Current through Register Vol. 56, No. 24, December 18, 2024
(a)
As part of a decommissioning plan submitted pursuant to
N.J.A.C.
7:1F-6.1, the owner or operator of an
underground storage cavern system shall demonstrate and maintain a financial
responsibility assurance mechanism for decommissioning activities in the amount
of at least $ 1 million per permit. The amount determined necessary is based on
the scope of the decommissioning plan. If the owner or operator demonstrates
that an amount less than $ 1 million is sufficient to protect the environment
and public health, safety, and welfare, the Department may accept evidence of
financial responsibility in such lesser amount. Decommissioning activities
includes any activity conducted, in accordance with the decommissioning plan
and/or pursuant to
N.J.A.C.
7:1F-6.1.
(b) In determining the sufficiency of the
amount of financial responsibility, the Department will consider factors
including, without limitation, the nature and quantity of regulated substance
that is present at the system; estimated costs, with inflation considerations,
to evacuate substances and residuals, confirm cavern integrity, seal wells,
address ground water intrusion, long-term maintenance considerations; and other
similar factors.
(c) The
demonstration of sufficient financial responsibility does not limit the
liability of the owner and operator.
(d) Financial responsibility may be
demonstrated by any one, or by any combination, of the following:
1. Financial test of
self-insurance;
2.
Guarantee;
3. Insurance or risk
retention group coverage;
4. Surety
bond; or
5. Letter of
credit.
(e) An owner or
operator may use self-insurance in combination with a guarantee only if, for
the purposes of meeting the requirements of the financial test under this
section, the financial statements of the owner or operator are not consolidated
with the financial statements of the guarantor.
(f) To pass the financial test of
self-insurance, the owner or operator or guarantor must meet the criteria at
(f)1 or 2 below based on the year-end financial statements of the latest
completed financial reporting year. The owner and operator must maintain,
onsite, a letter signed by the chief financial officer worded as specified in
section A.1 of Appendix A, incorporated herein by reference. This letter shall
be updated within 120 days of the close of each financial reporting year.
1. The owner or operator or guarantor must
have a tangible net worth of at least $ 10 million, and the owner or operator
or guarantor must:
i. Have a tangible net
worth of at least 10 times the required aggregate amount at (a) above plus any
other liability coverage for which the owner or operator is using a financial
test to demonstrate financial responsibility to the State;
ii. Either file financial statements annually
with the U.S. Securities and Exchange Commission, the Energy Information
Administration, the Rural Utilities Services, or the Board of Public Utilities;
or report annually the firm's tangible net worth to Dun and Bradstreet, and Dun
and Bradstreet must have assigned the firm a financial strength rating of 4A or
5A; and
iii. Have year-end
financial statements that, if independently audited, do not include an adverse
auditor's opinion, a disclaimer of opinion, or a "going concern"
qualification;
2. The
owner or operator or guarantor must have a bond rating of AAA, AA, A, or BBB as
issued by Standard and Poor's, or Aaa, Aa, A, or Baa as issued by Moody's, or
net working capital of at least six times the required amount at (a) above plus
any other liability coverage being provided by a financial test, and the owner
or operator, or the guarantor, must have:
i. A
tangible net worth of at least six times the applicable amount at (a)
above;
ii. U.S. assets that are at
least 90 percent of total assets or at least six times the required amount at
(a) above plus any other liability coverage being provided by a financial test;
and
iii. Fiscal year-end financial
statements filed with the U.S. Securities and Exchange Commission, the Energy
Information Administration, Rural Utilities Services, or the New Jersey Board
of Public Utilities, or a special report by an independent certified public
accountant stating that the data specified in the letter from the chief
financial officer have been compared to the data in the latest financial
statements and that no matters have come to his or her attention that cause him
or her to believe that the data should be adjusted.
(g) If an owner or operator, or
guarantor, using the financial test to provide financial responsibility finds
that it no longer meets the requirements of the financial test based on the
year-end financial statements, the owner or operator must obtain alternative
coverage within 150 days of the end of the year for which financial statements
have been prepared.
(h) The
Department may require reports of financial condition at any time from the
owner or operator, or guarantor. If the Department finds, on the basis of such
reports or other information, that the owner or operator, or guarantor, no
longer meets the financial test requirements at (f) above, the owner or
operator shall obtain alternate coverage within 30 days after notification of
such a finding.
(i) If the owner or
operator fails to obtain alternate coverage within 150 days of finding that it
no longer meets the requirements of the financial test based on the year-end
financial statements, or within 30 days of notification by the Department that
it no longer meets the requirements of the financial test, the owner or
operator shall notify the Department of such failure within 10 days.
(j) To demonstrate financial responsibility
through a guarantee:
1. Within 120 days of the
close of each financial reporting year, the guarantor must demonstrate that it
meets the financial test criteria set forth at (f) above by completing the
letter from the chief financial officer as specified in section A.1 of the
Appendix and must deliver the letter to the owner and operator and the
Department. If the guarantor fails to meet the requirements at (f) above,
within 120 days of the end of the financial reporting year the guarantor must
send by certified mail, before cancellation or nonrenewal of the guarantee,
notice to the owner and operator and the Department. If the Department notifies
the guarantor that he or she no longer meet the requirements at (f) above, the
guarantor must notify the owner and operator within 10 days of receiving such
notification from the Department. In both cases, the guarantee will be deemed
as terminated, no less than 120 days after the date the owner and operator
receives the notification, or 120 days after the date the Department receives
the notification, whichever is later, as evidenced by the return receipt. The
owner or operator must obtain alternate coverage within 30 days; and
2. The guarantee must be worded as specified
in section A.2 of the Appendix, and a copy of the guarantee maintained at the
facility at all times.
