TITLE 9. ENVIRONMENT

STATE WATER CONTROL BOARD

Final Regulation

Title of Regulation: 9VAC25-590. Petroleum Underground Storage Tank Financial Responsibility Requirements (amending 9VAC25-590-10, 9VAC25-590-40, 9VAC25-590-60, 9VAC25-590-70, 9VAC25-590-90, 9VAC25-590-100, 9VAC25-590-105, 9VAC25-590-110, 9VAC25-590-140 through 9VAC25-590-170, 9VAC25-590-190 through 9VAC25-590-220; repealing 9VAC25-590-230).

Statutory Authority: §§ 62.1-44.15 and 62.1-44.34:9 of the Code of Virginia; 42 USC § 6901 et seq.; 40 CFR Parts 280 and 281.

Effective Date: November 23, 2022.

Agency Contact: Russell P. Ellison, Department of Environmental Quality, 1111 East Main Street, Suite 1400, P.O. Box 1105, Richmond, VA 23218, telephone (804) 659-2670, FAX (804) 698-4266, or email russell.ellison@deq.virginia.gov.

Summary:

Pursuant to Chapter 356 of the 2022 Acts of Assembly, the amendments conform the regulation to a statutorily change shifting authority to issue and enforce permits from the State Water Control Board to the Department of Environmental Quality.

9VAC25-590-10. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Accidental release" means any sudden or nonsudden release of petroleum arising from operating an underground storage tank that results in a need for corrective action or compensation for bodily injury or property damage, or both, neither expected nor intended by the tank owner or operator.

"Annual aggregate" means the maximum financial responsibility requirement that an owner or operator is required to demonstrate annually.

"Board" means the State Water Control Board. When used outside the context of the promulgation of regulations, including regulations to establish general permits, "board" means the Department of Environmental Quality.

"Bodily injury" means the death or injury of any person incident to an accidental release from a petroleum underground storage tank; but not including any death, disablement, or injuries covered by workers' compensation, disability benefits or unemployment compensation law or other similar law. Bodily injury may include payment of medical, hospital, surgical, and funeral expenses arising out of the death or injury of any person. This term shall not include those liabilities which, consistent with standard insurance industry practices, are excluded from coverage in liability insurance policies for bodily injury.

"Chief financial officer" in the case of local government owners and operators, means the individual with the overall authority and responsibility for the collection, disbursement, and use of funds by the local government.

"Controlling interest" means direct ownership of at least 50% of the voting stock of another entity.

"Corrective action" means all actions necessary to abate, contain and cleanup a release from an underground storage tank to mitigate the public health or environmental threat from such releases and to rehabilitate state waters in accordance with Parts V (9VAC25-580-190 et seq.) and VI (9VAC25-580-230 et seq.) of 9VAC25 Chapter 580, Underground Storage Tanks: Technical Standards and Corrective Action Requirements. The term does not include those actions normally associated with closure or change in service as set out in Part VII (9VAC25-580-310 et seq.) of 9VAC25 Chapter 580 or the replacement of an underground storage tank.

"Department" means the Department of Environmental Quality.

"Facility" means any development or installation within the Commonwealth that deals in, stores or handles oil, and includes a pipeline.

"Financial reporting year" means the latest consecutive 12-month period for which any of the following reports used to support a financial test is prepared: (i) a 10 K report submitted to the U.S. Securities and Exchange Commission (SEC); (ii) an annual report of tangible net worth submitted to Dun and Bradstreet; (iii) annual reports submitted to the Energy Information Administration or the Rural Utilities Service; or (iv) a year-end financial statement authorized under 9VAC25-590-60 B or C of this chapter. "Financial reporting year" may thus comprise a fiscal or calendar year period.

"Gallons of petroleum pumped" means either the amount pumped into or the amount pumped out of a petroleum underground storage tank.

"Group self-insurance pool" or "pool" means a pool organized by two or more owners and/or operators of underground storage tanks for the purpose of forming a group self-insurance pool in order to demonstrate financial responsibility as required by § 62.1-44.34:12 of the Code of Virginia.

"Legal defense cost" means any expense that an owner or operator or provider of financial assurance incurs in defending against claims or actions brought (i) by the federal government or the board department to require corrective action or to recover the costs of corrective action, or to collect civil penalties under federal or state law or to assert any claim on behalf of the Virginia Petroleum Storage Tank Fund; (ii) by or on behalf of a third party for bodily injury or property damage caused by an accidental release; or (iii) by any person to enforce the terms of a financial assurance mechanism.

"Local government" means a municipality, county, town, commission, separately chartered and operated special district, school board, political subdivision of a state, or other special purpose government which provides essential services.

"Member" means an owner or operator of an underground storage tank who has entered into a member agreement and thereby becomes a member of a group self-insurance pool.

"Member agreement" means the written agreement executed between each member and the pool, which sets forth the conditions of membership in the pool, the obligations, if any, of each member to the other members, and the terms, coverages, limits, and deductibles of the pool plan.

"Occurrence" means an accident, including continuous or repeated exposure to conditions, which results in a release from an underground storage tank.

NOTE: This definition is intended to assist in the understanding of this chapter and is not intended either to limit the meaning of "occurrence" in a way that conflicts with standard insurance usage or to prevent the use of other standard insurance terms in place of "occurrence."

"Operator" means any person in control of, or having responsibility for, the daily operation of the UST system.

"Owner" means:

1. In the case of an UST system in use on November 8, 1984, or brought into use after that date, any person who owns an UST system used for storage, use, or dispensing of regulated substances; and

2. In the case of any UST system in use before November 8, 1984, but no longer in use on that date, any person who owned such UST immediately before the discontinuation of its use.

The term "owner" shall not include any person, who, without participating in the management of an underground storage tank or being otherwise engaged in petroleum production, refining, and marketing, holds indicia of ownership primarily to protect the holder's security interest in the tank.

"Owner" or "operator," when the owner or operator are separate parties, refers to the person that is obtaining or has obtained financial assurances.

"Person" means an individual, trust, firm, joint stock company, corporation, including a government corporation, partnership, association, any state or agency thereof, municipality, county, town, commission, political subdivision of a state, any interstate body, consortium, joint venture, commercial entity, the government of the United States or any unit or agency thereof.

