Financial Responsibility For Owners And Operators

What are financial responsibility requirements?

When Congress amended Subtitle I of the Solid Waste Disposal Act, it directed the U.S. Environmental Protection Agency (EPA) to develop financial responsibility regulations (PDF) (36 pp, 148K, About PDF) for owners and operators of underground storage tanks.

Congress wanted owners and operators of underground storage tanks (USTs) to show that they have the financial resources to clean up a site if a release occurs, correct environmental damage, and compensate third parties for injury to their property or themselves. The amount of coverage required depends on the type and size of the business, as explained in the chart below. EPA produced a 16-page booklet called Dollars And Sense that clearly presents these requirements to UST owners and operators.

How can owners and operators demonstrate financial responsibility?

Owners and operators have several options: obtain insurance coverage from an insurer or a risk retention group; demonstrate self-insurance using a financial test; obtain corporate guarantees, surety bonds, or letters of credit; place the required amount into a trust fund administered by a third party; or rely on coverage provided by a state financial assurance fund. Local governments have four additional compliance mechanisms tailored to their special characteristics: a bond rating test, a financial test, a guarantee, and a dedicated fund.

Have compliance deadlines passed?

Yes. All of the compliance deadlines for financial responsibility have passed. All USTs that have not been permanently closed must currently meet the financial responsibility requirements.

What are the required coverage amounts?

The table below presents required amounts of financial responsibility for groups of UST owners and operators.

Required Amounts Of Financial Reponsibility
Group Of UST Owners And Operators	Per Occurrence Coverage	Aggregate Coverage
Group 1: Petroleum producers, refiners, or marketers	$1 million	$1 million for 100 or fewer tanks or $2 million for more than 100 tanks
Group 2: Nonmarketers	$500,000 if throughput is 10,000 gallons monthly or less or $1 million if throughput is more than 10,000 gallons monthly

Required Amounts Of Financial Reponsibility

Group Of UST Owners And Operators

Per Occurrence Coverage

Aggregate Coverage

Group 1:

Petroleum producers, refiners, or marketers

$1 million

$1 million for 100 or fewer tanks

$2 million for more than 100 tanks

Group 2:

Nonmarketers

$500,000 if throughput is 10,000 gallons monthly or less

$1 million if throughput is more than 10,000 gallons monthly

EPA's publication, Financial Responsibility for Underground Storage Tanks: A Reference Manual, provides information regarding the restrictions, limitations, and requirements of each financial responsibility mechanism under the federal UST regulations. Note that this reference manual is based on the federal UST financial responsibility requirements, though it should provide useful information and insight into understanding and reviewing state-specific financial responsibility mechanisms.

How can state financial assurance funds help?

Many states have developed financial assurance funds to help owners and operators meet financial responsibility requirements and to help cover the costs of cleanups. State financial assurance fund programs, which supplement or are a substitute for private insurance, have been especially useful for small-to-medium sized petroleum marketers. Other characteristics of the funds appear below:

Financial assurance funds are created by state legislation and must be submitted to EPA for approval before they can be used as compliance mechanisms.
In most cases, states generate money for the funds with tank registration and petroleum fees.
Legislatures delegate authority for the fund to a state agency addressing health, environmental, or insurance issues.
Some state assurance funds incorporate eligibility requirements, such as demonstrations that facilities are in compliance with technical requirements.
Most state funds contain some deductible that the owner or operator is responsible for paying. Details on the funds are specific to each state.

Nationwide, these state funds raise and spend about $600-700 million annually on LUST cleanups.

How many states have financial assurance funds?

Currently 36 state funds qualify as financial assurance mechanisms. One additional state (Washington) has a reinsurance program that enables insurance companies to offer lower-cost premiums to the state's UST owners.

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