WSR 03-04-103

PERMANENT RULES

DEPARTMENT OF ECOLOGY


[ Order 99-24A -- Filed February 4, 2003, 4:24 p.m. ]

Date of Adoption: January 10, 2003.

Purpose: To file a correction to WAC 173-350-600 Financial assurance requirements. This correction is to change subsection (1)(b) to the language as proposed, and which was adopted by the director of ecology.

Statutory Authority for Adoption: Chapter 70.95 RCW.

Adopted under notice filed as WSR 02-14-061 on June 27, 2002.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0.
Effective Date of Rule: Thirty-one days after filing.

February 4, 2003

Tom Fitzsimmons

Director

OTS-6193.1


NEW SECTION
WAC 173-350-600   Financial assurance requirements.   (1) Financial assurance requirements - Applicability. This section is applicable to:

(a) Waste tires storage facilities regulated under WAC 173-350-350;

(b) Moderate risk waste facilities regulated under WAC 173-350-360; and

(c) Limited purpose landfills regulated under WAC 173-350-400.

(2) Financial assurance requirements - Definitions. For the purposes of this section, the following definitions apply:

(a) Public facility means a publicly or privately owned facility that accepts solid waste generated by other persons.

(b) Private facility means a privately owned facility maintained on private property solely for the purpose of managing waste generated by the entity owning the site.

(3) Financial assurance requirements - Instrument options. Financial assurance options are available, based on facility type as defined in WAC 173-350-600(2), ownership and permittee. Contents of all instruments must be acceptable to the jurisdictional health department. The following instrument options exist:

(a) Reserve accounts that are managed as either:

(i) Cash and investments accumulated and restricted for activities identified in the closure or post-closure plans, with the equivalent amount of fund balance reserved in the fund; or

(ii) Cash and investments held in a nonexpendable trust fund.

(b) Trust funds to receive, manage and disburse funds for activities identified in the approved closure and post-closure plans. Trust funds shall 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 shall also be established by the owner or operator to receive any funds that may be paid by the operator or surety company. The surety shall 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 shall 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 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. Standby trust funds for closure and post-closure shall 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 shall be irrevocable and issued for a period of at least one year, and 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, the content of which:

(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 shall 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;

(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 shall 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 shall 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 shall provide a corporate guarantee that the corporation passes the financial test at the time the closure plan is filed. This corporate guarantee shall 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 shall 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 such reports or other information, that the owner or operator no longer meets the criteria of the financial test, the owner or operator shall 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 such 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 such alternative financial assurance in the name of the owner or operator.

(4) Financial assurance requirements - Eligible financial assurance instruments. The financial assurance instruments identified in subsection (3) 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, as defined in subsection (2) of this section, when the permittee is a public entity, the following options are available:

(i) Reserve account;

(ii) Trust account;

(iii) Surety bond (payment or performance); or

(iv) Insurance;

(b) For a public facility as defined in subsection (2) of this section, where the permittee is a private entity, the following options are available:

(i) Trust account;

(ii) Surety bond (payment or performance);

(iii) Letter of credit; or

(iv) Insurance;

(c) For private facilities as defined in subsection (2) of this section, the following options are available:

(i) Trust account;

(ii) Surety bond (payment or performance);

(iii) Letter of credit;

(iv) Insurance; or

(v) Financial test/corporate guarantee.

(5) Financial assurance requirements - Cost estimate for closure. The owner or operator shall:

(a) Prepare a written closure cost estimate as part of the facility closure plan. The closure cost estimate shall:

(i) Be in current dollars and represent the cost of closing the facility;

(ii) Provide a detailed written estimate, in current dollars, of the cost of hiring a third party 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;

(iii) Project intervals for withdrawal of closure funds from the closure financial assurance instrument to complete the activities identified in the approved closure plan;

(iv) Not reduce by allowance for salvage value of equipment, solid waste, or the resale value of property or land;

(b) Prepare a new closure cost estimate in accordance with (a) of this subsection whenever:

(i) Changes in operating plans 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 by March 1st of each calendar year. The review shall 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 shall be factored into a revised closure cost estimate and submit the revised cost estimate to the jurisdictional health department for review and approval. The jurisdictional health department shall evaluate each cost estimate for completeness, and may accept, or require a revision of the cost estimate in accordance with its evaluation.

(6) Financial assurance requirements - Cost estimate for post-closure. The owner or operator shall:

(a) Prepare a written post-closure cost estimate as part of the facility post-closure plan. The post-closure cost estimate shall:

(i) Be in current dollars and represent the total cost of completing post-closure activities for the facility for a twenty-year post-closure period or a time frame determined by the jurisdictional health department;

(ii) Provide a detailed written estimate, in current dollars, of the cost of hiring a third party to conduct post-closure care for the facility in compliance with the post-closure plan;

(iii) Project intervals for withdrawal of post-closure funds from the post-closure financial assurance instrument to complete the activities identified in the approved post-closure plan; and

(iv) Not reduce by allowance for salvage, value of equipment, or resale value of property or land.

(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.

(c) During the operating life of the facility, the owner or operator must review the post-closure cost estimate by March 1st of each calendar year. The review will 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 shall examine all factors, including inflation, involved in estimating the post-closure cost estimate. Any changes in costs shall be factored into a revised post-closure cost estimate. The new estimate shall be submitted to the jurisdictional health department for approval. The jurisdictional health department shall evaluate each cost estimate for completeness, and may accept, or require a revision of the cost estimate in accordance with its evaluation.

(7) Financial assurance requirements - Closure/post-closure financial assurance account establishment and reporting.

(a) Closure and post-closure financial assurance funds generated shall 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 generated to ensure full implementation of the approved closure and post-closure plans.

(b) The facility owner or operator with systematic deposits shall 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) The owner or operator shall file with the jurisdictional health department, no later than April 1st of each year, an annual audit 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:

(i) For facilities owned and operated by municipal corporations, the financial assurance accounts shall be audited according to the audit schedule of the office of state auditor. A certification of audit completion and summary findings shall be filed with the jurisdictional health department and the department, including during each of the post-closure care years.

(ii) For facilities not owned or operated by municipal corporations:

(A) Annual audits shall be conducted by a certified public accountant licensed in the state of Washington. A certification of audit completion and summary findings shall be filed with the jurisdictional health department and the department, including during each of the post-closure care years.

(B) The audit shall 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 shall not constitute an asset of the facility owner or operator.

(e) Any income accruing to the established financial assurance account(s) will be used at the owner's discretion upon approval of the jurisdictional health department.

(8) 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 shall be amended.

(c) After verification by the jurisdictional health department of facility closure, excess funds remaining for closure in a financial assurance account shall 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 shall be released to the facility owner or operator.

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