ILLINOIS POLLUTION CONTROL BOARD
January
25,
1990
IN THE MATTER OF:
UST STATE FUND
)
R89-19
(Rulemaking)
PROPOSAL FOR PUBLIC COMI~ENT
PROPOSED OPINION AND ORDER OF THE BOARD
(by J.
Anderson):
Pursuant
to Section 22.4(d) and 22.13(d) of the
Environmental Protection Act
(Act),
as amended
by
P.A.
86—0958,
the Board is proposing to amend
the UST underground storage tank
regulations
in
35
Ill.
Adm.
Code
731.
Section
22.13
of the Act establishes
the ‘Underground
Storage Tank Fund”.
Section 22.13(d) requires the Board
to
implement
the Fund by adopting regulations pursuant
to Section
22.4(d), which provides for quick adoption of
regulations which
are “identical
in substance”
to federal
regulations.
Section
22.4(d)
provides that Title
VII
of
the Act and Section
5 of
the
Administrative Procedure Act
(APA)
shall
not apply.
Because this
rulemaking
is not subject
to Section
5 of the APA,
it
is not
subject
to first notice or
to second notice review
by the Joint
Committee on Administrative
Rules
(JCAR).
The federal UST rules
are found at
40 CFR 280.
The rules governing State Funds are
40
CFR 280.100 and 280.101, adopted at
53
Fed.
Reg.
43378, October
26, 1988.
HISTORY OF UST RULES
The UST rules are contained
in
35
Ill.
Adm. Code
731.
They
were adopted and amended as
follows:
R86—l
71 PCB 110,
July
11,
1986;
10
Ill.
Reg.
13998,
August
22,
1986.
R86—28
75 PCB 306, February
5,
1987;
and
76 PCB 195,
March
5,
1987;
11
111.
Peg.
6017, April
3,
1987.
Correction
at
77 PCB
235, April
16,
1987;
11
Ill.
Peg.
8684,
May
1,
1987.
P88—27
April
27,
1989;
13
Ill. Reg.
9519,
effective June
12,
1989.
P89—4
July 27,
1989;
13
Ill.
Peg.
15010,
effective
September
12,
1989.
P89—10
Proposed November
15,
1989;
January
5,
1990,
at
14
Ill.
Reg.
153.
107—517
—2—
On April
27, 1989 the Board adopted regulations which are
identical
in substance
to the major revisions
to the USEPA UST
rules which appeared
at
53
Fed.
Peg.
37194,
September
23,
1988.
The Board separated
the financial responsibility
rules
from the
September
23 rules
in order
to
avoid delaying adoption of the
latter.
The financial responsibility
rules were adopted
in P89—
4.
Until P88—27 the UST rules were addressed
in the RCRA update
Dockets.
The Board separated
the September
23,
1988
rules from
the RCRA update process
because of
the size and timing
of the
rulemaking,
and because
of
the desirability
of developing
a
separate mailing
list
for persons interested only
in tanks.
The
Board will consider recombining the RCRA and UST updates after
initial adoption of
the new program.
FIRE MARSHAL RULES
As
is discussed
in greater detail below,
the legislation
requires that both
the Board and Office of
the State Fire Marshal
adopt equivalents of much
of the USEPA UST rules.
The
Fire
Marshal’s
rules are contained
in
41
Ill.
Adm. Code
170,
along
with preexisting rules adopted prior
to rhe USEPA equivalent
rules.
They were adopted,
amended, corrected and objected
to
in
the following actions:
13 Ill.
Peg.
5669,
effective April
21,
1989.
13 Ill.
Peg.
7744,
effective May
9,
1989.
13 Ill.
Peg.
8515,
effective May
19, 1989.
13 Ill.
Peg.
8875,
effective May
19, 1989.
13
Ill. Peg.
13288,
August
18,
1989.
13
Ill.
Peg.
T~3305, August
18,
1989.
13
Ill.
Reg.
14992,
effective September 11,
1989.
13
Ill. Peg.
15126, September
22,
1989
The technical standards were adopted
at
13
Ill.
Peg.
5669.
The financial assurance requirements were incorporated
by
reference at
13
Ill.
Reg.
8515.
The other actions were
corrections and objections.
STATUTORY AUTHORITY
The Opinion
in R88—27 included a
lengzhy discussion
of
Section
22.4(d)
of the Act, and other provisions
of
P.A.
85—861,
the statutory basis of
the UST program.