"Petroleum" means petroleum, including crude oil or any fraction thereof, that is liquid at standard conditions of temperature and pressure (60°F and 14.7 pounds per square inch absolute).

"Petroleum marketing facilities" includes all facilities at which petroleum is produced or refined and all facilities from which petroleum is sold or transferred to other petroleum marketers or to the public.

"Pool plan" means the plan of self-insurance offered by the pool to its members as specifically designated in the member agreement.

"Property damage" means the loss or destruction of, or damage to, the property of any third party including any loss, damage or expense incident to an accidental release from a petroleum underground storage tank. This term shall not include those liabilities which, consistent with standard insurance industry practices, are excluded from coverage in liability insurance policies for property damage. However, such exclusions for property damage shall not include corrective action associated with releases from tanks which are covered by the policy.

"Provider of financial assurance" means a person that provides financial assurance to an owner or operator of an underground storage tank through one of the mechanisms listed in 9VAC25-590-60 through 9VAC25-590-110 and 9VAC25-590-250, including a guarantor, insurer, group self-insurance pool, surety, issuer of a letter of credit or certificate of deposit.

"Release" means any spilling, leaking, emitting, discharging, escaping, leaching or disposing from an UST into ground water, surface water, or upon lands, subsurface soils or storm drain systems.

"Substantial business relationship" means the extent of a business relationship necessary under Virginia law to make a guarantee contract issued incident to that relationship valid and enforceable. A guarantee contract is issued "incident to that relationship" if it arises from and depends on existing economic transactions between the guarantor and the owner or operator.

"Tangible net worth" means the tangible assets that remain after deducting liabilities; such assets do not include intangibles such as goodwill and rights to patents or royalties. For purposes of this definition, "assets" means all existing and all probable future economic benefits obtained or controlled by a particular entity as a result of past transactions.

"Termination" under Appendix III and Appendix IV means only those changes that could result in a gap in coverage as where the insured has not obtained substitute coverage or has obtained substitute coverage with a different retroactive date than the retroactive date of the original policy.

"Underground storage tank" or "UST" means any one or combination of tanks (including underground pipes connected thereto) that is used to contain an accumulation of regulated substances, and the volume of which (including the volume of underground pipes connected thereto) is 10% or more beneath the surface of the ground. This term does not include any:

1. Farm or residential tank of 1,100 gallons or less capacity used for storing motor fuel for noncommercial purposes;

2. Tank used for storing heating oil for consumption on the premises where stored;

3. Septic tank;

4. Pipeline facility (including gathering lines) regulated under:

a. The Natural Gas Pipeline Safety Act of 1968 (49 USC App. 1671, et seq.),

b. The Hazardous Liquid Pipeline Safety Act of 1979 (49 USC App. 2001, et seq.), or

c. Which is an intrastate pipeline facility regulated under state laws comparable to the provisions of the law referred to in subdivision 4 a or 4 b of this definition;

5. Surface impoundment, pit, pond, or lagoon;

6. Stormwater or wastewater collection system;

7. Flow-through process tank;

8. Liquid trap or associated gathering lines directly related to oil or gas production and gathering operations; or

9. Storage tank situated in an underground area (such as a basement, cellar, mineworking, drift, shaft, or tunnel) if the storage tank is situated upon or above the surface of the floor.

The term "underground storage tank" or "UST" does not include any pipes connected to any tank which is described in subdivisions 1 through 9 of this definition.

"UST system" or "tank system" means an underground storage tank, connected underground piping, underground ancillary equipment, and containment system, if any.

"9VAC25-580" means the Underground Storage Tanks: Technical Standards and Corrective Action Requirements regulation promulgated by the board.

9VAC25-590-40. Amount and scope of financial responsibility requirement.

A. Owners or operators of petroleum underground storage tanks shall demonstrate financial responsibility for taking corrective action and for compensating third parties for bodily injury and property damage caused by accidental releases arising from the operation of petroleum underground storage tanks at least in the following per-occurrence amounts:

1. For owners or operators of petroleum underground storage tanks that are located at petroleum marketing facilities, or that handle an average of more than 10,000 gallons of petroleum per month based on annual throughput for the previous calendar year; $1 million.

2. For all other owners or operators of petroleum underground storage tanks; $500,000.

B. Owners and operators of petroleum underground storage tanks shall demonstrate financial responsibility for taking corrective action and for compensating third parties for bodily injury and property damage caused by accidental releases arising from the operation of petroleum underground storage tanks in at least the following annual aggregate amounts:

1. For owners and operators of 1 to 100 petroleum underground storage tanks, $1 million; and

2. For owners and operators of 101 or more petroleum underground storage tanks, $2 million.

C. Owners and operators of petroleum underground storage tanks may use the Virginia Petroleum Storage Tank Fund in combination with one or more of the mechanisms specified in 9VAC25-590-60 through 9VAC25-590-110 and 9VAC25-590-250 to satisfy the financial responsibility as required by this section. The fund may be used to demonstrate financial responsibility for the owner or operator in excess of the amounts specified in 9VAC25-590-210 C 1 up to the per occurrence and annual aggregate requirements specified in this section for both taking corrective action and compensating third parties for bodily injury and property damage caused by accidental releases from petroleum underground storage tanks.

D. Owners and operators who demonstrate financial responsibility shall maintain copies of those records on which the determination is based. The following documents may be used for purposes of demonstrating financial responsibility by owners or operators to support a financial responsibility requirement determination:

1. Copies of invoices from petroleum suppliers which indicate the gallons of petroleum pumped into all underground storage tanks on an annual basis.

2. Copies of disposal or recycling receipts which indicate the gallons of petroleum pumped out of all underground storage tanks on an annual basis.

3. Letters from petroleum suppliers or disposal or recycling firms on the supplier's, disposer's or recycler's letterhead, which are signed by the appropriate financial officer and which indicate the gallons of petroleum pumped into or out of all of the owner's or operator's underground storage tanks on an annual basis.

4. Any other form of documentation which the board department may deem to be acceptable evidence to support the financial responsibility requirement determination.

