40 CFR Part 265 -- INTERIM STATUS
STANDARDS FOR OWNERS AND OPERATORS OF HAZARDOUS WASTE TREATMENT, STORAGE, AND DISPOSAL
FACILITIES
§265.146 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 §§265.143 and 265.145. 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.
§265.147 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
Administrator if 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.
(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, or land treatment facility which 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 paragraph (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.
(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.
(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 in writing to the Regional Administrator. 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
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. The Regional Administrator will process
a variance request as if it were a permit modification request under §270.41(a)(5) of
this chapter and subject to the procedures of §124.5 of this chapter. Notwithstanding any
other provision, the Regional Administrator may hold a public hearing at his discretion or
whenever he finds, on the basis of requests for a public hearing, a significant degree of
pubic interest in a tentative decision to grant a variance.
(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. The Regional Administrator will process an adjustment of the level of
required coverage as if it were a permit modification under §270.41(a)(5) of this chapter
and subject to the procedures of §124.5 of this chapter. Notwithstanding any other
provision, the Regional Administrator may hold a public hearing at his discretion or
whenever he finds, on the basis of requests for a public hearing, a significant degree of
public interest in a tentative decision to adjust the level or type of required coverage.
(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 that 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) of this section:
(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, 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 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) The owner or operator may obtain a one-time extension of the time allowed for
submission of the documents specified in paragraph (f)(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, the amount of liability coverage and, when applicable, 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 (f)(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 (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.
(g) Guarantee for liability coverage. (1) Subject to paragraph (g)(2) of this section, an
owner or operator may meet the requirements of this section by obtaining a written
guarantee, hereinafter referred to as "guarantee.'' The guarantor must be the direct
or higher-tier parent corporation of the owner or operator, a firm whose parent
corporation is also the parent corporation of the owner or operator, or a firm with a
"substantial business relationship'' with the owner or operator. The guarantor must
meet the requirements for owners or operators in paragraphs (f)(1) through (f)(6) of this
section. The wording of the guarantee must be identical to the wording specified in
§264.151(h)(2) of this chapter. A certified copy of the guarantee must accompany the
items sent to the Regional Administrator as specified in paragraph (f)(3) of this section.
One of these items must be the letter from the guarantor's chief financial officer. If the
guarantor's parent corporation is also the parent corporation of the owner or operator,
this letter must describe the value received in consideration of the guarantee. If the
guarantor is a firm with a "substantial business relationship'' with the owner or
operator, this letter must describe this "substantial business relationship'' and the
value received in consideration of the guarantee.
(i) If the owner or operator fails to satisfy a judgment based on a determination of
liability for bodily injury or property damage to third parties caused by sudden or
nonsudden accidental occurrences (or both as the case may be), arising from the operation
of facilities covered by this corporate guarantee, or fails to pay an amount agreed to in
settlement of claims arising from or alleged to arise from such injury or damage, the
guarantor will do so up to the limits of coverage.
(ii) (Reserved)
(2)(i) In the case of corporations incorporated in the United States, a guarantee may be
used to satisfy the requirements of this section only if the Attorneys General or
Insurance Commissioners of (A) the State in which the guarantor is incorporated, and (B)
each State in which a facility covered by the guarantee is located have submitted a
written statement to EPA that a guarantee executed as described in this section and
§264.151(h)(2) is a legally valid and enforceable obligation in that State.
(ii) In the case of corporations incorporated outside the United States, a guarantee may
be used to satisfy the requirements of this section only if (A) the non-U.S. corporation
has identified a registered agent for service of process in each State in which a facility
covered by the guarantee is located and in the State in which it has its principal place
of business, and if (B) the Attorney General or Insurance Commissioner of each State in
which a facility covered by the guarantee is located and the State in which the guarantor
corporation has its principal place of business, has submitted a written statement to EPA
that a guarantee executed as described in this section and §264.151(h)(2) is a legally
valid and enforceable obligation in that State.
(h) Letter of credit for liability coverage. (1) An owner or operator may satisfy the
requirements of this section by obtaining an irrevocable standby letter of credit that
conforms to the requirements of this paragraph and submitting a copy of the letter of
credit to the Regional Administrator.
(2) The financial institution issuing the letter of credit must be an entity that has the
authority to issue letters of credit and whose letter of credit operations are regulated
and examined by a Federal or State agency.
(3) The wording of the letter of credit must be identical to the wording specified in
§264.151(k) of this chapter.
(i) Surety bond for liability coverage. (1) An owner or operator may satisfy the
requirements of this section by obtaining a surety bond that conforms to the requirements
of this paragraph and submitting a copy of the bond to the Regional Administrator.
(2) The surety company issuing the bond must be among those listed as acceptable sureties
on Federal bonds in the most recent Circular 570 of the U.S. Department of the Treasury.
(3) The wording of the surety bond must be identical to the wording specified in
§264.151(l) of this chapter.
(4) A surety bond may be used to satisfy the requirements of this section only if the
Attorneys General or Insurance Commissioners of (i) the State in which the surety is
incorporated, and (ii) each State in which a facility covered by the surety bond is
located have submitted a written statement to EPA that a surety bond executed as described
in this section and §264.151(l) of this chapter is a legally valid and enforceable
obligation in that State.
