§11-280.1-95 - Financial test of self-insurance.

§11-280.1-95 Financial test of self-insurance.

         (a) An owner or operator, and/or guarantor, may satisfy the requirements of section 11-280.1-93 by passing a financial test as specified in this section. To pass the financial test of self-insurance, the owner or operator, and/or guarantor, must meet the criteria of subsection (b) or (c) based on year-end financial statements for the latest completed fiscal year.

         (b) (1) The owner or operator, and/or guarantor, must have a tangible net worth of at least ten times:

         (A) The total of the applicable aggregate amount required by section 11-280.1-93, based on the number of underground storage tanks for which a financial test is used to demonstrate financial responsibility to the department, to EPA, or to a state implementing agency under a state program approved by EPA under 40 C.F.R. part 281;

         (B) The sum of the RCRA subtitle C corrective action cost estimates, the current closure and post-closure care cost estimates, and amount of liability coverage for which a financial test is used to demonstrate financial responsibility to demonstrate financial responsibility to the department under 40 C.F.R. sections 261.143 and 261.147, as incorporated and amended in section 11-261.1-1, 40 C.F.R. sections 264.101, 264.143, 264.145, and 264.147, as incorporated and amended in section 11-264.1-1, and 40 C.F.R. sections 265.143, 265.145, and 265.147, as incorporated and amended in section 11-265.1-1, to EPA under 40 C.F.R. sections 261.143, 261.147, 264.101, 264.143, 264.145, 264.147, 265.143, 265.145, and 265.147, or to a state implementing agency under a state program authorized by EPA under 40 C.F.R. part 271; and

         (C) The sum of current plugging and abandonment cost estimates for which a financial test is used to demonstrate financial responsibility to EPA under 40 C.F.R. section 144.63 or to a state implementing agency under a state program authorized by EPA under 4 0 C.F.R. part 145.

         (2) The owner or operator, and/or guarantor, must have a tangible net worth of at least $10,000,000.

         (3) The owner or operator, and/or guarantor, must have a letter signed by the chief financial officer worded as specified in subsection (d).

         (4) The owner or operator, and/or guarantor, must either:

         (A) File financial statements annually with the U.S. Securities and Exchange Commission, the Energy Information Administration, or the Rural Utilities Service; or

         (B) Report annually the firm's tangible net worth to Dun and Bradstreet, and Dun and Bradstreet must 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) (1) The owner or operator, and/or guarantor, must meet the financial test requirements of 40 C.F.R. section 264.147(f)(1), as incorporated and amended in chapter 11-264.1, substituting the appropriate amounts specified in section 11-280.l-93(b)(1) and (2) for the "amount of liability coverage" each time specified in that section. (2) The fiscal year-end financial statements of the owner or operator, and/or guarantor, must 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) The owner or operator, and/or guarantor, must have a letter signed by the chief financial officer, worded as specified in subsection (d).

         (5)If the financial statements of the owner or operator, and/or guarantor, are not submitted annually to the U.S. Securities and Exchange Commission, the Energy Information Administration or the Rural Utilities Service, the owner or operator, and/or guarantor, must obtain a special report by an independent certified public accountant stating that:

         (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 the owner or operator, and/or guarantor, with the amounts in such financial statements; and

         (B) In connection with that comparison, 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 the owner or operator, or guarantor, must sign, within one hundred twenty days of the close of each financial reporting year, as defined by the twelve-month period for which financial statements used to support the financial test are prepared, a letter worded exactly as follows, except that the instructions in brackets are to be replaced by the relevant information and the brackets deleted:

         LETTER FROM CHIEF FINANCIAL OFFICER

         I am the chief financial officer of [insert: name and address of the owner or operator, or guarantor]. This letter is in support of the use of [insert: "the financial test of self-insurance" or "guarantee" or both] to demonstrate financial responsibility for [insert: "taking corrective action or "compensating third parties for bodily injury and property damage" or both] caused by 'insert: "sudden accidental releases" or "nonsudden accidental releases" or "accidental releases"] in the amount of at least [insert: dollar amount] per occurrence and [insert: dollar amount] annual aggregate arising from operating (an) underground storage tank(s).

         Underground storage tanks at the following facilities are assured by this financial test, or a corresponding financial test under EPA or another authorized state program, by this [insert: "owner or operator" or "guarantor"):

         [List for each facility: the name and address of the facility where tanks assured by this financial test are located, and whether tanks are assured by this financial test or a corresponding financial test under EPA or under a state program approved under 40 C.F.R. part 281. If separate mechanisms or combinations of mechanisms are being used to assure any of the tanks at this facility, list each tank assured by this financial test by the tank identification number provided in the notification submitted pursuant to section 342L-30, Hawaii Revised Statutes, or 40 C.F.R. section 280.22, or in the permit applications submitted under sections 11-280.1-324 and 11-280.1-326.]

