional Administrator. This standby trust fund must meet the requirements of the
trust fund specified in §265.143(a), except that:
(i) An originally signed duplicate of the trust agreement must be submitted to the
Regional Administrator with the letter of credit; and
(ii) Unless the standby trust fund is funded pursuant to the requirements of this section,
the following are not required by these regulations:
(A) Payments into the trust fund as specified in §265.143(a);
(B) Updating of Schedule A of the trust agreement (see §264.151(a)) to show current
closure cost estimates;
(C) Annual valuations as required by the trust agreement; and
(D) Notices of nonpayment as required by the trust agreement.
(4) The letter of credit must be accompanied by a letter from the owner or operator
referring to the letter of credit by number, issuing institution, and date, and providing
the following information: The EPA Identification Number, name, and address of the
facility, and the amount of funds assured for closure of the facility by the letter of
credit.
(5) The letter of credit must be irrevocable and issued for a period of at least 1 year.
The letter of credit must provide that the expiration date will be automatically extended
for a period of at least 1 year unless, at least 120 days before the current expiration
date, the issuing institution notifies both the owner or operator and the Regional
Administrator by certified mail of a decision not to extend the expiration date. Under the
terms of the letter of credit, the 120 days will begin on the date when both the owner or
operator and the Regional Administrator have received the notice, as evidenced by the
return receipts.
(6) The letter of credit must be issued in an amount at least equal to the current closure
cost estimate, except as provided in §265.143(f).
(7) Whenever the current closure cost estimate increases to an amount greater than the
amount of the credit, the owner or operator, within 60 days after the increase, must
either cause the amount of the credit to be increased so that it at least equals the
current closure cost estimate and submit evidence of such increase to the Regional
Administrator, or obtain other financial assurance as specified in this section to cover
the increase. Whenever the current closure cost estimate decreases, the amount of the
credit may be reduced to the amount of the current closure cost estimate following written
approval by the Regional Administrator.
(8) Following a final administrative determination pursuant to section 3008 of RCRA that
the owner or operator has failed to perform final closure in accordance with the approved
closure plan when required to do so, the Regional Administrator may draw on the letter of
credit.
(9) If the owner or operator does not establish alternate financial assurance as specified
in this section and obtain 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 from the issuing institution that it has decided not to extend
the letter of credit beyond the current expiration date, the Regional Administrator will
draw on the letter of credit. The Regional Administrator may delay the drawing if the
issuing institution grants an extension of the term of the credit. During the last 30 days
of any such extension the Regional Administrator will draw on the letter of credit if the
owner or operator has failed to provide alternate financial assurance as specified in this
section and obtain written approval of such assurance from the Regional Administrator.
(10) The Regional Administrator will return the letter of credit to the issuing
institution for termination 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 §265.143(h).
(d) Closure insurance. (1) An owner or operator may satisfy the requirements of this
section by obtaining closure insurance which conforms to the requirements of this
paragraph and submitting a certificate of such insurance to the Regional Administrator. By
the effective date of these regulations the owner or operator must submit to the Regional
Administrator a letter from an insurer stating that the insurer is considering issuance of
closure insurance conforming to the requirements of this paragraph to the owner or
operator. Within 90 days after the effective date of these regulations, the owner or
operator must submit the certificate of insurance to the Regional Administrator or
establish other financial assurance as specified in this section. At a minimum, the
insurer must be 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) The wording of the certificate of insurance must be identical to the wording specified
in §264.151(e).
(3) The closure insurance policy must be issued for a face amount at least equal to the
current closure cost estimate, except as provided in §265.143(f). The term "face
amount'' means the total amount the insurer is obligated to pay under the policy. Actual
payments by the insurer will not change the face amount, although the insurer's future
liability will be lowered by the amount of the payments.
(4) The closure insurance policy must guarantee that funds will be available to close the
facility whenever final closure occurs. The policy must also guarantee that once final
closure begins, the insurer will be responsible for paying out funds, up to an amount
equal to the face amount of the policy, upon the direction of the Regional Administrator,
to such party or parties as the Regional Administrator specifies.
(5) After beginning partial or final closure, an owner or operator or any other person
authorized to conduct closure may request reimbursements for closure expenditures by
submitting itemized bills to the Regional Administrator. The owner or operator may request
reimbursements for partial closure only if the remaining value of the policy is sufficient
to cover the maximum costs of closing the facility over its remaining operating life.
Within 60 days after receiving bills for closure activities, the Regional Administrator
will instruct the insurer to make reimbursements in such amounts as the Regional
Administrator specifies in writing if the Regional Administrator determines that the
partial or final closure expenditures are in accordance with the approved closure plan or
otherwise justified. If the Regional Administrator has reason to believe that the maximum
cost of closure over the remaining life of the facility will be significantly greater than
the face amount of the policy, he may withhold reimbursement of such amounts as he deems
prudent until he determines, in accordance with §265.143(h), that the owner or operator
is no longer required to maintain financial assurance for final closure of the particular
facility. If the Regional Administrator does not instruct the insurer to make such
reimbursements, he will provide to the owner or operator a detailed written statement of
reasons.
