Geologic Sequestration 

of Carbon Dioxide

Underground Injection 

Control (UIC) Program 

Class VI Financial 

Responsibility Guidance

July 2011
Office of Water (4606M)

EPA 816-R-11-005 

July 2011 

http://water.epa.gov/drink/
UIC Program Class VI Financial Responsibility Guidance i

Executive Summary

This document provides guidance to Underground Injection Control (UIC) Program Directors, 

Geologic Sequestration (GS) well owners or operators, independent third party providers, and the 

general public on the financial responsibility requirements of the “Federal Requirements under 

the Underground Injection Control Program for Carbon Dioxide Geologic Sequestration Wells” 

Rule. The Federal Register Notice for this Rule is available at:

http://water.epa.gov/type/groundwater/uic/class6/gsregulations.cfm. Throughout this guidance 

document the terms corrective action, injection well plugging, post injection site care and site 

closure, and emergency and remedial response are collectively referred to as “financial 

responsibility activities” or “required GS activities.” Financial responsibility requirements are 

designed to ensure that owners or operators have the resources to carry out required GS activities 

related to closing and remediating GS sites if needed, during injection or after wells are plugged, 

so that they do not endanger Underground Sources of Drinking Water (USDWs). Setting aside

financial resources (or the expectation that the owner or operator will continue to have sufficient 

financial resources with self insurance) is intended to prevent the general public from bearing the 

costs of abandoned GS projects. This guidance describes the following in detail: 

• Financial instruments that owners or operators of Class VI wells can select to 

demonstrate financial responsibility, as well as the relative strengths and weaknesses 

associated with each instrument;

• Minimum specifications and conditions of financial coverage that owners or operators 

must use to demonstrate compliance with the GS Rule requirements; 

• Submission requirements for owners or operators demonstrating financial responsibility 

and review requirements for the UIC Program Director; and

• Ongoing financial responsibilities of the owners or operators of Class VI wells and the 

UIC Program Director. 

Under the Rule, owners or operators select financial coverage options from a list of qualified 

independent third-party instruments or self insurance to cover the estimated costs of GS projects. 

Qualifying financial responsibility instruments offered by independent third party institutions 

include trust funds, escrow accounts, surety bonds, letters of credit, and insurance. Self insurance 

requires that the owner or operator demonstrate their financial condition. For all qualifying 

financial responsibility demonstrations, it is expected that the demonstration, including cost 

estimates, will be updated and verified over time to ensure that the project costs will fall within 

the coverage provided by the financial responsibility instrument(s). 

Based on a review of available information and input from stakeholders on the potential for 

instrument failure and the resource implications for owners or operators and UIC Program

Directors, the financial responsibility instruments recommended for the following GS activities 

include: 
UIC Program Class VI Financial Responsibility Guidance ii

• Corrective action: Trust funds, letters of credit, surety bonds, escrow accounts, and 

financial tests and corporate guarantees 

• Injection well plugging: Trust funds, letters of credit, surety bonds, insurance, and 

financial tests and corporate guarantees 

• Post-injection site care and site closure: Trust funds, insurance, and financial tests and 

corporate guarantees

• Emergency and remedial response: Insurance, letters of credit (during operation), surety 

bonds (during operation), and financial tests and corporate guarantees 

This list is not exhaustive of all options available for each GS activity. Under 40 CFR 146.85, 

owners or operators can use other qualifying instruments that are satisfactory to the UIC Program 

Director or use a combination of qualifying instruments to demonstrate financial responsibility 

for a specific phase of the GS project. 

The guidance provided in this document is based on United States Environmental Protection 

Agency’s (EPA’s) current understanding of the best approach to regulating financial 

responsibility for GS. As such, it is important to note that EPA is pursuing an adaptive 

rulemaking approach to regulating GS; additional requirements or other changes to this guidance 

might be needed in the future to protect underground sources of drinking water and provide 

useful information on financial responsibility. 
UIC Program Class VI Financial Responsibility Guidance iii

Purpose and Disclaimer

The category of Underground Injection Control (UIC) Class VI injection well was established by 

the “Federal Requirements under the Underground Injection Control Program for Carbon 

Dioxide Geologic Sequestration Wells.” The Federal Register Notice for this Rule is available at:

http://water.epa.gov/type/groundwater/uic/class6/gsregulations.cfm. 

The Safe Drinking Water Act (SDWA) provisions and EPA regulations cited in this document 

contain legally-binding requirements. This document does not substitute for those provisions or 

regulations, nor is it a regulation itself. Thus, it does not impose legally-binding requirements on 

EPA, states, or the regulated community, and may not apply to a particular situation based upon 

the circumstances. EPA and authorized state decision makers retain the discretion to adopt 

approaches on a case-by-case basis that differ from this guidance where appropriate. Any 

decisions regarding a particular facility or site will be made based on the applicable statutes and 

regulations. Therefore, interested parties are free to raise questions and objections about the 

appropriateness of the application of this guidance to a particular situation, and EPA will 

consider whether the recommendations or interpretations in the guidance are appropriate in that 

situation. EPA may change this guidance in the future. Mention of trade names or commercial 

products does not constitute endorsement or recommendation for use. 

While EPA has made every effort to ensure the accuracy of the discussion in this document, the 

obligations of the regulated community are determined by statutes, regulations or other legally 

binding requirements. In the event of a conflict between the discussion in this document and any 

statute or regulation, legally binding requirements take precedence. 

Several chapters of this guidance document make suggestions and offer alternatives that go 

beyond the minimum requirements indicated by the Rule. This is done to provide information 

and suggestions that could be helpful for implementation efforts. Such suggestions are prefaced 

by “may” or “should” and are to be considered advisory. They are not required elements of the 

Rule. 

EPA is subject to the Miscellaneous Receipts Act, 31 U.S.C. 3302, which requires EPA to 

deposit money it receives into the U.S. Treasury unless a federal statute authorizes EPA to retain 

the funds. Additionally, EPA must have statutory authorization to be the beneficiary of a trust or 

insurance policy. Because the SDWA does not authorize EPA to retain funds or be the 

beneficiary of a trust or insurance policy, this guidance provides that financial assurance will not 

provide funds to EPA or name EPA as the beneficiary of a trust or insurance policy. 

 

EPA is taking an adaptive rulemaking approach to regulating Geologic Sequestration (GS), and 

EPA will continue to evaluate ongoing research and demonstration projects and gather other 

relevant information as needed to refine the Rule. Consequently, this guidance is likely to change 

in the future. This is a living document and may be revised periodically without public notice. 
UIC Program Class VI Financial Responsibility Guidance iv

For additional information contact: Joe Tiago, UIC Program, Drinking Water Protection 

Division, Office of Ground Water and Drinking Water (4606M), U.S. Environmental Protection 

Agency, 1200 Pennsylvania Avenue NW, Washington, D.C., 20460, Telephone: (202) 564-0340, 

Fax: (202) 564-3756, Email: tiago.joseph@epa.gov. 
UIC Program Class VI Financial Responsibility Guidance v

Table of Contents

Executive Summary ......................................................................................................................... i

Purpose and Disclaimer ................................................................................................................. iii

Table of Contents ............................................................................................................................ v

List of Figures .............................................................................................................................. viii

List of Tables ............................................................................................................................... viii

Acronyms and Abbreviations ........................................................................................................ ix

Definitions....................................................................................................................................... x

1. Introduction ............................................................................................................................. 1

2. Financial Responsibility Demonstrations ............................................................................... 5

3. Introduction to Qualifying Financial Responsibility Instruments .......................................... 8

A. Qualifying financial instruments specified in the Rule.................................................... 9

B. Other qualifying financial instruments .......................................................................... 17

C. Availability and affordability of financial responsibility instruments ........................... 17

4. Matching Financial Instruments to Meet the Specific Needs of a GS Project...................... 19

A. Minimizing costs ............................................................................................................ 19

B. Maximizing instrument benefits .................................................................................... 19

5. Conditions of Coverage and Specifications for Financial Responsibility Demonstrations .. 24

A. Trust fund ....................................................................................................................... 25

1. Required specifications ............................................................................................... 25

2. Recommended specifications...................................................................................... 26

B. Surety bond guaranteeing payment into a trust fund ..................................................... 27

1. Required specifications ............................................................................................... 27

2. Recommended specifications...................................................................................... 28

C. Surety bond guaranteeing performance of injection well plugging and abandonment . 29

1. Required specifications ............................................................................................... 29

2. Recommended specifications...................................................................................... 29

D. Letter of credit................................................................................................................ 30

1. Required specifications ............................................................................................... 30

2. Recommended specifications...................................................................................... 30

E. Insurance ........................................................................................................................ 32

1. Required specifications ............................................................................................... 32

2. Recommended specifications...................................................................................... 32

F. Escrow account .............................................................................................................. 34
UIC Program Class VI Financial Responsibility Guidance vi

1. Required specifications ............................................................................................... 34

2. Recommended specifications...................................................................................... 34

G. Financial test and corporate guarantee ........................................................................... 36

1. Required specifications ............................................................................................... 36

2. Recommended specifications...................................................................................... 36

H. Use of multiple financial instruments ............................................................................ 38

I. Use of a financial instrument for multiple facilities ...................................................... 39

J. Release of the owner or operator from the requirements of 40 CFR 146.85 ................. 39

6. Submission Requirements ..................................................................................................... 40

A. Cost estimate .................................................................................................................. 40

B. Documented proof of an independent third-party instrument or self insurance ............ 41

1. Submissions using independent third-party instrument .............................................. 41

2. Submissions using self insurance................................................................................ 41

7. UIC Program Director’s Review .......................................................................................... 43

A. Determining the completeness and accuracy of the demonstration ............................... 43

B. Financial stability of the independent third party .......................................................... 44

C. Additional considerations for understanding/approving the demonstration .................. 45

D. Requesting additional information from the owner or operator .................................... 47

E. UIC Program Director’s evaluation and approval ......................................................... 47

F. Evaluating the demonstration’s success......................................................................... 48

G. Importance of stakeholder involvement ......................................................................... 48

8. Ongoing Responsibilities ...................................................................................................... 49

A. Owner or operator responsibilities ................................................................................. 49

B. UIC Program Director responsibilities .......................................................................... 51

C. Independent third party responsibilities ......................................................................... 51

List of Appendices ........................................................................................................................ 54

Appendix A: Regulatory Language for Financial Responsibility for Class VI Wells ............ A-1

Appendix B: Recommended Financial Responsibility Instrument Language for Class VI Wells 

(Forms/Templates) .................................................................................................................. B-1

I. Trust Agreement ....................................................................................................... B-2

II. Financial Guarantee Surety Bond ............................................................................. B-9

III. Performance Surety Bond ....................................................................................... B-12

IV. Irrevocable Standby Letter of Credit ...................................................................... B-16

V. Certificate of Insurance ........................................................................................... B-17

VI. Letter from CFO ..................................................................................................... B-19

VII. Corporate Guarantee ............................................................................................... B-22

VIII. Escrow Account ...................................................................................................... B-24
UIC Program Class VI Financial Responsibility Guidance vii

Appendix C: Methodology for Estimating Costs for Financial Responsibility Demonstrations 

for Class VI Wells ................................................................................................................... C-1

I. Introduction ............................................................................................................... C-1

II. Estimating Costs to Support GS Financial Responsibility Demonstrations ............. C-3

Appendix D: Injection Well Plugging and Abandonment Checklist for Financial 

Responsibility Cost Determination ......................................................................................... D-1
UIC Program Class VI Financial Responsibility Guidance viii

List of Figures

Figure 1: GS Project Activities ....................................................................................................... 2

Figure 2: GS Financial Responsibility Timeline ............................................................................ 5

Figure 3: Qualifying Financial Responsibility Instruments Specified in the Rule ......................... 9

List of Tables

Table 1: Owner or operator submission requirements and Director responsibilities as specified by 

40 CFR 146.85 ................................................................................................................................ 6

Table 2: Definitions of financial coverage criteria ....................................................................... 15

Table 3: List of financial ratios and thresholds specified at 40 CFR 146.85(a)(6)(v) .................. 16

Table 4: Recommended financial responsibility instruments for GS activities (relative ranking) 21

Table 5: Regulatory risk and oversight and enforcement needed ................................................. 45

Table 6: Timeline for owner or operator actions .......................................................................... 50

Table 7: Submission requirements at 40 CFR 146.85 for owners or operators and review 

requirements for UIC Program Directors ..................................................................................... 53
UIC Program Class VI Financial Responsibility Guidance ix

Acronyms and Abbreviations 

AoR Area of Review

CE Current Cost Estimate

CFO Chief Financial Officer

CFR Code of Federal Regulations

CV Current Value (of trust fund or escrow account) 

EPA U.S. Environmental Protection Agency 

FERC Federal Energy Regulatory Commission

GAAP Generally Accepted Accounting Principles 

GS Geologic Sequestration

NRSRO Nationally Recognized Statistical Rating Organization

NWC Net Working Capital 

RCRA Resource Conservation and Recovery Act 

SDWA Safe Drinking Water Act

SEC Securities and Exchange Commission

TNW Tangible Net Worth

UIC Underground Injection Control 

USDWs Underground Sources of Drinking Water 

Y Number of Years
UIC Program Class VI Financial Responsibility Guidance x

Definitions

Key to definition sources: 

1: Class VI Rule Preamble.

2: 40 CFR 144.3. 

3: This definition was drafted for the purposes of this document. 

Director refers to the person responsible for permitting, implementation, and compliance of the 

UIC Program. For UIC Programs administered by EPA, the UIC Program Director is the EPA 

Regional Administrator or his/her delegatee; for UIC Programs in primacy states, the UIC 

Program Director is the person responsible for permitting, implementation, and compliance of 

the state, territorial, or tribal UIC Program.

1

 

Owner or operator means the owner or operator of any ‘‘facility or activity’’ subject to 

regulation under the UIC program.2 

Independent third party providers refer to a party who is not a parent, sibling, subsidiary, or 

any other company related to the owner or operator (i.e., no substantial business relationship 

with the owner or operator). In many cases, demonstrations of financial responsibility by an 

owner or operator will use an independent third party who holds funds or backs a liability. 

Independent third parties entering into a contractual relationship with an owner or operator have 

an interest in understanding the broader context within which the financial instrument is being 

used. Owners or operators will have to demonstrate that they have a contract with a qualified 

independent third party provider and obtain the UIC Program Director’s approval.3 

General public refers to all individuals in the United States and its territories. The goal of 

requiring demonstrations of financial responsibility is to ensure that the costs of abandoned GS 

projects are not borne by the general public.3

Independent third-party instrument(s) means independent third-party financial instruments 

that are agreements that rely on an independent third party’s guarantee to hold funds, or directly 

fund or perform the financial responsibility activities. Banks, insurance companies, and surety 

companies are examples of independent third party institutions that offer “cash holding” 

financial instruments such as trust funds and escrow accounts, as well as “risk management” 

financial instruments including surety bonds, insurance policies, and letters of credit. These 

instruments can be used by the owner or operator to demonstrate financial responsibility.3

Self insurance allows the owner or operator to submit financial statements and other information 

to prove that they are likely to remain in operation, based on indicators of the economic health of 

the organization, and that they will be able to complete all required GS activities. Self insurance 

is only available if the owner or operator meets specified criteria, including either a financial 

ratio or bond rating test. An owner or operator may demonstrate financial responsibility utilizing 

self insurance.3
UIC Program Class VI Financial Responsibility Guidance 1 

1. Introduction

This guidance describes some of the types of financial instruments that owners or operators of 

Underground Injection Control (UIC) Class VI Geologic Sequestration (GS) wells can choose to 

demonstrate compliance with the financial responsibility requirements of the Rule. The intended 

audience of this guidance is UIC Program Directors, Class VI well owners or operators, 

independent third party providers, and the general public. 

The U.S. Environmental Protection Agency (EPA) published federal regulations for Class VI 

wells that inject carbon dioxide underground for the purpose of GS, referred to in this document 

as the Class VI Rule, in December 2010. The Federal Register Notice for this Rule is available 

at: http://water.epa.gov/type/groundwater/uic/class6/gsregulations.cfm. Pursuant to 40 CFR 

146.85(a), owners or operators of Class VI wells must demonstrate and maintain financial 

responsibility for corrective action on wells in the Area of Review (AoR), injection well 

plugging, post-injection site care and site closure, and emergency and remedial response phases.

Financial responsibility requirements are designed to ensure that owners or operators have the 

resources to carry out activities related to closing and remediating GS sites if needed during 

injection or after wells are plugged, so that they do not endanger Underground Sources of 

Drinking Water (USDWs). The requirements will also help ensure that the costs of abandoned 

GS projects are not borne by the general public. Throughout this guidance document corrective 

action, injection well plugging, post injection site care and site closure, and emergency and 

remedial response are collectively referred to as “financial responsibility activities” or “required 

GS activities.” 

In the course of developing financial responsibility requirements and this guidance, EPA 

conducted research and analysis to inform the decision-making process. This information is 

published as “Research and Analysis in Support of UIC Class VI Program Financial 

Responsibility Requirements and Guidance.” Topics covered in the supporting document 

include: the information shared on financial instruments, additional research, analysis, and the 

rationale for selecting acceptable instruments for financial responsibility demonstrations; an 

analysis of options for the UIC Program Director’s examination of third party stability; rationale 

for the selection of self insurance requirements; and an evaluation of the appropriate minimum 

tangible net worth for owners or operators. 

Because of differences in the structure of the Class VI regulations, financial responsibility is 

required for more phases or activities than in other well classes of the UIC program. One 

additional activity is the financial responsibility required for post-injection site care. The Rule 

describes specific conditions for financial responsibility while leaving final decisions up to the 

UIC Program Director’s evaluation and approval. The UIC Program Director is expected to 

make binding decisions and can also specify additional requirements not included in this 

guidance to protect USDWs from being endangered.

The figure below shows the phases and major activities of a GS project. The activities for which 

financial responsibility must be demonstrated, under 40 CFR 146.85(a), are shown in bold. To 

comply with 40 CFR 146.85, owners or operators will need to demonstrate financial 

responsibility coverage for each of these activities at the time of permit application.
UIC Program Class VI Financial Responsibility Guidance 2 

Figure 1: GS Project Activities

*Please note that the timeframes in this exhibit are not to scale. Activities for which financial responsibility must be demonstrated 

are shown in bold. Financial responsibility demonstrations will coincide with permitting (or revisions made after permitting), therefore 

Area of Review and Corrective Action prior to permitting (i.e., prior to well construction) are not activities for which financial 

responsibility must be demonstrated. 

Corrective action on wells in the AoR presents some uncertainty in terms of when it will occur 

and how much it will cost because it will depend on ongoing and subsequent AoR reevaluations. 

EPA anticipates that corrective action will most likely occur within a 20- to 30-year period. 

Injection well plugging occurs later in a GS project’s lifecycle, and EPA anticipates that it will 

take place over a period of weeks, not years. Post-injection site care and closure occurs last in the 

GS project’s lifecycle, lasting for at least 50 years unless an alternative timeframe has been 

approved by the UIC Program Director, and site closure will occur at the UIC Program 

Director’s approval. Emergency and remedial response events are uncertain in terms of if and 

when these events will occur, but they have the potential to occur over the entire course of the 

GS project’s lifecycle.

Although financial responsibility is 

required for and occurs in different 

GS project activities over time, the 

owner or operator’s initial financial 

responsibility demonstration must 

cover all GS activities required by 

the rule. These activities are 

represented in the GS Project 

Activities timeline above in bold.

After the completion of specific 

activities, the owner or operator can 

request to be released from related 

aspects of financial coverage, but 

the owner or operator must retain 

coverage for all remaining 

activities. For additional 

information on project activities see 

“Geologic Sequestration of Carbon 

Dioxide: Underground Injection 

Control (UIC) Class VI Well Area 

of Review Evaluation and 

GS Financial Responsibility Requirements in Context

Under the Safe Drinking Water Act (SDWA), the Underground 

Injection Control (UIC) Program requires the demonstration of 

“financial responsibility and resources to close, plug, and 

abandon the UIC operation” for all well classes as described at 

40 CFR 144.28(d) and 144.52(a)(7)). To provide information 

and guidance on this general requirement for financial 

responsibility, EPA published in 1990 financial responsibility 

demonstration guidance for the owners or operators for Class 

II oil and gas wells. 

Class I hazardous waste wells are uniquely regulated by both 

SDWA and the Resource Conservation and Recovery Act 

(RCRA). In contrast to the other UIC well classes, the 

information about options and the detailed requirements for 

owners or operators using those options are described in 40 

CFR 144.63 and 146.73. 

The financial responsibility Class VI Rule requirements for 

Class VI wells are more detailed than the general 

demonstration for well Classes II-V but less detailed than the 

Class I hazardous waste well requirements. This guidance 

compliments the Class VI Rule requirements by providing 

general information on financial responsibility and 

recommendations from EPA.
UIC Program Class VI Financial Responsibility Guidance 3 

Corrective Action Guidance for Owners and Operators.” 

It is important to note that EPA is pursuing an adaptive rulemaking approach to regulating GS. 

EPA plans to collect and review all project data on early GS projects, including financial 

responsibility instruments, to determine whether the appropriate amount and types of information 

and appropriate documentation were collected. Based on a review of the data, EPA plans to 

publish a determination on whether additional requirements or guidance are needed to protect 

USDWs. This document provides guidance based on EPA’s current understanding of the best 

approach. 

This guidance document: 

• Presents options for demonstrating financial responsibility;

• Provides an overview of coverage options, including the types of independent third-party 

instruments and self insurance;

• Describes the different financial responsibility instruments that qualify under the Rule; 

• Advises how to best match financial instruments to the specific GS project activities; 

• Assists in explaining the submission requirements and procedures for the owner or 

operator; and 

• Explains the ongoing finance-related responsibilities of the UIC Program Director, the 

owner or operator, and the third parties involved in the GS project. 

The appendices include: 

• Regulatory Language for Financial Responsibility for Class VI Wells;

• Recommended Financial Responsibility Language for Class VI Wells;

• Methodology for Estimating Costs for Financial Responsibility Determinations for Class 

VI Wells; and

• Injection Well Plugging and Abandonment Checklist for Financial Responsibility Cost 

Determination. 

Finally, the Safe Drinking Water Act (SDWA) provisions and EPA regulations cited in this 

document contain legally-binding requirements. This document does not substitute for those 

provisions or regulations and does not impose legally-binding requirements on EPA, states, or 

the regulated community. EPA and authorized UIC Program Directors retain the discretion to 

adopt approaches on a case-by-case basis that differ from this guidance where appropriate. The 

Class VI Rule states, at 40 CFR 146.82(a), that the UIC Program Director shall consider, among 

other things, the financial responsibility demonstration and any other information requested by 
UIC Program Class VI Financial Responsibility Guidance 4 

the UIC Program Director before issuing a Class VI permit. Additionally, it states that the 

financial responsibility demonstration must be satisfactory to the UIC Program Director. 

The Scope of the GS Financial Responsibility Requirements

Under 40 CFR 146.85(a), owners or operators must demonstrate and maintain financial responsibility for 

the following GS activities: performing corrective action on wells in the Area of Review, injection well 

plugging, post-injection site care and site closure, and emergency and remedial response. 

These activities are a subset of all potential activities that are likely to take place for a geologic 

sequestration (GS) project. The purpose of the financial responsibility requirements is to ensure that 

owners or operators have the resources to carry out activities related to closing and remediating GS sites 

if needed during injection or after wells are plugged so that they do not endanger underground sources of 

drinking water (USDWs). The four GS activities requiring financial responsibility are the minimum 

activities EPA considered necessary to achieve this goal.

Although the owners or operators are not required to demonstrate financial responsibility after the postinjection site care period has ended, owners or operators are still financially liable for the site. Safe 

Drinking Water Act (SDWA) does not provide EPA with the authority to indefinitely release owners or 

operators from long-term responsibility for potential impacts to USDWs after the post-injection site care 

period has ended (e.g., for unanticipated migration that endangers a USDW). Under current SDWA 

provisions EPA does not have the authority to transfer liability from one entity to another.
UIC Program Class VI Financial Responsibility Guidance 5 

2. Financial Responsibility Demonstrations

This chapter describes the methods owners or operators can elect to make financial responsibility 

demonstrations for Class VI wells. Under 40 CFR 146.85, the owner or operator must 

demonstrate that they have met the stated financial responsibility requirements before the UIC 

Program Director can approve a permit for a Class VI well. 40 CFR 146.85(a) states that owners 

or operators must use a qualifying instrument sufficient to cover the cost of corrective action, 

injection well plugging, post-injection site care and site closure, and emergency and remedial 

response. See Figure 2 for a general GS financial responsibility timeline and Table 1 (next page) 

for the regulatory requirements as of December 10, 2010. 

Figure 2: GS Financial Responsibility Timeline

*Please note that the timeframes in this exhibit are not to scale. Activities for which financial responsibility must be demonstrated 

are shown in bold. Financial responsibility demonstrations will coincide with permitting (or revisions made after permitting), therefore 

Area of Review and Corrective Action prior to permitting (i.e., prior to well construction) are not activities for which financial 

responsibility must be demonstrated.

EPA recommends that the owner or operator consider the financial responsibility demonstration 

at the onset of the project – during site characterization and AoR evaluation. Concurrently, the 

owner or operator should consider estimating the costs of corrective action, injection well 

plugging, post-injection site care and site closure, and emergency and remedial response. The 

Rule requires, at 40 CFR 146.85(c), that the owner or operator have a detailed written estimate, 

in current dollars, of the cost of performing corrective action on wells in the area of review, 

plugging the injection well(s), post-injection site care and site closure, and emergency and 

remedial response. More detailed information regarding cost estimation requirements can be 

found in Appendix C. The UIC Program Director can set additional requirements for the 

financial responsibility demonstration under 40 CFR 146.85. For example, the UIC Program 

Director might require more stringent requirements for third party providers or owners or 

operators utilizing self insurance. See Chapter 3 “Introduction to Qualifying Financial 

Responsibility Instruments” and Chapter 5 “Conditions of Coverage and Specifications for 

Financial Responsibility Demonstrations” for additional details.
UIC Program Class VI Financial Responsibility Guidance 6 

If the UIC Program Director approves the initial financial responsibility demonstration, pursuant 

to 40 CFR 146.85(c)(2), the owner or operator must provide an annually updated cost estimate to 

the UIC Program Director for an annual review of the adequacy of demonstration. This is not 

considered re-permitting. The UIC Program Director has the authority to revoke the permit on an 

annual basis, as a result of the annual review, if the existing documentation is inadequate or the 

owner or operator cannot subsequently provide adequate demonstration. EPA recommends that 

financial responsibility demonstrations be updated with revised cost estimates over time to verify 

that project costs will fall within the coverage provided by the financial responsibility 

instruments. Under 40 CFR 144.85(b) the owner or operator must maintain coverage during the 

life of the project until the UIC Program Director receives and approves the final Post-Injection 

Site Care and Site Closure Plan and determines that the site has reached the end of the postinjection site care period. See Chapter 8 “Ongoing Responsibilities” for additional details.

Table 1: Owner or operator submission requirements and Director responsibilities as specified by 

40 CFR 146.85 

Key:  = Submission or review requirement

**Note that requirements and responsibilities are 

paraphrased for the purposes of this table**

Owner or Operator Submission

Requirements

and

Director Review Responsibilities

Initial Demonstration

for Permitting

(See Ch. 6)

Ongoing to Maintain 

Permit or for Site 

Closure (See Ch. 8)

(a) The owner or operator must demonstrate and 

maintain financial responsibility 



(a) (1) Financial responsibility instrument(s) must be 

from the list of qualifying instruments 



(a) (2) The qualifying instrument(s) must be sufficient to 

cover required activity costs 

(a) (3) The financial responsibility instrument(s) must 

be sufficient to address endangerment of USDWs 

(a) (4) The qualifying financial instrument(s) must 

comprise protective conditions of coverage 

(a) (5) The qualifying financial responsibility 

instrument(s) must be approved by the UIC Program 

Director



(a) (5) (i) The UIC Program Director must consider and 

approve the financial responsibility demonstration for all 

phases



(a) (5) (ii) The UIC Program Director must evaluate the 

financial responsibility demonstration annually to 

confirm that the instrument(s) used remain adequate 

for use



(a) (5) (iii) The UIC Program Director may disapprove a 

financial instrument if it is not sufficient to fulfill

obligations

 

(a) (6) The owner or operator may use one or multiple 

qualifying financial instrument for specific project 

phases


UIC Program Class VI Financial Responsibility Guidance 7 

Key:  = Submission or review requirement

**Note that requirements and responsibilities are 

paraphrased for the purposes of this table**

Owner or Operator Submission

Requirements

and

Director Review Responsibilities

Initial Demonstration

for Permitting

(See Ch. 6)

Ongoing to Maintain 

Permit or for Site 

Closure (See Ch. 8)

(a) (6) (i) Instruments based on performance cannot be 

combined 

(a) (6) (ii) Third party providers must meet minimum 

requirements 

(a) (6) (iii) Standby trust funds must be established for 

select third-party instruments 

(a) (6) (v) An owner or operator may use self insurance

if it meets minimum requirements 

(a) (6) (vi) A corporate parent may guarantee financial 

responsibility on behalf of the owner or operator 

(b) (1) The owner or operator must maintain financial 

responsibility and resources 

(b) (2) The owner or operator may be released from a 

financial instrument in specific circumstances 

(c) The owner or operator must have a detailed written 

estimate, in current dollars  

(c) (1) The cost estimate must be performed for each 

phase separately and must be based on the costs to 

the owner or operator of hiring a third party



(c) (2) During the active life of the GS project, the 

owner or operator must adjust the cost estimate for 

inflation



(c) (3) The UIC Program Director must approve any 

decrease or increase to the initial cost estimate 

(c) (4) Whenever the current cost estimate increases 

the owner or operator must either increase the face 

amount or obtain other financial responsibility 

instruments



(d) The owner or operator must notify the UIC Program 

Director by certified mail of adverse financial conditions 

(e) The owner or operator must provide an adjustment 

of the cost estimate to the UIC Program Director within 

60 days of notification by the UIC Program Director



(f) The UIC Program Director must approve the use 

and length of pay-in periods 
UIC Program Class VI Financial Responsibility Guidance 8 

3. Introduction to Qualifying Financial Responsibility Instruments 

It is recommended that an owner or operator first determine which financial coverage options 

they qualify for in order to make a financial responsibility demonstration. This chapter provides 

an overview of financial responsibility instruments that can be used as qualifying financial 

responsibility demonstrations for GS activities (see Figure 3). The intent of the instrument 

overviews is to provide general information on the functionality and defining characteristics of 

each instrument. Additional detailed information relating to each financial responsibility 

instrument is described in subsequent chapters. Specifically, standards for GS financial 

responsibility demonstrations using each instrument are described in Chapter 5 “Conditions of 

Coverage and Specifications for Financial Responsibility Demonstrations.” 

There are two broad categories of financial responsibility instruments: independent third-party 

instruments (i.e., financial instruments) and self insurance (i.e., financial statements used to 

document financial ratios or bond ratings), as described below. Owners and operators can choose 

from various coverage options from the third-party instruments or elect to use self insurance. 

However, some financial responsibility options might not be available or appropriate depending 

on the individual project. 

• Independent third-party instrument(s). Using a financial instrument to demonstrate 

financial responsibility is the simplest way to ensure that funds sufficient to cover the 

cost estimates for the GS activities are available. Financial instruments are agreements 

that rely on an independent third party institution’s guarantee to hold funds, or directly 

fund or perform the financial responsibility activities. Banks, insurance companies, and 

surety companies are examples of independent third party institutions that offer “cash 

holding” financial instruments such as trust funds and escrow accounts, as well as “risk 

management” financial instruments including surety bonds, insurance policies, and letters 

of credit. Insurance policies may be established both for certain activities (e.g., life 

insurance) and uncertain activities (e.g., automobile insurance). If the owner or operator 

submits an acceptable independent third-party financial instrument that meets or exceeds 

the cost estimate and receives the UIC Program Director’s approval, then the owner or 

operator has adequately demonstrated financial responsibility coverage.

