Iowa Admin. Code r. 567-120.13 - Financial assurance requirements for landfarms
The holder of a
(1)
No permit without financial
assurance. The department shall not issue or renew a permit to an
owner or operator of a landfarm until a financial assurance instrument has been
submitted to and approved by the department .
(2)
Proof of compliance.
Proof of the establishment of the financial assurance instrument and compliance
with this rule, including a current closure cost estimate, shall be submitted
at the time of application for a permit for a landfarm applicator permit. The
owner or operator must provide continuous coverage for closure and submit proof
of compliance, including an updated closure cost estimate, with each permit
renewal thereafter until released from this requirement by the
department .
(3)
Financial
assurance amounts required. The estimate submitted to the department
must be certified by a professional engineer and account for at least the
following factors determined by the department to be minimal necessary costs
for closure pursuant to rule
567-120.12 (455B):
a. Third-party costs to conduct soil sampling
and properly clean all equipment and storage areas at the landfarm
plot (s).
b. If PCS is temporarily
stored on site prior to incorporation , then this estimate shall include
third-party labor and transportation costs and total tip fees to properly
dispose of all PCS equal to the maximum storage capacity on site .
(4)
Acceptable financial
assurance instruments. The financial assurance instrument shall be
established in an amount equal to the cost estimate prepared in accordance with
subrule 120.13(3) and shall not be canceled, revoked, disbursed, released, or
allowed to terminate without the approval of the department . Financial
assurance may be provided by cash in the form of a secured trust fund or local
government dedicated fund, surety bond, letter of credit, or corporate or local
government guarantee as follows:
a.
Secured trust fund. The owner or operator of a landfarm or
entity serving as a guarantor may demonstrate financial assurance for closure
by establishing a secured trust fund that conforms to the requirements of this
paragraph.
(1) The trustee must be an entity
which has the authority to act as a trustee and whose trust operations are
regulated and examined by a federal or state agency. The fund shall be
restricted for the sole purpose of funding closure activities at the landfarm
sites, and a copy of the trust agreement must be submitted to the department
and placed in the permit holder's official files.
(2) A secured trust fund shall name the
department of natural resources as the entity authorized to draw funds from the
trust, subject to proper notification to the trust officer of failure by the
permittee to properly close the site within 30 days of permit suspension,
termination, revocation, or expiration.
(3) Moneys in the fund shall not be assigned
for the benefit of creditors with the exception of the state.
(4) Moneys in the fund shall not be used to
pay any final judgment against a permit holder arising out of the ownership or
operation of the site during its active life or after closure.
(5) The owner or operator or another person
authorized to conduct closure activities may request reimbursement from the
trustee for closure expenditures as they are incurred. Requests for
reimbursement shall be granted by the trustee only if sufficient funds are
remaining in the trust fund to cover the remaining costs of closure and if
documentation of the justification for reimbursement has been submitted to the
department for prior approval.
(6)
If the balance of the trust fund exceeds the current cost estimate for closure
at any time, the owner or operator may request withdrawal of the excess funds
from the trustee so long as the withdrawal does not cause the balance to be
reduced below the amount of the current cost estimate.
b.
Local government dedicated
fund. The owner or operator of a publicly owned entity permitted to
landfarm PCS or a local government serving as a guarantor may demonstrate
financial assurance for closure by establishing a dedicated fund that conforms
to the requirements of this paragraph.
(1) The
fund shall be dedicated by state constitutional provision or local government
statute, charter, ordinance, resolution or order as a restricted fund to pay
for closure costs arising from the operation of the landfarm site (s).
(2) A copy of the document establishing the
dedicated fund must be submitted to the department and placed in the permit
holder's official files.
(3) If the
balance of the dedicated fund exceeds the current cost estimate for closure at
any time, the owner or operator may withdraw excess funds so long as the
withdrawal does not cause the balance to be reduced below the amount of the
current cost estimate.
c.
Surety bond. A surety bond must be written by a company
authorized by the commissioner of insurance to do business in the state. The
surety bond shall comply with the following:
(1) The bond shall be in a form approved by
the commissioner of insurance and shall be payable to the department of natural
resources.
(2) The bond shall be
specific to a particular landfarm owner or operator for the purpose of funding
closure in accordance with rule
567-120.12 (455B) and removing
any stockpiled PCS that may remain at the site (s) due to the owner's or
operator 's failure to properly close the site within 30 days of permit
suspension, termination, revocation, or expiration.
(3) The owner or operator shall provide the
department with a statement from the surety with each permit application
renewal, noting that the bond is paid and current for the permit period for
which the owner or operator has applied for renewal.
d.
Letter of credit. The
issuing institution must be 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.
(1) The owner or
operator must submit to the department a copy of the letter of credit and place
a copy in the permit holder's official files.
