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53 FR 43322-43383 Wednesday, Oct. 26, 1988 40 CFR Parts 280 and 281, Underground Storage Tanks Containing Petroleum-Financial Responsibility Requirements and State Program Approval Objective; Final Rule--Preamble Section IV. Integration with Other EPA Programs

40 CFR Parts 280 and 281
(pp. 43362-43365)

IV. Integration with Other EPA Programs

A. Other Subtitle I Rulemakings

B. Leaking Underground Storage Tank (LUST) Trust Fund and Response Program

IV. Integration with Other EPA Programs

In promulgating the Subtitle I financial responsibility requirements, the Agency received a number of comments concerning integration of these requirements with other EPA programs, including other Subtitle I rulemakings and the LUST Trust Fund program.

A. Other Subtitle I Rulemakings

The proposal noted that certain requirements in other Subtitle I rulemakings were relevant to UST financial responsibility requirements. One set of relationships raised in the preamble was the influence of UST technical standards on the cost of corrective action and third-party liability, and on the amounts of aggregate coverage needed. Early detection or reduction in the probability of release will reduce the occurrence and extent of harm, thus influencing coverage. These relationships were the subject of numerous comments addressed in Section III.D of this preamble concerning aggregate levels of coverage.

Numerous comments raised other significant concerns about the relationship between the technical and financial responsibility requirements. Commenters were concerned about the impact providers of financial assurance would have on tank upgrading and replacement vis-a-vis the proposed phasing of requirements in the technical standards rule. For example, several state and local governments addressed the relationship between the content and timing of the proposed technical UST requirements and the financial requirements, primarily the securing of insurance. They thought that insurance would become more readily available and less expensive if tank inspection and certification were required first since insurance companies generally attached these conditions to coverage. However, they were surprised that the Agency's timeframe for bringing tanks into compliance with new tank standards was so long in view of the relationship between tank upgrading and inspection and availability of insurance.

Some went further, stating that the insurance industry via the financial responsibility requirements would be determining the technical tank standards, and that this incongruity was a major philosophical and logical flaw in the regulations. Rather, technical considerations should drive the construction and monitoring standards; then, with tougher tank standards, the financial responsibility requirements can be significantly curtailed. Furthermore, they argued that the heavy reliance placed by Congress and EPA on financial responsibility was not consistent with the goal of Subtitle I to prevent contamination of ground water. Instead, consideration should be given to expanding efforts in preventing contamination, which should be the objective of regulation, rather than environmental reclamation after the fact.

Commenters from the regulated community made approximately the same comment as the above, noting that meeting conditions imposed by insurers for tank tightness and leak detection will force tank owners and operators to meet technical standards when the financial responsibility requirements become effective, despite the later compliance schedules under the technical standards.

Drawing a blunter economic relationship between the financial responsibility and the technical requirements, these commenters stated that the money spent on insurance would be unavailable for tank upgrading where, they reasoned, it would be better spent. One commenter concluded that a conservative UST technical program and the state-of-the-art UST manufacturing and installation techniques currently available will substantially reduce, if not eliminate, the need for excessive financial responsibility in most cases.

Commenters from states and the regulated community argued that the timing and content of the technical and financial responsibility regulations will result in remediation, rather than prevention, being the dominant consideration behind UST control, and in the providers of financial assurance specifying the technical requirements for tank owners and operators as a condition for coverage. The states and owners and operators apparently differ on how each would correct this situation. The states would strengthen the technical requirements and reduce the financial responsibility requirements, whereas commenters from the regulated community would substitute state-of-the-art technical requirements for all financial assurance requirements.

EPA does not believe either correction is necessary. EPA does not agree with the assumption that the technical and financial responsibility rules are necessarily competing alternatives, and in its final rules has attempted to interrelate the two more clearly.

Congress specified that financial responsibility under §9003(c) and (d) of RCRA could be required at the discretion of the Administrator. SARA amended these provisions to mandate financial responsibility coverage and to provide a response program for petroleum UST releases. Congress did not present these amendments as alternatives to technical specifications for USTs. The sections of this comprehensive legislation cannot be viewed in isolation, but must be viewed as a whole; the overall goal of the legislation is to reduce the unacceptable risk to human health and the environment posed by thousands of UST leaks through prevention and assuring quick response when leaks occur.

