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Indiana Department of Environmental Management

IDEM > Environmental Cleanup > Leaking Underground Storage Tanks (LUSTs) > LUST: Financial Responsibility LUST: Financial Responsibility

Table of Contents

  1. What is financial responsiblity?
  2. Who is requried to have financial responsibility?
  3. How much money do you have to have for financial responsiblity?
  4. How much is the deductible for ELTF?
  5. What kinds of financial assurance for the deductible can I use?
  6. Tell me more about using ELTF as my financial responsibility?
  7. What does the certificate say?
  8. What if the ELTF doesn't have enough money to provide financial assurance for all the UST owners and operators?
  9. So, what if I am not eligible to use the ELTF fund, do I still need financial assurance for my tanks?
  10. What are methods I can use for financial assurance?
  11. What about financial assurance for local governments that own tanks?
  12. What is a local government?
  13. Can I mix the methods for the full amount of the financial assurance?
  14. What happens when I get the financial assurance?
  15. What paperwork do I need to have?
  16. What happens if I don't have financial responsibility?
  17. Where can I find these laws?
  18. Who can I call if I have questions about financial responsibility?

1. What is financial responsibility?

Financial responsibility is the demonstrated capability to pay for remediating potential damage to the environment or compensating third parties.

2. Who is required to have financial responsibility?

The federal rules, state statute and state rules require either the owner or the operator of a regulated petroleum underground storage tank to obtain financial assurance. The rule exempts some tanks from all requirements. These exempted tanks include federal and state owned UST systems, tanks using heating oil for on-site consumption, small quantity tanks holding less than 110 gallons and other tanks exempted by statute or rule.

3. How much money do you have to have for financial responsibility?

For an owner or operator of 1 to 100 tanks, it is $1 million and for an owner or operator of more than 100 UST systems, it is $2 million. But if the owner or operator pays the tank fees and is eligible for the Excess Liability Trust Fund (ELTF) then the amount required for financial responsibility is reduced to the deductible for the ELTF for each release.

4. How much is the deductible for ELTF?

If the tank is not in compliance but was upgraded before a release, the deductible is $35,000.

If the tank is in compliance and does not have a double wall with secondary containment for the piping, the deductible is $30,000. If the tank is in compliance and has a double wall with secondary containment for the piping, the deductible is $25,000.

5. What kinds of financial assurance for the deductible can I use?

An owner or operator can use any of the methods listed below or a combination of any of them for financial assurance for the deductible:

  • Loan Guarantee: A written promise by a qualified financial institution to give the owner or operator a loan for the full amount of the cost of the deductible.
  • Certificate of Deposit: An interest-bearing certificate purchased by the owner or operator.
  • Accountant's Letter of Net Worth: A letter signed by a certified public accountant that verifies the tangible net worth of the owner or operator and that the net worth is sufficient to pay the deductible.
  • Insurance: A contractual arrangement where the owner or operator pays for a policy and the insurer agrees to reimburse the policyholder for the deductible for the ELTF.
  • Surety Bond: a bond issued by a surety company for a premium paid by the owner or operator. A standby trust must be established if this method is used.
  • Irrevocable Standby Letter of Credit: Issued by a bank or other qualified financial institutions for a fee paid by the owner or operator. The financial institution may require collateral of as much as 100% of the face value of the letter.
  • Trust Fund: Money put into a trust that covers the full cost of the deductible.
  • Guarantee: A contract between the guarantor and the owner or operator to provide the money for the deductible using a method described above.

6. Tell me more about using ELTF as my financial responsibility?

If you are eligible under the state rules and ask, the department will give you a certificate of financial responsibility. This certificate says that ELTF fulfills the federal and state financial responsibility requirements and the UST owner or operator is covered for all but the cost of the deductible.

7. What does the certificate say?

The certificate will contain the facility name and address, the facility ID number, and the amount of money available for corrective action and compensating third parties that is assured by the fund.

8. What if the ELTF doesn't have enough money to provide financial assurance for all the UST owners and operators?

IDEM will notify the owners and operators covered under the fund by certified mail. The fund coverage will continue for 60 days after notification and owners and operators during that 60 days must get other financial assurance.

