Ariz. Admin. Code § 11-3-809

Current through Register Vol. 30, No. 25, June 21, 2024

Section R11-3-809 - Certificate of Self-insurance

A. A responsible party may satisfy the financial assurance requirements in the Act and this Chapter by successfully completing the financial test specified in this Section. Successful completion involves:

1. Submitting the information required under subsection (B), and

2. Demonstrating to the Inspector's satisfaction the responsible party meets the requirements under subsection (C).

B. The responsible party shall submit to the Inspector the following information and shall submit updated information annually within 120 days after the close of the responsible party's fiscal year:

1. Proof the responsible party is authorized to do business in Arizona;

2. A letter signed by the chief financial officer of the responsible party certifying:

a. The responsible party is qualified to self-insure as a financial assurance mechanism because the responsible party meets the requirements in subsection (C); and

b. The data used to reach the conclusion under subsection (B)(2)(a) are from an independently audited, year-end financial statement for the latest fiscal year of the responsible party; and

3. A copy of one of the following:

a. The financial statements the responsible party is required to submit annually to the U.S. Securities and Exchange Commission; or

b. A report from an ICPA certifying the ICPA has compared the data under subsection (B)(2)(b) with the financial statement submitted to the U.S. Securities and Exchange Commission and finds no matters requiring the data to be adjusted.

C. To qualify to self-insure as a financial assurance mechanism, the responsible party shall meet one of the three following criteria:

1. The responsible party has a tangible net worth of at least 10 times the costs estimated in the approved reclamation plan or a tangible net worth of at least $10 million, whichever is greater;

2. The responsible party has all of the following:

a. Two of the following three ratios:

i. A ratio of total liabilities to net worth of less than 2.0;

ii. A ratio of the sum of net income plus depreciation, depletion, and amortization to total liabilities great than 0.1; and

iii. A ratio of current assets to current liabilities greater than 1.5;

b. Both net working capital and tangible net worth at least six times the costs estimated in the approved reclamation plan;

c. Tangible net worth at least $10 million; and

d. Assets located in the U.S. amounting to at least 90 percent of total assets or at least six times the costs estimated in the approved reclamation plan; or

3. The responsible party has all of the following:

a. A current rating for the most recent bond issuance of AAA, AA, A, or BBB as issued by Standard and Poor's or Aaa, Aa, A, or Baa as issued by Moody's;

b. Tangible net worth at least six times the costs estimated in the approved reclamation plan;

c. Tangible net worth at least $10 million; and

d. Assets located in the U.S. amounting to at least 90 percent of total assets or at least ten times the costs estimated in the approved reclamation plan.

D. If a responsible party that is meeting the financial assurance requirements in the Act and this Chapter by self-insuring is no longer qualified under subsection (C), the responsible party shall provide to the Inspector evidence of an alternative financial assurance mechanism within 60 days after the sooner of:

1. The end of the responsible party's fiscal year, or

2. The Inspector provides notice to the responsible party that the responsible party is no longer qualified under subsection (C).

E. If the Inspector has good cause to believe a responsible party that is meeting the financial assurance requirements in the Act and this Chapter by self-insuring is no longer qualified under subsection (C), the Inspector may require additional reporting of the responsible party's financial condition.

F. A responsible party may meet the requirements of this Section by obtaining a written guarantee. If the responsible party obtains a written guarantee:

1. The guarantor shall be:

a. The direct or higher-tier parent corporation of the responsible party;

b. A group of legal entities controlled through stock ownership by a common parent corporation;

c. A firm with a parent corporation that is also the parent corporation of the responsible party; or

d. A firm with a substantial business relationship with the responsible party.

2. The guarantor shall meet all requirements for a responsible party specified in this Section.

3. The guarantor shall comply with all terms of the guarantee. The responsible party shall ensure the guarantee includes the following terms:

a. If the responsible party fails to perform the reclamation specified in the approved reclamation plan and covered by the guarantee, the guarantor shall do so or establish a trust as specified in R11-3-806 in the name of the responsible party;

b. The guarantee shall remain in force unless the guarantor sends notice of cancellation by certified mail to both the responsible party and Inspector and waits at least 120 days after both the responsible party and Inspector receive the notice of cancellation; and

c. If the responsible party fails to provide the Inspector with evidence an alternate financial assurance mechanism that meets the requirements of the Act and this Chapter has been obtained within 90 days after the responsible party and Inspector receive notice of cancellation under subsection (F)(3)(b), the guarantor shall obtain and provide evidence to the Inspector of an alternate financial assurance mechanism in the name of the responsible party.

G. A responsible party that meets the requirements of this Section by obtaining a written guarantee shall include with the information submitted under subsection (B):

1. A certified copy of the guarantee;

2. If the guarantor's parent corporation is also the parent corporation of the responsible party, a letter describing the value received in consideration of the guarantee; and

3. If the guarantor is a firm with a substantial business relationship with the responsible party, a letter describing the substantial relationship and the value received in consideration of the guarantee.

Ariz. Admin. Code § R11-3-809

Adopted by final rulemaking at 25 A.A.R. 828, effective 5/11/2019.