(2) A letter from the owner or operator
referring to the letter of credit by number, issuing institution, and date, and
providing the name and address of the permit holder and the amount of funds
assured, must be included with the letter of credit submitted to the department
and placed in the permit holder's files.
(3) The letter of credit must be irrevocable
and must be issued for a period of at least one year. The letter of credit must
provide that the expiration date will be automatically extended for a period of
at least one year unless the issuing institution has canceled the letter of
credit by sending notice of cancellation by certified mail to the owner or
operator and to the department 90 days in advance of cancellation. When such
notice is provided, the owner or operator shall, within 60 days, provide to the
department adequate proof of alternative financial assurance, notice of
withdrawal of cancellation, or proof of a deposit of a sum equal to the amount
of the letter of credit into a secured trust fund that meets the requirements
of paragraph 120.13(4)"a." If the owner or operator has not
complied with this subrule within the 60-day time period, the issuer of the
letter of credit shall deposit a sum equal to the amount of the letter of
credit into the secured trust fund established by the owner or operator . The
provision of funds by the issuer of the letter of credit shall be considered an
issuance of a loan to the owner or operator , and the terms of that loan shall
be governed by the letter of credit or subsequent agreement between those
parties. The state shall not be considered a party to this credit
transaction.
e.
Corporate guarantee. An owner or operator may meet the
requirements of this rule by obtaining a written guarantee. The guarantor must
be the direct or higher-tier parent corporation of the owner or operator , an
owner or operator whose parent corporation is also the parent corporation of
the owner or operator , or an owner or operator with a "substantial business
relationship" with the owner or operator .
(1)
The terms of the written guarantee must provide that within 30 days of the
owner's or operator 's failure to perform closure of a landfarm site (s) covered
by the guarantee, the guarantor will:
1.
Perform closure or pay a third party to perform closure as required
(performance guarantee);
2.
Establish a fully funded secured trust fund as specified in paragraph
120.13(4)"a" in the name of the owner or operator (payment
guarantee); or
3. Establish an
alternative financial assurance instrument in the name of the owner or operator
as required by this rule.
(2) The guarantor must satisfy one of the
following three conditions:
1. A current
rating for its senior unsubordinated debt of AAA, AA, A, or BBB as issued by
Standard & Poor's or Aaa, Aa, A, or Baa as issued by Moody's; or
2. A ratio of less than 1.5 comparing total
liabilities to net worth; or
3. A
ratio of greater than 0.10 comparing the sum of net income plus depreciation,
depletion and amortization, minus $10 million, to total
liabilities.
(3) The
tangible net worth of the guarantor must be greater than the sum of the current
closure cost estimate and any other environmental obligations, including other
financial assurance guarantees.
(4)
The guarantor must have assets amounting to at least the sum of the current
closure cost estimate and any other environmental obligations, including other
financial assurance guarantees.
(5)
Record-keeping and reporting requirements. The guarantor must submit the
following records to the department and place a copy in the permit holder's
official files:
1. A copy of the written
guarantee between the owner or operator and the guarantor.
2. A letter signed by a certified public
accountant and based upon a certified audit that:
* Lists all the current cost estimates covered by a guarantee
including, but not limited to, cost estimates required by subrule 120.13(3);
cost estimates required for municipal
* Provides evidence demonstrating that the guarantor meets the conditions of subparagraphs 120.13(4) "e"(2), (3) and (4).
3. A copy of the
independent certified public accountant's unqualified opinion of the
guarantor's financial statements for the latest completed fiscal year . In order
for the guarantor to be eligible to use the guarantee, the guarantor's
financial statements must receive an unqualified opinion from the independent
certified public accountant. An adverse opinion or disclaimer of opinion shall
be cause for disallowance of this instrument. A qualified opinion related to
the demonstration of financial assurance may, at the discretion of the
department , be cause for disallowance. If the department does not allow use of
the corporate guarantee, the owner or operator must provide alternative
financial assurance that meets the requirements of this rule.
f.
Local
government guarantee. An owner or operator may demonstrate financial
assurance for closure by obtaining a written guarantee provided by a local
government or jointly provided by the members of an agency established pursuant
to Iowa Code chapter 28E.
(1) The terms of the
written guarantee must provide that within 30 days of the owner's or operator 's
failure to perform closure of a landfarm site (s) covered by the guarantee, the
guarantor will:
1. Perform closure or pay a
third party to perform closure as required (performance guarantee);
2. Establish a fully funded secured trust
fund as specified in paragraph 120.13(4)"a" in the name of the
owner or operator (payment guarantee); or
3. Establish an alternative financial
assurance instrument in the name of the owner or operator as required by this
rule.
