Ala. Admin. Code r. 335-13-4-.28

Current through Register Vol. 43, No. 1, October 31, 2024

Section 335-13-4-.28 - Financial Assurance Criteria

(1) The requirements of 335-13-4-.28 apply to owners and operators of all MSWLF, except owners or operators who are state or federal government entities whose debts and liabilities are the debts and liabilities of the State or the United States.

(2)Financial Assurance for Closure.

(a) The owner or operator shall have a detailed written estimate, in current dollars, of the cost of hiring a third party to close the largest area of all landfill cells at the MSWLF ever requiring a final cover as required under 335-13-4-.20 at any time during the active life in accordance with the closure plan. The owner or operator shall place the closure cost estimate in the operating record and submit a copy of the estimate to ADEM for approval.

1. The closure cost estimate shall equal the cost of closing the largest area of the MSWLF ever requiring a final cover at any time during the active life when the extent and manner of its operation would make closure the most expensive, as indicated by its closure plan. The cost estimate shall include the costs of continuing the operation of the gas collection and control systems as may be required in 335-3-10-.02(75) or 335-3-19, as applicable.

2. During the active life of the MSWLF, the owner or operator shall annually adjust the closure cost estimate for inflation.

3. The owner or operator shall increase the closure cost estimate and the amount of financial assurance provided under 335-13-4-.28(2)(b) if changes to the closure plan or landfill conditions increase the maximum cost of closure at any time during the remaining active life.

4. The owner or operator may reduce the closure cost estimate and the amount of financial assurance provided under 335-13-4-.28(2)(b) if the cost estimate exceeds the maximum cost of closure at any time during the remaining life of the MSWLF. The owner or operator shall place the justification for the reduction of the closure cost estimate and the amount of financial assurance in the operating record and submit a copy of the justification and new estimate to ADEM for approval.

(b) The owner or operator of a MSWLF shall establish financial assurance for closure of the MSWLF in compliance with 335-13-4-.28(5). The owner or operator shall provide continuous coverage for closure until released from financial assurance requirements by ADEM.

(3)Financial Assurance for Post-Closure Care.

(a) The owner or operator shall have a detailed written estimate, in current dollars, of the cost of hiring a third party to conduct post-closure care for the MSWLF in compliance with the post-closure requirements in 335-13-4-.20(3). The post-closure cost estimate used to demonstrate financial assurance in 335-13-4-.28(3) (b) shall account for the total costs of conducting post-closure care, including annual and periodic costs as described in the post-closure plan over the entire post-closure care period. The owner or operator shall place the estimate in the operating record and submit a copy of the estimate to ADEM for approval.

1. The cost estimate for post-closure care shall be based on the most expensive costs of post-closure care during the post-closure care period.

2. During the active life of the MSWLF and during the post-closure care period, the owner or operator shall annually adjust the post-closure cost estimate for inflation.

3. The owner or operator shall increase the post-closure care cost estimate and the amount of financial assurance provided under 335-13-4-.28(3)(b) if changes in the post-closure plan or MSWLF conditions increase the maximum costs of post-closure care.

4. The owner or operator may reduce the post-closure cost estimate and the amount of financial assurance provided under 335-13-4-.28(3)(b) if the cost estimate exceeds the maximum costs of post-closure care remaining over the post-closure care period. The owner or operator shall place the justification for the reduction of the post-closure cost estimate and the amount of financial assurance in the operating record and submit a copy of the justification and new estimate to ADEM for approval.

(b) The owner or operator of a MSWLF shall establish, in accordance with 335-13-4-.28(5), financial assurance for the costs of post-closure care required under 335-13-4-.28(3). The owner or operator shall provide continuous coverage for post-closure care until released from financial assurance requirements for post-closure care under 335-13-4-.20(3) (e).

(4)Financial Assurance for Corrective Action.

(a) An owner or operator of a MSWLF required to undertake a corrective action program under 335-13-4-.27(5) shall have a detailed written estimate, in current dollars, of the cost of hiring a third party to perform the corrective action in accordance with the program required under 335-13-4-.27(5). The corrective action cost estimate shall account for the total costs of corrective action activities as described in the corrective action plan for the entire corrective action period. The owner or operator shall place the estimate in the operating record and submit a copy to ADEM for approval.

1. The owner or operator shall annually adjust the estimate for inflation until the corrective action program is completed in accordance with 335-13-4-.27(5).

2. The owner or operator shall increase the corrective action cost estimate and the amount of financial assurance provided under 335-13-4-.28(4)(b) if changes in the corrective action program or MSWLF conditions increase the maximum costs of corrective action.

3. The owner or operator may reduce the amount of the corrective action cost estimate and the amount of financial assurance provided under 335-13-4-.28(4)(b) if the cost estimate exceeds the maximum remaining costs of corrective action. The owner or operator shall place the justification for the reduction of the corrective action cost estimate and the amount of financial assurance in the operating record and submit a copy of the justification and new estimate to ADEM for approval.

