55 FR 46022-46025 Wednesday, Oct. 31, 1990 Underground Storage Tanks Containing Petroleum; Financial Responsibility Requirements
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 280 and 281
Underground Storage Tanks Containing Petroleum;
Financial Responsibility Requirements
Protection Agency (EPA).
ACTION: Final rule.
SUMMARY: The Environmental Protection Agency (EPA) is today publishing a final rule to amend the financial responsibility regulations promulgated on October 26, 1988 (53 FR 43322) for underground storage tanks (USTS) containing petroleum. Specifically, EPA is modifying the compliance dates under 40 CFR 280.91(d). Under the modifications, all petroleum marketing firms owning 1 to 12 USTs (or fewer than 100 USTs at one facility) and nonmarketers whose net worth is less than $20 million will be required to comply with the requirements of 40 CFR part 280 subpart H-Financial Responsibility-as of October 26, 1991. Local government entities will be required to comply with these requirements one year from the date of publication of final regulations that will provide additional mechanisms that they may use to comply with financial responsibility requirements for USTs containing petroleum in 40 CFR part 280. These modifications establish two new deadlines, both extended from the original date of October 26, 1990. The amendments published today will provide additional time for the development of financial assurance mechanisms (especially state assurance funds and mechanisms for use by local governments) to enable these UST owners and operators to comply. The Agency is also modifying 40 CFR part 281.37(b) to allow approved state programs a comparable amount of time during which they must phase in their financial responsibility requirements.
DATES: The amendments to 40 CFR part 280,281 contained in this rulemaking are effective October 31, 1990.
ADDRESSES: The final rule, the proposed rule, and EPA's responses to comments on this rulemaking may be inspected in the public docket, located in room 2427 (Mall), U.S. Environmental Protection Agency, 401 M Street SW., Washington, DC 20460. The docket is open from 9 a.m. to 4 p.m., Monday through Friday, excluding Federal holidays.
FOR FURTHER INFORMATION CONTACT: The RCRA/Superfund Hotline at (800)424-9346 (toll free) or (202) 382-3000 in Washington, DC.
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). (These requirements are referred hereinafter as "the final rule.") 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 (or fewer than l00 USTs at one facility), local government entities, and nonmarketers 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 in the final rule was to provide the time necessary for providers of financial assurance mechanisms (including private insurance companies and States intending to establish state assurance funds) to develop new policies and programs or conform their policies and programs to EPA requirements. (See 53 FR 43324.) The final rule required those organizations with the greatest ability to comply to obtain financial assurance first. Others, particularly smaller businesses and local governments, were allowed more time to obtain coverage. EPA has since proposed additional mechanisms for use by local government entities to comply with the financial responsibility requirements (55 FR 24692, June 18, 1990).
Since October 1988, EPA has monitored 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 were becoming available to satisfy the needs of the regulated community. Based on this ongoing review, EPA believes that tank owners required to comply by October 26, 1990 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. On July 6, 1990, EPA published a proposed rule to extend the compliance deadline for these owners and operators by one year and invited comments on the proposed action (55 FR 27837).
After reviewing the comments submitted in response
to the proposed rule, EPA is now extending the compliance date
for owners and operators of 1 to 12 USTS, or fewer than l00 USTs
at one facility, and nonmarketers whose net worth is less than
$20 million from October 26,1990 to October 26, 1991. EPA is also
deferring the compliance date for local government entities from
October 26, 1990 to one year from the date of publication of final
regulations for additional mechanisms for use by local government
entities to comply with financial responsibility requirements
for USTs containing petroleum in 40 CFR part 280. Publication
of a final rule is now expected during the summer of 1991. The
Agency believes that these extensions will provide adequate time
for tank owners and operators to obtain assurance. EPA is also
modifying the State Program Approval Objective (40 CFR part 281)
to allow state programs approved to administer and enforce UST
programs to modify their regulations to match the new federal
These regulations are issued under the authority
of sections 2002, 9001, 9002, 9003, 9004, 9005, 9006, 9007, 9009
of the Solid Waste Disposal Act, as amended (42 U.S.C. 6912, 6991,
6991a, 6991b, 6991c 6991d, 699le, 6991f, and 6991h).
