requirements that may otherwise be similar to CERCLA response
actions and compensable through a CERCLA 108(b) financial
responsibility instrument would not be unfairly paid twice.
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VI. Section-by-Section Analysis

A. Subpart A--General Facility Requirements

1. Purpose and Scope (Sec.  320.1) and Applicability (Sec.  320.2)
    This proposed rule would establish financial responsibility
requirements under CERCLA applicable to current owners and operators of
hardrock mining facilities that are authorized to operate or should be
authorized to operate, that is, owners and operators that are required
to obtain authorization to operate and have done so, as well as those
who are required to obtain authorization to operate and have failed to
do so. The proposed rule would not apply to owners or operators of past
hardrock mining facilities, such as abandoned mines, nor would it apply
to former owners or operators of mines that are covered by the rule.
The financial responsibility requirements for those current owners or
operators would extend to all potential CERCLA liabilities at the
facility, based on current conditions at the site. This approach
balances the dual goals of providing funds to address CERCLA
liabilities at their sites, and of creating incentives for sound
practices that will minimize the likelihood of a need for a future
CERCLA response.
    In developing this proposed rule, EPA considered whether to propose
conditions applicable to all owners and operators, past and present, of
facilities covered by the rule, or whether to limit the rule to current
owners and operators. EPA also considered whether CERCLA Sec.  108(b)
requirements could be applied to abandoned facilities. Although CERCLA
Sec.  108(b) could potentially be interpreted to cover such owners,
operators and facilities, EPA is proposing requirements applicable only
to current owners and operators of currently authorized to operate
facilities for a number of reasons.
    The plain language of CERCLA Sec.  108(b) is ambiguous on the
owners, operators and facilities to which it is intended to apply. The
section uses the terms ``owner'' and ``operator'' and ``facility''
repeatedly, but says nothing about whether these terms could include
past owners and operators, or owners or operators of former facilities.
    Looking at the statute more broadly, however, indicates that it is
appropriate to adopt a narrower interpretation than the bare terms in
CERCLA Sec.  108(b) would suggest. First, reading CERCLA Sec.  108(b)
as applying to current owners and operators of currently-active or -
idled facilities comports with CERCLA Sec.  108 when read as a whole.
CERCLA Sec.  108 requires evidence of financial responsibility for
three different types of facilities: vessels under CERCLA Sec.  108(a),
motor carriers under CERCLA Sec.  108(b)(5), and other facilities under
CERCLA Sec.  108(b). The provisions applicable to vessels and motor
carriers logically apply to current owners and operators of existing
vessels and motor carriers. For example, CERCLA Sec.  108(a) refers, as
does CERCLA Sec.  108(b), to ``owners'' and ``operators'' of
``vessels'' without qualification. However, logically only current
owners and operators of existing vessels are able to ``use[] any port
or place within the United States'' as required by CERCLA Sec.  108(a),
and only those entities and vessels would be subject to the remedies
available to the Secretaries of the Treasury and Transportation in
CERCLA Sec. Sec.  108(a)(2) and (3). Indeed, the U.S. Coast Guard's
CERCLA Sec.  108(a) regulations apply only to current owners and
operators of vessels used or capable of being used as a means of
transportation on the water. See 33 CFR Sec. Sec.  138.12 and 138.20.
DOT's motor carrier financial responsibility requirements also only
apply prospectively.
    Current owners and operators are the primary actors at facilities
and as such would be able to evaluate the applicability of the rules
and apply the formula to the features present. EPA anticipates that
requiring entities that may no longer have the legal rights to access a
facility to evaluate it for purposes of determining whether they are
subject to the rule and if so, the appropriate amount of financial
responsibility, would be difficult in many cases. Thus EPA intends for
this proposal to be focused upon an easily-identified, particular
subset of parties that has control over and are thus in the best
position to control and address hazardous substance management
activities. Such incentives would not exist in the case of owners and
operators that no longer have activities at the site. Nor does EPA
expect that applying the rules to such former owners would further a
primary goal of financial responsibility, that is, to develop
incentives for good practices.
    Similar reasoning leads EPA to propose applying the CERCLA Sec.
108(b) requirements only to currently-active or currently-idled
facilities. These facilities are readily identifiable and because they
are ongoing concerns, are more likely to be able to obtain the kind of
financial responsibility necessary under the regulation, and to further
the dual goals of CERCLA Sec.  108(b) regulations. By contrast, EPA is
concerned that a rule applicable to facilities that are not currently
active or currently idled would be very difficult to implement, and has
the potential to divert significant resources from existing Superfund
priorities with minimal benefit to the program. Therefore, EPA believes
that attempting to regulate and oversee CERCLA Sec.  108(b)
requirements for this vast universe of facilities would impose a
tremendous administrative burden on the Superfund program, with the
likelihood of very little return. EPA

believes that the Superfund and existing enforcement processes are
significantly better suited for use at sites that are not currently
active or currently idled to effect cleanup directly. Thus, EPA expects
that the approach in this proposed rule would maximize the
effectiveness of CERCLA Sec.  108(b) requirements.
    EPA has sought to complement CERCLA's liability provisions by
requiring owners and operators subject to the rule, to provide
assurance against all potential risks associated with hazardous
substance management at their facility. In this way EPA's proposed
approach thus also is intended to support CERCLA's broad remedial
purposes, while accounting for the differences between CERCLA Sec.
108(b)'s regulatory program and CERCLA's liability and enforcement
provisions.
    As discussed in further detail in following sections of this
preamble, requirements for financial responsibility under CERCLA Sec.
108(b) do not affect the liability of any parties potentially
responsible for CERCLA costs. This would include that of any former
owners and operators. The existing CERCLA processes for enforcement,
contribution, cost recovery, and assignment of liability are unaffected
by CERCLA Sec.  108(b) financial responsibility requirements, and are
available to ensure that responsible parties pay the costs associated
with releases or threatened releases of hazardous substances. In fact,
while not required by the proposed rule itself, EPA believes that
requiring current owners and operators to demonstrate CERCLA Sec.
108(b) financial responsibility may have the salutatory effect of
inducing those subject to the rule to seek out any other parties who
may be liable for contamination at their facility in order to obtain
their assistance with cleanup. The result could be a potential
reduction in threats to human health and the environment at the site
which could in turn result in a reduced CERCLA Sec.  108(b) financial
responsibility amount. Given the practical difficulties of imposing
CERCLA Sec.  108(b) financial responsibility requirements upon past
owners and operators, EPA expects that those existing processes are the
appropriate means for parties to divide liabilities amongst themselves.
Exemption for States and the Federal Government
    The proposed rule at Sec.  320.1(c) would exempt states and the
Federal Government from the requirements of part 320. This provision is
modeled on a similar, long-standing exemption in EPA's regulations for
RCRA Subtitle C hazardous waste treatment, storage, and disposal
facilities.\48\ In EPA's view, the Federal and state governments have
adequate resources and taxing authority to ensure that they will be
able to pay for any CERCLA Sec.  107 costs that may arise at facilities
where they are owners or operators. Local governments, however, are not
exempt. As EPA explained in 1980, local governments can and do become
insolvent, and if small enough, may not be able to cover their
liabilities. EPA requests comment on this exemption.
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    \48\ See 45 FR 33198-99 (May 19, 1980); 45 FR 33262 (May 19,
1980).
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Non-Transportation-Related Facilities
    E.O. 12580 delegates the responsibility for developing regulations
under CERCLA Sec.  108(b) for non-transportation-related facilities to
EPA. Responsibility for developing regulations for transportation-
related facilities is delegated to the Department of Transportation.
Thus, transportation-related facilities at hardrock mining sites would
not be subject to requirements under this proposed rule. The Agency
anticipates that jurisdictional issues between EPA and the Department
of Transportation will be worked out in implementation. EPA solicits
comment on this approach.
2. Definitions (Sec.  320.2)
    The Agency is proposing the following definitions for use in Part
320:
    Hardrock Mining Facility means a hardrock mine, as defined in
subpart H of part 320, and/or a mineral processor, as defined in
subpart H part 320.
    Administrator means the EPA Administrator, or designee thereof.
3. Availability of Information; Confidential Business Information
(Sec.  320.4)
    Section 2.203(b) of this chapter provides procedures through which
any person submitting information to EPA in accordance with this Part
may assert a claim of business confidentiality covering part or all of
that information. Information covered by such a claim will be disclosed
by EPA only to the extent, and by means of the procedures, set forth in
Part 2, Subpart B, of this chapter. However, if no such claim
accompanies the information when it is received by EPA, it may be made
available to the public without further notice to the person submitting
it.
    This rule proposes an option to require owners or operators to post
on their company website all information submitted to EPA that is not
identified as confidential business information (CBI). EPA anticipates
that owners or operators will claim some of the information submissions
required under this rule as CBI. However, the Agency believes that
there are categories of information required that will not be CBI
including, but not limited to, identification of the type of financial
responsibility instrument used, the amount of financial responsibility
required at a facility, the facility contact information, failure of
instrument providers, an owner or operator entering bankruptcy, claims
made against the owner or operator, or an owner or operator's request
for release from financial responsibility requirements. To facilitate
implementation of this proposed rule, the Agency is considering making
Class Determinations for certain types of CBI information. EPA solicits
comment on the types of information that owners or operators anticipate
would be CBI, and on the value of CBI Class Determinations.
4. Initial Notification Requirement (Sec.  320.5)
    EPA is proposing to require owners or operators subject to the
requirements of this rule to submit a notification form to EPA. Owners
or operators authorized to operate on the promulgation date of this
rule would be required to submit the initial notification form within
thirty days of the effective date of the final rule. Owners or
operators that become authorized to operate after the effective date of
the final rule would be required to submit the notification form and
comply with the requirements of this proposed rule prior to beginning
operations
    The notification form is specified in proposed Sec.  320.5. Owners
or operators would be required to provide, at a minimum, the following
information: (1) The name, mailing address, and location of the
facility, (2) the facility's EPA ID number, if one has been previously
issued, (3) the name and contact information for a contact person for
financial responsibility issues, (4) the land type on which the
facility is located, (5) owner and operator information, (6) and
information about the activities conducted at the facility.
    Within thirty days of receiving the notification form, EPA would
issue an EPA identification number to the facility, if the facility has
not yet received one.
    The requirement for this notification form would serve several
purposes important to the implementation of financial responsibility
requirements under this proposed rule. First, it would