(b) The owner or operator of a MSWLF required to undertake a corrective action program under 335-13-4-.27(5) shall establish, in a manner in accordance with 335-13-4-.28(5), financial assurance for the most recent corrective action program. The owner or operator shall provide continuous coverage for corrective action until released from financial assurance requirements for corrective action by demonstrating compliance with 335-13-4-.27(5) (o) and (p).

(5)Allowable Mechanisms for Financial Assurance. Allowable mechanisms used to demonstrate financial assurance under 335-13-4-.28 shall ensure that the funds necessary to meet the costs of closure, post-closure care, and corrective action for known releases will be available whenever they are needed. Owners and operators shall choose from the options specified in 335-13-4-.28(5)(a) through (j).

(a) Trust Fund.

1. An owner or operator may satisfy the requirements of 335-13-4-.28 by establishing a trust fund that conforms to the requirements of 335-13-4-.28(5)(a). The trustee 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 placed in the MSWLF operating record and a copy submitted to ADEM for approval.

2. Payments into the trust fund shall be made annually by the owner or operator over the life of the MSWLF permit or over the remaining life of the MSWLF, whichever is shorter, in the case of a trust fund for closure or post-closure care, or over one-half of the estimated length of the corrective action program in the case of corrective action for known releases. This period is referred to as the pay-in period.

3. For a trust fund used to demonstrate financial assurance for closure and post-closure care, the first payment into the fund shall be at least equal to the current cost estimate for closure or post-closure care, except as provided in 335-13-4-.28(5)(k), divided by the number of years in the pay-in period as defined in 335-13-4-.28(5) (a) 2. The amount of subsequent payments shall be determined by the following formula:

Next Payment = [CE - CV] / Y

where CE is the current cost estimate for closure or post-closure care (updated for inflation or other changes),CV is the current value of the trust fund, and Y is the number of years remaining in the pay-in period.

4. For a trust fund used to demonstrate financial assurance for corrective action, the first payment into the trust fund shall be at least equal to one-half of the current cost estimate for corrective action, except as provided in 335-13-4-.28(5)(k), divided by the number of years in the corrective action pay-in period as defined in 335-13-4-.28(5)(a)2. The amount of subsequent payments shall be determined by the following formula:

Next Payment = [RB - CV] / Y

where RB is the most recent estimate of the required trust fund balance for corrective action (i.e., the total costs that will be incurred during the second half of the corrective action period), CV is the current value of the trust fund, and Y is the number of years remaining in the pay-in period.

5. The initial payment into the trust fund shall be made before the initial receipt of waste or before the effective date of the requirements of 335-13-4-.28 in the case of closure and post-closure care, or no later than 120 days after the corrective action remedy has been selected in accordance with the requirements of 335-13-4-.27(5).

6. If the owner or operator establishes a trust fund after having used one or more alternate mechanisms specified in 335-13-4-.28(5), the initial payment into the trust fund shall be at least the amount that the fund would contain if the trust fund were established initially and annual payments were made according to the specifications of 335-13-4-.28(5) (a).

7. The owner or operator, or other person authorized to conduct closure, post-closure care, or corrective action activities may request reimbursement from the trustee for these expenditures. Requests for reimbursement will be granted by the trustee only if sufficient funds are remaining in the trust fund to cover the remaining costs of closure, post-closure care, or corrective action, and if justification and documentation of the cost is placed in the operating record, submitted to and approved by ADEM. The owner or operator shall place the documentation of the justification for reimbursement in the operating record and notify ADEM that reimbursement has been received.

8. The trust fund may be terminated by the owner or operator only if the owner or operator substitutes alternate financial assurance as specified in 335-13-4-.28(5) or if he is no longer required to demonstrate financial responsibility in accordance with the requirements of 335-13-4-.28(2)(b), (3)(b), or (4) (b).

(b) Surety Bond Guaranteeing Payment or Performance.

1. An owner or operator may demonstrate financial assurance for closure or post-closure care by obtaining a payment or performance surety bond which conforms to the requirements of 335-13-4-.28(5)(b). An owner or operator may demonstrate financial assurance for corrective action by obtaining a performance bond which conforms to the requirements of 335-13-4-.28(5)(b). The bond shall be effective before the initial receipt of waste or before the effective date of the requirements of 335-13-4-.28(2) and (3) in the case of closure and post-closure care, or no later than 120 days after the corrective action remedy has been selected in accordance with the requirements of 335-13-4-.27(5). The owner or operator shall place a copy of the bond in the operating record and submit a copy of the bond to ADEM for approval. The surety company issuing the bond shall, at a minimum, be among those listed as acceptable sureties on federal bonds in Circular 570 of the U.S. Department of the Treasury.

2. The penal sum of the bond shall be in an amount at least equal to the current closure, post-closure care or corrective action cost estimate, whichever is applicable, except as provided in 335-13-4-.28(5) (k).

