15A NCAC 13B .1805      ALLOWABLE MECHANISMS FOR FINANCIAL ASSURANCE

(a)  Pursuant to G.S. 130A-295.2, owners and operators of solid waste management facilities that are required to establish financial assurance in accordance with this Section shall choose one of the mechanisms or a combination of mechanisms in Paragraph (e) of this Rule to cover the cost of closure, post-closure care, corrective action programs, and potential assessment and corrective action.

(b)  When multiple financial assurance mechanisms are established, no more than one allowable mechanism shall be provided by the same financial institution or its corporate entities. The corporate financial test provided by a corporation and the corporate guarantee provided by a corporate parent, sibling, or grandparent shall not be combined if the financial statements of the two firms are consolidated. A surety bond mechanism guaranteeing performance shall not be combined with other mechanisms. The mechanisms shall be submitted to the Division as original signed hard copies, and the language of each mechanism shall be identical to the language specified in Rule .1806 of this Section for that mechanism.

(c)  A corporate seal shall be required to complete the financial assurance mechanism as part of the certification of acknowledgement required in the mechanism language in Rule .1806 of this Section for a corporate owner or operator using a trust fund, surety bond guaranteeing payment or performance, corporate financial test, and corporate guarantee as set forth in Paragraph (e) of this Rule. When a corporate seal is required to certify a financial assurance mechanism but the corporation does not have a corporate seal, a member of the corporation's senior management or a representative of the board of directors shall submit to the Division a copy of the corporation's bylaws, a corporate ownership organization chart describing the relationship of the facility owner and operator to the corporation and its parent companies, contact information for the board of directors or senior management for the corporation, and a statement on corporate letterhead stating the signee has the authority to execute correspondence and financial assurance mechanisms on behalf of the corporation, pursuant to G.S. 130A-295.2(f). The documentation shall be submitted to the Division of Waste Management, Solid Waste Section at 1646 Mail Service Center, Raleigh, NC 27699. Senior management for the corporation shall be one of the following positions: the Chief Executive Officer or President, the Chief Operating Officer or Vice President, or the Chief Financial Officer or Treasurer.

(d)  The July 1, 2010 edition of 40 CFR 258.74 is incorporated by reference and can be obtained free of charge from the Division's website at http://go.ncdenr.gov/fa. When used in 40 CFR 258.74, except where the context requires references to remain without substitution, "United States" and "State" shall mean the State of North Carolina; "Agency" shall mean the Department of Environmental Quality; "Director" shall mean the Secretary of the Department of Environmental Quality; "municipal solid waste landfills facility(ies)", "MSWLF(s)", or "MSWLF unit(s)" shall mean solid waste management facility or facilities; and "owner or operator" shall mean the owner and operator of a solid waste management facility.

(e)  The following mechanisms may be used to meet the requirements of this Section for financial assurance.

(1)           A trust fund as set forth in 40 CFR 258.74(a), including the following requirements.

(A)          The trust fund may be elected as a standby trust mechanism to accompany the surety bond mechanism in Subparagraph (2) of this Paragraph, or the letter of credit mechanism in Subparagraph (3) of this Paragraph; or may be elected as a standalone funded trust mechanism.

(B)          40 CFR 258.74(a)(7) is revised to state: "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 shall be granted only if sufficient funds are remaining in the trust fund to cover the remaining costs of closure, post-closure care, corrective action programs, or potential assessment and corrective action, and if justification and documentation of the cost is submitted to the Division and placed in the operating record."

(C)          The trust agreement shall be accompanied by a certification of acknowledgement as specified following the language of the trust agreement in Rule .1806(1) of this Section.

(D)          Schedule A of the trust agreement shall be updated no less than 60 days after any change in the amount of the current cost estimate covered by the agreement.

(2)           Surety bonds guaranteeing payment or performance as set forth in 40 CFR 258.74(b) including the following requirements.

(A)          The surety company issuing the bond shall be licensed to do business in North Carolina.