allow EPA to identify the universe of facilities subject to the rule.
In addition, it would assure that all facilities subject to the rule
receive an EPA identification number, which will allow EPA to track
financial responsibility implementation information. Finally, it would
provide EPA information about the facility that EPA anticipates will be
important for effective rule implementation. The Agency solicits
comment on this proposed notification requirement, on the proposed
notification form, and on the timeframe for notification.
5. Information Submission Requirements (Sec.  320.6)
    This proposed rule would require that owners or operators of
facilities subject to the rule submit information to EPA. The Agency
believes that submission of the information proposed in this rule would
be needed for effective implementation of CERCLA Sec.  108(b)
requirements. By requiring the owner or operator to submit information
about the facility to EPA, these requirements would better enable the
Agency to ensure full compliance with the requirements for financial
responsibility throughout the time the facility is subject to those
requirements.
    Under Sec.  320.5, owners and operators would be required to submit
an initial notification form. The form would provide EPA basic
information about the facility. The form can be found in Appendix A of
Part 320. EPA solicits comment on the information required in the form.
    Owners or operators would further be required to submit evidence of
financial responsibility. The precise submittal requirements for each
financial instrument are described in subpart C. Generally, owners or
operators demonstrating financial responsibility using a surety bond
would be required to submit the surety bond to EPA. Owners or operators
using a letter of credit would be required to submit the letter of
credit to EPA unless it is held by a trustee, as provided in Sec.
320.40, in which case they would be required to submit a certified
copy. Owners or operators using insurance would be required to submit
the endorsement. Owners or operators using a trust agreement (either a
stand-alone trust or a stand-by trust established for use with another
instrument) would be required to provide a duplicate original. If the
final rule allows for the use of a financial test and corporate
guarantee, owners or operators using the corporate guarantee would be
required to submit a signed corporate guarantee, as well as a letter
from the Chief Financial Officer (CFO letter), audited financial
statements, and agreed upon procedures report, as required in Sec.
320.44. Finally, owners or operators using the financial test, if
allowed in the final rule, would be required to submit the CFO letter,
audited financial statements, and agreed upon procedures report, as
required in Sec.  320.43. In the case of the corporate guarantee and
the financial test, the CFO letter, auditors report, and agreed upon
procedures report would be required to be updated annually.
    This proposal also requires information submission to assure proper
maintenance of financial responsibility. The precise submittal
requirements for each of the following are described in Sec.  320.65.
These requirements include a requirement to update financial
responsibility amount calculations every three years, at a minimum, and
to notify EPA of changes in the information on the facility's initial
notification form, facility transfer, claims filed against the
instrument or owner or operator, intent to close the facility, failure
of an instrument provider, instrument provider intent to cancel, and
owner or operator bankruptcy.
    Owners or operators are also required to submit information that
may vary according to facility class. These requirements will be
specified in the relevant Subparts to 40 CFR part 320, but for clarity,
those submission requirements are also incorporated into the general
information submission requirement in proposed Sec.  320.6. Thus, for
example, owners and operators of hardrock mining facilities must
calculate a financial responsibility amount for their facilities using
the formula in Sec.  320.66, and Sec.  320.67 requires submission of
information to support that calculation, including data inputs to the
proposed formula to determine a financial responsibility amount, and
documentation supporting all data inputs and assumptions. Under
proposed Sec.  320.6, this information must be submitted to EPA.
    The Agency solicits comment on these information submission
requirements including comments on the need for these requirements and
suggestions for additional information that should be required under
this rule.
6. Requirement for Electronic Submission of Information (Sec.  320.7)
    This proposed rule includes information submission requirements
throughout the financial responsibility process. These information
submission requirements include: (1) Initial notification, (2)
demonstration of financial responsibility, (3) notifications pursuant
to financial responsibility maintenance, (4) submission of a financial
responsibility amount and support for the amount, and (5) request for
release from financial responsibility. The Agency is proposing to
require that the submissions under this rule be in electronic format.
a. Benefits of Electronic Reporting
    Adopting electronic information submission across its programs will
benefit the Agency, owners and operators, and the general public.
Electronic information submission will save Agency resources and
improve data quality by reducing the need for manual data entry, and
will help the Agency manage environmental programs more efficiently and
effectively. EPA also expects electronic information submission to
promote public participation by facilitating EPA's ability to make
information submitted more readily accessible to interested parties. In
this respect, electronic reporting can work in concert with another
requirement in the proposed rule--that owners and operators have a
publicly-accessible Web site (see Section VI.A.8. of this preamble). In
addition, electronic information submission will reduce the time needed
for owners and operators to submit information by eliminating the need
to print or mail forms, eliminate mailing or courier fees, and allow
members of the regulated community to obtain information about the
status of their submissions without requesting such information from
EPA by phone or mail.
    Use of electronic forms should also facilitate the effective
submission of required information. Owners and operators may benefit
through integration of data entry error prevention and compliance
assistance into the reporting tool. Namely, electronic systems can
provide automatic data quality checks, such as for improperly formatted
addresses, math errors, or significant changes in cost estimates, and
flag these for correction, if needed, before submission. A system can
also provide automated reminders and prompts (e.g., when annual updates
are due) to owners and operators, and pre-populate forms with
information from prior reports. EPA does not expect that these or other
tools that could be built into such a system would guarantee compliance
or be a substitute for an owner or operator's own compliance
assessment, since they cannot account for every site-specific
situation, but EPA expects that such tools will make it easier for
owners and operators to comply with the rules. It can also facilitate
communication between EPA, owners and operators,

and instrument providers to immediately address data quality issues and
to provide compliance assistance or take other action when potential
problems are identified. Finally, the system may also provide a way for
entities to maintain records supporting financial responsibility
compliance, such as cost estimate documents.
    This approach is also consistent with the Agency's 2013 E-Reporting
Policy Statement for EPA Regulations, which reflects that, in
developing new regulations, EPA will assume that reporting will be
electronic and not paper-based.\49\ As described by this policy, e-
reporting is not simply a regulated entity e-mailing an electronic copy
of a document (e.g., a PDF file) to the government, but a system in
which an electronic tool guides the regulated entity through the
reporting process, often with built-in compliance assistance and data
quality checks. This policy embraces the Digital Government Strategy
issued by the White House on May 23, 2012,\50\ which calls for EPA to
continue evolving its reporting systems to take advantage of new
technology and improve transparency for all of its stakeholders.
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    \49\ See E-Reporting Policy Statement for EPA Regulations
(September 30, 2013), http://www.epa.gov/sites/production/files/2016-03/documents/epa-ereporting-policy-statement-2013-09-30.pdf.
    \50\ http://www.whitehouse.gov/sites/default/files/omb/egov/digital-govemment/digital-govemment-strategy.pdf.
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    Electronic reporting also is a key component of the Next Generation
Compliance Strategy.\51\ EPA's Next Generation Compliance Strategy is
an integrated strategy to improve regulations with new monitoring and
information technology and expanded transparency.\52\ It is designed to
motivate the regulated community to increase compliance, inform the
public about performance, and help ensure the public has access to
information about their communities that allows them to more fully
engage in environmental protection efforts.
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    \51\ See http://www.epa.gov/compliance/next-generation-compliance-strategic-plan-2014-2017.
    \52\ See http://www2.epa.gov/compliance/next-generation-compliance.
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b. Financial Responsibility Portal
    To realize these benefits, EPA is considering development of a
Financial Responsibility Portal to collect information relevant to the
rule and to serve as an electronic tool that guides owners and
operators through the reporting and submission processes with built-in
compliance assistance and data quality checks. EPA envisions that this
system would be a component of EPA's Central Data Exchange,\53\ or an
equivalent technical architecture. If the Financial Assurance Portal is
created using Central Data Exchange, owners and operators will be
required to establish an account with Central Data Exchange in order to
use the system. Any electronic reporting system will comply with
subpart D of EPA's Cross-Media Electronic Reporting Regulation
(CROMERR).\54\ CROMERR sets performance-based, technology-neutral
standards for receiving electronic reports from facilities regulated
under EPA programs to protect users and their data.
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    \53\ CDX is EPA's electronic system for environmental data
exchange to the Agency. CDX also provides the capability for
submitters to access their data through the use of Web services. CDX
enables EPA to work with stakeholders, including governments,
regulated industries, and the public, to enable streamlined,
electronic submission of data via the Internet. For more information
about CDX, go to http://epa.gov/cdx.
    \54\ see 40 CFR part 3.
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    EPA envisions that users would access the portal through a Web form
based on Extensible Mark-up Language (XML). EPA expects that XML
schemas and stylesheets, when combined with XML enabled browsers, data
bases, and other applications are currently the method of choice for
conducting data exchange using the Internet to transfer and manipulate
data.\55\ The Agency is seeking comment on using an XML format, or if
another type of electronic format, such as an Electronic Data
Interchange (EDI) would be preferable. EPA also requests comment on the
estimated burden reduction if EPA developed an option to submit
information electronically using a system-to-system based approach
using Extensible Mark-up Language (XML) through EPA's Central Data
Exchange.
---------------------------------------------------------------------------

    \55\ EPA states a similar expectation in the Final Rule for
Hazardous Waste Manifest Revisions--Standards and Procedures for
Electronic Manifests (79 FR 7517, Aug. 6, 2004).
---------------------------------------------------------------------------

    Once the Financial Assurance Portal is developed, EPA is proposing
to require that regulated facilities electronically submit the
following categories of information through the portal: (1) Initial
notification form required under Sec.  320.5, (2) submission of URL
where CERCLA Sec.  108(b) information will be available, (3) financial
responsibility formula data (upload documentation), (4) financial
responsibility instrument evidence, (5) notification of change in
financial responsibility amount, (6) notification of change in
instrument, (7) notification of claim filed against the instrument or
owner or operator, (8) notification of closure, (9) request for release
from financial responsibility; and (10) notice of owner or operator
bankruptcy. In addition, EPA is proposing to provide for both paper and
electronic submission of the following notices from instrument
providers: (1) Notice of cancellation (by provider), and (2) notice of
provider incapacity. Within these categories, EPA expects that certain
types of information will need to be submitted using different types of
electronic means, which are discussed in detail in later sections.
    In order to gain the full benefits of electronic reporting,
obtaining as much information as possible in an electronic format is
preferable. At the same time, the Agency is considering whether some of
the information submission requirements of this proposed rule may not
be appropriate for electronic information submission. For example, some
of the information submission requirements proposed in this rule will
result in more frequent submissions to EPA than will others. An example
of submissions that EPA expects to occur more frequently relate to
facility conditions--every facility will have to notify the Agency, and
the notification form will have to be updated to reflect changed
facility conditions. On the other hand, other requirements may be less
frequent. For example, EPA's analysis of instrument providers
(conducted for purposes of evaluating provider qualifications)
indicates that failures are relatively uncommon. Thus, it is possible
that few owners or operators will have to submit notification of
instrument provider failure. Where infrequent submissions are likely,
EPA expects that developing an electronic form for that submission may
not have significant benefits. In addition, there may be specific types
of documents (e.g., cost estimate data, certain types of financial
responsibility instruments that may require wet ink signatures) that
cannot be submitted electronically. The Agency solicits comment on
types of information that are inappropriate for electronic submission,
including the reason they may not be appropriate, and the burden to the
regulated community if electronic submission of such information were
to be required. EPA also asks for comment on which types of information
commenters believe should be highest priority for EPA development of
electronic submission tools.
    As EPA develops its data system, it is considering technical issues
associated with its development as described later in this section. EPA
solicits comment on how an electronic submission system can be
constructed to appropriately capture submission of the categories of
information that EPA proposes to

