Current through Register Vol. 24-06, March 15, 2024
(1)
Financial assurance requirements -
Applicability. This section is applicable to:
(a) Waste tires storage facilities subject to
WAC
173-350-350;
(b) Moderate risk waste facilities storing
more than nine thousand gallons of MRW on-site, excluding used oil, subject to
WAC
173-350-360;
and
(c) Limited purpose landfills
subject to WAC
173-350-400.
(2)
Financial assurance
requirements - Instrument options. Financial assurance options are
available, based on facility type as specified in subsection (3) of this
section. Contents of all instruments must be acceptable to the jurisdictional
health department. The following instrument options exist:
(a) Reserve accounts consisting of cash and
investments accumulated in a reserve fund restricted for the purpose of closure
or post-closure care;
(b) Cash and
investments in a trust fund to receive, manage, and disburse funds for
activities identified in the approved closure and post-closure plans. Trust
funds must be established with an entity that has authority to act as a trustee
and whose trust operations are regulated and examined by a federal or state
agency;
(c) Surety bond(s) issued
by a surety company listed as acceptable in Circular 570 of the United States
Treasury Department. A standby trust fund for closure or post-closure must also
be established by the owner or operator to receive any funds that may be paid
by the operator or surety company. The surety must become liable for the bond
obligation if the owner or operator fails to perform as guaranteed by the bond.
The surety may not cancel the bond until at least one hundred twenty days after
the owner or operator, the jurisdictional health department, and the department
have received notice of cancellation. If the owner or operator has not provided
alternate financial assurance acceptable under this section within ninety days
of the cancellation notice, the surety must pay the amount of the bond into the
standby closure or post-closure trust account. The following types of surety
bonds are options:
(i) Surety bond;
or
(ii) Surety bond guaranteeing
that the owner or operator will perform final closure or post-closure
activities.
(d)
Irrevocable letter of credit issued by 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. Standby trust funds for closure and
post-closure must also be established by the owner or operator to receive any
funds deposited by the issuing institution resulting from a draw on the letter
of credit. The letter of credit must be irrevocable and issued for a period of
at least one year, and automatically renewed annually, unless the issuing
institution notifies the owner or operator, the jurisdictional health
department, and the department at least one hundred twenty days before the
current expiration date. If the owner or operator fails to perform activities
according to the closure or post-closure plan and permit requirements, or if
the owner or operator fails to provide alternate financial assurance acceptable
to the jurisdictional health department within ninety days after notification
that the letter of credit will not be extended, the jurisdictional health
department may require that the financial institution provide the funds from
the letter of credit to the jurisdictional health department to be used to
complete the required closure and post-closure activities;
(e) Insurance policies issued by an insurer
who is licensed to transact the business of insurance or is eligible as an
excess or surplus line insurer in one or more states, and meeting the
following:
(i) Guarantees that the funds will
be available to complete those activities identified in the approved closure or
post-closure plans;
(ii) Guarantees
that the insurer will be responsible for paying out funds for those
activities;
(iii) Provides that the
insurance is automatically renewable and that the insurer may not cancel,
terminate, or fail to renew the policy except for failure to pay the
premium;
(iv) Provides that if
there is a failure to pay the premium, the insurer may not terminate the policy
until at least one hundred twenty days after the notice of cancellation has
been received by the owner or operator, the jurisdictional health department
and the department;
(v) Provides
that termination of the policy may not occur and the policy must remain in full
force and effect if:
(A) The jurisdictional
health department determines the facility has been abandoned;
(B) Closure has been ordered by the
jurisdictional health department or a court of competent
jurisdiction;
(C) The owner or
operator has been named as debtor in a voluntary or involuntary proceeding
under Title 11 U.S.C., Bankruptcy; or
(D) The premium due is paid.
(vi) The owner or operator is
required to maintain the policy in full force and until an alternative
financial assurance guarantee is provided or when the jurisdictional health
department has verified that closure, and/or post-closure, as appropriate, have
been completed in accordance with the approved closure or post-closure plan;
and
(vii) For purposes of this
rule, "captive" insurance companies as defined in WAC
173-350-100, are not
an acceptable insurance company.
(f) Financial Test/corporate guarantee allows
for a private corporation meeting the financial test to provide a corporate
guarantee those activities identified in the closure and post-closure plans
will be completed;
(i) To qualify, a private
corporation owner or operator shall meet the criteria of either option A or B:
(A) Option A - To pass the financial test
under this option the private corporation must have:
(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; or 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;
(III) Tangible net worth of at least ten
million dollars; and
(IV) Assets in
the United States amounting to at least ninety percent of its total assets or
at least six times the sum of the current closure and post-closure cost
estimates.
(B) Option B
- To pass this alternative financial test, the private corporation must have:
(I) A current 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;
(II) Tangible net worth at
least six times the sum of the current closure and post-closure cost
estimates;
(III) Tangible net worth
of at least ten million dollars; and
(IV) Assets in the United States amounting to
at least ninety percent of its total assets or at least six times the sum of
the current closure and post-closure cost estimates.
