Kan. Admin. Regs. § 28-18a-24 - Financial assurance for swine waste-retention lagoon or pond closure

(a) Before January 15 each year, each swine operator of a swine facility with an animal unit capacity of 3,725 or more that utilizes swine waste-retention lagoons or ponds shall provide evidence, satisfactory to the department, that the swine operator has the financial ability to cover the cost of closure of the swine waste-retention lagoons or ponds as required by the department.

(b) For new construction or new expansion of a swine facility with a proposed animal unit capacity of 3,725 or more that employs the use of swine waste-retention lagoons or ponds, the swine operator shall provide evidence, satisfactory to the department, that the swine operator has the financial ability to cover the cost of closure of the proposed swine waste-retention lagoons or ponds at the time the application is submitted to the department for review.

(c) Each swine operator of a swine facility with an animal unit capacity of 3,725 or more shall submit, as a part of the evidence provided to the department, a detailed written estimate in current dollars of the cost to close the swine waste-retention lagoons or ponds in a manner acceptable to the department. The estimate shall be prepared by a professional engineer or consultant approved by the department.

(d) To estimate the cost to close the swine wasteretention lagoons or ponds, the swine operator shall consider the following:

(1) The cost of the swine waste-retention lagoons or ponds closure by determining the cost of a third party to collect and dispose of all swine or other process wastes stored or retained on-site in the lagoons or ponds at a specifically identified off-site application area; and

(2) all swine waste-retention lagoons or ponds to be 100 percent full, for the purpose of estimating costs.

(e) Each swine operator shall increase the closure cost estimate and the amount of financial assurance provided if changes in the swine facility closure plan addressing the swine waste-retention lagoons or ponds or a change in operation increase the maximum cost of closure at any time.

(f) Each swine operator shall provide continuous financial assurance for the cost of closure until the department determines the closure of the swine waste-retention lagoons or ponds to be acceptable.

(g) Mechanisms used to demonstrate financial assurance shall ensure that the funds necessary to meet the cost to close the swine waste-retention lagoons or ponds required by K.A.R. 28-18a-22 are accessible to the department in a timely fashion when needed. In establishing financial assurance for the swine waste-retention lagoons or ponds closure, swine operators shall utilize one or more of the following options:

(1) Trust fund;

(2) surety bond guaranteeing payment or performance;

(3) letter of credit;

(4) insurance; or

(5) self-insurance.

(h) If a swine operator utilizes a trust fund for financial assurance, the swine operator shall meet following requirements:

(1) The swine operator shall provide for a trustee that shall be an entity that has the authority to act as a trustee and whose trust operations are regulated and examined by a federal or state agency. A copy of the trust agreement shall be provided to the department.

(2) The swine operator shall provide authority for the department or person authorized by the department to implement the closure to request and obtain reimbursement for closure expenditures from the trustee. Requests for reimbursement shall be granted by the trustee, to the limit of the funds in the trust fund and with proper documentation of the incurred costs.

(3) The swine operator shall maintain the trust fund until an alternative financial assurance mechanism is approved by the department and is in place or shall cease operations and close the swine waste-retention lagoons or ponds before the trust fund is terminated, unless the operator is no longer required to demonstrate financial assurance.

(i) If a swine operator utilizes a surety bond guaranteeing payment or performance for financial assurance, the swine operator shall meet the following requirements:

(1) Obtain a surety bond, with the penal sum of the bond in an amount at least equal to the estimated swine waste-retention lagoons or ponds closure cost;

(2) provide the department with a copy of the bond;

(3) obtain the bond from a company that is licensed to issue bonds in Kansas;

(4) provide in the bond that the surety becomes liable on the bond obligation when the swine operator fails to perform as guaranteed by the bond;

(5) establish a standby trust fund;

(6) provide that payments made under the terms of the bond shall be deposited by the surety directly into the standby trust fund. Payments from the trust fund shall be made by the trustee to the limit of the bond amount when proper documentation of the incurred costs is provided; and

(7) obtain a bond providing that the surety may cancel the bond by sending notice of cancellation by certified mail to the swine operator and the department at least 120 days in advance of the cancellation. If the surety cancels the bond, the swine operator shall obtain alternative financial assurance before the cancellation or shall cease operations and close the swine waste-retention lagoons or ponds before the cancellation date of the bond, unless the swine operator is no longer required to demonstrate financial assurance.