         A [insert: "financial test" and/or "guarantee"] is also used by this [insert: "owner or operator" or "guarantor"] to demonstrate evidence of financial responsibility in the following amounts under other EPA regulations or state programs authorized by EPA

         under 40 C.F.R. parts 271 and 145:

         Amount

         EPA Regulations:

         Closure (§§261.143, 264.143, and $ 265.143)

         Post-Closure Care (§§264.145 and $ 265.145)

         Liability Coverage (§§261.147, 264.147, $ and 265.147)

         Corrective Action (§264.101(b)) $

         Plugging and Abandonment (§144.63) $

         Authorized State Programs:

         Closure $

         Post-Closure Care $

         Liability Coverage $

         Corrective Action $

         Plugging and Abandonment $

         TOTAL $

         This [insert: "owner or operator" or "guarantor"] has not received an adverse opinion, a disclaimer of opinion, or a "going concern" qualification from an independent auditor on his or her financial statements for the latest completed fiscal year.

         [Fill in the information for Alternative I if the criteria of subsection (b) are being used to demonstrate compliance with the financial test requirements. Fill in the information for Alternative II if the criteria of subsection (c) are being used to demonstrate compliance with the financial test requirements.]

         ALTERNATIVE I

         Amount

         1. Amount of annual UST aggregate coverage being assured by a financial test, or guarantee or both $

         2. Amount of corrective action, closure and post-closure care costs, liability coverage, and plugging and abandonment costs covered by a financial test, or guarantee or both $

         3. Sum of lines 1 and 2 $

         4. Total tangible assets $

         5. Total liabilities [if any of the amount reported on line 3 is included in total liabilities, you may deduct that amount from this line and add that amount to line 6]$

         6. Tangible net worth [subtract line 5 from line 4]$

         7. Is line 6 at least $10,000,000? Yes No

         8. Is line 6 at least ten times line 3? Yes No

         9. Have financial statements for the latest fiscal year been filed with the U.S. Securities and Exchange Commission? Yes No

         10. Have financial statements for the latest fiscal year been filed with the federal Energy Information Administration? Yes No

         11. Have financial statements for the latest fiscal year been filed with the federal Rural Utilities Service? Yes No

         12. Has financial information been provided to Dun and Bradstreet, and has Dun and Bradstreet provided a financial strength rating of 4A or 5A? [Answer "Yes" only if both criteria have been met.] Yes No

         ALTERNATIVE II

         Amount

         1. Amount of annual UST aggregate coverage being assured by a financial test, or guarantee or both $

         2. Amount of corrective action, closure and post-closure care costs, liability coverage, and plugging and abandonment costs covered by a financial test, or guarantee or both $

         3. Sum of lines 1 and 2 $

         4. Total tangible assets $

         5. Total liabilities [if any of the amount reported on line 3 is included in total liabilities, you may deduct that amount from this line and add that amount to line 6] $

         6. Tangible net worth [subtract line 5 from line 4] $

         7. Total assets in the U.S. [required only if less than ninety per cent of assets are located in the U.S.] $

         8. Is line 6 at least $10,000,000? Yes No

         9. Is line 6 at least six times line 3? Yes No

         10. Are at least ninety per cent of assets located in the U.S.? [If "No," complete line 11] Yes No

         11. Is line 7 at least six times line 3? [Fill in either lines 12-15 or lines 16-18:] es No

         12. Current assets $

         13. Current liabilities $

         14. Net working capital [subtract line 13 from line 12] $

         15. Is line 14 at least six times line 3? Yes No

         16. Current bond rating of most recent bond issue

         17. Name of rating service

         18. Date of maturity of bond

         19. Have financial statements for the latest fiscal year been filed with the U.S. Securities and Exchange Commission, the federal Energy Information Administration, or the federal Rural Utilities Service? Yes No

         [If "No," please attach a report from an independent certified public accountant certifying that there are no material differences between the data as reported in lines 4-18 above and the financial statements for the latest fiscal year.]

         [For both Alternative I and Alternative II complete the certification with this statement.]

         I hereby certify that the wording of this letter is identical to the wording specified in section 11-280.1-95(d), Hawaii Administrative Rules, as such regulations were constituted on the date shown immediately below.

         [Signature]

         [Name]

         [Title]

         [Date]

         (e) If an owner or operator using the test to provide financial assurance finds that he or she no longer meets the requirements of the financial test based on the year-end financial statements, the owner or operator must obtain alternative coverage within one hundred fifty days of the end of the year for which financial statements have been prepared.

         (f) The director may require reports of financial condition at any time from the owner or operator, and/or guarantor. If the director finds, on the basis of such reports or other information, that the owner or operator, and/or guarantor, no longer meets the financial test requirements of subsections (b) or (c) and (d), the owner or operator must obtain alternate coverage within thirty days after notification of such a finding.

         (g) If the owner or operator fails to obtain alternate assurance within one hundred fifty days of finding that he or she no longer meets the requirements of the financial test based on the year-end financial statements, or within thirty days of notification by the director that he or she no longer meets the requirements of the financial test, the owner or operator must notify the director of such failure within ten days.

        [Eff 7/15/18; comp JAN 17 2020 ] (Auth: HRS §§342L-3, 342L-36) (Imp: HRS §§342L-3, 342L-36)

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