Financial Assurance Mechanisms Corporate Owners and Operators of Municipal Solid Waste Landfill Facilities and Hazardous Waste Treatment, Storage, and Disposal Facilities

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