56 FR 66369-66373 Monday, Dec. 23, 1991 Underground Storage Tanks Containing Petroleum; Financial Responsibility Requirements, Final Rule
66369 - 66373 Federal Register / Vol. 56, No. 246 / Monday, December 23, 1991 / Rules and Regulations
40 CFR Part 280
Underground Storage Tanks Containing Petroleum; Financial Responsibility Requirements
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
SUMMARY: The Environmental Protection Agency (EPA) is today promulgating a rule to amend the financial responsibility requirements for underground storage tanks (USTS) containing petroleum that appeared in the Federal Register on October 26, 1988 (53 FR 43322), as amended October 31, 1990 (55 FR 46022). Specifically, this rule modifies the compliance dates under 40 CFR 280.91(d). Under the modification, all petroleum marketing firms owning 1 to 12 USTs at more than one facility or fewer than 100 USTs at a single facility and non-marketers with net worth of less than $20 million are required to comply with the requirements of 40 CFR part 280 subpart H-Financial Responsibility-by December 31, 1993. Today's rule extends the deadline from the previous date of October 26, 1991. This change will provide additional time for the development of financial assurance mechanisms (especially State assurance funds) to enable this group to comply.
EFFECTIVE DATE: The amendment to 40 CFR 280.91(d) contained in this rulemaking is effective December 23, 1991.
ADDRESSES: The public docket for this rule is in room M2427, U.S. EPA, 401 M St., SW., Washington, DC 20460. Call (202) 260-9327 for an appointment to review docket materials.
FOR FURTHER INFORMATION CONTACT: The RCRA/Superfund Hotline at (800) 424-9346 (toll free) or (703) 920-9810 in Virginia. For technical questions, contact Andrea Osborne in the Office of Underground Storage Tanks at (703) 308-8883.
SUPPLEMENTARY INFORMATION: On October 26, 1988, EPA promulgated financial responsibility requirements applicable to owners and operators of underground storage tanks (USTS) containing petroleum (53 FR 43322). In the final rule, EPA established a phased schedule of compliance for owners and operators of petroleum USTS. Petroleum marketing firms with 1 to 12 USTs at more than one facility or fewer than 100 USTs at a single facility, local government entities, and non-marketers whose net worth is less than $20 million were required to comply with the financial responsibility requirements by October 26,1990. The principal reason for adopting the phased compliance approach was to provide the time necessary for providers (including private insurance companies and States intending to establish State assurance funds) of financial assurance mechanisms to develop new policies and programs or conform their policies and programs with EPA requirements. (See 53 FR 43324.)
On October 31, 1990, EPA published regulations (55 FR 46022) extending for one year (to October 26, 1991) the compliance deadline for marketers with I to 12 USTs at more than one facility or fewer than 100 USTs located at a single facility and non-marketers whose net worth is less than $20 million. The compliance deadline for local governments was extended until one year after the promulgation of a final rule providing additional mechanisms for local governments. Additional mechanisms for local governments were proposed on June 18, 1990 (55 FR 24692).
Since October 1990, EPA has continued to monitor the development of financial assurance markets, especially (1) insurance for corrective action and third party liability and (2) State assurance funds, to determine whether financial assurance mechanisms are becoming available to satisfy the needs of the regulated community. Based on this on-going review, EPA believes that tank owners required to comply by October 26, 1991, need additional time to meet insurers' standards for coverage. Also, States need additional time to develop State assurance funds, to submit them to EPA for review and approval as financial assurance mechanisms, and to make any modifications necessary for approval. Therefore, EPA is extending the compliance date for marketers with 1 to 12 USTs at more than one facility or fewer than 100 USTs at a single facility and non-marketers whose net worth is less than $20 million from October 26, 1991 to December 31, 1993. The Agency believes that this 26-month extension for Category IV tank owners will provide adequate time for tank owners and operators to obtain assurance. By October 1990, when the deadline was previously extended, EPA had approved 14 State assurance funds and had begun to review 11 State assurance funds that were submitted to EPA for approval. (It is important to note that upon submission of a State assurance fund, the fund is considered to be approved unless and until EPA disapproves it.) During the subsequent 12 months, an additional 13 State assurance funds have been approved by EPA to serve as financial responsibility compliance mechanisms. Currently, 27 State assurance funds have been approved by EPA and an additional 9 State assurance funds have been submitted to EPA for approval. EPA expects State assurance fund development to continue during the 26-month extension. The Agency notes, however, that States are not required to develop assurance funds and that several States have indicated that they do not intend to develop State fund programs. Nevertheless, EPA anticipates that the extension will allow all States intending to develop State funds adequate time to do so.
