Current through Register Vol. 48, No. 38, September 20, 2024
An owner or operator of each facility must establish
financial assurance for closure of the facility. The owner or operator must
choose from the options specified in subsections (a) through (e).
a) Closure Trust Fund
1) An owner or operator may satisfy the
requirements of this Section by establishing a closure trust fund that conforms
to the requirements of this subsection and submitting an original, signed
duplicate of the trust agreement to the Agency. The trustee must 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.
2) The wording of the trust agreement must be
as specified in 35 Ill. Adm. Code
724.251,
and the trust agreement must be accompanied by a formal certification of
acknowledgment, as specified in 35 Ill. Adm. Code 724.251. Schedule A of the
trust agreement must be updated within 60 days after a change in the amount of
the current closure cost estimate covered by the agreement.
3) Payments into the trust fund must be made
annually by the owner or operator over the remaining operating life of the
facility as estimated in the closure plan; this period is hereafter referred to
as the "pay-in period". The payments into the closure trust fund must be made
as follows:
A) The first payment must be at
least equal to the current closure cost estimate, except as provided in
subsection (f), divided by the number of years in the pay-in period.
B) Subsequent payments must be made no later
than 30 days after each anniversary date of the first payment. The amount of
each subsequent payment must be determined by this formula:
Where:
CE
|
=
|
the current closure cost estimate
|
CV
|
=
|
the current value of the trust fund
|
Y
|
=
|
the number of years remaining in the pay-in
period
|
4) The owner or operator may accelerate
payments into the trust fund or may deposit the full amount of the current
closure cost estimate at the time the fund is established. However, the owner
or operator must 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 subsection
(a)(3).
5) If the owner or operator
establishes a closure trust fund after having used one or more alternate
mechanisms specified in this Section, the owner or operator's first payment
must be in at least the amount that the fund would contain if the trust fund
were established initially and annual payments made as specified in subsection
(a)(3).
6) After the pay-in period
is completed, whenever the current closure cost estimate changes, the owner or
operator must compare the new estimate with the trustee's most recent annual
valuation of the trust fund. If the value of the fund is less than the amount
of the new estimate, the owner or operator, within 60 days after the change in
the cost estimate, must either deposit an amount into the fund so that its
value after this deposit at least equals the amount of the current closure cost
estimate, or obtain other financial assurance, as specified in this Section, to
cover the difference.
7) If the
value of the trust fund is greater than the total amount of the current closure
cost estimate, the owner or operator may submit a written request to the Agency
for release of the amount in excess of the current closure cost
estimate.
8) 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 may submit a written
request to the Agency for release of the amount in excess of the current
closure cost estimate covered by the trust fund.
9) Within 60 days after receiving a request
from the owner or operator for release of funds as specified in subsection
(a)(7) or (a)(8), the Agency must instruct the trustee to release to the owner
or operator such funds as the Agency specifies in writing.
10) After beginning partial or final closure,
an owner or operator or another person authorized to conduct partial or final
closure may request reimbursement for closure expenditures by submitting
itemized bills to the Agency. The owner or operator may request reimbursement
for partial closure only if sufficient funds are remaining in the trust fund to
cover the maximum costs of closing the facility over its remaining operating
life. Within 60 days after receiving bills for partial or final closure
activities, the Agency must instruct the trustee to make reimbursement in those
amounts as the Agency specifies in writing if the Agency determines that the
partial or final closure expenditures are in accordance with the approved
closure plan, or otherwise justified. If the Agency determines that the maximum
cost of closure over the remaining life of the facility will be significantly
greater than the value of the trust fund, it must withhold reimbursement of
such amounts as it deems prudent until it determines, in accordance with
subsection (h), that the owner or operator is no longer required to maintain
financial assurance for final closure of the facility. If the Agency does not
instruct the trustee to make such reimbursements, the Agency must provide the
owner or operator a detailed written statement of reasons.
11) The Agency must agree to termination of
the trust when either of the following occurs:
A) An owner or operator substitutes alternate
financial assurance, as specified in this Section; or
B) The Agency releases the owner or operator
from the requirements of this Section in accordance with subsection
(h).
b)
Surety Bond Guaranteeing Payment into a Closure Trust Fund
1) An owner or operator may satisfy the
requirements of this Section by obtaining a surety bond that conforms to the
requirements of this subsection (b) and submitting the bond to the Agency. The
surety company issuing the bond must, at a minimum, be among those listed as
acceptable sureties on federal bonds in Circular 570 of the U.S. Department of
the Treasury.