require. Specifically, EPA requests comment on whether specific
technical requirements are called for to support data submission of the
following categories of information: (1) The development of a financial
responsibility amount, (2) evidence of financial responsibility, (3)
updates to the facility's financial responsibility information, (4)
notice of closure of the facility, and (5) submission of instruments
and cancellations, including how to account for the acceptance of
originally signed financial responsibility documents. EPA is also
seeking comment on the feasibility and utility of developing tools
within the system that would assist users in complying with reporting
requirements, such as the use of decision-trees to determine if an
entity is regulated, checklists to ensure the proper form/documents are
submitted, or reminders when reports or updated documents are due.
c. Anticipated Format of Submissions
    The electronic system envisioned by EPA would have both mandatory
and optional data entry fields. Submissions will not be processed until
each of the mandatory fields have data entered, ensuring complete data
entry before final submission. Data entry fields are expected to be a
variety of drop down lists, number fields, calendars, and open test
fields depending on the information that is required. For example, the
type of activities occurring at the facility could be chosen from a
drop down list, and the date of a facility's last financial
responsibility amount calculation or financial test submission could be
chosen from a calendar.
    EPA expects these types of controls on data input can result in
reduced errors. In turn this should provide efficiencies by
substantially decreasing the time needed for EPA to review and process
the submissions, and the time needed for the submitter to correct
deficiencies. As discussed earlier, EPA is considering the ability to
duplicate previous submissions when seeking to update or renew
information. This will simplify future submissions to only those fields
that require updates. To address the issue of CBI (described in Sec.
320.4) the Agency envisions establishing a database that tags
information as public or confidential upon receipt. This would allow
the system to then auto-populate an EPA webpage to provide information
not identified as CBI to the public. EPA solicits comment on this
approach.
    As discussed earlier, EPA would like to make it possible for users
to enter some types of information through electronic forms available
in the Portal. For example, EPA intends that the following information
would be entered into the Financial Assurance Portal using smart forms
with data-entry boxes that specify the exact information needed: (1)
Initial notification; (2) website URL; (3) amount of financial
responsibility required; (4) amount of financial responsibility
secured; (5) type of instrument; and, if the financial test is used,
credit rating, tangible net worth, and assets in the United States; and
(6) instrument provider information (e.g., name, address, etc.).
    EPA intends other submissions to be accomplished through forms with
electronic signatures and verification: (1) Financial responsibility
instruments, (2) certain information demonstrating passage of the
financial test, (3) notice of a change in financial status if using the
financial test, (4) notice of cancellation of a financial assurance
instrument, (5) notice of a claim against the instrument, (6) notice of
bankruptcy; (7) notice of a change in instrument, (8) notification of
change in the amount of financial responsibility required, and (9)
notice of incapacity of the instrument provider. Where an electronic
signature is required, the proposal requires that the signature be a
legally valid and enforceable signature under applicable EPA and other
Federal requirements pertaining to electronic signatures.
    EPA also expects that the user will need to upload other
information from outside the system. EPA expects that this information
will need to meet certain document requirements (e.g., downloadable,
not encrypted, printable, searchable, etc.). For this category of
documents, owners and operators would be required to produce duplicate
originals of certain electronic filings upon request by EPA. EPA
expects that the following information, if applicable, may fall into
this category: (1) Information supporting the financial responsibility
amount determination, (2) information to support a financial test
showing, for example financial statements; the CFO letter; a CPA audit
of financial information; and an agreed-upon procedures document; (3)
annual updates on trust properties and (4) evidence of financial
responsibility; and (5) PDF copies of instruments that cannot be
submitted electronically.
    The Agency solicits comment on these expectations for information
submission format.
d. Access to the System
    EPA envisions that owners or operators will receive a password and/
or user identification number to access the portal when they notify EPA
that they are a regulated entity. The system will then assist owners or
operators in obtaining a unique user identification number, similar to
the electronic interface that EPA has recently made available for
states and the regulated community to use to electronically submit RCRA
Site Identification (Site ID) forms, which are used by facilities to
notify regulators that they are involved in RCRA waste activities. EPA
intends to establish an electronic notification form for owners or
operators to comply with proposed Sec.  320.5. EPA solicits comment on
whether instrument providers should be given access to the Financial
Assurance Portal in order to submit notices to EPA and to owners and
operators as required under this rule (e.g., notice of cancellation).
EPA solicits comment from instrument providers specifically, on whether
they would use the electronic system described to file their notices
electronically.
e. Beginning Electronic Reporting Once Portal Developed
    Because the Agency anticipates that the Financial Assurance Portal
will not be available to receive submissions when this rule is made
final, the Agency is proposing that owners or operators be required to
initially submit information in paper format until the electronic
capability is available. Thus, EPA is proposing to identify an
electronic filing compliance date in Sec.  320.7(a). Because that date
is not currently known, EPA is proposing to announce that date in the
Federal Registerat least sixty days in advance. The Agency is further
proposing that after that compliance date, owners or operators would be
required to submit information electronically unless they apply for and
receive a waiver from electronic reporting requirements under Sec.
320.7(d). This waiver provision is discussed in more detail later in
this section. The Agency solicits comment on this approach.
    EPA is considering an alternative approach under which electronic
reporting would be phased in over the four-year compliance timeframe.
EPA would require the initial notification to be submitted
electronically, but would roll out other electronic forms as parts of
the rule become effective or required (e.g., the full amount of
financial responsibility is not required until four years after the
rule is promulgated). This will give EPA time to complete and fully
test a number of the electronic documents prior to requiring their use.
The disadvantage of this option is the increased burden to industry of
having to print and mail paper documents,

along with the Agency's burden of manually entering data into its data
system. EPA is considering whether such phasing may help ensure the
system is working effectively and efficiently. Under this option, EPA
would similarly identify an electronic filing compliance date for each
phase in future Federal Register notices in a similar manner as
described in the proposed option described earlier. Also similarly to
the proposed option, the facility would be required to submit
information in paper format until electronic submittals are possible
for submission of the facility's information, and electronic filing
would be subject to waiver.
f. Proposed Waivers
    As part of the proposal for mandatory electronic reporting, the
proposed rule would provide two options through which the Administrator
could waive the requirement for electronic submission. EPA recognizes
that there may be some circumstances where it may be necessary to
provide for paper reporting of information otherwise required
electronically, e.g., in areas that lack sufficient broadband access,
during large-scale national disasters (e.g., hurricanes) or prolonged
electronic reporting system outages, or to accommodate the religious
practices of individuals that choose not to use certain technologies
(e.g., computers, electricity) in accordance with their religion. The
Agency solicits comment on situations where flexibility might be
required, and on what types of waivers should be provided under this
rule.
    EPA has included both a general waiver provision and an emergency
waiver provision in the proposed rule. A general waiver could be
granted to owners or operators that cannot comply with the requirement
for electronic submission. The owner or operator would be required to
submit a request for a general waiver to the Administrator at least
thirty days in advance of the date the information is due to EPA. The
Administrator could grant a general waiver upon a finding that: (1) The
owner or operator is unable to gain access to a system allowing
electronic reporting because it is located in an area with insufficient
broadband access, or (2) religious practices of the owner or operator
prohibit the use of necessary technologies. A general waiver could be
granted for one year, and the owner or operator would be able to
reapply annually.
    In addition, the Administrator could grant a waiver of the
requirements for electronic submission in emergency situations. To
obtain an emergency waiver, the owner or operator would be required to
submit a request within ten days of the date the information is due to
EPA. The request for an emergency waiver must describe the conditions
that prevent electronic submission of information and must be
accompanied by a paper copy of the information due. The Administrator
may grant an emergency waiver upon a finding that the owner or operator
was unable to comply with the requirement for electronic information
submission due to: (1) A large-scale national disaster (e.g.,
hurricane), (2) a prolonged electronic reporting system outage, or (3)
a prolonged outage of the owner's and operator's computer system. The
Agency solicits comment on the adequacy of these waiver provisions.
7. Recordkeeping Requirements (Sec.  320.8)
    EPA is proposing that owners or operators be required to develop
and maintain a facility record that includes information documenting
compliance with the financial responsibility requirements of this
proposed rule. The facility record must include at least all
information required to be submitted to EPA under this Part, comments
received from the public, and all notifications received from EPA
related to the financial responsibility obligations of the facility.
The rule would require owners or operators to maintain this information
until three years after the Agency releases the owner or operator from
the requirement for financial responsibility. EPA solicits comment on
these recordkeeping requirements.
8. Requirements for Public Notice (Sec.  320.9)
    EPA is proposing requirements for public notice for owners and
operators subject to CERCLA Sec.  108(b) requirements. This approach
will add the benefit of transparency to implementation of CERCLA Sec.
108(b) requirements. In addition, these proposed requirements are
consistent with EPA's commitment to assuring that the public is aware
of EPA's Superfund activities at sites, even when there may not be an
active Superfund action underway.\56\ EPA believes that the proposed
requirements for public notice would enhance the implementation of the
proposed rule in two respects.
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    \56\ See Superfund Community Involvement Handbook, 2005 page 5.
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    First, such public notice would help to ensure that the financial
responsibility formula is applied as intended, so that the resulting
financial responsibility level reflects the degree and duration of risk
at the facility. As discussed in the financial responsibility formula
section of this preamble, Sec.  320.63, the financial responsibility
formula is intended to be implemented by owners or operators, rather
than by EPA. While EPA expects that in the vast majority of cases the
financial responsibility formula will be applied accurately, EPA
believes that providing information to the public can enhance the
incentives for owners and operators to fully comply with regulatory
requirements. The reliance on public notice as an incentive for
compliance under this proposal is consistent with the 2010 guidance
issued by the Office of Management and Budget (OMB), where that office
recognized that the public disclosure of information is an increasingly
common and important regulatory tool.\57\
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    \57\ See United States Office of Management and Budget. Sharing
Data While Protecting Privacy. Memorandum from Jeffrey D. Zeints and
Cass R. Sunstein. November 3, 2010. Available at: https://www.whitehouse.gov/sites/default/files/omb/memoranda/2011/m11-02.pdf
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    Second, the proposed rules are structured to support CERCLA
responses undertaken by the Federal Government, states, and private
parties--a structure that is consistent with the CERCLA scheme. EPA is
proposing to require owners and operators to make readily available to
the public information about the levels of financial responsibility,
information on claims made, and information that may relate to the
continued validity of the instruments--for example, any notices of
instrument cancellation by providers. EPA believes that ready access to
this information will help ensure that parties with CERCLA claims, and
parties potentially impacted by the CERCLA claims of others, will have
the opportunity to monitor changes in the facility's financial
responsibility.
    EPA is today proposing two approaches for public notice procedures.
Under the first approach, the owner or operator would be required to
maintain a web site to convey information regarding its compliance with
the requirements of proposed part 320. Under the second, EPA would
provide information to the public on the Agency's Web site.
    Under the first approach, owners and operators would be required to
post information on a Web site created and maintained by the owner and
operator. EPA is considering this approach because, as those generating
the information, owners and operators are in the best position to track
information about their facilities. In addition,

requiring owners and operators to update information related to their
financial responsibility requirements would eliminate lag times between
when the information is submitted to EPA and when EPA can make that
information publicly available. Thus, EPA expects that requiring owners
and operators to create and maintain their own Web sites may be an
efficient way to ensure timely dissemination of information related to
CERCLA Sec.  108(b) financial responsibility.
    The owner or operator would be required to establish a Web site
titled ``CERCLA Sec.  108(b) Financial Responsibility Information''
within sixty days of the date it first becomes subject to CERCLA Sec.
108(b) requirements to and provide EPA with the URL of the location on
its company Web site where it will make information available to the
public about the implementation of financial responsibility
requirements at the facility.
    EPA would be required, within thirty days of receiving the URL, to
post on its Web site the facility name, company EPA identification
number, and the URL where information will be made available to the
public by the owner or operator.
    The proposed rule would then require the owner or operator to
provide information on its company Web site beginning ninety days after
the date it becomes subject to requirements under CERCLA Sec.  108(b).
The initial posting of information must include the name and contact
information for a person that can provide the public information about
the facility's CERCLA Sec.  108(b) requirements. In addition to this
information, the rule would require the owner or operator to make
public at least the following information: (1) Any information that the
owner or operator is required to submit to EPA under this proposed
rule, and (2) notifications from EPA to the owner or operator .
    This approach would also establish conditions for maintenance of
the information on the company Web site. For example, Sec.  320.9(e)
would require that the information be posted in a location where a
visitor to the Web site would reasonably expect to see announcement of
issues related to compliance with requirements of CERCLA. In addition,
that section would require that the owner or operator assure freely
available access to the information, and that the access not be
obstructed by complex access processes or passwords. The Agency
believes these requirements are necessary to assure meaningful access
to information.
    To assure that current information is made available to the public,
this approach would require the owner or operator to post all
information submitted to EPA within thirty days of its submission.
Thus, for example, the rule would require the owner or operator to
submit to EPA the Initial Notification Form required under Sec.  320.5
within thirty days of the promulgation date of this rule, and to post
that form on the company's Web site within thirty days of submitting it
to EPA. By requiring that the owner or operator post information
submitted to EPA, the proposed rule will require that the Web site
information be updated at key financial responsibility implementation
points including: (1) When the level of financial responsibility
required at the facility is initially determined and when it changes,
(2) upon application for release from financial responsibility
requirements, (3) when a claim is made on the instrument, (4) upon
receiving notification of cancellation of an instrument, (5) upon
transfer of ownership of the facility, and (6) upon submitting notice
to a regulator of closure of the facility. The Agency believes that
this approach will allow the public or claimants the opportunity to
follow the implementation of financial responsibility requirements and
the facility and be aware of changes that occur.
    Under the second approach proposed in this rule, the owner or
operator would not be required to post information on a Web site;
rather, EPA would make the required information available to the public
on the Agency's Web site.
    EPA solicits comment on these approaches to providing notice to the
public regarding the CERCLA Sec.  108(b) financial responsibility at a
facility. EPA particularly solicits comment on whether the owner or
operator should be required to post information, what information would
be of most benefit to the public in the implementation of CERCLA Sec.
108(b) financial responsibility, and how the information would be used
for that purpose.
Class Determinations for Confidential Business Information
    As discussed in section VI.A.3. of this preamble, some information
that owners and operators would be required to submit under this
proposed rule may be claimed as CBI. This proposal would not require or
allow posting of CBI. However, the Agency expects that much of the
information submitted to EPA under the proposal would not be CBI, and
could be made available. EPA is considering issuing a Class
Determination under 40 CFR 2.207 notifying parties how it intends to
treat information submitted under this rule. The purpose of a
Determination is to state the Agency's position regarding the manner in
which information within a class will be treated when information
received by the Agency shares characteristics and necessarily results
in identical treatment of the information. EPA expects that a Class
Determination would clarify the Agency position on what does and does
not constitute CBI under this rule. The Agency solicits comment on this
approach. In particular, the Agency requests information regarding what
the information that would be required under this proposed rule might
owners or operators consider to be CBI.
    Finally, EPA notes that it is planning to develop a Financial
Responsibility Portal to receive and track financial responsibility
information. Ultimately, when developed and populated, the goal is for
that system to auto-populate an Agency public database and make
available to the public information submitted under this rule. EPA
solicits comment on whether, when the EPA public database becomes
available, the requirement for the owner or operator to maintain a Web
site should continue if that requirement is adopted in the final rule.