• Self insurance. A second option, using self insurance, is only available if the owner or 

operator meets specified criteria, including either a financial ratio or bond rating test. 

This financial responsibility demonstration generally allows the owner or operator to 

submit financial statements and other information to prove they are likely to remain in 

operation, based on indicators of the economic health of the organization, and they will 

be able to complete all required GS activities. Owners or operators can expect to provide 

documents such as annual financial statements that show profits and losses for the year, 

and statements verifying total net worth and net working capital. This information will be 

confirmed by an independent auditor, who will look for consistency between a letter from 

the Chief Financial Officer (CFO), annual reports and Security Exchange Commission 

(SEC) reports, irregularities in annual income from one year to the next, and the values 

for ratios of profit and loss. Financial documents of the owner or operator that have 

already been audited can be used to supplement a financial test, including the SEC Form 
UIC Program Class VI Financial Responsibility Guidance 9 

10-K and the Federal Energy Regulatory Commission (FERC) Form 2. The UIC Program 

Director must determine whether the information submitted for one of these tests is 

sufficient to make a determination regarding the owner’s or operator’s financial stability. 

The UIC Program Director may require the owner or operator to pass an additional 

financial test if the original demonstration is not satisfactory. 

Under 40 CFR 146.85(a) the owner or operator must submit the information necessary to 

demonstrate financial responsibility and receive and maintain a permit. Pursuant to 40 CFR 

146.85(b) the owner or operator must also submit information to be released from financial 

responsibility requirements. For third-party instruments, if the owner or operator fails to 

complete the required activities and the UIC Program Director subsequently calls on the 

instrument to cover the environmental liability, the instrument may be retired after the activity 

has been completed. In the case of owner or operator failure when self insurance has been used, 

the UIC Program Director does not have the option to draw upon a third-party instrument, thus 

resulting in instrument failure. 

A. Qualifying financial instruments specified in the Rule

Under 40 CFR 146.85(a)(1), specific qualifying independent third-party and self insurance 

instruments are listed for use in financial responsibility demonstrations. Qualifying independent 

third-party instruments listed include trust funds, surety bonds, letters of credit, insurance, and 

escrow accounts. Qualifying self insurance instruments include self insurance and corporate 

guarantees that meet the specified financial test criteria. This list of instruments is neither

exhaustive nor absolute; therefore, an owner or operator may use any other financial instruments 

that the UIC Program Director finds satisfactory. Correspondingly, the UIC Program Director

may find one or more of instruments listed in the Rule does not meet the requirements of the rule 

and is thus unallowable for financial responsibility demonstrations. See 146.85(a)(5)(iii). For 

example, the UIC Program Director may find that an owner cannot demonstrate sufficient 

Tangible Net Worth and not allow self insurance. 

Figure 3: Qualifying Financial Responsibility Instruments Specified in the Rule

*Not a stand-alone instrument. Dotted connection to standby trust from surety bond, letter of credit, and escrow account represents 

the need for a standby trust when EPA is the UIC Program Director. If authorized by applicable law, a standby trust might not be 

needed when a state or tribe is the UIC Program Director and is named as the beneficiary.

Instruments

Independent 

Third-party Instruments Self Insurance

Financial 

Test

Corporate 

Guarantee

Trust Fund Surety Bond Letter of 

Credit

Escrow 

Account

Insurance

(Third-party) 

Standby Trust*
UIC Program Class VI Financial Responsibility Guidance 10

Trust fund

To demonstrate financial responsibility, owners or operators can establish an irrevocable trust 

fund. Trust funds serve as a repository for money set aside for a specific purpose. A trust fund is 

established at a bank or other financial institution that is a “neutral party” and is regularly 

examined and regulated by a federal or state entity. The Rule established the minimum federal 

financial responsibility requirements for GS activities and specifically listed trust funds as one 

option for a financial responsibility demonstration. The trust is administered and, if necessary,

managed by a trustee who is designated by the owner or operator establishing the trust. EPA 

recommends that the UIC Program Director confirm that the independent third party institution

administering the trust has a proven track record of effectively managing trusts, using 

information provided during the demonstration review (e.g., list of past trusts managed of a 

similar size, revenue threshold, time in business). The trustee’s financial stability must be 

demonstrated to the UIC Program Director by the owner or operator pursuant to 40 CFR 146.85. 

In the financial responsibility demonstration, the owner or operator is required to deposit the 

required amount of money into the trust prior to permitting or may have the option to exercise a

“pay-in period” specified by the UIC Program Director. 

EPA recommends that the trust fund agreements established by owners or operators describe the 

acceptable ways that the trustee can invest the fund and applicable legal principles, show proof 

that the trust was established at the direction of the owner or operator’s board of directors or 

principal owners, and identify the conditions under which the UIC Program Director can

authorize payments to complete a required activity under the Class VI Rule. EPA recommends 

that the agreements include the timeframe in which the trustee will submit statements of the 

value of the trust (at least annually) to the UIC Program Director and the process of how to 

accept additional deposits or release funds with the UIC Program Director’s concurrence. 

Subject to investment restrictions1

 set forth in the trust agreement, trust funds will likely yield 

interest over time. This accrued interest can be reinvested to cover increases in the cost of 

materials and labor for GS activities due to inflation. If interest is earned and the revised cost 

estimate (including adjustments for inflation) shows that the amount held in the trust exceeds the 

most recently estimated cost (assuming management fees due to the trustee have been paid), the 

owner or operator may request the UIC Program Director’s approval for release of the excess 

funds. If the value of the trust falls below the cost estimate, the owner or operator will be 

required to deposit additional funds into the instrument or establish an additional instrument. 

Generally, the funds held in the trust can be released to the owner or operator when the owner or 

operator meets its financial obligations related to the GS activities or when the owner or operator 

submits an alternative financial responsibility demonstration that is approved by the UIC 

Program Director. See Chapter 5 for “Conditions of Coverage and Specifications for Financial 

Responsibility Demonstrations.” 

 

1 Investment restrictions may include floors or caps on cash or the purchase of bonds or certain categories of stocks.
UIC Program Class VI Financial Responsibility Guidance 11

Standby trust fund

A standby trust fund is not a stand-alone financial instrument that can be used by an owner or 

operator to demonstrate financial responsibility. A standby trust is different from a trust fund 

because the trust is unfunded (or in standby) until another financial instrument pays into it. When 

EPA acts as the UIC Program Director, standby trust funds must be established when an owner 

or operator establishes a surety bond, letter of credit, or escrow account as part of a financial 

responsibility demonstration. EPA does not have express authority under SDWA to accept and 

use funds for financial assurance. Consequently, standby trust agreements cannot name EPA as a 

recipient of funds or a beneficiary. Therefore, EPA recommends that the standby trust 

agreements be written such that EPA, as the UIC Program Director, has authority to notify the 

trustee of the need for payments from the fund to cover the costs of GS project activities covered 

under the agreement. However, when a state or tribe is the UIC Program Director, financial 

responsibility instruments can name a state, tribal or local government as a recipient of funds or a 

beneficiary, if authorized by applicable law.

As a financial responsibility instrument, the standby trust allows the UIC Program Director to 

request the use of funds guaranteed by other instruments. For example, when funds are collected 

from letters of credit and surety bonds, they are moved to the standby trust, where they can be 

withdrawn and allocated to an independent third party to cover the costs associated with financial 

responsibility activities. In the standby trust, “Schedule A” will specify the cost estimate for each 

permitted well or facility and “Schedule B” will define the initial property or money establishing 

the fund. See Chapter 5 for “Conditions of Coverage and Specifications for Financial 

Responsibility Demonstrations.” 

Surety bond

A surety bond is a guarantee by a surety or insurance company that includes specific obligations. 

There are two types of surety bonds: performance and financial guarantee. A performance bond 

guarantees the performance of the financial responsibility activities. For example, a performance 

bond might give the surety three options to guarantee and finance the completion of a project: 

completing the project itself, hiring a contractor to complete the project, or paying the amount of 

funds guaranteed by the bond. On the other hand, a financial guarantee bond, also commonly 

referred to as a payment bond, ensures that the surety company will pay the amount of funds 

guaranteed by the bond. Both types of surety bonds require the establishment of a standby trust2

to receive, on behalf of the UIC Program Director, any money that the surety company is 

required to pay to an independent third party to cover the cost of financial responsibility 

activities. 

In practice, if the owner or operator fails to meet its financial responsibility activities, the surety 

company will pay the amount of the surety bond into a standby trust, or perform the required 

activities. In turn, the trustee in charge of the standby trust will pay an independent third party to 

finalize the environmental obligations as instructed by the UIC Program Director. 

 

2

 When a state or tribe is the UIC Program Director the surety bond may name a state, tribal, or local government as 

a recipient of funds or a beneficiary, if authorized by applicable law. In this case a standby trust is not needed.
UIC Program Class VI Financial Responsibility Guidance 12

EPA recommends that surety bond agreements meet certain conditions. For example, the surety 

company should be tested and approved under the U.S. Department of the Treasury Circular 570. 

The surety’s financial stability must be demonstrated to the UIC Program Director by the owner 

or operator. The UIC Program Director may require that the bond specifies which well(s) it 

covers. If the owner or operator drills or acquires new wells, it should post a new bond or amend 

the existing demonstrations. Furthermore, the bond agreement should require that the bondholder 

provide the owner or operator and the UIC Program Director with notice prior to cancelling the 

bond. EPA recommends that the agreement also include a provision that the surety company will 

pay the bond’s face value if the owner or operator does not provide a substitute demonstration of 

financial responsibility to the UIC Program Director in addition to paying the face value for the 

owner or operator’s failure to perform. 

Depending on the permit’s scope, a surety bond can be secured for either a single well (i.e., 

single well bonding) or a multi-well facility (i.e., multiple well bonding). In the case of multiple 

wells, EPA recommends that the face value of the bond reflect the sum of the costs of all the 

wells. In the financial responsibility demonstration, the owner or operator might establish a 

surety bond to be used for the duration of the GS activities that it covers. The owner or operator 

should submit proof of the bond to the UIC Program Director. Typically, the cost of the surety 

bond depends on the cost estimate for the activity (e.g., one well or multiple wells, varied GS 

phases) as well as the associated risk and the type of surety bond (performance or financial 

guarantee). The owner or operator must increase or decrease in the required value of the surety 

bond or establish an additional instrument, based on changes in cost estimates that are approved 

by the UIC Program Director [40 CFR 146.85(c)(3)]. See Chapter 5 for “Conditions of Coverage 

and Specifications for Financial Responsibility Demonstrations.” 

 

Letter of credit

A letter of credit guarantees that funds, up to a specified limit, will be available to a designated 

party under certain conditions. Generally, a letter of credit used as a GS financial responsibility 

instrument is issued by a bank or other financial institution to the owner or operator of a GS 

facility to cover the costs of the financial responsibility activities. The instrument is established 

for the life of the covered GS activity. If the owner or operator fails to fulfill financial 

responsibility activities backed by the letter of credit, the bank or financial institution must pay to 

meet the obligation. When an EPA Region is the UIC Program Director, the instrument must use 

a standby trust3 to facilitate the transfer of funds to complete the activity. 

EPA recommends that if an owner or operator chooses to use a letter of credit to demonstrate 

financial responsibility under 40 CFR 146.85, the letter of credit should be issued by a bank or 

other institution whose operations are regulated and examined by a federal or state agency. The 

issuing institution’s financial stability must be demonstrated to the UIC Program Director by the 

owner or operator. Additionally, EPA recommends that the letter of credit require the issuing 

institution to provide the owner or operator and the UIC Program Director with notice if it does 

not plan to reissue the letter of credit. If the owner or operator fails to provide a substitute 

financial responsibility instrument the beneficiary can draw on the letter of credit. EPA 

 

3 When a state or tribe is the UIC Program Director the letter of credit may name a state, tribal, or local government 

as a recipient of funds or a beneficiary, if authorized by applicable law. In this case a standby trust is not needed. 
UIC Program Class VI Financial Responsibility Guidance 13

recommends that the letter of credit include a provision for its automatic renewal; specifically, 

the agreement should specify that the letter of credit be cancelled only if the UIC Program 

Director has consented in writing. 

The overhead cost of a letter of credit depends on the cost estimate for an activity (e.g., one well 

or multiple wells, varied GS activities) and the associated risk. Upon approval of updates to the 

cost estimate by the UIC Program Director the owner or operator must increase or decrease the 

required value of the letter of credit or establish an additional instrument to reflect changes in 

cost estimates [40 CFR 146.85(c)(3)]. See Chapter 5 for “Conditions of Coverage and 

Specifications for Financial Responsibility Demonstrations.” 

Independent third-party insurance

As a GS financial responsibility instrument, independent third-party insurance is a contract 

between the insurer (typically an insurance company) and the insured (the Class VI well owner 

or operator) written in the form of an insurance policy (either for certain activities or risk 

management for uncertain activities) to cover specified events for the duration of the covered 

activity. Independent third-party insurance demonstrations generally require that there is no 

ownership relation between the insurance company and the insured party. However, EPA 

considers mutual insurance companies, for the purpose of financial responsibility 

demonstrations, to be third party providers. A mutual insurance company is formed and owned 

entirely by its policyholders, to cover specific events or risks. Pursuant to 40 CFR 146.85 the 

third party insurer’s financial stability must be demonstrated to the UIC Program Director by the 

owner or operator. 

To make the financial demonstration, the owner or operator secures an insurance policy with a 

face value equal to the cost estimate for the GS activity and pays the premium annually, monthly, 

or, in some instances, entirely up front before coverage begins. The owner or operator might be 

required by the UIC Program Director to submit a certificate of insurance that identifies 

information about the policy including the name of the insured, the insurer, the facility covered, 

as well as a statement that says the insurer is providing financial assurance for the insured. EPA 

recommends that the policy state that it conforms in all respects with the requirements for the 

fulfillment of financial responsibility activities described in the Rule. Generally, if a covered 

incident occurs, the insurance company directly pays the expenses related to the financial 

responsibility activities or reimburses the insured party for those expenses, as requested by the 

UIC Program Director. 

The cost of an insurance policy will vary depending on the insurance company’s evaluation of 

the risks involved with the operations. The terms of the insurance policy can vary among, and 

even within, states. EPA cannot be the beneficiary of the insurance policy. See Chapter 5 for 

“Conditions of Coverage and Specifications for Financial Responsibility Demonstrations.” 
UIC Program Class VI Financial Responsibility Guidance 14

Captive Insurance

Captive insurance is an insurance policy underwritten by a subsidiary to insure its own parent company or 

a client of a parent company in a financial responsibility demonstration. The arrangement allows an owner 

or operator to retain greater control over the details of the insurance policy at a lower cost than using an 

outside insurance company. If satisfactory to the UIC Program Director, an owner or operator may use 

captive insurance as an “other” qualifying financial instrument.

Escrow account

An escrow account sets aside funds to be used for an explicit purpose and can be used to deliver 

funds from one party to another. An owner or operator can establish an escrow account in a 

financial responsibility demonstration to cover the cost estimate for financial responsibility 

activities. Although escrow accounts have not been used in the federal UIC program, they are 

functionally equivalent to a trust fund, and may be more accessible and have a lower overhead 

cost; however, they tend to yield lower interest as highly liquid instruments. 

In a financial responsibility demonstration under 40 CFR 146.85, the owner or operator deposits 

the required amount of funds into the escrow account prior to the issuance of the permit or 

during the “pay-in-period.” It is recommended that the escrow agreement describe the acceptable 

ways that the escrow agent can invest the fund, show proof that the account was established at 

the direction of the owner or operator’s board of directors or principal owners, and identify the 

conditions under which the escrow agent will release funds to fulfill required GS activities. EPA 

recommends that the agreement also stipulate that the escrow agent submit statements with the 

value of the escrow account (at least annually) to the UIC Program Director, invest the trust 

according to the guidance provided in the agreement and applicable legal principles, and accept 

additional deposits or release funds with the concurrence of the UIC Program Director. Pursuant 

to 40 CFR 146.85 the escrow agent’s financial stability must be demonstrated to the UIC 

Program Director by the owner or operator. 

Once the required GS activities are complete, the funds held in escrow can be returned to the 

owner or operator. If the obligations are not met, the funds will be paid to a standby trust for an 

independent third party to fulfill the obligations, as requested by the UIC Program Director. 

Escrow accounts may yield some (minimal) interest over time. The accrued interest can be 

reinvested to cover increases in the cost of materials and labor for GS activities resulting from 

inflation. If interest is earned and the revised cost estimate (including adjustments for inflation) 

shows that the amount held in the instrument exceeds the most recently estimated cost (assuming 

management fees due to the trustee have been paid), the owner or operator may request the UIC 

Program Director’s approval for release of the excess funds. If the value of the account falls 

below the cost estimate, the owner or operator will be required to deposit additional funds. The 

funds held in escrow can be released to the owner or operator if the owner or operator completes 

required GS activities or submits an alternative financial responsibility demonstration that is 

approved by the UIC Program Director. It is recommended that there be no restrictions placed on 
UIC Program Class VI Financial Responsibility Guidance 15

the time of withdrawal. See Chapter 5 for “Conditions of Coverage and Specifications for 

Financial Responsibility Demonstrations.” 

Self insurance

Unlike independent third-party instruments, financial responsibility demonstrations with self

insurance involve only the owner or operator (and their parent company, in the case of a 

corporate guarantee). A two-step process for demonstrating financial responsibility with self

insurance is required. First, the owner or operator provides the pre-specified “financial coverage 

criteria” to qualify for the test. Then, the owner or operator passes one of two financial tests. The 

information for these two steps may typically be submitted at the same time, but the UIC 

Program Director will evaluate them in a step-wise process. The UIC Program Director may 

require the owner or operator to pass an additional financial test in cases where the original 

demonstration is not satisfactory. See Chapter 5 for “Conditions of Coverage and Specifications 

for Financial Responsibility Demonstrations.” 

Financial coverage criteria 

To qualify for the financial test, minimum financial coverage criteria must be met, pursuant to 40 

CFR 146.85. The required thresholds for Net Working Capital (NWC) and Total Assets and the 

recommended threshold for Tangible Net Worth (TNW) are presented in the table below. 

Table 2: Definitions of financial coverage criteria

Financial Indicators Description Requirement at 40 CFR 

146.85(a)(6)(v)

Net Working Capital (NWC)

Measures short-term financial 

health. Defined as current assets 

minus current liabilities.

NWC must be at least six times the 

sum of the current cost estimates 

for all required GS activities.

Total Assets

Combined value of economic 

resources and all items of 

monetary value owned by a firm.

Assets in the United States must

either:

a) amount to at least 90 percent of 

total assets, 

or

b) amount to at least six times the 

sum of the current cost estimates 

for all required GS activities.

Tangible Net Worth (TNW)

Measures the value of a company 

that is liquefiable, i.e., total assets 

(not including intangible assets) 

minus liabilities.

Recommended Threshold4

Although the Rule doesn’t require a 

minimum TNW amount for GS 

projects, based on recent evaluation 

EPA recommends a TNW of at least 

$100 million, 

and

at least six times the sum of the 

current cost estimates for all 

required GS activities.

 

4 The UIC program’s decision to recommend a $100 million TNW threshold is intended to assure that the risk of 

instrument failure when self insurance is used is no greater than the riskiest scenario when third-party instruments 

are used.
UIC Program Class VI Financial Responsibility Guidance 16

If the UIC Program Director approves the financial coverage criteria submitted by the owner or 

operator, the UIC Program Director will then evaluate the self insurance demonstration based on 

a corporate financial test. As discussed below, EPA suggests two types of corporate financial 

tests: bond rating and financial ratio. In principle, this process confirms that the company 

presents a low risk because it is profitable, not overly leveraged, and has sufficient liquidity. 

EPA recommends that the materials for a financial test be submitted by a trusted authority (e.g., 

an independent auditor). The financial test should be accompanied by a letter from the owner or 

operator’s CFO, a full auditor’s opinion from an independent certified public accountant (CPA), 

and an independently audited financial statement. The auditor’s opinion should state that the data 

submitted is of the most recent year and that the auditor followed Generally Accepted 

Accounting Principles (GAAP). 

Tangible Net Worth (TNW) as a Coverage Criterion

TNW is an indicator of the owner or operator’s size. Generally, larger well-capitalized firms tend to fail 

(i.e., enter bankruptcy) at a lower rate than smaller firms. In the case of owner or operator failure when 

self insurance has been used, the UIC Program Director does not have the option to draw upon a thirdparty instrument, resulting in instrument failure. In contrast, third-party financial responsibility 

demonstrations fail only when both the owner or operator and the third party fail. To minimize the risk of 

self insurance failure, EPA recommends that TNW be at least $100 million and at least six times the sum 

of the current cost estimate for all secured financial responsibility activities. The recommendation of $100 

million is estimated to be the minimum TNW required to make self insurance no more likely to fail than a 

demonstration utilizing a third party and a high-risk owner or operator. This recommendation is based on 

an analysis of the failure rates of firms likely to participate in GS and firms likely to act as third parties. 

Financial ratio test 

Based on the UIC Program Director’s approval of the financial coverage criteria, an owner or 

operator can submit financial information, including data on the company’s assets, liabilities, 

cash return and depletion, worth, and profit to demonstrate financial responsibility. Pursuant to 

40 CFR 146.85 for the financial ratio test, the financial indicators must be compared and ratios

calculated, as presented in the table below. 

Table 3: List of financial ratios and thresholds specified at 40 CFR 146.85(a)(6)(v)

Type of Ratio Financial Ratios Threshold

Debt-Equity Net Worth

Total Liabilities < 2.0

Assets-Liabilities Current Liabilities

Current Assets

> 1.5

Cash Return

on Liabilities Total Liabilities

(Net Income + Depreciation + Depletion + Amortization) > 0.10

Liquidity Total Assets

(Current Assets – Current Liabilities) > -0.10

Net Profit Net Profit > 0
UIC Program Class VI Financial Responsibility Guidance 17

The ratios must exceed the minimum thresholds presented in the table. For additional details, see 

Chapter 5 “Conditions of Coverage and Specifications for Financial Responsibility 

Demonstrations.” 

Bond rating test 

Based on the UIC Program Director’s approval of the financial coverage criteria, an owner or 

operator can submit the most recent investment grade rating of bonds used to raise capital for the 

initial demonstration of financial responsibility, as well as any information on downgrades of the 

bonds following the initial demonstration. Pursuant to 40 CFR 146.85 the rating submitted must 

be issued by one or both of the nationally recognized bond rating agencies: Standard & Poor’s 

and Moody’s. For an owner or operator to pass the financial test the bond’s rating must be one of 

the four highest categories: AAA, AA, A, or BBB for Standard & Poor’s; or Aaa, Aa, A, or Baa

for Moody’s. The owner or operator should also submit an annual report of its bond rating. 

Corporate guarantee 

In a corporate guarantee financial responsibility demonstration, the financial test is generally met 

by the owner’s or operator’s parent company. If necessary, a corporate subsidiary can submit its 

parent company’s financial statement if the parent offers a corporate guarantee to pay for the 

subsidiary’s financial responsibility activities. The UIC Program Director can allow the 

corporate guarantee if it is issued by a parent corporation that owns at least 50 percent of the 

subsidiary’s voting stock, and has been in business for at least 5 years. For the financial 

responsibility demonstration, EPA expects the parent company to provide a specific written 

guarantee made by a corporate officer authorized to legally bind the parent company that meets 

the self insurance requirements. The written guarantee should explicitly state that the corporation 

will continue to honor the guarantee regardless of any ownership restructuring (e.g., sale of the 

owner or operator as an independent company). Beside the parent company, EPA recommends 

that any other company with a substantial business interest in the owner or operator firm should 

not provide a corporate guarantee. EPA recommends that if a joint-ownership venture is formed 

among multiple firms or owners or operators, the financial responsibility demonstration and 

financial guarantee should be made by one party as the primary parent. 

B. Other qualifying financial instruments 

The UIC Program Director may approve the use of financial instruments other than those 

specifically described in the Rule. Following the UIC Program Director’s determination that the 

instrument is satisfactory, an owner or operator can use these other qualifying instruments to 

demonstrate financial responsibility. For example, a Director may approve the use of captive 

insurance as a qualifying instrument without requiring the respective owner or operator to pass 

the self insurance financial test criteria. 

C. Availability and affordability of financial responsibility instruments

The availability and affordability of qualifying financial responsibility instruments is likely to 

change over time based on industry and market conditions. Along with the general market 
UIC Program Class VI Financial Responsibility Guidance 18

conditions, two main factors may influence the current availability and affordability of financial 

instruments. The first is the number of buyers (i.e., demand from owners or operators) for these 

instruments. If there are relatively few buyers in the market, then the industry can only support a 

limited number of sellers (i.e., firms offering financial instruments). The second is the relative 

amount of data on GS activities. For example, insurance underwriters use these data to calculate 

expected costs of insuring GS activities and for determining the appropriate amount of the 

insurance premium. With limited data, insurance companies may require larger premiums or may 

not offer policies for specific projects. 

While the relative availability and affordability of financial instrument will change overtime, all 

specific qualifying instruments listed under 40 CFR 146.85 have been successfully used for other 

well classes. However, some instruments may not be available for all phases of GS activities. In 

particular, the long-term nature of GS activities may restrict the availability of certain financial 

instruments. For example, insurance companies may not be willing to underwrite policies for the 

entire life of a GS project that must be covered by a demonstration since this period will last for 

a minimum of 50 years. In many cases, insurance companies underwrite policies with maximum 

terms of five to ten years that then can be renewed. Financial institutions may also be hesitant to

issue a surety bond for an owner or operator over longer time periods due to uncertainty over the 

firm’s long-term financial stability. Restrictions on the availability of certain financial 

instruments, however, may lessen as the GS industry grows. 

The market for GS financial responsibility instruments, like all markets, will change over time. 

Due to the nature and scope of GS, including infrastructure and geographic needs, it is likely that 

this market will never be as competitive or robust as, for example, the market for car insurance. 

At the level of owner or operator, however, the availability and affordability of financial 

instruments depends on project- and site- specific risks. If reputable and financially sound 

operators undertake projects at appropriate sites, financial responsibility instruments are likely to 

be both available and affordable. At less appropriate sites, insurance might be more expensive or 

unavailable, which is evidence of a price signal promoting economic efficiency.
UIC Program Class VI Financial Responsibility Guidance 19

4. Matching Financial Instruments to Meet the Specific Needs of a GS Project

This chapter describes the strengths and weaknesses of various financial instruments, including 

recommendations for using the instruments to demonstrate financial responsibility for various 

GS activities. The information provided in this chapter is informed by: the perspectives and 

recommendations of the EPA Office of Inspector General,

5

 the U.S. Government Accountability 

Office,6 and the Environmental Financial Advisory Board;7 comments to the proposed Rule; 

public financial responsibility webcasts held in spring 2009;8

 and publicly available literature, 

including peer-reviewed journal articles and government and non-government reports. 

A. Minimizing costs

The costs that owners or operators will incur to obtain financial assurance will vary by 

instrument type. All independent third-party instruments should require the owner or operator to 

fully pay all up-front costs needed to secure the instrument (e.g., funding the trust, providing 

collateral, etc.). Independent third-party instruments might also require additional periodic 

payments or fees to maintain the instruments. These overhead costs, including legal, opportunity, 

and liability costs, are likely to vary by institution, by amount of coverage, and by the level of 

investment activity for instruments such as trust funds and escrow accounts. The total cost of 

trust funds and escrow accounts will also include the total cost estimate of the GS activity.9

Letters of credit can require cash or hard asset collateral in addition to the premium.

The overhead costs of securing and maintaining self insurance will generally be less than the 

overhead costs of independent third-party instruments. Overhead costs for self insurance include 

the expenses incurred for submitting documentation for financial tests or corporate guarantees 

and for demonstrating continued financial health over time. However, the voluntary use of risk 

management instruments (e.g., captive insurance) by self insurers to manage the financial risk 

associated with financial responsibility activities can increase total overhead costs. Because the 

use of risk management instruments is not required for self insurers, it is possible that some self

insurers will forgo the use of risk management instruments for part or all of the costs estimated 

for financial responsibility activities. 

B. Maximizing instrument benefits

The appropriateness of various financial instruments depends on the characteristics of the 

instruments and the covered GS project activities. Some instruments are better suited for certain 

 

5 EPA OIG. 2005. Continued EPA Leadership Will Support State Needs for Information and Guidance of RCRA 

Financial Assurance (http://www.epa.gov/oig/reports/2005/20050926-2005-P-00026.pdf).

6 U.S. GAO. 2005. Environmental Liabilities (http://www.gao.gov/new.items/d05658.pdf). 7

 Report on Financial Assurance. EFAB. March 2010. (http://www.epa.gov/efinpage/efabpub.htm). 8 EPA. 2009. Webcasts on Financial Responsibility Instruments for Geologic Sequestration (GS) Wells. EPA 815-

D-09-001. (http://water.epa.gov/type/groundwater/uic/class6/gsregulations.cfm). 

9 Because the costs of the activity are directly paid for by trust funds and escrow accounts, or the owner or operator 

is reimbursed, estimated costs are paid (i.e., set aside) up front. However, when demonstrations are made with surety 

bonds and letters of credit, the owner or operator pays the activity costs in addition to overhead costs, and the 

secured financial responsibility instrument is only used in the event that the owner or operator cannot complete the 

activity.
UIC Program Class VI Financial Responsibility Guidance 20

GS activities than others. Therefore, benefits of the instruments can be maximized by effectively 

matching them with specific GS project activities. In general, the GS activities requiring 

financial responsibility demonstrations can be characterized as either relatively well-defined in 

terms of when they will occur and how much they will cost, or uncertain in terms of when (and 

if) they will occur and how much they will cost. The following descriptions characterize GS 

activities in terms of certainty and sequencing.

• Corrective action on wells in the AoR, described at 40 CFR 146.84, presents some 

uncertainty in terms of when it will occur and how much it will cost. It is anticipated that 

if phased corrective action is employed, this corrective action might occur over a period 

of decades. For additional information on AoR, see the guidance document “Geologic 

Sequestration of Carbon Dioxide: Underground Injection Control (UIC) Class VI Well 

Area of Review Evaluation and Corrective Action Guidance for Owners and Operators.”

• Injection well plugging, described at 40 CFR 146.92, is relatively well defined in terms of 

when it will occur and how much it will cost. It is anticipated that injection well plugging 

will take place over a period of weeks, not years. 

• Post-injection site care and site closure, described at 40 CFR 146.93, is relatively well 

defined in terms of when it will occur and how much it will cost. It is anticipated that 

post-injection site care will occur over a period of decades and site closure will occur at 

the UIC Program Director’s approval. 

• Emergency and remedial response activities, described at 40 CFR 146.94, are relatively 

uncertain in terms of when (and if) they will occur and how much they will cost. In 

addition, the period during which emergency and remedial response can occur is the 

longest. 

In addition, owners and operators should recognize that high quality site selection and clear 

identification and analysis of the AoR can improve the quality of GS projects, lower the 

estimated costs for specific GS activities, and help owners or operators identify the most suitable 

financial responsibility instruments specific to the site and activities. For additional information 

on site characterization and on evaluation of the AoR, respectively, see the guidance documents 

“Geologic Sequestration of Carbon Dioxide: Underground Injection Control (UIC) Class VI 

Well Site Characterization Guidance for Owners and Operators” and “Geologic Sequestration of 

Carbon Dioxide: Underground Injection Control (UIC) Class VI Well Area of Review 

Evaluation and Corrective Action Guidance for Owners and Operators.” 

