Financial Responsibility (FR)

State regulations (Title 17, Chapter 56, Subchapter 8, Administrative Rules of Montana ) require Underground Storage Tanks (UST) owners and operators to demonstrate financial responsibility for the clean-up or third party liability compensation that results from a petroleum release from UST systems.

tank

 

Who must demonstrate financial responsibility? 

  • Owners or operators of petroleum UST systems must demonstrate financial responsibility for taking corrective action and for compensating third parties.

What UST systems require demonstration of financial responsibility? 

  • Financial responsibility requirements apply to underground tanks and piping storing petroleum.

There are two categories of exclusions that are listed below:

  • State and federal owned UST systems,
  • Tanks excluded under ARM 17.56.102(2),(3),(4),(5) or (6).

FR Types of Mechanisms

A firm with a tangible net worth of at least $10 million may demonstrate FR by passing one of the two financial tests listed in the Montana Administrative Rules.

You may obtain a surety bond that is a guarantee by a surety company that will satisfy FR obligations if the person who obtained the surety bond does not.

You may obtain a letter of credit that obligates the issuer to provide funding for corrective action and third-party compensation. If selecting this type, must also have a standby trust fund.

-  Standby Trust Fund - Standby trust that uses one of these assurance mechanisms (guarantee, surety bond or letter of credit) to fund the trust.

You may set up a fully funded trust fund administered by a third-party to pay for corrective action and third-party claims.

You may buy insurance from an insurer or a risk retention group.

You may secure a corporate guarantee from another eligible firm. The provider of the guarantee must pass one of the financial tests listed in the Montana Administrative Rules.

Elements of FR

There are four primary elements that make up the financial responsibility requirements for Underground Storage Tank (UST) Systems. Owners or Operators must demonstrate each of the following elements:

 

This is the financial assurance option selected by owners/operators.

This is the amount of coverage required that depends on the tank operator,  number of tanks covered and name of issuer and mechanism number (if applicable).

This is the financial responsibility mechanism that must cover the required categories of obligations and releases (e.g., corrective action and third-party compensation) and period of coverage.

This is the documentation that demonstrates the correct financial responsibility mechanisms, coverage amount and scope sufficient.

Scope of FR

  • -  Accidental - Owner/Operator must be able to cover all UST system releases classified as accidental, as opposed to intentional releases.
  • -  Sudden and Non-Sudden - Owner/Operator must be able to cover both sudden and non-sudden UST system releases.
  • -  Corrective Action - FR must address both on and off site corrective action due to UST system releases.
  • -  Third-Party Compensation - FR mechanism must cover both bodily injury and property damage claims from third parties as a result of UST system releases.

FR Forms

Amounts Required &/or Paid

1) Must have valid operating permit if using Petroleum Tank Release Compensation Board (PTRCB) funding
      a) And must be in full regulatory compliance to receive full reimbursement
      b) If not in full regulatory compliance for *period of:
           i) 1-30 days – 90% reimbursement
           ii) 31-60 days- 75% reimbursement
           iii) 61-90 days – 505 reimbursement
           iv) 91-180 days – 25% reimbursement
           v) Greater than 180 days = No reimbursement
2) CO-PAY: If checking PTRCB must have other mechanism(s) checked to cover the co-pay requirement of $17,500 and costs in excess of $1 million
     a) If checking Letter of Credit, must also check and have Standby Trust Fund

* for period explanation see ARM 17.58.336 (7)

 

PTRCF

1) Must meet Owner/Operator requirements listed above
2) PRTCF covers:
      a) Per Occurrence (ARM 75-11-307):
           i) 50% of the first $35,000 of eligible costs and 100% of subsequent eligible costs, up to a maximum total reimbursement of $982,500 for occurrences of a release.
           ii) 50% of the first $10,000 of eligible costs and 100% of subsequent eligible costs, up to a maximum total reimbursement of $495,000 for all tanks storing heating oil for consumptive use on the premises.
      b) Annual Aggregate:
           i) Federal Requirement:   <= 100 tanks $1 million, OR > 100 tanks $2 million
           ii)  The PTRCF covers each release or occurence for $1 million less the required copay, without any aggregation (excluding tanks that are storing heating oil that is being consumed on the premises).

Other Coverage

Tanks on farms, residences or used for heating oil and that are <= 1,100 gallons

 

  • -   100% eligible for costs up to $500,000 if properly designed and have double-walled system with release between 10/01/1993 to 10/01/2009, OR
  • -   Owner needs $5,000 co-pay, then PTRCB pays 50% of first $10,000 and 100% of costs up to $495,000

Financial Responsibility Mechanisms for Local Governments

Local governments may use the financial responsibility mechanisms available to other Owners and Operators. However, they have the option of using four additional mechanisms that have been tailored to their characteristics.

  • Bond Rating Test - A local government may demonstrate (or guarantee) financial responsibility by passing a bond rating test.
  • Financial Test - A local government may demonstrate (or guarantee) by passing a financial test.
  • Guarantee - A local government may obtain from another local government or the State of Montana.
  • Dedicated Fund - A local government may demonstrate (or guarantee) financial responsibility by establishing a fund.

If you have questions about FR, please contact the UST Program at (406) 444-5300, DEQUSTProgram@mt.gov or Petroleum Tank Cleanup Section at (406) 444-9710 or Petroleum Tank Release Compensation Board at (406) 444-9710.