9. So, what if I am not eligible to use the ELTF fund, do I still need financial assurance for my tanks?

Yes, federal and state law requires tank owners or operators to have Financial Responsibility. All owners or operators must acquire financial assurance for tanks, unless exempted as specified in question 2.

10. What are methods I can use for financial assurance?

Financial assurance methods are similar to the financial assurance methods for the deductible, they include:

  • Insurance: A contractual arrangement where the owner or operator pays for a policy and the insurer or risk retention group agrees to reimburse the policy holder for costs of cleanups and 3rd party compensation.
  • Corporate Guarantee and standby trust fund: A contract between another eligible firm and the owner or operator to provide the money for cleanups and 3rd party compensation. The eligible firm must pass a financial test. A standby trust must also be established if this method is used.
  • Surety bond and standby trust fund: A bond issued by a surety company for a premium paid by the owner or operator. The surety bond is a guarantee by the surety company that it will pay if the owner or operator does not pay. A standby trust must be established if this method is used.
  • Irrevocable Standby Letter of Credit and standby trust fund: Issued by a bank or other qualified financial institutions for a fee paid by the owner or operator. The letter of credit says that the issuer of the letter will provide the money. A standby trust must be established if this method is used.
  • Qualifications to be self-insured: The owner or operator with a tangible net worth of at least $10 million must pass a financial test.
  • Trust Fund: The owner or operator must set up a full-funded trust fund administered by a bank to pay for costs for cleanups and 3rd party compensation.
  • Excess Liability Trust Fund: The excess liability trust fund is money from tank fees, late fees, penalties, etc., administered by the state and covers the cost of cleanups and 3rd party compensation.
  • Other methods may be suggested by the owner or operator and approved by the state.

11. What about financial assurance for local governments that own tanks?

Local governments that own tanks can use any of the methods under question 10 but there are a few additional methods for financial assurance or for the ELTF deductible that can be used only by local governments.

  • Local government bond rating test: The local government must have outstanding bonds of $1million with certain ratings to qualify.
  • Local government financial test: Local government must pass a financial test to show it can cover the cost of cleanups and 3rd party compensation.
  • Local government guarantee: A contract between the local government and the owner or operator. The contract states that the local government will provide the cost of cleanups and 3rd party compensation if the owner or operator can't.
  • Local government fund: Local government sets aside money in a dedicated fund.

12. What is a local government?

It is a city, county, single or joint solid waste management district, municipal corporation, municipality, school corporation, special district, special taxing district, town, township, unit, Indian tribe, other legal entity.

13. Can I mix the methods for the full amount of the financial assurance?

Yes, you can use one or more methods available to you for financial responsibility to make up the total for either the deductible for the ELFT fund or the general financial assurance.

14. What happens when I get the financial assurance?

Keep the paperwork to show full funding of the financial responsibility at either the tank site or the owner or operator's workplace. You may need to show the paperwork to the IDEM inspector or send a copy to the department if asked. This would also include the financial assurance for the deductible. If it is a new tank, the owner or operator must send to the department a statement certifying that they have financial responsibility as required on the "Notification for Underground Storage Tanks&", State Form 45223.

15. What paperwork do I need to have?

A Certification of Financial Responsibility must be filled out with the owner or operator's appropriate information. This certification lists the method and amount of financial assurance provided by each method. The certification must be updated whenever the information changes. This certification can be found in the rule at 329 IAC 9-8-21(c). Copies of the evidence of financial responsibility must also be kept.

16. What happens if I don't have financial responsibility?

If you don't have evidence that you have the required financial responsibility, then you may be subject to an enforcement action and penalties.

17. Where can I find these laws?

The Federal rule is at 40 CFR 280.90 to 40 CFR 280.115. The State statute is at IC 13-23-4-1 to IC 13-23-9-5. The State rules are at 329 IAC 9-8. These can be found on the Internet at http://www.epa.gov/OUST/fedlaws/280_h.pdf for the federal rules, http://www.in.gov/legislative/ic/code/title13/ar23/ for Indiana statutes, or http://www.in.gov/legislative/iac/title329.html for Indiana rules. You can also get copies by asking the department.

18. Who can I call if I have questions about financial responsibility?

You can call the Underground Storage Tank Branch at (317) 234-4112.