Financial requirements were established to ensure funds are available to pay for closing a facility, for rendering postclosure care at disposal facilities, and to compensate third parties for bodily injury and property damage caused by accidents related to the facility's operation. There are two kinds of financial requirements:
• Financial assurance for closure and postclosure
• Liability coverage for injury and property damage
To meet financial assurance requirements, owners and operators must first prepare written cost estimates for closing their facilities. If postclosure care is required, a cost estimate for providing this care must also be prepared. These cost estimates must reflect the actual cost of the activities outlined in the closure and postclosure plans, and are adjusted annually for inflation. The cost estimate for closure is based on the point in the facility's operating life when closure would be most expensive. Cost estimates for post-closure monitoring and maintenance are based on projected costs for the entire postclosure period.
The owner or operator must demonstrate to the EPA or state agency an ability to pay the estimated amounts. This is known as financial assurance. The owner/operator may use one or a combination of the following six mechanisms to comply with financial assurance requirements: trust fund, surety bond, letter of credit, closure/postclosure insurance, corporate guarantee for closure, and financial test. All six mechanisms are adjusted annually for inflation or more frequently if cost estimates change.
The Subpart H requirements for these mechanisms are extensive. Readers with particular interest in the details should examine 40 CFR Parts 264 and 265, Subpart H. Liability insurance requirements include coverage of at least $1 million (annual aggregate of at least $2 million) per sudden accidental occurrence, such as fire or explosion. Owners and operators must also maintain coverage of at least $3 million per occurrence (annual aggregate of at least $6 million), exclusive of legal defense costs, for nonsudden occurrences such as groundwater contamination. Liability coverage may be demonstrated using any of the six mechanisms allowed for assurance of closure or postclosure funds.
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