E. For the purposes of this section, "a petroleum underground storage tank" means a single containment unit and does not mean combinations of single containment units.

F. If the owner or operator uses separate mechanisms or separate combinations of mechanisms to demonstrate financial responsibility for: (i) taking corrective action; (ii) compensating third parties for bodily injury and property damage caused by sudden accidental releases; or (iii) compensating third parties for bodily injury and property damage caused by nonsudden accidental releases, the amount of assurance provided by each mechanism or combination of mechanisms shall be in the full amount specified in subsections A and B of this section.

G. If an owner or operator uses separate mechanisms or separate combinations of mechanisms to demonstrate financial responsibility for different petroleum underground storage tanks, the annual aggregate required for each mechanism shall be the amount specified in subsection B of this section.

H. If assurance is being demonstrated by a combination of mechanisms, the owner or operator shall demonstrate financial responsibility in the appropriate amount of annual aggregate assurance specified in subsection B of this section, by the first-occurring effective date anniversary of any one of the mechanisms combined (other than a financial test or guarantee) to provide assurance.

I. The amounts of assurance required under this section exclude legal defense costs.

J. The required per-occurrence and annual aggregate coverage amounts do not in any way limit the liability of the owner or operator.

9VAC25-590-60. Financial test of self-insurance.

A. An owner or operator and/or guarantor, may satisfy the requirements of 9VAC25-590-40 by passing a financial test as specified in this section. To pass the financial test of self-insurance, the owner or operator and/or guarantor shall meet the requirements of subsection B or C and subsection D of this section based on year-end financial statements for the latest completed financial reporting year.

B. 1. The owner or operator and/or guarantor shall have a tangible net worth at least equal to the total of:

a. The applicable aggregate financial responsibility amount required by 9VAC25-590-40 B for which a financial test is used to demonstrate financial responsibility, except as provided in 9VAC25-590-210; and

b. The aggregate aboveground storage tank financial responsibility amount required under 9VAC25-640, for which a financial test is used to demonstrate financial responsibility.

2. In addition to the requirements set forth in subdivision 1 of this subsection, the owner or operator and/or guarantor shall also have a tangible net worth of at least 10 times:

a. The sum of the corrective action cost estimates, the current closure and postclosure care cost estimates, and amount of liability coverage for which a financial test for self-insurance is used in each state of business operations to demonstrate financial responsibility to the EPA under 40 CFR §§ 264.101(b), 264.143, 264.145, 265.143, 265.145, 264.147, and 265.147, to another state implementing agency under a state program authorized by EPA under 40 CFR Part 271 or the Virginia Waste Management Board under 40 CFR 264.143, 264.145 and 264.147 (as incorporated by reference in 9VAC20-60-264) and 40 CFR 265.143, 265.145 and 265.147 (as incorporated by reference in 9VAC20-60-265) of the Virginia Hazardous Waste Management Regulations; and

b. The sum of current plugging and abandonment cost estimates for which a financial test for self-insurance is used in each state of business operations to demonstrate financial responsibility to EPA under 40 CFR 144.63 or to a state implementing agency under a state program authorized by EPA under 40 CFR Part 145 (Underground Injection Control Program).

3. The owner or operator, and/or guarantor shall comply with either subdivision a or b of this subdivision:

a. (1) The financial reporting year-end financial statements of the owner or operator and/or guarantor shall be examined by an independent certified public accountant and be accompanied by the accountant's report of the examination; and

(2) The financial reporting year-end financial statements of the owner or operator and/or guarantor cannot include an adverse auditor's opinion, a disclaimer of opinion, or a "going concern" qualification.

b. (1) (a) File financial statements annually with the U.S. Securities and Exchange Commission, the Energy Information Administration, or the Rural Utilities Service; or

(b) Report annually the tangible net worth of the owner or operator and/or guarantor to Dun and Bradstreet, and Dun and Bradstreet shall have assigned a financial strength rating which at least equals the amount of financial responsibility required by the owner or operator under subdivisions 1 and 2 of this subsection. Relevant Dun and Bradstreet ratings are as follows (current Dun and Bradstreet ratings will be used for demonstration requirements which exceed the annual aggregate amounts listed below):

Annual Aggregate Requirement	Dun and Bradstreet Rating
$20,000	EE ($20,000 to $34,999)
$40,000	DC ($50,000 to $74,999)
$80,000	CB ($125,000 to $199,999)
$150,000	BB ($200,000 to $299,999)
$200,000	BB ($200,000 to $299,999)
$300,000	BA ($300,000 to $499,999)
$500,000	1A ($500,000 to $749,999)
$750,000	2A ($750,000 to $999,999)
$1,000,000	3A ($1,000,000 to 9,999,999); and

(2) The financial reporting year-end financial statements of the owner or operator and/or guarantor, if, independently audited, cannot include an adverse auditor's opinion, a disclaimer of opinion, or a "going concern" qualification.

4. The owner or operator and/or guarantor shall have a letter signed by the chief financial officer worded identically as specified in Appendix I/Alternative I or Appendix XI.

C. 1. The owner or operator and/or guarantor shall have a tangible net worth at least equal to the total of:

a. The applicable aggregate amount required by 9VAC25-590-40 B for which a financial test is used to demonstrate financial responsibility, except as provided in 9VAC25-590-210; and

b. The aggregate aboveground storage tank financial responsibility amount required under 9VAC25-640 for which a financial test is used to demonstrate financial responsibility.

2. In addition to the requirements set forth in subdivision 1 of this subsection, the owner or operator and/or guarantor shall also have a tangible net worth of at least six times:

a. The financial test requirements for self insurance of the corrective action cost estimates, the current closure and post-closure care cost estimates, and amount of liability coverage in each state of business operations to the EPA under 40 CFR 264.101(b), 264.143, 264.145, 265.143, 265.145, 264.147, and 265.147, to another state implementing agency under a state program authorized by EPA under 40 CFR Part 271 or the Virginia Waste Management Board under 40 CFR 264.143, 264.145 and 264.147 (as incorporated by reference in 9VAC20-60-264) and 40 CFR 265.143, 265.145, and 265.147 (as incorporated by reference in 9VAC20-60-265) of the Virginia Hazardous Waste Management Regulations; and

b. The financial test requirements for self-insurance of current plugging and abandonment cost estimates in each state of business operations to EPA under 40 CFR 144.63 or to a state implementing agency under a state program authorized by EPA under 40 CFR Part 145 (Underground Injection Control Program).

