Hazardous Waste:

Environmental Safeguards Jeopardized When Facilities Cease Operating

RCED-86-77: Published: Feb 11, 1986. Publicly Released: Mar 19, 1986.

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Pursuant to a congressional request, GAO determined the extent to which: (1) owners and operators of hazardous waste facilities have declared bankruptcy and thereby avoided paying closure and post-closure costs for their facilities; (2) financial assistance requirements ensure that sufficient funds will be available to close and provide post-closure care at such facilities; (3) facilities that cease operations are inspected for compliance with closure requirements; and (4) the Environmental Protection Agency (EPA) and states are taking enforcement action for violations of those requirements.

GAO found that: (1) according to state and territorial officials, 74 hazardous waste facilities have filed for bankruptcy; (2) while bankruptcy law provides for the enforcement of environmental regulations over creditor claims, various courts have given EPA and state environmental interests equal status with other unsecured creditors, thereby hindering efforts to force responsible parties to properly close their facilities; (3) in cases reviewed, courts restricted EPA or state efforts to obtain proper closures in three cases; (4) the adequacy of new EPA and state financial assurance requirements that are designed to ensure that hazardous waste firms are strong enough to pay closure and post-closure costs could not be assessed; and (5) it is difficult for states to assess the financial condition of interstate hazardous waste facility operators. GAO also found that: (1) about 37 percent of the facilities that EPA inspected either during or after closure violated EPA regulations; (2) only 46 percent of the operators in states it reviewed had submitted financial assurance documents; (3) 34 percent of the financial assurance statements submitted were deficient; and (4) in many cases, EPA did not take adequate enforcement actions against operators committing financial assurance or closure violations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On July 1, 1991, EPA proposed regulations amending the requirements for the use of the financial test for closure, post-closure, and third-party liability. The revised criteria for the financial test should act as a better indicator for screening out potentially bankrupt firms. EPA is obtaining annual data on facility financial assurance mechanisms. However, because of higher priority pending regulations and staff constraints, EPA does not expect to finalize this regulation probably until a year or two.

    Recommendation: The Administrator, EPA, should monitor and periodically reevaluate hazardous waste facility closures and the implementation of corrective action activities to ensure that the trust fund and the financial test are providing adequate assurance that funds will be available.

    Agency Affected: Environmental Protection Agency

  2. Status: Closed - Implemented

    Comments: EPA considered the possibility of developing an automated system for making a centralized review of multi-state financial test submissions. EPA solicited comments on the need for such a system in a proposed rulemaking published on July 1, 1991. However, EPA said that because of resource constraints and other higher priority needs, there are no plans to act on this proposal in the forseeable future, if at all.

    Recommendation: The Administrator, EPA, should develop and implement a system for providing a centralized review of all multistate financial tests.

    Agency Affected: Environmental Protection Agency

  3. Status: Closed - Implemented

    Comments: EPA implemented a requirement in fiscal year 1986 which requires all states to incorporate the EPA Enforcement Response Policy in their EPA/state grants and/or enforcement agreements. This policy essentially covers the issues covered in this recommendation.

    Recommendation: The Administrator, EPA, should direct EPA regional offices to ensure that all state grant or enforcement agreements include a requirement for states to issue compliance orders for all violations of financial assistance requirements as initial enforcement actions and closely oversee state implementation of this requirement.

    Agency Affected: Environmental Protection Agency

  4. Status: Closed - Not Implemented

    Comments: EPA is taking, or plans to take, action on each of the recommendations within its existing resources making this recommendation unnecessary.

    Recommendation: With the current emphasis on reducing government spending, it may be difficult to obtain the additional staff or funds needed to monitor the effectiveness of the trust fund and financial test and to develop a centralized system to review multi-state financial tests. If, however, resources are not available because of higher priority requirements, EPA should determine the additional needs of the program and provide such information to the appropriate congressional committees for their consideration.

    Agency Affected: Environmental Protection Agency


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