Additionally, States will have more time to develop and implement financial assistance programs (e.g., direct loan programs, loan guarantee programs, grant programs) which help owners and operators pay for technical improvements such as tank upgrading, which, in turn, helps owners and operators qualify for insurance. Four States-Alaska, Hawaii, Maryland, and Washington-indicated that they have or are developing State financial assistance programs, and that an extension would provide more time for qualified owners and operators to obtain financial assistance to upgrade their UST facilities to meet insurance underwriting criteria. Finally, extension of the compliance deadline to December 319 1993 will relate the compliance deadline for Category IV owners and operators to the final compliance date for implementation of release detection. Implementation of a release detection program is a critical element of the underwriting criteria for many insurers, and the ability to demonstrate that tanks are not leaking will allow more owners and operators to obtain insurance. Under EPA's phased schedule for release detection, all owners and operators must implement release detection no later than December 23, 1993.
These regulations are issued under the authority of Sections 2002, 9001, 9002, 9003, 9004, 9005, 9006, 9007, and 9009 of the Solid Waste Disposal Act, as amended (42 U.S.C. 6912, 6991, 6991a, 6991b, 6991c, 6991d, 69gle, 6991f, and 6991h).
II. Effective Date
This rule will be effective on December 23, 1991 pursuant to 5 U.S.C. 553(d). This rule may be made effective immediately because it extends a deadline for compliance in existing regulations and therefore is a "substantive rule which grants or recognizes an exemption or relieves a restriction." 5 U.S.C. 553(d)(1). The Agency also finds that there is good cause to make the rule effective immediately because the regulated community does not need time to come into compliance. 5 U.S.C. 553(d)(3).
When devising the phased compliance approach, the Agency wanted to achieve the best balance between the need to demonstrate financial responsibility for UST releases and the time necessary for owners and operators to obtain assurance mechanisms. The Agency attempted to establish compliance dates that were as early as possible, considering the type of assurance different types of facilities were likely to obtain. Petroleum marketers owning or operating 1,000 or more USTs and nonmarketers with more than $20 million in tangible net worth were required to comply by January 24,1989, based primarily on their ability to qualify for self-insurance. Petroleum marketers with 100 to 999 USTs were required to comply by October 26,1989. These marketers were estimated to be relatively more likely to be able to obtain insurance; some of them were also expected to qualify as self-insurers. Petroleum marketers owning 13 to 99 USTs at more than one facility were originally required to comply by April 26, 1990. However, on May 2, 1990, the Agency published a rule (55 FR 18566) extending this compliance date to April 26, 1991. These marketers were thought to be less likely to be able to obtain insurance than members of the October 26,1989, compliance group. Petroleum marketers owning or operating fewer than 13 USTs at more than one facility or owning or operating only one facility with fewer than 100 USTS, and UST owners and operators who were not petroleum marketers (including local government entities) were required to comply by October 26,1990. This group was expected to rely primarily on State assurance funds for compliance. On October 31, 1990, EPA extended the compliance deadline for one year for small marketers (marketers with fewer than 13 USTs or fewer than 100 USTs at a single facility) and small nonmarketers (non-marketers with less than $20 million in net worth). This extension was based on the rate of development of State assurance funds. In addition, EPA extended the compliance deadline for local governments until one year after publication of a final rule with additional mechanisms for local governments to demonstrate compliance. Additional mechanisms for local governments were proposed on June 18,1990 (55 FR 24692). The deadline for compliance by local governments is not affected by this rule.