3. The financial reporting year-end financial statements of the owner or operator and/or guarantor shall be examined by an independent certified public accountant and be accompanied by the accountant's report of the examination.

4. The financial reporting year-end financial statements of the owner or operator and/or guarantor cannot include an adverse auditor's opinion, a disclaimer of opinion, or a "going concern" qualification.

5. If the financial statements of the owner or operator and/or guarantor are not submitted annually to the U.S. Securities and Exchange Commission, the Energy Information Administration or the Rural Utilities Service, the owner or operator and/or guarantor shall obtain a special report by an independent certified public accountant stating that:

a. The accountant has compared the data that the letter from the chief financial officer specified as having been derived from the latest financial reporting year-end financial statements of the owner or operator and/or guarantor with the amounts in such financial statements; and

b. In connection with that comparison, no matters came to the accountant's attention which caused him to believe that the specified data should be adjusted.

6. The owner or operator and/or guarantor shall have a letter signed by the chief financial officer, worded identically as specified in Appendix I/Alternative II or Appendix XI.

D. To meet the financial demonstration test under subsection B or C of this section, the chief financial officer of the owner or operator and/or guarantor shall sign, within 120 days of the close of each financial reporting year, as defined by the 12-month period for which financial statements used to support the financial test are prepared, a letter worded identically as specified in Appendix I with the appropriate alternative or Appendix XI, except that the instructions in brackets are to be replaced by the relevant information and the brackets deleted.

E. If an owner or operator using the financial test to provide financial assurance finds that he no longer meets the requirements of the financial test based on the financial reporting year-end financial statements, the owner or operator shall obtain alternative coverage within 150 days of the end of the year for which financial statements have been prepared.

F. The board department may require reports of financial condition at any time from the owner or operator and/or guarantor. If the board department finds, on the basis of such reports or other information, that the owner or operator and/or guarantor no longer meets the financial test requirements of subsection B or C and subsection D of this section, the owner or operator shall obtain alternate coverage within 30 days after notification of such finding.

G. If the owner or operator fails to obtain alternate assurance within 150 days of finding that he no longer meets the requirements of the financial test based on the financial reporting year-end financial statements, or within 30 days of notification by the board department that he or she no longer meets the requirements of the financial test, the owner or operator shall notify the board department of such failure within 10 days.

9VAC25-590-70. Guarantee.

A. An owner or operator may satisfy the requirements of 9VAC25-590-40 by obtaining a guarantee that conforms to the requirements of this section. The guarantor shall be:

1. A firm that:

a. Possesses a controlling interest in the owner or operator;

b. Possesses a controlling interest in a firm described under subdivision A 1 a of this section; or

c. Is controlled through stock ownership by a common parent firm that possesses a controlling interest in the owner or operator; or

2. A firm engaged in a substantial business relationship with the owner or operator and issuing the guarantee as an act incident to that business relationship.

B. Within 120 days of the close of each financial reporting year, the guarantor shall demonstrate that it meets the financial test criteria of 9VAC25-590-60 B or C and D based on year-end financial statements for the latest completed financial reporting year by completing the letter from the chief financial officer described in Appendix I or Appendix XI and shall deliver the letter to the owner or operator. If the guarantor fails to meet the requirements of the financial test at the end of any financial reporting year, within 120 days of the end of that financial reporting year, the guarantor shall send by certified mail, before cancellation or nonrenewal of the guarantee, notice to the owner or operator, and the board department. If the board department notifies the guarantor that he no longer meets the requirements of the financial test of 9VAC25-590-60 B or C and D, the guarantor shall notify the owner or operator within 10 days of receiving such notification from the board department. In both cases, the guarantee will terminate no less than 120 days after the date the owner or operator and the board department receive the notification, as evidenced by the return receipts. The owner or operator shall obtain alternate coverage as specified in 9VAC25-590-190.

C. The guarantee shall be worded identically as specified in Appendix II, except that instructions in brackets are to be replaced with the relevant information and the brackets deleted.

D. Under the terms of the guarantee, all amounts paid by the guarantor under the guarantee will be paid directly to the board department in accordance with instructions from the board department under 9VAC25-590-170.

9VAC25-590-90. Surety bond.

A. An owner or operator may satisfy the requirements of 9VAC25-590-40 by obtaining a surety bond that conforms to the requirements of this section. The surety company issuing the bond shall be licensed to operate as a surety in the Commonwealth of Virginia and be among those listed as acceptable sureties on federal bonds in the latest Circular 570 of the U.S. Department of the Treasury.

B. The surety bond shall be worded identically as specified in Appendix V, except that instructions in brackets shall be replaced with the relevant information and the brackets deleted.

C. Under the terms of the bond, the surety will become liable on the bond obligation when the owner or operator fails to perform as guaranteed by the bond. In all cases, the surety's liability is limited to the per-occurrence and annual aggregate penal sums.

Under the terms of the bond, all amounts paid by the surety under the bond will be paid directly to the board department in accordance with instructions from the board department under 9VAC25-590-170.

9VAC25-590-100. Letter of credit.

A. An owner or operator may satisfy the requirements of 9VAC25-590-40 by obtaining an irrevocable standby letter of credit that conforms to the requirements of this section. The issuing institution shall be an entity that has the authority to issue letters of credit in the Commonwealth of Virginia and whose letter-of-credit operations are regulated and examined by a federal agency or the State Corporation Commission.

B. The letter of credit shall be worded identically as specified in Appendix VI, except that instructions in brackets are to be replaced with the relevant information and the brackets deleted.

C. Under the terms of the letter of credit, all amounts paid pursuant to a draft by the board department will be paid by the issuing institution directly to the board department in accordance with instructions from the board department under 9VAC25-590-170.