B. Subpart B--General Financial Responsibility Requirements

    This proposed rule is designed to set up a regulatory program for
multiple classes of facilities. Thus, the proposed rule includes
several basic provisions that are intended to be used in conjunction
with the class-specific requirements in Subparts D-Z.
    These requirements are intended to guide the regulated community
through the general requirements to establish the required evidence of
financial responsibility, and also provide requirements that EPA
anticipates will be applicable to multiple facility classes.
1. Applicable Financial Responsibility Amounts and Procedures for
Establishing Financial Responsibility (Sec.  320.20 and Sec.  320.21)
    EPA has included a general requirement that owners and operators
calculate a current amount of financial responsibility at their
facilities in accordance with this part. Because this proposed rule
also includes requirements for hardrock mining classes, proposed Sec.
320.20 includes a cross reference to Table A-1 in Sec.  320.2, which
identifies the class-specific

requirements applicable to hardrock mining facilities. Those class-
specific requirements are found in subpart H, where the Financial
Responsibility Formula developed for those facilities is proposed. Upon
addition of future classes to the CERCLA Sec.  108(b) program, EPA
anticipates that additional cross references will be added to Table A-
1.
    Each instrument included in the proposed rule has its own
particular supporting information. The specific instruments proposed in
this rule are further discussed in section VI.C.1. of this preamble.
2. Maintenance of Instruments (Sec.  320.22)
    The proposed rule would require the owner or operator to
recalculate the financial responsibility level three years after the
date the facility is required to provide the full amount of financial
responsibility at its facility under Sec.  320.61, every three years
thereafter, and within sixty days after every successful claim against
a CERCLA Sec.  108(b) financial responsibility instrument. The
recalculation must use the most current facility information available.
The owner or operator must submit the revised financial responsibility
amount to EPA, along with supporting documentation.
    Whenever the required financial responsibility amount changes, the
owner or operator would be required to compare the new amount with the
value of the financial responsibility instrument(s). If the resulting
amount of financial responsibility required is greater than the amount
of financial responsibility provided by the current CERCLA Sec.  108(b)
financial responsibility instrument(s), the owner or operator, within
sixty days after the change in the required financial responsibility
amount, would be required to increase the value of the instrument(s),
or obtain a new instrument(s), in accordance with Subpart C, so that
the value of the instrument(s) is at least equal to the newly required
financial responsibility amount. This proposed provision ensures that
adjustments to the required level are made promptly.
    Conversely, if the resulting amount of financial responsibility
required is less than the amount of financial responsibility provided
by the current CERCLA Sec.  108(b) financial responsibility
instrument(s), the owner or operator may send a written request to the
Regional Administrator to lower the required financial responsibility
amount at the facility. The request must include updated information to
support the revised financial responsibility amount as required in
Sec.  320.22. The amount of financial responsibility required at the
facility would be reduced to the recalculated amount only with written
approval by the Administrator.
    This provision would ensure that the owner or operator first
receive approval from EPA that the financial responsibility may be
lowered, which provides a check against improper implementation of the
requirements. Furthermore, under the proposed wording of the trust
agreement, EPA would need to provide notification to the trustee that
funds may be released (see Sec.  320.50(a)).
    This proposed requirement is intended to ensure that the amount of
financial responsibility at the facility continues to reflect the level
of risk at the facility. EPA recognizes that facility conditions and
operations may change over time, or that new information may be
available that may affect the amount of financial responsibility
required. EPA thus is proposing a three-year periodic recalculation of
the required financial responsibility amount to ensure the amount
reflects the current risk at the facility. EPA expects that three years
was a frequent enough requirement to provide current information while
not overly burdening owners, operators and EPA with a more frequent
implementation of the recalculation requirements. EPA requests comment
on requiring recalculation of the amount of financial responsibility
every three years.
    Furthermore, EPA recognized that claims against the instrument may
be successfully made that would correspondingly reduce the amount of
financial responsibility at the facility. In some cases, the claims may
be the result of responses that lower the risk at the facility.
However, this is not expected to always be the case. Accordingly, EPA
believes it is necessary for owners and operators to recalculate the
required amount of financial responsibility after successful claims
against the CERCLA Sec.  108(b) financial responsibility instruments in
order to compare the new required amount to the remaining financial
responsibility at the facility.
3. Incapacity of Owners or Operators, Guarantors, or Financial
Institutions; or Instrument Cancellation (Sec.  320.23)
    Under this proposed rule, an owner or operator would be required to
notify the Administrator by certified mail of the commencement of a
voluntary or involuntary proceeding under Title 11 U.S.C. (Bankruptcy),
naming the owner or operator as debtor, within ten days after
commencement of the proceeding. [Option 2 only: A guarantor of a
corporate guarantee would be required to make such a notification if he
is named as debtor, as required under the terms of the corporate
guarantee. Those requirements are discussed in section VI.C.5. of this
preamble.]
    This provision is modeled after a similar requirement in the
requirements for hazardous waste treatment, storage, and disposal
facilities at 40 CFR part 264 and 265. EPA believes it is important for
EPA to be made aware of the owner or operator entering bankruptcy, as
that event may have implications for the owner's or operator's ability
to meet financial obligations under CERCLA. Likewise, EPA believes it
is important for the Agency to be aware of situations where a guarantor
of a corporate guarantee is entering bankruptcy as it may have
implications for the guarantor's ability to meet financial obligations
under the guarantee.
    An owner or operator who demonstrates CERCLA Sec.  108(b) financial
responsibility for CERCLA liabilities by obtaining a trust fund, surety
bond, letter of credit, or insurance policy would be deemed to be
without the required financial responsibility in the event of
bankruptcy of the trustee or issuing institution, or a suspension or
revocation of the authority of the trustee institution to act as
trustee or of the institution issuing the surety bond, letter of
credit, or insurance policy to issue such instruments. The owner or
operator would be required to provide other evidence of financial
responsibility within sixty days after such an event. This provision is
also modeled on existing RCRA Subtitle C requirements. As with those
regulations, EPA expects that this requirement will make clear what
must be done by the owner or operator when the institution providing
trustee services or issuing a bond, letter of credit, or insurance
policy goes bankrupt or loses its authority to act as a trustee or
issue such instruments.
4. Notification of Claims Brought Against Owners, Operators, or
Guarantors (Sec.  320.24)
    The owner or operator would be required to notify the Regional
Administrator by certified mail, within ten days of a CERCLA claim
being filed against the owner or operator or financial responsibility
guarantor. The proposed rule also requires that this notification
include certain key information: a copy of any papers filed by the
claimant with a court, or other information allowing the Regional
Administrator to identify the court, case

name and number, and parties. This notification requirement would apply
to owners or operators regardless of the instrument they have elected
to use. This proposed notification requirement is important because EPA
will not, in many cases, be involved in the claims process against a
financial responsibility instrument. It is appropriate for EPA to
monitor potential claims because claims made may affect the adequacy of
the instrument provided under the regulations, because those claims may
reduce the amount available to below that which is required for that
facility class. In addition, EPA is also proposing these requirements
to apprise the Agency of potential issues at a site that could
ultimately lead to EPA or another governmental agency having to take a
response at the facility. This provision thus helps the CERCLA Sec.
108(b) requirements support the broader CERCLA response program.
5. General Provisions on Instrument Payment
    In this section of the preamble EPA discusses generally the key
payment methods that are associated with each instrument. Proposed
Subpart B does not contain corresponding language. Instead, this is
contained in Subpart C of the proposed regulations, in the required
wording of each instrument. Instead of addressing these considerations
multiple times, however, EPA is presenting its approach to these common
provisions once in this section of this preamble.
    Under this proposed rule, the funds from all types of financial
responsibility instruments except the financial test would be available
under three circumstances and also under direct action scenarios. In
essence, EPA has sought to allow for maximum flexibility in how the
instruments pay out through the payment terms. EPA believes this
approach will help integrate the operation of the CERCLA Sec.  108(b)
instruments into the various CERCLA enforcement and cleanup processes
and therefore will efficiently support the goal of ensuring that funds
be made available for the payment of CERCLA response costs, health
assessment costs, and natural resource damages.
    It is EPA's intent that each payment term as well as direct action
be available independently of one another, and claimants may use any or
any combination of the terms as the circumstances dictate. Similarly,
use of one payment term by a particular claimant would not prevent its
reuse or use of another payment term by another claimant. Again, this
is to maximize flexibility in the manner in which the instruments can
be payable, to promote the goal of ensuring cleanup while avoiding
unnecessary litigation over whether the instruments are in fact
payable. EPA seeks comment on these proposed payment terms.
a. Payment of an Unsatisfied CERCLA Judgment
    Under this proposed rule, the financial responsibility instruments
would be available to pay a final judgment from a Federal court
awarding CERCLA response costs, health assessment costs, and/or natural
resource damages associated with the facility against any of the
current owner or operators for which payment as required by the
judgment has not otherwise been made within thirty days. This is
intended to cover all types of CERCLA actions, including those under
CERCLA Sec. Sec.  107 or 113(f). This is also intended to cover
judgments in favor of both governmental claimants (e.g., EPA or another
Federal agency, a state, or an Indian tribe) as well as private
claimants. EPA solicits comments on this approach.
    EPA is requiring that the claim be reduced to a final judgment
under this payment term for two reasons. First, this provision provides
court oversight to ensure the validity of the claims. This is important
because EPA or another regulatory agency may not be directly involved
in a particular cleanup. Second, the requirement to present a valid
final court judgment may help alleviate concerns of potential
instrument providers about instruments that could pay to multiple
potential claimants. In discussions with representatives of the
financial industry, certain representatives expressed concern that the
availability of the instruments to multiple claimants would either: (1)
Raise the risk to the instrument provider of fraudulent claims, or (2)
increase the potential claims management and investigation costs of
determining which claims are valid. While the preferred option of
several representatives of the financial community was to have EPA
specified as the beneficiary of the instrument, EPA had concerns with
such an option in the context of CERCLA Sec.  108(b) (see, for example,
discussion in Section VI.C.1. of this preamble in the section titled
``two letter of credit constructions''). Representatives did, however,
express greater comfort at a court having first ordered payment as that
would limit the prospect for fraudulent or specious claims against the
instruments. Further, having an objective documentary payment trigger
limits the amount of due diligence required on the part of the
instrument provider.
    This payment provision also requires that the party may only make a
claim if they have not recovered or been paid the funds from any other
source. This is intended to provide further assurance to providers and
current owners and operators that the claims are valid and that the
claimant is not being paid twice for the same costs or damages.
    It should be noted that EPA does not intend for this provision to
displace the standard manner in which CERCLA claims are brought and
resolved outside of the CERCLA Sec.  108(b) instrument. Claims can
continue to be asserted against the owner and/or operator in the first
instance, and EPA expects that in most instances, the owner or operator
would pay the claim itself, without resort to the instrument.\58\
Indeed, EPA expects owners and operators to continue to do so to the
extent they are able, in order to avoid the costs incurred in drawing
upon the instrument which in many cases would result in the provider
seeking to recoup those costs from the owner or operator. For example,
were a successful third-party CERCLA claimant to make a draw on a
CERCLA Sec.  108(b) letter of credit, the owner or operator would be
obligated to pay the financial institution that issued the letter of
credit for the amount paid under the instrument. Owners or operators
also have an obligation to reimburse the issuer of a surety bond for
payment made in accordance with the terms of the bond. The surety bond
issuer's right to reimbursement helps to ensure that it is the owner or
operator rather than the issuer of the surety bond that ultimately
bears the cost of fulfilling the CERCLA obligations owed to the
claimant. However, should the owner or operator fail to satisfy the
final judgment, the instruments are structured to become available to
the claimant within thirty days. EPA identified this time period based
upon current EPA settlement practice which typically provides thirty
days for performance to occur. EPA believes it provides adequate time
for payment to occur while not providing more time than under a
settlement scenario which may create a disincentive to settle. In this
role, the financial responsibility instruments serve as a backstop to
help assure that recovery will be successful.
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    \58\ Similarly, provision of financial responsibility under
CERCLA Sec.  108(b) by an owner or operator would not affect a
party's ability to make CERCLA claims against other potentially
responsible parties at a site.