The table below identifies the instruments EPA recommends for GS activities requiring financial 

responsibility demonstrations based on the potential for instrument success or failure, and 

resource implications for owners or operators and UIC Program Directors. These instruments are 

relatively ranked for each GS activity from generally most appropriate to generally least 

appropriate, and the ultimate suitability should take into account factors such as the site 

characteristics and the availability and affordability of the instrument options.
UIC Program Class VI Financial Responsibility Guidance 21

Table 4: Recommended financial responsibility instruments for GS activities (relative ranking)10

Corrective Action Injection Well 

Plugging

Post-injection Site 

Care and Site Closure

Emergency and 

Remedial Response

1. Trust Fund

2. Letter of Credit

3. Surety Bond

4. Escrow Account 

5. Financial Test and 

Corporate 

Guarantee*

6. Insurance

1. Trust Fund

2. Letter of Credit 

3. Surety Bond

4. Insurance

5. Financial Test and 

Corporate 

Guarantee*

6. Escrow Account

1. Trust Fund

2. Insurance

3. Financial Test and 

Corporate 

Guarantee*

4. Surety Bond

5. Escrow Account

6. Letter of Credit

1. Insurance

2. Letter of Credit**

3. Surety Bond**

4. Financial Test and 

Corporate 

Guarantee*

5. Trust Fund

6. Escrow Account

*Financial tests and corporate guarantees present the lowest direct costs to owners or operators, but the highest risk to the public. 

**Letters of credit and surety bonds are likely most appropriate for emergency and remedial response during operation phases.

The relative strengths and weaknesses associated with each instrument are as follows.

• Trust Funds. Trust funds are best suited for corrective action, injection well plugging, and 

post-injection site care and site closure demonstrations because these activities are 

relatively certain in terms of occurrence and cost. A fully funded independent third-party

trust represents the lowest risk to the public of paying for these activities. Although the 

cost of the instrument is essentially the full cost of the activity, generally the owner or 

operator recovers this cost (in the form of reimbursement) following the completion of 

the activity. For activities of uncertain frequency and cost, such as emergency and 

remedial responses, the trust will likely not have the right amount of funds—too little is a 

partial failure of the instrument and too much represents an inefficient use of funds that 

unnecessarily raises GS costs. 

• Letters of Credit. Letters of credit are best suited for corrective action and injection well 

plugging demonstrations because they generally perform equally well for certain and 

uncertain environmental activities, as long as the credit limits are not exceeded. The cost 

to the owner or operator is a function of the credit limit, the financial health of the owner 

or operator, and the risks faced by the owner or operator. For activities that continue over 

the long term (i.e., post-injection site care, site closure, and emergency and remedial 

responses), letters of credit might be unreliable because there are more opportunities for 

the independent third party to cancel the line of credit. Moreover, they have likely been 

used on a limited basis over longer time periods (i.e., greater than 20 years), making their 

long-term reliability uncertain. Therefore, letters of credit might not be effective for postinjection site care and site closure.

• Surety Bonds. Surety bonds are best suited for injection well plugging and are good for 

corrective action demonstrations because they generally perform equally well for certain 

and uncertain environmental activities—as long as the limits of the bond are not 

exceeded. Surety providers might not underwrite bonds over longer time periods where 

there is considerable uncertainty. Hence, surety bonds might not be available for 

 

10 Relative rankings and recommendations are based on “Research and Analysis in Support of UIC Class VI 

Program Financial Responsibility Requirements and Guidance.” 
UIC Program Class VI Financial Responsibility Guidance 22

activities that continue over the long term (i.e., post-injection site care and site closure, 

and emergency and remedial responses). 

• Insurance. Insurance policies are best suited for diversifying environmental risk. 

Insurance is the ideal instrument for handling the numerous possible scenarios associated 

with uncertain events such as emergency and remedial response demonstrations.

However, policies may also be useful for certain events such as injection well plugging, 

post-injection site care and site closure. For these certain activities, effective policies may 

take the form of an annuity, an assurance contract, or may require up-front payment of 

premiums. Policies for certain events may also retain a risk-based factor. For example, 

even though injection well plugging costs are expected, there is some risk as to when 

these costs are expected to occur. For well-defined activities, insurance might be less 

attractive to insurers because there is less diversifiable environmental risk. 

• Escrow Account. Escrow accounts are best suited for corrective action demonstrations 

because they generally have lower set-up costs than trust funds. Funds are kept in a 

highly liquid form (a simple interest-bearing account such as a savings or money market 

account at a bank), which limits risk and administrative costs, but causes escrow accounts 

to generate minimal interest. In the case of GS, where the relative time horizon is 

measured in decades, a trust fund’s investment strategy is likely to outperform an escrow 

account in terms of accrued interest. As a result, an escrow account can generate greater 

costs associated with lost investment income, which suggests little benefit to using an 

escrow account instead of a trust fund. Therefore, escrow accounts are likely to be best 

utilized for the shortest term activities, such as corrective action, or for serving as a 

temporary account. 

• Financial Tests and Corporate Guarantees. Financial tests and corporate guarantees are

useful for all activities. Self insurance is beneficial for owners or operators because it is 

likely to have the lowest overhead cost, but it represents the highest financial risk to the 

public. There is a greater risk of instrument failure for self insurance, particularly in the 

post-injection site care period, because the injection well is no longer in operation and 

profitable (i.e., the site represents an ongoing liability). However, the UIC Program 

Director may consider the added risk to the public worthwhile to facilitate the realization 

of broader anticipated public benefits from GS beyond those considered in the Class VI 

Rule (i.e., climate change mitigation, economic development). 

• Combining Multiple Instruments. The Rule allows flexibility in selecting the instruments 

that are best suited for each activity by allowing the combination of more than one 

instrument to demonstrate financial responsibility. If a combination of instruments is 

used, the sum of the amounts provided by these instruments must be at least equal to the 

current cost estimate for the given GS phase. However, if an owner or operator chooses 

to combine more than one instrument for a specific GS activity (e.g., injection well 

plugging), at least one of these instruments must not be based on financial strength or 

performance (e.g., self insurance or performance bond). EPA recommends that owners 

and operators, as well as UIC Program Directors, thoughtfully evaluate which 
UIC Program Class VI Financial Responsibility Guidance 23

instruments should be combined for specific activities based on the individual 

instruments’ strengths and weaknesses. 

Pay-in period

A fully funded trust fund or escrow account minimizes the risk of instrument failure. While longer pay-in 

periods reduce the up-front financial burden for the owner or operator, longer pay-in periods also increase 

the risk that the instrument will fail if the owner or operator cannot meet its obligations. Under 40 CFR 

146.85(f) the UIC Program Director must approve the use and length of pay-in periods. Utilizing the UIC 

Program Director’s authority, the permit might be revoked if the owner or operator does not meet the payin period schedule agreed upon. 

To minimize risk of instrument failure EPA recommends the use of the shortest pay-in periods possible. 

The UIC Program Director may also determine that a pay-in period is not desirable and that the trust fund 

or escrow account be fully funded at its inception. Third party providers of other instruments may also 

require up-front payment, foregoing pay-in periods for specific activities or GS projects. For example,

many insurance policies may require fully-funded premiums for activities such as emergency and 

remedial response since these activities may have large one-time costs. Owners or operators can reduce 

the financial burden of shorter pay-in periods or up-front payments by obtaining third party financing. 
UIC Program Class VI Financial Responsibility Guidance 24

5. Conditions of Coverage and Specifications for Financial Responsibility 

Demonstrations 

This chapter describes the minimum conditions assuring that financial responsibility 

demonstrations will provide coverage for the complete duration of required GS activities. This 

chapter also provides specifications that owners or operators can consider when choosing a 

qualifying financial responsibility instrument. Both legal requirements and recommendations are 

provided in this chapter. EPA recommends that these conditions of coverage and specifications 

be discussed with the CFO of the owner or operator and with the various providers of financial 

instruments such as banks and surety companies, as appropriate. Sub-headings of letters and 

numbers are used to facilitate references within the chapter.

The owner or operator of each facility must establish financial assurance for each existing and 

new Class VI well under 40 CFR 146.85. When a state or tribe is the UIC Program Director, if 

authorized by applicable law, the surety bond, letter of credit, or escrow account can name a 

state, tribal, or local government as a recipient of funds or a beneficiary and a standby trust is not 

needed. 

Required Coverage Conditions for Instruments

Under 40 CFR 146.85(a), the UIC Program Director must ensure that coverage satisfies Class VI 

Rule requirements. The qualifying financial responsibility instrument(s) must comprise 

conditions of coverage under 40 CFR 146.85(a)(4)(i). Conditions include, at a minimum: 

cancellation provisions, renewal provisions, continuation provisions, specifications on when the 

provider becomes liable following a notice of cancellation (if there is no renewal), and

requirements for the provider to meet a minimum rating, minimum capitalization, and ability to 

pass the bond rating when applicable. The instruments must also specify when the provider 

becomes liable following a notice of cancellation if there is a failure to renew with a new 

qualifying financial instrument.

Cancellation coverage conditions are specified at 40 CFR 146.85(a)(4)(i)(A). To guarantee 

financial responsibility instrument coverage, an owner or operator must provide that their 

financial instrument may not cancel, terminate, or fail to renew except for failure to pay 

instrument overhead costs. If there is a failure to pay the financial instrument, the third party 

financial institution may elect to cancel, terminate, or fail to renew the instrument by sending 

notice by certified mail to the owner or operator and the UIC Program Director. However, the 

cancellation must not be final until 120 days after receipt of cancellation notice. Within the 120 

days, the owner or operator must provide an alternate financial responsibility demonstration 

within 60 days of notice of cancellation, and if an alternate financial responsibility demonstration 

is not acceptable (or possible), any funds from the instrument being cancelled should be released 

within 60 days of notification by the UIC Program Director to complete required GS activities. 

Renewal requirements to ensure coverage are specified at 40 CFR 146.85(a)(4)(i)(B). To 

guarantee financial responsibility instrument coverage, an owner or operator must renew all 

financial instruments, if an instrument expires, for the entire term of the GS project. The 

instrument may be automatically renewed as long as the owner or operator has the option of 
UIC Program Class VI Financial Responsibility Guidance 25

renewal at the face amount of the expiring instrument. Pursuant to 40 CFR 146.85(a)(4)(i)(B), 

the automatic renewal of the instrument must, at a minimum, provide the holder with the option 

of renewal at the face amount of the expiring financial instrument.

Other continuation provisions under 40 CFR 146.85(a)(4)(i)(C) specify that the financial 

instrument(s) will remain in full force and effect so that required GS activities can be completed

in the event that on or before the date of expiration the following circumstances arise: 

• The UIC Program Director deems the facility abandoned; 

• The permit is terminated or revoked or a new permit is denied; 

• Closure is ordered by the UIC Program Director or a U.S. district court or other court of 

competent jurisdiction; 

• The owner or operator is named as debtor in a voluntary or involuntary proceeding under 

Title 11 (Bankruptcy) of the U.S. Code; or 

• The amount due is paid. 

Under 40 CFR 146.85(b)(1), the owner or operator must maintain financial responsibility and 

resources until the UIC Program Director receives and approves the completed Post-Injection 

Site Care and Site Closure Plan, and approves site closure. Prior to the approval of site closure, 

the owner or operator may be released from a financial instrument, under 40 CFR 

146.85(b)(2)(i), if the owner or operator has completed the phase of the GS project for which the 

financial instrument was required and has fulfilled all its financial obligations as determined by 

the UIC Program Director, including obtaining financial responsibility for the next phase of the 

GS project, if required. As specified at 40 CFR 146.85(b)(2)(ii), the owner or operator can cancel 

the financial instrument if the UIC Program Director has given prior written consent to substitute 

alternate financial assurance. 

Sections A through F of this chapter provide required or recommended specifications for 

financial responsibility instruments available for owners or operators to choose from when 

establishing financial assurance.

 

A. Trust fund

1. Required specifications 

(1) Under 40 CFR 146.85(a)(6)(ii), the owner or operator must provide proof that the trustee

either:

(i) has passed financial strength requirements based on credit ratings, or 

(ii) has met a minimum rating, minimum capitalization, and ability to pass the bond 

rating when applicable.
UIC Program Class VI Financial Responsibility Guidance 26

(2) Under 40 CFR 146.85(f), the UIC Program Director must approve the use and length of payin-periods for trust funds. 

2. Recommended specifications 

(3) The owner or operator should submit an originally signed duplicate of the trust agreement to 

the UIC Program Director. EPA recommends that the owner or operator of a Class VI well 

submit the originally signed duplicate of the trust agreement to the UIC Program Director with 

the permit application. The trustee should be an entity that has the authority to act as a trustee 

and whose trust operations are regulated and examined by a federal or state agency.

(4) EPA recommends that the wording of the trust agreement conform to the wording provided 

in Appendix B, and the trust agreement should be accompanied by a formal certification of 

acknowledgment (for an example of a certification of acknowledgement, see Appendix B). 

Schedule A of the trust agreement must be updated within 60 days after a change in the amount 

of the current cost estimate covered by the agreement.

(5) EPA recommends that payments into the trust funds be made annually by the owner or 

operator over a three-year period or over a period determined by the UIC Program Director; this

period is hereafter referred to as the “pay-in period.” The payments into the trust fund could be 

made as follows:

(i) For a new well, EPA requires that the first payment be made before the initial injection of 

carbon dioxide. A receipt from the trustee for this payment should be submitted by the owner 

or operator to the UIC Program Director before the initial injection of carbon dioxide. The 

first payment should be at least equal to the current cost estimate unless a pay-in period has 

been approved by the UIC Program Director, in which case the cost estimate should be 

divided by the number of years in the pay-in period. Subsequent payments should be made 

no later than 30 days after each anniversary date of the first payment. The amount of each 

subsequent payment should be determined by this formula: 

Y

CVCE NextPayment − =

where CE is the current cost estimate, CV is the current value of the trust fund, and Y is the 

number of years remaining in the pay-in period. 

(ii) If an owner or operator establishes a trust fund as specified in Section A: “Trust Fund” of 

this chapter, and the value of that trust fund is less than the current cost estimate when a 

permit is awarded for the injection well, the amount of the current cost estimate still to be 

paid into the trust fund should be paid in full, or over the pay-in period approved by the UIC 

Program Director. Payments should continue to be made no later than 30 days after each 

anniversary date of the first payment. The amount of each payment should be determined by 

this formula:

Y

CVCE NextPayment − =

where CE is the current cost estimate, CV is the current value of the trust fund, and Y is the 

number of years remaining in the pay-in period. 
UIC Program Class VI Financial Responsibility Guidance 27

(6) The owner or operator can deposit the full amount of the current cost estimate at the time the 

fund is established or, if a pay-in period is approved by the UIC Program Director, the owner or 

operator can accelerate payments into the trust fund. However, EPA recommends that the owner 

or operator maintain the value of the fund at no less than the value that the fund would have if 

annual payments were made as specified in paragraph (a)(5) of this Section. 

(7) EPA recommends that if the owner or operator establishes a trust fund after having used one 

or more alternate instruments specified in this chapter, the owner or operator’s first payment 

should be at least equal to the amount that the fund would contain if the trust fund were 

established initially and annual payments had been made. 

(8) EPA recommends that if an owner or operator substitutes other financial assurance as 

specified in this Section for all or part of the trust fund, the owner or operator can submit a 

written request to the UIC Program Director for release of the amount in excess of the current 

cost estimate covered by the trust fund. 

(9) EPA recommends that after completing required GS activities, an owner or operator or any 

other person authorized to perform the activities can request reimbursement for expenditures by 

submitting itemized bills to the UIC Program Director. Within 60 days after receiving bills for 

activities, the UIC Program Director should determine whether the expenditures are in 

accordance with the plan or otherwise justified, and if so, the UIC Program Director should 

instruct the trustee to make reimbursement in the amounts that the UIC Program Director

specifies in writing. If the UIC Program Director determines that the cost of covered GS 

activities will be significantly greater than the value of the trust fund, the UIC Program Director

can withhold reimbursement of such amounts as the UIC Program Director deems prudent until 

the UIC Program Director determines (in accordance with Section J. “Release of the owner or 

operator from the requirements of 40 CFR 146.85”) that the owner or operator is no longer 

required to maintain financial assurance for the GS activity(ies).

(10) The UIC Program Director can agree to termination of the trust when the UIC Program 

Director releases the owner or operator from the recommendations in this Section in accordance 

with Section J. “Release of the owner or operator from the requirements of 40 CFR 146.85.” 

B. Surety bond guaranteeing payment into a trust fund

1. Required specifications 

(1) Under 40 CFR 146.85(a)(6)(ii), the owner or operator must provide proof that the surety

either:

(i) has passed financial strength requirements based on credit ratings, or 

(ii) has met a minimum rating, minimum capitalization, and ability to pass the bond 

rating when applicable.

(2) Under 40 CFR 146.85(a)(6)(iii), the owner or operator must establish a standby trust to 

enable EPA to be party to the financial responsibility agreement without EPA being the 

beneficiary of any funds. 
UIC Program Class VI Financial Responsibility Guidance 28

(3) As specified at 40 CFR 146.85(a)(2), the penal sum of the bond must be an amount at least 

equal to the current cost estimate, except as provided in Section H. “Use of multiple financial 

instruments.” 

2. Recommended specifications 

(4) The owner or operator should submit the surety bond to the UIC Program Director with the 

application for a permit. EPA recommends that the bond be effective before the initial injection 

of carbon dioxide. The issuing surety company should be among those listed as acceptable 

sureties on federal bonds in Circular 570 of the U.S. Department of the Treasury. 

(5) EPA recommends that the wording of the surety bond conform to the wording provided in 

Appendix B. 

(6) EPA recommends that under the terms of the bond, all payments should be deposited by the 

surety directly into the standby trust fund in accordance with instructions from the UIC Program 

Director to fulfill corrective action, injection well plugging, post injection site care and site 

closure, and/or emergency and remedial response obligations. This standby trust fund could meet 

the requirements specified in Section A: “Trust Fund”, except that:

(i) An originally signed duplicate of the standby trust agreement should be submitted to the 

UIC Program Director with the surety bond, and

(ii) Until the standby trust fund is funded pursuant to the requirements of this Section, the 

following are not required: 

(A) Payments into the trust fund as specified in Section A. “Trust Fund”; 

(B) Updating of Schedule A of the trust agreement to show current cost estimates;

(C) Annual valuations as required by the trust agreement; and 

(D) Notices of nonpayment as required by the trust agreement. 

(7) EPA recommends that the bond guarantee that the owner or operator will fund the standby 

trust fund in an amount equal to the penal sum within 15 days after an order to begin is issued by 

the UIC Program Director or a U.S. district court or other court of competent jurisdiction. 

(8) EPA recommends that under the terms of the bond, the surety becomes liable on the bond 

obligation when the owner or operator fails to perform as guaranteed by the bond. 

(9) EPA recommends that under the terms of the bond, the surety can cancel the bond by sending 

notice of cancellation by certified mail to the owner or operator and to the UIC Program 

Director. EPA requires that cancellation not become final for 120 days beginning on the date of 

the receipt of the notice of cancellation by both owner or operator and the UIC Program Director

as evidenced by the returned receipts.
UIC Program Class VI Financial Responsibility Guidance 29

C. Surety bond guaranteeing performance of injection well plugging and abandonment

1. Required specifications 

(1) Under 40 CFR 146.85(a)(6)(ii), the owner or operator must provide proof that the surety

either:

(i) has passed financial strength requirements based on credit ratings, or 

(ii) has met a minimum rating, minimum capitalization, and ability to pass the bond 

rating when applicable.

(2) Under 40 CFR 146.85(a)(6)(iii), the owner or operator must establish a standby trust to 

enable EPA to be party to the financial responsibility agreement without EPA being the 

beneficiary of any funds. 

(3) As specified at 40 CFR 146.85(a)(2), the penal sum of the bond must be in an amount at least 

equal to the current cost estimate, except as provided in Section H. “Use of multiple financial 

instruments.” 

2. Recommended specifications 

(4) The owner or operator should submit the bond to the UIC Program Director. Under 40 CFR 

146.85(a), an owner or operator of a new facility must submit the bond to the UIC Program 

Director with the permit application and the bond should be effective before injection of carbon 

dioxide is started. The surety company issuing the bond should be among those listed as 

acceptable sureties on federal bonds in Circular 570 of the U.S. Department of the Treasury. 

(5) EPA recommends that the wording of the surety bond conform to the wording specified in 

Appendix B of this guidance. 

(6) EPA recommends that under the terms of the bond, all payments will be deposited by the 

surety directly into the standby trust fund in accordance with instructions from the UIC Program 

Director to fulfill corrective action, injection well plugging, post injection site care and site 

closure, and/or emergency and remedial response obligations. The standby trust should meet the 

requirements specified in Section A: “Trust Fund,” except that:

(i) An original signed duplicate of the standby trust agreement should be submitted to the 

UIC Program Director with the surety bond, and

(ii) Until the standby trust fund is funded pursuant to the requirements of this Section, the 

following are not required: 

(A) Payments into the trust fund as specified in Section A. “Trust Fund”; 

(B) Updating of Schedule A of the trust agreement to show current cost estimates;

(C) Annual valuations as required by the trust agreement; and 

(D) Notices of nonpayment as required by the trust agreement. 

(7) EPA recommends that the bond guarantees that the owner or operator will perform in 

accordance with the plan and other requirements of the permit for the injection well whenever 

required to do so. 
UIC Program Class VI Financial Responsibility Guidance 30

(8) EPA recommends that 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. Upon 

notification by the UIC Program Director that the owner or operator has failed to perform as 

guaranteed by the bond, the surety will either: 

(i) perform corrective action, injection well plugging, post injection site care and site closure, 

and/or emergency and remedial response as guaranteed by the bond, or 

(ii) place funds in the amount guaranteed into the standby trust funds for the fulfillment of 

corrective action, injection well plugging, post injection site care and site closure, and/or 

emergency and remedial response obligations.

In circumstances where the UIC Program Director is a state or a tribe, the UIC Program Director

can be party to the bond and receive funds from the surety without a standby trust, if authorized 

by applicable law.

(9) The UIC Program Director can release the owner or operator from the recommendations in 

this Section in accordance with Section J. “Release of the owner or operator from the 

requirements of 40 CFR 146.85.” 

(10) The surety will not be liable for deficiencies in the performance of the owner or operator 

after the UIC Program Director releases the owner or operator from the recommendations in this 

Section in accordance with Section J. “Release of the owner or operator from the requirements of 

40 CFR 146.85.” 

D. Letter of credit

1. Required specifications 

(1) Under 40 CFR 146.85(a)(6)(ii), the owner or operator must provide proof that the issuing 

institution either:

(i) has passed financial strength requirements based on credit ratings, or 

(ii) has met a minimum rating, minimum capitalization, and ability to pass the bond 

rating when applicable.

(2) Under 40 CFR 146.85(a)(6)(iii), the owner or operator must establish a standby trust to 

enable EPA to be party to the financial responsibility agreement without EPA being the 

beneficiary of any funds. 

(3) As specified at 40 CFR 146.85(a)(2), the letter of credit must be issued in an amount at least 

equal to the current cost estimate, except as provided in Section H. “Use of multiple financial 

instruments.” 

2. Recommended specifications 

(4) The owner or operator should submit the letter of credit to the UIC Program Director. EPA 

recommends that an owner or operator of an injection well submit the letter of credit to the UIC 

Program Director during submission of the permit application. The letter of credit must be 
UIC Program Class VI Financial Responsibility Guidance 31

effective before initial injection of carbon dioxide. The issuing institution should be an entity 

which has the authority to issue letters of credit and whose letter-of-credit operations are 

regulated and examined by a federal or state agency.

(5) EPA recommends that the wording of the letter of credit conform to the wording specified in 

Appendix B of this guidance. 

(6) EPA recommends that under the terms of the letter of credit, all amounts paid pursuant to a 

draft by the UIC Program Director should be deposited by the issuing institution directly into the 

standby trust fund in accordance with instructions from the UIC Program Director to fulfill 

corrective action, injection well plugging, post injection site care and site closure, and/or 

emergency and remedial response obligations. This standby trust fund should meet the 

requirements of the trust fund specified in Section A. “Trust Fund,” except that:

(i) An originally signed duplicate of the trust agreement should be submitted to the UIC 

Program Director with the letter of credit; and

(ii) Until the standby trust fund is funded pursuant to the requirements of this Section, the 

following are not required: 

(A) Payments into the trust fund as specified in Section A. “Trust Fund”; 

(B) Updating of Schedule A of the trust agreement to show current cost estimates; 

(C) Annual valuations as required by the trust agreement; and

(D) Notices of nonpayment as required by the trust agreement. 

(7) EPA recommends that the letter of credit be accompanied by a letter from the owner or 

operator referring to the letter of credit by number, issuing institution, and date, and provides the 

following information: the EPA Identification Number, name and address of the facility, and the 

amount of funds assured for the well by the letter of credit. 

(8) EPA recommends that the letter of credit be irrevocable and issued for a period of at least 1 

year. The letter of credit could provide that the expiration date will automatically be extended for 

a period of at least one year unless, at least 120 days before the current expiration date, the 

issuing institution notifies both the owner or operator and the UIC Program Director by certified 

mail of a decision not to extend the expiration date. Under the terms of the letter of credit, the 

120 days will begin on the date when both the owner or operator and the UIC Program Director

have received the notice, as evidenced by the return receipts.

(9) EPA recommends that upon notification by the UIC Program Director that the owner or 

operator has failed to perform as guaranteed by the letter of credit, the issuing institution will 

place funds up to the guaranteed amount into the standby trust funds for the fulfillment of 

corrective action, injection well plugging, post injection site care and site closure, and/or 

emergency and remedial response obligations. In circumstances where the UIC Program Director

is a state or a tribe, the UIC Program Director can draw on the letter of credit, if authorized by 

applicable law.

(10) EPA recommends that if the owner or operator does not establish alternate financial 

assurance as specified in this Section, and obtain written approval of such alternate assurance 

from the UIC Program Director within 60 days after receipt by both the owner or operator and 
UIC Program Class VI Financial Responsibility Guidance 32

the UIC Program Director of a notice from the issuing institution that it has decided not to extend 

the letter of credit beyond the current expiration date, the UIC Program Director should draw on 

the letter of credit. The UIC Program Director might delay the drawing if the issuing institution 

grants an extension of the term of the credit. During the last 30 days of any such extension the 

UIC Program Director can instruct that the letter of credit fund the standby trust if the owner or 

operator has failed to provide alternate financial assurance as specified in this Section and obtain 

written approval of such assurance from the UIC Program Director. 

(11) EPA recommends that the UIC Program Director return the letter of credit to the issuing 

institution for termination when the UIC Program Director releases the owner or operator from 

the recommendations in this Section in accordance with Section J. “Release of the owner or 

operator from the requirements of 40 CFR 146.85.” 

E. Insurance

1. Required specifications 

(1) Under 40 CFR 146.85(a)(6)(ii) the owner or operator must provide proof that the insurer 

either:

(i) has passed financial strength requirements based on credit ratings, or 

(ii) has met a minimum rating, minimum capitalization, and ability to pass the bond 

rating when applicable.

(2) Under 40 CFR 146.85(a)(6)(vii) the owner or operator must demonstrate that the insurer 

issuing the policy is a third party. 

(3) As specified at 40 CFR 146.85(a)(2), the insurance policy must be issued for a face amount at 

least equal to the current estimate, except as provided in Section H. “Use of multiple financial 

instruments.” The term “face amount” means the total amount the insurer is obligated to pay 

under the policy. Actual payments by the insurer will not change the face amount, although the 

insurer’s future liability will be lowered by the amount of the payments. 

2. Recommended specifications 

(4) The owner or operator should submit a certificate of such insurance to the UIC Program 

Director. EPA recommends that an owner or operator of a new injection well submit the 

certificate of insurance to the UIC Program Director with the permit application for approval to 

operate under the permit. The insurance should be effective before injection starts. At a 

minimum, the insurer should be licensed to transact the business of insurance, or eligible to 

provide insurance as an excess or surplus lines insurer, in one or more states. 

(5) EPA recommends the wording of the certificate of insurance conform to the wording 

specified in Appendix B. 

(6) EPA recommends that the insurance policy guarantee that funds will be available whenever 

final covered GS activities occur. The policy should also guarantee that once covered GS 
UIC Program Class VI Financial Responsibility Guidance 33

activities begin, the issuer will be responsible for paying out funds, up to an amount equal to the 

face amount of the policy, upon the notification of the UIC Program Director that the obligations 

have not been fulfilled, to such party or parties as the UIC Program Director specifies.

(7) EPA recommends that after beginning covered GS activities, an owner or operator or any 

other person authorized to perform required GS activities can request reimbursement for 

expenditures by submitting itemized bills to the UIC Program Director. Within 60 days after 

receiving bills for activities, the UIC Program Director should determine whether the 

expenditures are in accordance with the plan or otherwise justified, and, if so, the UIC Program 

Director should instruct the insurer to make reimbursement in such amounts as the UIC Program 

Director specifies in writing. If the UIC Program Director determines that the cost of covered GS 

activities will be significantly greater than the face amount of the policy, the UIC Program 

Director can withhold reimbursement of such amounts as the UIC Program Director deems 

prudent until the UIC Program Director determines, in accordance with Section J. “Release of 

the owner or operator from the requirements of 40 CFR 146.85,” that the owner or operator is no 

longer required to maintain financial assurance for the injection well.

(8) EPA recommends that the owner or operator maintain the policy in full force and effect until 

the UIC Program Director consents to termination of the policy by the owner or operator as 

specified in paragraph (E)(12) of this Section. Upon payment of the premium the owner or 

operator should submit a confirmation of payment to the UIC Program Director on an agreed 

upon schedule. Failure to pay the premium, without substitution of acceptable alternate financial 

assurance as specified in this Section, will warrant such remedy as the UIC Program Director

deems necessary. Such violation will be deemed to begin upon receipt by the UIC Program 

Director of a notice of future cancellation, termination, or failure to renew due to nonpayment of 

the premium, rather than upon the date of expiration. 

(9) EPA recommends that each policy contain provisions allowing assignment to a successor 

owner or operator. Such assignment can be conditional upon consent of the insurer, provided 

such consent is not unreasonably refused. Alternatively, if the third party insurance provider does 

not allow the assignment of policies to a successor owner or operator, the policy may be 

cancelled, in which case the successor should substitute it with a new insurance policy. The 

original owner or operator is responsible until the new owner or operator has demonstrated 

financial responsibility. 

(10) EPA recommends, if there is a failure to pay the premium, that the insurer can elect to 

cancel, terminate, or fail to renew the policy by sending notice by certified mail to the owner or 

operator and the UIC Program Director. 

(11) EPA recommends that the UIC Program Director give written consent to the owner or 

operator that the UIC Program Director can terminate the insurance policy when the UIC 

Program Director releases the owner or operator from the recommendations in this Section in 

accordance with Section J. “Release of the owner or operator from the requirements of 40 CFR 

146.85.” 
UIC Program Class VI Financial Responsibility Guidance 34

F. Escrow account

1. Required specifications 

(1) Under 40 CFR 146.85(a)(6)(iv), the owner or operator must ensure that the escrow account 

segregates funds from other accounts and uses. Funds must be sufficient to cover estimated costs 

for GS financial responsibility activities. 

(2) Under 40 CFR 146.85(f), the UIC Program Director must approve the use and length of payin-periods for trust funds or escrow accounts. 