The Board will reference
that discussion here, and will only summarize
it
in this Proposed
Opinion.
Section
22.4(d)
of the Act requires the Board
to adopt
regulations which are “identical
in substance”
with USEPA’s UST
regulations.
Ill.
Rev.
Stat.
1987,
ch.
127 1/2, par.
l54(b)(i)
requires the Office of
the Illinois State Fire Marshal
to adopt
regulations which are also
to be
“identical
in substance”
to the
same USEPA UST regulations.
While the Fire Marshal
is
to adopt
I 07-518
—3—
regulations only through
“corrective action”,
the Board
is
to
adopt the entire set of
rules.
In P88—27
the Board adopted
regulations which,
among other
things,
reflect the delineation
between regulations before and after
“corrective action”.
The financial responsibility regulations bridge the
corrective action gap.
Operators are required
to
provide
financial assurance immediately or
in the near
future.
This will
mainly
be for tanks which are not known or
suspected
to be
leaking.
However,
if
a tank leaks,
and
the operator fails
to
take sufficient corrective action,
the financial institutions
will pay funds
for corrective action which will be under
the
direction of
the Agency.
Thus the Fire Marshal will
be
responsible
for receiving the financial
assurance documents,
but
the Agency will be the recipient
of any funds.
Ill.
Rev.
Stat.
1987,
ch.
127
1/2,
par.
154(b)(ii)
allows
the Fire Marshal
to adopt
“additional
requirements”.
Section
22.4(d)
of the Act provides that the Board may,
upon receiving
notice of such requirements,
to adopt further Board requirements
which are “identical
in
substance
to the additional Fire Marshal
requirements.
S.B.
64 AND
752
In P89—4
the Board adopted
the JSEPA
financial assurance
requirements, which are trom the October
26,
1988 Federal
Register.
These regulations require
that owners or operators
obtain
“private insurance”,
as defined below and establish
a
standby trust
fund
to receive
the proceeds of
the financial
assurance.
40 CFP 280.100 and 280.101 allow the use of state
funds under
certain conditions.
The Board adopted
no equivalent
of
40 CFR 280.100 or
280.101 because,
at the time P89—4 was under
consideration,
there appeared
to be no State fund in Illinois
which met the conditions.
At about
the same time R89—4 was adopted,
S.D.
64 was signed
into law as
P.A.
86—125.
S.B.
64 created
a State
fund.
However,
S.B.
64 did not state
that
it was intended
to create a State Fund
meeting the USEPA requirements;
did not provide that persons
qualifying under
the Fund met
the federal financial assurance
requirement;
did not direct
the Board
to amend
its rules
to
allow the use of the Fund
in lieu of private insurance;
and,
did
not permit the Board
to use the “identical
in substance”
rulemaking mechanism
to
so amend
its rules.
The problem was resolved
in S.D.
752
(P.A.
86—0958),
which
added Section 22.13(d)
to the Act.
This section provides as
follows:
The
Fund
is
intended
to
be
a
State
Fund
by
which
persons
who
qualify
for
access
to
the
Fund
in the event
of
a release may satisfy the
financial
responsibility
requirements
under
107—5 19
—4—
applicable
federal
law
and
regulations.
The
Board
shall
impleme~nt this
intent
by adopting
regulations
pursuant
to
subsection
(d)
of
Section
22.4
of this
Act.
“IDENTICAL
~N SUBSTANCE” MANDATE
Section
22.4(d)
requires the Board
to adopt regulations
which are “identical
in substance”.
Section 7.2
of the Act
orovides that:
...Rlegulations
that
are
“identical
in
substance”
means
State
regulations
which
require
the
same
actions
with
respect
to
protection
of
the
environment,
by
the
same
group
of
affected
oersons,
as
would
federal
regulations
if
USEPA administered
the subject
program
in
Illinois.
After
consideration
of
comments
..
.,
the
Board
shall
adopt
the
verbatim text
of such USEPA reculations as are
necessary and appropriate
for authorization of
the program...
The “identical
in substance”
mandate
in this rulemaking
ordinarily would pose
a difficulty
in
that the federal
regulations allow,
but
do not require creation of a state
fund.
Also,
the USEPA rules prescribe the form of
a state fund which
qualifies under federal
law,
not
a verbatim text.
In such
situations
Section 7.2(a)(3) would require the Board to
“adopt a
regulation
as prescribed,
to the extent Dcssible consistent with
other
relevant USEPA regulations and existing State law.”