Both the technical and financial responsibility requirements are preventive in nature. Neither would be totally preventive of harm to the public health and environment in itself, but in conjunction they will assure a high degree of protection. The direct control of leakage from USTs is obviously a preventive strategy, but is not foolproof. The funds assured through the various mechanisms permitted in this rulemaking establish a safety net that finances immediate and thorough corrective action when a release does occur and before the spread of contamination. If the provider of assurance also places demands on the owner or operator for technical controls, this strengthens protection of public health and the environment by increasing the incentive for tank upgrading and replacement as well as assuring funds for corrective action and third-party liability.

Phasing in compliance for the financial responsibility requirements brings this compliance schedule more into balance with the compliance schedule for the technical requirements. The Agency projects that many owners and operators will begin to comply with the technical standards early in the phased-in schedule for tank testing and upgrading or replacement. These tanks will represent low-risk USTs and thus financial assurance, particularly insurance, should be available for them at a lower cost than for pre-regulation tanks.

The Agency recognizes that there might be continuing concern because the timeframes for the two regulations are not the same; however, EPA cannot wait until all technical requirements are in place before imposing the financial responsibility rules. The result of further delay would be an unduly long period of time during which many members of the regulated community would have no financial assurance and could be unable to afford the cost of cleanup or liability. Moreover, longer delay would provide little incentive to states and insurance providers to develop mechanisms that will be needed to comply with the rule.

Several commenters claimed that the burden of complying with financial responsibility requirements would force owners and operators to move tanks aboveground and, thus, that the final rules should contain criteria that help the changeover to aboveground systems. For example, commenters suggested that an owner or operator's commitment to move tanks aboveground over a specified period of time should trigger an exemption from interim requirements for leak detection. Small businesses would be especially likely to install aboveground petroleum tanks in place of USTs. Because these tanks would pose significant hazards to facility personnel, local communities, and the environment, the commenters went on to urge the Agency to assess the consequences of this scenario before promulgating a final rule, and, meanwhile, to exempt small businesses not involved in petroleum marketing from financial responsibility requirements.

The Agency feels that moving tanks aboveground is not necessarily a problem if done in compliance with applicable state and local requirements. Any tank removed from underground to aboveground must meet the same closure requirements under Subpart G as any other tank that is taken out of service or permanently closed. No reasons have been put forth by commenters for why financial assurance requirements should be waived for owners and operators who intend to withdraw tanks from coverage under these regulations in the future. In addition, because numerous jurisdictions already stringently regulate or prohibit aboveground tanks, the Agency suspects that moving tanks will not present as appealing an alternative to leaving the tanks underground and providing mandated protection. Therefore, EPA has not provided an exemption from these requirements for tanks that may be moved aboveground.

Finally, two suggestions were submitted that would relate technical and financial requirements. One commenter suggested that a financial credit should be available to owners and operators who installed secondary containment with continuous interstitial monitoring, thereby minimizing the potential for leak occurrence and attendant cleanup costs and third-party damages. However, EPA has rejected the use of such credits, as discussed in Section III.D, above.

The second mechanism consists of a new federal fund, financed by a sales tax on petroleum products, to be collected and used by states as a state cleanup fund. One condition on the fund is that owners and operators would have to register tanks with the state environmental department within 90 days, with failure to comply triggering the need to supply proof of insurance and/or net worth as prescribed in the proposed financial responsibility regulations. However, the only available federal fund, the LUST Trust Fund under §9003(h), was created to provide cleanup of UST releases in particular circumstances. Congress did not authorize its use as a financial assurance mechanism. Rather the fund is intended to "stand behind" the owner or operator who has obtained financial responsibility in the required amounts. SARA Conference Report H. Rep. 99-962, 99th Cong., 2nd Sess. at 271.

B. Leaking Underground Storage Tank (LUST) Trust Fund and Response Program

Because the LUST Trust Fund and the financial responsibility program are closely related, the comments proposed a wide range of uses for the Fund. Several commenters stated that the final regulation should require states to use the Trust Fund to cover costs in excess of financial responsibility limits where the owner or operator has complied with all regulatory and financial responsibility requirements. In support, the commenters cited the Agency's discretion to forego full cost-recovery in Section 9003(h)(6)(B) and the potential incentive this provision might give owners and operators to secure financial responsibility and report leaks promptly, as reasons why the final rules should specify such a condition on use of the Trust Fund.