2. Recommended specifications 

(3) The owner or operator should submit an originally signed duplicate of the escrow agreement 

to the UIC Program Director. EPA recommends that an owner or operator of a Class VI well 

submit the originally signed duplicate of the escrow agreement to the UIC Program Director with 

the permit application. The escrow agent should be an entity which has the authority to act as an 

escrow agent and whose trust operations are regulated and examined by a federal or state agency.

(4) EPA recommends that the wording of the escrow agreement conform to the wording 

specified in Appendix B, and that the escrow agreement be accompanied by a formal 

certification of acknowledgment. The required escrow amount must be updated within 60 days 

after a change in the amount of the current cost estimate covered by the agreement.

(5) EPA recommends that payments into the escrow account be made over a three-year period or 

over a period determined by the UIC Program Director; this period is hereafter referred to as the 

“pay-in period.” The payments into the escrow account should be made as follows: 

(i) For a new well, the first payment is expected to be made before the initial injection of 

carbon dioxide. A receipt from the escrow agent for this payment should be submitted by the 

owner or operator to the UIC Program Director before this initial injection of carbon dioxide. 

The first payment should be at least equal to the current cost estimate, divided by the number 

of years in the pay-in period. Subsequent payments should be made no later than 30 days 

after each anniversary date of the first payment. The amount of each subsequent payment 

should be determined by this formula: 

Y

CVCE NextPayment − =

where CE is the current cost estimate, CV is the current value of the escrow account, and Y is 

the number of years remaining in the pay-in period. 

(ii) If an owner or operator establishes an escrow account and the value of that escrow 

account is less than the current cost estimate when a permit is awarded for the injection well, 

the amount of the current cost estimate still to be paid into the escrow account should be paid 

in over the pay-in period as defined in paragraph (F)(3) of this Section. Payments should 

continue to be made no later than 30 days after each anniversary date of the first payment 

made pursuant to this chapter. The amount of each payment should be determined by this 

formula:
UIC Program Class VI Financial Responsibility Guidance 35

Y

CVCE NextPayment − =

where CE is the current cost estimate, CV is the current value of the escrow account, and Y is 

the number of years remaining in the pay-in period. 

(6) EPA recommends that the owner or operator be authorized to accelerate payments into the 

escrow account or the owner or operator can deposit the full amount of the current cost estimate 

at the time the fund is established. However, the owner or operator should maintain the value of 

the fund at no less than the value that the fund would have if annual payments were made as 

specified in paragraph (F)(3) of this Section. 

(7) EPA recommends that if the owner or operator establishes an escrow account after having 

used one or more alternate instruments specified in this chapter, the owner or operator’s first 

payment should be at least equal to the amount that the fund would contain if the escrow account 

were established initially and annual payments made according to specifications of this 

paragraph. 

(8) EPA recommends that if an owner or operator substitutes other financial assurance as 

specified in this Section for all or part of the escrow account, the owner or operator can submit a 

written request to the UIC Program Director for release of the amount in excess of the current 

cost estimate covered by the escrow account.

(9) After beginning required GS activities, the owner or operator or any other person authorized 

to perform the activity can request reimbursement for expenditures by submitting itemized bills 

to the UIC Program Director. EPA recommends that within 60 days after receiving bills for 

activities, the UIC Program Director determine whether the expenditures are in accordance with 

the plan or otherwise justified, and if so, the UIC Program Director should instruct the escrow 

agent to make reimbursement in such amounts as the UIC Program Director specifies in writing. 

If the UIC Program Director determines that the cost of covered GS activities will be 

significantly greater than the value of the escrow account, the UIC Program Director can

withhold reimbursement of such amounts as the UIC Program Director deems prudent until the 

UIC Program Director determines, in accordance with Section J. “Release of the owner or 

operator from the requirements of 40 CFR 146.85,” that the owner or operator is no longer 

required to maintain financial assurance for the GS activity(ies).

(10) EPA recommends that the UIC Program Director agree to the termination of the escrow 

account when the UIC Program Director releases the owner or operator from the 

recommendations in this Section in accordance with Section J. “Release of the owner or operator 

from the requirements of 40 CFR 146.85.” 
UIC Program Class VI Financial Responsibility Guidance 36

G. Financial test and corporate guarantee

1. Required specifications 

(1) As specified at 40 CFR 146.85(a)(6)(v), an owner or operator can demonstrate financial 

responsibility by passing the financial test as specified in this paragraph. To qualify for this test 

the owner or operator must have: 

(i) Tangible net worth for an amount approved by the UIC Program Director; and

(ii) Net working capital and tangible net worth each at least six times the sum of the current 

cost estimate for all financial responsibility activities; and

(iii) Assets in the United States amounting to at least 90 percent of his total assets or at least 

six times the sum of the current cost estimate.

To pass a financial test, the owner or operator could meet the criteria of either paragraph 

(G)(1)(iv) or (G)(1)(v) of this Section. The UIC Program Director also has the authority to 

require the owner or operator to pass the criteria of both paragraphs. The UIC Program Director

may choose this requirement if the criteria from one paragraph do not provide a satisfactory 

demonstration or if states with primacy set this as an additional requirement.

(iv) The owner or operator must have the following five ratios: A ratio of total liabilities to 

net worth less than 2.0; a ratio of the sum of net income plus depreciation, depletion, and 

amortization to total liabilities greater than 0.1; a ratio of current assets to current liabilities 

greater than 1.5; a ratio of current assets net current liabilities to total assets greater than 

-0.10; and net profit greater than 0. 

(v) The owner or operator must have a current rating for its most recent bond issuance of 

AAA, AA, A or BBB as issued by Standard & Poor's or Aaa, Aa, A, or Baa as issued by 

Moody's. 

(2) The owner or operator must submit a report of its bond rating and financial information 

annually. 

(3) As specified at 40 CFR 146.85(a)(6)(vi), when an owner or operator cannot meet financial 

test criteria, the owner or operator may arrange a corporate guarantee by demonstrating that its 

corporate parent meets the financial test requirements on its behalf. The parent must also 

guarantee to fulfill the obligations for the owner or operator. 

2. Recommended specifications 

(4) EPA recommends that the owner or operator have tangible net worth of at least $100 

million.

11

(5) EPA recommends that the owner or operator submit the following items to the UIC Program 

Director in order to demonstrate compliance with the financial test: 

 

11 The UIC program’s decision to recommend a $100 million TNW threshold is intended to assure that the risk of 

instrument failure when self insurance is used is no greater than the riskiest scenario when third-party instruments 

are used.
UIC Program Class VI Financial Responsibility Guidance 37

(i) A letter signed by the CFO of the owner or operator and worded as specified in Appendix 

B; and

(ii) A copy of the independent certified public accountant's report on examination of the 

owner's or operator's financial statements for the latest completed fiscal year; and

(iii) A special report from the owner's or operator's independent certified public accountant to 

the owner or operator stating that: 

(A) The certified public accountant has compared the data upon which the letter from the 

chief financial officer specifies as having been derived from the independently audited, 

year-end financial statements for the latest fiscal year, with the amounts in such financial 

statements; and

(B) The certified public accountant followed Generally Accepted Accounting Principles 

(GAAP).

(6) EPA recommends that an owner or operator of a new injection well submit the items 

specified in paragraph (G)(5) of this Section to the UIC Program Director within 90 days after 

the close of each preceding fiscal year. This information should consist of all three items 

specified in paragraph (G)(4) of this Section. 

(7) EPA recommends that after the initial submission of items specified in paragraph (G)(5) of 

this Section, if there are significant changes in the owner or operator’s financial condition, 

updated information should be sent to the UIC Program Director within 90 days after it becomes 

available. This information should consist of all three items specified in paragraph (G)(5) of this 

Section. 

(8) EPA recommends that if the owner or operator cannot meet the financial test, the owner or 

operator should send notice to the UIC Program Director of intent to establish alternate financial 

assurance as specified in this Section. Similar to the cancellation of third-party instruments, the 

notice should be sent by certified mail within 10 days after the end of the fiscal year for which 

the year-end financial data show that the owner or operator no longer meets the requirements, or 

within 10 days after becoming aware of no longer meeting the requirements. The owner or 

operator should provide the alternate financial assurance within 60 days after the end of such 

fiscal year, or 60 days after becoming aware of no longer meeting requirements. 

(9) The UIC Program Director can, based on a reasonable belief that the owner or operator may 

no longer meet the financial test, require reports of financial condition at any time from the 

owner or operator in addition to those specified in paragraph (G)(5) of this Section. EPA 

recommends that if the UIC Program Director finds, on the basis of such reports or other 

information, that the owner or operator no longer meets the financial test, the owner or operator 

should provide alternate financial assurance as specified in this Section within 30 days after 

notification of such a finding. 

(10) The UIC Program Director can disallow use of this test based on the findings of the 

independent certified public accountant in his report on examination of the owner's or operator's 

financial statements [see paragraph (G)(5)(ii) of this Section]. An adverse opinion or disclaimer 

of opinion will be cause for disallowance. EPA recommends that the UIC Program Director

evaluate other qualifications on an individual basis. The owner or operator should provide 
UIC Program Class VI Financial Responsibility Guidance 38

alternate financial assurance as specified in this Section within 30 days after notification of the 

disallowance.

(11) Generally, EPA requires that for an owner or operator utilizing a corporate guarantee, the 

guarantor must meet the requirements for owners or operators in paragraphs (G)(1) through 

(G)(3), and should meet the recommendations at (G)(4) through (G)(10) of this Section and 

should comply with the terms of the corporate guarantee. The wording of the corporate guarantee 

should be identical to the wording specified in Appendix B. The corporate guarantee and all 

other items specified in paragraph (G)(5) of this Section should be submitted to the UIC Program 

Director every year. EPA recommends that the terms of the corporate guarantee provide that: 

(i) If the owner or operator fails to perform required GS activities covered by the corporate 

guarantee in accordance with the plan and other permit requirements, the guarantor will 

perform required GS activities or establish a trust fund as specified in Section A: “Trust 

Fund” in the name of the owner or operator. 

(ii) The corporate guarantee will remain in force unless the guarantor sends notice of 

cancellation by certified mail to the owner or operator and the UIC Program Director, as 

evidenced by the return receipts. Cancellation should not occur, however, during the 120 

days beginning on the date of receipt of the notice of cancellation by both the owner or 

operator and the UIC Program Director, as evidenced by the return receipts.

(iii) If the owner or operator fails to provide alternate financial assurance as specified in this 

Section and obtain the written approval of such alternate assurance from the UIC Program 

Director within 90 days after receipt by both the owner or operator and the UIC Program 

Director of a notice of cancellation of the corporate guarantee from the guarantor, the 

guarantor will provide such alternative financial assurance in the name of the owner or 

operator. 

H. Use of multiple financial instruments

EPA recommends that, at the UIC Program Director’s approval, an owner or operator can satisfy 

the recommendations in this Section by establishing more than one financial instrument per 

injection well. As described at 40 CFR 146.85(a)(6)(i), in the event that the owner or operator 

combines more than one instrument for a specific GS phase (e.g., injection well plugging), such 

combination must be limited to instruments that are not based on financial strength or 

performance (i.e., self insurance or performance bond). Therefore, qualifying instruments 

specified in the Preamble of the Rule are trust funds, surety bonds guaranteeing payment into a 

trust fund, letters of credit, insurance, and escrow accounts. EPA recommends that the 

instruments be as specified in Sections (A), (B), (D), (E) and (F), of this Section, except that it is 

the combination of instruments, rather than the single instrument, which should provide financial 

assurance for an amount at least equal to the adjusted cost. Because they guarantee performance 

instead of payment, self insurance and performance surety bonds cannot be combined with other 

instruments for the purposes of the financial responsibility demonstration. If an owner or 

operator uses a trust fund in combination with a surety bond or letter of credit, the UIC Program 

Director might use that trust fund as the standby trust fund for the other instruments. However, in 

this case, the trust would have to specify that money can be passed through to complete the 

activity covered by the surety bond or letter of credit. A single standby trust can be established 

for two or more instruments. The UIC Program Director can invoke any or all of the instruments 
UIC Program Class VI Financial Responsibility Guidance 39

to provide for the completion of required GS activities. In this case, it is the combination of 

instruments, rather than the single instrument, which must provide financial responsibility for an 

amount at least equal to the current cost estimate.

An owner or operator can also satisfy the recommendations in this Section by establishing more 

than one financial instrument per injection well by specifying the GS activity(ies) covered by the 

instrument.

I. Use of a financial instrument for multiple facilities

Generally, an owner or operator can use a specified financial responsibility instrument for more 

than one injection well. EPA recommends that evidence of financial responsibility submitted to 

the UIC Program Director include a list showing, for each injection well, the EPA Identification 

Number, name, address, and the amount of funds assured by the instrument. If the injection wells 

covered by the instrument are in more than one state or EPA Region, EPA recommends that 

identical evidence of financial responsibility be submitted to and maintained with the UIC 

Program Directors of all such states or Regions. The amount of funds available through the 

instrument should be no less than the sum of funds that would be available if a separate 

instrument had been established and maintained for each injection well. In directing funds 

available through the instrument for any of the injection wells covered by the instrument, the 

UIC Program Director should direct only the amount of funds designated for that injection well, 

and if the designated funds are insufficient, the UIC Program Director can request that the owner 

or operator increase the amount of financial assurance. 

J. Release of the owner or operator from the requirements of 40 CFR 146.85

As specified under 40 CFR 146.85(b)(1), the owner or operator must maintain financial 

responsibility until the UIC Program Director approves the completed Post-Injection Site Care 

and Site Closure Plan and approves site closure. The owner or operator must submit 

certifications to the UIC Program Director that all GS activities have been completed in 

accordance with the Post-Injection Site Care and Site Closure Plan. The owner or operator may 

request to be released from a financial instrument after the UIC Program Director approves a 

replacement instrument or after completion of the specific phase of the GS project for which the 

instrument was required. The UIC Program Director may release the owner or operator from a 

financial instrument for a completed phase of the GS project only after the owner or operator 

fulfills all its financial obligations as determined by the UIC Program Director. The UIC 

Program Director must determine whether the GS activities have been completed in accordance 

with applicable regulations. This determination may be supported by a professional engineer’s 

report. Upon making this determination and within 60 days after receiving the necessary 

certifications, EPA recommends that the UIC Program Director notify the owner or operator that 

the instrument is no longer required for the completed phase of the GS project or for the closed 

injection well. 
UIC Program Class VI Financial Responsibility Guidance 40

6. Submission Requirements

This chapter describes methods of submission that owners and operators can use at the time of 

the initial financial responsibility demonstration, when the owner or operator, under 40 CFR 

146.85, must submit (1) a cost estimate and (2) documented proof of an independent third-party

instrument or of self insurance.

A. Cost estimate

To demonstrate financial responsibility according to 40 CFR 146.85, the owner or operator must 

submit a detailed written estimate, at the time of permit application and in current dollars, of the 

cost of performing corrective action on wells in the area of review, plugging the injection 

well(s), post-injection site care and site closure, and emergency and remedial response. The cost 

estimate determines the submission requirements for the financial responsibility instrument(s). 

The cost estimate represents the total approved likely liability for GS activities. The cost estimate

for required GS activities is based on the actual costs of contracting an independent third party to 

conduct the activities and all related costs. Instructions on how to determine total injection well 

plugging liability are in Appendix C “Methodology for Estimating Costs for Financial 

Responsibility Determinations for Class VI Wells.”12 

The Rule requires (at 40 CFR 146.85(a)(2)) that the qualifying financial responsibility 

instrument(s) be sufficient to cover the cost of: 

• Corrective action (that meets the requirements of 40 CFR 146.84); 

• Injection well plugging (that meets the requirements of 40 CFR 146.92); 

• Post-injection site care and site closure (that meets the requirements of 40 CFR 146.93); 

and 

• Emergency and remedial response (that meets the requirements of 40 CFR 146.94). 

The Rule also requires (at 40 CFR 146.85(a)(3)) that the financial responsibility instrument(s) be 

sufficient to address endangerment of USDWs; thus, the cost estimate must include costs 

associated with remediation activities. 

Specifically, at 40 CFR 146.85(c)(1) the Rule requires that the cost estimate must be based on 

the cost of hiring an independent third party who is neither a parent nor a subsidiary of the owner 

or operator to perform the required activities. The UIC Program Director may evaluate whether 

the cost estimation should come from an independent third party or from the owner or operator. 

 

12 Sources used in the development of the cost estimation methodology include government reports, peer-reviewed 

literature, industry reports, and the best professional judgment of EPA and expert reviewers.
UIC Program Class VI Financial Responsibility Guidance 41

B. Documented proof of an independent third-party instrument or self insurance

The Rule requires, at 40 CFR 146.85(a)(1), that the owner or operator demonstrate and maintain 

financial responsibility. The qualifying instruments for this demonstration include, but are not 

limited to, those introduced in Chapter 3 “Introduction to Qualifying Financial Responsibility 

Instruments.” 

The Rule requires, at 40 CFR 146.85(a)(4), that the qualifying financial responsibility 

instrument(s) comprise protective conditions of coverage. See Chapter 5 “Conditions of 

Coverage and Specifications for Financial Responsibility Demonstrations” for additional details 

on conditions of coverage for financial responsibility instruments. 

Under 40 CFR 146.85(a), the choice of instrument(s) must be submitted to the UIC Program 

Director for review. This submission can be made electronically using the forms in Appendix B 

“Recommended Financial Responsibility Instrument Language for Class VI Wells 

(Forms/Templates).” Original hard copies of finalized agreements must be delivered to the UIC 

Program Director with the permit application. 

1. Submissions using independent third-party instrument 

For submissions using trust funds, standby trusts, surety bonds, letters of credit, insurance, 

escrow accounts or other third-party instruments satisfactory to the UIC Program Director, EPA 

recommends that a signed original copy of the agreement be delivered to the UIC Program 

Director. For insurance, EPA recommends that, in addition to the certificate of insurance, the 

insurance policy be submitted to the UIC Program Director. 

Under 40 CFR 146.85(a)(6)(ii), EPA requires that the owner or operator submit proof of the third 

party’s financial strength. EPA recommends that the owner or operator submit the third party’s 

credit rating or, if the Director determines that the credit rating alone does not sufficiently meet 

the financial strength requirement, submit the third party’s credit rating plus its most recent bond 

rating and calculated financial ratios. EPA recommends that owners or operators demonstrate 

that third party providers have a credit rating in the top four categories from either Standard & 

Poor’s or Moody’s (i.e., AAA, AA, A, or BBB for Standard & Poor’s and Aaa, Aa, A, or Baa for 

Moody’s) or from any Nationally Recognized Statistical Rating Organization (NRSRO) as long 

as the owner or operator can demonstrate the equivalency of this rating with the recommended 

ratings. If required by the UIC Program Director, EPA recommends that the third party meet the

minimum capitalization criteria for all ratios presented in Table 3 (see Chapter 3 “Introduction to 

Qualifying Financial Responsibility Instruments”) and a bond rating in the top four categories 

from either Standard & Poor’s or Moody’s (i.e., AAA, AA, A, or BBB for Standard & Poor’s 

and Aaa, Aa, A, or Baa for Moody’s) or an equivalent rating from another NRSRO. 

2. Submissions using self insurance 

EPA recommends that, for submissions using self insurance, the owner or operator’s CFO send 

the UIC Program Director a letter that shows the owner or operator, or the company offering the 

corporate guarantee, passes the financial test.
UIC Program Class VI Financial Responsibility Guidance 42

EPA recommends that the owner or operator should ensure that the information in the CFO’s 

letter is accurate. This can be done by providing a full auditor’s opinion from an independent 

certified public accounting firm that attests to the accuracy of the financial data used in the letter.

Additional information that might be submitted includes: 

 

• A copy of the 10-K report, which is submitted annually to the SEC, and 

• A Federal Energy Regulatory Commission (FERC) Form 2 report. 

SEC 10-K reports and FERC Form 2 reports are based on full-scale audits. Consequently, EPA 

considers them equivalent to an auditor's opinion. EPA recommends that submitted statements 

should be equivalent to these example statements. 

Although there are many types of auditors’ analyses of financial data, the UIC Program Director

will accept only an auditor’s full opinion as confirmation of the accuracy of financial information 

showing that a company passes this test and specifying any qualifications that the UIC Program 

Director can use to determine the adequacy of the audit. 
UIC Program Class VI Financial Responsibility Guidance 43

7. UIC Program Director’s Review

This chapter describes factors that EPA recommends as considerations for the UIC Program 

Director when determining the completeness and adequacy of an owner’s or operator’s financial 

responsibility demonstration. 

The UIC Program Director has the authority under 40 CFR 146.85 to approve the use of 

financial responsibility instruments that address the costs and risks (e.g., endangerment of 

USDWs) associated with the GS activities. The UIC Program Director also has the authority to 

reject financial instruments determined to be insufficient if they are:

• Not a qualifying instrument;

• Not sufficient to cover the required costs (e.g. properly plugging and monitoring wells); 

• Not sufficient to address endangerment of USDWs; and 

• Not sufficiently meeting the required conditions of coverage that facilitate enforceability 

and prevent gaps in coverage through site closure. 

This chapter also describes the minimum federal requirements for Class VI wells and focuses on 

stages in the process where the UIC Program Director needs to make a decision or grant an 

approval or where UIC Program Director’s evaluation is authorized. 

A. Determining the completeness and accuracy of the demonstration

The UIC Program Director is charged with assessing 

and confirming the completeness and accuracy of the 

owner’s or operator’s financial responsibility 

demonstration. For details on what constitutes a 

complete demonstration, see Chapter 6 “Submission 

Requirements.” Since financial conditions for 

independent third party firms and GS owners or 

operators are highly variable, it is important that the 

UIC Program Director determine the completeness and 

accuracy of the demonstration annually, as required by 

the Rule at 40 CFR 146.85(a)(5)(i). When determining 

whether the demonstration is complete and accurate, it 

is recommended that the UIC Program Director

evaluate the financial instrument agreement; the 

language of the agreement should conform to the example forms provided in Appendix B of this 

guidance. If the UIC Program Director identifies differences between the examples provided, the 

Rule at 40 CFR 146.85, and the owner’s or operator’s submission, it is recommended that the 

UIC Program Director ensure that the owner or operator sufficiently explain the reasons for those 

differences.

Note on Insurance Policies

When an owner or operator uses 

insurance to demonstrate financial 

responsibility, the UIC Program 

Director should review the entire 

insurance policy, not just the 

Certificate of Insurance (included in 

Appendix B). The policy should 

contain a general statement that it 

conforms in all respects with the 

requirements for financial 

responsibility specified at 40 CFR 

146.85.
UIC Program Class VI Financial Responsibility Guidance 44

B.

 

Financial stability of the independent third party

The UIC Program Director’s review must include an evaluation of the financial and operational 

stability of the independent third party provider to minimize the risk on instrument failure. As 

specified at 40 CFR 146.85(a)(6)(ii), when using a third party to demonstrate financial 

responsibility, the owner or operator must provide proof that the third party provider either (1) 

has passed financial strength requirements based on credit ratings, or (2) has met a minimum 

rating, capitalization, and bond ratings when applicable. 

In all cases, third party providers must meet the credit rating requirement at 40 CFR 

146.85(a)(6)(ii). In many cases, this will be sufficient evidence of third party financial strength 

for the UIC Program Director. However, if the UIC Program Director has concerns about the 

third party provider or its credit rating, the UIC Program Director may request additional 

information to satisfy the requirements of part (2) of 40 CFR 146.85(a)(6)(ii). EPA interprets the 

minimum rating in part (2) to mean the minimum credit rating. 

In the review of third party financial strength EPA recommends that the UIC Program Director

use the following financial metrics: 

• Credit rating evaluation. EPA recommends that owners or operators demonstrate that 

third party providers have a credit rating in the top four categories from either Standard & 

Poor’s or Moody’s (i.e., AAA, AA, A, or BBB for Standard & Poor’s and Aaa, Aa, A, or 

Baa for Moody’s), consistent with the bond requirement for self insurance. However, 

EPA acknowledges that greater flexibility can be used for third party credit ratings. 

Therefore, the owner or operator may alternately submit a comparable rating from any 

NRSRO as long as the owner or operator can demonstrate the equivalency of this rating 

with the recommended ratings to the UIC Program Director’s request. Credit ratings for 

financial service providers are reviewed regularly by a credit rating agency and are 

typically available to the public. The UIC Program Director should be aware that the 

rationale for the rating might not be readily or publicly available.

• Minimum capitalization evaluation. EPA recommends that the owner or operator solicit 

calculations of the Debt-Equity, Assets-Liabilities, Cash Return on Liabilities, Liquidity, 

and Net Profit financial ratios presented in Table 3 (see Chapter 3 “Introduction to 

Qualifying Financial Responsibility Instruments”) from the third party and submit the 

calculated thresholds to the UIC Program Director for review. The calculated thresholds

should exceed the thresholds presented in Table 3 to demonstrate minimum 

capitalization.
UIC Program Class VI Financial Responsibility Guidance 45

• Bond rating evaluation. EPA recommends that when bond ratings are available,13 owners 

or operators demonstrate that third party providers have a bond rating in the top four 

categories from either Standard & Poor’s or Moody’s, consistent with the requirement for 

self insurance, or an equivalent rating from another NRSRO as proven by the owner or 

operator. 

The UIC Program Director may also consider financial evaluations conducted by a state or 

federal regulator. For example, the U.S. Department of the Treasury’s Department Circular No. 

570 can be useful for evaluating the strength of surety bond providers. The Treasury Department 

reviews the sureties and publishes the list of approved companies annually. Alternatively, an 

independent third party’s standing can be inferred by the number (and frequency) of enforcement 

actions taken by a financial regulator.

C. Additional considerations for understanding/approving the demonstration 

The purpose of the UIC Program Director’s review of the financial responsibility demonstration 

is to evaluate and determine the suitability of the specific financial responsibility instrument. 

Some additional considerations for understanding and approving demonstrations include: 

• Review and oversight time and risk. The review of financial responsibility demonstration 

will take time, regardless of which instrument is used by the owner or operator. The UIC 

Program Director might want to consider the long-term regulatory risk and oversight role 

the selected instrument(s) imply, as shown in Table 5. If available, the owner or operator 

can submit any independent third party evaluations of risk to the UIC Program Director, 

especially if insurance is used.

Table 5: Regulatory risk and oversight and enforcement needed

Financial Instrument Relative Financial Risk 

to the Government*

Oversight and Enforcement 

Effort Needed*

Trust Fund Low Medium Low

Letter of Credit Low Low

Surety Bond Medium Low Medium Low

Insurance Medium Medium

Financial Test and Corporate Guarantee High High

Escrow Account Low Medium Low

* Except for information on escrow accounts, relative rankings are based on U.S. Government Accountability Office. 2005. 

Environmental Liabilities (http://www.gao.gov/new.items/d05658.pdf) and EPA Office of Inspector General. 2005. Continued EPA 

Leadership Will Support State Needs for Information and Guidance of RCRA Financial Assurance 

(http://www.epa.gov/oig/reports/2005/20050926-2005-P-00026.pdf).

 

13 EPA recognizes that third party providers may not issue bonds. However, when they are available they are 

preferred to the third party’s credit rating. EPA understands that a credit rating represents a rating agency's opinion 

as to the relative creditworthiness of a company. The rating predicts the probability that a company will make 

promised payments on its obligations, based on a credit analysis that takes into account various objective (e.g., the 

company's historical default rate) and subjective (e.g., quality of management) factors. A company's "long term 

rating" represents a rating agency's opinion of the company's general ability to repay its senior unsecured debt 

obligations. When a company issues a more senior (e.g., senior secured) or junior (e.g., subordinated) class of bonds, 

the "bond rating" on this particular class of bonds would be the result of notching up or down, as applicable, from its 

long term (e.g., senior unsecured) rating and therefore provide a more up to date view of the third party’s credit.
UIC Program Class VI Financial Responsibility Guidance 46

• Pay-in period risk. Under 40 CFR 146.85 the UIC Program Director must approve the 

use and length of pay-in periods. Generally, it is recommended that the pay-in period for 

a trust fund or escrow account be economically feasible for the owner or operator while 

maintaining the lowest possible risk. Keeping this in mind, the UIC Program Director

should encourage the shortest pay-in period possible, noting that the owner or operator 

may be able to obtain third party financing to reduce the financial burden of a shorter 

pay-in period. In some cases, the UIC Program Director will find that a pay-in period is 

not appropriate and require that the trust fund or escrow account be fully funded up front. 

When determining the length of the pay-in period, the UIC Program Director may 

consider, among other things, the risk that the owner or operator may incur financial 

difficulty prior to fully funding the trust. Factors that the UIC Program Director may 

consider include the owner or operator’s recent financial stability, profitability, and nongeologic sequestration business operations that can impact geologic sequestration 

activities.

• Risk from self insurance. Self insurance poses the highest risk to the public, and it is 

recommended that the UIC Program Director thoroughly examine proposals that use a 

financial test or corporate guarantee for self insurance. If an owner or operator selects self

insurance, EPA recommends that the UIC Program Director’s review evaluate whether 

the higher risk of instrument failure inherent with self insurance is in the public interest. 

After an extensive review of the financial standing of an owner or operator, the UIC 

Program Director might wish to consider other factors, including the owner’s or 

operator’s history of fulfilling financial responsibility activities to determine whether self

insurance is appropriate as a financial responsibility instrument. The UIC Program 

Director’s evaluation of the level of acceptable financial risk can require a high level of 

financial expertise. The UIC Program Director might choose to evaluate the stability of 

the owner or operator and accept demonstrations only when the risk to the public of 

owner or operator failure is sufficiently low. EPA recommends that the UIC Program 

Director not accept self insurance as a financial responsibility instrument for postinjection site care and closure because it generally cannot ensure that resources will be 

available over the long term. There is a greater risk of instrument failure for self 

insurance in the post-injection site care period because the injection well is no longer in 

operation and profitable (i.e., the site represents an ongoing liability). While the 

requirement for annual reviews of financial responsibility demonstrations mitigates some 

risk of instrument failure, substituting a new instrument for a failed self insurance 

demonstration during this period may be difficult or impossible.

• Notification of adverse financial conditions. Under 40 CFR 146.85(d), the UIC Program 

Director must ensure that the timeframe for notification of adverse financial conditions 

(e.g., bankruptcy or the suspension or revocation of a trustee) specified in the financial 

instrument meets the Class VI Rule requirements. Specifically, the Rule requires that the 

owner or operator: 

o In the event of bankruptcy, notify the UIC Program Director within 10 days after 

commencement of the proceeding (40 CFR 146.85(d)(1)). 
UIC Program Class VI Financial Responsibility Guidance 47

o In cases where a guarantor of a corporate guarantee is named as debtor, make the 

notification under the terms of the corporate guarantee (40 CFR 146.85(d)(2)). 

o Establish other financial assurance or liability coverage within 60 days after such 

an event (40 CFR 146.85(d)(3)). 

Upon being notified of any adverse financial conditions or change in bond rating, EPA 

expects the UIC Program Director to initiate discussions with the owner or operator to 

resolve the problem or other type of discourse (e.g., by conducting another financial 

demonstration). 

 

D. Requesting additional information from the owner or operator 

The Rule states, at 40 CFR 146.82(a), that the UIC Program Director shall consider, among other 

things, the financial responsibility demonstration and any other information requested by the 

UIC Program Director before issuing a Class VI permit. 