The
Board construes
the legislative directive
in Section
22.13(d) as
superseding any requirements the Board might otherwise have to
make an “identical
in substance”
review as
regards
to the
statute.
The Board construes Section 22.13(d)
as
a legislative pre-
determination that
the UST State Fund statutory provisions
satisfy
the identical
in substance mandate and that no separate
Board consideration is required,
except
to
reference the statute
and identify the appeal procedure.
However,
there are a few
USEPA requirements discussed below.
In addition,
the Board has
proposed
regulatory language to address
two
of them, certificate~
of coverage and nature
of priviate
insurance.
PRIVATE INSURANCE REQUIREMENT
35
Ill. Adm. Code
731.195, and
40 CFR 280.95 specify certain
methods by which an operator demonstrates financial
responsibility.
Mechanisms
include prLvate insurance,
bonds,
letters of credit,
trust
funds,
self—insurance
for operators
which meet
a
financial
test and guarantees
from related
107—520
—5—
corporations which meet the financial
test.
Operators* are
allowed to use these mechanisms
in combinations
to meet the total
amount of
required financial assurance.
Operators must establish
a standby
trust fund
to receive
the proceeds of any mechanism
in
the event
of
a
release.
In
this Opinion
the Board will use the term “private
insurance”
to
refer
to the mechanisms under
the USEPA
rules,
exclusive of
state funds,
by which
an operator can meet the
financial assurance requirement.
It
is
to be understood
that
this refers to mechanisms
other
than
insurance,
including self—
insurance and guarantees.
40 CFP 280.100 AND 280.101
State funds are governed
by
40 CFR 280.100 and 280.101.
Section 280.100 applies
to UST’s
in states without
an approved
program where the state requires
a financial assurance
mechanism.
USEPA may accept
the mechanism
if
it meets
a certain
standard.
There may be
a USEPA Drafting ambiguity which merits
further
consideration.
Section 280.101 applies
to UST’s located states where USEPA
is administering the financial responsibility requirements
in a
state
“which assures
that monies will be available from a state
fund”.
USEPA will accept
the state
fund
in lieu of private
insurance
if
a certain standard
is met.
Which Section applies?
Clearly Section 280.101
is directed
at
state funds.
However,
in Illinois,
the UST fund
is also a
“state-required mechanism”,
since
its use
is mandatory.
Arguably
the UST fund could be approvable under either Section.
However,
the applicability question has deeper levels.
Both Section 280.100 and 280.101 are “USEPA—only Sections”,
which apply only
to USEPA approval of alternative mechanisms and
state funds when USEPA
is administering the program.
They are
silent as
to these mechanisins when the State
is administering the
program.
As the Board understands
the process, any State
mechanisms
in the final program will
be approved under
the
general language on program approval
in 40 CFR 281,
281.39.
However,
the Board
solicits comment
on
this.
APPROVABILITY OF THE FUND
40 CFR 280.101 allows the use of a “state fund”
if the
Regional Administrator determines
that
it
is “at least equivalent
to the financial mechanisms
specified”
in the regulations.
The
Regional Administrator
is
to evaluate equivalency principally
in
terms of:
*
As used
in this Opinion,
“operators” means “owners or
operators”.
107—521
—6—
Certainty of
the availability
of funds
for
taking
corrective
action
and/or
for
compen-
sating
third
parties;
the
amount
of
funds
which will
be
made
available;
and
the
types
of costs covered.
40 CFR 280.101(b).
40 CFR 280.100(a) and 280.101(a)
allow
the use of State
funds
to meet federal
requirements only
if approved by the
Regional Administrator
of USEPA.
Section
22.4(d)
of the Act
requires the Board
to maintain an “identical
in substance”
program.
There is
a potential conflict between
the mandates
of
Section
22.4(d)
and 22.13,
if USEPA were
to fail
to approve
the
Fund.
However,
in that the General Assembly has provided for
immediate use of
the Fund
to satisfy the financial assurance
requirement
in the Board rules,
the Board will not condition use
of the Fund on USEPA approval.
S.D.
752 mandates
that
the Board adopt
regulations
to
implement
the UST Fund.
The Board has therefore developed a
proposal without conducting
an evaluation as to whether the UST
Fund
is indeed approvable.
As the Board understands the process, approval
of state
funds will
be
a procedure separate from the authorization
application process.
USEPA may be able
to approve
the use of the
State fund prior
to authorization
of
the Illinois UST program.
