[Federal Register Volume 59, Number 196 (Wednesday, October 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25063]
[[Page Unknown]]
[Federal Register: October 12, 1994]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 258, 264, and 265
[FRL-5087-7]
RIN 2050-A77
Financial Assurance Mechanisms Corporate Owners and Operators of
Municipal Solid Waste Landfill Facilities and Hazardous Waste
Treatment, Storage, and Disposal Facilities
AGENCY: Environmental Protection Agency.
ACTION: Proposed rule.
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SUMMARY: The Environmental Protection Agency (EPA) proposes to amend
the financial assurance regulations under the Resource Conservation and
Recovery Act in two program areas. First, the Agency proposes to add
two financial assurance mechanisms to those currently available to
assure closure, post-closure, or corrective action costs associated
with municipal solid waste landfills under subtitle D: (1) a financial
test for use by corporate owners and operators, and (2) a guarantee for
use by firms that wish to guarantee the costs for an owner or operator.
Second, the Agency proposes to modify the domestic asset component of
the corporate financial test for hazardous waste treatment, storage,
and disposal facilities under subtitle C.
DATES: Comments on this proposed rule must be received on or postmarked
on or before December 12, 1994.
ADDRESSES: Written comments on this proposal should be addressed to the
docket clerk at the following address: U.S. Environmental Protection
Agency, RCRA Docket (OS-305), 401 M Street SW., Washington, DC 20460.
Commenters should send one original and two copies and place the docket
number (F-93-FTMP-FFFFF) in the comments. The docket is open from 9
a.m. to 4 p.m., Monday through Friday, except for Federal holidays.
Docket materials may be reviewed by appointment by calling (202) 260-
9327. Copies of docket material may be made at no cost, with a maximum
of 100 pages of material from any one regulatory docket. Additional
copies are $0.15 per page.
FOR FURTHER INFORMATION CONTACT: RCRA Hotline at 1-800-424-9346 (in
Washington, D.C., call (703) 920-9810), or Dale Ruhter (703) 308-8192,
Office of Solid Waste, U.S. Environmental Protection Agency, 401 M
Street SW., Washington, DC 20460.
SUPPLEMENTARY INFORMATION:
Preamble Outline
I. Authority
II. Background
III. Summary of Proposed Rule
IV. Section-by-Section Analysis of Proposed Subtitle D Provisions
A. Corporate Financial Test (section 258.74(e))
B. Corporate Guarantee (section 258.74(g))
C. Calculation of Obligations
V. Domestic Asset Requirement of the Subtitle C Corporate Financial
Test. (sections 264.143, 264.145, 264.147, 265.143, 265.145, and
265.147)
VI. Analysis Supporting this Proposed Rule
A. Development of the Subtitle C Corporate Financial Test
B. The Subtitle D Corporate Financial Test Analysis
VII. National Solid Wastes Management Association Rulemaking
Petition
A. Discussion of the Petition
B. The Meridian Test
C. Request for Comment on Allowing Owners and Operators to
Discount Costs
VIII. State Program Approval
IX. Implementation
X. State Authorization
XI. Economic and Regulatory Impacts
A. Executive Order 12866
B. Regulatory Flexibility Act
C. Paperwork Reduction Act
I. Authority
These amendments to part 258 are proposed under the authority of
sections 1008, 4004, and 4010 of the Resource Conservation and Recovery
Act (RCRA), as amended, 42 U.S.C. 6907, 6944, and 6949a. The amendments
to parts 264 and 265 are proposed under RCRA sections 3004 and 3005.
II. Background
On October 9, 1991, the Agency promulgated revised criteria for
municipal solid waste landfills (MSWLFs), which established minimum
Federal standards to assure that MSWLFs are designed and managed in a
manner that is protective of human health and the environment, taking
into account the practical capability of the MSWLFs (see 56 FR 50978).
The minimum Federal standards include location restrictions, facility
design and operating criteria, groundwater monitoring, corrective
action, financial assurance, closure, and post-closure care
requirements.
The Agency proposed the MSWLF criteria, including financial
assurance requirements, on August 30, 1988 (see 53 FR 33314). The
purpose of the financial assurance requirements of the MSWLF criteria
was to assure that adequate funds will be readily available to cover
the costs of closure, post-closure care, and corrective action
associated with MSWLFs. The Agency believes that these financial
assurance provisions are an important part of the MSWLF criteria for
two reasons. First, when an owner or operator does not have funds
readily available to address the environmental needs at a facility,
delays in addressing those needs can result. Second, if the owner or
operator does not have funds to address environmental needs at its
facilities, those needs are typically addressed under federal or state
cleanup authorities, rather than by the party responsible for the
facility.
In the August 30, 1988 proposal, rather than propose specific
financial assurance mechanisms, the Agency proposed a financial
assurance performance standard. The Agency solicited public comment on
this performance standard approach and, at the same time, requested
comment on whether the Agency should develop financial test mechanisms
for use by local governments and corporations.
Commenters on the proposed rule argued that the proposed
performance standard lacked sufficient detail to guide States in the
development and implementation of requirements with any consistency
among States, and that the Agency should develop specific mechanisms
that could be used to demonstrate financial assurance. Commenters also
supported the development of a local government financial test and a
corporate financial test.
In response to comment, the Agency promulgated several specific
financial mechanisms in the October 9, 1991, final rule. Those
mechanisms include trust funds, surety bonds, letters of credit,
insurance, and State assumptions of responsibility (Sec. 258.74). In
addition, to retain States' flexibility in implementing the subtitle D
program, the Agency promulgated the financial assurance performance
standard of Sec. 258.74, which allows approved States to use any State-
approved mechanism that meets that performance standard.
Commenters on the August 30, 1988, proposal also supported the
development of financial tests for local governments and for
corporations. The Agency agreed with commenters but, at the time the
final MSWLF criteria were promulgated, the Agency had not completed the
analyses necessary to propose those financial tests. Thus, in the
October 9, 1991, preamble, the Agency announced its intention to
develop both a local government and corporate financial test in advance
of the effective date of the financial assurance provisions. The Agency
then proceeded to conduct the necessary analysis, and develop a local
government and corporate financial test for MSWLF owners and operators.
To allow time to develop financial tests, the Agency promulgated an
effective date of April 9, 1994, for the financial assurance provisions
in the July 1, 1991 notice. In doing so, the Agency believed it had
allowed adequate time to promulgate the local government and corporate
financial tests in advance of the effective date. However, those
financial tests are taking longer to develop than the Agency originally
anticipated. As the April 1994, deadline approached, the Agency
recognized that it would be unable to promulgate final financial tests
by that time. Thus, on October 11, 1993, the Agency extended the
effective date of the financial assurance provisions until April 9,
1995 (see 58 FR 51536) to allow additional time to develop the
financial tests.
The Agency proposed a local government financial test on December
27, 1993 (see 58 FR 68353); this document proposes the corporate
financial test for MSWLFs.
III. Summary of Proposed Rule
This proposed rule would add a corporate financial test to the
financial assurance mechanisms currently available to owners and
operators of subtitle D MSWLFs. It also would allow corporations to use
that financial test to guarantee the costs of an owner or operator. It
would allow owners and operators to use a combination of financial
assurance mechanisms, including this financial test, to assure the
costs associated with their facilities. Finally, this rule proposes
revisions to one portion of the subtitle C corporate financial test,
specifically, to the domestic asset requirement of that test.
Discussion of the proposed revisions to the subtitle D provisions can
be found in sections IV-V of this preamble. A discussion of the
proposed revisions to the subtitle C corporate financial test can be
found in section IX.
IV. Section-by-Section Analysis of Proposed Subtitle D Provisions
A. Corporate Financial Test (Section 258.74(e))
This proposed corporate financial test includes a financial
component and a domestic asset component. Owners and operators that
meet the requirements of the financial test also must comply with
certain recordkeeping and reporting requirements. Each requirement is
described below.
1. Financial Component (Section 258.74(e)(1))
The financial component is designed to measure viability of the
owner or operator, based on its current financial condition. To satisfy
the financial component, a firm must have a minimum tangible net worth
of $10 million plus the costs it seeks to assure (e.g., closure, post-
closure, corrective action), either satisfy a bond rating requirement,
or pass one of two financial ratios, and satisfy a domestic asset
requirement.
a. Minimum Size Requirement. In Sec. 258.74(e)(1)(ii), the Agency
is proposing to require firms using the financial test to have a
tangible net worth at least equal to the sum of the costs they seek to
assure through a financial test plus $10 million. Under proposed
Sec. 258.74 (e)(3), the costs an owner or operator seeks to assure are
equal to the current cost estimates for closure, post-closure care, and
corrective action or the sum of such costs to be covered, and any other
environmental obligations assured by a financial test. The owner or
operator must include cost estimates required for municipal solid waste
management facilities under this part, as well as cost estimates
required for the following environmental obligations, if it assures
them through a financial test: obligations associated with UIC
facilities under 40 CFR 144.62, petroleum underground storage tank
facilities under 40 CFR part 280, PCB storage facilities under 40 CFR
part 761, and hazardous waste treatment, storage, and disposal
facilities under 40 CFR parts 264 and 265.
The Agency is proposing this minimum tangible net worth requirement
to ensure that the costs of closure, post-closure care, or corrective
action do not force a firm into bankruptcy. Further, an analysis of a
sample of bankrupt firms conducted by the Agency demonstrated that
firms with less than $10 million in net worth failed four times more
frequently than firms with greater than $10 million in tangible net
worth.
