U.S. Environmental Protection Agency - October 2007

Compliance and Enforcement National Priority

Financial Responsibility Under Environmental Laws

What is the Environmental Problem? 

Many environmental statutes contain financial responsibility provisions.
 Generally, financial responsibility requires regulated entities to set
aside funds, obtain, or otherwise guarantee that funds will be available
to address short and long term risks associated with the management and
permanent disposal of hazardous materials, substance and wastes so as
not to adversely affect human health and the environment.

Financial responsibility protects human health and the environment by
preventing improper handling and release of hazardous materials and
wastes, ensuring funds will be available to address contamination,
preventing the shift of cleanup costs from the responsible party to the
taxpayer or other parties; and making facilities and land available to
the public for reuse. These benefits are lost unless there is compliance
with the financial responsibility requirements and enforcement where
there is a failure to maintain sufficient financial assurances.  Absent
financial assurance, protection of human health and the environment
would depend on available governmental financial resources.  Compliance
and enforcement of financial responsibility requirements is consistent
with EPA’s mandate to prevent harm to human health and the
environment, deter illegal activities, and the Agency’s long-standing
“polluter pays” principle.

The Office of Enforcement and Compliance Assurance (OECA) is concerned
that entities are not providing adequate financial responsibility in
accordance with their obligations under federal environmental laws. 
Recent studies and inquiries by the EPA Office of Inspector General (IG)
and the Government Accountability Office (GAO) have noted issues
regarding compliance with the financial responsibility requirements
under RCRA closure/post-closure, RCRA corrective action, CERCLA cleanups
and SDWA UIC program.  Also, ongoing EPA Regional assessments of
owner’s or operator’s compliance with RCRA Subtitle C closure and
post-closure financial responsibility requirements, for example, have
identified a wide range of violations.  These violations place the
public at risk because of the potential financial inability to close or
clean-up the site.

Why Are We Addressing this Problem?

Prior to the designation of financial responsibility as an enforcement
priority, OECA and the States noted compliance concerns and engaged in
discussions and activities to address these issues. Several of the
environmental laws with financial responsibility requirements do not
provide for authorization of State programs (e.g., CERCLA, TSCA) and EPA
must take the lead in addressing financial responsibility issues.  In
programs that have a state and federal component, EPA plays a crucial
role by providing national leadership regarding the implementation and
enforcement of the financial responsibility requirements.

With the emergence in 2005 of financial responsibility as a potential
OECA national priority, 

support for OECA’s decision to undertake this area as a national
priority came from EPA’s IG and the States.  Areas that have been
identified by OECA, the IG and GAO where EPA can provide leadership are
capacity building, revising national databases to incorporate and better
track financial responsibility, additional guidance and oversight
regarding enforcement of financial responsibility requirements and
highlighting the importance of financial responsibility nationally.

Since a portion of the non-compliances attributed to national companies
are systemic, EPA has an important role to play as it is better able to
address the violations corporate-wide.  Moreover, some of the legal
issues associated with the non-compliance are being encountered for the
first time in case development, settlement negotiations and litigation. 
EPA’s national focus on financial responsibility will lead to national
consistency, highlight the importance of financial assurance, ensure the
proper and safe management of hazardous substances, wastes and
pollutants, and assures that the billions of dollars needed to properly
close and clean-up hazardous wastes and substances will be available.  

How is OECA Addressing the Problem?  

EPA initiated a phased approach in the examination of compliance and
enforcement issues.  OECA has initiated its review by looking at RCRA
Subtitle C closure/post-closure, RCRA corrective action, the
Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA) and the Toxic Substances Control Act (TSCA).  OECA then plans
to evaluate the Safe Drinking Water Act (SDWA) and RCRA Subtitle I to
determine if the financial assurance programs under these laws should be
included in this priority.  The phased approach allows OECA the ability
to assess the information as it is gathered and focus its activities on
significant environmental or compliance problems as well as adjusting
its responses (e.g., enforcement, compliance assistance, etc.) when
dealing with several environmental statutes that may have uniquely
associated compliance and environmental concerns.  

Highlights from the FY 2005-2007 Planning Cycle

OECA has been able to identify some trends from the work undertaken
during FY’06-FY’07.  This work was focused primarily on the
preliminary review of financial instruments and compliance
determinations under the RCRA, TSCA and CERCLA requirements and
obligations. As the priority has progressed, concerns regarding cost
estimates have been raised and OECA is placing additional focus on cost
estimates (particularly for RCRA corrective action).  Though this
information is generally still preliminary and under review, it gives
OECA a basis to make informed decisions regarding prioritization of and
type of enforcement activity it will initiate to address the identified
non-compliance EPA anticipates during FY’08 to focus its resources on
addressing the identified non-compliances with the financial
responsibility requirements.

Final: Financial Responsibility Summary		October 2007 

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