BOARD NOTE: The U.S. Department of the Treasury updates
Circular 570, "Companies Holding Certificates of Authority as Acceptable
Sureties on Federal Bonds and as Acceptable Reinsuring Companies", on an annual
basis pursuant to
31 CFR
223.16. Circular 570 is available on the
Internet from the following website:
http://www.fms.treas.gov/c570/.
2) The wording of the surety bond must be as
specified in 35 Ill. Adm. Code 724.251.
3) The owner or operator that uses a surety
bond to satisfy the requirements of this Section must also establish a standby
trust fund. Under the terms of the bond, all payments made thereunder will be
deposited by the surety directly into the standby trust fund in accordance with
instructions from the Agency. This standby trust fund must meet the
requirements specified in subsection (a), except as follows:
A) An original, signed duplicate of the trust
agreement must be submitted to the Agency with the surety bond; and
B) Until the standby trust fund is funded
pursuant to the requirements of this Section, the following are not required by
these regulations:
i) Payments into the trust
fund, as specified in subsection (a);
ii) Updating of Schedule A of the trust
agreement (see 35 Ill. Adm. Code
724.251(a)
) to show current closure cost estimates;
iii) Annual valuations, as required by the
trust agreement; and
iv) Notices of
nonpayment, as required by the trust agreement.
4) The bond must guarantee that the owner or
operator will:
A) Fund the standby trust fund
in an amount equal to the penal sum of the bond before the beginning of final
closure of the facility;
B) Fund
the standby trust fund in an amount equal to the penal sum within 15 days after
an order to begin final closure is issued by the Board or a court of competent
jurisdiction; or
C) Provide
alternate financial assurance, as specified in this Section, and obtain the
Agency's written approval of the assurance provided, within 90 days after
receipt by both the owner or operator and the Agency of a notice of
cancellation of the bond from the surety.
5) 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.
6) The penal sum of the bond must be in an
amount at least equal to the current closure cost estimate, except as provided
in subsection (f).
7) Whenever the
current closure cost estimate increases to an amount greater than the penal
sum, the owner or operator, within 60 days after the increase, must either
cause the penal sum to be increased to an amount at least equal to the current
closure cost estimate and submit evidence of such increase to the Agency, or
obtain other financial assurance, as specified in this Section, to cover the
increase. Whenever the current closure cost estimate decreases, the penal sum
may be reduced to the amount of the current closure cost estimate following
written approval by the Agency.
8)
Under the terms of the bond, the surety may cancel the bond by sending notice
of cancellation by certified mail to the owner or operator and to the Agency.
Cancellation may 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
Agency, as evidenced by the return receipts.
9) The owner or operator may cancel the bond
if the Agency has given prior written consent based on its receipt of evidence
of alternate financial assurance, as specified in this Section.
c) Closure Letter of Credit
1) An owner or operator may satisfy the
requirements of this Section by obtaining an irrevocable standby letter of
credit that conforms to the requirements of this subsection (c) and submitting
the letter to the Agency. The issuing institution must be an entity that has
the authority to issue letters of credit and whose letter-of-credit operations
are regulated and examined by a federal or State agency.
2) The wording of the letter of credit must
be as specified in 35 Ill. Adm. Code 724.251.
3) An owner or operator that uses a letter of
credit to satisfy the requirements of this Section must also establish a
standby trust fund. Under the terms of the letter of credit, all amounts paid
pursuant to a draft by the Agency must be deposited by the issuing institution
directly into the standby trust fund in accordance with instructions from the
Agency. This standby trust fund must meet the requirements of the trust fund
specified in subsection (a), except as follows:
A) An original, signed duplicate of the trust
agreement must be submitted to the Agency with the letter of credit;
and
B) Unless the standby trust
fund is funded pursuant to the requirements of this Section, the following are
not required by these regulations:
i)
Payments into the trust fund, as specified in subsection (a);
ii) Updating of Schedule A of the trust
agreement (as specified in 35 Ill. Adm. Code 724.251) to show current closure
cost estimates;
iii) Annual
valuations, as required by the trust agreement; and
iv) Notices of nonpayment as required by the
trust agreement.
4) The letter of credit must be accompanied
by a letter from the owner or operator referring to the letter of credit by
number, issuing institution, and date and providing the following information:
the USEPA identification number, name, and address of the facility, and the
amount of funds assured for closure of the facility by the letter of
credit.
5) The letter of credit
must be irrevocable and issued for a period of at least one year. The letter of
credit must provide that the expiration date will be automatically 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 Agency 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 Agency have received the notice,
as evidenced by the return receipts.