3. Under the terms of the bond, the surety will become liable on the bond obligation when the owner or operator fails to perform as guaranteed by the bond.

4. The owner or operator shall establish a standby trust fund. The standby trust fund shall meet the requirements of 335-13-4-.28(5)(a) except the requirements for initial payment and subsequent annual payments specified in 335-13-4-.28(5) (a) 2. through 5.

5. Payments made under the terms of the bond will be deposited by the surety directly into the standby trust fund in accordance with instructions from ADEM. Payments from the trust fund shall be approved by the trustee and ADEM.

6. Under the terms of the bond, the surety may cancel the bond by sending notice of cancellation by certified mail to the owner and operator and to ADEM 12 0 days in advance of cancellation. If the surety cancels the bond, the owner or operator shall obtain alternate financial assurance as specified in 335-13-4-.28(5).

7. The owner or operator may cancel the bond only if alternate financial assurance is substituted as specified in 335-13-4-.28(5) or if the owner or operator is no longer required to demonstrate financial responsibility in accordance with 335-13-4-.28(2) (b), (3)(b), or (4)(b).

(c) Letter of Credit.

1. An owner or operator may satisfy the requirements of 335-13-4-.28(5) by obtaining an irrevocable standby letter of credit which conforms to the requirements of 335-13-4-.28(5)(c). The letter of credit shall be effective before the initial receipt of waste or before the effective date of the requirements of 335-13-4-.28(2) and (3) in the case of closure and post-closure care, or no later than 120 days after the corrective action remedy has been selected in accordance with the requirements of 335-13-4-.27(5). The owner or operator shall place a copy of the letter of credit in the operating record and submit a copy of the letter of credit to ADEM for approval. The issuing institution shall be an entity that has the authority to issue letters of credit and whose letter-of-credit operations are regulated and examined by a federal or state agency.

2. A letter from the owner or operator referring to the letter of credit by number, issuing institution, and date shall be included with the letter of credit in the operating record. The letter shall provide the name, address of the MSWLF, and the amount of funds assured.

3. The letter of credit shall be irrevocable and issued for a period of at least one year in an amount at least equal to the current cost estimate for closure, post-closure care or corrective action, whichever is applicable, except as provided in 335-13-4-.28(5)(k). The letter of credit shall provide that the expiration date will be automatically extended for a period of at least one year unless the issuing institution has cancelled the letter of credit by sending notice of cancellation by certified mail to the owner and operator and to ADEM 120 days in advance of cancellation. If the letter of credit is cancelled by the issuing institution, the owner or operator shall obtain alternate financial assurance.

4. The owner or operator may cancel the letter of credit only if alternate financial assurance is substituted as specified in 335-13-4-.28(5) or if the owner or operator is released from the financial assurance requirements in accordance with 335-13-4-.28(2) (b), (3)(b), or (4)(b).

(d) Insurance.

1. An owner or operator may demonstrate financial assurance for closure and post-closure care, and corrective action by obtaining insurance which conforms to the requirements of 335-13-4-.28(5). The insurance shall be effective before the initial receipt of waste or before the effective date of the requirements of 335-13-4-.28(2) and (3) in the case of closure and post-closure care, or no later than 120 days after the corrective action remedy has been selected in accordance with the requirements of 335-13-4-.27(5). At a minimum, the insurer shall be licensed to transact the business of insurance, or eligible to provide insurance as an excess or surplus lines insurer, in one or more States. The owner or operator shall place a copy of the insurance policy in the operating record and submit a copy of the insurance policy to ADEM for approval.

2. The closure or post-closure care insurance policy shall guarantee that funds will be available to close the MSWLF whenever final closure occurs or to provide post-closure care for the MSWLF whenever the post-closure care period begins, whichever is applicable. The policy shall also guarantee that once closure or post-closure care begins, the insurer will be responsible for the paying out of funds to the owner or operator or other person authorized to conduct closure or post-closure care, up to an amount equal to the face amount of the policy upon the direction of ADEM.

3. The insurance policy shall be issued for a face amount at least equal to the current cost estimate for closure or post-closure care, whichever is applicable, except as provided in 335-13-4-.28(5)(k). The term face amount means the total amount the insurer is obligated to pay under the policy. Actual payments by the insurer will not change the face amount, although the insurer's future liability will be lowered by the amount of the payments.

4. An owner or operator, or other person authorized to conduct closure or post-closure care, may receive reimbursements for closure or post-closure expenditures, whichever is applicable. Requests for reimbursement will be granted by the insurer only if the remaining value of the policy is sufficient to cover the remaining costs of closure or post-closure care, and if justification and documentation of the cost is placed in the operating record and approved by ADEM. The owner or operator shall place the documentation of the justification for reimbursement in the operating record and notify ADEM that reimbursement has been received.

5. The insurance policy shall contain a provision allowing assignment of the policy to a successor owner or operator. Such assignment may be conditional upon consent of the insurer, provided that such consent is not unreasonably refused.