As a result, the Agency believes that this minimum net worth should
be required as an initial screen for corporations in demonstrating
financial responsibility for the very large costs of closure, post-
closure care, and corrective action. The Agency then combined this
requirement with other financial criteria to develop the financial test
described in this proposed rule. A more detailed discussion of this
analysis can be found in Section V. of this preamble and the Background
Document developed in support of this rulemaking.
b. Bond Rating/Financial Ratio Alternatives. The Agency is
proposing to allow firms that meet the minimum size requirement to
satisfy the remaining requirements of the financial test in one of two
ways.
First, under the proposed Sec. 258.74(e)(1)(i)(A), a firm could
satisfy the financial component if its most recent bond rating is
investment grade, that is, Aaa, Aa, A or Baa, as issued by Moody's, or
AAA, AA, A, or BBB, as issued by Standard and Poor's. The Agency is
proposing this option because it believes that a firm's bond rating
incorporates an evaluation of a firm's financial management practices.
Bond ratings reflect the expert opinion of bond rating services, which
are organizations that have established credibility in the financial
community for their assessments of firm financial conditions. An
analysis of bond ratings showed that bond ratings have been a good
indicator of firm defaults, and that few firms with investment grade
ratings have in fact gone bankrupt.
The proposal to include a bond rating option in this financial test
is consistent with other Agency programs. For example, the regulations
governing TSDFs under 40 CFR parts 264 and 265, petroleum underground
storage tanks under 40 CFR part 280, UIC facilities under 40 CFR part
144, and PCB commercial storage facilities under 40 CFR part 761 all
consider bond ratings as part of their financial tests. The local
government financial test for owners and operators of MSWLFs under 40
CFR part 258, which was proposed on December 27, 1993 (58 FR 68353)
also would allow a bond rating option.
Second, to provide the regulated community with flexibility in
meeting the financial test, the Agency is also proposing a ratio
alternative to the bond rating. In order to satisfy the ratio
requirement, a firm would have to have either:
a leverage ratio of less than 1.5 based on the ratio of
total liabilities to tangible net worth. This ratio attempts to show
the degree to which a firm is leveraged. This particular measure shows
the relationship between total liabilities to tangible net worth. Firms
with higher values for this ratio are more likely to suffer net losses
than those with lower values; or
a profitability ratio of greater than 0.10 based on the
ratio of the sum of net income plus depreciation, depletion, and
amortization, minus $10 million, to total liabilities. This ratio
attempts to show cash-flow from operations relative to the firm's total
liabilities. Firms with higher values for this measure are more likely
to meet their obligations than those firms with lower values.
The Agency selected these two specific financial ratios with their
associated thresholds based on their ability to differentiate between
viable and bankrupt firms. The Agency's analysis demonstrated that
leverage ratios (i.e., total liabilities/net worth) and profitability
ratios (i.e., cash flow/total liabilities) are particularly good
discriminators of financial health. The Agency selected as thresholds
for these ratios values that, together with the other financial test
criteria, minimized the costs associated with demonstrating financial
responsibility. A more detailed discussion of this analysis can be
found in Section V. of this preamble and the Background Document
developed in support of this rulemaking.
c. Domestic Assets Requirement. In Sec. 258.74(e)(1)(iii), the
Agency is proposing that all firms using the financial test have assets
in the United States at least equal to the costs they seek to assure
through a financial test. (see paragraph a. of this section, ``Minimum
Size Requirement,'' for more discussion on assured costs) The domestic
asset requirement is intended to ensure that the Agency has access to
funds in the event of bankruptcy. Without this requirement, the Agency
could experience substantial difficulty in accessing funds of bankrupt
firms that have their assets outside of the United States. The Agency
recognizes that this minimum assets requirement may be too low and
solicits comment on an assets requirement that provides the Agency with
adequate assurance that funds will be available in the event that an
owner or operator enters bankruptcy, but does not overly burden the
regulated community.
2. Recordkeeping and Reporting Requirements (Section 258.74(e)(2)
The Agency is proposing that after a firm has determined that it is
eligible to use this corporate financial test, it would be required to
document its use of the test by placing three items (discussed below)
in the facility operating record. These requirements would help ensure
that the self-implementing aspect of the proposed test requirements
have been met. In the case of closure and post-closure care, these
items would have to be placed in the operating record prior to the
initial receipt of waste or the effective date of the final rule,
whichever is later, or in the case of corrective action, no later than
120 days following selection of a corrective action remedy. This
proposed requirement, in the case of corrective action remedy, is
consistent with the subtitle C provision in the subpart S proposed
rulemaking (55 FR at 30855 July 27, 1990), as well as the Financial
Assurance for Corrective Action (FACA) proposed rulemaking (51 FR at
37854 October 24, 1986). Please refer to these proposals for more
discussion on this requirement. In addition, owners and operators would
be required to update these items annually, and to notify the State
Director and obtain alternative financial assurance if the firm is no
longer able to pass the financial test. These proposed criteria are
described below.
a. Chief financial officer (CFO) letter. Under
Sec. 258.74(e)(2)(i), the owner or operator would be required to submit
a letter from the firm's CFO. The letter would demonstrate that the
firm has complied with the criteria of the test. Specifically, the
letter would list all cost estimates covered by a financial test and
provide evidence that the firm satisfies the financial criteria of the
test (i.e., the financial component, including the minimum size
component and domestic assets requirement). The Agency expects that
this evidence will include a worksheet or similar demonstration showing
that the firm's annual financial data meet the specific measures
required by the test.
b. Accountant's opinion. Under Sec. 258.74(e)(2)(ii), the Agency is
also proposing to require the owner or operator to place in the
operating record the opinion from the independent certified public
accountant of the firm's financial statements for the latest completed
fiscal year. Further requirements of the CFO's letter are described in
Sec. 258.74(e)(2)(iii). An unqualified opinion (i.e., a ``clean
opinion'') from the accountant demonstrates that the firm has prepared
its financial statements in accordance with generally accepted
accounting principles for corporations. However, an adverse opinion,
disclaimer of opinion, or any qualification in the opinion would
automatically disqualify the owner or operator from using the corporate
financial test. The State Director of an approved State may evaluate
qualified opinions on a case by case basis, however, and accept such
opinions if the matters which form the basis for the qualified opinion
are insufficient to warrant disallowance of the test.
c. Special report from the independent certified public accountant.
The third item to be placed in the operating record would be a special
report of the independent certified public accountant upon examination
of the chief financial officer's letter. In this report, the accountant
would confirm that the data used in the CFO letter to pass the test
were appropriately derived from, the audited, year-end financial
statements. The purpose of this special report is to ensure that the
accountant has confirmed that the financial data used in the CFO letter
is appropriately presented.
This report would not be required if the CFO uses financial test
figures directly from the annual financial statements provided to the
Securities Exchange Commission (SEC). However, this report is required
if the CFO letter uses data that is derived from and is not identical
to the data in the annual financial statements provided to the SEC.
For example, in computing financial assurance under one alternative
owners and operators are required to recognize total liabilities,
including those associated with ``post-retirement benefits other than
pensions (OPEB).'' (Please see the discussion of FASB 106 in section VI
of this preamble.) The Financial Accounting Standards Board (FASB)
allows the use of two different methods when accounting for these
liabilities in annual financial statements. FASB 106 allows employers
the option of accounting for OPEB obligations in one year (immediate
recognition) or over a consecutive number of years (delayed
recognition). Since both the immediate and delayed recognition methods
are allowed by FASB 106, EPA does not require owners and operators that
are demonstrating they meet the requirements of the financial test to
use the same accounting method for OPEB obligations that is used for
annual SEC submission purposes. For example, the owner or operator may
use the immediate recognition method in the financial statement
prepared for the SEC, but the delayed recognition method in computing
liabilities for the purpose of demonstrating RCRA financial assurance.
EPA is proposing this approach in today's rule because it does not
believe a separate CPA statement is needed where the CFO simply takes
figures directly from an audited financial statement. This is a
straight forward process. On the other hand, where the CFO ``derives''
the figures--for example, by using different accounting procedures to
determine OPEB liabilities--the process may require a high level of
financial expertise. In these cases, EPA believes review by an
independent auditor is appropriate. The Agency solicits comment on this
approach and whether this approach would be appropriate for the
financial test under subtitle C.
d. Annual updates and placement of financial test documentation.The
financial test proposed in this action would require firms to place the
items specified in Sec. 258.74(e)(2) in the operating record and notify
the State Director that these items have been placed in the facilities
operating record. Because the financial condition of firms can change
over time, under Sec. 258.74(e)(2), firms will be required to update
annually all financial test documentation, including each of the items
described above, within 90 days of the close of the firm's fiscal year.
Under Sec. 258.74 (e)(2)(iv), the owner or operator is not required to
submit the items specified in Sec. 258.74(e)(2) when he substitutes
alternate financial assurance as specified in this section; or is
released from the requirements of this section in accordance with
Sec. 258.71(b), Sec. 258.72(b), or Sec. 258.73(b).
e. Alternate financial assurance. Under Sec. 258.74(e)(2)(v), if a
firm can no longer meet the terms of the financial test, the owner or
operator would have to notify the State Director and obtain alternative
financial assurance within 120 days of the close of the firm's fiscal
year. The alternative financial assurance selected by the owner or
operator would have to meet the terms of this section and the required
submissions for that assurance would have to be placed in the
facility's operating record. The owner or operator would have to notify
the State Director that he no longer meets the criteria of the
financial test and that alternate financial assurance has been
obtained.
f. Current financial test documentation. Under proposed
Sec. 258.74(e)(2)(vi), the Director of an approved State may, based on
a reasonable belief that the owner or operator no longer meets the
requirements of paragraph (e)(1) of this section, require the owner or
operator to provide current financial test documentation as specified
in paragraph (e)(2) of this section. Although the Agency anticipates
this provision will not be used often, it can be important in
situations where the financial condition of the owner or operator comes
into question. The State Director should have the flexibility to
require the owner or operator to provide current financial test
documents if information arises that raises serious questions about the
financial conditions of the owner or operator. For example, an owner or
operator may be forced into bankruptcy by a large, well-publicized
liability judgment. In such cases, the State Director should be able to
investigate the owner's or operator's change in financial condition,
and require them to demonstrate that they still meet the financial
test. The Agency requests comments from the public on this proposed
requirement.