6) The letter of credit must be issued in an
amount at least equal to the current closure cost estimate, except as provided
in subsection (f).
7) Whenever the
current closure cost estimate increases to an amount greater than the amount of
the credit, the owner or operator, within 60 days after the increase, must
either cause the amount of the credit to be increased so that it at least
equals the current closure cost estimate and submit evidence of such increase
to the Agency, or obtain other financial assurance, as specified in this
Section, to cover the increase. Whenever the current closure cost estimate
decreases, the amount of the credit may be reduced to the amount of the current
closure cost estimate following written approval by the Agency.
8) Following a final judicial determination
or Board order finding that the owner or operator has failed to perform final
closure in accordance with the approved closure plan when required to do so,
the Agency may draw on the letter of credit.
9) 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 Agency within 90
days after receipt by both the owner or operator and the Agency of a notice
from issuing institution that it has decided not to extend the letter of credit
beyond the current expiration date, the Agency must draw on the letter of
credit. The Agency may 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 Agency must draw on the letter of credit 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
Agency.
10) The Agency must return
the letter of credit to the issuing institution for termination when one of the
following occurs:
A) An owner or operator
substitutes alternate financial assurance, as specified in this Section;
or
B) The Agency releases the owner
or operator from the requirements of this Section in accordance with subsection
(h).
d)
Closure Insurance
1) An owner or operator may
satisfy the requirements of this Section by obtaining closure insurance that
conforms to the requirements of this subsection and submitting a certificate of
such insurance to the Agency. At a minimum, the insurer must 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.
2) The wording of the certificate of
insurance must be as specified in 35 Ill. Adm. Code 724.251.
3) The closure insurance policy must be
issued for a face amount at least equal to the current closure cost estimate,
except as provided in subsection (f). 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.
4) The closure insurance policy must
guarantee that funds will be available to close the facility whenever final
closure occurs. The policy must also guarantee that, once final closure begins,
the insurer will be responsible for paying out funds, up to an amount equal to
the face amount of the policy, upon the direction of the Agency to such party
or parties as the Agency specifies.
5) After beginning partial or final closure,
an owner or operator or any other person authorized to conduct closure may
request reimbursement for closure expenditures by submitting itemized bills to
the Agency. The owner or operator may request reimbursement for partial closure
only if the remaining value of the policy is sufficient to cover the maximum
costs of closing the facility over its remaining operating life. Within 60 days
after receiving bills for closure activities, the Agency must instruct the
insurer to make reimbursement in such amounts as the Agency specifies in
writing if the Agency determines that the partial or final closure expenditures
are in accordance with the approved closure plan or otherwise justified. If the
Agency determines that the maximum cost of closure over the remaining life of
the facility will be significantly greater than the face amount of the policy,
it must withhold reimbursement of such amounts as it deems prudent until it
determines, in accordance with subsection (h), that the owner or operator is no
longer required to maintain financial assurance for final closure of the
particular facility. If the Agency does not instruct the insurer to make such
reimbursements, the Agency must provide the owner or operator with a detailed
written statement of reasons.
6)
The owner or operator must maintain the policy in full force and effect until
the Agency consents to termination of the policy by the owner or operator as
specified in subsection (d)(10). Failure to pay the premium, without
substitution of alternate financial assurance as specified in this Section,
will constitute a significant violation of these regulations, warranting such
remedy as the Board may impose pursuant to the Environmental Protection Act.
Such violation will be deemed to begin upon receipt by the Agency of a notice
of future cancellation, termination, or failure to renew due to nonpayment of
the premium, rather than upon the date of expiration.
7) Each policy must contain a provision
allowing assignment of the policy to a successor owner or operator. Such
assignment may be conditional upon consent of the insurer, provided such
consent is not unreasonably refused.
8) The policy must provide that the insurer
may not cancel, terminate, or fail to renew the policy except for failure to
pay the premium. The automatic renewal of the policy must, at a minimum,
provide the insured with the option of renewal at the face amount of the
expiring policy. If there is a failure to pay the premium, the insurer may
elect to cancel, terminate, or fail to renew the policy by sending notice by
certified mail to the owner or operator and the Agency. Cancellation,
termination, or failure to renew may not occur, however, during the 120 days
beginning with the date of receipt of the notice by both the Agency and the
owner or operator, as evidenced by the return receipts. Cancellation,
termination, or failure to renew may not occur and the policy will remain in
full force and effect in the event that, on or before the date of expiration,
one of the following occurs:
A) The Agency
deems the facility abandoned;
B)
Interim status is terminated or revoked;
C) Closure is ordered by the Board or a court
of competent jurisdiction;
D) The
owner or operator is named as debtor in a voluntary or involuntary proceeding
under 11 USC (Bankruptcy); or
E)
The premium due is paid.