6. The insurance policy shall provide that the insurer may 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 owner and operator and to ADEM 12 0 days in advance of cancellation. If the insurer cancels the policy, the owner or operator shall obtain alternate financial assurance as specified in 335-13-4-.28(5).

7. For insurance policies providing coverage for post-closure care, commencing on the date that liability to make payments pursuant to the policy accrues, the insurer will thereafter annually increase the face amount of the policy. Such increase shall be equivalent to the face amount of the policy, less the payments made, multiplied by an amount equivalent to 85 percent of the most recent investment rate or of the equivalent coupon-issue yield announced by the U.S. Treasury for 26-week Treasury securities.

8. The owner or operator may cancel the insurance policy only if alternate financial assurance is substituted as specified in 335-13-4-.28(5) or if the owner or operator is no longer required to demonstrate financial responsibility in accordance with the requirements of 335-13-4-.28(2)(b), (3)(b), or (4) (b).

(e) Corporate Financial Test. An owner or operator that satisfies the requirements of 335-13-4-.28(5) (e) may demonstrate financial assurance up to the amount specified in 335-13-4-.28(5) (e):

1. Financial Component.

(i) The owner or operator shall satisfy one of the following three conditions:

(I) A current rating for its senior unsubordinated debt of AAA, AA, A, or BBB as issued by Standard and Poor's or Aaa, Aa, A or Baa as issued by Moody's, or

(II) A ratio of less than 1.5 comparing total liabilities to net worth, or

(Ill) A ratio of greater than 0.10 comparing the sum of net income plus depreciation, depletion and amortization, minus $10 million, to total liabilities.

(ii) The tangible net worth of the owner or operator shall be greater than:

(I) The sum of the current closure, post-closure care, corrective action cost estimates and other environmental obligations, including guarantees, covered by a financial test plus $10 million except as provided in 335-13-4-.28(5) (e) l. (ii) (II).

(II) $10 million in net worth plus the amount of the guarantees that have not been recognized as liabilities on the financial statements provided all of the current closure, post-closure care, and corrective action costs and other environmental obligations covered by a financial test are recognized as liabilities on the owner's or operator's audited financial statements, and subject to the approval of ADEM.

(iii) The owner or operator shall have assets located in the United States amounting to at least the sum of current closure, post-closure care, corrective action cost estimates and other environmental obligations covered by a financial test as described in 335-13-4-.28(5) (e)3.

2. Recordkeeping and Reporting Requirements.

(i) The owner or operator shall place the following items into the MSWLF operating record, and submit a copy to ADEM:

(I) A letter signed by the owner's or operator's chief financial officer that:

I. Lists all the current cost estimates covered by a financial test, including, but not limited to, cost estimates required for municipal solid waste management facilities under 335-13-4-.28, cost estimates required for UIC facilities under 40 CFR part 144, if applicable, cost estimates required for petroleum underground storage tank facilities under 40 CFR part 280, if applicable, cost estimates required for PCB storage facilities under 40 CFR part 761, if applicable, and cost estimates required for hazardous waste treatment, storage, and disposal facilities under 335-14-5 and 335-14-6, if applicable, and

II. Provides evidence demonstrating that the firm meets the conditions of either 335-13-4-.28(5)(e) l.(i)(I) or (i) (II) or (i)(III); and 335-13-4-.28(5) (e) 1. (ii) andl.(iii).

(II) A copy of the independent certified public accountant's unqualified opinion of the owner's or operator's financial statements for the latest completed fiscal year. To be eligible to use the financial test, the owner's or operator's financial statements shall receive an unqualified opinion from the independent certified public accountant. An adverse opinion, disclaimer of opinion, or other qualified opinion will be cause for disallowance, with the potential exception for qualified opinions provided in the next sentence. ADEM may evaluate qualified opinions on a case-by-case basis and allow use of the financial test in cases where ADEM deems that the matters that form the basis for the qualification are insufficient to warrant disallowance of the test. If ADEM does not allow use of the test, the owner or operator shall provide alternate financial assurance that meets the requirements of 335-13-4-.28(5).

(III) If the chief financial officer's letter providing evidence of financial assurance includes financial data showing that owner or operator satisfies 335-13-4-.28(5)(e) l.(i)(II) or (i)(III) that are different from data in the audited financial statements referred to in 335-13-4-.28(5)(e)2.(i)(II) or other audited financial statement or data filed with the SEC, then a special report from the owner's or operator's independent certified public accountant to the owner or operator is required. The special report shall be based upon an agreed upon procedures engagement in accordance with professional auditing standards and shall describe the procedures performed in comparing the data in the chief financial officer's letter derived from the independently audited, year-end financial statements for the latest fiscal year with the amounts in such financial statements, the findings of that comparison, and the reasons for the differences.

(IV) If the chief financial officer's letter provides a demonstration that the firm has assured for environmental obligations as provided in 335-13-4-.28(5)(e)2.(ii)(II), then the letter shall include a report from the independent certified public accountant that verifies that all of the environmental obligations covered by a financial test have been recognized as liabilities on the audited financial statements, how these obligations have been measured and reported, and that the tangible net worth of the firm is at least $10 million plus the amount of the guarantees provided.

