Ala. Admin. Code r. 335-6-13-.07

Current through Register Vol. 43, No. 1, October 31, 2024

Section 335-6-13-.07 - Allowable Mechanisms For Financial Assurance

Mechanisms used to demonstrate financial assurance under rule 335-6-13-.06 shall ensure that the funds necessary for closure will be available when they are needed. Only the mechanisms specified in paragraphs (2) through (6) of this rule are allowable.

(1) Reserved.

(2)Surety Bond Guaranteeing Payment or Performance.

(a) An owner or operator may demonstrate financial assurance by obtaining a payment or performance surety bond that conforms to the requirements of subparagraphs (2)(a)l. through (2)(a)5. of this rule.

1. The bond shall be effective before the initial start-up of operations for new centralized waste treatment facilities, or before the reissuance or modification of a permit for existing facilities.

2. The surety issuing the bond shall, at a minimum, be among those listed as acceptable sureties on federal bonds in Circular 570 of the U.S. Department of the Treasury.

3. The penal sum of the bond shall be in an amount at least equal to the current closure cost estimate, except as provided in paragraph (6) of this rule.

4. Under the terms of the bond, the surety will become liable on the bond obligation when the principal (i.e., the owner or operator) fails to perform as guaranteed by the bond.

5. Under the terms of the bond, the surety may cancel the bond by sending notice of cancellation by certified mail to the principal and to the Department 120 days in advance of cancellation.

(b) The owner or operator shall retain a duplicate copy of the bond in the waste treatment facility's record and shall submit the original copy of the bond to the Department, as specified in rule 335-6-13-.06(1).

(c) The owner or operator shall establish a standby trust fund. 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. If the bond is forfeited, the surety shall deposit the payments made under the terms of the bond directly into the standby trust fund in accordance with instructions from the Department. Payments from the trust fund shall be approved by the Department.

(d) The owner or operator shall retain a duplicate copy of the trust agreement in the waste treatment facility's record and shall submit the original copy to the Department, as specified in rule 335-6-13-.06(1).

(e) If the surety cancels the bond, the owner or operator shall obtain an alternate allowable financial assurance mechanism within 90 days of the notice of cancellation.

(f) The owner or operator may cancel the bond only if an alternate allowable financial assurance mechanism is demonstrated or if the owner or operator is released from the financial assurance requirements in accordance with rule 335-6-13-.08.

(3)Letter of Credit.

(a) An owner or operator may demonstrate financial assurance by obtaining an irrevocable standby letter of credit that conforms to the requirements of subparagraphs (3)(a)l. through (3)(a)3. of this rule.

1. The letter of credit shall be effective before the initial start-up of operations for new centralized waste treatment facilities or before the reissuance or modification of a permit for existing facilities.

2. The issuing institution shall 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.

3. The letter of credit shall be irrevocable and issued for a period of at least one year in an amount at least equal to the current closure cost estimate except as provided in paragraph (6) of this rule. The letter of credit shall provide that the expiration date will be automatically extended for a period of at least one year unless the issuing institution has cancelled the letter of credit by sending notice of cancellation by certified mail to the letter of credit applicant (i.e., the owner or operator) and to the Department 120 days in advance of cancellation.

(b) The owner or operator shall submit the original copy of the letter of credit to the Department, as specified in rule 335-6-13-.06(1). The submittal shall be accompanied by a transmittal letter that refers to the letter of credit by number, issuing institution, and date and that provides the name and address of the centralized waste treatment facility, name and address of the owner/operator, and the amount of funds assured.

(c) The owner or operator shall retain a duplicate copy of the letter of credit and a copy of the transmittal letter required by subparagraph (3)(b) of this rule in the centralized waste treatment facility's record.

(d) If the issuing institution cancels the letter of credit, the owner or operator shall obtain an alternate allowable financial assurance mechanism within 90 days of the notice of cancellation.

(e) The owner or operator may cancel the letter of credit only if an alternate allowable financial assurance mechanism is demonstrated or if the owner or operator is released from the financial assurance requirements in accordance with rule 335-6-13-.08.

(4)Insurance.

(a) An owner or operator may demonstrate financial assurance by obtaining insurance that conforms to the requirements of subparagraphs (4)(a)l. through (4)(a)6. of this rule.

1. The insurance shall be effective before the initial start-up of operations for new centralized waste treatment facilities or before the reissuance or modification of a permit for existing facilities.