(k) To demonstrate financial responsibility
through liability insurance:
1. Such
insurance must be obtained from a qualified insurer or risk retention group. It
may be in the form of a separate insurance policy or an endorsement to an
existing policy;
2. An existing
insurance policy must be amended by an endorsement worded as specified in
section A.3(1) of the Appendix or a separate insurance policy must be evidenced
by a certificate of insurance worded as specified in section A.3(2) of the
Appendix. A copy of this endorsement or certificate must be maintained at the
facility at all times;
3. The
provisions addressing cancellation or any other termination of the liability
insurance by the insurer or group, except for nonpayment of premium or material
misrepresentation by the insured, will be effective only upon written notice
and only after the expiration of 60 days after the date on which the insured
receives the written notice; or 60 days after the date on which the Department
receives the written notice, whichever is later. Cancellation for nonpayment of
premium or material misrepresentation by the insured will be effective only
upon written notice and only after the expiration of a minimum of 10 days after
the date on which the insured receives the written notice; or 10 days after the
date on which the Department receives the written notice, whichever is later;
and
4. Within 60 days of receipt of
a notice of cancellation or other termination, the owner or operator shall
provide alternative financial assurance, as specified in this
section.
(l) To
demonstrate financial responsibility through a surety bond:
1. The surety company issuing the bond must
be among those listed as acceptable sureties on Federal bonds in the latest
Circular 570 of the U.S. Department of the Treasury;
2. The surety bond must be worded as
specified in section A.4 of the Appendix, and a copy of the surety bond
maintained at the facility at all times;
3. Under the terms of the bond, the surety
will become liable on the bond obligation when the owner or operator fails to
perform as guaranteed by the bond. In all cases, the surety's liability is
limited to the penal sums;
4. The
owner or operator who uses a surety bond to meet the requirements at (a) above
must establish a standby trust fund when the surety bond is acquired. The
trustee shall be an entity which has the authority to act as a trustee and
whose trust operations are regulated and examined by a Federal or State agency.
Under the terms of the bond, all amounts paid by the surety under the bond will
be deposited directly into the standby trust fund, in accordance with
instructions from the Department;
5. The surety(ies) may cancel the bond by
sending written notice of cancellation by certified mail to the principal and
the Department; provided, however, that the cancellation shall not occur during
the 120 days beginning on the date of receipt of the notice of cancellation by
the principal or the date of receipt of the notice of cancellation by the
Department, whichever is later, as evidenced by the return receipt;
and
6. Within 60 days of receipt of
a notice of cancellation or other termination, the owner or operator shall
provide alternative financial assurance, as specified in this
section.
(m) To
demonstrate financial responsibility through a letter of credit:
1. The issuing agency must be an entity that
has the authority to issue letters of credit in this State and whose
letter-of-credit operations are regulated and examined by a State
agency;
2. The letter of credit
must be worded as specified in section A.5 of the Appendix, and a copy of the
letter of credit maintained at the facility at all times;
3. The owner or operator who uses a letter of
credit to meet the requirements at (a) above must establish a standby trust
fund when the letter of credit is acquired. The trustee shall be an entity that
has the authority to act as a trustee and whose trust operations are regulated
and examined by a Federal or State agency. Under the terms of the letter of
credit, all amounts paid pursuant to a draft by the Department will be
deposited by the issuing institution directly into the standby trust fund in
accordance with instructions from the Department;
4. The letter of credit must be irrevocable
with a term specified by the issuing institution and must provide that credit
be automatically renewed for the same term as the original term, unless, at
least 120 days before the current expiration date, the issuing institution
notifies the owner or operator and the Department, by certified mail, of its
decision not to renew the letter of credit. Under the terms of the letter of
credit, the 120 days will begin on the date when the owner and operator
receives the notice or on the date when the Department receives the notice,
whichever is later, as evidenced by the return receipt; and
5. Within 60 days of receipt of a notice of
cancellation or other termination, the owner and operator shall provide
alternative financial assurance as specified in this section.
(n) Within 10 days after
commencement of a voluntary or involuntary proceeding under Title 11
(Bankruptcy), U.S. Code:
1. Naming an owner
or operator as debtor, the owner and operator shall notify the Department by
certified mail of such commencement; or
2. Naming the provider of financial assurance
as debtor, the provider shall notify the owner or operator by certified mail of
such commencement, and the owner and operator shall then notify the
Department.
(o) An owner
and operator will be deemed to be without the required demonstration of
financial responsibility in the event of commencement of bankruptcy or other
incapacity of his or her provider of financial assurance. Within 30 days after
receiving notice of such an event, the owner or operator shall submit to the
Department an alternate demonstration of financial responsibility.