As noted earlier,
under 40 CFR 280.101(b), approvability of
the State fund depends
on:
the amount of
coverage;
the types
of
costs covered;
and,
the certainty of availability
of
funds.
AMOUNT OF COVERAGE
40 CFR 280.93, and
35
Ill.
Adm.
Code 731.193, specify
the
amounts
of required financial assurance.
For most operators
this
is
$1 million per occurrence, with an annual aggregate of
$1
million, with alternative amounts specified for small
or
large
throughput
tanks.
TYPES OF COSTS COVERED
35
Ill. Adm.
Code 731.193,
as adopted
in P89—4, and federal
law,
require owners or operators
of UST’s
to:
demonstrate
financial
responsibility
for
taking corrective
action
and for compensating
third
parties
for
bodily
injury
and property
damage
caused
by
accidental
releases
arising
from
operation
of
petroleum
underground
storage
tanks....
35
Iii.
Adm.
Code
731.193
and
40 CFR
280.93.
107—522
—7—
CERTAINTY OF AVAILABILITY OF FUNDS
Coverage under
the State UST Fund
is subject
to conditions,
including private
insurance coverage
for
the deductible,
registration of the tank,
compliance with Board regulations,
adequacy of
the Fund, prepayment
by the operator
of corrective
action costs and claims, and prepayment
of the deductible.
Regarding
the pre—payment
of the deductible,
for example,
the USEPA requirements
for private insurance provide:
The
insurer
is liable
for the payment
of any
amounts
within
any
deductible
applicable
to
the
policy
to
the
provider
of
corrective
action
or
a
damaged
third—party,
with
a
right
of
reimbursement
by
the
insured
for
any
such
payment
made
by
the
Insurer.
(40
CFR
280.97(b)(),
paragraph
(2)(b)
of
the required
private
insurance
form.)
(Incorporated
by
reference
in
35
Ill.
Adm. Code 731.197)
CERTIFICATE OF COVERAGE
40 CFR 280.101 has requirements
for an approvabe
fund which
do not appear
to be clearly addressed
in the legislation
regarding a certificate
of coverage.
40
CFR 280.101(d)
requires
the State to
issue
“a letter
or certificate describing
the nature
of
the state’s assumption
of responsibility”.
The certificate
must identify the facility and the “amount
of
funds for
corrective action and/or
for compensating
third parties
that
is
assured by the State.”
The Board
has below proposed to
include
these requirements
in the proposal.
The USEPA rule requires
in
addition that
the operator keep the certificate, at
the
facility.
However,
the
Board has not required this,
consistent
with the approach taken
in P89—4
in Section 731.206 and 731.207.
40 CFR 280.101(d)
requires the State
to issue, within
60
days after USEPA approval
of
the use of
a State
fund,
letters or
certificates
of coverage
to operators covered by
the fund.
However, access
to the UST fund under
S.D.
64 appears
to
be
subject
to many conditions which,
if
S.D.
64
is taken literally,
would present
the Fire Marshal
from issuing certificates
of
coverage until
after
a
release has occurred.
If
the Fire Marshal
could not issue certificates
of coverage
in advance,
the Bills
would fail
in their central
purpose of releasing
the operator
from the requirement
to maintain private insurance.
In the
proposal below,
the Board has reconciled
this potential conflict
by construing
the conditions of
S.B.
64
as conditions under which
the Fire Marshal
issues the certificate
of coverage,
rather than
as post—hoc conditions tot payment.
Also,
there
is
a very
real possibility that
an operator will
qualify for
a certificate, and later
fail
to meet the
conditions.
For example, one condition is
that
the operator have
107—523
—8—
private insurance for
the deductible.
The operator could obtain
the certificate,
and then allow
the private insurance
to lapse
by
failing
to pay premiums when due.
For
this reason
the Board has
proposed to limit certificates
of coverage
to one year.
Annual
renewal will
tend
to limit
the number
of operators with
certificates who subsequently
“fall off the wagon”.
The
Board
solicits comment
as
to whether there might
be an
alternative way
to
reconcile these provisions,
or whether tnese
orovisions
need to
he reconciled
at all.
NATURE
OF’
PRIVATE
INSuRANCE
S.D.
64
requires
that
the
operator
have private insurance
for
the
deductible
which
is
not covered
by
the
Fund.
The
Bill
is
not
otherwise
more
specific
as
to
the
nature of
this insurance.