The financial responsibility regulations promulgated on October 26, 1988 (53 FR 43322) included a phased schedule for compliance by UST owners and operators. When devising the phased compliance approach, the Agency wanted to achieve the best balance between the need to ensure financial capability for cleaning up or redressing UST releases and the need to allow necessary time 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. The Agency established four categories for purposes of setting compliance deadlines. Owners or operators in Category I (petroleum marketers owning or operating 1,000 or more USTs and non-marketers 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. Of the remaining tank owners and operators, those in Category II (petroleum marketers with l00 to 999 USTS) were projected to be the most able to obtain insurance; some of them were also expected to qualify as selfinsurers. These marketers were required to comply by October 26, 1989. Owners or operators in Category III (petroleum marketers owning 13 to 99 USTs at more than one facility) which were estimated to be less likely to be able to obtain insurance than members of Category 11 compliance group, were originally required to comply by April 26, 1990; on May 2, 1990 the Agency published an Interim Final Rule (40 FR 18566) extending the compliance date of April 26, 1991. Owners or operators in Category IV (petroleum marketers owning or operating fewer than 13 USTs or owning or operating a single facility with fewer than 100 USTS, and UST owners and operators, including local government entities, that were not petroleum marketers) were required to comply by October 26, 1990. This group was expected to rely primarily on state assurance funds for compliance.
Through monitoring the development of financial assurance mechanisms, and as the Agency has learned more about the way insurers operate in the UST insurance market, EPA now believes that the original compliance date for owners or operators in Category IV did not allow adequate time for compliance. When devising the original phased compliance schedule, the Agency expected that members of this compliance group would rely on insurance and State funds. The Agency had believed that 24 months from promulgation of the final rule would provide adequate time for owners and operators to upgrade their USTs to meet insurers' requirements, for States to develop and submit funds to EPA, and for EPA to approve those funds meeting its criteria. Since promulgation of the final rule, however, EPA has learned that UST owners and operators require additional time to comply with conditions imposed by the insurance industry. Some of these conditions include having tanks younger than 15 years of age, a clean site, 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, 1990 and thus would be required to seek an alternative financial assurance mechanism.
Consequently, the Agency believes that more members of this compliance group than the Agency had originally projected must rely on State assurance funds and other mechanisms, rather than on insurance, to demonstrate compliance with the financial responsibility requirements. In order for owners and operators to rely on State assurance funds as compliance mechanisms, States must submit their funds to EPA. Although owners and operators are deemed to be in compliance when the State funds are submitted, the Agency has not considered submitted funds when determining availability, because the funds ultimately could be disapproved. To date, fourteen State assurance funds have been approved by EPA to serve as compliance mechanisms. Eleven more States have submitted funds and some are in the process of making modifications necessary for approval. The remaining States either have not submitted their funds to EPA or have not yet developed assurance funds. Since many of the members of this compliance group must rely on State assurance funds to comply with the requirements, additional time is needed to allow States to develop, submit, and receive approval for the funds.
EPA is also in the process of developing several new mechanisms, including a self-insurance test, that could be used by local governments to meet the financial responsibility requirements. The Agency proposed some additional financial responsibility mechanisms on June 18, 1990 (55 FR 24692) for use by local governments. The Agency is in the process of responding to comments on the proposed rule and plans to promulgate a final rule in the summer of 1991. EPA believes that local governments will need additional time to comply with financial responsibility requirements, particularly any of the new mechanisms that EPA has proposed become final and local governments use them.