B. Corporate Guarantee (Section 258.74(g))
This rule proposes to allow owners and operators to comply with
financial responsibility requirements for MSWLFs using a guarantee
provided by another private firm (the guarantor). Under such a
guarantee, the guarantor promises to pay for or carry out closure,
post-closure care or corrective action activities on behalf of the
owner or operator of a MSWLF if the owner or operator fails to do so.
Guarantees, like other third-party mechanisms, such as letters of
credit or surety bonds, ensure that a third party is obligated to cover
the costs of closure, post-closure care, or corrective action in the
event that the owner or operator goes bankrupt or fails to conduct the
required activities. At the same time, a guarantee is an attractive
compliance option for owners and operators, especially those affiliated
with larger corporations because guarantees are generally much less
expensive than other third-party mechanisms.
The proposed rule would allow three types of qualified guarantors:
(1) The parent corporation or principal shareholder of the owner or
operator (e.g., a corporate parent or grandparent), (2) a firm whose
parent company is also the parent company of the owner or operator (a
corporate sibling), and (3) other related and non-related firms with a
``substantial business relationship'' with the owner or operator
(including subsidiaries of the owner or operator). Guarantors also
would be required to meet the conditions of the corporate financial
test.
To comply with the requirements of the corporate guarantee, the
owner or operator would be required to place in the facility operating
record a copy of the guarantee contract and copies of all of the
financial test documentation that is required of the guarantor as
specified in the corporate financial test requirements. The terms of
the guarantee contract must specify that, if the owner or operator
fails to perform closure, post-closure care, or corrective action in
accordance with the requirements of part 258, the guarantor will
either: (1) carry out those activities or pay the costs of having them
conducted by a third party (performance guarantee), or (2) fund a trust
to pay the costs of the activities (payment guarantee). The required
documentation must be placed in the operating record, in the case of
closure and post-closure care, prior to the initial receipt of waste or
the effective date of the final rule, whichever is later, or in the
case of corrective action, no later than 120 days following selection
of a corrective action remedy. The financial test documentation from
the guarantor must be updated annually, in accordance with the
requirements of the corporate financial test.
The financial test documentation required of the guarantor is the
same as that required of a corporate financial test user except that,
in cases where the guarantor is not a corporate parent, grandparent, or
sibling, the letter from the chief financial officer must address the
``substantial business relationship'' (as defined in Sec. 264.141(h))
that exists between the owner or operator and the guarantor. In
particular, the letter must describe the relationship and the
consideration received from the owner or operator in exchange for the
guarantee, which is necessary to ensure that the contract is valid and
enforceable.
This proposal would require that guarantors agree to remain bound
under this guarantee for so long as the owner or operator must comply
with the applicable financial assurance requirements of subpart G of
part 258, except that guarantors may cancel this guarantee by sending
notice to the State Director and to the owner or operator. The proposal
would provide that such cancellation cannot become effective earlier
than 120 days after receipt of such notice by both the State Director
and the owner or operator.
If a guarantee is cancelled, the proposal would require the owner
or operator to, within 90 days following receipt of the cancellation
notice by the owner or operator and the State Director, obtain
alternate financial assurance, place evidence of that alternate
financial assurance in the facility operating record, and notify the
State Director. If the owner or operator fails to provide alternate
financial assurance within the 90-day period, the guarantor must
provide that alternate assurance within 120 days, place evidence of the
alternate assurance in the facility operating record, and notify the
State Director.
If the corporate guarantor no longer meets the requirements of the
financial test, the owner or operator would have to, within 90 days
following the close of the guarantor's fiscal year, obtain alternative
assurance, place evidence of the alternate assurance in the facility
operating record, and notify the State Director. If the owner or
operator fails to provide alternate financial assurance within the 90-
day period, the guarantor would be required to provide that alternate
assurance within 120 days following the close of the guarantor's most
recent fiscal year, place evidence of the alternate assurance in the
facility operating record, and notify the State Director.
C. Calculation of Obligations
EPA currently allows financial tests as mechanisms to demonstrate
financial assurance for environmental obligations under several
programs. These include hazardous waste treatment, storage, and
disposal facilities under 40 CFR parts 264 and 265, petroleum
underground storage tanks under 40 CFR part 280, UIC facilities under
40 CFR part 144, and PCB commercial storage facilities under 40 CFR
part 761. Under each of these programs, the Agency requires that the
owner or operator include all of the costs it is assuring through a
financial test when it calculates its obligations. This policy prevents
an owner or operator from using the same assets to assure different
obligations under different programs. The Agency believes this is vital
to assure the effectiveness of the financial test and assure that
assets are available to assure all of the environmental obligations
covered by the test. Thus, consistent with Agency policy, today's
proposal requires a firm using a financial test for its subtitle D
obligations also to include those costs covered under other Agency
programs when it calculates assured costs.
V. Domestic Asset Requirement for the Subtitle C Corporate Financial
Test
The Agency is proposing to modify the domestic asset requirement of
the current subtitle C financial test. The current regulations at
Secs. 264.143(f)(1)(i)(D) and (ii)(D); 265.143(e)(1) (i)(D) and
(ii)(D); 264.145(f)(1) (i)(D) and (ii)(D); 265.145(e)(1) (i)(D) and
(ii)(D); 264.147(f)(1) (i)(D) and (ii)(D); and 265.147(f)(1) (i)(D) and
(ii)(D) require that corporations using the financial test have assets
located in the U.S. amounting to at least 90% of total assets or at
least six times the sum of costs assured through the financial test.
The purpose of this requirement is to assure access to funds in the
event of bankruptcy. The Agency is concerned that without a domestic
asset requirement, it could experience difficulty in accessing funds of
bankrupt firms whose assets are located outside of the United States.
When the Agency proposed revisions to the subtitle C corporate
financial test in the July 1, 1991, notice, at 56 FR 30201, the Agency
did not propose revisions to the domestic asset requirement portion of
that financial test. However, commenters on that proposal argued that
the domestic asset requirement should be revised, as it unnecessarily
limits the use of the test.
In response to comment received on the July 1 notice, the Agency is
proposing a revised domestic asset requirement for subtitle C. The
Agency is proposing that corporations using the financial test be
required to have assets in the U.S. at least equal to the sum of all
environmental obligations assured by a financial test. This approach is
consistent with the domestic asset requirement proposed in today's
corporate financial test for subtitle D. The Agency solicits comment on
its proposal to modify the subtitle C domestic asset requirement.
VI. Analysis Supporting This Proposed Rule
The discussion below describes the analysis conducted by the Agency
to develop the ratio alternative, minimum net worth requirement, and
domestic asset requirement of this proposed corporate financial test.
These provisions, which are proposed in this notice for use under the
subtitle D program, also were proposed by the Agency on July 1, 1991,
for use under the subtitle C program (56 FR 30201). In conducting
analysis to support today's proposal, the Agency relied in large part
on analysis conducted in support of the July 1, 1991, subtitle C
rulemaking. This section of the preamble discusses the subtitle C
analysis, and additional analysis conducted to support development of
this proposal.
For a more detailed description of the subtitle C analysis, the
reader can refer to the preamble of the July 1, 1991, proposal (56 FR
30201), and to the Background Document supporting the July 1 proposal,
which can be found in the docket for that rulemaking (Docket No. F-91-
RCFP-FFFFF). For a more detailed description of the analysis to support
this subtitle D corporate financial test proposal, the reader can refer
to the Background Document for today's rule, which can be found in the
docket for this proposal.
A. Development of the Subtitle C Corporate Financial Test
As was discussed above, on July 1, 1991, the Agency proposed
revisions to the subtitle C corporate financial test. At that time, the
Agency conducted analysis using the following approach.
First, the Agency examined whether the test should include a
minimum net worth requirement. Second, the Agency developed various
financial tests and analyzed their performance in discriminating
between bankrupt and viable firms. Finally, the Agency evaluated those
tests that best discriminated between viable and bankrupt firms
according to a ``least cost'' criterion, and selected a financial test.
Each of these analytical steps is described below.
1. Minimum Net Worth Requirement
In developing the subtitle C corporate financial test, the Agency
determined that a minimum net worth requirement was an important
element of the test. First, the Agency was concerned that, because of
their magnitude, the costs of closure and post-closure care could
themselves cause smaller firms to go bankrupt. In addition, the need
for a minimum net worth requirement was supported by analysis. The
Agency found significantly higher bankruptcy rates for firms with a net
worth less than $10 million. For example, firms with less than $10
million in net worth failed four times more frequently than firms with
greater than $10 million in net worth. Based on the above, the Agency
decided to propose a minimum net worth requirement.
To determine the threshold for this minimum net worth requirement,
the Agency analyzed public and private costs associated with different
thresholds. The Agency chose $10 million as the threshold because the
analysis demonstrated that although a higher threshold would result in
savings in public costs, those savings would not offset the additional
costs to the regulated community of obtaining alternative financial
assurance mechanisms.
