(a) Financial responsibility requirements are to ensure that owners or operators have the financial resources to carry out activities related to closing and remediating geologic sequestration sites if needed so they do not endanger the environment or USDWs.
(b) Owners or operators of Class VI wells must demonstrate and maintain financial responsibility for all applicable phases of the geologic sequestration project including complete site reclamation in the event of default. The phases of a geologic sequestration project are as follows: - (i) Permitting/Characterization
- (ii) Operations (injection and permanent well closure activities)
- (iii) Post-injection site care ("plume stabilization" - monitoring until certified by the administrator; above ground reclamation completed.)
- (iv) Emergency and remedial response (that meets the requirements of Section 18 of this chapter).
(c) The requirement to maintain adequate financial responsibility and resources is directly enforceable regardless of whether the requirement is a condition of the permit.
(d) To demonstrate financial responsibility, the owner or operator must submit a detailed written estimate, at the time of permit application and in current dollars, performing corrective action on wells in the area of review, plugging the injection well(s), post injection site care and site closure, and emergency and remedial response, including the requirements of Section 18 of this chapter. The submission requirements for the financial responsibility instruments are based on results of the cost estimate. - (i) The financial assurance cost estimate for the various phases of the sequestration project shall consider the following events:
- (A) Contamination of underground sources of water including drinking water supplies.
- (B) Mineral rights infringement.
- (C) Single large volume release of carbon dioxide that impacts human health and safety and/or causes ecological damage.
- (D) Low level leakage of carbon dioxide to the surface that impacts human health and safety and/or causes ecological damage.
- (E) Storage rights infringement.
- (F) Property and infrastructure damage including changes to surface topography and structures.
- (G) Entrained contaminant releases (non-CO2).
- (H) Accidents/unplanned events.
- (I) Well capping and permitted abandonment.
- (J) Removal of above ground facilities and site reclamation.
- (ii) The Risk Activity matrix in Appendix A shall be considered during the risk assessment process.
- (iii) The cost estimate shall be based upon a multi-disciplinary analytical framework such as Monte Carlo or other commonly accepted stochastic modeling tools.
- (A) Cost curves shall combine risk probabilities, event outcomes and damages assessment to calculate expected losses under a series of events.
- (B) For all cases of potential damages, the probability distributions should be identified for 50 percent, 95 percent, and 99 percent probabilities of occurrence.
(e) The owner or operator must also submit a proposed cost estimate for measurement, monitoring, and verification of plume stabilization following post-closure certification and release of all other financial assurance instruments.
(f) The cost estimate must be performed for each phase separately and must be based on the costs to the regulatory agency of hiring a third party to perform the required activities. A third party is a party who is not within the corporate structure of the owner or operator.
(g) The required demonstration of financial responsibility shall be from the following list of qualifying instruments: - (iv) Insurance
- (A) Any insurance instruments submitted for financial assurance purposes shall include the state of Wyoming as an additional insured, which inclusion shall not be deemed a waiver of sovereign immunity.
- (v) Self-insurance (i.e., Financial Test and Corporate Guarantee)
- (vii) Any other instrument(s) satisfactory to the administrator
(h) The qualifying financial responsibility instrument(s) must comprise protective conditions of coverage that include at a minimum cancellation, renewal, continuation provisions, specifications on when the provider becomes liable following a notice of cancellation, and requirements for the provider to meet a minimum rating, minimum capitalization, and the ability to pass the bond rating when applicable. - (i) Cancellation - An owner or operator must provide that their financial mechanism may not cancel, terminate or fail to renew except for failure to pay such financial instrument. If there is a failure to pay the financial instrument, the financial institution may elect to cancel, terminate, or fail to renew the instrument by sending notice by certified mail to the owner or operator and the administrator. The cancellation must not be final for 120 days after receipt of cancellation notice. The owner or operator must provide an alternate financial responsibility demonstration within 60 days of notice of cancellation, and if an alternate financial responsibility demonstration is not acceptable (or possible), any funds from the instrument being cancelled must be released within 60 days of notification by the administrator.
- (ii) Renewal - Owners or operators must renew all financial instruments, if an instrument expires, for the entire term of the geologic sequestration project. The instrument may be automatically renewed as long as, at a minimum, the owner or operator has the option of renewal at the face amount of the expiring instrument.
- (iii) Continuation - Cancellation, termination, or failure to renew may not occur and the financial instrument shall remain in full force and effect in the event that on or before the date of expiration:
- (A) The administrator deems the facility abandoned.
- (B) The permit is terminated, revoked, or a new permit is denied.