Instances in which the UIC Program Director might request additional information from the 

owner or operator include, but are not limited to, the following: 

• When, during the annual evaluation of the qualifying financial responsibility instrument, 

the UIC Program Director determines that the original demonstration is no longer 

adequate to cover the cost of corrective action, injection well plugging, post-injection site 

care and site closure, or emergency and remedial response, 

• Clarification or proof is needed to ensure that the cost estimate reflects third party costs,

• The owner or operator declares bankruptcy, 

• A revised cost estimate is greater than the face amount of a financial instrument currently 

in use, or 

• A revised cost estimate decreases the expected costs, and the owner or operator wishes to 

withdraw funds or decrease the coverage in its policy. 

EPA recommends that additional information be requested when the UIC Program Director 

determines that an owner or operator has not provided sufficient information in its financial 

responsibility demonstration to meet the requirements of the Rule (40 CFR 146.85(a)(5)). 

E. UIC Program Director’s evaluation and approval

All aspects of the financial responsibility demonstration required under 40 CFR 146.85 are 

subject to the UIC Program Director’s evaluation and approval. The Rule states, at 40 CFR 

146.82(a), that the UIC Program Director shall consider, among other things, the financial 

responsibility demonstration and any other information requested by the UIC Program Director

before issuing a Class VI permit. Additionally, it states that the financial responsibility 
UIC Program Class VI Financial Responsibility Guidance 48

demonstration must be satisfactory to the UIC Program Director. The UIC Program Director can

find that the financial responsibility demonstration is unsatisfactory for any reason, as long as 

that reason is not arbitrary or capricious. EPA expects the UIC Program Director to exercise this 

authority in particular to negotiate a satisfactory financial responsibility demonstration or to deny 

a demonstration with regard to the pay-in periods or the financial tests. 

F. Evaluating the demonstration’s success

The UIC Program Director’s goal in reviewing a financial responsibility demonstration is to 

ensure adequacy of the instrument on protecting USDWs by minimizing the potential risk of 

instrument failure and the potential costs to the public. A successful financial responsibility 

demonstration will likely establish instruments that are aimed to protect USDWs and that 

guarantee the owner or operator will pay if coverage is needed for financial responsibility 

activities and ensure that no costs for GS projects will be passed on to the public. 

G. Importance of stakeholder involvement

The Class VI Rule adopts the existing public participation requirements under the SDWA, at 40 

CFR Part 25, and existing permitting procedures under the UIC Program, at 40 CFR Part 124. 

These requirements discuss: 1) providing public notice to interested parties of pending actions 

via newspaper advertisements, radio, mailings, or e-mails; 2) holding public hearings, soliciting 

and responding to public comment; and 3) involving a broad range of stakeholders. The Rule 

also requires, at 40 CFR 124.10(c)(1)(xi), that the UIC Program Director provide public notice of 

Class VI permitting activities to state and local oil and gas regulatory agencies, state agencies 

regulating mineral exploration and recovery, the UIC Program Director of the Public Water 

System Supervision (PWSS) program in the state, and all other agencies that may have 

jurisdiction over injection activities within the state.

While regulations only require the UIC Program Director to complete these activities after 

issuing a draft permit, EPA recommends that the UIC Program Director begin stakeholder 

outreach as early in the permitting process as possible, preferably beginning it shortly after 

receiving the permit application. By beginning outreach before a draft permit has been issued, 

both the UIC Program Director and the owner or operator have more flexibility to adapt and 

change the prospective permit based on stakeholder concerns. Earlier stakeholder outreach, 

including information about the proposed financial responsibility demonstration, gives 

community members more time to work with their state and local governments and address 

concerns that fall outside the scope of EPA permit decisions. Earlier stakeholder outreach has 

been shown to better address stakeholder concerns, mitigate controversial issues, and avoid 

litigation and project delays. Additionally, states with primacy may require earlier outreach and 

may establish additional requirements for protecting public interest.14

 

14 Deep Injection Wells: EPA Needs to Involve Communities Earlier and Ensure That Financial Assurance

Requirements Are Adequate. United States General Accounting Office (GAO) report. June 2003. 

http://www.gao.gov/new.items/d03761.pdf
UIC Program Class VI Financial Responsibility Guidance 49

8. Ongoing Responsibilities

This chapter describes the ongoing submission and review requirements under the Rule at 40 

CFR 146.85 that GS owners or operators and UIC Program Directors are required to follow. 

Subsequent to the initial financial responsibility demonstration, the UIC Program Director can 

request the owner or operator to (1) submit revisions to the cost estimate, and (2) document the 

use of an independent third-party instrument or self insurance. The financial instrument(s) used 

to fulfill a financial demonstration might require adjustments based on any updates to the cost 

estimate, including regular updates resulting from inflation. EPA recommends using indices or 

inflation factors related to GS activities rather than those related to consumer goods or other 

unrelated industries. 

Under 40 CFR 146.85(b), the owner or operator must submit information to be released from 

financial responsibility requirements. Only the UIC Program Director can release or retire the 

owner or operator from their financial responsibility obligations. For third-party instruments, if 

the owner or operator fails to complete the required activities and the UIC Program Director

subsequently calls on the instrument to cover the environmental liability, the instrument will be 

retired after the activity has been completed. In the case of owner or operator failure when self

insurance has been used, the UIC Program Director does not have the option to draw upon a 

third-party instrument, resulting in instrument failure. 

A. Owner or operator responsibilities

As specified at 40 CFR 146.85(c), following the initial demonstration, owners or operators are 

required to revisit their original cost estimate and revise their financial responsibility 

demonstration to reflect the most up-to-date information for their financial instrument(s) or self

insurance demonstration. Under 40 CFR 146.85(c), cost estimates must be updated: 

• On an annual basis for inflation, within 60 days of the anniversary of the financial 

instrument’s establishment, and

• Following any amendments to the Area of Review and Corrective Action Plan, the 

Injection Well Plugging Plan, the Post-Injection Site Care and Site Closure Plan, or the 

Emergency and Remedial Response Plan. 

Under 40 CFR 146.85(c) the UIC Program Director must approve the revised cost estimate 

subsequent to each revision. If the cost estimate decreases in value, the UIC Program Director

must approve any decreases in the value of the financial responsibility instrument(s). If the cost 

estimate increases in value, the owner or operator must appropriately increase the face value of 

the instrument(s).

Pursuant to 40 CFR 146.85(b), the owner or operator must maintain financial responsibility and 

resources until the UIC Program Director receives and approves the completed Post-Injection 

Site Care and Site Closure Plan, and approves site closure. To be released from a financial 

instrument, the owner or operator must have completed all required GS activities for the specific 
UIC Program Class VI Financial Responsibility Guidance 50

phase or the entire life of the GS project and must have fulfilled all its financial obligations as 

determined by the UIC Program Director. Otherwise, the owner or operator is required to submit 

a replacement financial instrument and receive written approval from the UIC Program Director

that accepts the new financial instrument and releases the owner or operator from the previous 

financial instrument. The Rule requires that owners or operators obtain financial instruments 

with agreements that do not allow the financial institution to cancel, terminate or fail to renew 

the instrument—unless the owner or operator fails to pay for the financial instrument. 

The Rule also requires, at 40 CFR 146.85(d), that the owner or operator notify the UIC Program 

Director in the event of financial distress that would prevent it from fulfilling its financial 

responsibility activities and no later than 10 days after filing for bankruptcy. This requirement 

helps mitigate instrument failure in the event of operator bankruptcy or well abandonment and 

helps avoid a gap in coverage. This timeframe is consistent with the current U.S. Bankruptcy 

Code. Additionally, EPA requires that the owner or operator provide notification to the UIC 

Program Director of the cancellation or change of a qualifying instrument. 

Table 6 provides a general timeline for owner or operator actions. EPA recommends that the 

owner or operator contact their permitting Director for further information or clarification. 

Table 6: Timeline for owner or operator actions

Event 10 Days 30 Days 60 Days 70 Days 90 Days 120 Days

Cancellation of 

Instrument

Owner or operator must provide 

alternative instrument within 60 days. 

If alternate demonstration is not 

acceptable or possible, Director must 

draw on funds from the instrument 

being cancelled within 60 days. 

Change in Cost 

Estimate: 

- Annual Review

- Amendments to AoR 

and Corrective Action 

Plan, Injection Well 

Plugging Plan, PostInjection Site Care and 

Closure Plan, and 

Emergency and 

Remedial Response 

Plan

Owner or operator must annually 

provide an adjustment for inflation to 

the UIC Program Director within 60 

days prior to the anniversary date of 

the establishment of the instrument. 

The owner or operator must provide 

an adjustment within 60 days of any 

amendments to the AoR and 

Corrective Action Plan, Injection Well 

Plugging Plan, Post-Injection Site 

Care and Closure Plan, and 

Emergency and Remedial Response 

Plan. 

If the current cost estimate increases 

to an amount greater than the face 

amount of the financial instrument in 

use, the owner or operator must 

submit evidence, within 60 days, 

that:

- The face amount of the 

instrument was increased to at 

least equal to the current cost 

estimate, or

- Another instrument was obtained 

to cover the cost of the increase.

Bankruptcy of Owner or 

Operator

Owner or operator must notify the UIC Program 

Director within 10 days of a voluntary or 

involuntary proceeding (for the owner or operator 

or third party provider) under Title 11 (Bankruptcy), 

U.S. Code. 

If the third party provider files for bankruptcy, the 

owner or operator must establish other financial 

assurance or liability coverage within 60 days. 
UIC Program Class VI Financial Responsibility Guidance 51

B. UIC Program Director responsibilities

The UIC Program Director’s goal is to ensure adequacy of the instrument on protecting USDWs 

and to reduce or eliminate risks to the public that financial responsibility activities will not be 

completed and to reduce or eliminate the burden associated with recovering expenses from 

owners, operators or independent third party institutions in order to complete these financial 

responsibility activities. 

Pursuant to 40 CFR 146.85, the UIC Program Director must perform the initial review of a GS 

project’s financial responsibility demonstration and additional reviews on an ongoing basis. 

Under 40 CFR 146.85(a)(5), the UIC Program Director must review the annual updates to each 

project’s financial responsibility demonstration, as well as the updated cost estimates; any delay 

in receiving these updates to the instruments and cost estimates should serve as a warning to the 

UIC Program Director of potential financial distress. Under 40 CFR 146.85(c)(3), the UIC 

Program Director must approve any increase or decrease in the cost estimate, any withdrawal of 

financial responsibility funds, and any decrease in the face value of financial responsibility 

instruments. Pursuant to 40 CFR 146.85(c)(4), the UIC Program Director must ensure that any 

withdrawal of funds or decrease in the face value of the instrument does not reduce the 

instrument’s face value to an amount less than the current cost estimate. 

During the annual reevaluations, it is recommended that the UIC Program Director carefully 

review each agreement that the owner or operator enters into with an independent third party

financial assurance provider. For instance, the UIC Program Director can decide to look for the 

contractual conditions that need to be met in order for funds to be paid to complete financial 

responsibility activities. The UIC Program Director also might decide to look for any exclusions 

or coverage limitations in the instrument contract that could decrease the costs for the 

independent third party financial institution and the owner or operator, but that would be 

insufficient to meet environmental assurance needs. When reviewing the instrument contract text 

regarding cancellation of the instrument, EPA recommends that the UIC Program Director

confirm that cancellation is prohibited unless the owner or operator fails to meet conditions that 

the UIC Program Director finds acceptable. 

The UIC Program Director can also look for clauses that specify the timeframe required for 

payout on covered events. From the UIC Program Director’s perspective, it is important to know 

if the owner or operator will be allowed to submit claims after the policy is cancelled for events 

that occurred while the policy was in force. Some contracts might even allow the coverage to 

continue for a period of time after cancellation. Table 7 summarizes the Class VI Rule’s 

submission requirements, at 40 CFR 145.86, for GS owners or operators and the review 

requirements for UIC Program Directors.

C. Independent third party responsibilities

The Rule requires, at 40 CFR 146.85(d)(3), that if an independent third party provider declares 

bankruptcy or is no longer able to act as a trustee, the owner or operator must establish other 

means of financial assurance or liability coverage within 60 days. 
UIC Program Class VI Financial Responsibility Guidance 52

The Rule also states that independent third party providers cannot cancel coverage unless the 

owner or operator fails to meet certain conditions. Under 40 CFR 146.85(a)(4)(i), if an owner or 

operator has failed to pay for the instrument, the financial institution can cancel or terminate the 

policy and must send notice via certified mail to both the UIC Program Director and the owner 

or operator. 
UIC Program Class VI Financial Responsibility Guidance 53

Table 7: Submission requirements at 40 CFR 146.85 for owners or operators and review 

requirements for UIC Program Directors

Timeframe/Condition Owner or Operator 

Submission Requirements

Director Review Requirements

Annually (a)(5)(ii) Submit updated financial 

responsibility demonstration

Evaluate the financial responsibility 

demonstration to confirm that the 

instrument(s) used remain adequate 

Annually (c) Submit an updated detailed written 

estimate of the cost of performing 

corrective action on wells in the 

AoR, plugging the injection well(s), 

post injection site care and site 

closure, and emergency and 

remedial response

Review submission to approve any 

decrease or increase to initial cost 

estimate

60 days prior to anniversary of 

establishment of financial instrument 

(c)(2) 

Adjust cost estimate for inflation 

Within 60 days of any amendments to 

required project plans15 Submit written updates of  (c)(2) adjustments to cost estimate

During the active life of the project, and 

60 days after Director has approved a 

request to modify required project plans 

(c)(3) 

If change in plans increases cost, 

revise cost estimate; revised cost 

estimate must be adjusted for 

inflation as specified at 40 CFR 

146.85(c)(1)

Any withdrawal of funds must be 

approved by the UIC Program 

Director

If change in plans decreases the 

cost, revise cost estimate; revised 

cost estimate must be adjusted for 

inflation as specified at 40 CFR 

146.85(c)(1)

Approve any decrease in value of 

the financial assurance instrument 

Within 60 days after the current cost 

estimate increases to an amount greater 

than the face amount of a financial 

instrument currently in use (c)(4)

Increase face amount of coverage 

up to an amount at least equal to 

the current cost estimate and 

submit evidence of such increase to

the UIC Program Director, or obtain 

other financial responsibility 

instruments to cover the increase

Review updates to the cost estimate 

and accompanying evidence 

Whenever the current cost estimate 

decreases (c)(4)

Reduce face amount of financial 

assurance instrument to amount of 

the current cost estimate, which 

depends upon receiving written 

approval from the UIC Program 

Director

Provide written approval before face 

amount of instrument may be 

reduced in response to decreasing 

estimated costs

In the event of adverse financial 

conditions such as bankruptcy; In the 

event of bankruptcy, within 10 days of 

commencement of Title 11 (Bankruptcy), 

U.S. Code (d) 

Notify Director by certified mail that 

adverse financial conditions may 

affect ability to carry out injection 

well plugging and post injection site 

care and site closure

Within 60 days of Director notification 

that original demonstration is no longer 

adequate for required project phases16

The owner or operator must provide 

adjustment of the cost estimate to 

the UIC Program Director

(e) 

Review submission to approve 

update to the initial cost estimate

 

15 Required plans include area of review, plugging the injection well(s), post-injection site care and site closure, and 

emergency and remedial response plans. 

16 Financial responsibility demonstration is required for the following project phases: corrective action (as required 

by 40 CFR 146.84), injection well plugging (as required by 40 CFR 146.92) and post-injection site care and site 

closure (as required by 40 CFR 146.93), and, emergency and remedial response (as required by 40 CFR 146.94)
UIC Program Class VI Financial Responsibility Guidance 54

List of Appendices

Appendix A: Regulatory Language for Financial Responsibility for Class VI Wells

Appendix B: Recommended Financial Responsibility Instrument Language for Class VI Wells

(Forms/Templates)

Appendix C: Methodology for Estimating Costs for Financial Responsibility Determinations for 

Class VI Wells

Appendix D: Injection Well Plugging and Abandonment Checklist for Financial Responsibility 

Cost Determination
UIC Program Class VI Financial Responsibility Guidance A-1 

Appendix A: 40 CFR 146.85

Appendix A: Regulatory Language for Financial Responsibility for Class VI Wells

40 CFR 146.85 Financial responsibility. 

(a) The owner or operator must demonstrate and maintain financial responsibility as determined 

by the Director that meets the following conditions:

(1) The financial responsibility instrument(s) used must be from the following list of 

qualifying instruments: 

 (i) Trust Funds 

 (ii) Surety Bonds 

(iii) Letter of Credit

(iv) Insurance

 (v) Self Insurance (i.e., Financial Test and Corporate Guarantee) 

 (vi) Escrow Account 

(vii) Any other instrument(s) satisfactory to the Director

(2) The qualifying instrument(s) must be sufficient to cover the cost of: 

(i) Corrective action (that meets the requirements of §146.84); 

(ii) Injection well plugging (that meets the requirements of §146.92); 

(iii) Post injection site care and site closure (that meets the requirements of 

§146.93); and 

(iv) Emergency and remedial response (that meets the requirements of §146.94). 

(3) The financial responsibility instrument(s) must be sufficient to address endangerment 

of underground sources of drinking water. 

(4) The qualifying financial responsibility instrument(s) must comprise protective 

conditions of coverage. 

(i) Protective conditions of coverage must include at a minimum cancellation, 

renewal, and continuation provisions, specifications on when the provider 

becomes liable following a notice of cancellation if there is a failure to renew with 

a new qualifying financial instrument, and requirements for the provider to meet a 

minimum rating, minimum capitalization, and ability to pass the bond rating when 

applicable. 

(A) Cancellation – for purposes of this part, an owner or operator must provide 

that their financial mechanism may not cancel, terminate or fail to renew except 

for failure to pay such financial instrument. If there is a failure to pay the financial 

instrument, the financial institution may elect to cancel, terminate, or fail to renew 

the instrument by sending notice by certified mail to the owner or operator and the 

Director. The cancellation must not be final for 120 days after receipt of 

cancellation notice. The owner or operator must provide an alternate financial 

responsibility demonstration within 60 days of notice of cancellation, and if an 

alternate financial responsibility demonstration is not acceptable (or possible), any 

funds from the instrument being cancelled must be released within 60 days of 

notification by the Director. 

(B) Renewal – for purposes of this part, owners or operators must renew all 

financial instruments, if an instrument expires, for the entire term of the geologic 

sequestration project. The instrument may be automatically renewed as long as 

the owner or operator has the option of renewal at the face amount of the expiring 

instrument. The automatic renewal of the instrument must, at a minimum, provide 
UIC Program Class VI Financial Responsibility Guidance A-2 

Appendix A: 40 CFR 146.85

the holder with the option of renewal at the face amount of the expiring financial 

instrument. 

(C) Cancellation, termination, or failure to renew may not occur and the financial 

instrument will remain in full force and effect in the event that on or before the 

date of expiration: the Director deems the facility abandoned; or the permit is 

terminated or revoked or a new permit is denied; or closure is ordered by the 

Director or a U.S. district court or other court of competent jurisdiction; or the 

owner or operator is named as debtor in a voluntary or involuntary proceeding 

under Title 11 (Bankruptcy), U.S. Code; or the amount due is paid. 

(5) The qualifying financial responsibility instrument(s) must be approved by the 

Director. 

 (i) The Director shall consider and approve the financial responsibility 

demonstration for all the phases of the geologic sequestration project prior to issue a 

Class VI permit (§146.82). 

(ii) The owner or operator must provide any updated information related to their 

financial responsibility instrument(s) on an annual basis and if there are any changes, the 

Director must evaluate, within a reasonable time, the financial responsibility 

demonstration to confirm that the instrument(s) used remain adequate for use. The owner 

or operator must maintain financial responsibility requirements regardless of the status of 

the Director’s review of the financial responsibility demonstration.

(iii) The Director may disapprove the use of a financial instrument if he 

determines that it is not sufficient to meet the requirements of this section. 

(6) The owner or operator may demonstrate financial responsibility by using one or 

multiple qualifying financial instruments for specific phases of the geologic sequestration 

project. 

(i) In the event that the owner or operator combines more than one instrument for 

a specific geologic sequestration phase (e.g., well plugging), such combination must be 

limited to instruments that are not based on financial strength or performance (i.e., self 

insurance or performance bond), for example trust funds, surety bonds guaranteeing 

payment into a trust fund, letters of credit, escrow account, and insurance. In this case, it 

is the combination of mechanisms, rather than the single mechanism, which must provide 

financial responsibility for an amount at least equal to the current cost estimate. 

(ii) When using a third-party instrument to demonstrate financial responsibility, 

the owner or operator must provide a proof that the third party providers either have 

passed financial strength requirements based on credit ratings; or has met a minimum 

rating, minimum capitalization, and ability to pass the bond rating when applicable. 

(iii) An owner or operator using certain types of third party instruments must 

establish a standby trust to enable EPA to be party to the financial responsibility 

agreement without EPA being the beneficiary of any funds. The standby trust fund must 

be used along with other financial responsibility instruments (e.g., surety bonds, letters of 

credit, or escrow accounts) to provide a location to place funds if needed. 

(iv) An owner or operator may deposit money to an escrow account to cover 

financial responsibility requirements; this account must segregate funds sufficient to 

cover estimated costs for Class VI (geologic sequestration) financial responsibility from 

other accounts and uses. 
UIC Program Class VI Financial Responsibility Guidance A-3 

Appendix A: 40 CFR 146.85

(v) An owner or operator or its guarantor may use self insurance to demonstrate 

financial responsibility for geologic sequestration projects. In order to satisfy this 

requirement the owner or operator must meet a Tangible Net Worth of an amount 

approved by the Director, have a Net working capital and tangible net worth each at least 

six times the sum of the current well plugging, post injection site care and site closure 

cost, have assets located in the United States amounting to at least 90 percent of total 

assets or at least six times the sum of the current well plugging, post injection site care 

and site closure cost, and must submit a report of its bond rating and financial 

information annually. In addition the owner or operator must either: have a bond rating 

test of AAA, AA, A, or BBB as issued by Standard & Poor’s or Aaa, Aa, A, or Baa as 

issued by Moody’s; or meet all of the following five financial ratio thresholds: a ratio of 

total liabilities to net worth less than 2.0; a ratio of current assets to current liabilities 

greater than 1.5; a ratio of the sum of net income plus depreciation, depletion, and 

amortization to total liabilities greater than 0.1; a ratio of current assets minus current 

liabilities to total assets greater than -0.1; and a net profit (revenues minus expenses) 

greater than 0. 

(vi) An owner or operator who is not able to meet corporate financial test criteria 

may arrange a corporate guarantee by demonstrating that its corporate parent meets the 

financial test requirements on its behalf. The parent’s demonstration that it meets the 

financial test requirement is insufficient if it has not also guaranteed to fulfill the 

obligations for the owner or operator. 

(vii) An owner or operator may obtain an insurance policy to cover the estimated 

costs of geologic sequestration activities requiring financial responsibility. This insurance 

policy must be obtained from a third party provider. 

(b) The requirement to maintain adequate financial responsibility and resources is directly 

enforceable regardless of whether the requirement is a condition of the permit. 

(1) The owner or operator must maintain financial responsibility and resources until:

(i) The Director receives and approves the completed post-injection site care and 

site closure plan; and 

(ii) The Director approves site closure. 

(2) The owner or operator may be released from a financial instrument in the following 

circumstances:

(i) The owner or operator has completed the phase of the geologic sequestration 

project for which the financial instrument was required and has fulfilled all its financial 

obligations as determined by the Director, including obtaining financial responsibility for 

the next phase of the GS project, if required; or 

(ii) The owner or operator has submitted a replacement financial instrument and 

received written approval from the Director accepting the new financial instrument and 

releasing the owner or operator from the previous financial instrument. 

(c) The owner or operator must have a detailed written estimate, in current dollars, of the cost of 

performing corrective action on wells in the area of review, plugging the injection well(s), postinjection site care and site closure, and emergency and remedial response. 

(1) The cost estimate must be performed for each phase separately and must be based on 

the costs to the regulatory agency of hiring a third party to perform the required activities. 

A third party is a party who is not within the corporate structure of the owner or operator. 
UIC Program Class VI Financial Responsibility Guidance A-4 

Appendix A: 40 CFR 146.85

(2) During the active life of the geologic sequestration project, the owner or operator 

must adjust the cost estimate for inflation within 60 days prior to the anniversary date of 

the establishment of the financial instrument(s) used to comply with paragraph (a) of this 

section and provide this adjustment to the Director. The owner or operator must also 

provide to the Director written updates of adjustments to the cost estimate within 60 days 

of any amendments to the area of review and corrective action plan (§146.84), the 

injection well plugging plan (§146.92), the post-injection site care and site closure plan 

(§146.93), and the emergency and remedial response plan (§146.94). 

(3) The Director must approve any decrease or increase to the initial cost estimate. 

During the active life of the geologic sequestration project, the owner or operator must 

revise the cost estimate no later than 60 days after the Director has approved the request 

to modify the area of review and corrective action plan (§146.84), the injection well 

plugging plan (§146.92), the post-injection site care and site closure plan (§146.93), and 

the emergency and response plan (§146.94), if the change in the plan increases the cost. If 

the change to the plans decreases the cost, any withdrawal of funds must be approved by 

the Director. Any decrease to the value of the financial assurance instrument must first be 

approved by the Director. The revised cost estimate must be adjusted for inflation as 

specified at paragraph (c)(2) of this section. 

(4) Whenever the current cost estimate increases to an amount greater than the face 

amount of a financial instrument currently in use, the owner or operator, within 60 days 

after the increase, must either cause the face amount to be increased to an amount at least 

equal to the current cost estimate and submit evidence of such increase to the Director, or 

obtain other financial responsibility instruments to cover the increase. Whenever the 

current cost estimate decreases, the face amount of the financial assurance instrument 

may be reduced to the amount of the current cost estimate only after the owner or 

operator has received written approval from the Director. 

(d) The owner or operator must notify the Director by certified mail of adverse financial 

conditions such as bankruptcy that may affect the ability to carry out injection well plugging and 

post-injection site care and site closure. 

(1) In the event that the owner or operator or the third party provider of a financial 

responsibility instrument is going through a bankruptcy, the owner or operator must 

notify the Director by certified mail of the commencement of a voluntary or involuntary 

proceeding under Title 11 (Bankruptcy), U.S. Code, naming the owner or operator as 

debtor, within 10 days after commencement of the proceeding. 

(2) A guarantor of a corporate guarantee must make such a notification to the Director if 

he/she is named as debtor, as required under the terms of the corporate guarantee.

(3) An owner or operator who fulfills the requirements of paragraph (a) of this section by 

obtaining a trust fund, surety bond, letter of credit, escrow account, or insurance policy 

will be deemed to be without the required financial assurance in the event of bankruptcy 

of the trustee or issuing institution, or a suspension or revocation of the authority of the 

trustee institution to act as trustee of the institution issuing the trust fund, surety bond, 

letter of credit, escrow account, or insurance policy. The owner or operator must establish 

other financial assurance within 60 days after such an event. 

(e) The owner or operator must provide an adjustment of the cost estimate to the Director within 

60 days of notification by the Director, if the Director determines during the annual evaluation of 

the qualifying financial responsibility instrument(s) that the most recent demonstration is no 
UIC Program Class VI Financial Responsibility Guidance A-5 

Appendix A: 40 CFR 146.85

longer adequate to cover the cost of corrective action (as required by §146.84), injection well 

plugging (as required by §146.92), post-injection site care and site closure (as required by 

§146.93), and emergency and remedial response (as required by §146.94). 

(f) The Director must approve the use and length of pay-in-periods for trust funds or escrow 

accounts. 
UIC Program Class VI Financial Responsibility Guidance A-6 

Appendix A: 40 CFR 146.85

This Page Intentionally Left Blank
UIC Program Class VI Financial Responsibility Guidance B-1 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

Appendix B: Recommended Financial Responsibility Instrument Language for Class VI Wells

(Forms/Templates)

DISCLAIMER

EPA does not have express authority in the Safe Drinking Water Act to accept and use funds for financial 

assurance due to the requirement under the Miscellaneous Receipts Act to deposit funds EPA receives 

for the use of the Government into the U.S. Treasury. Consequently, trust agreements, surety bonds, 

letters of credit, insurance policies and other financial responsibility instruments cannot name EPA as a 

recipient of funds or beneficiary. Therefore, EPA recommends that the standby trust agreements be 

written such that EPA, as the UIC Program Director, has authority to notify the trustee of the need for 

payments from the fund to cover the costs of GS project activities covered under the agreement. 

Financial responsibility instruments may name a state, or tribal government as a recipient of funds or 

beneficiary if authorized by applicable law. The following forms and templates include recommended 

language. The UIC Program Director, owner or operator, and appropriate financial institution may work 

together to determine the most suitable language.

Under 40 CFR 146.85, EPA has established requirements for financial responsibility for 

Geologic Sequestration (GS). Historically, instruments utilized to demonstrate financial 

responsibility for Underground Injection Control (UIC) program injection wells include 

irrevocable trust fund, surety bond, performance bond, letter of credit, insurance, financial test, 

and corporate guarantee. The template language for these instruments is adapted from language 

from 40 CFR 144.70 (Class I hazardous waste well requirements). Because there is no 

instrument language precedent for escrow accounts under the Underground Injection Control 

(UIC) program, the following financial responsibility instrument language for escrow accounts 

was based on existing environmental liability escrow account agreements used by states.

Contents:

I. Trust Agreement or Standby Trust 

II. Financial Guarantee Surety Bond

III. Performance Surety Bond

IV. Irrevocable Standby Letter of Credit

V. Certificate of Insurance

VI. Letter from CFO

VII. Corporate Guarantee

VIII. Escrow Account 
UIC Program Class VI Financial Responsibility Guidance B-2 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

I. Trust Agreement

A trust agreement for a trust fund, as specified in this chapter, may be worded as follows, 

except that instructions in brackets are to be replaced with the relevant information and the 

brackets deleted. EPA recommends that a standby trust agreement contain similar language 

except that an originally signed duplicate of the trust agreement should be submitted to the UIC 

Program Director with the surety bond or letter of credit, and the fund should be fully funded 

upon the disbursement of the surety bond or letter of credit. 

Trust Agreement

TRUST AGREEMENT, the “Agreement,” entered into as of [date] by and between [name of 

the owner or operator], a [name of state] [insert “corporation,” “partnership,” “association,” 

or “proprietorship”], the “Grantor,” and [name of corporate trustee], [insert “incorporated in 

the State of ___” or “a national bank”], the “Trustee.” 

Whereas, the United States Environmental Protection Agency, “EPA,” an agency of the 

United States Government, or the state of [name of state] has established certain regulations 

applicable to the Grantor, requiring that an owner or operator of an injection well shall 

provide assurance that funds will be available when needed for [corrective action, injection 

well plugging, post injection site care and site closure, and/or emergency and remedial 

response] of the injection well,

Whereas, the Grantor has elected to establish a trust to provide all or part of such financial 

assurance for the facility(ies) identified herein,

Whereas, the Grantor, acting through its duly authorized officers, has selected the Trustee to 

be the trustee under this agreement, and the Trustee is willing to act as trustee,

Now, therefore, the Grantor and the Trustee agree as follows: 

Section 1. Definitions as used in this Agreement

(A) The term “Grantor” means the owner or operator who enters into this Agreement and 

any successors or assigns of the Grantor.

: 

(B) The term “Trustee” means the Trustee who enters into this Agreement and any 

successor Trustee.

(C) Facility or activity means any “underground injection well” or any other facility or 

activity that is subject to regulation under the Underground Injection Control Program. 

(D) Beneficiary (if any) means an entity other than EPA that has authority to direct the 

Trustee to make payments of Trust proceeds to contractors or other entities for corrective 
UIC Program Class VI Financial Responsibility Guidance B-3 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

action, injection well plugging, post injection site care and site closure, and/or emergency 

and remedial response work. 

Section 2. Identification of Facilities and Cost Estimates.