2. Develop and Analyze Alternative Financial Tests
The Agency first conducted a search of financial literature and
identified possible financial ratios typically used for bankruptcy
prediction. In addition to financial ratios, the Agency selected a
variety of other financial measures, such as multiples requirements for
net worth and net working capital (i.e., one through six times the size
of the financial obligation) and ``additive'' requirements, which
required firms to have a certain level of net worth (in addition to the
minimum net worth requirement of $10 million) based on the amount of
costs they wished to cover with the test.
The Agency then evaluated the performance of these individual
financial measures in discriminating between viable and bankrupt firms.
Using samples of bankrupt and non-bankrupt firms, the Agency evaluated
their ability to ``pass'' non-bankrupt firms capable of meeting their
financial assurance obligations, and, at the same time, ``fail''
bankrupt firms that would enter bankruptcy without the means to meet
those obligations. Each financial measure was evaluated using two
performance measures:
Availability (A): Measured as the percentage of total financial
assurance obligations facing non-bankrupt firms with over $10
million in net worth that can be covered using a particular
financial measure or financial test.
Misprediction (M): Measured as the percentage of total financial
assurance obligations facing bankrupt firms that can be covered by
bankrupt firms using the financial test.
Those individual financial measures that performed relatively well
at differentiating between the two samples had a high differential
between the availability (A) and misprediction (M) measures; i.e., they
allow viable firms to cover a relatively large percentage of
obligations and, at the same time, screen out a large share of
obligations of bankrupt firms. Those measures that performed relatively
poorly had about the same availability to viable firms and bankrupt
firms; i.e., they allowed bankrupt and non-bankrupt firms to cover a
similar percentage of obligations. In some cases, poorly-performing
measures had a negative differential--they allowed bankrupt firms to
cover a higher percentage of obligations than non-bankrupt firms.
The Agency's analysis of ratio measures found that profitability
ratios, which measure a firm's net income or cash flow in relation to
firm size (e.g., cash flow/total liabilities) and leverage ratios,
which measure a firm's debt in relation to firm size (i.e., total
liabilities/net worth) were particularly good at discriminating between
bankrupt and non-bankrupt firms.
The Agency then combined various profitability and leverage ratios,
which had performed well at distinguishing between bankrupt and non-
bankrupt firms, to form alternative financial tests. A variety of
possible multiple and additive requirements for net worth were then
added to each combination of financial ratios.
The process described above led to the development of over 500
``candidate'' alternative financial tests. These candidate financial
tests were then evaluated in a similar manner against the samples of
bankrupt and non-bankrupt firms to determine their ability to pass non-
bankrupt firms capable of meeting their financial assurance obligations
(availability or ``A'') and their ability to screen out bankrupt firms
that would enter bankruptcy without the means to meet those obligations
(misprediction or ``M''). From these candidates, ``dominant'' tests
were selected, i.e., tests with the highest ability to pass non-
bankrupt firms for given levels of bankruptcy misprediction.
The Agency then calculated the public and private cost of each
``dominant'' test. The Agency defined public costs as the costs to the
public sector of paying for financial assurance obligations for firms
that pass the test but later go bankrupt without funding their
obligations, and private costs as the cost to viable firms of obtaining
alternative financial assurance mechanisms when they cannot pass the
test. The amount of public and private costs associated with a
particular test depends on the test's performance in terms of its
availability to viable firms and its ability to screen out bankrupt
firms.
3. Select a Financial Test for Proposal
The Agency then identified a set of low-cost tests, and selected a
test from that group for proposal. The Agency based its selection on
policy considerations as well as the total costs of the financial
tests. The Agency took this approach, rather than select the lowest
cost test, because several tests had very similar total costs but
different balances between public and private costs. Using this
modified cost-effectiveness approach, the Agency was able to consider
the balance of public and private costs among tests of approximately
equal total costs.
Exhibit 1 presents total public and private costs of the top two
tests identified. Test 94 was the lowest-cost test analyzed, but the
Agency proposed Test 902 in the July 1, 1991, rule for several reasons.
First, Test 94 included a tax rate adjustment (FR) in the cash flow
ratio which may change over time, thus making it a more difficult test
to implement and verify. (The estimate shown in Exhibit 1 is that all
firms are subject to a 34 percent corporate tax rate). In contrast,
Test 902 required a cash flow ratio adjusted by a set value of $10
million,1 rather than by a tax adjusted cost estimate. Second,
Test 902 required a net worth of $10 million plus the amount of the
cost to be assured (an additive requirement), whereas Test 94 required
that the net worth be at least $10 million and that it be at least the
amount of the cost to be assured. The Agency believed that the net
worth additive requirement of Test 902 would ensure that a firm has net
worth sufficient to cover its financial assurance obligations and has
an additional $10 million in net worth to cover other debts and
obligations as necessary. Finally, Test 902 had a different balance of
public and private costs than Test 94. Because it is less available to
firms, it had higher private costs than Test 94. However, the
substantial improvement in bankruptcy screening (lower misprediction,
or ``M'') led to far lower public costs than Test 94, so that the total
costs were close to the total costs of Test 94.
---------------------------------------------------------------------------
\1\The Agency analyzed many cash-flow ratios, some of which
subtracted a constant amount (e.g., $5 million, $10 million, $15
million), others of which, like the ratio in Test 94, subtracted
variable amounts. Of the ratios that subtracted a constant amount,
this ratio, which subtracted $10 million, was the most effective in
reducing public and private costs.
Exhibit 1.--Results of Alternative Financial Tests for Closure and Post-Closure Care
[Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
Private Public
Test Test requirements costs costs Total costs
----------------------------------------------------------------------------------------------------------------
94... Cashflow--(.66 x FR)/total liabilities greater than .05........... $2,868 $15,408 $18,277
OR
Total liabilities/net worth less than 2.5
AND
Net worth at least 1 x closure and post-closure care cost estimate
AND
Net worth of at least $10 million.................................
902.. Cashflow--$10 million/total liabilities greater than .10.......... 12,075 6,898 18,972
OR
Total liabilities/net worth less than 1.5
AND
Net worth of at least $10 million plus the amount of closure and
post-closure care cost estimate
----------------------------------------------------------------------------------------------------------------
B. The Subtitle D Corporate Financial Test Analysis
As was discussed above, the approach used by the Agency to evaluate
alternative subtitle D financial tests was consistent with the 1991
subtitle C analysis. However, because candidate measures for the 1991
subtitle C analysis were assembled from a thorough review of available
research on bankruptcy predictors, the Agency decided that additional
research was not likely to identify any new candidate measures.
Therefore, the Agency did not consider it necessary to repeat the
process of assembling and testing candidate financial measures, and
combining the most promising candidate measures into alternative
financial test configurations.
Instead, the Agency used the alternative financial tests identified
in the subtitle C analysis as the starting point for the subtitle D
analysis. The Agency then developed firm samples and cost estimates for
the subtitle D program, and proceeded to evaluate those candidate
financial tests using basically the same procedure used for subtitle C,
with minor modifications.
1. Firm Samples
The Agency identified 16 non-bankrupt firms (12 public and 4
private) that own or operate MSWLFs. One of the private firms, which
appeared to be quite small, was dropped from the sample for lack of
financial data. Two of the remaining private firms were deleted because
they had tangible net worth less than $10 million. The final non-
bankrupt firm sample, then, consisted of 13 firms--12 public and one
private.2
---------------------------------------------------------------------------
\2\The Agency believes that the same policy considerations
discussed above for subtitle C compel use of a $10 million net worth
requirement for subtitle D. In addition, the Agency conducted
analysis to determine whether a lower net worth requirement would
significantly increase the amount of financial assurance that could
be covered by the subtitle D financial test. The Agency found that
the 3 small firms excluded by the minimum net worth requirement
owned only 12 MSWLFs, which were less than half the size of the
landfills owned and operated by larger firms. Therefore, the Agency
concluded that a lower minimum net worth requirement would not
significantly increase the availability of the subtitle D corporate
financial test. The final non-bankrupt firm sample, then, consisted
of 13 firms--12 public and one private.
---------------------------------------------------------------------------
The bankrupt firm sample used in the subtitle C corporate financial
test analysis was also used for the subtitle D financial test analysis.
That sample consisted of 31 firms, which were either known to operate
hazardous waste facilities or were likely to do so. The Agency believed
that this was the best sample of bankrupt firms available for the
subtitle D analysis for several reasons. First, owning and operating
MSWLFs entails a capital-intensive, long-term investment in engineering
and construction for industrial activity, similar to the industrial
activities of many firms in the subtitle C universe. Second, firms in
the MSWLF industry, like firms in the subtitle C universe, are subject
to environmental regulations and associated compliance costs. Third,
the Agency could not identify bankruptcies of MSWLF firms, as they have
not been subject to Federal regulatory requirements and, therefore,
have not been identified like subtitle C facilities, which were
required to notify EPA of their existence in 1980, thus providing the
Agency with historical data.
2. Cost Estimates
a. Closure and Post-Closure Care. The Agency's derived estimates of
closure and post-closure care costs from data provided by the
Regulatory Impacts Analysis (RIA) of the proposed subtitle D MSWLF
criteria (56 FR 50978).
Because the analysis predated the effective date of the landfill
criteria, the Agency did not have site-specific cost estimates for
firms that own or operate MSWLFs. Therefore, the Agency estimated the
financial assurance obligations for each firm in the non-bankrupt firm
sample, based on the number and size of landfills owned or operated by
each firm, and the Agency's estimate of closure and post-closure care
costs per landfill.
b. Corrective Action. The Agency took a different approach to
analyzing the impact of corrective action costs on the performance of
alternative financial tests. As in the case of closure and post-closure
care, the Agency did not have site-specific data on the cost of
corrective action. However, unlike the costs of closure and post-
closure, corrective action costs are not certain to occur. In addition
to not having site-specific cost data, the Agency also did not have
data on the probability of corrective action being necessary.
