Current through Reg. 50, No. 13; March 28, 2025
(a) An owner or
operator may satisfy the requirements of financial assurance by establishing a
financial test which conforms to the requirements of this section, in addition
to the requirements specified in Subchapters A and B of this chapter (relating
to General Financial Assurance Requirements and Financial Assurance
Requirements for Closure, Post Closure, and Corrective Action).
(b) To pass this test, the owner or operator
must meet the criteria of either paragraph (1) or (2) of this subsection:
(1) the owner or operator must have:
(A) 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; and
(B) net working
capital and tangible net worth each at least six times the sum of the current
cost estimates, liability coverage requirements, and any other financial
assurance obligations under the Texas Commission on Environmental Quality
(TCEQ) or other federal or state environmental regulations assured by a
financial test; and
(C) tangible
net worth of at least $10 million; and
(D) assets located in the United States
amounting to at least 90% of the owner's or operator's total assets or at least
six times the sum of the current cost estimates, liability coverage
requirements, and any other financial assurance obligations under the TCEQ or
other federal or state environmental regulations assured by a financial
test;
(2) the owner or
operator must have:
(A) a current rating for
his 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; and
(B) tangible net worth at least six times the
sum of the current cost estimates, liability coverage requirements, and any
other financial assurance obligations under the TCEQ or other federal or state
environmental regulations assured by a financial test; and
(C) tangible net worth of at least $10
million; and
(D) assets located in
the United States amounting to at least 90% of the owner's or operator's total
assets or at least six times the sum of the current cost estimates, liability
coverage requirements, and any other financial assurance obligations under the
TCEQ or other federal or state environmental regulations assured by a financial
test.
(c) To
demonstrate that the requirements of the test are being met, the owner or
operator shall submit the following items to the executive director:
(1) a letter signed by the owner's or
operator's chief financial officer worded identically to the wording specified
in §
37.351 of this title (relating to
Financial Test). If an owner or operator is using the financial test to
demonstrate assurance for closure, post closure, or corrective action as
specified in Subchapter B of this chapter and liability coverage as specified
in Subchapter E of this chapter (relating to Financial Assurance Requirements
for Liability Coverage), the owner or operator must submit the letter specified
in the Financial Test for Liability, Part B in §
37.651 of this title (relating to
Financial Test for Liability) to cover both forms of financial responsibility.
A separate letter as specified in §
37.351 of this title is not
required; and
(2) a copy of the
owner's or operator's independently audited year-end financial statements for
the latest fiscal year including the "unqualified opinion" of the auditor;
and
(3) a special report from the
owner's or operator's independent certified public accountant to the owner or
operator stating that:
(A) the accountant has
compared the data 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) in connection
with that procedure:
(i) such amounts were
found to be in agreement; or
(ii)
no matters came to the attention of the accountant which caused them to believe
that the specified data should be adjusted; and
(4) a written verification of the current
bond rating from the applicable bond rating agency, if the owner or operator is
using Alternative II of the letter signed by the owner's or operator's chief
financial officer specified in §
37.351 of this title;
and
(5) a schedule identifying
intangible assets used to calculate tangible net worth.
(d) After the initial submission of items
specified in subsection (c) of this section, the owner or operator must send
updated information to the executive director within 90 days after the close of
each succeeding fiscal year. This information shall consist of all items
specified in subsection (c) of this section.
(e) If the owner or operator no longer meets
the requirements of subsection (b) of this section, a notice shall be sent to
the executive director of intent to establish alternate financial assurance as
specified in this subchapter. 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 shall provide the alternate financial assurance within 120 days after
the end of such fiscal year.
(f)
The executive director may, based on a reasonable belief that the owner or
operator may no longer meet the requirements of subsection (b) of this section,
require reports of financial condition at any time from the owner or operator
in addition to those specified in subsection (c) of this section. If the
executive director finds, on the basis of such reports or other information,
that the owner or operator no longer meets the requirements of subsection (b)
of this section, the owner or operator must provide alternate financial
assurance as specified in this subchapter within 30 days after notification of
such a finding.
(g) The executive
director may disallow use of this test on the basis of qualifications in the
opinion expressed in the independent certified public accountant's report on
examination of the owner's or operator's financial statements. An adverse
opinion or disclaimer of opinion shall be cause for disallowance. The executive
director shall evaluate other qualifications on an individual basis. The owner
or operator shall provide alternate financial assurance as specified in this
subchapter within 30 days after notification of the disallowance.