D. The letter of credit shall be irrevocable with a term specified by the issuing institution. The letter of credit shall provide that credit will be automatically renewed for the same term as the original term, unless, at least 120 days before the current expiration date, the issuing institution notifies the owner or operator, and the board department by certified mail of its decision not to renew the letter of credit. Under the terms of the letter of credit, the 120 days will begin on the date when the owner or operator and the board department receive the notice, as evidenced by the return receipts.

9VAC25-590-105. Certificate of deposit.

A. An owner or operator may satisfy the requirements of 9VAC25-590-40, wholly or in part, by assigning all rights, title, and interest of a certificate of deposit to the State Water Control Board Department of Environmental Quality, Commonwealth of Virginia. The owner or operator shall maintain the certificate of deposit until the requirements of 9VAC25-590-180 are met. The original assignment and the certificate of deposit, if applicable, must be submitted to the board department to prove that the certificate of deposit has been obtained and meets the requirements of this section. A copy of the certificate of deposit shall be maintained at the underground storage tank site or the owner's or operator's place of work located in Virginia. The issuing institution shall be a bank or other financial institution whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC) and whose operations are regulated and examined by the Commonwealth of Virginia, by a federal agency, or by an agency of another state.

B. The owner or operator shall be entitled to demand, receive, and recover the interest and income from the certificate of deposit as it becomes due and payable as long as the market value of the certificate of deposit plus any other mechanisms used continue to at least equal the amount of financial responsibility the owner or operator is required to demonstrate under 9VAC25-590-40.

C. In the event of failure of the owner or operator to comply with the requirements of 9VAC25-590-140, the board department shall cash the certificate of deposit.

D. Payments made under the terms of the certificate of deposit will be deposited by the issuing institution directly into the Virginia Petroleum Storage Tank Fund. Payments from the fund shall be approved by the board department.

E. The wording of the assignment shall be identical to the wording specified in Appendix XIII.

9VAC25-590-110. Trust fund.

A. An owner or operator may satisfy the requirements of 9VAC25-590-40 by establishing an irrevocable trust fund that conforms to the requirements of this section. The trustee shall be an entity that has the authority to act as a trustee and whose trust operations are regulated and examined by a federal agency or the State Corporation Commission.

B. The trust fund shall be irrevocable and shall continue until terminated at the written direction of the grantor and the trustee, or by the trustee and the State Water Control Board department, if the grantor ceases to exist. Upon termination of the trust, all remaining trust property, less final trust administration expenses, shall be delivered to the owner or operator. The wording of the trust agreement shall be identical to the wording specified in Appendix VII, and shall be accompanied by a formal certification of acknowledgment as specified in Appendix VIII.

C. The irrevocable trust fund, when established, shall be funded for the full required amount of coverage, or funded for part of the required amount of coverage and used in combination with other mechanism or mechanisms that provide the remaining required coverage.

D. If the value of the trust fund is greater than the required amount of coverage, the owner or operator may submit a written request to the board department for release of the excess.

E. If other financial assurance as specified in this chapter is substituted for all or part of the trust fund, the owner or operator may submit a written request to the board department for release of the excess.

F. Within 60 days after receiving a request from the owner or operator for release of funds as specified in subsection D or E of this section, the board department will instruct the trustee to release to the owner or operator such funds as the board department specifies in writing.

9VAC25-590-140. Cancellation or nonrenewal by a provider of financial assurance.

A. Except as otherwise provided, a provider of financial assurance may cancel or fail to renew an assurance mechanism by sending a notice of termination by certified mail to the owner or operator, and the board department.

1. Termination of a local government guarantee, a guarantee, a surety bond, or a letter of credit may not occur until 120 days after the date on which the owner or operator, and the board department receive the notice of termination, as evidenced by the return receipts.

2. Termination of insurance or group self-insurance pool coverage, except for nonpayment or misrepresentation by the insured, may not occur until 60 days after the date on which the owner or operator and the board department receive the notice of termination, as evidenced by the return receipts. Termination for nonpayment of premium or misrepresentation by the insured may not occur until a minimum of 15 days after the date on which the owner or operator and the board department receive the notice of termination, as evidenced by the return receipts.

B. If a provider of financial responsibility cancels or fails to renew for reasons other than incapacity of the provider as specified in 9VAC25-590-190, the owner or operator shall obtain alternate coverage as specified in this section within 60 days after receipt of the notice of termination. If the owner or operator fails to obtain alternate coverage within 60 days after receipt of the notice of termination, the owner or operator shall immediately notify the board department of such failure and submit:

1. The name and address of the provider of financial assurance;

2. The effective date of termination; and

3. The evidence of the financial assurance mechanism subject to the termination maintained in accordance with 9VAC25-590-160 B.

9VAC25-590-150. Reporting by owner or operator.

A. An owner or operator shall submit the appropriate original forms listed in 9VAC25-590-160 B documenting current evidence of financial responsibility to the board department within 30 days after the owner or operator identifies or confirms a release from an underground storage tank required to be reported under 9VAC25-580-220 or 9VAC25-580-240. For all subsequent releases within the same period of time for which the documents submitted according to this subsection are still effective, the owner or operator shall submit a letter which identifies the owner's or operator's name and address and the underground storage tanks' location by site name, street address, board department incident designation number and a statement that the financial responsibility documentation previously provided to the board department is currently in force.

B. An owner or operator shall submit the appropriate forms listed in 9VAC25-590-160 B documenting current evidence of financial responsibility to the board department if the owner or operator fails to obtain alternate coverage as required by this chapter within 30 days after the owner or operator receives notice of:

1. Commencement of a voluntary or involuntary proceeding under Title 11 (Bankruptcy), U.S. Code, naming a provider of financial assurance as a debtor;

2. Suspension or revocation of the authority of a provider of financial assurance to issue a financial assurance mechanism;

3. Failure of a guarantor to meet the requirements of the financial test; or

4. Other incapacity of a provider of financial assurance.

C. An owner or operator shall submit the appropriate forms listed in 9VAC25-590-160 B documenting current evidence of financial responsibility to the board department as required by 9VAC25-590-60 G and 9VAC25-590-140 B.