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b. Payment for a CERCLA Settlement With the Federal Government
    Under this proposal, the financial responsibility instruments also
would be available to pay for a CERCLA settlement with agencies of the
Federal Government, including but not limited to administrative
settlements and consent decrees. Specifically, the instruments provide
for payment to the Administrator or another authorized Federal agency
if payment has not been made as required by a CERCLA settlement
associated with the facility with a current owner or operator. EPA's
current CERCLA model settlements often include a financial
responsibility component to ensure that funds are available, should the
respondent fail to perform. EPA expects that future settlements could
rely on an owner or operator's CERCLA Sec.  108(b) instrument for this
purpose if the settling parties agreed to employ the instrument in this
manner. EPA expects to review and, if necessary, modify its existing
models to account for the possibility that CERCLA Sec.  108(b)
instruments could be used to assure the work required by future
settlements. Additionally, some settlements are structured on a ``cash
out'' basis, where the respondent is not doing work, but is instead
resolving liability as a lump-sum payment to the United States. EPA's
intent is for this payment term to function in any of these settlement
scenarios. Such payments, in the case of settlements with EPA, would be
expected to be made into the Superfund and/or a CERCLA special
account.\59\ For settlements with other Federal government agencies
acting pursuant to delegated CERCLA authority, such as the Bureau of
Land Management, the payments would be made pursuant to the terms of
the settlement.
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    \59\ EPA retains money received through settlements with
potentially responsible parties in site-specific ``special
accounts'' to conduct planned future cleanup work at a site based on
the terms of a settlement agreement. These special accounts are sub-
accounts within the Superfund.
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    Again, EPA does not intend for this provision to displace the
standard manner in which CERCLA claims are brought and resolved outside
of the CERCLA Sec.  108(b) instrument. Federal agency claims may
continue to be asserted against the owner and/or operator, where
appropriate, and the parties would remain free to settle those claims
as they determine appropriate under the circumstances. EPA expects that
in most instances, the owner or operator would make the payment
required in the settlement directly, in order to avoid the costs
incurred in drawing upon the instrument which may result in the owner
or operator incurring costs as discussed earlier. However, should the
owner or operator fail to make payment as provided in a settlement, the
instruments are structured to become available for payment to (an)
authorized Federal government agency(ies).
    EPA is proposing including this term for several reasons. First,
the Agency intends to make express provision for settlement
accomplished under direct Federal oversight to assure that any
necessary response actions are completed in a manner that protects
human health and the environment. Such a provision would provide the
flexibility for payment into special accounts under CERCLA Sec.
122(b)(3), when appropriate as determined in the particular settlement,
in order to provide an avenue for settlement funds to be used at a
particular site. This provision also would allow for money recovered by
the Federal Government to be deposited back into the Superfund Trust
Fund under 26 U.S.C. 9507(b). EPA expects that this payment term would
therefore provide a further incentive for owners and operators to
undertake necessary CERCLA response actions at their sites or otherwise
settle their liabilities without protracted litigation, even where
their ability to pay for such a settlement would otherwise be limited.
In this role, the instruments would help promote the goal of CERCLA
Sec.  108(b) to support CERCLA's ``polluter pays'' principle.
    As noted earlier, this payment term is independent of other payment
terms. Thus for example, in the absence of any settlement, the
instruments could be made available upon obtaining a CERCLA judgment.
Similarly, this would not affect settlements between non-Federal
parties and owners and operators. Such settlements could also proceed
under the payment term discussed in the previous subsection, but would
require court approval and reduction to a CERCLA judgment for costs.
EPA solicits comment on this approach.
c. Payment Into a Trust Fund Established Under a Unilateral
Administrative Order
    This proposal would also allow the financial responsibility
instruments to pay into a trust fund established pursuant to a
unilateral administrative order under CERCLA Sec.  106(a) under certain
circumstances. Specifically, under the proposal, the Administrator or
another Federal agency may make a claim against the instrument
requesting payment into a trust fund established pursuant to a CERCLA
unilateral administrative order issued to a current owner or operator
if performance at the facility as required by the order had not
occurred. The proposed rules also provide that the Administrator or
another Federal agency may only make the claim against the instrument
if the owner or operator has provided a written statement that the
instrument may be used to assure the performance of the work required
in the order.
    These provisions of the proposed rule are intended to complement
existing EPA model orders. Under EPA's existing models, EPA requires
recipients to provide evidence of financial responsibility to ensure
that funds will be available to complete the work, should the recipient
fail to perform as required under the unilateral administrative order.
In essence, the owner or operator chooses the instrument to comply with
the financial responsibility provisions of the order. EPA expects to
review and, if necessary, modify its existing model administrative
orders to account for the possibility that CERCLA Sec.  108(b)
instruments could be used to assure the work required by future
unilateral administrative orders. EPA believes that this approach would
provide owners and operators the maximum amount of flexibility to use
the CERCLA Sec.  108(b) instrument, should they become subject to a
unilateral administrative order.
d. Payment Through the Direct Action Provision
    Finally, CERCLA Sec.  108(c)(2) contains a ``direct action''
provision, under which claims can be brought against the guarantor,
instead of against the owner or operator, as in the case of the other
payment triggers discussed earlier. CERCLA Sec.  108(c)(2) generally
provides that any claim authorized by CERCLA Sec. Sec.  107 or 111 may
be asserted directly against the provider of the financial
responsibility instrument in situations where the owner or operator is
in bankruptcy or is unavailable. In addition, CERCLA Sec.  108(d)(1)
generally provides that the total liability of any guarantor in a
direct action suit is limited to the aggregate amount of the monetary
limits of the policy of insurance, guarantee, surety bond, letter of
credit, or similar instrument obtained from the guarantor by the person
subject to liability.
    The proposed CERCLA Sec.  108(b) instruments are intended to
account for direct actions authorized by these provisions. Where an
owner or operator is bankrupt or unavailable, there is uncertainty
around a claimant's ability to obtain a judgment. Thus, the ability

to take direct action against the financial responsibility instrument
may be critical for assuring that funds will be made available for
necessary cleanup.
    The direct action provisions of the statute received attention
during meetings EPA held with representatives of financial institutions
that provide financial instruments or services being considered for use
in the proposed rule. Information on these meetings is available in the
docket for this proposed rule (Docket No. EPA-HQ-SFUND-2015-0781).
Specifically, EPA asked representatives how the direct action provision
may affect their willingness to provide instruments for the CERCLA
Sec.  108(b) rule. Financial industry representatives indicated that
providers' willingness to issue instruments was impacted by the
availability of direct action and the potential scope of claimants,
although to varying degrees across the instruments. With the exception
of insurance providers, financial instrument providers expressed some
degree of aversion to the direct action provision.
    Representatives of the insurance industry informed the Agency that
the industry is familiar with direct action because it is required
under some state insurance laws. Insurance providers indicated that
direct action would not generally have an effect on market
participation.
    Representatives from the surety industry had a mixed reception to
the direct action provision. Sureties typically have some ability to
step into the shoes of the owner or operator to perform or fulfill the
obligation insured by the bond. Sureties have experience stepping into
the shoes of an owner or operator and thus had some level of comfort in
assuming the owner or operator's responsibilities in negotiating a
settlement for CERCLA response costs, health assessment costs, and
natural resource damages on behalf of the facility. However, surety
representatives were concerned about the risk of direct action
attracting class action suits and suits from environmental groups who
did not have valid claims. The representatives also communicated
concern over legal fees incurred in responding to numerous invalid
suits.
    Members of the banking community who issue or are expert in letters
of credit or serve as trustees expressed great concern about the direct
action provision. Letter of credit specialists asserted that direct
action would be out of the realm of the typical responsibilities of a
bank providing letters of credit. In fact, EPA was told that banks in
their role as issuers of letters of credit can only be subject to suit
if they do not complete the obligation to pay according to the
specifications of the letter of credit.
    Banking institutions that serve as trustees expressed that trust
institutions would not participate in a program where the institution
can be subject to any liability. Trustees also communicated that there
is a distinction between a trust and the trustee--the trust itself
holds the financial assurance, whereas the trustee executes the trust
agreement in order to manage the instrument. Following this argument
trustees suggested that the trust itself might qualify as a CERCLA
``guarantor'' and therefore direct action could be applied against the
trust itself. Trustees stated that the possibility of liability on the
trust institution would greatly and negatively impact their
participation in providing trustee services to facilities subject to
the proposed rule.
    While the ability to bring a direct action against a guarantor is
created by the statute itself, EPA has nonetheless sought to address
the major issues raised by the financial community to the extent
possible, in development of the proposed rules. EPA has included
language in the instruments that mirror the terms of the direct action
provision, specifically referring to claims authorized by CERCLA
Sec. Sec.  107 or 111.
    EPA has also sought to lessen the perceived barriers for
participation of banks issuing letters of credit and trustee
institutions acting as guarantors. Specifically, EPA is proposing two
structures for use of a letter of credit--first a letter of credit
payable directly to claimants, and second a letter of credit held and
managed by a trust fund. The owner or operator could choose either
option. In the second arrangement the trustee would have direct access
to draw on the letter of credit to satisfy the claims. EPA intends for
this arrangement to address concerns about direct action claims for
letters of credit, because claimants would bring those claims to the
trust fund holding the letter of credit, instead of the letter of
credit provider. In addition, EPA has structured the trust fund
instrument with the express intent that direct action would be taken
against the trust fund itself, not the trustee. This is intended to
address concerns about potential trustee liability from their role as
trustee under the trust agreement. Section 3 of the proposed trust
agreement states explicitly that the trust Grantor and Trustee do not
intend for the Trustee to qualify as a ``guarantor'' as that term is
used in CERCLA Sec. Sec.  101(13) and 108(c)(2), and therefore intend
that the Trustee will not be subject to a direct action by Trustee's
agreement to act as Trustee for the trust fund. The proposed trust
agreement further states that the Grantor and Trustee intend for the
trust fund to qualify as a ``guarantor'' as that term is used in CERCLA
Sec. Sec.  101(13) and 108(c)(2), and therefore intend that only the
trust fund will be subject to any direct action brought pursuant to
CERCLA Sec.  108(c)(2). The trust agreement provides further that any
claim authorized by Sec. Sec.  107 or 111 of CERCLA may be asserted
directly against the trust fund as provided by CERCLA Sec.  108(c)(2)
subject to the limitations in CERCLA Sec.  108(d). Stand-alone, funded
trusts are structured similarly. The proposed structure of the trust
fund is discussed in more detail in VI.C.6 of this preamble. EPA seeks
comment on the effectiveness of this structure for the proposed trust
and letter of credit to increase the likelihood that a bank or trustee
institution will issue letters of credit or agree to be a trustee under
the proposed regulations.
    EPA recognizes that the direct action provision is an important and
potentially unfamiliar feature to potential instrument providers, and
the Agency requests comment on how its function in practice may affect
the availability of instruments.
6. Facility Transfer (Sec.  320.25)
    This proposed rule would require that the owner or operator subject
to the rule maintain financial responsibility in accordance with part
320 upon transfer of ownership, in whole or in part, to a new owner, or
upon transfer of operations to a new operator, until the Administrator
releases the previous owner or operator. EPA would provide a release to
the former owner or operator upon the new owner or operator's
demonstration of financial responsibility in accordance with this
proposed rule.
    These requirements assure continuity of financial responsibility
coverage and prevent circumvention of the requirements by changes in
facility ownership or operation. The Administrator's release of the old
owner and operator would not affect the old owner's and operator's
liability under CERCLA, only their responsibility to maintain financial
responsibility for the facility under Part 320. EPA solicits comment on
these requirements.
7. Notification of Cessation of Operations (Sec.  320.26)
    Section 320.26 requires a facility owner or operator to notify the
Administrator thirty days prior to either the date the facility will no
longer be authorized to operate or the date the owner or operator is
required under