Through monitoring the development of financial assurance mechanisms, the Agency has learned more about the way insurers operate in the UST insurance market. EPA now believes that the extended compliance date of October 26, 1991 for Category IV tank owners (marketers owning 1 to 12 USTs or fewer than 100 USTs at one facility and nonmarketers whose net worth is less than $20 million) did not allow adequate time for compliance. When devising the original and revised phased compliance schedule, the Agency expected that members of this compliance group would rely on insurance and State assurance funds. The Agency had originally believed that 24 months from promulgation of the final financial responsibility rule would provide adequate time for owners and operators to upgrade their USTs to meet insurers' requirements and for States to develop and submit assurance funds to EPA. Since promulgation of the 1988 final rule, however, EPA has learned that tank owners and operators require additional time to comply with conditions imposed on them by the insurance industry. Some of these conditions include operation of only tanks younger than 15 years of age, clean site conditions, a reliable method of leak detection, etc. For example, some insurers have informed EPA that they have rejected UST coverage applications because of existing contamination, poor tank management, and inadequate leak detection monitoring. Many members of this compliance group may not be able to meet these standards by October 26, 1991, and thus would be required to seek an alternative financial assurance mechanism.
On August 14, 1991, EPA proposed to extend the compliance deadline for this group (56 FR 40292). EPA based the proposal on its understanding that more members of this compliance group than the Agency had originally projected must rely on State assurance funds, rather than on insurance, to demonstrate compliance with the financial responsibility requirements. EPA believed that, in order for owners and operators to rely on State assurance funds as compliance mechanisms, States must have more time to submit their State assurance funds to EPA for approval.
At this time, EPA has approved 27 State assurance funds to serve as financial responsibility compliance mechanisms that provide full or partial coverage; 9 more have formally submitted their State assurance funds to EPA for approval.
In addition to State assurance funds, which serve as financial responsibility compliance mechanisms, some States, such as Alaska, Hawaii, Oregon, Washington, and Maryland, are developing financial assistance programs, such as grant programs and loan programs, to assist UST owners in upgrading their facilities to meet insurance underwriting standards. The State of Washington has also implemented a reinsurance program, under which the State relies on private insurers to sell insurance but provides reinsurance coverage to limit the insurers' risk and reduce premium costs.
Comments on the proposed rule were received from 57 commenters. A Response to Comments Document is in the public docket for the rule. Most commenters supported the extension of the compliance deadline for Category IV owners and operators. Commenters asserted that the proposed extension would allow the time needed for owners and operators seeking insurance to meet insurers' standards for coverage. They also stated that an extension would allow the time necessary for States that do not have State assurance funds or financial assistance programs to develop such funds and programs; whereas in States where these funds and programs exist, the extension would provide States with more time to develop outreach programs, and would provide owners and operators with more time to participate.
Some commenters argued against extending the compliance deadline, however, stating that affordable private insurance is available to both marketers and nonmarketers, and that an extension would discourage UST owners from taking the necessary steps toward compliance and would undermine the credibility of the UST program. Some of the comments regarding the availability and affordability of insurance in certain States were countered directly by comments from UST owners in those States that they were able to obtain only minimal pollution liability coverage, with high deductibles, and that the costs for this coverage were prohibitive. Some of the commenters opposing a general extension acknowledged that an extension was justified in States without State assurance funds.
One commenter, who removed tanks before the proposal to extend the compliance deadline, argued that an additional extension places those who have already complied with the regulations at a competitive disadvantage with respect to those who have not. The Agency believes that this situation is an unfortunate result of the regulatory development process, but is not indicative of the potential effects on the majority of the regulated community. The Agency is unable to determine whether an extension is necessary until near the deadline for compliance, however, and so is unable to provide more advanced notice of the extension. This difficulty is exacerbated by statutory requirements to obtain public participation in the rulemaking process, which further restricts EPA's ability to provide definitive answers about forthcoming changes in the regulations. The Agency regrets any problems experienced by specific UST owners and operators as a result of the changes in the regulatory deadline.
Regarding the length of an extension, many commenters supported the proposal to extend the compliance deadline to December 31, 1992. One commenter proposed a shorter extension of the deadline to allow States more time to develop State assurance funds, yet not undermine the financial responsibility requirements through excessive delay of compliance deadlines. Several commenters favored an extension until December 31, 1993. These included the Hawaii Department of Health, which requested the extra time to implement its loan program for UST owners, and the National Air Transportation Association, which advocated synchronizing the compliance schedule for financial responsibility requirements with that for release detection requirements. Other commenters also suggested longer extensions; two of these requested an indefinite extension.