(ii) The owner or operator's chief
financial officer must provide a corporate guarantee that the corporation
passes the financial test at the time the closure plan is filed. This corporate
guarantee must be reconfirmed annually ninety days after the end of the
corporation's fiscal year by submitting to the jurisdictional health department
a letter signed by the chief financial officer that:
(A) Provides the information necessary to
document that the owner or operator passes the financial test;
(B) Guarantees that the funds to finance
closure and post-closure activities according to the closure or post-closure
plan and permit requirements are available;
(C) Guarantees that closure and post-closure
activities will be completed according to the closure or post-closure plan and
permit requirements;
(D) Guarantees
that within thirty days if written notification is received from the
jurisdictional health department that the owner or operator no longer meets the
criteria of the financial test, the owner or operator must provide an
alternative form of financial assurance consistent with the requirements of
this section;
(E) Guarantees that
the owner or operator's chief financial officer will notify in writing the
jurisdictional health department and the department within fifteen days any
time that the owner or operator no longer meets the criteria of the financial
test or is named as debtor in a voluntary or involuntary proceeding under Title
11 U.S.C., Bankruptcy;
(F)
Acknowledges that the corporate guarantee is a binding obligation on the
corporation and that the chief financial officer has the authority to bind the
corporation to the guarantee;
(G)
Attaches a copy of the independent certified public accountant's report on
examination of the owner or operator's financial statements for the latest
completed fiscal year; and
(H)
Attaches a special report from the owner or operator's independent certified
public accountant (CPA) stating that the CPA has reviewed the information in
the letter from the owner or operator's chief financial officer and has
determined that the information is true and accurate.
(iii) The jurisdictional health department
may, based on a reasonable belief that the owner or operator no longer meets
the criteria of the financial test, require reports of the financial condition
at any time in addition to the annual report. The jurisdictional health
department will specify the information required in the report. If the
jurisdictional health department finds, on the basis of the reports or other
information, that the owner or operator no longer meets the criteria of the
financial test, the owner or operator must provide an alternative form of
financial assurance consistent with the requirements of this section, within
thirty days after notification by the jurisdictional health
department;
(iv) If the owner or
operator fails to perform final closure and, where required, provide
post-closure care of a facility covered by the guarantee in accordance with the
approved closure and post-closure plans, the guarantor will be required to
complete the appropriate activities;
(v) The guarantee will remain in force unless
the guarantor sends notice of cancellation by certified mail to the owner or
operator, the jurisdictional health department, and the department.
Cancellation may not occur, however, during the one hundred twenty days
beginning on the date of receipt of the notice of cancellation by the owner or
operator, the jurisdictional health department, and the department.
(vi) If the owner or operator fails to
provide alternate financial assurance as specified in this section and obtain
the written approval of alternate assurance from the jurisdictional health
department within ninety days after receipt of a notice of cancellation of the
guarantee from the guarantor, the guarantor will provide alternative financial
assurance in the name of the owner or operator.
(3)
Financial assurance requirements -
Eligible financial assurance instruments. The financial assurance
instruments identified in subsection (2) of this section are available for use
based on facility category and whether the permittee is a public or private
entity as follows:
(a) For a public facility,
when the permittee is a public entity, the following options are available:
(i) Reserve account;
(ii) Trust fund;
(iii) Surety bond (payment or performance);
or
(iv) Insurance.
(b) For a public facility, when
the permittee is a private entity, the following options are available:
(i) Trust fund;
(ii) Surety bond (payment or
performance);
(iii) Letter of
credit; or
(iv)
Insurance.
(c) For
private facilities, the following options are available:
(i) Trust fund;
(ii) Surety bond (payment or performance);
(iii) Letter of credit;
(iv) Insurance; or
(v) Financial test/corporate
guarantee.
(4)
Financial assurance requirements - Cost estimate for closure. The
owner or operator must:
(a) Prepare a
detailed written closure cost estimate as part of the facility closure plan.
The closure cost estimate must:
(i) Be stated
in current dollars and represent the cost of hiring a third party under a
contract subject to chapter 39.12 RCW, Prevailing wages on public works, to
close the facility at any time during the active life when the extent and
manner of its operation would make closure the most expensive in accordance
with the approved closure plan;
(ii) Project a schedule for withdrawal of
closure funds from the closure financial assurance instrument to complete the
activities identified in the approved closure plan; and
(iii) Not use any sale value of salvage,
equipment, or property or land to offset or reduce the estimated costs of
activities conducted in compliance with the approved closure plan.
(b) Prepare a new closure cost
estimate in accordance with (a) of this subsection whenever:
(i) Changes in plans of operation or facility
design affect the closure plan; or
(ii) There is a change in the expected year
of closure that affects the closure plan.