another applicable regulatory program to notify the relevant regulatory
authority that the facility is ceasing operations, whichever is
earlier. This requirement provides EPA notice of upcoming changes at
the facility that will likely affect the level of required financial
responsibility under CERCLA Sec.  108(b). EPA solicits comment on this
requirement.
    The proposed rule provides that CERCLA Sec.  108(b) requirements
continue until EPA releases the owner or operator from such
obligations. Thus, closure of a facility would not, in and of itself,
trigger release from requirements under proposed part 320. Owners or
operators of closed facilities would be required to maintain financial
responsibility instruments until CERCLA Sec.  108(b) obligations are
released by EPA. In developing this proposed rule, the Agency has
considered whether some financial responsibility instruments might be
better suited than others where the owner or operator no longer is
operating the facility. For example, EPA has considered whether owners
or operators should be able to continue to use a financial test to
provide financial responsibility where they are no longer operating the
facility, or whether financial responsibility should be converted to a
trust instrument at facilities where obligations continue after the
facility ceases operation. EPA has not identified any reasons to
restrict the options for instruments, and is therefore proposing that
the same instruments available to owners and operators of operating
facilities would continue to be available to owners and operators of
facilities that cease operation. However, EPA solicits comment on the
reliability of instruments where an owner or operator is no longer
operating a site.
8. Release From Financial Responsibility Requirements (Sec.  320.27)
    Under this proposed rule, owners or operators and operators subject
to CERCLA Sec.  108(b) requirements under part 320 would remain subject
to those requirements until released by EPA. Thus, those obligations
would continue regardless of the operating status of the facility.
    Proposed Sec.  320.25 discussed earlier provides for release of the
owner or operator from its obligations under part 320 upon transfer of
ownership of the facility, or transfer of operations of the facility,
where the new owner or operator provides evidence of financial
responsibility that satisfies the requirements of this proposed rule.
Where release from the regulations is not accompanied by a transfer of
the regulatory obligation to maintain CERCLA Sec.  108(b) financial
responsibility, EPA is proposing a different process that reflects the
final nature of the determination. EPA also explains the importance of
this determination in its discussion of the public involvement
requirements in proposed Sec.  320.9.
    Proposed Sec.  320.27 provides that the owner or operator may
petition to be released from its CERCLA Sec.  108(b) obligations by
submitting a request to the Administrator. The request must include
evidence demonstrating that the degree and duration of risk associated
with the production, transportation, treatment, storage and disposal of
hazardous substances is minimal. The opportunity provided in Sec.
320.27 is not intended to provide for adjustments of financial
responsibility levels, but is intended to be limited to decisions to
release the owner or operator from CERCLA Sec.  108(b) requirements.
Thus, owners or operators that cannot demonstrate minimal levels of
risk at the facility would not be eligible to petition the Agency under
this provision. A demonstration of minimal levels of risk at the
facility is important because following the owner's and operator's
release from the CERCLA Sec.  108(b) requirements financial
responsibility would not be available if needed at a later date. Upon
receiving such request, proposed Sec.  320.27 provides that the
Administrator would evaluate facility information, including the
information submitted by the owner or operator, regarding the degree
and duration of risk associated with the production, transportation,
treatment, storage, and disposal of hazardous substances at the
facility, and make a determination regarding the owner or operator's
request.\60\
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    \60\ Note that the proposed rule does not limit the ability of
the Administrator to take other measures (for example, under the
authority of CERCLA Sec.  104) if appropriate, to obtain relevant
information.
---------------------------------------------------------------------------

    If the Administrator determines that the degree and duration of
risk associated with the production, transportation, treatment,
storage, and disposal of hazardous substances at the facility is
minimal, and that the facility should therefore be released from CERCLA
Sec.  108(b) requirements, the Administrator would follow the
procedures described in Sec.  320.9 to involve the public in the
decision. Under those procedures, EPA would post the draft decision on
the Agency's Web site, provide the public opportunity to comment on the
decision, and post the Agency's final decision, and response to
comments received, on the EPA Web site.\61\
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    \61\ It should be noted that any release from CERCRA Sec.
108(b) obligations does not affect the ability of the Federal
Government to make a CERCLA claim.
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    If, on the other hand, the Administrator determines that the degree
and duration of risk associated with the production, transportation,
treatment, storage, and disposal of hazardous substances is not
minimal, the Administrator would not release the owner or operator from
the requirement to maintain financial responsibility in accordance with
this part. Section 320.9 provides that upon a finding that the owner or
operator should not be released from financial responsibility
requirements, the Administrator would provide notice of the Agency's
final decision, and response to comments received, and will provide the
owner or operator with written notice of its decision. EPA is
considering whether to make these available through EPA's Web site, or
alternatively through traditional Federal Register notices. EPA
solicits comment on this approach, and method of public notice.
    The Agency is proposing not to initiate a public involvement
process in cases where the Agency decides to deny the request of the
owner or operator to release its financial responsibility obligation.
In these cases, the obligation to maintain financial responsibility
continues, and thus continues to be available should CERCLA liabilities
arise. Thus, EPA does not see any benefit for public comment in these
situations. EPA solicits comment on this approach.
    EPA is proposing a site-by-site evaluation of facility risk for
decisions to release an owner or operator from CERCLA Sec.  108(b)
requirements for a number of reasons. First and foremost, EPA has not
identified a set of circumstances that if followed, would allow it to
determine on a national basis that every facility across the country
would demonstrate a minimal degree and duration of risk. Moreover, EPA
has substantial experience making individualized determinations of site
risk, as this practice is consistent with EPA's practice under the
Superfund program, for example, in selecting remedies under the NCP.
EPA solicits comment on the proposed approach to releasing owners or
operators from CERCLA Sec.  108(b) financial responsibility
requirements.
    The proposed rule also provides that owners or operators may
petition the Administrator for a renewed determination regarding its
continued

requirement to maintain financial responsibility. The Administrator
will consider a petition for a renewed determination only when it
presents new and relevant information not previously considered by the
Administrator.
    While beyond the scope of this rulemaking, EPA notes in the
interest of transparency that EPA and the owner or operator might, in
some cases, elect to enter into a CERCLA settlement regarding the
facility. The work provided for in such a settlement, depending upon
its scope, may provide the basis for a renewed determination by the
agency that results in a release from part 320.
    Finally, EPA recognizes that in some instances, facilities may be
located in locations under the jurisdiction, custody or control of
another Federal agency. In that instance, EPA will work with the other
agencies to gather the necessary information for it to make a
determination on whether to release an owner or operator from the
requirements of part 320.

C. Subpart C--Available Financial Responsibility Instruments

    Under this proposed rule, an owner or operator would have to
establish financial responsibility by obtaining one or a combination of
mechanisms as specified in proposed subpart C. CERCLA Sec.  108(b)(2)
states that ``financial responsibility may be established by any one,
or any combination, of the following: Insurance, guarantee, surety
bond, letter of credit, or qualification as a self-insurer. In
promulgating requirements [under CERCLA Sec.  108(b)], EPA is
authorized to specify policy or other contractual terms, conditions, or
defenses which are necessary, or which are unacceptable, in
establishing such evidence of financial responsibility in order to
effectuate the purposes of [CERCLA].''
    EPA is proposing to establish required wording for all of the
instruments (including the financial test and corporate guarantee) for
several reasons. By specifying the instrument terms, EPA reduces the
administrative burden to the Agency of reviewing the wide range of
potential instrument wording that may otherwise be employed. EPA does
not wish to create a situation where resources that otherwise would
have been devoted to cleanups would be expended reviewing the myriad
possible instrument constructions. EPA is also specifying the terms of
the instruments so that they operate in a manner that integrates the
CERCLA Sec.  108(b) instruments into the overall CERCLA scheme and are
uniformly enforceable by the Agency or other parties seeking
compensation for costs and damages. Third, EPA's RCRA Subtitle C,
subpart H financial assurance requirements (see 40 CFR 264.151)
similarly specify the required wording of the instruments and EPA has
found this to be a beneficial feature. Fourth, EPA has received comment
as it developed this proposal from stakeholders that the RCRA Subtitle
C instruments are well-understood by regulated entities and the
financial industry. Without nationally-consistent provisions, EPA does
not expect that a similar familiarity with the CERCLA Sec.  108(b)
regulations would be as likely to develop.
    Those same commenters suggested that EPA use the RCRA Subtitle C
regulations as the basis for its proposed CERCLA Sec.  108(b)
instruments because those instruments are well-developed and understood
by regulators, the regulated community, and the financial-services
industry. This proposal does in fact use the instruments specified in
the RCRA Subtitle C, subpart H regulations as the model from which EPA
developed its proposed CERCLA Sec.  108(b) instruments, in part, for
that reason.\62\ EPA discusses particular provisions adapted from these
RCRA regulations in its discussions of individual instruments later in
this preamble, as well as new aspects necessitated by the CERCLA 108(b)
rule structure. In addition, this proposal reflects some of the lessons
EPA has learned in administering the RCRA Subtitle C financial
assurance program. For example, to ease administration EPA is proposing
that contact information for key parties (e.g., the EPA, the
representative of the financial institution) be identified in the
instruments to facilitate the notification requirements and other
necessary communication. More information on the required wording of
the instruments and the rationale for such wording is in the background
document entitled ``Potential Requirements for Insurance, Surety Bonds,
Letters of Credit, and Trust Agreements and Standby Trust Agreements
under CERCLA Section 108(b),'' which is in the docket for this proposal
(Docket No. EPA-HQ-SFUND-2015-0781). EPA requests comment on the
proposed wording of the financial responsibility instruments including
the proposed required documentary conditions required to make a claim
under several of the instruments.
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    \62\ EPA is not, however, reopening the RCRA Subtitle C, Subpart
H regulations by this proposal, nor will EPA respond to comments
related only to those regulations.
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1. Letter of Credit (Sec.  320.40)
    An owner or operator would be able to satisfy the requirements of
this section by obtaining an irrevocable standby letter of credit in
accordance with the proposed requirements of Sec.  320.40 and the
proposed wording of Sec.  320.50(b). A letter of credit is an
independent agreement by the issuer (e.g., a bank) to pay up to a
specified amount to parties upon the presentation of certain documents
on behalf of its customer. Through a letter of credit, the bank
provides assurance that the CERCLA response costs, health assessment
costs, and natural resource damages for which the owners and operators
are responsible would be paid. The financial strength of the bank would
backstop that of the owner and operator, reducing the credit risk to
potential claimants. EPA requests comment on the required wording and
specification of the letter of credit in this proposed rule.
Issuer Eligibility (Sec.  320.40(a))
    The issuing institution would be required to be an entity that has
the authority to issue letters of credit and whose letter of credit
operations are regulated and examined by a Federal or state agency.
These proposed requirements ensure that the letter of credit operations
are overseen by a regulator, a requirement that EPA intends to help
protect against failure of the issuing institution by ensuring that the
operations are regularly examined (e.g., lending limits are being
observed). This requirement is the same as that in the RCRA Subtitle C
financial assurance requirements for closure and post-closure care,\63\
which EPA believes has worked well, and would be familiar to the
regulated community and to the Agency. EPA considered additional
qualifications for banks providing letters of credit but is today
proposing the same qualifications as are required in the Subtitle C
regulations. Some of the alternative criteria considered were minimum
ratings from a rating agency or differentiating between state or
nationally chartered institutions. Additional information on the
consideration of alternative provider qualifications is in the
background document titled ``Potential Issuer Eligibility Requirements
for Insurance, Surety Bonds, Letters of Credit, and Trust Agreements
and Standby Trust Agreements under CERCLA Sec.  108(b).'' EPA is
proposing a standard similar to