Based on a review of the comments, EPA has decided to extend the compliance date to December 31, 1993, for small petroleum marketing firms (those with fewer than 13 USTs or fewer than 100 USTs at a single facility) and nonmarketers with net worth of less than $20 million. This 26-month extension will allow all States that intend to develop State assurance funds or financial assistance programs to do so, and will allow UST owners and operators in these States to participate. It will also delay the need for meeting financial responsibility requirements until after the December 22, 1993 compliance deadline for release detection under 40 CFR 280.40. Installing release detection may be a requirement for obtaining insurance in some areas; this extension will assure that all UST owners seeking insurance would have already complied with Federal release detection requirements. The Agency notes that the extension provided by this rule does not preclude States from adopting an earlier deadline; in those States where a State assurance fund exists, States may find it appropriate to maintain the previous deadlines for compliance with financial responsibility requirements. This final rule applies to the Federal compliance date only, and does not preclude different State compliance deadlines.
Several commenters requested that the extension be broadened to include owners and operators in compliance Category III, which were required to have complied by April 26,1991. Commenters argued that these owners and operators are also having difficulty obtaining insurance or otherwise demonstrating financial responsibility, and that extending the compliance deadline for owners and operators in Category IV only would place owners and operators in Category III at a competitive disadvantage. EPA believes, however, that owners and operators with financial assurance mechanisms may have an advantage over competitors without these mechanisms since the infrequent, unknown and possibly large costs associated with a leak may be greater than the regular, known, and possibly smaller costs of the financial assurance mechanism. In addition, EPA analysis suggests that up to 80% of the owners and operators in Category III have already obtained assurance mechanisms through State funds and private insurance. The Agency emphasizes that its intention has been and continues to be to require demonstration of financial responsibility at the earliest date reasonably achievable, which for Category III has already passed. UST owners and operators in Category III were required to have demonstrated compliance with the financial responsibility requirements more than six months ago. The Agency believes that "extending" the deadline at this time would penalize those owners and operators who have made a good faith effort to comply with the requirements.
Several commenters argued for special treatment for USTs owned by Indian Tribes and for USTs located on tribal lands. The commenters claimed that these USTs are not covered by State assurance funds, are not eligible for coverage by the LUST Trust Fund, are located in geographic regions that offer a low potential for contamination of groundwater supplies, and have limited access to insurance. While Indian Tribes cannot get State program grants or LUST Trust Fund Cooperative Agreements (as States can), they are eligible to receive LUST Trust Fund dollars from EPA under certain circumstances. State financial assurance funds do not necessarily exclude tribally-owned tanks; however, since States do not have taxing powers over tribal lands, States cannot collect the taxes and fees that are usually required for participation and access to these State funds unless the Tribe or individual owner opts to pay the fee voluntarily to participate in the fund.
The Agency anticipates that the extension will provide additional time for many owners and operators of USTs located on tribal lands to obtain financial assurance mechanisms. Nevertheless, EPA acknowledges the concerns expressed by these commenters. As discussed below, EPA intends to continue to monitor the development of financial assurance mechanisms during the extension period to determine whether specific groups of UST owners and operators, including owners and operators of USTs located on tribal lands, may require additional consideration.
USTs directly owned or operated by Tribal governments are not within the scope of this rule because the Agency treats them as local governments for the purposes of the financial responsibility requirements. Tribal governments will be eligible to use the new mechanisms being developed for local governments by the Agency and will be required to comply within 12 months of publication of the new mechanisms for demonstrating financial responsibility.
IV. Discussion of Options Considered But Not Proposed
In addition to the proposed rule, EPA considered, but did not propose, two additional options to grant relief to UST owners and operators. Under the first option, a subset of those entities currently required to comply by October 26, lR91 would be granted an additional extension. Under the second option, any UST facility meeting certain Federally-specified conditions as determined by the States would receive an extension.