- (C) Closure is ordered by the administrator, a U.S. district court, or other court of competent jurisdiction.
- (D) The owner or operator is named as debtor in a voluntary or involuntary proceeding under Title 11 (Bankruptcy), U.S. Code.
- (E) The amount due is paid.
(i) The qualifying financial responsibility instrument(s) must be approved by the administrator. The administrator shall also approve the use and length of pay-in-periods for trust funds and escrow accounts. - (i) The administrator shall consider and approve the financial responsibility demonstration for all the phases of the geologic sequestration project prior to issuing a Class VI permit.
- (ii) The administrator may find that the financial responsibility demonstration is unsatisfactory for any reason, as long as that reason is not arbitrary or capricious. The administrator may exercise discretion in negotiating a satisfactory financial responsibility demonstration or to deny a demonstration.
- (iii) The owner or operator must provide any updated information related to their financial responsibility instrument(s) on an annual basis and if there are any changes, the director must evaluate the financial responsibility demonstration to confirm that the instrument(s) used remain adequate for use. The owner or operator must maintain financial responsibility requirements regardless of the status of the administrator's review of the financial responsibility demonstration.
- (iv) The owner or operator must provide an adjustment of the cost estimate to the administrator within 60 days of notification by the administrator, if the administrator determines during the annual evaluation of the qualifying financial responsibility instrument(s) that the most recent demonstration is no longer adequate to cover the cost of corrective action (as required by Section 8 ), injection well plugging (as required by Section 16 ), post-injection site care and site closure (as required by Section 17 ), and emergency and remedial response (as required by Section 18 ).
- (v) During the active life of the geologic sequestration project, the owner or operator must adjust the cost estimate for inflation within 60 days prior to the anniversary date of the establishment of the financial instrument(s) used to comply with paragraph (g) of this section and provide this adjustment to the administrator. The owner or operator must also provide to the administrator written updates of adjustments to the cost estimate within 60 days of any amendments to the area of review and corrective action plan (Section 8 ), the injection well plugging plan (Section 16 ), the post-injection site care and site closure plan (Section 17 ), the emergency and remedial response plan (Section 18 ), and mitigation or reclamation costs that the state may incur as a result of any default by the permit holder.
- (vi) The administrator must approve any decrease or increase to the initial cost estimate. During the active life of the geologic sequestration project, the owner or operator must revise the cost estimate no later than 60 days after the administrator has approved the request to modify the area of review and corrective action plan (Section 8 ), the injection well plugging plan (Section 16 ), the post-injection site care and site closure plan (Section 17 ), and the emergency and response plan (Section 18 ), if the change in the plan increases the cost. If the change to the plans decreases the cost, any withdrawal of funds must be approved by the administrator. Any decrease to the value of the financial assurance instrument must first be approved by the director. The revised cost estimate must be adjusted for inflation as specified in the preceding paragraph.
- (vii) Whenever the current cost estimate increases to an amount greater than the face amount of a financial instrument currently in use, the owner or operator, within 60 days after the increase, must either cause the face amount to be increased to an amount at least equal to the current cost estimate and submit evidence of such increase to the administrator, or obtain other financial responsibility instruments to cover the increase. Whenever the current cost estimate decreases, the face amount of the financial assurance instrument may be reduced to the amount of the current cost estimate only after the owner or operator has received written approval from the administrator.
(j) The owner or operator may demonstrate financial responsibility by using one or multiple qualifying financial instruments for specific phases of the geologic sequestration project. - (i) In the event that the owner or operator combines more than one instrument for a specific geologic sequestration phase (e.g., well plugging), such combination must be limited to instruments that are not based on financial strength or performance (i.e., self-insurance or performance bond). For example trust funds, surety bonds guaranteeing payment into a trust fund, letters of credit, escrow account, and insurance.
- (ii) When using a third-party instrument to demonstrate financial responsibility, the owner or operator must provide proof that the third-party providers either have passed financial strength requirements based on credit ratings; or has met a minimum rating, minimum capitalization, and ability to pass the bond rating when applicable.
- (iii) An owner or operator using certain types of third party instruments must establish a standby trust to enable the State of Wyoming to be party to the financial responsibility agreement without the State of Wyoming being the beneficiary of any funds. The standby trust fund must be used along with other financial responsibility instruments (e.g., surety bonds, letters of credit, or escrow accounts) to provide a location to place funds if needed.
- (iv) An owner or operator may deposit money into an escrow account to cover financial responsibility requirements; this account must segregate funds sufficient to cover estimated costs for Class VI (geologic sequestration) financial responsibility from other accounts and uses.