D. An owner or operator shall certify compliance with the financial responsibility requirements of this chapter as specified in the new tank notification form (Form 7530) when notifying the board department of the installation of a new underground storage tank under 9VAC25-580-70.

E. The board department may require an owner or operator to submit evidence of financial assurance as described in 9VAC25-590-160 B or other information relevant to compliance with this chapter at any time.

9VAC25-590-160. Recordkeeping.

A. Owners or operators shall maintain evidence of all financial assurance mechanisms used to demonstrate financial responsibility under this chapter for an underground storage tank until released from the requirements of this chapter under 9VAC25-590-180. An owner or operator shall maintain such evidence at the underground storage tank site or the owner's or operator's place of work in this Commonwealth. Records maintained off-site shall be made available upon request of the board department.

B. Owners or operators shall maintain the following types of evidence of financial responsibility:

1. An owner or operator using an assurance mechanism specified in 9VAC25-590-60 through 9VAC25-590-110 and 9VAC25-590-250 shall maintain a copy of the instrument worded as specified.

2. An owner or operator using a financial test or guarantee, or a local government financial test or a local government guarantee supported by the local government financial test, shall maintain a copy of the chief financial officer's letter based on year-end financial statements for the most recent completed financial reporting year. Such evidence shall be on file no later than 120 days after the close of the financial reporting year.

3. A local government owner or operator using the local government bond rating test under 9VAC25-590-250 shall maintain a copy of its bond rating published within the last 12 months by Moody's or Standard & Poor's.

4. A local government owner or operator using the local government guarantee under 9VAC25-590-250, where the guarantor's demonstration of financial responsibility relies on the bond rating test under 9VAC25-590-250 shall maintain a copy of the guarantor's bond rating published within the last 12 months by Moody's or Standard & Poor's.

5. An owner or operator using an insurance policy or group self-insurance pool coverage shall maintain a copy of the signed insurance policy or group self-insurance pool plan and membership agreement, with the endorsement or certificate of insurance and any amendments to the agreements.

6. An owner or operator using a local government fund under 9VAC25-590-250 shall maintain the following documents:

a. A copy of the state constitutional provision or local government statute, charter, ordinance or order dedicating the fund; and

b. Year-end financial statements for the most recent completed financial reporting year showing the amount in the fund. If the fund is established under 40 CFR 280.107(c) (as incorporated by reference in 9VAC25-590-250) using incremental funding backed by bonding authority, the financial statements shall show the previous year's balance, the amount of funding during the year, and the closing balance in the fund.

If the fund is established under 40 CFR 280.107(c) (as incorporated by reference in 9VAC25-590-250) using incremental funding backed by bonding authority, the owner or operator shall also maintain documentation of the required bonding authority, including either the results of a voter referendum (under 40 CFR 280.107(c)(1)) (as incorporated by reference in 9VAC25-590-250), or attestation by the Virginia Attorney General as specified under 40 CFR 280.107(c)(2) (as incorporated by reference in 9VAC25-590-250).

7. A local government owner or operator using the local government guarantee supported by the local government fund shall maintain a copy of the guarantor's year-end financial statements for the most recent completed financial reporting year showing the amount of the fund.

8. a. An owner or operator using an assurance mechanism specified in 9VAC25-590-60 through 9VAC25-590-110, 9VAC25-590-210, or 9VAC25-590-250 shall maintain an updated copy of a certification of financial responsibility worded identically as specified in Appendix IX, except that instructions in brackets are to be replaced with the relevant information and the brackets deleted.

b. The owner or operator shall update this certification whenever the financial assurance mechanism or mechanisms used to demonstrate financial responsibility changes.

9VAC25-590-170. Drawing on financial assurance mechanism.

A. Except as specified in subsection D of this section, the board department shall require the guarantor, surety, or institution issuing a letter of credit or certificate of deposit to pay to the board department an amount up to the limit of funds provided by the financial assurance mechanism if:

1. The owner or operator fails to establish alternate financial assurance within 60 days after receiving notice of cancellation of the guarantee, surety bond, letter of credit, or certificate of deposit; or

2. The conditions of subsection B of this section are satisfied.

B. The board department shall deposit the financial assurance funds forfeited pursuant to subsection A of this section into the Virginia Petroleum Storage Tank Fund. The board department may use the financial responsibility funds obtained pursuant to subsection A of this section to conduct corrective action or to pay a third party claim when:

1. The board department makes a final determination that a release has occurred and immediate or long-term corrective action for the release is needed, and the owner or operator, after appropriate notice and opportunity to comply, has not conducted corrective action as required under Part VI (9VAC25-580-230 et seq.) of 9VAC25-580; or

2. The board department has received either:

a. Certification from the owner or operator and the third party liability claimant or claimants and from attorneys representing the owner or operator and the third party liability claimant or claimants that a third party liability claim should be paid. The certification shall be worded identically as specified in Appendix X, except that instructions in brackets are to be replaced with the relevant information and the brackets deleted; or

b. A valid final court order establishing a judgment against the owner or operator for bodily injury or property damage caused by an accidental release from an underground storage tank covered by financial assurance under this chapter and the board department determines that the owner or operator has not satisfied the judgment.

C. If the board department determines that the amount of corrective action costs and third party liability claims eligible for payment under subsection B of this section may exceed the obligation of the provider of financial assurance, the first priority for payment shall be corrective action costs necessary to protect human health and the environment. The board department shall direct payment of the financial responsibility funds for third party liability claims in the order in which the board department receives certifications under subdivision B 2 a of this section and valid court orders under subdivision B 2 b of this section.

D. A local government acting as guarantor under 40 CFR 280.106(e) (as incorporated by reference in 9VAC25-590-250), the local government guarantee without standby trust, shall make payments as directed by the board department under the circumstances described in subsection A, B or C of this section.

9VAC25-590-190. Bankruptcy or other incapacity of owner, operator or provider of financial assurance.

A. Within 10 days after commencement of a voluntary or involuntary proceeding under Title 11 (Bankruptcy), U.S. Code, naming an owner or operator as debtor, the owner or operator shall notify the board department by certified mail of such commencement and submit the appropriate forms listed in 9VAC25-590-160 B documenting current financial responsibility.