Therefore, the Agency did not attempt to estimate site-specific costs
to analyze the impact of corrective action costs on the performance of
alternative financial tests; rather, the Agency conducted a sensitivity
analysis, which is described later in this preamble.
3. Results of Evaluation of Candidate Financial Tests for Closure and
Post-Closure Care
The Agency calculated the public and private costs for the
alternative financial test configurations, and selected a set of
dominant tests.\3\ Table 2 shows the results for the lowest cost tests.
---------------------------------------------------------------------------
\3\Note that in the 1991 subtitle C analysis, the alternative
financial tests were evaluated against the firm samples to establish
a set of dominant tests, and the sum of public and private costs was
then calculated for each dominant test. However, in the subtitle D
analysis, the sample size of non-bankrupt firm sample was so small
(13 firms) that directly calculating the sum of the public and
private costs for each of the alternative test configurations was
more analytically efficient.
Table 2.--Financial Tests With Lowest Public and Private Costs for Closure and Post-Closure Care
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Private Public Total costs
Test Requirements costs costs (thousands)
(thousands) (thousands)
----------------------------------------------------------------------------------------------------------------
\1\56
2... Total Liabilities/Net Worth less than 1.5......................... $17.4 $8.8 $26.2
OR
(Cash Flow--$10 million)/Total Liabilities greater than 0.1
AND
Net worth of at least $10 million plus the amount of closure and
post-closure care cost estimate
130.. Total Liabilities/Net Worth less than 1.5......................... 17.4 8.8 26.2
OR
(Cash Flow--$10 million)/Total Liabilities greater than 0.1
AND
Net worth of at least the amount of closure and post-closure care
cost estimate
58... Total Liabilities/Net Worth less than 1.5......................... 6.1 10.8 16.9
OR
(Cash Flow--$10 million)/Total Liabilities less than 0.1
AND
No minimum net worth requirement
----------------------------------------------------------------------------------------------------------------
\1\Subtitle D Test 562 is identical to Subtitle C Test 902, which was selected for proposal under that program.
Though Test 58 was the lowest cost test, the Agency did not select
it for proposal because that test did not include a minimum net worth
requirement beyond the $10 million. The Agency believes that an
additional net worth requirement that is related to the costs to be
assured is important to assure that the firm's environmental costs will
not increase the probability of firm failure. For example, if a firm
had a net worth of $10 million, but closure and post-closure costs of
$100 million, those costs would, in all likelihood, cause the firm to
enter bankruptcy. Thus, the Agency eliminated Test 58 from
consideration and considered for proposal only those financial tests
that had a minimum net worth requirement that considered the size of
the obligation to be assured.
Tests 562 and 130 are identical except for the minimum net worth
requirement. Test 130 requires that the firm's minimum net worth be at
least $10 million and that it be at least the amount of the closure and
post-closure care cost estimate. Test 562 requires a minimum net worth
be equal to $10 million plus the closure and post-closure care cost
estimate. The Agency selected Test 562 for proposal for several
reasons.
First, the Agency believes that requiring a $10 million minimum net
worth requirement in addition to net worth equal to the firm's assured
costs protects against environmental obligations themselves causing
bankruptcy. Second, there was no difference in the availability of Test
130 and Test 562, so there was no compelling reason to select Test 130.
Finally, selection of Test 562, which is identical to the corporate
financial test proposed for subtitle C follows the Agency's policy of
maintaining consistency among programs wherever possible.
4. Results of Sensitivity Analysis To Determine Effects of Corrective
Action Costs on Test Performance
As was mentioned above, the Agency conducted a sensitivity analysis
to determine whether the costs of corrective action would affect the
performance of the candidate financial tests. This analysis evaluated
the alternative tests for closure, post-closure care, and corrective
action costs under three scenarios--corrective action costs equal to
50%, 100%, and 200% of the costs of closure and post-closure. Under
each scenario, Test 130 and Test 562 were the lowest cost tests with a
minimum net worth requirement related to the size of obligation to be
assured.
5. Statement of Accounting Standards Number 106 (FASB 106)
Concerns have been raised by some members of the regulated
community that the December 1990 Statement issued by the Financial
Accounting Standards Board, entitled ``Employers' Accounting for
Postretirement Benefits Other Than Pensions (OPEB)'' (FASB 106),
adversely impacts their ability to pass the Agency's corporate
financial test for their environmental obligations.
While the Security and Exchange Commission (SEC) is ultimately
responsible for specifying Generally Accepted Accounting Principles
(GAAP) for publicly-owned firms, the SEC has informally followed
policies developed by the FASB, an independent private organization
that is funded by various professional accounting associations.
In this case, according to FASB 106, employers who do not already
account for these benefits as required by the Statement must do so for
fiscal years beginning after December 15, 1992 (This requirement is
delayed for certain small, non-public employers to fiscal years
beginning after December 15, 1994). FASB 106 allows employers the
option of accounting for these benefits in one year (immediate
recognition of OPEB) or over a consecutive number of years (delayed
recognition of OPEB).
These members of the regulated community that are concerned about
FASB 106 have requested that for Security and Exchange Commission
purposes, they be allowed to continue to use the immediate recognition
method, but for purposes of the Agency's financial test, they be
allowed to use the delayed recognition method. Since both the immediate
and delayed recognition of these obligations are allowed by the FASB
106 rule, the Agency believes there is enough flexibility in the
regulations to allow recognition of OPEB benefits in the manner
described above. A more detailed description of EPA's interpretation of
the federal regulations governing the corporate financial test within
the context of FASB 106 can be found in the docket in support of this
proposal. (See Letter to Torger Dahl of Eastman Kodak Company from
Michael H. Shapiro, Director of the Office of Solid Waste.) The Agency
solicits comment on whether the subtitles D and C corporate financial
tests should be revised to clarify how owners and operators can account
for FASB 106 when using the financial test to demonstrate financial
responsibility for their environmental obligations.
6. Domestic Asset Requirement
The Agency is proposing that all firms using the financial test
have assets in the United States at least equal to the sum of the costs
they seek to assure through the financial test. This domestic asset
requirement is intended to ensure that the Agency has access to funds
in the event of bankruptcy. Without this requirement, the Agency could
experience substantial difficulty in accessing funds of bankrupt firms
that have their assets outside of the United States.
The domestic asset requirement proposed for the subtitle D
corporate owners and operators of MSWLFs is consistent with revisions
to the domestic asset requirement of the subtitle C corporate financial
test proposed today (see section V. of this preamble for further
discussion).
VII. National Solid Wastes Management Association (NSWMA) Petition
A. Discussion of the Petition
On February 16, 1990, NSWMA submitted a rulemaking petition to the
Agency. The Agency has addressed many of the concerns raised in the
petition in a July 1, 1991 proposed rule (56 FR 30201) and a September
16, 1992 final rule (57 FR 42832). While today's proposed rule
addresses two more issues raised in this petition, it does not
represent the full Agency response to NSWMA's petition. The Agency
continues to examine the concerns raised in NSWMA's petition.
B. The Meridian Test
As part of its analysis, the Agency evaluated the test developed by
the Meridian Corporation, which was submitted to EPA on February 16,
1990, along with a rulemaking petition, by the National Solid Wastes
Management Association (NSWMA). Using the methodology described above,
the Agency found that the test was not as effective at minimizing
public and private costs as the test proposed on July 1, 1991. As a
result, the Agency has not proposed the test developed by Meridian
Corporation for further analysis. The NSWMA petition, the test
developed by the Meridian Corporation, and the Agency's analysis of
that test can be found in the docket in support of this proposal. The
Agency will consider and respond to any comments it receives on the
Meridian financial test in evaluating the revisions to the corporate
financial test for subtitle C.
C. Request for Comment on Allowing Owners and Operators to Discount
Costs
The financial assurance requirements in many EPA program areas
(e.g., RCRA subtitles C and D, TSCA PCBs) require owners and operators
to calculate cost estimates in current dollars, and aggregate these
estimates (even though these costs may be incurred many years in the
future). Owners must obtain a financial responsibility instrument for
at least the amount of this aggregated cost estimate. The RCRA
regulations currently do not allow owners and operators to adjust this
aggregated cost estimate to reflect the fact that these activities are
scheduled to occur in future years.
The Agency has received many requests to allow owners and operators
to meet the financial assurance requirements based on the present value
of these future obligations. In a rulemaking petition submitted on
February 16, 1990, the National Solid Wastes Management Association
(NSWMA) recommended that the Agency allow firms to use a present value
based on a discount rate to estimate their costs for post-closure care
and for the extended care portion of corrective action. (The NSWMA
petition can be found in the docket of today's rulemaking.) In
addition, the Agency has received public comment making similar
requests during the development of other financial-responsibility-
related rules. In the preamble to the proposed local government
financial test, the Agency solicited comment on the whether to allow
owners and operators to discount costs associated with MSWLFs (see 58
FR 68353 at 68361, December 27, 1993). The Agency recognizes that this
is an issue of interest to many parties, and has reviewed and
considered all comments received to date.
In general, the argument presented to the Agency has been, because
these expenditures are scheduled to occur in the future (often many
years in the future), a financial instrument for less than the
aggregate costs (i.e. the ``present value'' of the aggregated costs)
would pay off these expenditures in the future.4 This is the case
because there is a time dimension to the value of a monetary or
financial instrument--$100 in hand today is worth more than a
(guaranteed) promise to pay $100 in ten years. One hundred dollars
invested today, for example, in a ten-year Treasury bond paying at an
interest rate of 7 percent will pay back $197 ten years from now,
assuming that interest is compounded continually.