9) Whenever the current closure cost estimate
increases to an amount greater than the face amount of the policy, 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 closure cost
estimate and submit evidence of such increase to the Agency, or obtain other
financial assurance as specified in this Section to cover the increase.
Whenever the current closure cost estimate decreases, the face amount may be
reduced to the amount of the current closure cost estimate following written
approval by the Agency.
10) The
Agency must give written consent to the owner or operator that the owner or
operator may terminate the insurance policy when either of the following
occurs:
A) An owner or operator substitutes
alternate financial assurance, as specified in this Section; or
B) The Agency releases the owner or operator
from the requirements of this Section in accordance with subsection
(h).
e)
Financial Test and Corporate Guarantee for Closure
1) An owner or operator may satisfy the
requirements of this Section by demonstrating that the owner or operator passes
a financial test as specified in this subsection. To pass this test the owner
or operator must meet the criteria of either subsection (e)(1)(A) or (e)(1)(B):
A) The owner or operator must have all of the
following:
i) Two of the following three
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; and a ratio of current assets to current
liabilities greater than
1.5;
ii) Net working capital and tangible net
worth each at least six times the sum of the current closure and post-closure
cost estimates and the current plugging and abandonment cost
estimates;
iii) Tangible net worth
of at least $10 million; and
iv)
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 closure and post-closure
cost estimates and the current plugging and abandonment cost
estimates.
B) The owner
or operator must have all of the following:
i)
A current rating for its most recent bond issuance of AAA, AA, A, or BBB, as
issued by Standard and Poor's, or Aaa, Aa, A, or Baa, as issued by
Moody's;
ii) Tangible net worth at
least six times the sum of the current closure and post-closure cost estimates
and the current plugging and abandonment cost estimates;
iii) Tangible net worth of at least $10
million; and
iv) 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 closure and post-closure cost estimates and
the current plugging and abandonment cost estimates.
2) The phrase "current closure and
post-closure cost estimates", as used in subsection (e)(1), refers to the cost
estimates required to be shown in subsections 1 through 4 of the letter from
the owner's or operator's chief financial officer (see 35 Ill. Adm. Code
724.251). The phrase "current plugging and abandonment cost estimates", as used
in subsection (e)(1), refers to the cost estimates required to be shown in
subsections 1 through 4 of the letter from the owner's or operator's chief
financial officer (see 35 Ill. Adm. Code
704.240
).
3) To demonstrate that the owner
or operator meets this test, the owner or operator must submit each of the
following items to the Agency:
A) A letter
signed by the owner's or operator's chief financial officer and worded as
specified in 35 Ill. Adm. Code 724.251;
B) 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
C) A special report from the owner's or
operator's independent certified public accountant to the owner or operator
stating the following:
i) That the accountant
has compared the data that 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
ii) In
connection with that procedure, that no matters came to the accountant's
attention which caused the accountant to believe that the specified data should
be adjusted.
4) This subsection (e)(4) corresponds with
40 CFR
265.143(e)(4), a federal
provision relating to an extension of the time to file the proofs of financial
assurance required by this subsection (e) granted by USEPA. This statement
maintains structural consistency with the corresponding federal
regulations.
5) After the initial
submission of items specified in subsection (e)(3), the owner or operator must
send updated information to the Agency within 90 days after the close of each
succeeding fiscal year. This information must consist of all three items
specified in subsection (e)(3).
6)
If the owner or operator no longer meets the requirements of subsection (e)(1),
the owner or operator must send notice to the Agency of intent to establish
alternate financial assurance as specified in this Section. The notice must be
sent by certified mail within 90 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. The owner or operator must provide the alternate
financial assurance within 120 days after the end of such fiscal
year.
7) The Agency may, based on a
reasonable belief that the owner or operator may no longer meet the
requirements of subsection (e)(1), require reports of financial condition at
any time from the owner or operator in addition to those specified in
subsection (e)(3). If the Agency finds, on the basis of such reports or other
information, that the owner or operator no longer meets the requirements of
subsection (e)(1), the owner or operator must provide alternate financial
assurance as specified in this Section within 30 days after notification of
such a finding.
8) The Agency may
disallow use of this test on the basis of qualifications in the opinion
expressed by the independent certified public accountant in the accountant's
report on examination of the owner's or operator's financial statements (see
subsection (e)(3)(B)). An adverse opinion or a disclaimer of opinion will be
cause for disallowance. The Agency must evaluate other qualifications on an
individual basis. The owner or operator must provide alternate financial
assurance as specified in this Section within 30 days after notification of the
disallowance.