B. Within 10 days after commencement of a voluntary or involuntary proceeding under Title 11 (Bankruptcy), U.S. Code, naming a guarantor providing financial assurance as debtor, such guarantor shall notify the owner or operator and the board department by certified mail of such commencement as required under the terms of the guarantee specified in 9VAC25-590-70.

C. Within 10 days after commencement of a voluntary or involuntary proceeding under Title 11 (Bankruptcy), U.S. Code, naming a local government owner or operator as debtor, the local government owner or operator shall notify the board department by certified mail of such commencement and submit the appropriate forms listed in 9VAC25-590-160 B documenting current financial responsibility.

D. Within 10 days after commencement of a voluntary or involuntary proceeding under Title 11 (Bankruptcy), U.S. Code, naming a guarantor providing a local government financial assurance as debtor, such guarantor shall notify the local government owner or operator and the board department by certified mail of such commencement as required under the terms of the guarantee specified in 40 CFR 280.106 (as incorporated by reference in 9VAC25-590-250).

E. An owner or operator that obtains financial assurance by a mechanism other than the financial test of self-insurance will be deemed to be without the required financial assurance in the event of a bankruptcy or incapacity of its provider of financial assurance, or a suspension or revocation of the authority of the provider of financial assurance to issue a guarantee, insurance policy, group self-insurance pool plan, surety bond, letter of credit, or certificate of deposit. The owner or operator shall obtain alternate financial assurance as specified in this regulation within 30 days after receiving notice of such an event. If the owner or operator does not obtain alternate coverage within 30 days after such notification, he shall immediately notify the board department in writing.

F. Within 30 days after receipt of written notification that the Virginia Petroleum Storage Tank Fund has become incapable of covering assured corrective action or third party compensation costs, the owner or operator shall obtain alternate financial assurance in accordance with 9VAC25-590-40.

9VAC25-590-200. Replenishment of guarantees, letters of credit, certificates of deposit, or surety bonds.

A. If at any time a letter of credit, certificate of deposit, surety bond, or guarantee is drawn upon by instruction of the board department and the board department has expended all or part of the funds for corrective action or to pay a third party liability claim(s), the owner or operator by the anniversary date of the financial assurance mechanism shall:

1. Replenish the value of the financial assurance mechanism to equal the full amount of coverage required; or

2. Acquire another financial assurance mechanism for the amount by which the face value of the letter of credit, certificate of deposit, surety bond, or guarantee has been reduced.

B. For purposes of this section, the full amount of coverage required is the amount of coverage to be provided by 9VAC25-590-40. If a combination of mechanisms was used to provide the assurance funds which were drawn upon, replenishment shall occur by the earliest anniversary date among the mechanisms.

9VAC25-590-210. Virginia Petroleum Storage Tank Fund.

A. The Virginia Petroleum Storage Tank Fund will be used for costs in excess of the financial responsibility requirements specified under subsection C of this section up to $1 million per occurrence for both taking corrective action and compensating third parties for bodily injury and property damage caused by accidental releases from petroleum underground storage tanks in accordance with the following:

1. Corrective action disbursements for accidental releases with no associated third party disbursements from the fund shall not exceed:

a. $995,000 for the $5,000 corrective action requirement;

b. $990,000 for the $10,000 corrective action requirement;

c. $980,000 for the $20,000 corrective action requirement;

d. $970,000 for the $30,000 corrective action requirement;

e. $950,000 for the $50,000 corrective action requirement.

Third party disbursements for accidental releases with no corrective action disbursements from the fund shall not exceed:

a. $985,000 for the $15,000 third party requirement;

b. $970,000 for the $30,000 third party requirement;

c. $940,000 for the $60,000 third party requirement;

d. $880,000 for the $120,000 third party requirement;

e. $850,000 for the $150,000 third party requirement.

Combined corrective action and third party disbursements from the fund shall not exceed:

a. $980,000 for the $20,000 combined requirement;

b. $960,000 for the $40,000 combined requirement;

c. $920,000 for the $80,000 combined requirement;

d. $850,000 for the $150,000 combined requirement;

e. $800,000 for the $200,000 combined requirement.

The first priority for disbursements from the fund shall be for corrective action costs necessary to protect human health and the environment.

2. Reasonable and necessary costs of compensating third parties for bodily injury and property damage shall be paid only (i) in accordance with final court orders in cases which have been tried to final judgment no longer subject to appeal, (ii) in accordance with final arbitration awards not subject to appeal, or (iii) where the board department approved the settlement of claim between the owner or operator and the third party prior to execution by the parties. The reasonableness and necessity of costs shall be determined based upon documented or actual damage, loss in value, and other relevant factors.

The Commonwealth has not waived its sovereign immunity and does not believe that it is a necessary party to a private action against an owner or operator for third party bodily injury and property damage.

3. Owner or operator managed cleanups. An owner or operator, including an operator of a facility or an owner or operator of an underground storage tank exempted in subdivisions 1 and 2 of the definition of an underground storage tank in 9VAC25-590-10 and an aboveground storage tank with a capacity of 5,000 gallons or less used for storing heating oil for consumption on the premises where stored, responding to a release and conducting a board department approved corrective action plan in accordance with Parts V and VI (9VAC25-580-190 through 9VAC25-580-310) may proceed to pay for all costs incurred for such activities. An accounting submitted to the board department of all costs incurred will be reviewed and those costs in excess of the financial responsibility requirements up to $1 million which are reasonable and have been approved by the board department will be reimbursed from the fund.

4. Owners or operators shall pay the financial responsibility requirement specified in this section for each occurrence.

5. No person shall receive reimbursement from the fund for third party bodily injury or property damage:

a. Where the release, occurrence, injury or property damage is caused, in whole or in part, by the willful misconduct or negligence of the owner or operator, his employee, contractor, or agent, or anyone within his privity or knowledge;

b. Where the claim cost has been reimbursed or is reimbursable by an insurance policy;

c. Where the costs or damages were incurred pursuant to § 10.1-1232 of the Code of Virginia and the regulations promulgated thereunder;

d. Where the release was reported before December 22, 1989; or

e. Where the owner or operator does not demonstrate the reasonableness and necessity of the claim costs.

