Hazardous Waste Financial Assurance Mechanisms

Financial Assurance Mechanism Advantages Disadvantages
Pollution Liability (3rd Party) Provides money for bodily injury and property damage resulting from accidental releases at a facility. Limitations & exclusions in policies may make them worthless. No guidance available from EPA to judge adequacy.
Trust Fund Conventional instrument Pay-as- you-go.
TSDs must be fully fund.
5 year pay in period allowed for used oil and recycling facilities. Facility shutdown or closure before end of pay-in period means the facility doesn't pay for the waste removal and cleanup.
Surety Bond
(Payment)
Protection available immediately. Semi-conventional instrument. Complex (two financial instruments) Expensive. Likely not available in current market.
Surety Bond
(Performance)
Same as payment surety bond. Flexibility for bond holder. Same as for payment surety bond. Expensive. Likely not available in current market.
Letter of Credit Conventional instrument. Protection available immediately. Complexity (standby trust fund).
Expensive. Likely not available in current market.
Closure Insurance Familiar, can bundle liability into one policy. Instability of the insurance industry, excess line coverage. Limitations & exclusions in policies may make them worthless. No guidance available from EPA to Judge adequacy.
Financial Test Cheaper, easier to understand Credibility of financial reports and audits, confidence of financial reports to calculate company worth.