Example Schedule A

Facility

Cost Estimate

Corrective 

action

Injection well 

plugging

Post injection 

site care and 

site closure

Emergency and 

remedial 

response

EPA Identification 

Number, name, 

address

 

This Agreement pertains to the 

facilities and cost estimates identified on attached Schedule A [on Schedule A, for each 

facility list the EPA Identification Number, name, address, and the current [corrective action, 

injection well plugging, post injection site care and site closure, and/or emergency and 

remedial response] cost estimate, or portions thereof, for which financial assurance is 

demonstrated by this Agreement].

Section 3. Establishment of Fund.

Example Schedule B

Facility Funding Value for Activities

EPA Identification 

Number, name, 

address

 

 The Grantor and the Trustee hereby establish a trust fund, 

the “Fund,” for the benefit of the state of [name of state]. The Grantor and the Trustee 

acknowledge that the purpose of the Fund is to fulfill the Grantor’s [corrective action, 

injection well plugging, post injection site care and site closure, and/or emergency and 

remedial response] obligations described at 40 CFR 146.84, 146.92, 146.93, and/or 146.94, 

respectively. All expenditures from the Fund shall be to fulfill the legal obligations of the 

Grantor under such regulations, and not any obligation of EPA. The Grantor and the Trustee 

intend that no independent third party have access to the Fund except as herein provided. The 

Fund is established initially as consisting of the property, which is acceptable to the Trustee, 

described in Schedule B attached hereto. Such property and any other property subsequently 

transferred to the Trustee is referred to as the Fund, together with all earnings and profits 

thereon, less any payments or distributions made by the Trustee pursuant to this Agreement. 

The Fund shall be held by the Trustee, IN TRUST, as hereinafter provided. The Trustee shall 

not be responsible nor shall it undertake any responsibility for the amount or adequacy of, 

nor any duty to collect from the Grantor, any payments necessary to discharge any 

responsibilities of the Grantor established by EPA regulations or the state of [name of state].
UIC Program Class VI Financial Responsibility Guidance B-4 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

Section 4. Payment for [corrective action, injection well plugging, post injection site care and 

site closure, and/or emergency and remedial response]. The Trustee shall make payments 

from the Fund as the UIC Program Director shall direct, in writing, to provide for the 

payment of the costs of [corrective action, injection well plugging, post injection site care 

and site closure, and/or emergency and remedial response] of the injection wells covered by 

this Agreement. The Trustee shall use the Fund to reimburse the Grantor or other persons 

selected by the [Trustee, Grantor or Beneficiary] to perform work when the UIC Program 

Director advises in writing that the work will be or was necessary for the fulfillment of the 

Grantor’s [corrective action, injection well plugging, post injection site care and site closure, 

and/or emergency and remedial response] obligations described at 40 CFR 146.84, 146.92, 

146.93, and/or 146.94, respectively. The UIC Program Director may advise the Trustee that 

amounts in the Fund are no longer necessary to fulfill the Grantor’s obligations under 40 

CFR 146.85 and that the Trustee may refund the remaining funds to the Grantor. Upon 

refund, such funds shall no longer constitute part of the Fund as defined herein. 

Section 5. Payments Comprising the Fund. Payments made to the Trustee for the Fund shall 

consist of cash or securities acceptable to the Trustee.

Section 6. Trustee Management.

(A) Securities or other obligations of the Grantor, or any other owner or operator of the 

facilities, or any of their affiliates as defined in the Investment Company Act of 1940, as 

amended, 15 U.S.C. 80a–2.(a), shall not be acquired or held, unless they are securities or 

other obligations of the federal or a state government;

 The Trustee shall invest and reinvest the principal and 

income of the Fund and keep the Fund invested as a single fund, without distinction between 

principal and income, in accordance with general investment policies and guidelines which 

the Grantor may communicate in writing to the Trustee from time to time, subject, however, 

to the provisions of this Section. In investing, reinvesting, exchanging, selling, and managing 

the Fund, the Trustee shall discharge his duties with respect to the trust fund solely in the 

interest of the beneficiary and with the care, skill, prudence, and diligence under the 

circumstances then prevailing which persons of prudence, acting in a like capacity and 

familiar with such matters, would use in the conduct of an enterprise of a like character and 

with like aims; except that: 

(B) The Trustee is authorized to invest the Fund in time or demand deposits of the Trustee, 

to the extent insured by an agency of the federal or state government; and

(C) The Trustee is authorized to hold cash awaiting investment or distribution un-invested 

for a reasonable time and without liability for the payment of interest thereon. 

Section 7. Commingling and Investment. The Trustee is expressly authorized in its 

discretion: 
UIC Program Class VI Financial Responsibility Guidance B-5 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

(A) To transfer from time to time any or all of the assets of the Fund to any common, 

commingled, or collective trust fund created by the Trustee in which the Fund is eligible to 

participate, subject to all of the provisions thereof, to be commingled with the assets of 

other trusts participating therein; and

(B) To purchase shares in any investment company, except as specified in writing by the 

owner or operator, registered under the Investment Company Act of 1940, 15 U.S.C. 80a–1 

et seq., including one which may be created, managed, underwritten, or to which 

investment advice is rendered or the shares of which are sold by the Trustee. The Trustee 

may vote shares in its discretion.

Section 8. Express Powers of Trustee.

(A) To sell, exchange, convey, transfer, or otherwise dispose of any property held by it, by 

public or private sale. No person dealing with the Trustee shall be bound to see to the 

application of the purchase money or to inquire into the validity or expediency of any such 

sale or other disposition; 

Without in any way limiting the powers and 

discretions conferred upon the Trustee by the other provisions of this Agreement or by law, 

the Trustee is expressly authorized and empowered: 

(B) To make, execute, acknowledge, and deliver any and all documents of transfer and 

conveyance and any and all other instruments that may be necessary or appropriate to carry 

out the powers herein granted; 

(C) To register any securities held in the Fund in its own name or in the name of a nominee 

and to hold any security in bearer form or in book entry, or to combine certificates 

representing such securities with certificates of the same issue held by the Trustee in other 

fiduciary capacities, or to deposit or arrange for the deposit of such securities in a qualified 

central depository even though, when so deposited, such securities may be merged and held 

in bulk in the name of the nominee of such depositary with other securities deposited 

therein by another person, or to deposit or arrange for the deposit of any securities issued 

by the United States Government, or any agency or instrumentality thereof, with a Federal 

Reserve bank, but the books and records of the Trustee shall at all times show that all such 

securities are part of the Fund;

(D) To deposit any cash in the Fund in interest-bearing accounts maintained or savings 

certificates issued by the Trustee, in its separate corporate capacity, or in any other banking 

institution affiliated with the Trustee, to the extent insured by an agency of the federal or 

state government; and

(E) To compromise or otherwise adjust all claims in favor of or against the Fund. 

Section 9. Taxes and Expenses. All taxes of any kind that may be assessed or levied against 

or in respect of the Fund and all brokerage commissions incurred by the Fund shall be paid 

from the Fund. All other expenses incurred by the Trustee in connection with the 

administration of this Trust, including fees for legal services rendered to the Trustee, the 
UIC Program Class VI Financial Responsibility Guidance B-6 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

compensation of the Trustee to the extent not paid directly by the Grantor, and all other 

proper charges and disbursements of the Trustee shall be paid from the Fund. 

Section 10. Annual Valuation. The Trustee shall annually, at least 30 days prior to the 

anniversary date of establishment of the Fund, furnish to the Grantor and to the appropriate 

Director a statement confirming the value of the Trust. Any securities in the Fund shall be 

valued at market value as of no more than 60 days prior to the anniversary date of 

establishment of the Fund. The failure of the Grantor to object in writing to the Trustee 

within 90 days after the statement has been furnished to the Grantor and the UIC Program 

Director shall constitute a conclusively binding assent by the Grantor, barring the Grantor 

from asserting any claim or liability against the Trustee with respect to matters disclosed in 

the statement.

Section 11. Advice of Counsel. The Trustee may from time to time consult with counsel, who 

may be counsel to the Grantor, with respect to any question arising as to the construction of 

this Agreement of any action to be taken hereunder. The Trustee shall be fully protected, to 

the extent permitted by law, in acting upon the advice of counsel. 

Section 12. Trustee Compensation. The Trustee shall be entitled to reasonable compensation 

for its services as agreed upon in writing from time to time with the Grantor.

Section 13. Successor Trustee. The Trustee may resign or the Grantor may replace the 

Trustee, but such resignation or replacement shall not be effective until the Grantor has 

appointed a successor trustee and this successor accepts the appointment. The successor 

trustee shall have the same powers and duties as those conferred upon the Trustee hereunder. 

Upon the successor trustee's acceptance of the appointment, the Trustee shall assign, transfer, 

and pay over to the successor trustee the funds and properties then constituting the Fund. If 

for any reason the Grantor cannot or does not act in the event of the resignation of the 

Trustee, the Trustee may apply to a court of competent jurisdiction for the appointment of a 

successor trustee or for instructions. The successor trustee shall specify the date on which it 

assumes administration of the trust in a writing sent to the Grantor, the UIC Program 

Director, and the present Trustee by certified mail 10 days before such change becomes 

effective. Any expenses incurred by the Trustee as a result of any of the acts contemplated by 

this Section shall be paid as provided in Section 9. 

Section 14. Instructions to the Trustee. All orders, requests, and instructions by the Grantor to 

the Trustee shall be in writing, signed by such persons as are designated in the attached 

Exhibit A or such other designees as the Grantor may designate by amendment to Exhibit A. 

The Trustee shall be fully protected in acting without inquiry in accordance with the 

Grantor's orders, requests, and instructions. All orders, requests, and instructions by the UIC 

Program Director to the Trustee shall be in writing, signed by the UIC Program Director, and 

the Trustee may rely on these instructions with to the extent permissible by law. The Trustee 

shall have the right to assume, in the absence of written notice to the contrary, that no event 

constituting a change or a termination of the authority of any person to act on behalf of the 

Grantor or EPA or the state of [name of state] hereunder has occurred. The Trustee shall have 
UIC Program Class VI Financial Responsibility Guidance B-7 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

no duty to act in the absence of such orders, requests, and instructions from the Grantor 

and/or EPA or the state of [name of state], except as provided for herein.

Section 15. Notice of Nonpayment. The Trustee shall notify the Grantor and the appropriate 

Director, by certified mail within 10 days following the expiration of the 30-day period after 

the anniversary of the establishment of the Trust, if no payment is received from the Grantor 

during that period. After the pay-in period is completed, the Trustee shall not be required to 

send a notice of nonpayment. 

Section 16. Amendment of Agreement. This Agreement may be amended by an instrument in 

writing executed by the Grantor, the Trustee, with the concurrence of the UIC Program 

Director, or by the Trustee and the appropriate Director if the Grantor ceases to exist. 

Provided, however, that EPA may not be named as a beneficiary of the Trust, receive funds 

from the Trust, or direct that Trust funds be paid to a particular entity selected by EPA. 

Section 17. Cancelation, Irrevocability and Termination. Subject to the right of the parties to 

amend this Agreement as provided in Section 16, this Trust shall be irrevocable and shall 

continue until terminated at the written agreement of the Grantor, the Trustee, with the 

concurrence of the UIC Program Director, or by the Trustee and the UIC Program Director 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 Grantor. 

Section 18. Immunity and Indemnification. The Trustee shall not incur personal liability of 

any nature in connection with any act or omission, made in good faith, in the administration 

of this Trust, or in carrying out any directions by the Grantor issued in accordance with this 

Agreement. The Trustee shall be indemnified and saved harmless by the Grantor or from the 

Trust Fund, or both, from and against any personal liability to which the Trustee may be 

subjected by reason of any act or conduct in its official capacity, including all expenses 

reasonably incurred in its defense in the event the Grantor fails to provide such defense. EPA 

does not indemnify either the Grantor or the Trustee due to the restrictions imposed by the 

Anti-Deficiency Act, 31 U.S.C. 1341. Rather, any claims against EPA are subject to the 

Federal Tort Claims Act, 28 U.S.C. 2671, 2680. 

Section 19. Choice of Law. This Agreement shall be administered, construed, and enforced 

according to the laws of the State of [name of state] with regard to claims by the Grantor, 

Trustee or Beneficiary (if any). Claims involving EPA are subject to federal law.

Section 20. Interpretation.

In Witness Whereof the parties have caused this Agreement to be executed by their 

respective officers duly authorized and their corporate seals to be hereunto affixed and 

attested as of the date first above written.

 As used in this Agreement, words in the singular include the plural 

and words in the plural include the singular. The descriptive headings for each Section of this 

Agreement shall not affect the interpretation or the legal efficacy of this Agreement.

[Signature of Grantor] 
UIC Program Class VI Financial Responsibility Guidance B-8 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

[Title]

[Seal]17

Attest: [Signature of attester] 

[Title] 

[Signature of trustee] 

[Name of trustee] 

[Title] 

[Seal]18

Attest: [Signature of attester] 

 

[Title]

The following is an example of the certification of acknowledgment which must accompany 

the trust agreement for a trust fund. State requirements may differ on the proper content of 

this acknowledgment. 

State of 

County of 

On this [date], before me personally came [owner or operator] to me known, who, being 

by me duly sworn, did depose and say that she/he resides at [address], that she/he is [title] 

of [corporation], the corporation described in and which executed the above instrument; 

that she/he knows the seal of said corporation; that the seal affixed to such instrument is 

such corporate seal; that it was so affixed by order to the Board of Directors of said 

corporation, and that she/he signed her/his name thereto by like order. 

[Signature of Notary Public] 

 

17 A corporate seal is only recommended if the company has a corporate seal.

18 A corporate seal is only recommended if the company has a corporate seal.
UIC Program Class VI Financial Responsibility Guidance B-9 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

II. Financial Guarantee Surety Bond 

A surety bond guaranteeing payment into a trust fund, as specified in this chapter, may be 

worded as follows, except that instructions in brackets are to be replaced with the relevant 

information and the brackets deleted: 

Financial Guarantee Bond

Dated bond executed: 

Effective date:

Principal: [legal name and business address of owner or operator] 

Type of organization: [insert “individual,” “joint venture,” “partnership,” or “corporation”] 

State of incorporation: 

Surety(ies): [name(s) and business address(es)]

EPA Identification Number, name, address, and [corrective action, injection well plugging, 

post injection site care and site closure, and/or emergency and remedial response] amount(s) 

for each facility guaranteed by this bond [indicate [corrective action, injection well plugging, 

post injection site care and site closure, and/or emergency and remedial response] amounts 

separately]: 

Total penal sum of bond: $ 

Surety's bond number: 

Know All Persons By These Presents, That we, the Principal and Surety(ies) hereto are 

firmly bound to the state of [name of state] or another party other than EPA, in the above 

penal sum for the payment of which we bind ourselves, our heirs, executors, administrators, 

successors, and assigns jointly and severally; provided that, where the Surety(ies) are 

corporations acting as co-sureties, we, the Sureties, bind ourselves in such sum jointly and 

severally only for the purpose of allowing a joint action or actions against any or all of us, 

and for all other purposes each Surety binds itself, jointly and severally with the Principal, 

for the payment of such sum only as is set forth opposite the name of such Surety, but if no 

limit of liability is indicated, the limit of liability shall be the full amount of the penal sum. 
UIC Program Class VI Financial Responsibility Guidance B-10 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

Whereas said Principal is required, under the Underground Injection Control Regulations 

(UIC), to have a permit or comply with requirements to operate under the Class VI Rule in 

order to own or operate each injection well identified above, and

Whereas said Principal is required to provide financial assurance for [corrective action, 

injection well plugging, post injection site care and site closure, and/or emergency and 

remedial response] as a condition of the permit or provisions to operate under the Rule, and 

Whereas said Principal shall establish a standby trust fund as is required when a surety 

bond is used to provide such financial assurance; 

Now, therefore, the conditions of the obligation are such that if the Principal shall 

faithfully, before the beginning of [corrective action, injection well plugging, post injection 

site care and site closure, and/or emergency and remedial response] of each injection well 

identified above, fund the standby trust fund in the amount(s) identified above for the 

injection well,

Or if the Principal shall fund the standby trust fund in such amount(s) within 15 days 

after an order to begin [corrective action, injection well plugging, post injection site care and 

site closure, and/or emergency and remedial response] is issued by the UIC Program Director

or a U.S. district court or other court of competent jurisdiction, 

Or, if the Principal shall provide alternate financial assurance, as applicable, and obtain 

the UIC Program Director's written approval of such assurance, within 90 days after the date 

of notice of cancellation is received by both the Principal and the UIC Program Director from 

the Surety(ies), then this obligation shall be null and void, otherwise it is to remain in full 

force and effect.

The Surety(ies) shall become liable on this bond obligation only when the Principal has 

failed to fulfill the conditions described above. Upon notification by the UIC Program 

Director that the Principal has failed to perform as guaranteed by this bond, the Surety(ies) 

shall place funds in the amount guaranteed for the injection well(s) into the standby trust 

funds for the fulfillment of [corrective action, injection well plugging, post injection site care 

and site closure, and/or emergency and remedial response] obligations described at 40 CFR 

146.84, 146.92, 146.93, and/or 146.94, respectively. 

The liability of the Surety(ies) shall not be discharged by any payment or succession of 

payments hereunder, unless and until such payment or payments shall amount in the 

aggregate to the penal sum of the bond, but in no event shall the obligation of the Surety(ies) 

hereunder exceed the amount of said penal sum. 

The Surety(ies) may cancel the bond only for failure to pay and by sending notice of 

cancellation by certified mail to the Principal and to the UIC Program Director for the area in 

which the injection well(s) is (are) located. EPA requires that cancellation not become final 

for 120 days beginning on the date of receipt of the notice of cancellation by both the 

Principal and the UIC Program Director, as evidenced by the return receipts.
UIC Program Class VI Financial Responsibility Guidance B-11 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

The Principal may terminate this bond by sending written notice to the Surety(ies), 

provided, however, that no such notice shall become effective until the Surety(ies) receive(s) 

written authorization for termination of the bond by the UIC Program Director for the area in 

which the bonded facility(ies) is (are) located.

[The following paragraph is an optional rider that may be included.] 

Principal and Surety(ies) hereby agree to adjust the penal sum of the bond yearly so that 

it guarantees a new [corrective action, injection well plugging, post injection site care and 

site closure, and/or emergency and remedial response] amount, provided that the penal sum 

does not increase by more than 20 percent in any one year, and no decrease in the penal sum 

takes place unless the UIC Program Director determines in writing that the reduced amount is 

adequate to fulfill the Principal’s obligations under 40 CFR 146.84, 146.92, 146.93, and/or 

146.94, respectively. 

In Witness Whereof, the Principal and Surety(ies) have executed this Financial Guarantee 

Bond and have affixed their seals on the date set forth above. 

The persons whose signatures appear below hereby certify that they are authorized to 

execute this surety bond on behalf of the Principal and Surety(ies). 

Principal

[Signature(s)]

[Name(s)]

[Title(s)]

[Corporate seal]19

Corporate Surety(ies)

[Name and address] 

State of incorporation: 

Liability limit: $

[Signature(s)]

[Name(s) and title(s)]

[Corporate seal]17 

[For every co-surety, provide signature(s), corporate seal, and other information in the 

same manner as for Surety above.]

Bond premium: $ 

 

19 A corporate seal is only recommended if the company has a corporate seal.
UIC Program Class VI Financial Responsibility Guidance B-12 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

III. Performance Surety Bond

A surety bond guaranteeing performance of [corrective action, injection well plugging, post 

injection site care and site closure, and/or emergency and remedial response], as specified in 

this chapter, may be worded as follows, except that the instructions in brackets are to be 

replaced with the relevant information and the brackets deleted:

Performance Bond

Date bond executed: 

Effective date: 

Principal: [legal name and business address of owner or operator]

Type of organization: [insert “individual,” “joint venture,” “partnership,” or “corporation”] 

State of incorporation: 

Surety(ies): [name(s) and business address(es)]

EPA Identification Number, name, address, and [corrective action, injection well plugging, 

post injection site care and site closure, and/or emergency and remedial response] amounts(s) 

for each injection well guaranteed by this bond [indicate [corrective action, injection well 

plugging, post injection site care and site closure, and/or emergency and remedial response] 

amounts for each well]: 

Total penal sum of bond: $ 

Surety's bond number: 

Know All Persons By These Presents, That We, the Principal and Surety(ies) hereto are 

firmly bound to the state of [insert name of state or another party other than EPA], in the 

above penal sum for the payment of which we bind ourselves, our heirs, executors, 

administrators, successors, and assigns jointly and severally; provided that, where the 

Surety(ies) are corporations acting as co-sureties, we, the Sureties, bind ourselves in such 

sum “jointly and severally” only for the purpose of allowing a joint action or actions against 

any or all of us, and for all other purposes each Surety binds itself, jointly and severally with 

the Principal, for the payment of such sum only as is set forth opposite the name of such 

Surety, but if no limit of liability is indicated, the limit of liability shall be the full amount of 

the penal sum. 
UIC Program Class VI Financial Responsibility Guidance B-13 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

Whereas said Principal is required, under the Underground Injection Control Regulations, 

as amended, to have a permit or comply with provisions to operate under the Class VI Rule 

for each injection well identified above, and 

Whereas said Principal is required to provide financial assurance for [corrective action, 

injection well plugging, post injection site care and site closure, and/or emergency and 

remedial response] as a condition of the permit or approval to operate under the Rule, and 

Whereas said Principal shall establish a standby trust fund as is required when a surety 

bond is used to provide such financial assurance; 

Now, Therefore, the conditions of this obligation are such that if the Principal shall 

faithfully perform [corrective action, injection well plugging, post injection site care and site 

closure, and/or emergency and remedial response], whenever required to do so, of each 

injection well for which this bond guarantees [corrective action, injection well plugging, post 

injection site care and site closure, and/or emergency and remedial response], in accordance 

with the [Corrective Action, Injection Well Plugging, Post Injection Site Care and Site 

Closure, and/or Emergency and Remedial Response] Plan and other requirements of the 

permit or provisions for operating under the Rule and other requirements of the permit or 

provisions for operating under the Rule as may be amended, pursuant to all applicable laws, 

statutes, rules and regulations, as such laws, statutes, rules, and regulations may be amended, 

Or, if the Principal shall provide alternate financial assurance and obtain the UIC 

Program Director's written approval of such assurance, within 90 days after the date of notice 

of cancellation is received by both the Principal and the UIC Program Director from the 

Surety(ies), then this obligation shall be null and void, otherwise it is to remain in full force 

and effect.

The Surety(ies) shall become liable on this bond obligation only when the Principal has 

failed to fulfill the conditions described above. 

Upon notification by the UIC Program Director that the Principal has been found in 

violation of the [corrective action, injection well plugging, post injection site care and site 

closure, and/or emergency and remedial response] requirements of 40 CFR part 146, for an 

injection well which this bond guarantees performances of [corrective action, injection well 

plugging, post injection site care and site closure, and/or emergency and remedial response], 

the Surety(ies) shall either perform [corrective action, injection well plugging, post injection 

site care and site closure, and/or emergency and remedial response] in accordance with the 

[Corrective Action, Injection Well Plugging, Post Injection Site Care and site closure, and/or 

Emergency and remedial Response] Plan and other permit requirements or provisions for 

operating under the Rule and other requirements or place the amount for [corrective action, 

injection well plugging, post injection site care and site closure, and/or emergency and 

remedial response] into a standby trust fund for the fulfillment of [corrective action, injection 

well plugging, post injection site care and site closure, and/or emergency and remedial 

response] obligations described at 40 CFR 146.84, 146.92, 146.93, and/or 146.94, 

respectively. 
UIC Program Class VI Financial Responsibility Guidance B-14 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

Upon notification by the UIC Program Director that the Principal has failed to provide 

alternate financial assurance and obtain written approval of such assurance from the UIC 

Program Director during the 90 days following receipt by both the Principal and the UIC 

Program Director of a notice of cancellation of the bond, the Surety(ies) shall place funds in 

the amount guaranteed for the injection well(s) into the standby trust fund. 

The surety(ies) hereby waive(s) notification of amendments to [Corrective Action, 

Injection Well Plugging, Post Injection Site Care and Site Closure, and/or Emergency and 

Remedial Response] Plans, permits, applicable laws, statutes, rules, and regulations and 

agrees that no such amendment shall in any way alleviate its (their) obligation on this bond. 

The liability of the Surety(ies) shall not be discharged by any payment or succession of 

payments hereunder, unless and until such payment or payments shall amount in the 

aggregate to the penal sum of the bond, but in no event shall the obligation of the Surety(ies) 

hereunder exceed the amount of said penal sum. 

The Surety(ies) may cancel the bond only for failure to pay and by sending notice by 

certified mail to the owner or operator and to the UIC Program Director of the area in which 

the injection well(s) is (are) located. EPA requires that cancellation not become final for 120 

days beginning on the date of receipt of the notice of cancellation by both the Principal and 

the UIC Program Director, as evidenced by the return receipts.

The principal may terminate this bond by sending written notice to the Surety(ies), 

provided, however, that no such notice shall become effective until the Surety(ies) receive(s) 

written authorization for termination of the bond by the UIC Program Director of the area in 

which the bonded injection well(s) is (are) located. 

[The following paragraph is an optional rider that may be included but is not required.] 

Principal and Surety(ies) hereby agree to adjust the penal sum of the bond yearly so that 

it guarantees a new [corrective action, injection well plugging, post injection site care and 

site closure, and/or emergency and remedial response] amount, provided that the penal sum 

does not increase by more than 20 percent in any one year, unless the UIC Program Director

determines in writing that the reduced amount is adequate to fulfill the Principal’s obligations 

under 40 CFR 146.84, 146.92, 146.93, and/or 146.94, respectively. 

In Witness Whereof, The Principal and Surety(ies) have executed this Performance Bond 

and have affixed their seals on the date set forth above. 

The persons whose signatures appear below hereby certify that they are authorized to 

execute this surety bond on behalf of the Principal and Surety(ies). 

Principal

[Signature(s)] [Name(s)] [Title(s)] [Corporate seal]20

 

20 A corporate seal is only recommended if the company has a corporate seal.
UIC Program Class VI Financial Responsibility Guidance B-15 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

Corporate Surety(ies)

[Name and address]

State of incorporation: 

Liability limit: $

[Signature(s)] [Name(s) and title(s)] [Corporate seal]21

[For every co-surety, provide signature(s), corporate seal, and other information in the 

same manner as for Surety above.] 

Bond premium: $ 

 

21 A corporate seal is only recommended if the company has a corporate seal.
UIC Program Class VI Financial Responsibility Guidance B-16 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

IV. Irrevocable Standby Letter of Credit 

A letter of credit, as specified in this chapter, may be worded as follows, except that 

instructions in brackets are to be replaced with the relevant information and the brackets 

deleted:

Irrevocable Standby Letter of Credit

[state or someone other than EPA] 

Dear Sir or Madam:

We hereby establish our Irrevocable Standby Letter of Credit No. ______ in your favor, at 

the request and for the account of [owner's or operator's name and address] up to the 

aggregate amount of [in words] U.S. dollars $______, available upon [insert state or someone 

other than EPA] presentation of 

(1) Your sight draft, bearing reference to this letter of credit No. ______, and 

(2) Your signed statement reading as follows: “I certify that the amount of the draft is 

payable pursuant to satisfy [name of owner or operator]’s obligations set forth in

regulations issued under authority of the Safe Drinking Water Act.” 

This letter of credit is effective as of [date] and shall expire on [date at least 1 year later], but 

such expiration date shall be automatically extended for a period of [at least 1 year] on [date] 

and on each successive expiration date, unless, at least 120 days before the current expiration 

date, we notify both you and [owner's or operator's name] by certified mail that we have 

decided not to extend this letter of credit beyond the current expiration date. In the event you 

are so notified, any unused portion of the credit shall be available upon presentation of your 

sight draft for 120 days after the date of receipt by both you and [owner's or operator's name], 

as shown on the signed return receipts.

Whenever this letter of credit is drawn on under and in compliance with the terms of this 

credit, we shall duly honor such draft upon presentation to us, and we shall deposit the 

amount of the draft directly into the standby trust fund of [owner's or operator's name] in 

accordance with your instructions for the fulfillment of [corrective action, injection well 

plugging, post injection site care and site closure, and/or emergency and remedial response] 

obligations described at 40 CFR 146.84, 146.92, 146.93, and/or 146.94, respectively. 

[Signature(s) and title(s) of official(s) of issuing institution]

[Date]

This credit is subject to [insert “the most recent edition of the Uniform Customs and Practice 

for Documentary Credits, published and copyrighted by the International Chamber of 

Commerce,” or “the Uniform Commercial Code”].
UIC Program Class VI Financial Responsibility Guidance B-17 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

V. Certificate of Insurance 

A certificate of insurance, as specified in this chapter, may be worded as follows, except that 

instructions in brackets are to be replaced with the relevant information and the brackets 

deleted:

Certificate of Insurance for [corrective action, injection well plugging, post injection site care 

and site closure, and/or emergency and remedial response] 

Name and Address of Insured (herein called the “insured”):

Name and Address of Insurer (herein called the “insurer”):

Injection Wells covered: [list for each well: The EPA Identification Number, name, 

address, and the amount of insurance for [corrective action, injection well plugging, post 

injection site care and site closure, and/or emergency and remedial response] (these 

amounts for all injection wells covered must total the face amount shown below).] 

Face Amount: 

Policy Number: 

Effective Date:

The insurer hereby certifies that it has issued to the Insured the policy of insurance identified 

above to provide financial assurance for [corrective action, injection well plugging, post 

injection site care and site closure, and/or emergency and remedial response] for the injection

wells identified above. The Insurer further warrants that such policy conforms in all respects 

with the requirements for the fulfillment of [corrective action, injection well plugging, post 

injection site care and site closure, and/or emergency and remedial response] obligations 

described at 40 CFR 146.84, 146.92, 146.93, and/or 146.94, respectively, as applicable and 

as such regulations were constituted on the date shown immediately below. It is agreed that 

any provision of the policy inconsistent with such regulations is hereby amended to eliminate 

such inconsistency. 

The insurer may cancel the policy only for failure to pay the premium and by sending notice 

of cancellation by certified mail to the owner or operator and to the UIC Program Director

for the area in which the injection well(s) is (are) located. EPA requires that cancellation not 

become final for 120 days beginning on the date of receipt of the notice of cancellation by 

the UIC Program Director, as evidenced by the return receipts.

Whenever requested by the UIC Program Director, the Insurer agrees to furnish to the UIC 

Program Director a duplicate original of the policy listed above, including all endorsements 

thereon. 
UIC Program Class VI Financial Responsibility Guidance B-18 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

[Authorized signature of Insurer] 

[Name of person signing] 

[Title of person signing]

[Signature of witness or notary:] 

[Date]
UIC Program Class VI Financial Responsibility Guidance B-19 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

VI. Letter from CFO

A letter from the chief financial officer, as specified in this chapter, may be worded as 

follows, except that instructions in brackets are to be replaced with the relevant information 

and the brackets deleted: 

Letter From Chief Financial Officer

[Address to the UIC Program Director for which financial responsibility is to be 

demonstrated.] 

I am the chief financial officer of [name and address of firm.] This letter is in support of this 

firm's use of the financial test to demonstrate financial assurance.

[Fill out the following four paragraphs regarding injection wells and associated cost 

estimates. If your firm has no injection wells that belong in a particular paragraph, write 

“None” in the space indicated. For each injection well, include its EPA Identification 

Number, name, address, and current [corrective action, injection well plugging, post injection 

site care and site closure, and/or emergency and remedial response] cost estimate.]