2. At a minimum, the insurer shall be licensed to transact the business of insurance, or shall be eligible to provide insurance as an excess or surplus lines insurer, in one or more states.

3. The insurance policy shall guarantee that funds will be available for closure of the waste treatment facility when final closure occurs. The policy shall also guarantee that once closure begins, the insurer will be responsible for the paying out of funds to the insured (i.e., the owner or operator) or to other person(s) authorized to conduct closure up to an amount equal to the face amount of the policy upon the direction of the Department.

4. The insurance policy shall be issued for a face amount at least equal to the current closure cost estimate except as provided in paragraph (6) of this rule. 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.

5. The insurance policy shall 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 that such consent is not unreasonably refused.

6. The insurance policy shall 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 shall, 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 cancel the policy by sending notice of cancellation by certified mail to the insured and to the Department 120 days in advance of cancellation.

(b) The owner or operator shall retain a duplicate copy of the insurance policy in the facility's record and shall submit the original copy of the insurance policy to the Department, as specified in rule 335-6-13-.06(1).

(c) An owner or operator, or other person(s) authorized to conduct closure, may receive reimbursements for closure. Requests for reimbursement will be granted by the insurer only if the remaining value of the policy is sufficient to cover the remaining costs of closure. Any person seeking reimbursement for closure costs shall provide justification and documentation of the closure costs to the Department for approval prior to requesting reimbursement from the insurer. Persons receiving reimbursement shall notify the Department of the reimbursement within 30 days of receipt. Persons receiving reimbursement shall retain the documentation of the justification for reimbursement and confirmation of receipt of reimbursement in the waste treatment facility's record or other record, as applicable.

(d) If the insurer cancels the policy, the owner or operator shall obtain an alternate allowable financial assurance mechanism within 90 days of the notice of cancellation.

(e) The owner or operator may cancel the insurance policy only if an alternate allowable financial assurance mechanism is demonstrated or if the owner or operator is released from the financial assurance requirements in accordance with rule 335-6-13-.08.

(5)State-Approved Mechanism. An owner or operator may demonstrate financial assurance by obtaining other mechanisms that meet the criteria of this rule and that are approved by the Department.

(6)Use of Multiple Mechanisms. An owner or operator may demonstrate financial assurance by obtaining more than one financial mechanism per centralized waste treatment facility. The mechanisms used shall meet the applicable criteria specified in paragraphs (2) through (5) of this rule except that financial assurance for an amount at least equal to the current closure cost estimate may be provided by multiple mechanisms, rather than a single mechanism.

(7)General Criteria for Financial Assurance Mechanisms.

(1) The language of the financial assurance mechanisms listed in paragraphs (2) through (5) of this rule shall ensure that the instruments satisfy the following criteria:

(a) The amount of funds assured is sufficient to cover the costs of closure.

(b) Funds will be available in a timely fashion if needed.

(c) The owner or operator is obtaining the mechanism by the required dates as indicated in this rule and is maintaining the mechanism until released from the financial assurance requirements under rule 335-6-13-.08.

(d) The financial assurance mechanism is legally valid, binding, and enforceable under State and federal law.

(8)Discounting. The Department may allow discounting of closure cost estimates obtained in accordance with paragraphs 335-6-13-.06(2) and (3) up to the rate of return for essentially risk free investments, net of inflation, under the following conditions:

(a) The Department determines that cost estimates are complete and accurate and the owner or operator has submitted a statement from an engineer so stating;

(b) The Department finds the waste treatment facility in significant compliance with applicable and appropriate permit conditions; and

(c) The owner or operator adjusts the discounted closure cost estimates annually to reflect inflation and years of remaining life.

(9) The owner or operator subject to the requirements of this chapter shall certify in writing to the Department that each mechanism used to demonstrate financial assurance as required by rule 335-6-13-.06 remains current and valid and that changes to the closure plan or waste treatment facility conditions have not occurred that would significantly increase the maximum cost of closure. If one or both conditions cannot be certified as true, the owner or operator shall so indicate and provide an explanation. The certification shall be submitted annually no later than the anniversary of the date the mechanism initially became effective.

Ala. Admin. Code r. 335-6-13-.07

Amended: Filed February 19, 2013; effective March 26, 2013.

Amended by Alabama Administrative Monthly Volume XXXVI, Issue No. 11, August 31, 2018, eff. 10/5/2018.

Authors: Chris Sasser; Daphne Lutz

Statutory Authority:Code of Ala. 1975, §§ 22-25C-l, 22-25C-2.