(ii) An owner or operator shall place the items specified in 335-13-4-.28(5)(e)2.(i) in the operating record before the initial receipt of waste or before the effective date of the requirements of 335-13-4-.28(2) and (3) in the case of closure, and post-closure care, or no later than 120 days after the corrective action remedy has been selected in accordance with the requirements of 335-13-4-.27(5).

(iii) After the initial placement of items specified in 335-13-4-.28(5)(e)2.(i) in the operating record, the owner or operator shall annually update the information and place updated information in the operating record within 90 days following the close of the owner or operator's fiscal year. ADEM may provide up to an additional 45 days for an owner or operator who can demonstrate that 90 days is insufficient time to acquire audited financial statements. The updated information shall consist of all items specified in 335-13-4-.28(5) (e)2.(i).

(iv) The owner or operator is not required to submit the items specified in 335-13-4-.28(5)(e)2. or comply with the requirements 335-13-4-.28(5)(e) when:

(I) They substitute alternate financial assurance as specified in 335-13-4-.28(5) that is not subject to these recordkeeping and reporting requirements, or

(II) They are released from the financial assurance requirements in accordance with 335-13-4-.28(2)(b), (3)(b), and (4) (b).

(v) If the owner or operator no longer meets the requirements of 335-13-4-.28(5)(e) l., the owner or operator shall, within 120 days following the close of the owner or operator's fiscal year, obtain alternative financial assurance that meets the requirements of 335-13-4-.28, place the required submissions for that assurance in the operating record, and notify ADEM that the owner or operator no longer meets the criteria of the financial test and that alternate assurance has been obtained. Proof of alternate assurance shall be submitted to ADEM for review.

(vi) An owner or operator using the mechanism in 335-13-4-.28(5)(e) l. shall provide an annual report of its financial condition in addition to or including current financial test documentation as specified in 335-13-4-.28(5)(e)2., to ADEM. If ADEM finds that the owner or operator no longer meets the requirements of 335-13-4-.28(5)(e) l., the owner or operator must provide alternate financial assurance that meets the requirements of 335-13-4-.28.

3. Calculation of Costs to be Assured. When calculating the current cost estimates for closure, post-closure care, corrective action, or the sum of the combination of such costs to be covered, and other environmental obligations assured by a financial test referred to in 335-13-4-.28(5) (e), the owner or operator must include cost estimates required for municipal solid waste management facilities under this part, as well as cost estimates required for the following environmental obligations, if it assures them through a financial test: obligations associated with UIC facilities under 40 CFR part 144, petroleum underground storage tank facilities under 40 CFR part 280, PCB storage facilities under 40 CFR part 761, and hazardous waste treatment, storage, and disposal facilities under 335-14-5 and 335-14-6.

(f) Local Government Financial Test. An owner or operator that satisfies the requirements of 335-13-4-.28(5) (f) l. to 3. may demonstrate financial assurance up to the amount specified in 335-13-4-.28(5)(f)4.

1. Financial Component.

(i) The owner or operator must satisfy 335-13-4-.28(5)(f)1.(i)(I) or (II) as applicable:

(I) If the owner or operator has outstanding, rated, general obligation bonds that are not secured by insurance, a letter of credit, or other collateral or guarantee, it 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 and Poor's on all such general obligation bonds, or

(II) The owner or operator must satisfy all of the following financial ratios based on the owner or operator's most recent audited annual financial statement:

I. A ratio of cash plus marketable securities to total expenditures greater than or equal to 0.05, and

II. A ratio of annual debt service to total expenditures less than or equal to 0.20.

(ii) The owner or operator must prepare its financial statements in conformity with Generally Accepted Accounting Principles for governments and have its financial statements audited by an independent certified public accountant (or appropriate State agency).

(iii) A local government is not eligible to assure its obligations under 335-13-4-.28(5) (f) if it:

(I) Is currently in default on outstanding general obligation bonds, or

(II) Has outstanding general obligation bonds rated lower than Baa as issued by Moody's or BBB as issued by Standard and Poor's, or

(III) Operated at a deficit equal to five percent or more of total annual revenue in each of the past two fiscal years, or

(IV) Receives an adverse opinion, disclaimer of opinion, or other qualified opinion from the independent certified public accountant (or appropriate State agency) auditing its financial statement as required under 335-13-4-.28(5)(f)1.(ii). However, ADEM may evaluate qualified opinions on a case-by-case basis and allow use of the financial test in cases where ADEM deems the qualification insufficient to warrant disallowance of use of the test.

(iv) The following terms used in 335-13-4-.28(5)(f) are defined as follows:

(I) Deficit equals total annual revenues minus total annual expenditures.

(II) Total revenues include revenues from all taxes and fees but does not include the proceeds from borrowing or asset sales, excluding revenue from funds managed by local government on behalf of a specific third party.