1. This firm is the owner or operator of the following injection wells for which financial 

assurance for [corrective action, injection well plugging, post injection site care and site 

closure, and/or emergency and remedial response] is demonstrated through the financial 

test. The current [corrective action, injection well plugging, post injection site care and site 

closure, and/or emergency and remedial response] cost estimate covered by the test is 

shown for each injection well (i.e., all obligations secured by the owner or operator using 

by financial test): 

2. This firm guarantees, through the corporate guarantee, the [corrective action, injection 

well plugging, post injection site care and site closure, and/or emergency and remedial 

response] of the following injection wells owned or operated by subsidiaries of this firm. 

The current cost estimate for [corrective action, injection well plugging, post injection site 

care and site closure, and/or emergency and remedial response] so guaranteed is shown for 

each injection well: 

3. In states where EPA is not administering the financial requirements, this firm, as owner 

or operator or guarantor, is demonstrating financial assurance for the [corrective action, 

injection well plugging, post injection site care and site closure, and/or emergency and 

remedial response] of the following injection wells through the use of a test equivalent or 

substantially equivalent to the financial test. The current [corrective action, injection well 

plugging, post injection site care and site closure, and/or emergency and remedial response] 

cost estimate covered by such a test is shown for each injection well: 

4. This firm is the owner or operator of the following injection wells for which financial 

assurance for [corrective action, injection well plugging, post injection site care and site 

closure, and/or emergency and remedial response] is not demonstrated either to EPA or a 
UIC Program Class VI Financial Responsibility Guidance B-20 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

state through the financial test or any other financial assurance instrument. The current 

[corrective action, injection well plugging, post injection site care and site closure, and/or 

emergency and remedial response] cost estimate not covered by such financial assurance is 

shown for each injection well: 

This firm [insert “is required” or “is not required”] to file a Form 10K with the Securities and 

Exchange Commission (SEC) for the latest fiscal year.

The fiscal year of this firm ends on [month, day]. The figures for the following items marked 

with an asterisk are derived from this firm's independently audited, year-end financial 

statements for the latest completed fiscal year, ended [date].

[Fill in Financial Coverage Criteria regardless of which corporate financial test is being 

used.] 

Financial Coverage Criteria 

1. (a) Cost in current dollars for [corrective action, injection well plugging, post injection 

site care and site closure, and/or emergency and remedial response] (i.e., all obligations 

secured by the owner or operator using the financial test)

$____ 

(b) Sum of the company's financial responsibilities currently met using the financial 

test or corporate guarantee, including CERCLA and RCRA

(c) Total of lines a and b

2. Tangible net worth

3. Current assets

4. Current liabilities

5. Net working capital [line 3 minus line 4]

6. Total assets

7. Total assets in U.S.

Yes No

8. Is line 2 at least $100 million?

9. Is line 2 at least 6 times line 1(c)?

10. Is line 5 at least 6 times line 1(c)?

11. Is line 7 at least 90% of Line 6? If not, complete line 12.

12. Is line 7 at least 6 times line 1(c)?
UIC Program Class VI Financial Responsibility Guidance B-21 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

[Fill in Alternative I if using the financial ratios test. Fill in Alternative II if using the bond 

rating test.] 

Alternative I: Financial Ratios Test 

1. Total liabilities $____

2. Net worth

3. Current assets

4. Current liabilities

5. Net working capital [line 3 minus line 4]

6. The sum of net income plus depreciation, depletion and amortization

7. Total assets

Yes No

8. Is line 1 divided by line 2 less than 2.0?

9. Is line 3 divided by line 4 greater than 1.5?

10. Is line 6 divided by line 1 greater than 0.1?

11. Is line 5 divided by line 7 greater than -0.1?

12. Is net profit greater than 0?

Alternative II: Bond Rating Test 

1. Current bond rating of most recent issuance of this firm and name of rating service

(rating service must be either Standard & Poor’s or Moody’s) 

2. Date of issuance of bond

3. Date of maturity of bond

4. Committee on Uniform Securities Identification Procedures (CUSIP) number

I hereby certify that the wording of this letter is identical to the wording specified in the 

Underground Injection Control VI Program Financial Responsibility Guidance as such 

regulations were constituted on the date shown immediately below. 

[Signature]

[Name]

[Title]

[Date]
UIC Program Class VI Financial Responsibility Guidance B-22 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

VII. Corporate Guarantee 

A corporate guarantee as specified in this chapter may be worded as follows except that 

instructions in brackets are to be replaced with the relevant information and the bracketed 

material deleted:

Guarantee for [corrective action, injection well plugging, post injection site care and site 

closure, and/or emergency and remedial response] 

Guarantee made this ___ day of ___, 20___, by [name of guaranteeing entity], a business 

corporation organized under the laws of the State of __________, herein referred to as 

guarantor, to the United States Environmental Protection Agency (EPA) or state of [name of 

state], obligee, on behalf of our subsidiary [owner or operator] of [business address]. 

Recitals

1. Guarantor meets or exceeds the financial test criteria and agrees to comply with the 

reporting requirements for guarantors.

2. [Owner or operator] owns or operates the following Class I hazardous waste injection 

well covered by this guarantee: [List for each facility: EPA Identification Number, name, 

and address. Indicate for each whether guarantee is for closure, post-closure care, or both.] 

3. “[Corrective Action, Injection Well Plugging, Post Injection Site Care and Site Closure,

and/or Emergency and Remedial Response] Plan” as used below refers to the plans 

maintained as required by 40 CFR part 146 for the [corrective action, injection well 

plugging, post injection site care and site closure, and/or emergency and remedial response] 

of injection wells as identified above.

4. For value received from [owner or operator], guarantor guarantees to EPA or the state of 

[name of state] that in the event that [owner or operator] fails to perform [“[corrective 

action, injection well plugging, post injection site care and site closure, and/or emergency 

and remedial response]”] of the above facility(ies) in accordance with the [Corrective 

Action, Injection Well Plugging, Post Injection Site Care and Site Closure, and/or 

Emergency and Remedial Response] Plan and other requirements when required to do so, 

the guarantor may do so or fund a trust fund in the name of [owner or operator] in the 

amount of the adjusted [corrective action, injection well plugging, post injection site care 

and site closure, and/or emergency and remedial response] cost estimates prepared.

5. Guarantor agrees that, if at the end of any fiscal year before termination of this 

guarantee, the guarantor fails to meet the financial test criteria, guarantor may send within 

90 days, by certified mail, notice to the UIC Program Director for the area in which the 

facility(ies) is (are) located and to [owner or operator] that he intends to provide alternate 

financial assurance in the name of [owner or operator]. Within 30 days after sending such 

notice, the guarantor may establish such financial assurance if [owner or operator] has not 

done so. 
UIC Program Class VI Financial Responsibility Guidance B-23 

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

6. The guarantor agrees to notify the UIC Program Director, by certified mail, of a 

voluntary or involuntary case under Title 11, U.S. Code, naming guarantor as debtor, 

within 10 days after its commencement.

7. Guarantor agrees that within 30 days after being notified by the UIC Program Director of 

a determination that guarantor no longer meets the financial test criteria or that he is 

disallowed from continuing as a guarantor of [corrective action, injection well plugging, 

post injection site care and site closure, and/or emergency and remedial response], he may

establish alternate financial assurance, in the name of [owner or operator] if [owner or 

operator] has not done so. 

8. Guarantor agrees to remain bound under this guarantee notwithstanding any or all of the 

following: amendment or modification of the [Corrective Action, Injection Well Plugging, 

Post Injection Site Care and Site Closure, and/or Emergency and Remedial Response] Plan, 

the extension or reduction of the time of performance of [corrective action, injection well 

plugging, post injection site care and site closure, and/or emergency and remedial response] 

or any other modification or alteration of an obligation of [owner or operator]. 

9. Guarantor agrees to remain bound under this guarantee for so long as [owner or 

operator] must comply with the applicable financial assurance requirements of 40 CFR part 

164.85 for the above-listed facilities, except that guarantor may cancel this guarantee by 

sending notice by certified mail, to the UIC Program Director for the area in which the 

facility(ies) is (are) located and to [owner or operator], such cancellation should become 

effective no earlier than 120 days after actual receipt of such notice by both EPA or the 

state of [name of state] and [owner or operator] as evidenced by the return receipts. 

10. Guarantor agrees that if [owner or operator] fails to provide alternate financial 

assurance and obtain written approval of such assurance from the UIC Program Director

within 90 days after a notice of cancellation by the guarantor is received by both the UIC 

Program Director and [owner or operator], guarantor may provide alternate financial 

assurance in the name of [owner or operator]. 

11. Guarantor expressly waives notice of acceptance of this guarantee by the EPA or the 

state of [name of state] or by [owner or operator]. Guarantor also expressly waives notice 

of amendments or modifications of the [Corrective Action, Injection Well Plugging, Post 

Injection Site Care and Site Closure, and/or Emergency and Remedial Response] Plan.

Effective date: 

[Name of guarantor]

[Authorized signature for guarantor] 

[Type name of person signing] 

[Title of person signing] 

[Signature of witness or notary] 
UIC Program Class VI Financial Responsibility Guidance

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

B-24

VIII. Escrow Account

An escrow agreement, as specified in this chapter, may be worded as follows, except that

instructions in brackets are to be replaced with the relevant information and the brackets deleted:

Escrow Agreement

This Escrow Agreement is entered into by and between: The “Grantor,” [Name of owner or

operator] a [name of state] [insert “corporation,” “partnership,” “association,” or

“proprietorship”]; and the “Escrow Agent,” [name of Escrow Agent].

The Grantor and the Escrow Agent are hereinafter collectively referred to as the “Parties.”

Recitals

Whereas, on [insert date] the “Agency,” [(United States Environmental Protection Agency, an

agency of the United States Government), or (name of state agency)], issued to the Grantor an

individual [Class VI Well Permit];

Whereas, the Permit authorizes the Grantor to operate a Class VI Well located at [insert city,

state] and to operate an injection well in accordance with the terms and conditions set forth

therein;

Whereas, the Agency has established certain regulations applicable to the Grantor, requiring that

an owner or operator of an injection well shall provide assurance that funds will be available

when needed for [corrective action, injection well plugging, post injection site care and site

closure, and/or emergency and remedial response of the injection well];

Whereas, this Escrow Agreement is the Agency approved form of a financial assurance

instrument that provides for [corrective action, injection well plugging, post injection site care

and site closure, and/or emergency and remedial response of the injection well], as required by

the Permit. This Escrow Agreement defines the terms and conditions under which the account

will be held and disbursed;

Whereas, the “Required Escrow Amount” to be placed in the Escrow Account is [can insert

statement on the amount to be held in the Escrow Account];

Whereas, the Escrow Agent agrees to accept, hold, and disburse the Escrow Account funds and

the earnings thereon in accordance with the terms of this Escrow Agreement; and

Whereas said Escrow Agent shall establish a standby trust fund as is required when an Escrow

Account is used to provide such financial assurance.

Now, therefore, in consideration of the recitals above, the covenants and agreements set forth

herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby

acknowledged, the Parties agree as follows:

Escrow Account

1. The Grantor shall deliver to the Escrow Agent the Required Escrow Amount of $[insert

dollars] at least [insert number (#)] calendar days prior to [insert date].
UIC Program Class VI Financial Responsibility Guidance

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

B-25

2. Within [insert number (#)] business days of receipt of the Required Escrow Amount or

additional funds pursuant to Paragraph 3 below, the Escrow Agent shall place the

Required Escrow Amount in an interest bearing account (the “Escrow Account”) at the

“Financial Institution ”, [insert name of financial institution] located at [insert city,

state]. All funds delivered by the Grantor to the Escrow Agent shall be deposited and

held by the Escrow Agent in the Escrow Account.

3. Within [insert number (#)] calendar days of any disbursement form the Escrow Account,

the Grantor shall deliver additional funds to the Escrow Agent so that the amount

available in the Escrow Account shall be no less than the Required Escrow Amount,

provided that at no time may the Escrow Account incur a negative balance.

4. The Financial Institution shall be entitled to charge the Escrow Account for services

related to the maintenance of the Escrow Account at a rate not exceeding the Financial

Institution ’s standard charges to other customers for similar services.

5. The Escrow Account shall be opened with the signature of the Escrow Agent indicating

that checks drawn against the Escrow Account shall be signed by the Escrow Agent and

by no other persons. Disbursements shall be made from the Escrow Account only in

accordance with the terms of this Agreement.

6. The Escrow Agent shall maintain a record of all deposits, income, disbursements, and

other transactions concerning the Escrow Account. [More details can be inserted here].

7. The Escrow Agent shall keep in its possession all book(s) and records relating to the

Escrow Account until such time as they are delivered to a successor Escrow Agent

pursuant to [insert paragraph] or to the Grantor and the Agency pursuant to [insert

paragraph] below.

Disbursements

8. The Escrow Agent shall make disbursements of the Escrow Account funds including any

accrued interest only as follows:

a. [Number (#) business days] following receipt of written direction from the Agency

stating that funds held in the Escrow Account are required to pay for [corrective

action, injection well plugging, post injection site care and site closure, and/or

emergency and remedial response of the injection well], the Escrow Agent shall

disburse such funds to the standby trust fund in the amount(s) identified, in

accordance with the Agency’s written direction for the fulfillment of [corrective

action, injection well plugging, post injection site care and site closure, and/or

emergency and remedial response] obligations described at 40 CFR 146.84,

146.92, 146.93, and/or 146.94, respectively. Or, if an order is issued to begin

[corrective action, injection well plugging, post injection site care and site closure,

and/or emergency and remedial response] by a U.S. district court or other court of

competent jurisdiction, the Escrow Agent shall disburse such funds to the standby

trust fund within [Number (#) of business days].
UIC Program Class VI Financial Responsibility Guidance

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

B-26

b. The Escrow Agent shall disburse all funds in the Escrow Account to the Grantor

within [number (#)] business days of receipt of a joint written direction from the

Agency and the Grantor that the Escrow Account funds are no longer required to

fund the [corrective action, injection well plugging, post injection site care and

site closure, and/or emergency and remedial response of the injection well], as

required by the Permit.

Duties and Liabilities of Escrow Agent

9. The Escrow Agent shall have no liability or obligation with respect to the Escrow

Account funds except for the Escrow Agent’s willful misconduct, bad faith, or gross

negligence. The Escrow Agent shall be under no duty to: (a) pass upon the adequacy of

any documents; (b) determine whether any of the Parties are complying with the terms

and provisions of the Escrow Agreement; or (c) determine the identity or authority of any

person purporting to be a signatory authorized by the Grantor or the Agency.

Escrow Agent’s Fee

10. The Escrow Agent shall be entitled to compensation from the Grantor for its services

under this Escrow Agreement in accordance with the attached fee schedule.

Investment Risk

11. In no event shall the Escrow agent have any liability as a result of any loss occasioned by

the financial difficulty or failure of any institution, including the Financial Institution , or

for failure of any banking institutions, including the Financial Institution , to follow the

instructions of the Escrow Agent.

Notices

12. All notices, certifications, authorizations, request, or other communications permitted or

required shall be delivered as follows:

a. To the Grantor: [insert address]

b. To the Agency: [insert address]

c. To the Escrow Agent: [insert address]

13. The Escrow Agent shall annually, at least 30 days prior to the anniversary date of

establishment of the account, furnish to the Grantor and to the appropriate Agency a

statement confirming the value of the account. Any securities in the account shall be

valued at market value as of no more than 60 days prior to the anniversary date of

establishment of the account. The failure of the Grantor to object in writing to the Escrow

Agency within 90 days after the statement has been furnished to the Grantor and the

Agency shall constitute a conclusively binding assent by the Grantor, barring the Grantor

from asserting any claim or liability against the Escrow Agent with respect to matters

disclosed in the statement.
UIC Program Class VI Financial Responsibility Guidance

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

B-27

Resignation, Removal, and Successor Escrow Agent

14. If, at any time, the Escrow Agent shall resign, be removed, be dissolved, or otherwise

become incapable of acting, or the position of the Escrow Agent shall become vacant for

any reason, the Parties shall promptly appoint a successor Escrow Agent.

15. The Escrow Agency may not cancel or terminate the Escrow Account unless there is a

failure to pay service fees. The Escrow Agent should send notice of cancellation by

certified mail to the owner or operator and the Agency.

16. All interest income accrued on funds in the Escrow Account shall become part of the

Escrow Account and shall remain in the Escrow Account. The Grantor shall be solely

responsible for the payment of all federal and state taxes on accrued Escrow Account

interest.

Miscellaneous

17. This Escrow Agreement constitutes the entire agreement between the Parties relating to

the holding, investment, and disbursement of the Escrow Account funds.

18. The Escrow Agreement shall be binding upon, and shall inure to the benefit of the Parties

hereto and their successors and assigns.

This Escrow Agreement shall be governed by and be construed and interpreted in

accordance with the laws of [name of state] with regard to the Grantor without

giving effect to the conflict of laws principles thereof. Any claims relating to EPA

will be resolved under federal law including, but not limited to the Federal Tort

Claims Act 28 U.S.C. 2671, 2680.

19. This Escrow Agreement may be executed in any number of counterparts each which shall

constitute an original and all counterparts shall constitute one Agreement.

20. This Escrow Agreement may not be assigned, amended, altered, or modified except by

written instrument duly executed by all of the Parties, with the concurrence of the UIC

Program Director, or by the Escrow Agent and the appropriate Director if the Grantor

ceases to exist.

21. This Escrow Agreement shall terminate, and the Escrow Agent shall be relieved of all

liability to the Grantor after: (a) all funds in the Escrow Account have been properly

disbursed in accordance with the terms and conditions of this agreement; (b) the Escrow

Agent has provided a final accounting of all transactions hereunder to the Parties; and (c)

a copy of all books and records relating to the Escrow Account has been delivered to the

Grantor, and, if requested, to the Agency. EPA does not indemnify either the Grantor or

the Escrow Agent due to the restrictions imposed by the Anti-Deficiency Act, 31 U.S.C.

1341.

22. This Agreement shall take effect on the latest date of execution by the Grantor, Agency,

or Escrow Agent.

23. [Can add additional terms here]
UIC Program Class VI Financial Responsibility Guidance

Appendix B: Recommended Financial Responsibility Instrument Language (Forms/Templates)

B-28

In witness whereof, the Parties have caused this Escrow Agreement to be duly executed as set

forth below.

[Signature of Grantor]

[Title]

[Seal]

[Signature of Escrow Agent]

[Title]

[Seal]
UIC Program Class VI Financial Responsibility Guidance C-1 

Appendix C: Cost Estimation Methodology

Appendix C: Methodology for Estimating Costs for Financial Responsibility Demonstrations for 

Class VI Wells

DISCLAIMER

This is guidance only. It provides examples of cost considerations or activities that may need to be 

performed to satisfy the requirements of the Class VI Rule. It may not include all necessary costs. 

I. Introduction 

In December 2010, EPA published “Federal Requirements under the Underground Injection 

Control Program for Carbon Dioxide Geologic Sequestration Wells.”22 The Rule established a 

new Class VI well with specific requirements for the underground injection of carbon dioxide for

the purpose of GS, including minimum technical criteria for: geologic site characterization; area 

of review (AoR) and corrective action; Class VI well construction and operation; mechanical 

integrity testing (MIT) and monitoring; and injection well plugging, post-injection site care, and 

site closure. 

The Rule also contains specific provisions for owners or operators of Class VI wells to 

demonstrate and maintain financial responsibility for corrective action on wells in the AoR, 

injection well plugging, post-injection site care and site closure, and emergency and remedial 

response. Operators would also be required to adjust the financial responsibility cost estimates as 

needed, e.g., to account for any amendments to the required plans for the above activities or if 

the UIC Program Director determines that the original demonstration is no longer adequate. 

Appendix A presents the regulatory language for financial responsibility at 40 CFR Part 146.85. 

Figure 2, reproduced from Chapter 2, presents the overall phases of GS project activities; the 

required GS activities for which financial responsibility must be demonstrated are shown in bold. 

To demonstrate financial responsibility, Class VI well owners or operators need to accurately 

estimate costs, particularly for the GS-unique requirements, such as post-injection site care and 

closure and emergency and remedial response, where less experience with estimating and 

evaluating these costs exists. In some cases, states may be able to provide technical assistance in 

estimating costs by providing resources or direct assistance. In all cases the UIC Program 

Director must be able to evaluate these cost estimates. Finally, independent third party insurers 

or providers of financial instruments need to know the process of cost estimation for Class VI

wells since accurate cost estimation is the underpinning of demonstrating financial responsibility. 

 

22 The requirements are published under the Safe Drinking Water Act (SDWA), therefore, failure to perform or 

sequester carbon dioxide is not a part of this regulation.
UIC Program Class VI Financial Responsibility Guidance C-2 

Appendix C: Cost Estimation Methodology

Figure 2: GS Financial Responsibility Timeline (Reproduced from Chapter 2)

*Please note that the timeframes in this exhibit are not to scale. Financial responsibility demonstrations will coincide with permitting

(or revisions made after permitting), therefore Area of Review and Corrective Action prior to permitting (i.e., prior to well 

construction) are not activities for which financial responsibility must be demonstrated.

This guidance provides methods and considerations for estimating the costs of GS activities for 

which there are financial responsibility requirements. The intended audience is Class VI well 

owners or operators, EPA and state regulators, and the general public. For information on 

financial responsibility instruments in the UIC Program and for GS, see “Underground Injection 

Control (UIC) Class VI Program: Financial Responsibility Guidance.” 

The Sections that follow address the following topics:

• Guidelines for estimating costs to support financial responsibility demonstrations for 

Class VI wells.

• Suggestions for estimating the total project costs for activities that require financial 

responsibility over the life of a GS project. 

This guidance provides a framework and considerations for owners or operators to assist with the 

cost estimation process. In each Section, tables break out a number of relevant activities and cost 

estimates. Additionally, each Section includes a number of considerations for cost estimation. 

However, this guidance is not intended to be a complete or all inclusive template for estimating 

costs. Costs for activities not listed in this guidance may be relevant, and uncertainty and 

variability should be considered. Many of the tables have a field for “other” costs not described 

in this guidance. Notably, the cost of securing financial responsibility instruments for GS 

activities is not described in this guidance. Full responsibility for complete and accurate cost 

estimations rests with the owner or operator alone. 
UIC Program Class VI Financial Responsibility Guidance C-3 

Appendix C: Cost Estimation Methodology

II. Estimating Costs to Support GS Financial Responsibility Demonstrations 

This Section suggests a process for estimating costs for the following activities: 

1. Performing corrective action on wells in the AoR 

2. Plugging the injection well(s) 

3. Post-injection site care 

4. Site closure 

5. Emergency and remedial response 

These activities follow the siting of a GS project and occur during and following carbon dioxide 

injection activities. Each GS project will have different characteristics for each of these activities

and will require unique management decisions by the owner or operator or the UIC Program 

Director. Corrective action activities are conducted according to the owner or operator’s 

approved AoR and Corrective Action Plan that details the immediate, as well as phased-in, 

actions to ensure that all wells in the AoR receive needed corrective action. During project 

operation, injection and monitoring, as well as during injection well plugging and post-injection 

site care and closure a number of activities are required as either one-time or recurring events as 

should be described in respective planning documents. Additionally, during these phases costs 

for emergency response may be incurred to address movement of formation of fluids that may 

endanger underground sources of drinking water (USDWs). The process of estimating costs for 

each of these activities is described in this Section. 

Sources of information to support cost estimations include environmental, geological, and 

engineering firms, which typically perform these types of activities on contractual basis. It is 

recommended that operators or permitting authorities consult third parties, such as certified 

contractors or engineers with established credentials or with whom they have worked before. 

Also, see the “Final Cost Analysis for the Federal Requirements Under the Underground 

Injection Control Program for Carbon Dioxide Geologic Sequestration Wells (Final GS Rule)” 

(EPA 816-R-10-013) which contains costs estimated by EPA as part of the rulemaking. 

 

1. Performing corrective action on wells in the AoR 

Summary of Requirements 

Class VI well operators must identify all artificial penetrations (including active and abandoned 

wells and mines) in the AoR, determine which wells may potentially endanger USDWs, and 

apply corrective action to those wells in a manner that prevents movement of carbon dioxide or 

other fluids. 

At the UIC Program Director’s approval, owners or operators of Class VI wells may be able to 

phase-in corrective action and focus initially on those wells in the portion of the AoR that would 

be intersected by the carbon dioxide plume or pressure front over the early years of the injection 

operation. The operator would address the remaining wells after injection has commenced 

according to the requirements of 40 CFR 146.84 and as described in the approved AoR and 

Corrective Action Plan. Class VI well operators must provide financial assurance that resources 
UIC Program Class VI Financial Responsibility Guidance C-4 

Appendix C: Cost Estimation Methodology

are available to address wells for which corrective action is deferred. This phased approach is 

only applicable to Class VI wells.

Throughout the life of the project, owners and operators will be required to periodically 

reevaluate the AoR according to 40 CFR 146.84. Owners or operators would need to address any 

additional deficient wells identified if the AoR were determined to be larger (or differently 

shaped) as a result of the reevaluation. 

To estimate corrective action costs, owners or operators may need to identify the costs of 

following activities:

• Obtaining data inputs for the AoR model (e.g., monitoring and operating data gathered 

during the course of injection); 

• Updating the AoR modeling based on operational and monitoring data; 

• Identifying and evaluating wells in the AoR that were not evaluated in the pre-operational 

AoR study; or

• Addressing newly-identified deficient wells and wells identified in the original study for 

which corrective action was deferred.

Estimating Costs 

AoR Modeling 

While the Class VI Rule contains no specific requirement to demonstrate financial responsibility 

for AoR reevaluations, it will be necessary to update the AoR models to ensure that all wells that 

need corrective action are identified. The cost of this element derives from paying an expert (or 

team of experts) to set up, run, and interpret a site-specific simulation model. This could also be 

a re-run of the modeling conducted in the original AoR. In either case, the model should 

incorporate monitoring and operating data collected during injection operations. Some operators 

may choose to retain contractor support for this activity. In this case, the cost would be based on 

the estimate provided by the contractor. 

Table 1: Estimating AoR Modeling Costs

Activity Cost Estimate

Obtaining/compiling data inputs for model (e.g., monitoring and 

operating data )

Incorporate monitoring results into computational AoR models

Sum of Above = Total Cost Estimate
UIC Program Class VI Financial Responsibility Guidance C-5 

Appendix C: Cost Estimation Methodology

Identifying and Evaluating Additional Wells that Require Corrective Action

Locating wells in the AoR may involve a range of activities, from database searches to ground 

surveys to sophisticated remote sensing techniques, such as airborne or geophysical surveys. 

If reliable state or local databases exist, an updated data search may suffice, but if well logs or a 

physical inspection of known wells is not conclusive (e.g., in areas where land uses rapidly 

change), ground or airborne surveys may be needed. An airborne magnetic survey is carried out 

using a helicopter which flies over the area to detect well casings. Magnetic surveys can also be 

carried out from ground vehicles, but airborne surveys can cover large survey areas much more 

efficiently. 

If additional wells in the AoR are identified, additional follow-up, research of well records, or 

physical inspection of the wells can be used to obtain additional data on the condition of these 

wells. The total cost of this activity is the sum of the following (see Table 2):

• The labor hours needed to perform a database search.

• The cost of performing ground or airborne surveys (a function of the size of the AoR). 

• The labor hours required to evaluate the condition of the wells. 

Table 2: Estimating the Cost of Evaluating Wells in the AoR 

Activity Cost Estimate

Conduct database search

Perform ground or airborne survey

Evaluate wells

Other

Sum of Above = Total Cost Estimate

Addressing Deficient Wells in the AoR

A deficient well is one that may potentially serve as a conduit for the movement of carbon 

dioxide or fluids into USDWs. Available corrective action techniques to address deficient wells 

in the AoR include plugging of the injection wells in the AoR or remedial cementing. The total 

cost of this activity is dependent on the action taken, the number of wells in the AoR that must be 

addressed (if injection well plugging or remedial cementing is used), and the extent of any 

additional testing performed. Cost estimates must account for wells to be identified as part of 

phased corrective action and any wells identified as part of AoR reevaluations. See Table 3. 

• Plugging deficient injection wells involves cleaning out the well (i.e., the removal of 

existing plugs and casing strings) and re-plugging the wells using cement that is 

compatible with carbon dioxide. 

• In remedial cementing, operators squeeze carbon dioxide-compatible cement into 

channels or voids between the casing and the borehole to prevent upward migration along 

the un-cemented casing. 
UIC Program Class VI Financial Responsibility Guidance C-6 

Appendix C: Cost Estimation Methodology

Table 3: Estimating the Cost to Address Deficient Wells in the AoR23

Activity A B Cost Estimate

Plug deficient wells

Cost to clean out well 

and re-plug well Number of wells Total = A*B

Perform remedial 

cementing

Cost to cement well Number of wells Total = A*B

Other testing necessary to 

determine well integrity

Sampling and analysis 

cost per well

No. of monitoring 

wells Total = A*B

Sum of Above = 

Total Cost Estimate

Total Costs: AoR Reevaluation and Corrective Action 

The total cost estimate for reevaluating the AoR and performing all necessary corrective action is 

the sum of the above activities, as illustrated in Table 4 below: 

Table 4: Total Cost of AoR Reevaluation and Corrective Action

Activity Cost Estimate

Cost to update AoR modeling (from Table 1)

Cost to identify and evaluate additional wells in the AoR (from 

Table 2) 

Cost to address deficient wells in the AoR (from Table 3)

Sum of Above = Total Cost Estimate

Considerations for Cost Estimation

The following should be considered in estimating and evaluating costs for updating the AoR 

model and applying additional corrective action: 

• The sophistication of the original AoR calculation model (i.e., how easily its parameters 

can be updated to incorporate new data and how well the code is constructed to 

accommodate changes in the parameters).

• The type of geophysical or other method used to locate wells in the AoR. 

• The anticipated size and shape of the carbon dioxide plume and pressure front. This will 

affect the amount of monitoring data that would need to be incorporated into model 

updates or the complexity/extent of additional well surveys. 

 

23 This form is one possible method for estimating cost, but it is more likely that insurance for improbable but 

sizeable risk events be based on damage estimates rather than the number of wells. The most appropriate estimate 

will be project- and project phase-specific.
UIC Program Class VI Financial Responsibility Guidance C-7 

Appendix C: Cost Estimation Methodology

• The type of target formation, which may affect the number of wells in the AoR. For GS 

projects in saline reservoirs, there may be few, if any, existing wellbores. However, old 

abandoned oil and gas fields may have a significant number of wells. 

• Geologic conditions, which may affect the modeling sophistication needed to adequately 

incorporate operational data and evaluate the plume.

• The pace of development or land use changes in the region, which may increase the 

chance that additional wells, including other Class VI wells, have been drilled (or 

abandoned) between AoR evaluations. In smaller AoRs with fairly slow or stable 

development, database searches may be adequate; otherwise field studies may be 

necessary. 

• The availability (and completeness) of state and local databases of drinking water wells 

and oil and gas exploration wells. 

• The condition of the cement and overall well maintenance at the wells, which may impact 

the cost of applying corrective action. 

• Access to the wells, e.g., if they are on private property.

• Composition of the carbon dioxide stream, which can affect the requirements for the 

cement used to plug the well. 

2. Plugging the Injection Well(s) 

Summary of Requirements

When injection operations are complete, owners or operators must plug injection wells to ensure 

that the wells do not become conduits for the movement of carbon dioxide, or other fluids thus 

preventing any endangerment of USDWs. This requirement is similar to the financial 

responsibility requirements for Class I and II wells. Owners or operators have the flexibility of 

choosing from suitable materials and available tests specific to the carbon dioxide GS operations 

for meeting the requirements for injection well plugging. 

