Financial Responsibility (FR) is the process of paying for site rehabilitation as well as compensating third parties for bodily injury and property damage caused by accidental releases from underground storage tanks containing petroleum or petroleum products. Site rehabilitation means investigation, evaluation, planning, design, engineering, construction, or other services put forth to investigate or clean up affected subsurface soils, groundwater, or surface water. For more information on site rehabilitation, click here.
According to R. 61-92, Part 280 Underground Storage Tank Control Regulations (pdf) all owners and/or operators of regulated tanks (including Temporarily closed tanks) must provide financial responsibility. If the owner and operator are separate persons, only one person is required to provide financial responsibility; however, both parties are liable in the event of noncompliance.
According to South Carolina Code of Laws, Title 44, Chapter 2 ( SUPERB Act of 1988 ), the amount owners and/or operators must provide is a $25,000 per occurrence deductible. This works in much the same way as a health insurance policy. For a qualified release, once the tank owner satisfies the deductible the SUPERB fund will begin paying for site rehabilitation and third party claims (up to 1 million dollars).
There are several ways (pdf) tank owners can satisfy the $25,000 per occurrence deductible requirement. A single mechanism, or a combination of mechanisms, can be used to meet the requirement. The following information is only an outline of the various mechanisms. More specific information, including language that must be used policies or letters can be found in the regulations (pdf).
- Self-Test (Section 280.95)
- The owner or operator must pass a financial test as specified in the regulation.
- Must provide a Financial self-test from a Chief Financial Officer or a report prepared by a CPA as stated in the regulation.
- Self-Insurance (Section 280.101)
- Self-insurance requires that an owner or operator show an actual net worth of $50,000.
- Must provide an annual financial statement and letter prepared by a Certified Public Accountant, Licensed Public Accountant, a board-licensed Accounting Practitioner or the chief financial officer of the company must be provided.
- Guarantee (280.96)
- A guarantee is a promise by a related company or another company to fund a standby trust fund. The third party has significant business interest in the owner or operator. They must provide information outlined in Self-Insurance.
- Must provide an annual financial statement from guarantor and a letter from a Certified Public Accountant, Licensed Public Accountant, a board-licensed Accounting Practitioner or the chief financial officer of the company.
- Pollution Liability Insurance (Section 280.97)
- The owner or operator obtains liability insurance from a qualified insurer or risk retention group. The policy must specifically address releases from USTs.
- Must provide a copy of the policy or the Certificate of Insurance Endorsement.
- Here is a list of pollution insurance providers (pdf).
- Surety Bond (Section 280.98)
- A surety bond is a guarantee by a surety company that will meet the obligation of the owner or operator. Surety companies eligible to issue surety bonds are listed in Circular 570.
- Must provide the surety bond.
- Letter of Credit (280.99)
- A letter of credit is a contract between the issuer (normally a bank), the principal (the UST owner or operator), and the third party (DHEC). The issuer promises to pay a certain amount to the third party in the event the principal fails to meet an obligation.
- Must provide the Letter of Credit
- Trust Fund (Section 280.102)
- The owner or operator may establish a fully funded trust fund. Money is held and managed by an impartial third party (trustee). The trustee must have authority to act as a trustee and be regulated and examined by a federal agency or a South Carolina Agency. The trust fund may be funded for the full-required amount or funded for part of the required amount in combination with another mechanism.
- Must provide the Trust Fund Agreement and the Certification of Acknowledgement
- Local Government Options (Section 280.104-107)
- Local government entities may use a bond rating test, a financial test, issue a guarantee, or dedicate a fund to meet financial responsibility requirements.
- Must provide a letter from the Chief Financial Officer, Local Government Guarantee with Standby Trust, or Local Government Guarantee without Standby Trust.
All methods of financial responsibility must also submit a completed Certificate of Financial Responsibility (pdf) with the other required documentation. A copy of the certificate should be kept with the facility DHEC records.
Every facility with regulated tanks (including Temporarily closed tanks), must provide financial responsibility.
- New facilities must provide financial responsibility before the Permit to Operate will be issued.
- New tank owners who purchase an existing facility are given 15 days to provide financial responsibility.
- Current tank owners must maintain their financial responsibility. A 45-day reminder letter will be mailed out to notify tank owners of the upcoming expiration of their current mechanism.
Failure to provide financial responsibility:
- A Notice of Alleged Violation (NOAV) will be issued giving 30 days to provide documentation.
- If information is still not provided at the end of 30 days, the delivery prohibition process will begin.
- At the end of the 15-day delivery prohibition process, the tanks will be tagged until all documentation is provided.
- Third-time repeat violators will be automatically referred to enforcement and civil penalties may apply.