(j) Trust fund for liability coverage. (1) An owner or operator may satisfy the
requirements of this section by establishing a trust fund that conforms to the
requirements of this paragraph and submitting an originally signed duplicate of the trust
agreement to the Regional Administrator.
(2) 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.
(3) The trust fund for liability coverage must be funded for the full amount of the
liability coverage to be provided by the trust fund before it may be relied upon to
satisfy the requirements of this section. If at any time after the trust fund is created
the amount of funds in the trust fund is reduced below the full amount of the liability
coverage to be provided, the owner or operator, by the anniversary date of the
establishment of the Fund, must either add sufficient funds to the trust fund to cause its
value to equal the full amount of liability coverage to be provided, or obtain other
financial assurance as specified in this section to cover the difference. For purposes of
this paragraph, "the full amount of the liability coverage to be provided'' means the
amount of coverage for sudden and/or nonsudden occurrences required to be provided by the
owner or operator by this section, less the amount of financial assurance for liability
coverage that is being provided by other financial assurance mechanisms being used to
demonstrate financial assurance by the owner or operator.
(4) The wording of the trust fund must be identical to the wording specified in
§264.151(m) of this part.
(k) Notwithstanding any other provision of this part, an owner or operator using liability
insurance to satisfy the requirements of this may use, until October 16, 1982, a Hazardous
Waste Facility Liability Endorsement or Certificate of Liability Insurance that does not
certify that the insurer is licensed to transact the business of insurance, or eligible as
an excess or surplus lines insurer, in one or more States.
(Approved by the Office of Management and Budget under control number 2000-0445, for
paragraphs (a)(1)(i), (b)(1)(i), (b)(5), (c), (d), and (f) (3) through (6))
(47 FR 16558, Apr. 16, 1982, as amended at 47 FR 28627, July 1, 1982; 47 FR 30447, July
13, 1982; 48 FR 30115, June 30, 1983; 51 FR 16458, May 2, 1986; 51 FR 25355, July 11,
1986; 52 FR 44321, Nov. 18, 1987; 53 FR 33959, Sept. 1, 1988; 56 FR 30200, July 1, 1991;
56 FR 47912, Sept. 23, 1991)
§265.148 Incapacity of owners or operators, guarantors, or financial institutions.
(a) An owner or operator must notify the Regional Administrator by mail of the
commencement of a voluntary or involuntary proceeding under Title 11 (Bankruptcy), U.S.
Code, naming the owner or operator as debtor, within 10 days after commencement of the
proceeding. A guarantor of a corporate guarantee as specified in §§265.143(e) and
265.145(e) must make such a notification if he is named as debtor, as required under the
terms of the corporate guarantee (§264.151(h)).
(b) An owner or operator who fulfills the requirements of §265.143, §265.145, or
§265.147 by obtaining a trust fund, surety bond, letter of credit, or insurance policy
will be deemed to be without the required financial assurance or liability coverage in the
event of bankruptcy of the trustee or issuing institution, or a suspension or revocation
of the authority of the trustee institution to act as trustee or of the institution
issuing the surety bond, letter of credit, or insurance policy to issue such instruments.
The owner or operator must establish other financial assurance or liability coverage
within 60 days after such an event.
§265.149 Use of State-required mechanisms.
(a) For a facility located in a State where EPA is administering the requirements of this
subpart but where the State has hazardous waste regulations that include requirements for
financial assurance of closure or post-closure care or liability coverage, an owner or
operator may use State-required financial mechanisms to meet the requirements of
§§265.143, 265.145, or 265.147 if the Regional Administrator determines that the State
mechanisms are at least equivalent to the financial mechanisms specified in this subpart.
The Regional Administrator will evaluate the equivalency of the mechanisms principally in
terms of (1) certainty of the availability of funds for the required closure or
post-closure care activities or liability coverage and (2) the amount of funds that will
be made available. The Administrator may also consider other factors as he deems
appropriate. The owner or operator must submit to the Regional Administrator evidence of
the establishment of the mechanism together with a letter requesting that the
State-required mechanism be considered acceptable for meeting the requirements of this
subpart. The submission must include the following information: The facility's EPA
Identification Number, name, and address, and the amount of funds for closure or
post-closure care or liability coverage assured by the mechanism. The Regional
Administrator will notify the owner or operator of his determination regarding the
mechanism's acceptability in lieu of financial mechanisms specified in this subpart. The
Regional Administrator may require the owner or operator to submit additional information
as is deemed necessary to make this determination. Pending this determination, the owner
or operator will be deemed to be in compliance with the requirements of §265.143,
§265.145, or §265.147, as applicable.
(b) If a State-required mechanism is found acceptable as specified in paragraph (a) of
this section except for the amount of funds available, the owner or operator may satisfy
the requirements of this subpart by increasing the funds available through the
State-required mechanism or using additional financial mechanisms as specified in this
subpart. The amount of funds available through the State and Federal mechanisms must at
least equal the amount required by this subpart.