Under the first option, retail marketers in Category IV that provided essential services such as being the sole source of petroleum products for a rural community and whose tanks posed minimal environmental risks would be granted an extension of the compliance deadline of up to 90 days following the final date for compliance with the technical standards for new tanks (i.e., March 22, 1999). Owners and operators must generally meet these technical requirements (which include tank upgrading, leak detection, etc.) to qualify for private insurance.
If EPA were to adopt the second option, EPA would extend the federal deadline for any facility, regardless of its compliance category, if the State made certain findings based on federally determined criteria. The extension would last up to 90 days following the final date for compliance with the technical standards for new tanks (March 22,1999). The specified criteria could include facilities that (1) had been identified by States as entities in need of an extension, (2) sold petroleum products on a retail basis, (3) were the sole provider of a class of petroleum transportation fuels (e.g., gasoline or diesel fuel) within a 25-mile radius, and (4) met certain environmental criteria such as that the underground storage tank not be too close to groundwater or that the percentage of the local population that relies on groundwater as their drinking water source not exceed a certain number. Under this option, the federal extension could be granted to local governments, especially those in isolated rural areas that provide essential community services (e.g., public health and safety). Additionally, EPA could allow extensions for Indian tribes owning and operating USTs on Indian lands or to owners and operators of USTs on Indian lands that provided essential services.
Most commenters opposed Option 1. Some claimed that the definitions of "rural" or "sole source provider" would prove unworkable. Others claimed that non-marketers have an equivalent need for an extended compliance deadline. A few commenters stated that the definitions could provide some firms with unfair competitive advantages. A few commenters supported Option 1. Commenters in favor of Option 1 stated that current UST regulations are reducing the retail availability of petroleum products in rural areas where retail outlets for these products may already be scarce. Commenters also proposed definitions of "rural area" for EPA to consider if the Agency were to propose Option 1.
Many more commenters supported Option 2, under which any facility unable to comply with the financial responsibility deadline, or having difficulty in obtaining financial assurance, could be granted an extension in States where certain findings are made based on Federally determined criteria. Others advocated extensions when neither State assurance funds, financial assistance programs, nor affordable insurance were available. Some commenters challenged the use of "sole provider" as a criterion, while others suggested definitions for "sole provider" for EPA's consideration if the Agency were to propose Option 2. Commenters also proposed environmental criteria to be considered for use under Options 1 or 2.
Three commenters requested that EPA review the special circumstances of tribal governments and of UST owners and operators on tribal lands. The commenters noted that Indian tribes do not impose taxes and therefore do not have the financial resources to self-insure. At the same time, they said that State assurance funds generally do not apply to tribes, because States do not have the authority to levy and collect taxes on Indian lands. EPA acknowledges the concerns expressed by these commenters. EPA intends to use the time available during this extension period to continue to monitor the development of financial assurance mechanisms and to determine whether specific groups of UST owners and operators, including owners and operators of USTs located on tribal lands, may require additional consideration. Under today's rule, however, category IV USTs on Tribal lands that are not owned by Tribal governments must demonstrate financial responsibility by December 31, 1993.
USTs directly owned or operated by Tribal governments are not within the scope of today's rule. The Agency treats Indian Tribes as local governments for the purposes of the financial responsibility requirements. Consequently, USTs owned by Tribal governments will be required to comply within one year of the publication of the final rule providing additional mechanisms for local governments to demonstrate financial responsibility; these mechanisms were proposed on June 18, 1990 (55 FR 24692).
EPA appreciates the efforts of commenters in providing information relative to Options 1 and 2. These comments suggest that some specific classes or categories of UST owners or facilities may face exceptional or unique difficulty in complying with the financial responsibility requirements by December 31, 1993. Although neither option is being adopted in today's rule, EPA is continuing to review how and whether some variation of Option 2 should be adopted. EPA will use the 26 month period provided by today's rule to continue to monitor the development of programs to assist the most affected segments of the regulated community and to determine whether additional relief may be necessary. If further relief is determined to be appropriate, after considering all statutory, environmental, economic, and programmatic concerns, EPA will determine the best method, if any, to provide the relief. The Agency believes, however, that more information will be necessary to characterize fully the segments that may require further assistance and to develop appropriate criteria. To obtain this information, EPA intends to continue its dialogue with States and the regulated community.