the Subtitle C standard so as to not unduly constrain supply because
additional requirements beyond the existing framework of Federal and
state examination and regulation would limit the pool of available
providers and also to avoid the administrative burden on EPA of
verifying additional qualifications.
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    \63\ See 46 FR 2826, January 12, 1981
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    The Institute of International Banking Law and Practice (IIBLP)
suggested to EPA that the minimum issuer qualifications may be improved
by specifying that the institution must be one that ``regularly issues
standby letters of credit.'' IIBLP's stated intent of the recommended
specification was to align the EPA requirement with the Uniform
Commercial Code \64\ (UCC) Sec.  5-108(e) that obligates issuers to
observe the standard practice of ``financial institutions that
regularly issue letters of credit''. However, such a provision would
require EPA to determine what constitutes regularly issuing letters of
credit and would increase the administrative burden of implementation.
Because the UCC would apply in the background as state law the Agency
does not expect it is necessary to include such a requirement in the
proposed regulations, and so is not proposing such a requirement.
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    \64\ The Uniform Commercial Code (UCC) is a comprehensive code
of law addressing commercial transactions in the United States
created to serve as a model for state adoption. Use of standby
letters of credit is governed by state laws that track Article 5 of
the UCC.
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Required Standardized Wording (Sec.  320.40(b))
    EPA is proposing required wording of the letter of credit. The
proposal would require that instruments be worded identically to the
language proposed in Sec.  320.50(b) of this proposed rule, except that
the instructions in brackets would be replaced with the relevant
information and the brackets deleted. The IIBLP also suggested that EPA
should allow for greater flexibility to accommodate confirmations,
other parties obtaining the letter of credit or state variations.
Specifically, IIBLP recommended that the letter of credit wording be
``substantially in accordance with'' the specified instrument language.
While flexibility may help accommodate a wider range of circumstances,
EPA has found in its financial assurance programs that standardized
wording is generally acceptable to providers, and provides significant
benefits. Most significantly, standardized wording saves EPA staff from
having to review and assess the myriad variations in instrument wording
that may arise, which the Agency may not have the technical expertise
to readily undertake. However, EPA requests comment on whether specific
additional aspects of the proposed wording could benefit from
additional flexibility. Specifically, EPA requests comments on
additional variations that should explicitly be provided for in
brackets that may improve the effectiveness of the proposed letter of
credit specifications.
Two Letter of Credit Constructions (Sec.  320.40(b)-(d))
    The proposed required wording provides for two separate letter of
credit constructs--one in which the letter would be issued in favor of
any and all third-party CERCLA claimants and one in which the letter of
credit would be issued in favor of the trustee of a trust fund
established by an agreement worded identically to the language for the
proposed trust fund. EPA is proposing to allow for two possible letter
of credit constructions based on feedback the Agency received during
discussions with the banking community. Providing both options enhances
flexibility and is consistent with the RCRA third-party liability
program where a similar letter of credit arrangement is employed.\65\
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    \65\ See 40 CFR 264.151(k)
---------------------------------------------------------------------------

    The first option for a letter of credit is for it to be issued in
favor of any and all third-party CERCLA claimants. Under this
arrangement, parties seeking payment from the letter of credit for
CERCLA claims against the current owners or operators of the facility
would be able to make claims by presenting the necessary documents
directly to the issuing institution. This would provide a streamlined
approach for paying claims and may entail lower fees and expenses than
the second option. EPA intends for the CERCLA 108(b) instruments to be
available to any potential CERCLA claimant. Given that the identity of
potential claimants is both difficult to ascertain at a given point and
because they may change over time, EPA is concerned that attempting to
name particular beneficiaries would be unworkable. For example, EPA
would be unable to determine in many cases what claims made by what
parties would arise. In addition, EPA wishes to avoid a claims
administration role that could result if EPA were the named
beneficiary. EPA is concerned about the resources that would be
necessary to assess the merits of and make all CERCLA claims that may
be made against the instruments nationwide. Such a role would have the
potential to redirect Superfund programmatic resources away from
cleanups and other high priority activities to assessing claims at
facilities where EPA may not otherwise have been involved or considered
a priority. Further, in instances where EPA is involved, EPA may be a
claimant. EPA was concerned that the Agency may be placed in the
awkward position of administering and prioritizing claims in that
situation. Finally, EPA is concerned that specifying EPA as the
beneficiary of the instruments may be inconsistent with the direct
action provision and preclude other claimants from taking direct
actions against the instruments as provided by 108(c)(2).
    At the same time, several industry representatives expressed their
concerns about the possibility of such a wide range of potential
claimants who could not possibly be ascertained at the time the letter
of credit is established. Instead, these representatives indicated a
strong preference for a named beneficiary.
    In light of this feedback, and because EPA does not intend to
restrict options such that institutions may be unwilling to issue
letters of credit, EPA is also proposing letter of credit language that
would provide the option for the letter of credit to be issued in favor
of a single named beneficiary, specifically the trustee of a trust fund
that would be established pursuant to the proposed trust fund
regulations. In this case, the letter of credit would authorize the
trustee to make draws on the letter of credit to administer the claims
process for CERCLA response costs, health assessment costs, and natural
resource damages in accordance with the terms of the trust agreement.
Parties seeking payment from the letter of credit for CERCLA claims
against the current owners or operators of the facility would be able
to present claims against the trust fund in accordance with the
proposed trust agreement language. The trustee would, upon receipt and
review of the required documents, accordingly make a draw on the letter
of credit and provide the claimant with payment.
    This latter option also appears to provide other advantages. First,
letter of credit issuers indicated to EPA that this option is more
consistent with commercial practice. Second, representatives of trustee
institutions expressed a high level of comfort and willingness to
provide such administrative services over a letter of credit. Third,
the trust fund itself could be the subject of any direct actions
authorized by CERCLA Sec.  108(c). Accordingly, in this proposal, the
language acknowledging that direct action claims may be brought against

the issuing institution is required only for letters of credit issued
in favor of any and all third-party CERCLA claimants, and is not
required for those letters of credit issued in favor of a trustee.
Considerations regarding the direct action provisions are discussed in
more detail in section IV.B.5. of this preamble.
    Even with these advantages, EPA expects that the principal
disadvantage in having the trustee hold the letter of credit and
channel claims through the trust fund is that it will result in higher
trustee expenses and fees in comparison with the letter of credit
issued in favor of any and all third-party CERCLA claimants. This is
because the trustee would need to hold the letter of credit and review
the documents presented as part of the claims process to determine
whether payment was merited under the terms of the trust. EPA is
proposing nevertheless to offer such an arrangement in order to provide
additional flexibility in compliance options for the owners and
operators subject to the rule as well as offer an option that the
Agency has been told is more consistent with commercial practice.
    EPA considered a third possible letter of credit option. Under this
option, EPA would be the named beneficiary of the letter of credit and
would administer the claims process but would require that the letter
of credit provide for assignment of proceeds to other parties as
identified by EPA. EPA recognized that this approach may provide the
familiarity of a named beneficiary for issuers of letters of credit and
may reduce trustee expenses because they would not need to provide a
custodial service over the standby letter of credit. However, as
discussed earlier in this preamble section, EPA's concerns about
administering the claims process has led EPA not to include provisions
for this option in this proposal. However, EPA solicits comment on this
option.
    Finally, the proposed rule also includes specific information
submission requirements in proposed Sec.  320.40(c) and (d). Where the
beneficiary is a trustee, the original letter of credit would be held
by the trustee as part of the trust fund property. A certified copy of
the letter of credit would be required to be submitted to the
Administrator. In addition, the owner or operator would be required to
submit the original letter to the trustee authorized to make draws on
the letter of credit, and then submit to the Administrator an
acknowledgment of receipt of the letter of credit by the trustee.
Submission of this information to EPA is intended to assist the Agency
in monitoring compliance as part of its program oversight role.
    If the letter of credit is issued in the favor of any and all
third-party CERCLA claimants, under proposed Sec.  320.40(d) the
original letter of credit would be submitted to EPA, also to assist the
Agency to monitor compliance.
Requirement To Establish a Trust Fund, Automatic Extension and
Irrevocability Provisions of the Letter of Credit (Sec. Sec.  320.40(e)
Through (f) and (k) Through (l))
    Standby letters of credit are typically issued for specific, finite
periods of time although they may automatically extend provided the
issuer has the right to allow the credit to expire. In developing this
proposal, one consideration for EPA was how to assure funds would be
available when necessary. One consideration with the letter of credit
was that the issuer may wish not to extend the letter of credit at some
point potentially leaving the owner or operator without the required
evidence of financial responsibility. EPA was concerned that the
decision not to extend a letter of credit may occur at a time when the
owner's or operator's finances were in decline at which point the
ability of the owner or operator to obtain alternate financial
responsibility may be constrained. To ensure continuity of financial
responsibility coverage EPA is proposing a suite of regulatory
provisions intended to provide strong assurance that funds would be
available when necessary.
    First, an owner or operator who uses a letter of credit to satisfy
the requirements of this regulation would also be required to establish
a trust fund and update Schedule A of the trust agreement within sixty
days after a change in the amount of CERCLA Sec.  108(b) financial
responsibility. The requirement to establish a trust fund is included
regardless of whether the letter of credit is issued in favor of all
third-party CERCLA claimants, or in favor of the trustee of a trust
fund. EPA is proposing to require that a trust fund either hold the
letter of credit or be established alongside the letter of credit to
provide a repository for funds drawn from the letter of credit in
instances where the issuing institution declines to extend the letter
of credit and the owner or operator fails to obtain replacement
financial responsibility.
    This standby trust fund would be worded identically to the proposed
trust fund language (see Sec.  320.50(a) for the proposed wording of
the trust agreement) and would meet the same requirements specified for
the trust funds (see Sec.  320.45 for proposed trust fund regulations)
with two exceptions. The first is that an originally signed duplicate
of the trust agreement would be submitted to the Administrator with the
original or the certified copy of the letter of credit. The second is
that, unless the standby trust fund was funded pursuant to the
requirements of this part including holding a letter of credit as
specified in Sec.  320.40 and described earlier, the following would
not be required: (1) Payments into the trust fund as specified in Sec.
320.45; (2) annual valuations as required by the trust agreement; and
(3) notices of payment as required by the trust agreement.
    Second, EPA is proposing that the letter of credit must be
irrevocable and issued for a period of at least one year. Without this
provision the letter of credit could potentially be withdrawn or
modified for any reason and at any time by the issuer unilaterally,
without notification to the current owner or operator. With this
provision, the owner or operator, third-party CERCLA claimants, and EPA
are assured of at least one year of coverage.
    Further, EPA is proposing that the letter of credit must provide
that the expiration date would automatically be extended for a period
of at least one year unless, at least 120 days before the current
expiration date, the issuing institution notifies the owner or
operator, the trust fund trustee (if the letter of credit is held by
the trustee) and the Administrator by certified mail of a decision not
to extend the expiration date. Under the terms of the letter of credit,
the 120 days would begin on the date when the owner or operator, the
trust fund trustee (if the letter is issued in favor of the trustee),
and the Administrator have received the notice, as evidenced by the
return receipts. This proposed automatic extension provision would help
to ensure that coverage continues. Combined with the irrevocability
provision, the owner and operator, EPA and other third-party CERCLA
claimants can be assured of continuous coverage unless notified by the
issuing institution.
    As a final proposed provision to ensure continuity of coverage, the
proposed rule would provide for the possibility for the letter of
credit to fund the trust fund in one of two ways if the letter of
credit were not extended. The first way would apply when the letter of
credit is issued in favor of any and all third-party CERCLA claimants.
In that scenario, if the owner or operator did not establish alternate
financial responsibility as specified in this proposed rule and obtain
written