Today's rule accommodates these unanticipated delays in the development of the private insurance market, State funds, and financial responsibility mechanisms by extending the compliance deadline for UST owners and operators in Category IV. Marketers owning or operating 1 to 12 USTs (or fewer than 100 USTs at a single facility) and non-marketers with net worth of less than $20 million must comply by October 26, 1991. Local government owners or operators must comply within one year of promulgation of additional mechanisms for meeting the financial responsibility requirements. EPA proposed several new mechanisms on June 18, 1990 (55 FR 24692). Barring unanticipated delays, EPA now expects to promulgate a final rule during the summer of 1991.
The Agency reviews State UST programs based on criteria
established in 40 CFR 281 and may approve them to operate in lieu
of the Federal program if the State program is no less stringent
than the requirements set out at 9004(a)(1-8) and the program
provides for adequate enforcement of compliance with the requirements.
Under 40 CFR 281.37(b), State programs must phase in their financial
responsibility requirements within 21 months of the effective
date of the Federal financial responsibility requirements, which
is considered to be October 26, 1988. In the absence of an amendment
to part 281, the effect of today's modifications to the final
compliance date would be to require that State programs be more
stringent than the Federal rules by requiring compliance with
financial responsibility requirements sooner than the amended
Federal Regulations. Consequently, the Agency is also amending
40 CFR 281.37 so that approved State programs may phase in their
financial responsibility requirements on a schedule comparable
to the Federal phase-in, as modified under today's amendment to
40 CFR 280.91. These changes do not require States to change any
existing compliance schedule, because States may have more stringent
Ill. Analysis of Today's Rule
On July 6,1990 the Agency proposed to amend the financial responsibility compliance dates under 40 CFR 280.91(d) and the schedule for phase-in of financial responsibility requirements for approved State programs under 40 CFR 281.37(b) (55 FR 27837). The Agency provided a 30-day comment period. The following section of the preamble describes the final rule, some of the major comments that were made on the proposed rule, and the rationale for the changes. A Comment/Response Document ("Summary of Comments and EPA's Response to Comments on the July 6, 1990, Proposed Amendments to the Financial Responsibility Rule for Petroleum Underground Storage Tanks") containing a detailed summary of all comments on the proposed rule and the Agency's responses to those comments has been placed in the public docket.
Today's rule extends the financial responsibility
compliance deadline for UST owners or operators in Category IV
of the final rule. Petroleum marketers owning 1 to 12 USTS, or
owning fewer than l00 USTS at only one facility, and non-marketers
whose net worth is less than $20 million must comply by one year
from the previous date of October 26, 1990. Local government entities
are given an additional period of time to comply and are now required
to demonstrate compliance within one year from the date of promulgation
of additional mechanisms for use by local government entities
to comply with financial responsibility requirements for USTs
containing petroleum. Additional mechanisms were proposed on June
18, 1990, 55 FR 24692. The Agency believes that the extensions
promulgated in today's rule will allow sufficient time for these
UST owners to come into compliance. Specifically, the rule will
have four effects: (1) Owners and operators will have additional
time to meet insurers' standards, (2) States will have additional
time to submit their state assurance funds to EPA for approval,
(3) the Agency will have adequate time to complete work on alternative
compliance mechanisms for local governments, and (4) local governments
will have additional time to select and implement a compliance
mechanism. Thus owners and operators will be able to make much
greater use of all these mechanisms to comply with the financial
Comments on EPA's proposed rule were generally supportive of action to extend the compliance deadline for UST owners and operators in Category IV by one year, although some requested a longer extension and one supported a shorter extension. The major concerns expressed by commenters include the limited availability of private insurance, the lack of approved state assurance funds, the lack of financial responsibility mechanisms available to local governments, and the increasing cost of compliance with other regulatory requirements.
Several commenters indicated that the high cost, strict qualification requirements, and limited supply of private insurance providers are critically hampering owners and operators efforts to obtain pollution liability insurance, EPA acknowledges the validity of many of these points which justify today's extension of the original October 26, 1990 compliance deadline.