The cost associated with plugging each injection well upon completion of injection operations 

through the well includes: 

• Flushing the well with a buffer fluid;

• Performing appropriate tests to measure bottomhole reservoir pressure and a final 

external mechanical integrity test (MIT) to evaluate the integrity of the existing casing 

and cement that will remain in the ground after the well is plugged; and
UIC Program Class VI Financial Responsibility Guidance C-8 

Appendix C: Cost Estimation Methodology

• Emplacing plugs made of any material (e.g., cement) compatible with the fluids with 

which they may come into contact over all or part of the well, with special care taken to 

seal drinking water zones. 

Cost estimates for injection well plugging should address all activities described in the owner or 

operator’s approved Injection Well Plugging Plan. For additional information, see Appendix D, 

which presents an Injection Well Plugging and Abandonment checklist developed by the 

National UIC Technical Workgroup. 

Estimating Costs 

Flushing the Well and Performing Pressure Testing and MIT

The costs of well flushing – removing fluids remaining in the long string casing that could react 

with the well components over time – typically include a “base cost.” This base cost may include 

the cost of bringing equipment on site, incurred by the engineering firm performing the flushing. 

The total cost of injection well plugging then can be estimated by adding the cost of flushing per 

foot/meter multiplied by the average depth of each well and number of wells to the base cost, as 

seen in Table 5. The cost of flushing operation normally depends on the materials used and the 

diameter of the well. The total cost for flushing the well would be the combination of these costs, 

as shown in Table 5.

The purpose of testing bottom-hole reservoir pressure is to determine the appropriate density of 

injection well plugging fluids to achieve static equilibrium prior to plug placement.

An external MIT is required to ensure that the long string casing and cement that are left in the 

ground after injection well plugging and site closure will maintain integrity over time. A variety 

of testing options are available for demonstrating mechanical integrity, including: 

• A tracer survey such as oxygen-activation logging. An oxygen activation log is executed 

by using high energy neutrons to convert oxygen into nitrogen-16, a gamma-ray emitter 

with a very short half life. The nitrogen-16 is generated in the wellbore. As the nitrogen16 moves away from the source, nearby detectors will register changes in gamma 

radiation. By tracing the gamma rays emitted by the nitrogen-16 as it drifts, this method 

can detect the direction and velocity of fluid movement. 

• A temperature log that records the temperature down the length of the well. By 

comparing the log with the anticipated temperature profile (e.g., the geothermal gradient), 

any temperature anomalies, which may indicate leaks, can be located. 

• A noise log that uses a microphone and amplifier to detect noise created due to 

disturbances or turbulence that may indicate leaks. The log is most often created with 

measurements made at various points in the well, though it may also be performed as a 

continuous survey. 
UIC Program Class VI Financial Responsibility Guidance C-9 

Appendix C: Cost Estimation Methodology

In addition to the methods specified above, the UIC Program Director may request any 

additional or alternative test to evaluate mechanical integrity, or allow the use of another test 

with the written approval of the Administrator. 

Reservoir pressure testing and MIT costs typically include a “base cost,” e.g., to retain a 

contractor or to bring equipment on site, plus a cost per foot/meter multiplied by the depth of the 

well. The total cost for the testing would be the sum of these costs, as shown in Table 5. 

Table 5: Estimating the Cost of Flushing Injection Wells and Performing the MIT

Activity A B C D Cost Estimate

Base cost Cost per 

foot/meter

Average 

Well depth

Number of 

wells Total =A+(B*C*D)

Flush injection wells

Measure bottomhole

reservoir pressure

Perform MITs 

(e.g., tracer survey, 

temperature log, noise 

log)

Sum of Above = 

Total Cost Estimate

Emplacing Plugs 

A variety of methods are available to plug injection wells, including the balance method, the 

cement retainer method, and the two-plug method. While most aspects of plugging Class V wells 

are similar to the procedures used for other classes of injection wells, the process for Class VI 

wells may require the owner or operator to use more plugs or to use carbon dioxide-compatible 

cement. The cost of plugging the injection well includes a “base cost” for the services of the 

contractor, which includes the cost of preparing the site, and transporting equipment (e.g., 

drilling rigs or pump trucks) to the site. In addition, injection well plugging costs include the cost 

of each plug multiplied by the number of plugs per well (e.g., one plug within the injection 

formation and one plug from the surface to bottom of the lowermost USDW) summed over the 

number of wells, as shown in Table 6. 

Table 6: Estimating the Cost to Plug Injection Wells

Activity A B C D Cost Estimate

Base cost Cost per 

plug

Average number 

of plugs

Number of 

wells

Total = A+(B*C*D)

Plug injection wells

Sum of Above = 

Total Cost Estimate
UIC Program Class VI Financial Responsibility Guidance C-10

Appendix C: Cost Estimation Methodology

Total Costs: Injection Well Plugging 

The total cost estimate for plugging injection wells is the sum of the above cost estimates, as 

illustrated in Table 7.

Table 7: Total Cost to Plug Injection Well

Activity Cost Estimate

Cost to flush well and perform reservoir pressure test and MIT 

(from Table 5) 

Cost to plug well (from Table 6) 

Sum of Above = Total Cost Estimate

Considerations for Cost Estimation

The following should be considered in estimating and evaluating costs for plugging injection 

wells: 

• Well depth, which affects the cost of MITs as well as the number of plugs or the amount 

of cement needed. 

• Composition of the captured carbon dioxide, which may affect what types of cement are 

appropriate. 

• The presence of multiple subsurface layers with USDWs, which may affect the number 

of plugs and the amount and types of cement required. 

• Types of subsurface formations, which may affect both the ease of injection well 

plugging and the types of cement needed. 

3. Post-Injection Site Care 

Summary of Requirements 

Class VI well operators must follow a Director-approved Post-Injection Site Care and Site 

Closure Plan which includes (1) assessing the pressure differential between pre-injection and 

predicted post-injection pressures in the injection zone; (2) determining the predicted position of 

the plume and associated pressure front at the time the site is closed; (3) developing a description 

of post-injection monitoring location(s), methods, and proposed frequency of monitoring; and (4) 

maintaining a schedule for submitting post-injection site care and monitoring results to the UIC 

Program Director. The plan will be site-specific, but it is assumed that operators would perform 

direct monitoring of the pressure front and indirect monitoring of the carbon dioxide plume to 

confirm that it is limited to intended zones in a frequency approved by the UIC Program 

Director. However, direct monitoring of the plume may be necessary in some cases in which it 

may include geochemical monitoring in the injection zone. The operator must conduct postinjection site care for a default period of 50 years, unless they can demonstrate that the plume 
UIC Program Class VI Financial Responsibility Guidance C-11

Appendix C: Cost Estimation Methodology

and pressure front no longer pose a risk of endangerment to USDWs and an alternative 

timeframe has been approved by the UIC Program Director. (If such a demonstration cannot be 

made after 50 years or after the approved alternative timeframe, the UIC Program Director may 

require additional site care.) This requirement is unique to Class VI wells.

Costs associated with post-injection site care include the cost of monitoring/plume tracking 

identified in the UIC Program Director-approved Post-Injection Site Care and Site Closure Plan. 

It is assumed that the monitoring would include: 

• Geochemical sampling and analysis of ground water samples; and

• Determining the extent of the carbon dioxide plume using pressure monitoring or indirect 

geophysical methods. 

Estimating Costs

Geochemical and Pressure Monitoring

Ground water sampling costs are a function of 

the parameters to be analyzed (e.g., carbon 

dioxide, salinity, pH, or metals) and the 

number of monitoring wells. The worksheet in 

Table 8 below illustrates how to estimate the 

cost of a round of sampling and analysis which 

will be repeated in a Director-approved 

frequency during the post-injection site care 

period. 

Each sampling activity may include a “base 

cost” which might be due to general activities 

such as retaining a contractor and/or equipment 

(e.g., sampling equipment), site visit, labor, etc. 

Thus, the total cost of each geochemical 

monitoring activity would include this base 

cost plus the cost associated with actual sample collection (e.g., using wireline formation testers 

and U-Tubes), and analyses of the parameters in the UIC Program Director-approved plan per 

well multiplied by the number of monitoring wells subjected to geochemical monitoring (Table 

8). Geochemical analyses can be conducted on-site through automated monitoring using downhole sensors or off-site through a certified laboratory; off-site analyses may require additional 

packing, storing, and shipping costs. The parameters analyzed would be site-specific and detailed 

in the UIC Program Director-approved Post-Injection Site Care and Site Closure Plan, which 

may include relatively “typical” parameters such as aqueous and pure phase carbon dioxide, 

TDS, pH, etc., and heavy metals, organic contaminants, and dissolved minerals (e.g., if sitespecific data indicate a potential for mineralization or mobilization of these parameters). The 

composition of injected carbon dioxide, native fluids, and subsurface rock matrix would also be 

considered for determining the parameters to be analyzed. The cost of pressure monitoring could 

Examples of Sampling and Analysis Activities 

• Collect samples

• Pack/store/ship samples 

Examples of Parameters

• TDS

• Salinity

• pH

• Methane

• Ethane, N2

• Metals (Na, K, Ca)

• Stable isotopes (C, O)

• Organic constituents

• Dissolved minerals

• Aqueous and pure phase carbon dioxide

• Pressure 

• Other parameters
UIC Program Class VI Financial Responsibility Guidance C-12

Appendix C: Cost Estimation Methodology

be estimated in a similar fashion, since it may be conducted through the use of various pressure 

sensors (e.g. piezo-electric, transducers, strain gauges, diaphragms, etc.) located down-hole. 

For more detailed information on monitoring and testing that is appropriate for GS sites see 

“Geologic Sequestration of Carbon Dioxide: Underground Injection Control (UIC) Class VI 

Well Testing and Monitoring Guidance for Owners and Operators.” 

 

Table 8: Estimating Geochemical Sampling and Pressure Monitoring Costs

Activity A B C Cost Estimate

Base Cost Average Cost per 

well

Number of 

monitoring wells Total = A+(B*C)

Monitoring 

parameters (e.g. 

pH, gases, metals, 

etc.)

Sum of Above = 

Total Cost Estimate

Post-Injection Geophysical Surveys

Various subsurface monitoring techniques that are available to track the extent of a carbon 

dioxide plume include both seismic and electrical methods. Although their applicability might be 

limited and site-specific, they would create an additional cost during the post-injection site care 

period if applied and will therefore be discussed in this Section. 

Seismic survey data can be used to evaluate carbon dioxide plume movement by evaluating 

changes in fluid properties due to displacement of brine by the carbon dioxide. There are two 

major subsurface seismic methods for monitoring: vertical seismic profiling and cross-well 

seismic methods. 

• Vertical seismic profiling (VSP) is a technique in which surface sources are arrayed 

around a well that is in close proximity to a carbon dioxide plume, along with sensors 

deployed down-hole. The advantage of VSP is that it offers high quality resolution in the 

vicinity of the test well. It can also be used to detect upward migration of carbon dioxide. 

• In cross-well seismic methods, seismic sources suspended on a cable are lowered into one 

well, and the receivers are lowered into an adjacent well. Both wells must penetrate to the 

base of the storage reservoir under investigation. This method results in a twodimensional vertical slice of the subsurface with high resolution at the reservoir level. 

Some of the other geophysical methods that may be used in a GS site are electromagnetic 

surveys (EM), electrical resistance tomography (ERT), and microgravity surveys. 
UIC Program Class VI Financial Responsibility Guidance C-13

Appendix C: Cost Estimation Methodology

The base cost for geophysical methods is 

typically a function of costs associated with 

retaining a contractor, choice of recording 

equipment, choice of source (e.g., seismic 

source), labor, etc., and would be a constant 

cost for geophysical monitoring activity. 

However, the rest of the cost would vary 

according to the extent of the area being 

surveyed (e.g., number of detectors used/area). Thus, as can be seen in Table 9, the total cost of 

geophysical activity would be the sum of the separate costs for each method used, calculated 

based on the area surveyed. 

Table 9: Estimating Geophysical Monitoring Costs

Activity A B C Cost Estimate

Base Cost Cost/square mile or km

Survey area (in 

square miles or 

km)

Total = A+(B*C)

Geophysical survey 

(e.g., seismic survey, 

electromagnetic 

survey, etc.)

Sum of Above = 

Total Cost Estimate

Total Costs: Post-Injection Site Care

It is likely that ground water sampling and analysis, pressure monitoring, and plume tracking 

would be conducted at different frequencies during the post-injection site care phase of a GS 

project and will be site-specific. See Section III for additional information on estimating the total 

cost over the life of the post-injection site care.

Considerations for Cost Estimation

The following should be considered in estimating and evaluating costs for post-injection site 

care: 

• The size and shape of the AoR, which would affect the number of monitoring wells or the 

extent of geophysical surveys. 

• The site characteristics, depth and proximity of USDWs and the depth and thickness of 

the confining zone(s), which may affect the amount of monitoring expected, particularly 

the need for monitoring wells to ensure that drinking water supplies are unaffected by the 

GS project.

• The composition of the carbon dioxide and subsurface aqueous and solid geochemistry 

and mineralogy, which would impact ground water monitoring needs. 

Examples of Plume Monitoring Activities and 

Geophysical Methods 

• Seismic surveys

• Electromagnetic surveys (EM)

• Electrical Resistance Tomography (ERT)

• Microgravity surveys

• Other methods
UIC Program Class VI Financial Responsibility Guidance C-14

Appendix C: Cost Estimation Methodology

• Baseline geochemistry at the site, which would impact the potential for certain metals or 

minerals to be mobilized. 

• Whether tracers are used, and must therefore be monitored. 

4. Site Closure

Summary of Requirements

Before the UIC Program Director can authorize closure of the GS site, the owner or operator 

must perform and submit a non-endangerment demonstration that the site no longer poses a risk 

of endangerment to USDWs [40 CFR 146.93(b)(3)]. At this point, the UIC Program Director

would determine whether further monitoring is necessary or authorize closure of the site. This 

pre-closure demonstration of non-endangerment is unique for Class VI wells.

After site closure is authorized by the UIC Program Director, the owner or operator will plug all 

monitoring wells in a manner that will prevent endangerment of USDWs and as described in the 

UIC Program Director-approved Post-Injection Site Care and Site Closure Plan. 

Costs associated with closing a GS project include costs of the following activities:

• Performing a non-endangerment demonstration; and 

• Plugging monitoring wells. 

Estimating Costs 

Perform Non-Endangerment Demonstration 

The non-endangerment demonstration will likely be an analysis of the entire site (including 

reviews of geochemical and pressure monitoring and geophysical or other site-specific data), and 

a report by a professional geologist or engineer that no additional monitoring is needed to ensure 

that the GS project does not pose an endangerment to USDWs. Sources of estimates of the cost 

of this demonstration are independent third party professional engineers, geologists, or 

geological or engineering firms.

Table 10: Estimating the Cost to Demonstrate Non-Endangerment

Activity Cost Estimate

Prepare non-endangerment demonstration report

Sum of Above = Total Cost Estimate
UIC Program Class VI Financial Responsibility Guidance C-15

Appendix C: Cost Estimation Methodology

Plug Monitoring Wells

Because monitoring wells are used for post-injection site monitoring, they are not plugged after 

the completion of injection. Once PISC monitoring is complete and the UIC Program Director

has authorized site closure, the owner or operator must plug the monitoring wells in a manner 

which will prevent the movement of injection or formation fluids that could endanger USDWs 

[40 CFR 146.93(e)]. Estimating the cost to plug a monitoring well is a function of the number of 

plugs and the number of monitoring wells, which would include any additional wells drilled for 

the purpose of post-injection monitoring, as shown in Table 11. 

Table 11: Estimating the Cost to Plug Monitoring Wells

Activity A B C Cost Estimate

Cost per plug Number of plugs per 

monitoring well

Number of 

monitoring wells Total = A*B*C

Plug monitoring 

wells 

Sum of Above = 

Total Cost Estimate

Total Costs: Site Closure

The estimated total cost of site closure is the sum of the activities in Tables 10 and 11, as 

illustrated in Table 12 below. 

Table 12: Total Cost of Site Closure

Activity Cost Estimate

Cost to prepare non-endangerment demonstration (from Table 10) 

Cost to plug monitoring wells (from Table 11)

Sum of Above = Total Cost 

Estimate

Considerations for Cost Estimation

The following should be considered in estimating and evaluating costs for GS site closure: 

• The anticipated size and shape of the carbon dioxide plume. This will affect the amount 

of data collected during the post-injection monitoring phase that would need to be 

evaluated in preparing the non-endangerment demonstration. 

• The composition of the carbon dioxide stream and subsurface geochemistry and 

mineralogy, which would impact ground water monitoring requirements and therefore the 

amount of data to be evaluated for the non-endangerment demonstration. The 

composition of the carbon dioxide can also affect appropriate plugs and cements for 

plugging monitoring wells.

• Geologic conditions that may affect the sophistication of the analysis needed for the nonendangerment demonstration. 
UIC Program Class VI Financial Responsibility Guidance C-16

Appendix C: Cost Estimation Methodology

• Monitoring well depth, which would affect the number of plugs and the types and amount 

of cement needed. 

• The presence of multiple subsurface layers with USDWs, which would impact the 

number of plugs and types of cement required. 

• The types of subsurface formations, which may impact the ease of plugging and the types 

of cement needed.

5. Emergency and Remedial Response

Summary of Requirements 

The Class VI UIC permit will contain a Director-approved Emergency and Remedial Response 

Plan that describes actions to be taken to address movement of injection or formation fluids or 

other events that may endanger USDWs. If evidence shows potential endangerment of USDWs 

(per 40 CFR 146.94), the owner or operator must cease injection and notify the UIC Program 

Director, investigate and identify the carbon dioxide release, and then implement the Emergency 

and Remedial Response Plan. 

Owners or operators must provide financial assurance that resources are available to implement 

the Emergency and Remedial Response Plan, i.e., to perform any necessary remediation to 

address contamination that results from carbon dioxide leaks or fluid movement. The 

requirement to provide financial assurance for emergency and remedial response is unique for 

Class VI wells.

Estimating Costs

Estimating financial responsibility needs 

for emergency and remedial response is 

complicated by uncertainties as to whether 

such events will occur and the nature of 

the events (and therefore the cost of 

responding). While the probability will be 

low that emergency and remedial response will be necessary at a GS site, it is important that the 

potential for such events is not underestimated and that adequate resources are available to 

address such contingencies. Estimating these costs will require an assessment of the risk 

involved. The owner or operator’s in-house risk manager will be a reliable sources of 

information needed to identify the appropriate size of an insurance policy, bond, or other 

financial responsibility instrument. Also, environmental and engineering firms, which typically 

perform “emergency response” type activities on a contractual basis, may be able to provide base 

cost estimates.

Each GS site will be unique; therefore the risks and events that may require a remedial response 

and the actions that a GS project operator would take to address potential endangerment of 

Examples of Events Which May Necessitate 

Emergency and Remedial Response

• Injection well malfunction

• Ground water contamination

• Monitoring well failure
UIC Program Class VI Financial Responsibility Guidance C-17

Appendix C: Cost Estimation Methodology

USDWs (that meets the requirements of 40 CFR 146.94) will be unique to each site. Examples of 

emergency and remedial responses may include those listed in Table 13. 

Table 13: Emergency and Remedial Response Actions

Activity Cost Estimate

Response actions to address unplanned event

Sum of Above = Total Cost Estimate

Considerations for Cost Estimation

The following should be considered in estimating and evaluating costs related to emergency and 

remedial response: 

• The size of the site, including the volume of carbon dioxide injected. 

• The number of injection wells and their age (for converted wells), which may affect the 

likelihood of a well failure.

• The risks of occurrence of the known scenarios which could require emergency or 

remedial response actions.

• The composition of the carbon dioxide and subsurface geochemistry and mineralogy, 

which would impact the potential for ground water contamination. 

• The presence of communities, drinking water systems, residences, or buildings near the 

injection site or within the AoR. 

• Proximity to USDWs or other drinking water sources. 

III. Lifetime Costs for a GS project

The purpose of financial responsibility is to ensure that there will be sufficient funds to fully 

cover specified costs. Because GS projects occur over long time frames (i.e., decades), it is 

important to recognize that costs projected over extended periods are inexact. Uncertainty may 

exist for future prices. Price changes may be due to inflation, relative price changes, or changes 

in technology. For this reason, 40 CFR146.85(c) requires an annual reevaluation of costs to 

account for changes in cost over time.

Variation in the number of times activities may occur is another source of uncertainty. Between 

the selection of a site and its ultimate closure, some activities may occur just once, while others 

may occur hundreds of times. For example, some activities, such as injection well plugging, will 

happen once in the project’s lifespan, while monitoring will occur periodically and corrective 

action or remedial responses may occur infrequently or never at all.
UIC Program Class VI Financial Responsibility Guidance C-18

Appendix C: Cost Estimation Methodology

The owner or operator should consider all likely scenarios when estimating the costs that would 

need to be covered by their financial responsibility instrument. 

While it is difficult to make exact predictions of when these “milestone” activities will occur, an 

owner or operator is likely to have information available at the time of the permit application 

(e.g., reservoir data and the anticipated rates/volumes of carbon dioxide to be injected) to support 

reasonable estimates. In addition, all of the activities for which financial responsibility must be 

provided will be described in the various plans the owner or operator must develop at the time of 

their permit application and concurrently with the financial responsibility determination. Table 

14 presents the frequency at which GS activities might occur and some data sources an owner or 

operator might consider in estimating the timing of each event. 

Table 14: GS Project Scheduling

Activities whose costs 

should be covered by the 

Owner or Operator’s 

Financial Responsibility 

Instrument

Frequency Sources of Information

Performing corrective action Periodically throughout the 

operational phase or as needed.

• AoR and Corrective Action Plan

• Anticipated carbon dioxide

volumes and reservoir data

• AoR delineation model

Plugging the injection well(s) One time • Injection Well Plugging Plan

• Reservoir data

Post-injection site care

Periodically throughout the postinjection phase; varies by site and 

type of monitoring activity

• Post-Injection Site Care and Site 

Closure Plan

Site closure One time

• Post-injection Site Care and Site 

Closure Plan

Emergency and remedial 

response

As needed • Emergency and Remedial 

Response Plan

GS project operators should pursue a conservative approach to cost estimation, taking into 

account contingency factors. Ultimately, the appropriate level of financial responsibility required 

for a site will be approved by the UIC Program Director based on their evaluation of site-specific 

information and may be much higher than the amount necessary to cover the best-case scenario, 

even though the best-case scenario may be the most likely scenario to occur.

To the extent possible, owners or operators are encouraged to estimate the uncertainty associated 

with the variability of the data in quantitative or qualitative terms. Descriptions of uncertainty 

may include assumptions and methods used to estimate costs and the use sensitivity analysis to 

identify where the improvement in state of knowledge could be made to reduce this uncertainty.

To the extent technological advancements can improve knowledge in these identified areas the 

uncertainty in the cost estimate may be reduced. Financial responsibility cost estimates may be 

based on risk assessments where best professional judgment is used to select inputs to baseline 

risk and risk reduction models. Risk modeling efforts may be performed by the owner or 

operator, or an independent third party in cases where an independent third party provides a 

financial responsibility instrument. 
UIC Program Class VI Financial Responsibility Guidance C-19

Appendix C: Cost Estimation Methodology

Additional sources for cost estimation information include:

• The U.S. Department of Energy’s Energy Information Administration, which publishes an 

Annual Energy Outlook. 

• The U.S. Bureau of Labor Statistics which publishes annual occupational employment 

statistics (including wage date), the Producer Price Index, and the Consumer Price Index. 

• Industry publications, such as the Oil and Gas Journal, which publishes indices of 

construction costs. 

• Financial institutions through which financial responsibility instruments are acquired.

• Commercially-available “cost estimation” software products.

Estimating Total GS Project Costs

Exhibit 3 illustrates how scheduling information can be used to estimate the total costs to support 

financial responsibility demonstrations for GS projects. The scheduling of anticipated activities 

can be estimated as described under “Scheduling GS Project Milestones” earlier in this Section. 

The cost estimates for each activity in the schedule would be based on the tables in Section II. 
UIC Program Class VI Financial Responsibility Guidance C-20

Appendix C: Cost Estimation Methodology

Exhibit 3: Estimating Total GS Costs

One Time Activities Periodic or Recurring Uncertain Activities

Activities

Siting 

▼ 

Area of Review 

and Corrective 

Action

Model AoR

Table 1

Evaluate Wells

Table 2

Address Deficient Wells

Table 3

 

▼ 

Well 

Construction

 

▼ 

Injection/

Operation/

Monitoring

AoR 

Reevaluation 

and Corrective 

Action

Reevaluate AoR

Table 1

Evaluate Wells

Table 2

Address Deficient Wells

Table 3

►

◄

Emergency and 

Remedial 

Response

Implement Response 

Actions as Needed

Table 13

▼

Injection Well 

Plugging

Flush Injection Wells and 

perform testing/MIT

Table 5

Plug Injection Well 

Table 6

►

◄

▼

Post-injection 

Site Care

Perform Geochemical 

Sampling and Pressure 

Monitoring

Table 8

Conduct Geophysical 

Monitoring

Table 9

►

◄

▼

Site Closure Perform Non-Endangerment

Demonstration

Table 10

Plug Monitoring Wells 

Table 11

►

◄

▼ 

Long-term Care 
UIC Program Class VI Financial Responsibility Guidance D-1 

Appendix D: Plugging and Abandonment Checklist

Appendix D: Injection Well Plugging and Abandonment Checklist for Financial Responsibility 

Cost Determination

Available online at: http://www.epa.gov/r5water/uic/ntwg/p-achecklist.pdf 

P&A CHECKLIST

For Financial Responsibility Cost Determination

Facility Name:

EPA Well ID: 

Well Location:

Well Class:

Type of Well:

List USDWs:

Formation Name Formation Top Formation Bottom 

Is well construction information current? Y/N 

Current Well Construction Information 

(Attach a well bore diagram): 
UIC Program Class VI Financial Responsibility Guidance D-2 

Appendix D: Plugging and Abandonment Checklist

 Well Construction Information Hole 

Size

Casing Size Depth Set Sacks of 

Cement

Surface

Intermediate

Long String (Production) 

Liner

Tubing 

Other (additional casing string)

Describe the weight and grade of the material casing strings and tubing are constructed:

Surface:

Intermediate:

Long String:

Additional string(s):

Tubing: 

List all perforation(s) past and present:

Perforations Depth to 

Top of Perf

Dept to 

Bottom of 

Perf

Active or 

Plugged 

Formation

1 

2 

3 

4 

5 

6 
UIC Program Class VI Financial Responsibility Guidance D-3 

Appendix D: Plugging and Abandonment Checklist

If the perforation has been plugged, list the date and describe the procedure, including cement 

used, cement tops, etc.: 

Total Well Depth:____________________ 

Packer Type:____________________

Packer Depth:___________________ 

Additional packer information: 

Perforations:1)_____________________ 4)______________________ 

 2)_____________________ 5)______________________ 

 3)_____________________ 6)______________________ 

 

 

Plug Locations Required for Proper P&A:

Plug Identifier* Plug Top Plug Bottom Resource Being Protected

(USDW, gas, coal, etc.)

*Plug Identifier: Examples, 7" casing shoe 2700'-2600', surface, perforations 2100'-1900’ 

Have any intervals/sections of the wellbore been plugged previously? If so, give the location of 

the plugs, the circumstances that required the plug and how the plug was set. 
UIC Program Class VI Financial Responsibility Guidance D-4 

Appendix D: Plugging and Abandonment Checklist

Injection Well Plugging and Abandonment

Normal Costs

1. Rig Costs

Travel:____________miles @ $__________ =_________________ 

Labor:___________hrs @___________ =_________________ 

(Super & Crew)

Equipment Costs__________hrs @ $_________ =_________________ 

(Rig cost, drilling package, etc.) 

Miscellaneous Site Costs (Tubing work string rental,

water storage, flow tanks, mud pit, etc.) 

_____________hrs. @ $_______________ =_________________ 

Well Head Cutting =_________________ 

Cement Tagging$__________per#___________ =_________________ 

Pulling Casing/Tubing 

_____________hrs.@ $________________ =__________________ 

2. Cement Costs

Pump Truck & Operator (Including Set Up) 

_____________hrs.@ $________________ =__________________ 

Tank Truck & Operator 

_____________hrs @ $________________ =__________________ 

Cement

_____________sacks @ _______________/sk =__________________ 

Type Cement___________________ 

_____________sacks @ _______________/sk =___________________ 

Type Cement___________________ 

Cement Retainer(s) $__________each =___________________ 

List Retainers:

Cement Additives (high temperature/pressure) =___________________ 
UIC Program Class VI Financial Responsibility Guidance D-5 

Appendix D: Plugging and Abandonment Checklist

Balance Plug inc. fluids and testing

$_________________ per plug x _________count =____________________ 

List Plugs:

Surface Plug inc. fluids and testing 

$_________________ =____________________ 

3. Wireline Service

Transportation ___________hrs. @ $____________ =___________________ 

Labor:___________hrs @___________ =___________________ 

Service Charges =___________________ 

Perf/Squeeze________shots @ $__________/shot =___________________ 

Cut Casing _________event(s) @ $____________ =___________________ 

Cement Retainer(s) $__________each =___________________ 

List Retainers:

TOC Log =___________________ 

Depth charge for gage rings, junk basket 

_________________ft @ $ ________________ =___________________ 

Specialized tools for fluid sampling =___________________ 

4. Site Preparations & Costs

General Site Engineering & Plan Development =___________________ 

Owner or Operator Site Supervisor =___________________ 

Backhoe & Operator

_______________hrs @ $_______________ =___________________ 
UIC Program Class VI Financial Responsibility Guidance D-6 

Appendix D: Plugging and Abandonment Checklist

Dozer & Operator

_______________hrs @ $_______________ =___________________ 

Road Construction and Improvement Costs =___________________ 

Pit Liner =___________________ 

5. Transportation & Miscellaneous 

Special Land Use Costs (Zoning & Permits) =____________________ 

Winch truck w/driver (wages & mileage) 

______________hrs @ $________________ =____________________ 

Water truck w/ driver (wages & mileage)

______________hrs @ $________________ =____________________ 

Vacuum Truck w/ driver (wages & mileage)

______________hrs @ $________________ =____________________ 

2 axle rig-up truck driver& crew wages & mileage)

______________hrs @ $________________ =____________________ 

1 axle truck w/ driver (wages & mileage)

______________hrs @ $________________ =____________________ 

Hot oiler (equip, labor & mileage) 

______________hrs @ $________________ =____________________ 

Welder (equip, labor & mileage) 

______________hrs @ $________________ =____________________ 

Packer Fluid per specs. 

$___________per ____________bbl =____________________ 

Hydraulic Jacks____________hrs @ $____________ =____________________ 

Bridge Plug =____________________ 

Waste Disposal Costs =____________________ 

Tool Rental (Ex: Casing Ripper, Collar Buster, etc.) 

List:

a.

b. 

c. =____________________ 
UIC Program Class VI Financial Responsibility Guidance D-7 

Appendix D: Plugging and Abandonment Checklist

6. Land Reclamation

(State Delegated Programs)

Please provide comments and language

7. Remediation Costs (mostly shallow wells)

Sample Analysis (fluid or soil) =____________________ 

Soil Removal =____________________ 

Site Assessment Study Costs =____________________ 

System Removal Costs =____________________ 

Disposal System Modification Costs =____________________ 

Installation of Monitoring Well Costs =____________________ 

# Wells

Type

Depth 

Construction 

Subtotal _____________________ 

 _____________________ 

=____________________ 

=____________________ 

TOTAL

Contingency ____% 

Inflation Costs

(% Cost x yrs since plan developed) 

TOTAL AMOUNT

Rounded to $100.00 =____________________