---------------------------------------------------------------------------
\4\In order to make comparisons between alternative financial
instruments on capital investment decisions involving different
streams of payments over time, financial analysts, economists, etc.,
calculate the ``present value'' of the alternatives. This method
involves calculating in terms of current dollars using the interest
rate--or discount rate--present value of a promised future receipt
(or expenditure). For example, at a 7 percent interest rate, an
investor would be indifferent between receiving $100 five years from
now or receiving $71.30 today. The present value, then of the
promise to pay $100 in five years (at a discount rate of 7 percent)
would be $71.30. In much the same way, if the Agency allowed owners
and operators to discount their future costs when they demonstrated
financial responsibility, an owner or operator who had a $10 million
closure scheduled to occur 20 years in the future could demonstrate
financial responsibility for as little as $2.6 million today,
assuming they could invest that amount at the same 7% interest (or
discount ) rate described above. The effect of discounting becomes
more pronounced as the time period and discount rate increase.
---------------------------------------------------------------------------
The Agency has not proposed to allow owners and operators to
discount costs because the Agency remains unconvinced that by doing so
it would assure that adequate funds will be available in a timely
manner to perform required activities in the event that the owner or
operator is unable or unwilling to perform these activities.
First, the Agency is concerned that for an approach based on
discounting to be effective, it is important that the owner or operator
be able to predict with certainty when the costs will incur. For
example, an owner or operator who estimates that the closure costs of
its MSWLF will be $10 million to occur 20 years in the future would
only have to demonstrate financial responsibility for $2.6 million
today, assuming a 7 percent discount rate. If that MSWLF unexpectedly
has to close, it may not have sufficient resources to properly complete
all closure activities since the amount of financial responsibility
could be substantially less than the actual need.
Despite these concerns, the Agency is interested in allowing owners
and operators to discount costs under the subtitle D program wherever
it can do so and still assure that sufficient resources will be
available to perform required activities. The Agency believes that
discounting may be more applicable for some activities than others. For
example, where the cost of an activity is known, the timing of the
activity can be predicted with a greater degree of certainty, or where
the activity takes place over an extended time period, it may be
appropriate to discount costs.
Although current regulations require owners to have the financial
resources to carry out all closure and post-closure activities in one
year, some activities, such as post-closure groundwater monitoring, can
only be done over several decades. Therefore, even if a landfill must
close unexpectedly, certain activities (like post-closure care) and the
associated costs will still occur over a number of years in the future.
EPA could allow owners to discount these costs in computing their
obligations. However, where the timing and costs associated with an
activity are not known, discounting may not be appropriate.
Because of its interest in allowing owners and operators to
discount costs, and because of its concerns about allowing them to do
so, the Agency again solicits comment on the practice of discounting,
and how it might be applied to the subtitle D program. Members of the
public who submitted comments on discounting during the comment period
of the local government financial test need not submit those comments
again. If the Agency modifies the subtitle D regulations to allow
owners and operators to discount costs under that program, the Agency
will consider all comments related to discounting that were submitted
to the docket for this proposal during the public comment period and to
the docket for the local government financial test proposal during the
comment period for that rulemaking.
The Agency specifically requests comment and supporting information
on the following and on any other issues that commenters identify
regarding discounting for MSWLF financial responsibility requirements:
(1) Selection of a discount rate. Possible options include short-
or long-term interest rates, private, municipal or Treasury bonds, or
some other measure of interest rate.
(2) Selection of a method that provides adequate assurance that
funds will be available in the event of unexpected closure.
(3) Selection of a maximum time period over which costs may be
discounted, e.g., 5, 10, 20, or 50 years.
(4) Selection of activities that may be appropriate for employing
discounting, e.g., post-closure care when the costs and time period for
performing this activity may be estimated with reasonable accuracy.
(5) Selection of a method that minimizes the potential complexities
involved in administering and enforcing a program that allows
discounting of costs.
Commenters should note that this request for comment is limited to
whether discounting should be allowed for MSWLF financial assurance,
and is not intended to open for comment other financial assurance
regulations.
VIII. State Program Approval--Subtitle D
Section 4005(c) of RCRA requires that each State adopt and
implement a ``permit program or other system of prior approval and
conditions'' adequate to assure that each facility that may receive
household hazardous waste or small quantity generator waste will comply
with the revised MSWLF criteria. Each state must adopt and implement a
permit program not later than 18 months after October 9, 1991. EPA is
required to ``determine whether each State has developed an adequate
program'' pursuant to section 4005(c).
EPA plans to propose a State/Tribal implementation rule which will
establish adequacy determination requirements and procedures for State
subtitle D permit programs, including submission of a MSWLF permit
program application. EPA also plans to propose to extend eligibility
for subtitle D permit program approval to Indian Tribes. The statute,
however, does not require these rules to be in place before EPA
assesses the adequacy of any State or Tribal program.
As part of these rules, the Agency plans to include procedures for
submitting revised applications for State and Tribal program adequacy
determinations should a State or Tribe revise its permit program once
deemed adequate and the appropriate Regional Administrator determines
that a revised application is necessary. Program revision may be
necessary when the pertinent Federal statutory or regulatory authority
is changed, when State or Tribal statutory or regulatory authority or
relevant guidance changes, or when responsibility for the State or
Tribal program is shifted within the lead agency or to a new or
different State or Tribal agency or agencies.
A State or Tribe that receives permit program approval prior to the
final promulgation of today's rule and later elects to adopt the
financial test and local government guarantee mechanisms should work
with its respective Regional EPA office as it proceeds to make changes
to its permit program. EPA does not interpret the statute to require
that each and every program change a State or Tribe makes will require
a revised permit program application. Rather, only certain changes that
raise issues warranting a detailed review by EPA and an opportunity for
public comment will necessitate a revised application. EPA believes
that State and Tribal compliance with today's proposal will, in most
cases, not require a revised permit program application, since this
rule merely provides additional options for demonstrating financial
assurance. Furthermore, States and Tribes that have adopted financial
assurance requirements without this local government test and guarantee
are not required to take any action and may elect to retain only their
current options since this proposal simply expands the number of
options available to owners and operators for demonstrating financial
assurance.
IX. Implementation--Subtitle D
As stated above, today's proposal would amend part 258 by adding
additional options for corporations to use when demonstrating financial
assurance for the costs of closure, post-closure care and clean-up of
known releases. States and Tribes will not be required to include these
options in their MSWLF programs, since they may choose to establish
their own financial assurance programs as long as they meet the
financial assurance requirements in Federal criteria. EPA will be able
to approve the financial assurance portion of a State or Tribe's
program so long as it includes at least one of the options promulgated
in October, 1991, or added by today's proposal (if promulgated).
As a matter of Federal law, these proposed tests (if promulgated)
will be potentially available in all States and all Tribal
jurisdictions. EPA cautions owners and operators that wish to use the
options in the Federal program that they should look at the options
available under State or Tribal law. If the State or Tribe's rules do
not include the option that the owner or operator wishes to use, the
owner or operator would run the risk of being out of compliance with
State or Tribal law. State and Tribal laws for MSWLFs are fully
effective even when not approved by EPA.
In unapproved States or Tribes, if State or Tribal law did not
preclude the use of options proposed today (either because it did not
include any financial assurance requirements, included only a general
requirement that left the choice of mechanism to the discretion of the
owner or operator, or included mechanisms resembling those proposed
today) an owner or operator would be able to use the corporate test or
guarantee described in today's proposal (if promulgated) to satisfy
both State or Tribal and Federal law.
EPA notes that States or Tribes seeking approval for the financial
assurance portion of their MSWLF program or wishing to modify an
already approved program would have flexibility in adopting Federally
promulgated standards. The State or Tribe could simply adopt the
Federal standard or could adopt a mechanism that meets the five
performance standards detailed in the October 9, 1991 final criteria
rule. In this case, the mechanism could be used by owners or operators
for demonstrating financial responsibility for their MSWLF obligations
in that State or Tribe. The five criteria that the financial mechanism
would need to meet are the following: (1) Ensure that the amount of
funds assured is sufficient to cover the costs of closure, post-closure
care, and corrective action for known releases when needed; (2) ensure
that funds will be available in a timely fashion when needed; (3)
guarantee the availability of the required amount of coverage from the
effective date of these requirements or prior to the initial receipt of
waste, whichever is later, until the owner or operator is released from
financial assurance requirements under Secs. 253.32 (f), (g), (h); (4)
provide flexibility to the owner or operator for demonstrating
compliance with financial assurance requirements; and (5) be legally
valid, binding, and enforceable under State and Federal law.
As a result, while the Agency is developing financial tests that
are designed to meet these performance criteria (the financial test
proposed in this Federal Register and the financial test proposed on
December 27, 1993 (58 FR 68353)), approved States and Tribes could
develop their own financial tests that could be used by owners and
operators of MSWLFs within those States and Tribes for demonstrating
financial responsibility as long as those tests are determined to have
met the performance standards. (For a discussion of the effect of EPA's
approval of a State or Tribal program on the Federal regulations, see
56 FR 50995.)
Owners and operators who can use the options in today's proposal
under State or Tribal law would be required to maintain appropriate
documentation of the mechanism in the facility's operating record. They
would not be required by Federal law to submit that documentation to
the State or Tribe, but only to notify the State or Tribal Director
that the required items have been placed in the operating record.
Owners and operators using the financial test or guarantee would also
be required to update all required financial test information on an
annual basis, and retain this information in their operating records.
In addition, an owner or operator (or guarantor) that becomes unable to
meet the financial test criteria would be required to notify the State
or Tribal Director and establish alternate financial assurance within
specified deadlines. Finally, in order to cancel a guarantee, the
guarantor would have to notify both the State or Tribal Director and
the owner or operator at least 120 days prior to cancellation.