(2) The guarantor
must satisfy one of the following requirements:
1. If the guarantor has outstanding, rated,
general obligation bonds that are not secured by insurance, a letter of credit,
or other collateral or guarantee, the guarantor must have a current rating of
Aaa, Aa, A, or Baa, as issued by Moody's, or AAA, AA, A, or BBB, as issued by
Standard & Poor's, on all such general obligation bonds; or
2. The guarantor must satisfy each of the
following financial ratios based on the guarantor's most recent audited annual
financial statement: a ratio of cash plus marketable securities to total
expenditures greater than or equal to 0.05, and a ratio of annual debt service
to total expenditures less than or equal to 0.20.
(3) The guarantor must prepare its financial
statements in conformity with generally accepted accounting principles or other
comprehensive basis of accounting and must have its financial statements
audited by an independent certified public accountant or the office of the
auditor of the state of Iowa. The financial statement shall be in the form
prescribed by the office of the auditor of the state of Iowa.
(4) A guarantor is not eligible to assure its
obligations if:
1. The guarantor is currently
in default on any outstanding general obligation bonds; or
2. The guarantor has any outstanding general
obligation bonds rated lower than Baa as issued by Moody's or BBB as issued by
Standard & Poor's; or
3. The
guarantor operated at a deficit equal to 5 percent or more of total annual
revenue in each of the past two fiscal years; or
4. The guarantor receives an adverse opinion
or disclaimer of opinion from the independent certified public accountant or
office of the auditor of the state of Iowa auditing its financial statement. A
qualified opinion that is related to the demonstration of financial assurance
may, at the discretion of the department , be cause for disallowance of this
mechanism; or
5. The closure costs
to be assured are greater than 43 percent of the guarantor's total annual
revenue.
(5) The local
government guarantor must include disclosure of the closure costs assured
through the guarantee in its next annual audit report prior to the initial
application of PCS at the landfarm site (s) or prior to cancellation of an
alternative financial assurance instrument, whichever is later. For the first
year the guarantee is used to assure costs at a particular site (s), the
reference may instead be placed in the guarantor's official files until
issuance of the next available annual audit report if timing does not permit
the reference to be incorporated into the most recently issued annual audit
report or budget. For closure costs, conformance with Governmental Accounting
Standards Board Statement 18 ensures compliance with this public notice
component.
(6) The local government
owner or operator must submit to the department the following items:
1. A copy of the written guarantee between
the owner or operator and the local government serving as guarantor for the
closure costs at the landfarm site (s).
2. A copy of the guarantor's most recent
annual financial audit report indicating compliance with the financial ratios
required by numbered paragraph 120.13(4)"f"(2)"2," if
applicable, and the requirements of subparagraphs
120.13(4)"f"(3) and (4).
3. A letter signed by the local government's
chief financial officer that lists all the current cost estimates covered by
the guarantor, as described in subrule 120.13(3); and that provides evidence
and certifies that the local government meets the conditions of subparagraphs
120.13(4)"f"(2), (3), (4) and (5).
(5)
Financial assurance cancellation and permit suspension.
a. A financial assurance instrument may be
terminated by the owner or operator only if the owner or operator substitutes
alternate financial assurance prior to cancellation, as specified in this rule,
or if the owner or operator is no longer required to demonstrate financial
responsibility in accordance with this rule.
b. A financial assurance instrument shall be
continuous in nature until canceled by the financial assurance provider or
until the department gives written notification to the owner, operator , and
financial assurance provider that the covered site has been properly closed.
The financial assurance provider shall give at least 90 days' notice in writing
to the owner or operator and the department in the event of any intent to
cancel the instrument.
c. Within 60
days of receipt of a written notice of cancellation of financial assurance by
the financial assurance provider, the owner or operator must provide the
department an alternative financial assurance instrument. If a means of
continued financial assurance is not provided within that 60 days, the
department shall suspend the permit.
d. The owner or operator shall perform proper
closure within 30 days of the permit suspension. For the purpose of this rule,
"proper closure" means completion of all items pursuant to rule
567-120.12(455B) and subrule 120.13(3).
e. If the owner or operator does not properly
close the site within the 30-day period allowed, the department shall file a
claim with the financial assurance instrument provider to collect the amount of
funds necessary to properly close the site .
f. An owner or operator who elects to
terminate a permitted activity, whose renewal application has been denied, or
whose permit has been suspended or revoked for cause must submit within 30 days
of the termination of the permit a schedule for completing proper closure of
the terminated activity. Closure completion cannot exceed 60 days from the date
of termination of the permit.
g.
The director may also request payment from any financial assurance provider for
the purpose of completing closure when the following circumstances exist:
(1) The owner or operator is more than 15
days late in providing a schedule for closure or for meeting any date in the
schedule for closure.
(2) The owner
or operator declares an economic inability to comply with this rule, either by
sending written notification to the director or through an action such as, but
not limited to, filing for bankruptcy.
Notes
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