401 KAR 35:100. Postclosure financial requirements (IS).

 

      RELATES TO: KRS 224.10, 224.40, 224.43, 224.46, 224.99, 40 C.F.R. 265.144, 265.145

      STATUTORY AUTHORITY: KRS 224.46-505, 224.46-520

      NECESSITY, FUNCTION, AND CONFORMITY: To implement provisions of KRS 224.46-505 and 224.46-520 relative to postclosure financial requirements for hazardous waste sites or facilities qualifying for interim status.

 

      Section 1. Cost Estimate for Facility Postclosure Care. (1) The owner or operator of a hazardous waste disposal unit shall have a detailed written estimate, in current dollars, of the annual cost of postclosure monitoring and maintenance of the facility in accordance with the applicable postclosure administrative regulations in Sections 8 to 11 of 401 KAR 35:070, Section 6 of 401 KAR 35:200, Section 7 of 401 KAR 35:210, Section 7 of 401 KAR 35:220, and Section 4 of 401 KAR 35:230.

      (a) The postclosure cost estimate shall be based on the costs to the owner or operator of hiring a third party to conduct postclosure care activities. A third party is a party who is neither a parent nor subsidiary of the owner or operator (see definition of parent corporation in Section 1(1)(e) of 401 KAR 35:080.

      (b) The postclosure cost estimate shall be calculated by multiplying the annual postclosure cost estimate by the number of years of postclosure care required under Section 8 of 401 KAR 35:070.

      (2) During the active life of the facility, the owner or operator shall adjust the postclosure cost estimate for inflation within sixty (60) days prior to the anniversary date of the establishment of the financial instrument(s) used to comply with Sections 2 to 11 of this administrative regulation. For owners or operators using the financial test or corporate guarantee, the postclosure care cost estimate shall be updated for inflation no later than thirty (30) days after the close of the firm's fiscal year and before submission of updated information to the cabinet as specified in Section 6(5) of this administrative regulation. The adjustment may be made by recalculating the postclosure cost estimate in current dollars or by using an inflation factor derived from the most recent Implicit Price Deflator for Gross National Product published by the U.S. Department of Commerce in its Survey of Current Business as specified in paragraphs (a) and (b) of this subsection. The inflation factor is the result of dividing the latest published annual Deflator by the Deflator for the previous year.

      (a) The first adjustment is made by multiplying the postclosure cost estimate by the inflation factor. The result is the adjusted postclosure cost estimate.

      (b) Subsequent adjustments are made by multiplying the latest adjusted postclosure cost estimate by the latest inflation factor.

      (3) During the active life of the facility, the owner or operator shall revise the postclosure cost estimate no later than thirty (30) days after a revision the postclosure plan which increases the cost of postclosure care. If the owner or operator has an approved postclosure plan, the postclosure cost estimate shall be revised no later than thirty (30) days after the cabinet has approved the request to modify the plan, if the change in the postclosure plan increases the cost of postclosure care. The revised postclosure cost estimate shall be adjusted for inflation as specified in subsection (2) of this section.

      (4) The owner or operator shall keep the following at the facility during the operating life of the facility: The latest postclosure cost estimate prepared in accordance with subsections (1) and (3) of this section and, when this estimate has been adjusted in accordance with subsection (2) of this section, the latest adjusted postclosure cost estimate.

 

      Section 2. Financial Assurance for Postclosure Care. An owner or operator of a facility with a hazardous waste disposal unit shall establish financial assurance for postclosure care of the disposal unit(s). Financial assurance shall be established as specified in Sections 3 to 8 of this administrative regulation.

 

      Section 3. Postclosure Trust Fund. (1) An owner or operator may satisfy the requirements of this administrative regulation by establishing a postclosure trust fund which conforms to the requirements of this section and by submitting an originally signed duplicate of the trust agreement to the cabinet. The trustee shall 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.

      (2) The Trust Agreement for Closure and Postclosure Assurance shall be executed on DEP Form 6035A incorporated by reference in Section 4 of 401 KAR 34:080. The trust agreement shall be accompanied by a formal certification of acknowledgment. Schedule A of the Trust Agreement for Closure and Postclosure Assurance shall be updated within sixty (60) days after a change in the amount of the current postclosure cost estimate covered by the agreement.