(j) If a swine operator utilizes a letter of credit for financial assurance, the swine operator shall meet the following requirements:

(1) Obtain an irrevocable standby letter of credit by which the issuing institution shall be an entity that has authority to issue letters of credit and whose letter of credit operations are regulated by a federal or state agency. The letter of credit shall be in a form that constitutes an unconditional promise to pay and shall be in a form negotiable by the department;

(2) provide the department with a copy of the letter of credit. Information contained in the letter of credit or provided by the swine operator shall include the name, location, and permit number of the swine facility and the amount of funds assured;

(3) provide an irrevocable letter of credit issued for at least one year in an amount at least equal to the current cost estimate for closure of the swine waste-retention lagoons or ponds. The letter of credit shall provide that the expiration date shall be automatically extended for at least one year unless the issuing institution has canceled the letter of credit by sending notice of cancellation by certified mail to the swine operator and department at least 120 days in advance of cancellation. If the letter of credit is canceled by the issuing institution, the swine operator shall obtain alternative financial assurance before the cancellation or shall cease operations and close the swine waste-retention lagoons or ponds before the cancellation date of the letter of credit, unless the swine operator is no longer required to demonstrate financial assurance; and

(4) cancel the letter of credit only if alternative financial assurance, approved by the secretary, is substituted or if the swine operator is no longer required to demonstrate financial assurance.

(k) If a swine operator utilizes insurance for financial assurance, the swine operator shall meet the following requirements:

(1) Obtain insurance coverage for at least one year in an amount at least equal to the current cost estimate for closure of the swine waste-retention lagoons or ponds;

(2) obtain insurance from an insurer authorized to sell insurance in Kansas;

(3) provide the department with a copy of the insurance policy;

(4) ensure that the insurance policy guarantees that funds shall be available to close the swine waste-retention lagoons or ponds if the swine operator is unable or unwilling to close the swine waste-retention lagoons or ponds in accordance with the swine facility closure plan approved by the department;

(5) ensure that the insurance policy provides that the insurer is responsible for the payment of the department or person authorized to close the swine waste-retention lagoons or ponds. Payments by the insurer for the policy shall be made to the limit of the policy amount when proper documentation of the incurred costs is provided;

(6) ensure that the insurance policy shall provide that the insurer shall not cancel, terminate, or fail to renew the policy except for failure to pay the premium. The automatic renewal of the policy shall, at a minimum, provide the insured with the option of renewal at the face amount of the expiring policy. If there is a failure to pay the premium, the insurer may cancel the policy by sending notice of cancellation by certified mail to the swine operator and the department at least 120 days in advance of the cancellation;

(7) if the insurer cancels the policy, obtain alternative financial assurance before the cancellation or cease operations and close the swine waste-retention lagoons or ponds before the cancellation date of the insurance policy, unless the swine operator is no longer required to demonstrate financial assurance; and

(8) cancel the insurance policy only if alternative financial assurance, approved by the department, is substituted or if the swine operator is no longer required to demonstrate financial assurance.

(l) If a swine operator utilizes self-insurance for financial assurance, the swine operator shall meet the following requirements:

(1) Submit a financial statement, prepared by a certified public accountant, listing tangible assets and total liabilities of the swine operator. The assets shall not include the value of the swine at the swine facility. The financial statement shall include a general release by the swine operator, providing the department authorization for verification with banks or other financial institutions; and

(2) provide an indication on the financial statement of whether the tangible assets, less the total liabilities, are satisfactory to cover the estimated cost of closure. The financial statement shall note the estimated cost of closure utilized.

(m) Each swine operator that utilizes multiple financial assurance mechanisms shall meet both of the following requirements:

(1) Use only the financial assurance mechanisms specified in this regulation; and

(2) submit documentation to the department that confirms that the total coverage of all the financial mechanisms utilized provides an amount at least equal to the current cost estimate for closure of the swine wasteretention lagoons or ponds. (Authorized by and implementing K.S.A. 65-171d and 65-1,190; effective Jan. 15, 1999; amended Nov. 19, 2021.)

Notes

Kan. Admin. Regs. § 28-18a-24

Authorized by and implementing K.S.A. 65-171d and 65-1,190; effective Jan. 15, 1999; amended by Kansas Register Volume 40, No. 44; effective 11/19/2021.