The
Board
has
proposed
to
allow
the use
of any of
the private
mechanisms allowed
under Board
rules,
which are derived
from the
USEPA
rules.
The mechanisms
include
insurance,
bonds,
letters of
credit and trust
funds.
In addition,
they include self insurance
for operators
which meet
a financial
test,
and guarantees
from
parent corporations which meet the financial
test.
The Board
solicits comment as
to whether
this
is consistent with
the
statutes,
and as
to whether use
of these mechanisms
to meet the
deductiole
ought
to
be
compulsory.
STANDBY
TRUST
FUND
As
noted
above,
40
CFR
280.103
and
35
Ill.
Adm.
Code
731.203
require
the operator to establish
a standby
trust
fund to
receive
the proceeds of private
insurance.
The rules would be
simpler
if
the
IJST Fund functioned
the same
as private
insurance:
i.e.
if
it were payable
into the standby
trust
fund.
However,
35
Ill.
Adm.
Code 731.208
(40 CFP 280.108) governs
the details
of how the
Agency draws on the standby trust.
These provisions are not
compatible with the provisions
in the Bills.
Therefore,
the
Board has not directly proposed
to require operators
to establish
standby
trusts,
or
to require
the State Fund
proceeds to be paid
into such
a trust.
However,
if operators have
to have private
insurance meeting USEPA requirements
for the deductible,
as
discussed above,
they will be
required to establish standby
trusts anyway.
CONCLUSION
The Board proposes
to adopt
the Section
set forth below.
The Board will
receive written public comment
for
45 days after
the date
of publication of the proposal
in the Illinois Register.
ORDER
The Board proposes
to add the following Section as
35
Ill.
Adm.
Code
731.200:
107—524
—9—
Section 731.200
UST State Fund
a)
Section 22.13
of
the Act creates the Underground Storage
Tank
Fund
(Fund).
THE FUND
IS INTENDED TO BE A STATE
FUND BY WHICH PERSONS WHO QUALIFY FOR ACCESS TO THE FUND
IN THE EVENT OF A RELEASE MAY SATISFY THE FINANCIAL
RESPONSIBILITY REQUIREMENTS UNDER THIS PART.
(Section
22.13 of
the Act.)
b)
An owner
or operator may apply to the Fire Marshal
for
a
certificate of coverage,
on
forms provided by the Fire
Marshal.
c)
If
the.
Fire
Marshal
determines
that
the
owner
or
operator
would
be
entitled
to
receive
funds
from
the
Fund
in
the
event
of
a release,
it shall
issue
a
certificate
of
coverage.
The
certificate
must
specify:
1)
Name
of
the
owner
or
operator;
2)
Name and address
of
the
facility;
3)
The amount
of
funds for corrective action or
compensating
third parties which
is assured
by the
Fund;
4)
The effective date and expiration date
of the
certificate;
d)
Certificates are valid for
no longer
than one year.
e)
The owner
or operator shall
reapply
for
a new
certificate
rio less than 60 days prior
to expiration
of
the old certificate.
f)
An owner
or operator with
a certificate
is
deemed in
compliance with the requirements
of this Subpart with
respect
to the facility listed
in
the certificate.
g)
Owners or
operators may use any financial assurance
mechanism
or combination of mechanisms meeting
the
requirements of the other Sections of this Subpart
to
meet
the Fund
requirement
that they have insurance
for
the deductible.
h)
The owner or operator may appeal the refusal to
issue
a
certificate
or
the issuance of
a certificate subject
to
conditions pursuant
to
35
Ill.
Adm.
Code
105.
i)
IF THE AGENCY REFUSES TO REIMBURSE OR AUTHORIZES ONLY A
PARTIAL PEIMBURSEMENT, THE AFFECTED OWNER OR OPERATOR
MAY PETITION THE BOARD FOR A HEAPING pursuant
to
35
Ill.
Adm.
Code
105.
(Section 22.l8b(g)
of the Act).
107—525
—10—
(Source:
Added at
14
Ill. Reg.
,
effective
IT IS
SO ORDERED.
I,
Dorothy
M.
Gunn,
Clerk
of
the
Illinois
Pollution
Control
Board,
hereby certify that the above Proposal
for Public Comment,
Proposed Opinion and Order
was adopted on the
______
day
of
__________________________
,
1990,
by a vote
of
________
Dorothy M.
Gunn,
Clerk
Illinois Pollution Control Board
107—526