The Agency believes that most Tribes have an accounting structure
similar or identical to those of most local governments. Tribes that
meet the requirements of the local government financial test would be
eligible to use that financial test to demonstrate financial
responsibility for their subtitle D obligations to the extent that they
meet the provisions of that test. However, the Agency recognizes that
there may be Tribes and local government units that use an accounting
system similar or identical to those of most corporations. Those Tribes
and local government units would be eligible to use this proposed
corporate financial test to demonstrate financial responsibility for
their subtitle D obligations to the extent that they meet the
requirements of this proposal.
X. State Authorization--Subtitle C
On July 1, 1991, the Agency proposed revisions to the subtitle C
corporate financial test (56 FR 30201). In that proposal, the Agency
considered the effect of those proposed revisions on State
Authorization based on the entire test, rather than on the individual
components of the entire financial test (see 56 FR 30214 and 30215).
This proposal would modify one provision of that July 1, 1991 proposed
rule. Specifically, this proposal would modify the domestic assets
requirement of the financial test contained in Secs. 264.143(f)(1)
(i)(D) and (ii)(D); 265.143(e)(1) (i)(D) and (ii)(D); 264.145(f)(1)
(i)(D) and (ii)(D); 265.145(e)(1) (i)(D) and (ii)(D); 264.147(f)(1)
(i)(D) and (ii)(D); and 265.147(f)(1) (i)(D) and (ii)(D) and the
corresponding revisions to the financial test instruments at
Sec. 264.151 (f) and (g). This proposed change of the domestic asset
requirement would not change the effect of State Authorization detailed
in the July 1, 1991 proposed rule. As a result, if the Agency does
promulgate a revised financial test under subtitle C, the effect on
State Authorization would be based on the July 1, 1991 proposal, though
a full discussion of the effect on State Authorization of the entire
revised subtitle C corporate financial test will be contained in the
final rule.
XI. Economic and Regulatory Impacts
A. Executive Order 12866
Under Executive Order 12866, which was published in the Federal
Register on October 4, 1993 (see 58 FR 51735), the Agency must
determine whether a regulatory action is ``significant'' and,
therefore, subject to OMB review and the requirements of the Executive
Order. The Order defines ``significant regulatory action'' as one that
is likely to result in a rule that may:
(1) Have an annual effect on the economy of $100 million or more,
or adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or Tribal governments or
communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlement, grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
Under the terms of Executive Order 12866, OMB has notified EPA that
it considers this a ``significant regulatory action'' within the
meaning of the Executive Order. EPA has submitted this action to OMB
for review. Changes made in response to OMB suggestions or
recommendations are documented in the public record for this rulemaking
(see Docket #F-94-FTMP-FFFFF).
The Agency conducted an analysis to estimate the costs that would
be avoided by corporations if this corporate financial test were
available to them. Since corporations would be able to use the
financial test for all or part of their subtitle D obligations,
corporations would save the cost of obtaining a third-party instrument
for those portions of their obligations. The Agency estimates that the
corporate financial test and guarantee mechanisms would save
corporations $45 million annually. In performing this analysis, the
Agency assumed that the 1991 data used to estimate the number of
MSWLFs, the costs of closure and post-closure care for each of the
categories of MSWLFs, and the number of corporations are held constant.
The financial data of the corporations are also assumed not to have
changed since 1991. The Agency also assumed that corporations had, as
their only environmental obligations, the costs of closure, post-
closure care of their MSWLFs. The Agency further assumed that the cost
of obtaining a third-party financial instrument, such as a letter of
credit or surety bond, would be 1.5 percent of the cost estimate of
closure and post-closure care of the MSWLF. Finally, the Agency assumed
that corporate parents would be willing to provide guarantees to their
subsidiaries to the extent that they are able to provide those
guarantees through the financial test. A full discussion of this
analysis can be found in the docket for this rulemaking.
The Agency believes that the information it had when it performed
its analysis was the most current and the most complete at the time.
While the Agency recognizes that changes have occurred in the subtitle
D universe since 1991, it does not have information to quantify these
changes. As a result, the Agency solicits the public for more current
information that can be used to update its analysis. Further, the
Agency solicits comment on the assumptions made in order to perform the
analysis and solicits the public for information that supports or
refutes these assumptions. A detailed analysis of the cost savings
associated with this rule is available in the docket.
B. Regulatory Flexibility Act
Under the Regulatory Flexibility Act, 5 U.S.C. 601 et seq. at the
time an Agency publishes a proposed or final rule, it generally must
prepare a Regulatory Flexibility Analysis that describes the impact of
the rule on small entities, unless the Administrator certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. The Agency is aware of three companies that
would be excluded from using this proposed financial test because their
net worth is less than $10 million. Therefore, pursuant to 5 U.S.C.
605b, we believe that this regulation will not have a significant
impact on a substantial number of small entities.
C. Paperwork Reduction Act
OMB approved the information collection requirements of the MSWLF
criteria, including financial assurance criteria, under the provisions
of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq., and assigned
OMB control number 2050-0122. The burden estimate for the MSWLF
financial assurance provisions included the burden associated with a
landfill obtaining and maintaining any one of the allowable financial
assurance instruments, including a financial test. The proposed
revision to part 264 does not change the recordkeeping or reporting
requirements for subtitle C facilities. The information collection
requirements for financial assurance of subtitle C facilities are
discussed and approved under OMB control number 2050-0120.
The public may send comments regarding the burden estimate or any
other aspect of this collection of information, including suggestions
for reducing this burden to Chief, Information Policy Branch, 2136,
U.S. Environmental Protection Agency, 401 M Street, SW., Washington, DC
20460; and to the Office of Information and Regulatory Affairs, Office
of Management and Budget, 728 Jackson Place NW., Washington, DC 20503
(marked ``Attention: Desk Officer for EPA'').
List of Subjects
40 CFR Part 258
Environmental protection, Reporting and recordkeeping requirements,
Waste treatment and disposal.
40 CFR Part 264
Hazardous waste, Reporting and recordkeeping requirements.
40 CFR Part 265
Hazardous waste, Reporting and recordkeeping requirements.
Dated: September 30, 1994.
Carol M. Browner,
Administrator.
For the reasons set out in the preamble, chapter I, title 40 of the
Code of Federal Regulations is proposed to be amended as follows:
PART 258--CRITERIA FOR MUNICIPAL SOLID WASTE LANDFILLS
1. The authority citation for part 258 continues to read as
follows:
Authority: 42 U.S.C. 6907(a)(3), 6912(a), 6944(a), and 6949(c);
33 U.S.C. 1345 (d) and (e).
2. Section 258.74 is amended by adding paragraphs (e) and (g) to
read as follows:
Sec. 258.74 Allowable mechanisms.
* * * * *
(e) Corporate financial test. An owner or operator that satisfies
the requirements of this paragraph may demonstrate financial assurance
up to the amount specified herein:
(1) Financial Component. (i) The owner or operator must satisfy one
of the following three conditions:
(A) A current rating for its most recent bond issuance of AAA, AA,
A, or BBB as issued by Standard and Poor's or Aaa, Aa, A or Baa as
issued by Moody's; or
(B) A ratio of less than 1.5 comparing total liabilities to net
worth; or
(C) A ratio of greater than 0.10 comparing the sum of net income
plus depreciation, depletion and amortization, minus $10 million, to
total liabilities.
(ii) The tangible net worth of the owner or operator must be
greater than the sum of the current closure, post-closure care,
corrective action cost estimates and any other environmental
obligations covered by a financial test plus $10 million.
(iii) The owner or operator must have assets located in the United
States amounting to at least the sum of current closure, post-closure
care, corrective action cost estimates and any other environmental
obligations covered by a financial test as described in paragraph
(e)(3) of this section.
(2) Recordkeeping and reporting requirements. (i) The owner or
operator must place the following items into the facility's operating
record:
(A) A letter signed by the owner's or operator's chief financial
officer that:
(1) Lists all the current cost estimates covered by a financial
test, including, but not limited to, cost estimates required for
municipal solid waste management facilities under 40 CFR part 258, cost
estimates required for UIC facilities under 40 CFR part 144, if
applicable, cost estimates required for petroleum underground storage
tank facilities under 40 CFR part 280, if applicable, cost estimates
required for PCB storage facilities under 40 CFR part 761, if
applicable, and cost estimates required for hazardous waste treatment,
storage, and disposal facilities under 40 CFR parts 264 and 265, if
applicable;
(2) Provides evidence that the firm meets the conditions of either
paragraph (e)(1)(i) or paragraph (e)(1)(ii) of this section.
(B) A copy of the independent certified public accountant's
unqualified opinion of the owner's or operator's financial statements
for the latest completed fiscal year except as provided in paragraph
(e)(2)(i)(B)(1) of this section:
(1) To be eligible to use the financial test, the owner's or
operator's financial statements referenced in paragraph (e)(2) of this
section must receive an unqualified opinion from the independent
certified public accountant. An adverse opinion, disclaimer of opinion,
or other qualified opinion will be cause for disallowance. The Director
of an approved State may evaluate qualified opinions on a case by case
basis and allow use of the financial test in cases where the Director
deems that the matters which form the basis for the qualification are
insufficient to warrant disallowance of the test. If the Director of an
approved State does not allow use of the test, the owner or operator
must provide alternate financial assurance as specified in this
section.
