Iowa Admin. Code r. 567-121.8 - Financial assurance requirements for land application of wastes
The holder of a
(1)
No permit without financial
assurance. The department shall not issue or renew a permit to an
owner or operator 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 by July 1, 2008, or at the
time of application for a permit to land apply solid wastes. 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:
a. Third-party labor and
transportation costs and total tip fees to properly dispose of all solid wastes
equal to the maximum storage capacity of all approved storage areas,
or
b. Third-party labor costs to
land apply all solid wastes equal to the maximum storage capacity of all
approved storage areas.
(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
121.8(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 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 land application site (s), 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
land apply solid waste 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 land application sites.
(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 land application site (s) for the purpose of funding
closure in accordance with subrule 121.8(3) and removing any stockpiled solid
wastes that may remain on site 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 121.8(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 land application 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 121.8(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 121.8(3);
cost estimates required for municipal
* Provides evidence demonstrating that the guarantor meets the conditions of subparagraphs 121.8(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 land application 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
121.8(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 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 waste at the
land application 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 land application 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 land application sites.
2. A copy of the guarantor's most recent
annual financial audit report indicating compliance with the financial ratios
required by numbered paragraph 121.8(4)"f"(2)"2," if
applicable, and the requirements of subparagraphs 121.8(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 121.8(3); and that
provides evidence and certifies that the local government meets the conditions
of subparagraphs 121.8(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 subrule
121.8(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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