A number of commenters agreed that the proposed extension of the Category IV financial responsibility compliance deadline will afford the insurance industry the time necessary to respond to the needs of UST owners or operators with few USTs or those not engaged in petroleum marketing. A few commenters, however, suggested that EPA re-evaluate extending the compliance deadline beyond the proposed date of October 26, 1991. EPA believes that, barring any severe contraction of the pollution liability insurance market or slowdown in the progress of approval of state funds, one additional year will provide sufficient time for Category IV owners or operators, excluding local government entities, to obtain financial assurance and come into compliance. Currently, EPA is aware of at least 12 companies providing UST insurance to owners and operators, four of which offer policies in most or all States. In addition, another recently entered the market and is expected eventually to write policies across the country. Furthermore, 14 States currently have approved funds and another 11 States have funds that are under review and therefore tentatively approved. EPA understands that an additional 11 States have passed legislation establishing state funds, and that almost all remaining States are considering or have considered such legislation. EPA expects that both the availability of private insurance and the number of approved state funds will be higher by this time next year. Nonetheless, although EPA expects that the availability of private assurance mechanisms and state funds will improve sufficiently to accommodate Category IV owners or operators, EPA will continue to monitor the availability of assurance mechanisms.
The majority of the commenters conceded that state assurance funds are an increasingly important financial responsibility mechanism, and, likewise, supported the proposed extension of the financial responsibility compliance deadline. The Agency's primary intent in proposing the extend the financial responsibility compliance deadline for Category IV owners and operators was to provide additional time for the development of financial assurance mechanisms, particularly state assurance funds, to enable this group to comply. Toward this end, 14 state funds have been approved and another 11 funds have received tentative approval while they are under review. EPA continues to encourage States to enact trust fund legislation and submit state funds for review.
One commenter expressed concern that the approval of funds is occurring slowly. The commenter claims that EPA proceeds much too slowly on state assurance fund approval to allowmarketers to use them as a financial responsibility mechanism. The commenter further indicated that some States have not been willing to consider enacting trust fund legislation to date and may never do so. For those States, the commenter believes that the existence of a deadline extension will have no affect on the State's willingness to develop a State assurance fund mechanism.
With respect to these comments, EPA believes that there is noticeable progress in the approval of state funds. Twenty-five States have submitted funds to EPA for review, and are providing at least temporary coverage for eligible owners and operators; fourteen of these States' funds have been formally approved by the Agency. EPA expects that more States will develop and submit funds for approval, and that more state funds will receive approval in the coming year. The rate of approval of these assurance mechanisms, however, is not based solely on the time necessary for EPA to approve funds, but it is also contingent on the time it takes for States to develop and submit funds to EPA for review. While the Agency plans to continue supporting States in their efforts to develop and implement assurance funds, EPA cannot guarantee that all States will choose to develop funds. Twelve States with legislation authorizing funds have not yet submitted them to EPA for review. It is EPA's understanding, however, that state fund legislation is or has been under consideration in virtually all other States. EPA believes that the extension of the compliance deadline will allow those States actively considering funds to develop and submit them to EPA for approval. Nevertheless, States are not required to establish assurance programs, and EPA does not have control over whether States develop or submit funds.
One commenter supported an extension of EPA's financial responsibility compliance deadline for local governments, claiming that EPA needs to allow itself sufficient time to develop financial responsibility mechanisms for local governments. However, the commenter maintains that the proposed compliance date of October 26, 1991 does not allow local governments sufficient time to review, select, and implement a sound compliance program. It was argued that the additional mechanism proposed by EPA for local governments, such as the creation of a dedicated fund, would require at least one full budget cycle to implement. The commenter, therefore, requests EPA to further extend the compliance date by one year from the date of publication of a final financial responsibility rule for local governments.