- (v) An owner or operator or its guarantor may use self-insurance to demonstrate financial responsibility for certain phases of geologic sequestration projects. In order to satisfy this requirement the owner or operator must meet a tangible net worth of an amount approved by the administrator, have a net working capital and tangible net worth each at least six times the sum of the current well plugging, post injection site care and site closure cost, have assets located in the United States amounting to at least 90 percent of total assets or at least six times the sum of the current well plugging, post injection site care and site closure cost, and must submit a report of its bond rating and financial information annually. In addition the owner or operator must either: have a bond rating test of AAA, AA, A, or BBB as issued by Standard & Poor's or Aaa, Aa, A, or Baa as issued by Moody's; or meet all of the following five financial ratio thresholds: a ratio of total liabilities to net worth less than 2.0; a ratio of current assets to current liabilities greater than 1.5; a ratio of the sum of net income plus depreciation, depletion, and amortization to total liabilities greater than 0.1; a ratio of current assets minus current liabilities to total assets greater than -0.1; and a net profit (revenues minus expenses) greater than 0.
- (vi) An owner or operator who is not able to meet corporate financial test criteria may arrange a corporate guarantee by demonstrating that its corporate parent meets the financial test requirements on its behalf. The parent's demonstration that it meets the financial test requirement is insufficient if it has not also guaranteed to fulfill the obligations for the owner or operator.
- (vii) An owner or operator may obtain an insurance policy to cover the estimated costs of geologic sequestration activities requiring financial responsibility. This insurance policy must be obtained from a third party provider.
(k) The owner or operator must maintain financial responsibility and resources until the administrator receives and approves the completed post-injection site care and site closure plan and the administrator approves site closure. - (i) Post-injection site care shall be for a period of not less than ten (10) years after the date when all wells excluding monitoring wells have been appropriately plugged and abandoned, all subsurface operations and activities have ceased and all surface equipment and improvements have been removed or appropriately abandoned, or so long thereafter as necessary to obtain a completion and release certificate from the administrator certifying that plume stabilization has been achieved without the use of control equipment based on a minimum of three consecutive years of monitoring data.
- (ii) The site closure plan shall address all reclamation, required monitoring, and remediation sufficient to show that the carbon dioxide injected into the geologic sequestration site will not harm human health, safety, the environment, or drinking water supplies.
(l) The owner or operator must notify the administrator by certified mail of adverse financial conditions such as bankruptcy that may affect the ability to carry out injection well plugging and post-injection site care and site closure. - (i) In the event that the owner or operator or the third party provider of a financial responsibility instrument is going through a bankruptcy, the owner or operator must notify the administrator by certified mail of the commencement of a voluntary or involuntary proceeding under Title 11 (Bankruptcy), U.S. Code, naming the owner or operator as debtor, within 10 days after commencement of the proceeding.
- (ii) A guarantor of a corporate guarantee must make such a notification to the administrator if he/she is named as debtor, as required under the terms of the corporate guarantee.
- (iii) An owner or operator who fulfills the requirements of paragraph (g) of this section by obtaining a trust fund, surety bond, letter of credit, escrow account, or insurance policy will be deemed to be without the required financial assurance in the event of bankruptcy of the trustee or issuing institution, or a suspension or revocation of the authority of the trustee institution to act as trustee of the institution issuing the trust fund, surety bond, letter of credit, escrow account, or insurance policy. The owner or operator must establish other financial assurance within 60 days after such an event.
(m) The owner or operator may be released from a financial instrument in the following circumstances: - (i) The owner or operator has completed the phase of the geologic sequestration project for which the financial instrument was required and has fulfilled all its financial obligations as determined by the administrator, including obtaining financial responsibility for the next phase of the GS project, if required.
- (ii) The owner or operator has submitted a replacement financial instrument and received written approval from the administrator accepting the new financial instrument and releasing the owner or operator from the previous financial instrument.
- (iii) The owner or operator has submitted a revised cost estimate for the remaining phases of the geologic sequestration project. The revised cost estimate may demonstrate that a partial release of the financial instrument is warranted and can still provide adequate financial assurance for the remainder of the project. Partial release of the financial instrument is at the discretion of the administrator.
(n) Following the release of all financial assurance and receipt of a site closure certificate, the administrator must approve the cost estimate prepared for the post-closure measurement, monitoring and verification of a geologic sequestration site. The cost estimate shall only be provided after plume stabilization and all remediation work has been completed.
020-24 Wyo. Code R. § 24-19