(III) Total expenditures include all expenditures excluding capital outlays and debt repayment.

(IV) Cash plus marketable securities is all the cash plus marketable securities held by the local government on the last day of a fiscal year, excluding cash and marketable securities designated to satisfy past obligations such as pensions, and

(V) Debt service is the amount of principal and interest due on a loan in a given time period, typically the current year.

2. Public Notice Component. The local government owner or operator must place a reference to the closure and post-closure care costs assured through the financial test into its next comprehensive annual financial report (CAFR) after the effective date of 335-13-4-.28 or before the initial receipt of waste at the MSWLF, whichever is later. Disclosure must include the nature and source of closure and post-closure care requirements, the reported liability at the balance sheet date, the estimated total closure and post-closure care cost remaining to be recognized, the percentage of landfill capacity used to date, and the estimated landfill life in years. A reference to corrective action costs must be placed in the CAFR not later than 120 days after the corrective action remedy has been selected in accordance with the requirements of 335-13-4-.27(5). For the first year the financial test is used to assure costs at a particular MSWLF, the reference may instead be placed in the operating record until issuance of the next available CAFR if timing does not permit the reference to be incorporated into the most recently issued CAFR or budget. For closure and post-closure costs, conformance with Government Accounting Standards Board Statement 18 assures compliance with this public notice component.

3. Recordkeeping and Reporting Requirements.

(i) The local government owner or operator must place the following items in the MSWLF operating record, and submit a copy to ADEM:

(I) A letter signed by the local government's chief financial officer that:

I. Lists all the current cost estimates covered by a financial test, as described in 335-13-4-.28(5)(f)4.

II. Provides evidence and certifies that the local government meets the conditions of 335-13-4-.28(5)(f)1.(i), (ii), and (iii).

III. Certifies that the local government meets the conditions of 335-13-4-.28(5) ( f)2. and 4.

(II) The local government's independently audited year-end financial statements for the latest fiscal year (except for local governments where audits are required every two years where unaudited statements may be used in years when audits are not required), including the unqualified opinion of the auditor who must be an independent certified public accountant or an appropriate State agency that conducts equivalent comprehensive audits.

(III) A report to the local government from the local government's independent certified public accountant (CPA) or the appropriate State agency based on performing an agreed upon procedures engagement relative to the financial ratios required by 335-13-4-.28(5)(f)1.(i)(II), if applicable, and the requirements of 335-13-4-.28(5)(f) l.(ii) and 335-13-4-.28(5)(f)1.(iii)(III) and (IV). The CPA or State agency's report should state the procedures performed and the CPA or State agency's findings.

(IV) A copy of the comprehensive annual financial report (CAFR) used to comply with 335-13-4-.28(5) (f)2. or certification that the requirements of General Accounting Standards Board Statement 18 have been met.

(ii) The items required in 335-13-4-.28(5)(f)3.(i) must be placed in the MSWLF operating record as follows:

(I) In the case of closure and post-closure care, either before the effective date of 335-13-4-.28(2) and (3), or before the initial receipt of waste at the MSWLF, whichever is later.

(II) In the case of corrective action, not later that 120 days after the corrective action remedy is selected in accordance with the requirements of 335-13-4-.27(5).

(iii) After the initial placement of the items in the MSWLF operating record, the local government owner or operator must update the information and place the updated information in the operating record within 180 days following the close of the owner or operator's fiscal year. In addition, a copy of the updated information must be submitted to ADEM.

(iv) The local government owner or operator is not required to meet the requirements of 335-13-4-.28(5)(f)3. if:

(I) The owner or operator substitutes alternate financial assurance as specified in 335-13-4-.28(5); or

(II) The owner or operator is released from the financial assurance requirements in accordance with 335-13-4-.28(2) (b), (3)(b), or (4)(b).

(v) A local government must satisfy the requirements of the financial test at the close of a fiscal year. If the local government owner or operator no longer meets the requirements of the local government financial test it must, within 210 days following the close of the owner or operator's fiscal year, obtain alternative financial assurance that meets the requirements of 335-13-4-.28(5), place the required submissions for that assurance in the operating record, and notify ADEM that the owner or operator no longer meets the criteria of the financial test and that alternate assurance has been obtained.

(vi) ADEM, based on a reasonable belief that the local government owner or operator may no longer meet the requirements of the local government financial test, may require additional reports of financial condition from the local government at any time. If ADEM finds, on the basis of such reports or other information, that the owner or operator no longer meets the requirements of the local government financial test, the local government must provide alternate financial assurance in accordance with 335-13-4-.28(5).

4. Calculation of Costs to be Assured. The portion of the closure, post-closure, and corrective action costs for which an owner or operator can assure under 335-13-4-.28 is determined as follows:

(i) If the local government owner or operator does not assure other environmental obligations through a financial test, it may assure closure, post-closure, and corrective action costs that equal up to 43 percent of the local government's total annual revenue.

