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UST Technical Compendium Category 6: Financial Responsibility (FR)

These interpretations and guidance are based on the 1988 UST regulation.

EPA revised the UST regulations in June 2015. Some of the information in this compendium may no longer apply because of those revisions.

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Question 1: Please clarify the term "occurrence." How is "occurrence" to be applied to leaking underground storage tank (UST) sites?
[September 1990 letter from the State of Virginia via Wayne Naylor, Region III]

Answer: Insurance industry practice is to consider all contamination discovered during a single site investigation to be one occurrence, regardless of the number of tanks or piping which may be leaking. On the other hand, leaks discovered at different times from the same UST system as a result of unrelated investigations would be considered two occurrences.
[October 15, 1990 memorandum to Mr. Naylor (PDF) (2 pp, 15K)]


Question 2: Can the American Red Cross use net assets instead of tangible net worth to comply with the financial responsibility self-insurance test? Also, the American Red Cross does not file its annual report with the Securities and Exchange Commission (SEC) or obtain a rating from Dun & Bradstreet. Can we use double audit opinions by Deloitte & Touche and the U.S. Army Audit Agency in lieu of the CPA opinion?
[October 4, 1990 letter from Christopher E. Mandel of the American Red Cross]

Answer: No, the Red Cross is unable to use the self insurance test because, as a non-profit, the financial statements are not developed according to Generally Accepted Accounting Principles which was assumed during development of the test. In addition, as required by Part 280 (b)(4)(i), the double audit would not ensure access by the implementing agency to the current financial statements in a format that allows for verification of compliance with the requirements of the financial self-test.
[Undated letter to Mr. Mandel (PDF) (2 pp, 14K)]


Question 3: Can New Jersey Transit, which is a public transit agency under State control, be classified as either a State Agency or a local governmental entity for purposes of the financial responsibility regulations?
[October 11, 1990 letter from Shirley DeLibero of New Jersey Transit]

Answer: New Jersey Transit does not qualify as a State agency under Part 280.90(c) because the debts of New Jersey Transit are not the debts of the State of New Jersey. New Jersey Transit qualifies as local government for purposes of the financial responsibility regulations: in the local government proposed rule 55 FR 24695 (June 18, 1990), the preamble mentions transit authorities as an example of special purpose local governments and suggests that this category includes districts created by State enactment 55 FR 24696).
[October 24, 1991 letter to Ms. DeLibero (PDF) (2 pp, 12K)]


Question 4: Please explain allowable limitations to on-site corrective action with regard to insurance policy form and content.
[January 11, 1991 letter from Craig Stanovich of the Braley and Wellington Insurance Agency Corp.]

Answer: As explained in 53 43322, 43348, on-site corrective action coverage is required in insurance policies which are to be used as mechanisms to demonstrate financial responsibility. Thus, coverage limited to "the existence of imminent and substantial danger to third required corrective action coverage. Exact wording as described in Part 280.97 is required in either an endorsement or a certificate of insurance.
[Jan 11, 1991 letter to Mr. Stanovich (PDF) (2 pp, 11K)]


Question 5: Please define corrective action in order to determine if insurance policies in West Virginia comply with the financial responsibility requirements.
[February 8, 1991 request for clarification from West Virginia via Region III]

Answer: EPA has never formally defined "corrective action" in our rules. However, Subpart F -- Release, Response and Corrective Action for UST Systems Containing Petroleum or Hazardous Substances -- is generally viewed as the corrective action section and explains required procedures.
[March 29, 1991 note to Mr. Naylor (PDF) (1 pg, 5K)]
[March 29, 1991 letter to Ms. Ehlert (PDF) (3 pp, 12K)]


Question 6: Can Wyoming exclude releases under 25 gallons from its regulatory program and still receive State fund approval? With this 25 gallon exclusion, would Wyoming qualify as an approved State program?
[March 1991 request for clarification of Wyoming's Statute by Region VIII regarding the definition of "release."]

Answer: Wyoming's definition of "release" may be acceptable in the context of State fund approval because the requirement to respond immediately to releases less than 25 gallon is found in Subpart E of the UST rules - Release Reporting, Investigation and Confirmation. It can be reasonably argued that the State fund is not obligated to cover these activities because they are not required to be performed under Subpart F.

This "release" definition, however, is not acceptable with regard to State program approval because the Federal definition of release (Part 280.12) is identical to Wyoming's definition except for the 25 gallon exclusion in the stature. While reporting spills is not required, Subpart E of EPA's regulations requires spills of any size to be immediately contained and cleaned. Based on this discussion, we believe that Wyoming's definition of release would be less stringent than the Federal program allows.
[March 29, 1991 letter to Ms. Ehlert (PDF) (3 pp, 12K)]


Question 7: Please clarify the definitions of tangible net worth and net working capital. Also, are non-profit organizations subject to the EPA financial responsibility regulations?
[March 15, 1989 letter from Christopher J. Franki of the Insurance Buyer's Council, Inc.]

Answer: EPA defines tangible net worth as the tangible assets that remain after deducting liabilities; such assets do not include intangibles such as goodwill and rights to patents or royalties. The standard definition of working capital is current assets minus current liabilities. Unused borrowing capacity is not considered part of the standard definition of working capital.

The non-profit community service corporation that your firm represents is considered a non-marketer. If the non-profit organization can meet the criteria in the self-insurance test, they can use that mechanism to comply with the financial responsibility requirements. Otherwise, the other mechanisms could be used to demonstrate compliance such as a State fund or private insurance. The local government financial test is targeted to general purpose and special purpose local governments and may or may not apply to non-profit organizations.
[April 6, 1989 letter to Mr. Franki (PDF) (2 pp, 11K)]


Question 8: Please clarify the compliance date for non-marketers that do not report to Dun & Bradstreet. What does it mean to "report to Dun & Bradstreet?
[December 28, 1988 letter from Dean Ziegel of Rivkin, Radler, Dunne & Bayh]

Answer: According to Part 280.91(d), privately-held non-marketers owning USTs which do not report to SEC, D&B, etc. are considered to be in Category 4 for financial responsibility compliance purposes. A firm "reports" to Dun & Bradstreet if the firm provides information about the firm's net worth or other information that can be used to determine net worth, or if Dun & Bradstreet publishes a rating for the firm.
[April 6, 1989 letter to Mr. Ziegel (PDF) (1 pg, 10K)]


Question 9:  Can Region VII release in excess of $2 million held in a fully funded trust fund that is partially funded with marketable securities?  How should the marketable securities be valued?
[April 1, 1991 memo from Region VII regarding Fisca Oil Co.]

Answer: The Federal financial responsibility regulations (Part 280.102) state that "if the value of the trust fund is greater than the required amount of coverage, the owner or operator may submit a written request to the Director of the implementing agency for release of the excess." Upon release of such funds, in the case of a fully funded trust fund that is in full or in part funded by marketable securities, those securities should be valued at the lower of cost or market value until such time as the loss or gain is realized.
[March 28, 1991 memorandum to Mr. McLaughlin (PDF) (1 pg, 9K)]
[April 01, 1991 memorandum to Regional Program Managers (PDF) (1 pg, 9K)]

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