(B)          Bonding companies may write bonds with a penal sum over their underwriting limitation if they protect the excess amount with reinsurance, coinsurance, or other methods as specified at 31 CFR 223.10-11 and submit documentation to the Division. The owner and operator shall provide the Division with current contact information for the surety company for the life of the mechanism. 31 CFR 223.10-11 is incorporated by reference including subsequent amendments and editions and can be accessed free of charge at the U.S. Government Publishing Office website at www.ecfr.gov.

(C)          The penal sum of the surety bond shall be adjusted for inflation or any increase or decrease in the amount of financial assurance in accordance with Rule .1802(b), Rule .1803(b), or .1804(b) of this Section.

(D)          The bonded liability limit shall not be less than the penal sum of the surety bond and shall be adjusted annually for inflation or any increase or decrease in the amount of financial assurance in accordance with Rule .1802(b), Rule .1803(b), or .1804(b) of this Section.

(E)           If the owner and operator is no longer required to demonstrate financial responsibility, the owner and operator may cancel the surety bond in accordance with the requirements of Rules .1802(c), .1803(c), or .1804(c) of this Section.

(3)           A letter of credit as set forth in 40 CFR 258.74(c) including the following requirements.

(A)          The owner and operator shall establish a standby trust fund. The standby trust fund shall meet the requirements of 40 CFR 258.74(a) except the requirements for initial payment and subsequent annual payments specified in 40 CFR 258.74(a)(2), (3), (4), and (5). Payments made under the terms of the letter of credit shall be deposited by the financial institution directly into the standby trust fund.

(B)          No payments shall be made from the trust fund unless approved by the trustee and the Division.

(C)          The letter of credit shall be adjusted for inflation or any increase or decrease in the amount of financial assurance in accordance with Rule .1802(b), Rule .1803(b), or .1804(b) of this Section.

(D)          If the owner and operator is no longer required to demonstrate financial responsibility, the owner and operator may cancel the letter of credit in accordance with the requirements of Rules .1802(c), .1803(c), or .1804 (c) of this Section.

(4)           Insurance as set forth in 40 CFR 258.74(d), and if the owner and operator is no longer required to demonstrate financial responsibility, the owner and operator may cancel the insurance policy in accordance with the requirements of Rules .1802(c), .1803(c), or .1804(c) of this Section.

(5)           A corporate financial test as set forth in 40 CFR 258.74(e) including the following requirements.

(A)          The corporate financial test shall be adjusted for inflation or any increase or decrease in the amount of financial assurance in accordance with Rule .1802(b), Rule .1803(b), or .1804(b) of this Section.

(B)          If the owner and operator is no longer required to demonstrate financial responsibility, the owner and operator may cancel the test in accordance with the requirements of Rules .1802(c), .1803(c), or .1804(c) of this Section.

(6)           A local government financial test as set forth in 40 CFR 258.74(f) including the following requirements.

(A)          Owner and operators submitting a local government financial test that utilizes the bond rating indicator of financial strength shall submit a copy of the bond showing proof of the current bond rating of the most recent issuance and name of rating service, date of issuance of the bond, and date of maturity of the bond.

(B)          The local government test shall be adjusted for inflation or any increase or decrease in the amount of financial assurance in accordance with Rule .1802(b), Rule .1803(b), or .1804(b) of this Section.

(C)          If the owner and operator is no longer required to demonstrate financial responsibility, the owner and operator may cancel the test in accordance with the requirements of Rules .1802(c), .1803(c), or .1804(c) of this Section.

(7)           A corporate guarantee as set forth in 40 CFR 258.74(g) including the following requirements.

(A)          The owner and operator shall submit a corporate ownership organization chart describing the relationship of the owner and operator to the guarantor as defined in 40 CFR 258.74(g)(1) when financial assurance is initially established, and annually thereafter.