(ii) If the local government assures other environmental obligations through a financial test, including those associated with UIC facilities under 40 CFR 144.62, petroleum underground storage tank facilities under 40 CFR Part 280, PCB storage facilities under 40 CFR Part 761, and hazardous waste treatment, storage, and disposal facilities under 335-14-5 and 6, it must add those costs to the closure, post-closure, and corrective action costs it seeks to assure under 335-13-4-.28. The total that may be assured must not exceed 43 percent of the local government's total annual revenue.

(iii) The owner or operator must obtain an alternate financial assurance instrument for those costs that exceed the limits set in 335-13-4-.28(5)(f)4.(i) and (ii).

(g) Corporate Guarantee.

1. An owner or operator may meet the requirements of 335-13-4-.28(5) by obtaining a written guarantee. The guarantor must be the direct or higher-tier parent corporation of the owner or operator, a firm whose parent corporation is also the parent corporation of the owner or operator, or a firm with a "substantial business relationship" with the owner or operator. The guarantor must meet the requirements for owners or operators in 335-13-4-.28(5)(e) and must comply with the terms of the guarantee.

2. A certified copy of the guarantee must be placed in the MSWLF operating record along with copies of the letter from the guarantor's chief financial officer and accountants' opinions. If the guarantor's parent corporation is also the parent corporation of the owner or operator, the letter from the guarantor's chief financial officer must describe the value received in consideration of the guarantee. If the guarantor is a firm with a "substantial business relationship" with the owner or operator, this letter must describe this "substantial business relationship" and the value received in consideration of the guarantee.

3. The guarantee must be effective and all required submissions placed in the operating record before the initial receipt of waste or before the effective date of the requirements of 335-13-4-.28(2) and (3) in the case of closure and post-closure care, or in the case of corrective action no later than 120 days after the corrective action remedy has been selected in accordance with the requirements of 335-13-4-.27(5).

4. The terms of the guarantee must provide that:

(i) If the owner or operator fails to perform closure, post-closure care, and/or corrective action of a MSWLF covered by the guarantee, the guarantor will:

(I) Perform, or pay a third party to perform, closure, post-closure care, and/ or corrective action as required (performance guarantee); or

(II) Establish a fully funded trust fund as specified in 335-13-4-.28(5)(a) in the name of the owner or operator (payment guarantee).

(ii) The guarantee will remain in force for as long as the owner or operator must comply with the applicable financial assurance requirements of 335-13-4-.28 unless the guarantor sends prior notice of cancellation by certified mail to the owner or operator and to ADEM. Cancellation may not occur, however, during the 120 days beginning on the date of receipt of the notice of cancellation by both the owner or operator and ADEM, as evidenced by the return receipts.

(iii) If notice of cancellation is given, the owner or operator must, within 90 days following receipt of the cancellation notice by the owner or operator and ADEM, obtain alternate financial assurance, place evidence of that alternate financial assurance in the MSWLF operating record, and notify ADEM. If the owner or operator fails to provide alternate financial assurance within the 90-day period, the guarantor must provide that alternate assurance within 120 days of the cancellation notice, obtain alternative assurance, place evidence of the alternate assurance in the MSWLF operating record, and notify ADEM.

5. If a corporate guarantor no longer meets the requirements of 335-13-4-.28(5)(e) l., the owner or operator must, within 90 days, obtain alternative assurance, place evidence of the alternate assurance in the MSWLF operating record, and notify ADEM. If the owner or operator fails to provide alternate financial assurance within the 90-day period, the guarantor must provide that alternate assurance within the next thirty (30) days.

6. The owner or operator is not required to meet the requirements of 335-13-4-.28(5)(g) when:

(i) The owner or operator substitutes alternate financial assurance as specified in 335-13-4-.28(5); or

(ii) The owner or operator is released from the financial assurance requirements in accordance with 335-13-4-.28(2)(b), (3)(b), or (4)(b).

(h) Local Government Guarantee. An owner or operator may demonstrate financial assurance for closure, post-closure, and corrective action, as required by 335-13-4-.28(2), (3), and (4), by obtaining a written guarantee provided by a local government. The guarantor must meet the requirements of the local government financial test in 335-13-4-.28(5)(f), and must comply with the terms of a written guarantee.

1. Terms of the Written Guarantee. The guarantee must be effective before the initial receipt of waste in the case of closure, post-closure care, or no later than 120 days after the corrective action remedy has been selected in accordance with the requirements of 335-13-4-.27(5). The guarantee must provide that:

(i) If the owner or operator fails to perform closure, post-closure care, and/or corrective action of a MSWLF covered by the guarantee, the guarantor will:

(I) Perform, or pay a third party to perform, closure, post-closure care, and/or corrective action as required; or

(II) Establish a fully funded trust fund as specified in 335-13-4-.28(5)(a) in the name of the owner or operator.

