The U.S. Environmental Protection Agency's (EPA) Office of Inspector General (OIG), Washington, D.C., recently issued an audit report to determine whether the financial assurance mechanisms developed by the EPA ensure fund availability for landfill closure and post-closure activities.
This was the first audit by OIG on Resource Conservation and Recovery Act (RCRA) financial assurance mechanisms. They examined all of these mechanisms allowable under hazardous waste treatment, storage and disposal facility (TSDF) and municipal solid waste landfill (MSWLF) regulations.
In 1976, Congress enacted RCRA to ensure that generated waste was properly managed. Regulations developed by the EPA for TSDFs required a closure plan for when TSDFs no longer treated, stored or disposed of waste.
To ensure money was available for potentially costly closures, facilities were required to meet certain financial assurance criteria. Specifically, the regulations required financial affirmation for post-closure care of hazardous waste landfills, involving such activities as final cover maintenance and groundwater monitoring. Similar requirements also were developed for MSWLFs under RCRA Subtitle D.
Today, the financial assurance mechanisms allowable under the hazardous waste rules include trust funds, surety bonds, letters of credit, insurance, and a corporate financial test or guarantee. MSWLFs can use the same mechanisms, as well as a local government financial test and guarantee, state assumption of responsibility and additional state-approved mechanisms.
For its audit, OIG studied policies, regulations, statutes, RCRA cases and other EPA programs. Additionally, EPA officials were interviewed.
OIG found that in many cases, RCRA financial assurance mechanisms were working as intended. However, the EPA's analysis of potential failures could not be fully relied upon because not all significant risk factors were included, the report stated.
Additionally, OIG had a major concern about captive insurance. Captive insurance companies rely on the financial support and fiscal strength of a parent company. The dependency of a third party may present a high risk to a facility's financial assurance. Thus, OIG believed that captive insurance might not meet RCRA's requirements.
OIG did not, however, recommend prohibiting captive insurance use. Instead, the report suggested that EPA's Acting Assistant for Solid Waste and Emergency Response (OSWER) take action to review captive insurance mechanisms.
According to the report, OSWER should issue guidance to state financial assurance programs when an insurance policy is used for closure or post-closure financial assurance.
The insurance policy should meet all state and federal requirements; and
In the state where the insurance company issuing the policy is licensed, the state program should verify with the insurance commissioner that the policy allows reassignment to the successor owner or facility operator in case the facility is sold outside of the seller's corporate family.
OIG also recommended OSWER:
Investigate complex insurance issues with states and determine states' needs for additional guidance;
Develop web-accessible financial assurance training materials, which can be downloaded by state programs; and
Work with Association of State and Territorial Solid Waste Management Officials, Washington, D.C., to develop an Internet bulletin board to share information with financial assurance program officials.
OIG received EPA's response to the draft financial assurance report on March 27, 2001. OSWER agreed with all recommendations and will conduct a study during 2001 to examine existing financial assurance mechanisms.
Meanwhile, states are beginning to re-examine their own financial assurance regulations. In May, the National Solid Wastes Management Association's (NSWMA) Landfill Institute, Washington, D.C., commented on California's proposed regulations.
The Golden State's proposal would prohibit using captive insurance for solid waste landfills.
However, the NSWMA pointed out that OIG's report raised questions about certain mechanisms, and it did not recommend that any mechanism be banned. So until OSWER completes an in-depth financial assurance study, California's proposal is premature.
Troy Marino is the public affairs assistant for the EIA's National Solid Wastes Management Association (NSWMA) and Waste Equipment Technology Association (WASTEC), Washington, D.C.