9) The owner or
operator is no longer required to submit the items specified in subsection
(e)(3) when either of the following occurs:
A) An owner or operator substitutes alternate
financial assurance, as specified in this Section; or
B) The Agency releases the owner or operator
from the requirements of this Section in accordance with subsection
(h).
10) An owner or
operator may meet the requirements of this Section by obtaining a written
guarantee, hereafter referred to as "corporate guarantee". The guarantor must
be the direct or higher-tier parent corporation of the owner or operator, a
firm whose parent corporation is also the parent corporation of the owner or
operator, or a firm with a "substantial business relationship" with the owner
or operator. The guarantor must meet the requirements for owners or operators
in subsections (e)(1) through (e)(8), and must comply with the terms of the
corporate guarantee. The wording of the corporate guarantee must be identical
to the wording specified in 35 Ill. Adm. Code 724.251. The corporate guarantee
must accompany the items sent to the Agency as specified in subsection (e)(3).
One of these items must be the letter from the guarantor's chief financial
officer. If the guarantor's parent corporation is also the parent corporation
of the owner or operator, the letter must describe the value received in
consideration of the guarantee. If the guarantor is a firm with a "substantial
business relationship" with the owner or operator, this letter must describe
this substantial business relationship" and the value received in consideration
of the guarantee. The terms of the corporate guarantee must provide the
following:
A) That, if the owner or operator
fails to perform final closure of a facility covered by the corporate guarantee
in accordance with the closure plan and other interim status requirements
whenever required to do so, the guarantor will do so or establish a trust fund
as specified in subsection (a), in the name of the owner or operator.
B) That the corporate guarantee will remain
in force unless the guarantor sends notice of cancellation by certified mail to
the owner or operator and to the Agency. Cancellation may 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 Agency, as evidenced by the
return receipts.
C) That, 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 Agency within 90 days after receipt by both the owner or operator and
the Agency of a notice of cancellation of the corporate guarantee from the
guarantor, the guarantor will provide such alternate financial assurance in the
name of the owner or operator.
f) Use of Multiple Financial Mechanisms. An
owner or operator may satisfy the requirements of this Section by establishing
more than one financial mechanism per facility. These mechanisms are limited to
trust funds, surety bonds, letters of credit, and insurance. The mechanisms
must be as specified in subsections (a) through (d), respectively, except that
it is the combination of mechanisms, rather than the single mechanism, that
must provide financial assurance for an amount at least equal to the current
closure cost estimate. If an owner or operator uses a trust fund in combination
with a surety bond or a letter of credit, the owner or operator may use the
trust fund as the standby trust fund for the other mechanisms. A single standby
trust fund may be established for two or more mechanisms. The Agency may use
any or all of the mechanisms to provide for closure of the facility.
g) Use of a Financial Mechanism for Multiple
Facilities. An owner or operator may use a financial assurance mechanism
specified in this Section to meet the requirements of this Section for more
than one facility. Evidence of financial assurance submitted to the Agency must
include a list showing, for each facility, the USEPA identification number,
name, address, and the amount of funds for closure assured by the mechanism.
The amount of funds available through the mechanism must be no less than the
sum of funds that would be available if a separate mechanism had been
established and maintained for each facility. The amount of funds available to
the Agency must be sufficient to close all of the owner or operator's
facilities. In directing funds available through the mechanism for closure of
any of the facilities covered by the mechanism, the Agency may direct only the
amount of funds designated for that facility, unless the owner or operator
agrees to the use of additional funds available under the mechanism.
h) Release of the Owner or Operator from the
Requirements of This Section. Within 60 days after receiving certifications
from the owner or operator and a qualified Professional Engineer that final
closure has been completed in accordance with the approved closure plan, the
Agency must notify the owner or operator in writing that the owner or operator
is no longer required by this Section to maintain financial assurance for
closure of the facility, unless the Agency determines that closure has not been
in accordance with the approved closure plan. The Agency must provide the owner
or operator a detailed written statement of any such determination that closure
has not been in accordance with the approved closure plan.
i) Appeal. The following Agency actions are
deemed to be permit modifications or refusals to modify for purposes of appeal
to the Board (35 Ill. Adm. Code
702.184(e)(3)
):
1) An increase in, or a refusal to
decrease the amount of, a bond, letter of credit, or insurance; or
2) Requiring alternate assurance upon a
finding that an owner or operator or parent corporation no longer meets a
financial test.