V. Economic Impacts
This section provides an estimate of the economic impacts of the proposed rule. Because the proposed rule will not cause an annual impact on the economy of $100 million or more and will not cause an increase in the costs of production or the prices charged by the affected community, a Regulatory Impact Analysis is not required. Instead, EPA has prepared an economic impact analysis to estimate the number of affected facilities and the costs to affected facilities under the proposed and alternate options, and has evaluated the impacts on small entities as required by the Regulatory Flexibility Act.
A. Economic Impact Analysis The economic analysis examines the potential economic effects of extending the compliance deadline. It provides an estimate of the number of potentially affected entities, a comparison of the financial condition of affected entities with and without a State assurance fund, and an analysis of rural stations.
EPA analyses have suggested that a large number of USTs and UST-owning entities are subject to the October 26, 1991 deadline. Of the approximately 1.7 million USTs subject to the technical and financial responsibility standards, about 790,000 are owned by petroleum marketers with 12 or fewer USTS, by marketers that own or operate fewer than 100 USTs at a single facility, or by non-marketers with net worth of less than $20 million. These USTs are located at about 216,000 facilities, and are owned by about 213,000 firms (for an average of 3.8 USTs per owner). As a result, the extension of the compliance deadline will affect a significant proportion of the UST-owning population.
The development of State assurance funds and State financial assistance programs provides relief to UST owners and operators, particularly those with fewer facilities and USTS. Small service stations (including single-outlet stations) required to obtain private insurance or otherwise cope with cleanup costs without State aid face potentially severe impacts. EPA estimates that 45 percent of small stations could suffer severe financial distress, and 41 percent could fail. (The figure for severe financial distress includes those firms that would fail; thus, about go percent of those firms suffering financial distress would fail.) Small stations in rural areas may be even more heavily affected, because they tend to have a smaller revenue base and are less financially robust than stations in metropolitan areas.
In general, State assurance funds can reduce instances of failure over the next ten years if their deductibles are small enough. State assurance funds with $10,000 deductibles can reduce failures from 41 percent to only 14 percent. State assurance funds with $50,000 deductibles are predicted to reduce failures by a much smaller amount. State financial assistance programs that help firms upgrade their USTs can also help by alleviating some of the burden associated with obtaining insurance.
B. Regulatory Flexibility Analysis The Regulatory Flexibility Act generally requires all federal agencies to review the impact of their regulations to determine whether the regulations will have a significant economic impact on a substantial number of small entities. If so, the Agency must prepare a Regulatory Flexibility Analysis. EPA believes that this rule will not, if promulgated, have a significant economic impact on a substantial number of small entities. The proposed extension of the compliance date will provide relief to members of this compliance group by allowing them additional time to comply with the financial responsibility requirements. Accordingly, the Agency has concluded that the law does not require a Regulatory Flexibility Analysis, and certifies that this rule, if promulgated, will not have a significant economic impact on a substantial number of small entities.
List of Subjects in 40 CFR Part 280
Administrative practice and procedure, Environmental protection, Hazardous materials insurance, Oil pollution, Penalties, Petroleum, Reporting and recordkeeping requirements, State program approval, Surety bonds, Underground storage tanks, Water pollution control.
Dated: December 16,1991.
William K. Reilly,
For the reasons set out in the preamble, part 280 of title 40, chapter I of the Code of Federal Regulations is amended as follows:
PART 280-TECHNICAL STANDARDS AND CORRECTIVE ACTION REOUIREMENTS FOR OWNERS AND OPERATORS OF UNDERGROUND STORAGE TANKS (UST)
1. The authority citation for part 280 continues to read as follows:
Authority: 42 U.S.C. 6912, 6991, 6991(a), 6991(b), 6991(c), 6991(d), 6991(e), 6991(f), and 6991(h).
2. Section 280.91 is amended by revising paragraph (d) to read as follows:
§ 280.91 Compliance dates.
* * * * *
(d) All petroleum UST owners not described in paragraphs (a), (b), or (c) of this section, excluding local government entities; December 31, 1993.