(B)          The corporate guarantee shall be adjusted for inflation or any increase or decrease in the amount of financial assurance in accordance with Rule .1802(b), Rule .1803(b), or .1804(b) of this Section.

(C)          If the owner and operator is no longer required to demonstrate financial responsibility, the owner and operator may cancel the guarantee in accordance with the requirements of Rules .1802(c), .1803(c), or .1804(c) of this Section.

(8)           A capital reserve fund that meets the following requirements.

(A)          An owner and operator of a solid waste management facility that is a unit of local government or public authority may satisfy the requirements of this Rule by establishing a capital reserve fund which conforms to the requirements of this Subparagraph. The unit of local government or public authority shall be an entity which has the authority to establish a capital reserve fund under authority of G.S. 159 Part 2 and whose financial operations are regulated and examined by a State agency. The capital reserve fund shall be established consistent with auditing, budgeting, and government accounting practices as prescribed in G.S. 159-30 and by the Local Government Commission. A copy of the capital reserve fund ordinance or resolution with a certified copy of the meeting minutes and a copy of documentation of initial and subsequent years' deposits shall be submitted to the Division and placed in the facility's operating record.

(B)          Payments into the capital reserve fund shall be made annually by the unit of local government or public authority over the term of the initial permit or over the remaining life of the facility for closure or post-closure care, or over one-half of the estimated length of the corrective action program when a corrective action program is required in accordance with Rules .0545 or .1637 of this Subchapter. This period is referred to as the "pay-in period".

(C)          For a capital reserve 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, divided by the number of years in the pay-in period as defined in Part (B) of this Subparagraph. 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 capital reserve fund, and Y is the number of years remaining in the pay-in period.

(D)          For a capital reserve fund used to demonstrate financial assurance for a corrective action program, the first payment into the capital reserve fund shall be at least equal to one-half of the current cost estimate for the corrective action program. The total cost of the second half of the corrective action program period shall be divided into subsequent payments determined by the following formula:

Next Payment = [RB-CV]/Y

where RB is the most recent cost estimate for the corrective action program, updated for inflation or other changes (i.e. the total cost that will be incurred during the second half of the corrective action period), CV is the current value of the capital reserve fund, and Y is the number of years remaining in the pay-in period.

(E)           The initial payment into the capital reserve fund shall be made before the initial receipt of waste in the case of closure and post-closure care, or no later than 120 calendar days after the corrective action remedy has been selected in accordance with the requirements of this Subchapter. Subsequent payments shall be made no later than 30 calendar days after each anniversary date of the first payment.

(F)           If the unit of local government or public authority establishes a capital reserve fund after having used one or more alternate mechanisms specified in this Rule, the initial payment into the capital reserve fund shall be at least the amount that the fund would contain if the capital reserve fund had been established on the initial date that the alternate mechanism was established, and annual payments to the fund had been made according to the specifications of this Subparagraph.

(G)          The unit of local government or public authority authorized to conduct closure, post-closure care, or corrective action programs may expend capital reserve funds to cover the remaining costs of closure, post-closure care, corrective action programs, or for the debt service payments on financing arrangements for closure, post-closure care, or corrective action programs. Monies in the capital reserve fund shall only be used for these purposes unless the fund is terminated in accordance with Part (I) of this Subparagraph. The unit of local government or public authority shall document expenditures and provide a written justification for each expenditure and shall submit a copy to the Division and place a copy in the operating record.

(H)          The unit of local government or public authority shall adjust for inflation or any increase or decrease in the amount of financial assurance in accordance with Rule .1802(b), .1803(b), or .1804(b) of this Section.

(I)            To maintain financial assurance, a unit of local government or public authority may only terminate a capital reserve fund if it substitutes alternate financial assurance as specified in this Rule or if no longer required to demonstrate financial responsibility in accordance with the requirements of Rules .1802(c), .1803(c), or .1804(c) of this Section.

History Note:        Authority G.S. 130A-294; 130A-295.2;

Eff. July 1, 2020.