Several additional uses of the Trust Fund were suggested. One commenter encouraged EPA to allow use of Trust Fund monies in cases where a leak occurs at the site of an owner or operator who belongs to a class against which enforcement has been suspended. Another commenter suggested that the Trust Fund could be used to repay RRGs for payments for deductibles. To offset these costs to the Fund, the RRG would require protection beyond that required by the final regulations (e.g., secondary containment). Another commenter objected to the requirement that an insurance company must pay the deductible for a company in bankruptcy, because if the Trust Fund were used for such purposes, the U.S. Government would be a preferred creditor in bankruptcy, whereas an insurance company making the payment would be non-preferred.

A state commenter argued that Trust Fund money should not be given only to states with approved UST regulatory programs. The commenter stated that the Trust Fund and the regulatory program were created separately and should remain so; that the loss of Fund monies would place a major financial burden on states with marginal capability to fund the base program; and, furthermore, that the environment and public health would be jeopardized by not using the Trust Fund separately from the regulatory program, as designed by Congress. Mayors could tap into the Fund if EPA would require, as part of state program approval, that the state program provide direct municipal access to the Trust Fund for cleanup and oblige the state to address other local concerns. In addition, the commenter urged EPA to seek authority to use the Fund as a source of grants to develop local programs.

With respect to the numerous and varied uses of the LUST Trust Fund offered in the comments, as noted earlier, Congress has authorized use of the Fund to pay corrective action costs only under limited and specifically defined circumstances. After final regulations on the technical standards and financial responsibility go into effect, Fund monies can be used to pay for corrective action only in the following situations:

(1) An owner or operator who is required to undertake the corrective action and who is capable of carrying out corrective action properly does not exist or cannot be identified;

(2) Prompt action by the Administrator (or state) is necessary to protect human health and the environment;

(3) The financial resources of the owner or operator, including any UST financial assurance, are inadequate to pay the entire cost of the corrective action, and expenditures from the Fund are necessary to assure effective corrective action; or

(4) An owner or operator has failed or refused to comply with an order to perform corrective action.

Section 9003(h)(11) explicitly prohibits the expenditure of Fund monies for corrective action at any facility where the owner or operator has failed to maintain evidence of financial responsibility in the required amounts, except (l) in cases where there is no solvent owner or operator, or (2) in cases where immediate action is necessary to respond to an imminent and substantial endangerment of human health or the environment, or (3) to undertake an "allowable corrective action" to protect human health. (Section 9003(h)(5) defines these allowable corrective actions to include "temporary or permanent relocation of residents and alternative water supplies" and exposure assessments undertaken to protect human health.)

One result of these requirements is the preclusion of many of the alternative uses for the Fund suggested by commenters. Specifically, EPA does not agree that the state should be required to use the Trust Fund to cover costs in excess of the financial responsibility requirement. While the statute clearly allows the state to use the Trust Fund in such a situation, the decision should be made on a case-by-case basis at the discretion of the state. EPA also does not agree with commenters who suggested that the Trust Fund be used to (1) repay RRGs for payments for deductibles, and (2) to pay deductibles for companies in bankruptcy. Owners and operators are expected to maintain evidence of financial responsibility and pay the costs of their releases. Congress intended the Trust Fund to stand behind an owner or operator who obtained assurance to meet the financial responsibility requirement and, as indicated above, is to be used in instances where the cost of corrective action exceeds the level of financial responsibility required to be maintained.

In response to the comment that Trust Fund money should not be given to states that do not have approved UST regulatory programs, the Agency wants to emphasize that the negotiation of state cooperative agreements for use of the LUST Trust Fund is proceeding on a path separate from the approval of state programs. However, EPA has decided to make a link between the LUST Trust Fund and UST regulatory program to ensure that future contamination is minimized. After the effective date of today's final rule, a state's success in making reasonable progress toward submitting a completed application for state program approval may be grounds for increasing state access to the Trust Fund in fiscal year 1990 and thereafter.

In response to the commenters urging that the Trust Fund be made directly available to local governments, EPA's cooperative agreement process involves states negotiating arrangements for proper use, recovery, and accounting of Trust Fund money with EPA. The municipalities are not parties to these negotiations and will need to rely on the state to implement a sound and effective program for the use of the Trust Fund for corrective action. The statute does not provide for any direct EPA/municipality arrangement.

Finally, as discussed in Section III.W of this preamble, the Agency has decided to defer promulgation of final procedures for suspension of enforcement. Until such procedures are promulgated, the Agency does not intend to exercise its discretionary suspension of enforcement authority. At that time, the Agency will address the use of LUST Trust Fund monies to respond to releases from tanks whose owner or operator is a member of a class which has been granted a suspension of enforcement.

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