B. No person, including an operator of a facility or an owner or operator of an underground storage tank exempted in subdivisions 1 and 2 of the definition of an underground storage tank in 9VAC25-590-10 and an aboveground storage tank with a capacity of 5,000 gallons or less used for storing heating oil for consumption on the premises where stored, shall receive reimbursement from the fund for any costs or damages incurred:

1. Where the person, his employee, contractor or agent, or anyone within the privity or knowledge of that person, has violated substantive environmental regulations under 9VAC25-580 or this chapter;

2. Where the release occurrence is caused, in whole or in part, by the willful misconduct or negligence of the person, his employee, contractor or agent, or anyone within the privity or knowledge of that person;

3. Where the person, his employee, contractor or agent, or anyone within the privity or knowledge of that person has (i) failed to carry out the instructions of the board department, committed willful misconduct or been negligent in carrying out or conducting actions under Part V or VI (9VAC25-580-190 through 9VAC25-580-310) or (ii) has violated applicable federal or state safety, construction or operating laws or regulations in carrying out or conducting actions under Parts V or VI (9VAC25-580-190 through 9VAC25-580-310);

4. Where the claim has been reimbursed or is reimbursable by an insurance policy;

5. Where the costs or damages were incurred pursuant to § 10.1-1232 of the Code of Virginia and the regulations promulgated thereunder;

6. For corrective action taken prior to December 22, 1989, by an owner or operator of an underground storage tank, or an owner of an underground storage tank exempted in subdivisions 1 and 2 of the definition of an underground storage tank in 9VAC25-590-10, or an owner of an aboveground storage tank with a capacity of 5,000 gallons or less used for storing heating oil for consumption on the premises where stored; or

7. Prior to January 1, 1992, by an operator of a facility for containment and cleanup of a release from a facility of a product subject to 62.1-44.34:13 of the Code of Virginia.

C. 1. The fund will be used to demonstrate financial responsibility requirements for owners or operators in excess of the amounts specified in this subdivision up to the per occurrence and annual aggregate requirements specified in 9VAC25-590-40 for both taking corrective action and compensating third parties for bodily injury and property damage caused by accidental releases from petroleum underground storage tanks.

a. Owners and operators with 600,000 gallons or less of petroleum pumped on an annual basis into all underground storage tanks owned or operated, $5,000 per occurrence for taking corrective action and $15,000 per occurrence for compensating third parties, with an annual aggregate of $20,000.

b. Owners and operators with between 600,001 to 1,200,000 gallons of petroleum pumped on an annual basis into all underground storage tanks owned or operated, $10,000 per occurrence for taking corrective action and $30,000 per occurrence for compensating third parties, with an annual aggregate of $40,000.

c. Owners and operators with between 1,200,001 to 1,800,000 gallons of petroleum pumped on an annual basis into all underground storage tanks owned or operated, $20,000 per occurrence for taking corrective action and $60,000 per occurrence for compensating third parties, with an annual aggregate of $80,000.

d. Owners and operators with between 1,800,001 to 2,400,000 gallons of petroleum pumped on an annual basis into all underground storage tanks owned or operated, $30,000 per occurrence for taking corrective action and $120,000 per occurrence for compensating third parties, with an annual aggregate of $150,000.

e. Owners and operators with in excess of 2,400,000 gallons of petroleum pumped on an annual basis into all underground storage tanks owned or operated, $50,000 per occurrence for taking corrective action and $150,000 per occurrence for compensating third parties, with an annual aggregate of $200,000.

2. The fund may be used to satisfy only the portion of an owner or operator's financial responsibility requirement specified in subdivision 1 of this subsection and, therefore, shall be used in combination with one or more of the mechanisms specified in 9VAC25-590-60 through 9VAC25-590-110 and 9VAC25-590-250.

3. The requirements of 9VAC25-590-40 B apply solely to financial responsibility demonstration requirements under this section, and shall not affect reimbursements paid under this section.

D. This fund may also be used for the following:

1. Costs incurred by the board department for taking immediate corrective action to contain or mitigate the effects of any release of petroleum into the environment from an underground storage tank if such action is necessary, in the judgment of the board department to protect human health and the environment.

2. Costs incurred by the board department for taking corrective action up to $1 million for any release of petroleum into the environment from an underground storage tank:

a. Whose owner or operator cannot be determined by the board department within 90 days; or

b. Whose owner or operator is incapable, in the judgment of the board department, of carrying out such corrective action properly.

3. Costs incurred by the board department for taking corrective action for any release of petroleum into the environment from tanks which are otherwise specifically listed in 9VAC25-590-10 as exemptions in the definition of an underground storage tank.

4. All other uses authorized by § 62.1-44.34:11 of the Code of Virginia.

E. The board department shall seek recovery of fund moneys expended for corrective action in accordance with § 62.1-44.34:11 of the Code of Virginia where the owner or operator has violated substantive environmental regulations under 9VAC25-580 or this chapter.

F. The board department shall have the right of subrogation for moneys expended from the fund as compensation for bodily injury, death, or property damage against any person who is liable for such injury, death or damage.

G. No funds shall be paid for reimbursement of costs incurred by an owner or operator for corrective action and for compensating third parties for bodily injury and property damage prior to December 22, 1989.

H. No disbursements shall be made from the fund for owners or operators who are federal government entities or whose debts and liabilities are the debts and liabilities of the United States.

I. No funds shall be paid in excess of the minimum disbursement necessary to cleanup each occurrence to the acceptable level of risk, as determined by the board department in its sole discretion.

9VAC25-590-220. Notices to the State Water Control Board department.

All requirements of this regulation for notification to the State Water Control Board department shall be addressed as follows:

Director

Department of Environmental Quality

1111 East Main Street, Suite 1400

P.O. Box 1105

Richmond, Virginia 23218

9VAC25-590-230. Delegation of authority. (Repealed.)

The Director of the Department of Environmental Quality or a designee acting for him may perform any act of the board provided under this chapter, except as limited by § 62.1-44.14 of the Code of Virginia.