(ii) The guarantee will remain in force unless the guarantor sends notice of cancellation by certified mail to the owner or operator and to ADEM. Cancellation may not occur, however, during the 120 days beginning on the date of receipt of the notice of cancellation by the owner or operator and ADEM, as evidenced by the return receipts.

(I) If a guarantee is cancelled, the owner or operator must, within 90 days following receipt of the cancellation notice by the owner or operator and ADEM, obtain alternate financial assurance, place evidence of that alternate financial assurance in the MSWLF operating record, and notify ADEM. If the owner or operator fails to provide alternate financial assurance within the 90-day period, the guarantor must provide that alternate assurance within 120 days following the guarantor's notice of cancellation, place evidence of the alternate assurance in the MSWLF operating record, and notify ADEM.

2. Recordkeeping and Reporting.

(i) The owner or operator must place a certified copy of the guarantee along with the items required under 335-13-4-.28(5)(f)3. into the MSWLF operating record before the initial receipt of waste in the case of closure, post-closure care, or no later than 120 days after the corrective action remedy has been selected in accordance with the requirements of 335-13-4-.27(5). A copy of the guarantee along with other required items must be submitted to ADEM.

(ii) The owner or operator is not required to maintain the items specified in 335-13-4-.28(5)(h)2. when:

(I) The owner or operator substitutes alternate financial assurance as specified in 335-13-4-.28(5); or

(II) The owner or operator is released from the financial assurance requirements in accordance 335-13-4-.28(2)(b), (3)(b), or (4)(b).

(iii) If a local government guarantor no longer meets the requirements of 335-13-4-.28(5)(f), the owner or operator must, within ninety (90) days, obtain alternative assurance, place evidence of the alternate assurance in the MSWLF operating record, and notify ADEM. If the owner or operator fails to obtain alternate financial assurance within that 90-day period, the guarantor must provide that alternate assurance within the next thirty (30) days.

(i) State-Approved Mechanism. An owner or operator may satisfy the requirements of 335-13-4-.28 by obtaining other mechanisms that meets the criteria specified in 335-13-4-.28(5)(1), and that is approved by ADEM.

(j) State Assumption of Responsibility. If ADEM either assumes legal responsibility for an owner or operator's compliance with the closure, post-closure care and/or corrective action requirements of this part, or assures that the funds will be available from State sources to cover the requirements, the owner or operator will be in compliance with the requirements of 335-13-4-.28(5). A State assumption of responsibility must meet the criteria specified in 335-13-4-.28(5)(1).

(k) Use of Multiple Mechanisms. An owner or operator may demonstrate financial assurance for closure, post-closure, and corrective action, as required by 335-13-4-.28(2), (3), and (4), by establishing more than one financial mechanism per MSWLF, except that mechanisms guaranteeing performance, rather than payment, may not be combined with other instruments. The mechanisms must be as specified in 335-13-4-.28(5) (a) to (j), except that financial assurance for an amount at least equal to the current cost estimate for closure, post-closure care, and/or corrective action may be provided by a combination of mechanisms, rather than a single mechanism.

(l) The language of the mechanisms listed in 335-13-4-.28(5)(a) to (j), must ensure that the instruments satisfy the following criteria:

1. The financial assurance mechanisms must ensure that the amount of funds assured is sufficient to cover the costs of closure, post-closure care, and corrective action for known releases when needed.

2. The financial assurance mechanisms must ensure that funds will be available in a timely fashion when needed.

3. The financial assurance mechanisms must be obtained by the owner or operator by the effective date of these requirements or before the initial receipt of solid waste, whichever is later, in the case of closure and post-closure care, and no later that 120 days after the corrective action remedy has been selected in accordance with the requirements of 335-13-4-.27(5), until the owner or operator is released from the financial assurance requirements under 335-13-4-.28(2), (3), and (4).

4. The financial assurance mechanisms must be legally valid, binding, and enforceable under state and federal law.

(6)Discounting. ADEM may allow discounting of closure cost estimates in 335-13-4-.28(2) (a), post-closure cost estimates in 335-13-4-.28(3)(a), and/or corrective action costs in 335-13-4-.28(4)(a) up to the rate of return for essentially risk free investments, net of inflation, under the following conditions:

(a) ADEM determines that cost estimates are complete and accurate and the owner or operator has submitted a statement from an engineer so stating.

(b) ADEM finds the MSWLF in compliance with applicable and appropriate permit conditions.

(c) ADEM determines that the closure date is certain and the owner or operator certifies that there are no foreseeable factors that will change the estimate of site life; and

(d) Discounted cost estimates must be adjusted annually to reflect inflation and years of remaining life.

Ala. Admin. Code r. 335-13-4-.28

New Rule: Filed November 7, 2005; effective December 12, 2005.

Amended by Alabama Administrative Monthly Volume XXXVI, Issue No. 07, April 30, 2018, eff. 6/6/2018.

Authors: James L. Bryant, Heather M, Jones

Statutory Authority:Code of Ala. 1975, §§ 22-22A-5, 22-2 7-7, 22-27-8.