The Agency agrees with the commenter that additional time may be necessary for local governments to comply with the financial responsibility requirements, particularly if they are to use any of the new mechanisms that EPA may promulgate. The Agency has concluded that the budgetary constraints under which local governments operate, and the current timetable for promulgating a final municipal test of self-assurance, justify granting them an exception to the deadline that will apply to the other members of this compliance group. The final rule, therefore, incorporates the commenter's suggestion for extending the compliance deadline for local governments by one year from the date of publication of a final regulations for additional mechanisms for use by local government entities to comply with financial responsibility requirements for USTs containing petroleum.
One commenter suggested extending the compliance date to December 22, 1991, remarking that the incremental UST regulatory compliance costs, in addition to costs imposed by other statutory mandates, make the financial responsibility requirements truly burdensome. The commenter stated that Reid vapor pressure controls, Stage II vapor recovery, community right-to-know and toxic reporting requirements, drug testing, and hazardous materials transportation programs are all imposing significant burdens on the independent segment of the petroleum marketing industry. The commenter stated that extending the compliance date to December 22, 1991 would alleviate some of the burden.
The Agency acknowledges that all new regulations
have incremental costs. However, Congress gave no indication that
other regulatory costs were to be considered in determining the
dates for demonstrating financial responsibility compliance. Although
complying with the financial responsibility requirements may pose
an incremental burden for some owners or operators, EPA is not
aware of any evidence that the additional two-month extension
suggested will provide any additional significant relief over
the one-year extension proposed.
IV. Economic and Regulatory Impacts
The Regulatory Flexibility Act (5 U.S.C. 601, et seq.) 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 have a significant economic impact on a substantial number of small entities. The extension of the compliance date will provide regulatory relief to members of the Category IV compliance group by allowing them the additional time necessary to achieve compliance 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 will not have a significant economic impact on a substantial number of small entities.
The information collection requirements of EPA's UST financial responsibility rule have been previously approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.) and have been assigned OMB Control Number 2050-0066. Because today's rule does not require collection of any information or change the paperwork burden, EPA has not amended the estimate of burden.
If you wish to submit comments regarding any aspect
of this collection of information, including suggestions for reducing
the burden, or if you would like a copy of the information collection
request (please reference ICR #1359), contact Rick Westlund, Information
Policy Branch, PM-223, U.S. Environmental Protection Agency, 401
M Street, SW., Washington, DC 20460 (202-382-2745); and the Desk
Officer for Underground Storage Tanks, Office of Management and
Budget, Washington, DC 20503.
List of Subjects in 40 CFR 280 and 281
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
Dated: October 25, 1990.
For the reasons set out in the preamble, parts 280
and 281 of title 40 of the Code of Federal Regulations are amended
as set forth below.
PART 280 - TECHNICAL STANDARDS AND CORRECTIVE
ACTION REQUIREMENTS FOR OWNERS AND OPERATORS OF UNDERGROUND STORAGE
1. The authority citation for part 280 is revised
to read as follows:
Authority: 42 U.S.C. 6912,
6991, 6991a, 6991b, 6991c, 6991d, 699le, 6991f, and 6991h.
2. Section 280.91 is amended by revising paragraph
(d) and by adding paragraph (e) 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; October 26, 1991.
(e) Alllocal government entities; one year
from the date of promulgation of additional mechanisms for use
by local government entities to comply with financial responsibility
requirements for underground storage tanks containing petroleum.
PART 281 - APPROVAL OF STATE UNDERGROUND STORAGE
4. The authority citation for part 281 continues
to read as follows:
Authority: Secs. 2002,
9004, 9005, 9006 of the Solid Waste Disposal Act, as amended by
the Resource Conservation and Recovery Act of 1976, as amended
(42 U.S.C. 6912, 6991 (c), 6991(d), 6991(e).
5. Section 281.37 is amended by revising paragraph
(b) to read as follows:
§ 281. 37 Financial responsibility for UST
systems containing petroleum.
(b) Phase-in of requirements. Financial responsibility
requirements for petroleum UST systems must, at a minimum, be
scheduled to be applied at all UST systems on an orderly schedule
that completes a phase-in of the financial responsibility requirements
within the time allowed in the Federal regulations under 40 CFR