(6) The owner or operator must maintain the policy in full force and effect until the
Regional Administrator consents to termination of the policy by the owner or operator as
specified in paragraph (d)(10) of this section. Failure to pay the premium, without
substitution of alternate financial assurance as specified in this section, will
constitute a significant violation of these regulations, warranting such remedy as the
Regional Administrator deems necessary. Such violation will be deemed to begin upon
receipt by the Regional Administrator of a notice of future cancellation, termination, or
failure to renew due to nonpayment of the premium, rather than upon the date of
expiration.
(7) Each policy must contain a provision allowing assignment of the policy to a successor
owner or operator. Such assignment may be conditional upon consent of the insurer,
provided such consent is not unreasonably refused.
(8) The policy must provide that the insurer may not cancel, terminate, or fail to renew
the policy except for failure to pay the premium. The automatic renewal of the policy
must, at a minimum, provide the insured with the option of renewal at the face amount of
the expiring policy. If there is a failure to pay the premium, the insurer may elect to
cancel, terminate, or fail to renew the policy by sending notice by certified mail to the
owner or operator and the Regional Administrator. Cancellation, termination, or failure to
renew may not occur, however, during the 120 days beginning with the date of receipt of
the notice by both the Regional Administrator and the owner or operator, as evidenced by
the return receipts. Cancellation, termination, or failure to renew may not occur and the
policy will remain in full force and effect in the event that on or before the date of
expiration:
(i) The Regional Administrator deems the facility abandoned; or
(ii) Interim status is terminated or revoked; or
(iii) Closure is ordered by the Regional Administrator or a U.S. district court or other
court of competent jurisdiction; or
(iv) The owner or operator is named as debtor in a voluntary or involuntary proceeding
under Title 11 (Bankruptcy), U.S. Code; or
(v) The premium due is paid.
(9) Whenever the current closure cost estimate increases to an amount greater than the
face amount of the policy, the owner or operator, within 60 days after the increase, must
either cause the face amount to be increased to an amount at least equal to the current
cost estimate and submit evidence of such increase to the Regional Administrator, or
obtain other financial assurance as specified in this section to cover the increase.
Whenever the current closure cost estimate decreases, the face amount may be reduced to
the amount of the current closure cost estimate following written approval by the Regional
Administrator.
(10) The Regional Administrator will give written consent to the owner or operator that he
may terminate the insurance policy 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 §265.143(h).
(e) Financial test and corporate guarantee for closure. (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 (e)(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 located in the United States amounting to at least 90 percent of 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 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 (e)(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 (e)(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) The owner or operator may obtain an extension of the time allowed for submission of
the documents specified in paragraph (e)(3) of this section if the fiscal year of the
owner or operator ends during the 90 days prior to the effective date of these regulations
and if the year-end financial statements for that fiscal year will be audited by an
independent certified public accountant. The extension will end no later than 90 days
after the end of the owner's or operator's fiscal year. To obtain the extension, the
owner's or operator's chief financial officer must send, by the effective date of these
regulations, a letter to the Regional Administrator of each Region in which the owner's or
operator's facilities to be covered by the financial test are located. This letter from
the chief financial officer must:
(i) Request the extension;
(ii) Certify that he has grounds to believe that the owner or operator meets the criteria
of the financial test;
(iii) Specify for each facility to be covered by the test the EPA Identification Number,
name, address, and current closure and post-closure cost estimates to be covered by the
test;
(iv) Specify the date ending the owner's or operator's last complete fiscal year before
the effective date of these regulations;
(v) Specify the date, no later than 90 days after the end of such fiscal year, when he
will submit the documents specified in paragraph (e)(3) of this section; and
(vi) Certify that the year-end financial statements of the owner or operator for such
fiscal year will be audited by an independent certified public accountant.
(5) After the initial submission of items specified in paragraph (e)(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 (e)(3) of this section.
(6) If the owner or operator no longer meets the requirements of paragraph (e)(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 (e)(1) of this section, require
reports of financial condition at any time from the owner or operator in addition to those
specified in paragraph (e)(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 (e)(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
(e)(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) The owner or operator is no longer required to submit the items specified in paragraph
(e)(3) of this section when:
(i) An owner or operator substitutes alternate financial assurance specified in this
section; or
(ii) The Regional Administrator releases the owner or operator from the requirements of
this section in accordance with §265.143(h).
(10) 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 (e)(1) through (8) 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 (e)(3) of this
section. The terms of the corporate guarantee must provide that:
(i) If the owner or operator fails to perform final closure of a facility covered by the
corporate guarantee in accordance with the closure plan and other interim status
requirements whenever required to do so, the guarantor will do so or establish a trust
fund as specified in §265.143(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.