(c) Review the closure cost estimate
annually. The review must be submitted to the jurisdictional health department,
with a copy to the department, by April 1st of each calendar year stating that
the review was completed and the findings of the review. The review will
examine all factors, including inflation, involved in estimating the closure
cost. Any cost changes must be factored into a revised closure cost estimate
and submitted to the jurisdictional health department for review and approval.
The jurisdictional health department must evaluate each cost estimate for
completeness, and may accept, or require a revision of the cost estimate in
accordance with its evaluation. If the jurisdictional health department
approves a change in the closure cost estimate, the financial assurance
instrument must be revised accordingly and submitted to the jurisdictional
health department and a copy sent to the department.
(5)
Financial assurance requirements -
Cost estimate for post-closure. The owner or operator must:
(a) Prepare a detailed written post-closure
cost estimate as part of the facility post-closure plan. The post-closure
estimate must:
(i) Be stated in current
dollars and represent the cost of hiring a third party under a contract subject
to chapter 39.12 RCW, Prevailing wages on public works, to conduct post-closure
care activities in compliance with the approved post-closure plan for the
facility;
(ii) Project a schedule
for withdrawal of post-closure funds from the post-closure financial assurance
instrument to complete the activities identified in the post-closure plan;
and
(iii) Not use the sale value of
salv age, equipment, or property or land to offset or reduce the estimated
costs of activities conducted in compliance with the post-closure
plan.
(b) Prepare a new
post-closure cost estimate for the remainder of the post-closure care period in
accordance with (a) of this subsection, whenever a change in the post-closure
plan increases or decreases the cost of post-closure care; and
(c) During the operating life of the
facility, the owner or operator must review the post-closure cost estimate
annually. The review must be submitted to the jurisdictional health department,
with a copy to the department, by April 1st of each calendar year stating that
the review was completed and the finding of the review. The review must examine
all factors, including inflation, involved in estimating the post-closure cost
estimate. Any cost changes must be factored into a revised post-closure cost
estimate and submitted to the jurisdictional health department for review and
approval. The jurisdictional health department will evaluate each cost estimate
for completeness, and may accept, or require a revision of the cost estimate in
accordance with its evaluation. If the jurisdictional health department
approves a change in the post-closure cost estimate, the financial assurance
instrument must be revised accordingly and submitted to the jurisdictional
health department and a copy sent to the department.
(6)
Financial assurance requirements -
Closure/post-closure financial assurance account establishment and
reporting.
(a) Closure and
post-closure financial assurance funds generated must be provided to the
selected financial assurance instrument at the schedule specified in the
closure and post-closure plans, such that adequate closure and post-closure
funds will be available to ensure full implementation of the approved closure
and post-closure plans.
(b) The
facility owner or operator with systematic deposits must establish a procedure
with the financial assurance instruments trustee for notification of nonpayment
of funds to be sent to the jurisdictional health department and the
department.
(c) Except for item (i)
of this subdivision, the owner or operator satisfying the requirements of this
section using a reserve or trust fund must file with the jurisdictional health
department and the department, no later than April 1st of each year, an annual
audit report of the financial assurance accounts established for closure and
post-closure activities, and a statement of the percentage of user fees, as
applicable, diverted to the financial assurance instruments, for the previous
calendar year, including during each of the post-closure years.
(i) For facilities owned and operated by a
public entity, the audit must be conducted according to the audit schedule of
the office of the state auditor. The audit report must be filed with the
jurisdictional health department and the department and must include a
certification of audit completion and summary findings .
(ii) For facilities not owned or operated by
a public entity:
(A) The annual audits must be
conducted by a certified public accountant licensed in the state of Washington.
The annual audit report filed with the jurisdictional health department and the
department must include a certification of audit completion and summary
findings; and
(B) The annual audit
report must also include, as applicable, calculations demonstrating the
proportion of closure or post-closure, completed during the preceding year as
specified in the closure and post-closure plans.
(d) Established financial
assurance accounts must not constitute an asset of the facility owner or
operator.
(e) Any income in the
established financial assurance account(s) may be used at the owner's
discretion upon approval by the jurisdictional health department.
(7)
Financial assurance
requirements - Fund withdrawal for closure and post-closure activities.
(a) The owner or operator will withdraw funds
from the closure and/or post-closure financial assurance instrument as
specified in the approved closure/post-closure plans.
(b) If the withdrawal of funds from the
financial assurance instrument exceeds by more than five percent the withdrawal
schedule stated in the approved closure and/or post-closure plan over the life
of the permit, the closure and/or post-closure plan must be amended.
(c) After verification by the jurisdictional
health department of facility closure, excess funds remaining for closure in a
financial assurance account must be released to the facility owner or
operator.
(d) After verification by
the jurisdictional health department of facility post-closure, excess funds
remaining for post-closure in a financial assurance account must be released to
the facility owner or operator.
Statutory Authority:
Chapter
70.95 RCW. 03-03-043 and
03-04-103 (Order 99-24 and Order 99-24A), § 173-350-600, filed 1/10/03 and
2/4/03, effective 3/7/03 and 3/31/03.