(2) [Reserved]
(C) If the Chief Financial Officer's letter providing evidence of
financial assurance includes financial data that are different from
data in the audited financial statements referred to in paragraph
(e)(2)(i)(B) of this section or any other audited financial statement
or data filed with the SEC, a special report from the owner's or
operator's independent certified public accountant to the owner or
operator is required stating that:
(1) He has compared the data in the chief financial officer's
letter derived from the independently audited, year-end financial
statements for the latest fiscal year with the amounts in such
financial statements; and
(2) In connection with that examination, no matters came to his
attention which caused him to believe that the data in the chief
financial officer's letter should be adjusted.
(ii) An owner or operator must place the items specified in
paragraph (e)(2) of this section in the operating record and notify the
State Director that these items have been placed in the operating
record before the initial receipt of waste or before the effective date
of this section, whichever is later, in the case of closure, post-
closure care, or no later than 120 days after the corrective action
remedy has been selected in accordance with the requirements of
Sec. 258.58.
(iii) After the initial placement of items specified in paragraph
(e)(2) of this section in the operating record, the owner or operator
must update the information and place updated information in the
operating record within 90 days following the close of the owner or
operator's fiscal year. This information must consist of all three
items specified in paragraph (e)(2) of this section.
(iv) The owner or operator is no longer required to submit the
items specified in paragraph (e)(2) of this section when:
(A) He substitutes alternate financial assurance as specified in
this section; or
(B) He is released from the requirements of this section in
accordance with Sec. 258.71(b), Sec. 258.72(b), or Sec. 258.73(b).
(v) If the owner or operator no longer meets the requirements of
paragraph (e)(1) of this section, the owner or operator must, within
120 days following the close of the owner or operator's fiscal year,
obtain alternative financial assurance that meets the requirements of
this section, place the required submissions for that assurance in the
operating record, and notify the State Director that the owner or
operator no longer meets the criteria of the financial test and that
alternate assurance has been obtained.
(vi) The Director of an approved State may, based on a reasonable
belief that the owner or operator may no longer meet the requirements
of paragraph (e)(1) of this section, require at any time the owner or
operator to provide current financial test documentation as specified
in paragraph (e)(2) of this section. If the Director of an approved
State finds that the owner or operator no longer meets the requirements
of paragraph (e)(1) of this section, the owner or operator must provide
alternate financial assurance as specified in this section.
(3) Calculation of costs to be assured. When calculating the
``current cost estimates for closure, post-closure care, corrective
action, or the sum of the combination of such costs to be covered, and
any other environmental obligations assured by a financial test''
referred to in paragraph (e)(1) of this section, the owner or operator
must include cost estimates required for municipal solid waste
management facilities under this part, as well as cost estimates
required for the following environmental obligations, if it assures
them through a financial test: obligations associated with UIC
facilities under 40 CFR 144.62, petroleum underground storage tank
facilities under 40 CFR part 280, PCB storage facilities under 40 CFR
part 761, and hazardous waste treatment, storage, and disposal
facilities under 40 CFR parts 264 and 265.
* * * * *
(g) Corporate Guarantee. (1) An owner or operator may meet the
requirements of this section by obtaining a written guarantee. The
guarantor must be the direct or higher-tier parent corporation of the
owner or operator, a firm whose parent corporation is also the parent
corporation of the owner or operator, or a firm with a ``substantial
business relationship'' with the owner or operator. The guarantor must
meet the requirements for owners or operators in paragraph (e) of this
section and must comply with the terms of the guarantee. A certified
copy of the guarantee must be placed in the facility's operating record
along with copies of the letter from the guarantor's chief financial
officer and accountants' opinions as specified in paragraph (e)(2) of
this section. If the guarantor's parent corporation is also the parent
corporation of the owner or operator, the letter from the guarantor's
chief financial officer must describe the value received in
consideration of the guarantee. If the guarantor is a firm with a
``substantial business relationship'' with the owner or operator, this
letter must describe this ``substantial business relationship'' and the
value received in consideration of the guarantee.
(2) The guarantee must be effective and all required submissions
placed in the operating record before the initial receipt of waste or
before the effective date of this section, whichever is later, in the
case of closure and post-closure care, or no later than 120 days after
the corrective action remedy has been selected in accordance with the
requirements of Sec. 258.58.
(3) The terms of the guarantee must provide that:
(i) If the owner or operator fails to perform closure, post-closure
care, and/or corrective action of a facility covered by the guarantee,
the guarantor will:
(A) Perform, or pay a third party to perform, closure, post-closure
care, and/or corrective action as required (performance guarantee); or
(B) Establish a fully funded trust fund as specified in paragraph
(a) of this section in the name of the owner or operator (payment
guarantee).
(ii) The guarantee will remain in force unless the guarantor sends
prior notice of cancellation by certified mail to the owner or operator
and to the State Director. Cancellation may not occur, however, during
the 120 days beginning on the date of receipt of the notice of
cancellation by both the owner or operator and the State Director, as
evidenced by the return receipts.
(iii) If a guarantee is cancelled, the owner or operator must,
within 90 days following receipt of the cancellation notice by the
owner or operator and the State Director, obtain alternate financial
assurance, place evidence of that alternate financial assurance in the
facility operating record, and notify the State Director. If the owner
or operator fails to provide alternate financial assurance within the
90-day period, the guarantor must provide that alternate assurance
within 120 days, obtain alternative assurance, place evidence of the
alternate assurance in the facility operating record, and notify the
State Director.
(4) If a corporate guarantor no longer meets the requirements of
paragraph (e)(1) of this section, the owner or operator must, within 90
days following the close of the guarantor's fiscal year, obtain
alternative assurance, place evidence of the alternate assurance in the
facility operating record, and notify the State Director. If the owner
or operator fails to provide alternate financial assurance within the
90-day period, the guarantor must provide that alternate assurance
within 120 days following the close of the guarantor's fiscal year,
obtain alternative assurance, place evidence of the alternate assurance
in the facility operating record, and notify the State Director.
(5) The owner or operator is no longer required to submit the items
specified in paragraph (g)(1) of this section when:
(i) The owner or operator substitutes alternate financial assurance
as specified in this section; or
(ii) The owner or operator is released from the requirements of
this section in accordance with Sec. 258.71(b), Sec. 258.72(b), or
Sec. 258.73(b).
* * * * *
PART 264--STANDARDS FOR OWNERS OR OPERATORS OF HAZARDOUS WASTE
TREATMENT, STORAGE, AND DISPOSAL FACILITIES
1. The authority citation for part 264 continues to read as
follows:
Authority: 42 U.S.C. 6905, 6912(a), 6924 and 6925.
3. Section 264.143 is amended by revising paragraphs (f)(1)(i)(D)
and (f)(1)(ii)(D) to read as follows:
Sec. 264.143 Financial assurance for closure.
* * * * *
(f) * * *
(1) * * *
(i) * * *
(D) Assets located in the United States amounting to at least the
sum of all obligations covered by a financial test.
(ii) * * *
(D) Assets located in the United States amounting to at least the
sum of all obligations covered by a financial test.
* * * * *
(ii) * * *
3. Section 264.145 is amended by revising paragraphs (f)(1)(i)(D)
and (f)(1)(ii)(D) to read as follows:
Sec. 264.145 Financial assurance for post-closure care.
* * * * *
(f) * * *
(1) * * *
(i) * * *
(D) Assets located in the United States amounting to at least the
sum of all obligations covered by a financial test.
(ii) * * *
(D) Assets located in the United States amounting to at least the
sum of all obligations covered by a financial test.
* * * * *
3. Section 264.147 is amended by revising paragraphs (f)(1)(i)(C)
and (f)(1)(ii)(D) to read as follows:
Sec. 264.147 Liability requirements.
* * * * *
(f) * * *
(1) * * *
(i) * * *
(C) Assets located in the United States amounting to at least the
sum of all obligations covered by a financial test.
(ii) * * *
(D) Assets located in the United States amounting to at least the
sum of all obligations covered by a financial test.
* * * * *
PART 265--INTERIM STATUS STANDARDS FOR OWNERS OR OPERATORS OF
HAZARDOUS WASTE TREATMENT, STORAGE, AND DISPOSAL FACILITIES
1. The authority citation for Part 265 continues to read as
follows:
Authority: 42 U.S.C. 6905, 6912(a), 6924, 6925, 6935, and 6936.
3. Section 265.143 is amended by revising paragraphs (e)(1)(i)(D)
and (e)(1)(ii)(D) to read as follows:
Sec. 265.143 Financial assurance for closure.
* * * * *
(e) * * *
(1) * * *
(i) * * *
(D) Assets located in the United States amounting to at least the
sum of all obligations covered by a financial test.
(ii) * * *
(D) Assets located in the United States amounting to at least the
sum of all obligations covered by a financial test.
* * * * *
3. Section 265.145 is amended by revising paragraphs (e)(1)(i)(D)
and (e)(1)(ii)(D) to read as follows:
Sec. 265.145 Financial assurance for post-closure care.
* * * * *
(e) * * *
(1) * * *
(i) * * *
(D) Assets located in the United States amounting to at least the
sum of all obligations covered by a financial test.
(ii) * * *
(D) Assets located in the United States amounting to at least the
sum of all obligations covered by a financial test.
* * * * *
3. Section 265.147 is amended by revising paragraphs (f)(1)(i)(C)
and (f)(1)(ii)(D) to read as follows:
Sec. 265.147 Liability requirements.
* * * * *
(f) * * *
(1) * * *
(i) * * *
(C) Assets located in the United States amounting to at least the
sum of all obligations covered by a financial test.
(ii) * * *
(D) Assets located in the United States amounting to at least the
sum of all obligations covered by a financial test.
* * * * *
[FR Doc. 94-25063 Filed 10-11-94; 8:45 am]
BILLING CODE 6560-50-P