approval of such alternate financial responsibility from the
Administrator within ninety days after receipt of a non-extension
notice by the owner or operator and the Administrator, the
Administrator would draw on the letter of credit if the letter of
credit is issued in favor of any and all third party CERCLA claimants.
The issuing institution would then deposit the unused portion of the
credit into the standby trust. The second way would apply when the
letter of credit is issued in favor of the trust fund trustee. In such
scenarios, if the owner or operator did not obtain alternate financial
responsibility and obtain written approval of such alternate financial
responsibility from the Administrator within ninety days after receipt
of a non-extension notice by the owner or operator, the Administrator
and the trustee, the Administrator would inform the trustee that the
owner or operator had not established alternate financial
responsibility. This would prompt the trustee to draw on the letter of
credit and deposit any unused portion of the credit into the trust
fund.
    The Administrator would be able to delay the drawing of funds or
the notification to the trustee of the trust fund that the owner or
operator had not established alternate financial responsibility, if the
issuing institution grants an extension of the term of the credit.
During the last thirty days of any such extension, if the owner or
operator has failed to provide alternate financial responsibility as
specified in this section and obtain written approval of such financial
responsibility from the Administrator, the Administrator would draw on
the letter of credit or notify the trustee of the trust fund that the
owner or operator had not established alternate financial
responsibility and obtained written approval of such alternate
financial responsibility. Under the terms of the letter of credit, all
amounts paid pursuant to a draft by the Administrator or the trust fund
trustee in the circumstances described in this paragraph would be
deposited by the issuing institution directly into the trust fund.
    A similar arrangement is required under the RCRA Subtitle C closure
post closure financial assurance regulations and the Agency has found
it to be a valuable feature. The accompanying trust fund and the
automatic extension provisions for letters of credit are an important
feature of this proposal because letters of credit might otherwise not
be extended after a release of hazardous substances or after marked
financial decline of the owner or operator. Absent the ability for the
trustee or the Administrator to make a draw on the letter of credit in
instances of issuer notice of non-extension and the owner's or
operator's failure to obtain replacement financial responsibility,
financial responsibility may not be available when necessary. After
notice of non-extension, a CERCLA claim may not necessarily be possible
for some time because the CERCLA processes leading to a claim may be
lengthy. In such an instance, the letter of credit may expire, leaving
no financial responsibility instrument available. The proposed
arrangement would ensure that funds are still available to pay the
valid CERCLA claims. This provision, and the similar provisions for
other proposed instruments, as well as alternatives are discussed in
more depth in section VI.C.7 of this preamble.
    IIPLP also provided comments to EPA on these proposed automatic
extension and non-extension notification requirements. With respect to
the non-extension notification, the IIBLP suggested that the wording of
the letter of credit should not explicitly require notification to the
owner or operator of the decision not to extend the credit as discussed
earlier. Rather, IIBLP noted that the means of how issuers and their
applicants communicate is typically left to a separate agreement from
the letter of credit itself. However, EPA believes that specifying such
a notification term in the letter of credit itself, including notice to
the owner or operator, is preferable because timely receipt of such
notice by both EPA and the owner or operator is important as it would
establish the timeframe in which the owner or operator must obtain
alternate financial responsibility. Further, the provision helps
prevent expiration from taking place without the knowledge of EPA and
the owner or operator, or a draw being necessitated due to pending
expiration without the knowledge of the owner or operator. Finally,
while it may be unusual as a general matter of commercial practice,
such a provision is a common feature of government financial
responsibility programs. For example, similar notification requirements
are required in the RCRA Subtitle C closure and post closure letter of
credit which has been broadly used as a financial assurance instrument
by regulated entities in that program.
    With respect to the automatic extension provisions, the IIBLP
stated that a date should be identified beyond which extension should
not be able to occur. However, such a provision would be inconsistent
with other EPA financial assurance programs and necessitate more
frequent re-establishment of financial responsibility on the part of
the owner or operator or draws on the letter of credit prompted by
pending expiration. Further, given that the time horizon over which an
owner and operator must maintain financial responsibility under CERCLA
Sec.  108(b) may vary on a case-by-case basis, EPA could not identify a
nationally-uniform date beyond which the letter of credit should be
allowed to expire.
Claims Against a Letter of Credit Issued in Favor of Any and All Third-
Party CERCLA Claimants (Sec. Sec.  320.40(j) and 320.50(b))
    Under the proposed letter of credit language (Sec.  320.50(b)) and
regulations (Sec.  320.40(j)), when the letter of credit is issued in
favor of any and all third-party CERCLA claimants, it would provide
payment to third-party CERCLA claimants under three scenarios provided
that the claimant provides the necessary documentation, in addition to
authorizing direct action claims against the issuing institution
itself. Under the proposed regulations the following claims would be
authorized against the letter of credit when issued in favor of any and
all third-party CERCLA claimants:
    (1) Any party that obtained a final court judgment from a Federal
court awarding CERCLA response costs, health assessment costs, and/or
natural resource damages associated with the facility against any of
the current owners or operators to whom payment as required by the
judgment had not been made within thirty days would be able to make a
claim against the letter of credit. However, the party would only be
able to make a claim if it had not recovered or been paid the funds
from any other source.
    (2) The Administrator or another authorized Federal agency would be
able to make a claim against the letter of credit requesting payment if
payment had not been made as required by a CERCLA settlement associated
with the facility between a current owner or operator and EPA or
another Federal agency.
    (3) The Administrator or another authorized Federal agency would be
able to make a claim against the letter of credit requesting payment
into a trust fund established pursuant to a CERCLA unilateral
administrative order issued to a current owner or operator if
performance at the facility as required by the order had not occurred.
The Administrator or other Federal agency would be able to make the
claim against the letter of credit only if the owner or operator had
provided a written statement that the letter of credit may be

used to assure the performance of the work required in the order.
    In order to make a draw on the letter of credit under these three
scenarios, claimants would need to present one of two sets of
documents. The first set of documents would consist of a demand for
payment bearing reference to the letter of credit by number, a final
court judgment dated at least thirty days earlier from a Federal court,
in favor of the claimant, awarding CERCLA response costs, health
assessment costs, and/or natural resource damages associated with the
facility against any of the current owners or operators, and a
certification from the claimant that reads as follows: ``I hereby
certify that the amount of the demand is payable pursuant to
regulations issued under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended.''
    Because a claimant seeking satisfaction of a final court judgment
awarding CERCLA response costs, health assessment costs, and/or natural
resource damages may be any of a wide range of potential parties
including Federal and state government officials, natural resource
trustees, or private parties, EPA was told by several representatives
of the financial industry that the potential for inappropriate claims
in this scenario may be higher than in typical financial assurance
programs where a particular regulator is the only named beneficiary.
(The RCRA Subtitle C closure and post-closure letter of credit at 40
CFR 264.151(d) is an example of a single-beneficiary letter of credit).
EPA was informed by one bank representative that documentary payment
conditions requiring presentation of a court judgment would help ease
concerns in this regard. Specifically, the representative suggested
that the risk of fraud would be reduced if the rules required
production of a court judgment in addition to a demand and
certification. EPA does not expect that such a requirement would
present a significant burden to legitimate claimants, and wishes to
lower any perceived barriers to issuing the necessary instruments under
this proposed rule. Thus, EPA is proposing that the language of the
letter of credit issued in favor of any and all third-party CERCLA
claimants require not just a demand for payment and a certification
from the claimant but the presentation of the final court judgment as
well.
    As discussed in the general payment provisions section of the
preamble, the proposed regulatory text in Sec.  320.40(j) regarding
letters of credit includes other requirements for making draws on the
letter of credit. EPA's proposed letter of credit certification
requirement is intended to encompass these requirements and thereby to
help ensure that those supplemental criteria have been met. These
requirements are designed to foster fairness for both potential
claimants as well as to the owners or operators who provide the CERCLA
Sec.  108(b) financial responsibility. These requirements are (1) that
a claim for satisfaction of a final court judgment may only be made
against a CERCLA Sec.  108(b) financial responsibility instrument if
the judgment has been obtained against a current owner or operator at
the facility and if the owner or operator has failed to make payment on
the judgment within thirty days; and (2) that the claimant may only
make such a claim if they have not recovered or been paid the funds
from any other source. EPA is aware that letters of credit are designed
to be an independent undertaking that would preclude the issuing
institution from considering non-documentary conditions such as whether
the previously-mentioned supplemental criteria had been met. EPA is
thus requiring that claimants certify that the funds are payable
pursuant to regulations issued under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended. EPA
believes this additional documentary condition helps curb the potential
for inappropriate draws when the letter of credit is issued in favor of
any and all third party claimants.
    The second set of documents that could be presented in order for
EPA or another authorized Federal agency to make a draw when the letter
of credit is issued in favor of any and all third-party CERCLA
claimants is a demand for payment bearing reference to the letter of
credit by number and a certification from the Administrator or another
Federal agency that reads as follows: ``I hereby certify that the
amount of the demand is payable pursuant to regulations issued under
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 as amended.'' EPA intends for this second set of documents
to be presented by EPA or another authorized Federal agency in order to
obtain payment for a CERCLA settlement or into a trust fund established
pursuant to a CERCLA Sec.  106 unilateral administrative order in
instances where either (1) payment was not made as required by a CERCLA
settlement associated with the facility with a current owner or
operator, or (2) performance at the facility had not occurred as
required by a CERCLA Sec.  106 unilateral administrative order issued
to a current owner or operator.
    Because these payment scenarios are explicitly provided for in the
proposed rules at 320.40(j)(2) and (3), and because those scenarios are