Ariz. Admin. Code § 18-12-305

Current through Register Vol. 30, No. 45, November 8, 2024

Section R18-12-305 - Financial Test of Self-insurance

A. Owners, operators, or guarantors may satisfy the requirements of R18-12-303 by passing a financial test as specified in this Section. To pass the financial test of self-insurance, owners, operators, or guarantors shall meet the criteria of either subsection (B) or (C) based on year-end financial statements for the latest completed fiscal year.

B. In order to pass a financial test of self-insurance under this subsection, owners, operators, or guarantors shall meet all of the following requirements:

1. Have a tangible net worth of at least 10 times all of the following:

a. The total of the applicable aggregate amount required by R18-12-303, based on the number of underground storage tanks for which a financial test of self-insurance is used to demonstrate financial responsibility;

b. The sum of the corrective action cost estimates, the current closure and post-closure care cost estimates, and amount of liability coverage for which a financial test of self-insurance is used to demonstrate financial responsibility under R18-8-264 or R18-8-265;

c. The sum of current plugging and abandonment cost estimates for which a financial test of self-insurance is used to demonstrate financial responsibility to EPA under 40 CFR 144.63, amended as of October 13, 2015, or to a state implementing agency under a state program authorized by EPA under 40 CFR part 145.

2. Have a tangible net worth of at least $10 million,

3. Have a letter signed by the chief financial officer worded as specified in subsection (D),

4. Do either one of the following:

a. File financial statements annually with the U.S. Securities and Exchange Commission, the Energy Information Administration, or the Rural Electrification Administration.

b. Report annually the firm's tangible net worth to Dun and Bradstreet, and Dun and Bradstreet shall have assigned the firm a financial strength rating of 4A or 5A.

5. The firm's year-end financial statements, if independently audited, cannot include an adverse auditor's opinion, a disclaimer of opinion, or a "going concern" qualification.

C. In order to pass a financial test of self-insurance under this subsection, owners, operators, or guarantors shall meet all of the following requirements:

1. Owners, operators, or guarantors shall meet the financial test requirements of 40 CFR 264.147(f)(1), amended as of October 13, 2015, substituting the appropriate amount specified in either R18-12-303(B)(1) or (2) for the "amount of liability coverage" each time specified in 40 CFR 264.147(f)(1);

2. The fiscal year-end financial statements of owners, operators, or guarantors shall be examined by an independent certified public accountant and be accompanied by the accountant's report of the examination;

3. The firm's year-end financial statements cannot include an adverse auditor's opinion, a disclaimer of opinion, or a "going concern" qualification;

4. Owners, operators, or guarantors shall have a letter signed by the chief financial officer, worded as specified in subsection (D);

5. If the financial statements of owners, operators, or guarantors are not submitted annually to the U.S. Securities and Exchange Commission, the Energy Information Administration or the Rural Electrification Administration, owners, operators, or guarantors shall obtain a special report by an independent certified public accountant stating all of the following:

a. The accountant has compared the data that the letter from the chief financial officer specifies as having been derived from the latest year-end financial statements of owners, operators, or guarantors, with the amounts in such financial statements.

b. In connection with the comparison under subsection (C)(5)(a), no matters came to the accountant's attention which caused the accountant to believe that the specified data should be adjusted.

D. To demonstrate that it meets the financial test under subsection (B) or (C), the chief financial officer of owners, operators, or guarantors, shall sign, within 120 days of the close of each financial reporting year, as defined by the 12-month period for which financial statements used to support the financial test are prepared, a letter worded exactly as provided in 40 CFR 280.95(d), amended as of October 13, 2015, except that the instructions in brackets are to be replaced by the relevant information and the brackets deleted.

E. If owners and operators, using a financial test of self-insurance for financial responsibility find that they no longer meet the requirements of the financial test based on the year-end financial statements, owners and operators shall obtain alternative coverage within 150 days of the end of the financial reporting year for which financial statements have been prepared.

F. The Director may require reports of financial condition at any time from owners, operators, or guarantors. If the Director finds, on the basis of such reports or other information, that owners, operators, or guarantors, no longer meet the financial test requirements, owners and operators shall obtain alternate coverage within 30 days after notification of such a finding.

G. If owners and operators fail to obtain alternate assurance within 150 days of finding that they no longer meet the requirements of the financial test based on the year-end financial statements, or within 30 days of notification by the Director that they no longer meet the requirements of the financial test, owners and operators shall notify the Director of such failure within 10 days.

H. Owners and operators may use self-insurance in combination with a guarantee only if, for the purpose 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.

Ariz. Admin. Code § R18-12-305

Adopted effective September 21, 1992 (Supp. 92-3). Amended effective July 30, 1996 (Supp. 96-3). Amended by final rulemaking at 25 A.A.R. 3123, effective 10/1/2020.