      (3) Payments to the trust fund shall be made annually by the owner or operator over the twenty (20) year period beginning with October 8, 1982, or over the remaining operating life of the facility as estimated in the closure plan, whichever period is shorter; this period is hereafter referred to as the "pay-in period." The payments into the postclosure trust fund shall be made as follows:

      (a) The first payment shall be made by October 8, 1982, except as provided in subsection (5) of this section. The first payment shall be at least equal to the current postclosure cost estimate, except as provided in Section 9 of this administrative regulation, divided by the number of years in the pay-in period.

      (b) Subsequent payments shall be made no later than thirty (30) days after each anniversary date of the first payment. The amount of each subsequent payment shall be determined by this formula:

Where CE is the current postclosure cost estimate, CV is the current value of the trust fund, and Y is the number of years remaining in the pay-in period.

      (4) The owner or operator may accelerate payments into the trust fund or he may deposit the full amount of the current postclosure cost estimate at the time the fund is established. However, he shall maintain the value of the fund at no less than the value that the fund would have been if annual payments were made as specified in subsection (3) of this section.

      (5) If the owner or operator establishes a postclosure trust fund after having used one (1) or more alternate mechanisms specified in this administrative regulation, his first payment shall be at least the amount that the fund would contain if the trust fund were established initially and annual payments made according to specifications of subsection (3) of this section.

      (6) After the pay-in period is completed, whenever the current postclosure cost estimate changes during the operating life of the facility, the owner or operator shall compare the new estimate with the trustee's most recent annual valuation of the trust fund. If the value of the fund is less than the amount of the new estimate, the owner or operator, within sixty (60) days after the change in the cost estimate, shall either deposit an amount into the fund so that its value after this deposit at least equals the amount of the current postclosure cost estimate, or obtain other financial assurance as specified in this administrative regulation to cover the difference.

      (7) During the operating life of the facility, if the value of the trust fund is greater than the total amount of the current postclosure cost estimate, the owner or operator may submit a written request to the cabinet for release of the amount in excess of the current postclosure cost estimate.

      (8) If an owner or operator substitutes other financial assurance as specified in this administrative regulation for all or part of the trust fund, he may submit a written request to the cabinet for release of the amount in excess of the current postclosure cost estimate covered by the trust fund.

      (9) Within sixty (60) days after receiving a request from the owner or operator for release of funds as specified in subsections (7) and (8) of this section, the cabinet shall instruct the trustee to release to the owner or operator such funds as the cabinet specifies in writing.

      (10) During the period of postclosure care, the cabinet may approve a release of funds if the owner or operator demonstrates to the cabinet that the value of the trust fund exceeds the remaining cost of postclosure care.

      (11) An owner or operator or any other person authorized to conduct postclosure care may request reimbursements for postclosure expenditures by submitting itemized bills to the cabinet. Within sixty (60) days after receiving bills for postclosure care activities, the cabinet shall instruct the trustee to make reimbursement in those amounts as the cabinet specifies in writing, if the cabinet determines that the postclosure expenditures are in accordance with the approved postclosure plan or otherwise justified. If the cabinet does not instruct the trustee to make such reimbursements, he shall provide the owner or operator with a detailed written statement of reasons.

      (12) The cabinet shall agree to termination of the trust when:

      (a) An owner or operator substitutes alternate financial assurance as specified in this administrative regulation; or

      (b) The cabinet releases the owner or operator from the requirements of this administrative regulation in accordance with Section 11 of this administrative regulation.

 

      Section 4. Surety Bond Guaranteeing Payment Into a Postclosure Trust Fund. (1) An owner or operator may satisfy the requirements of this administrative regulation by obtaining a surety bond which conforms to the requirements of this section and submitting the bond to the cabinet. 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 Financial Guarantee Bond to Demonstrate Closure and/or Postclosure Care shall be executed on DEP Form 6035B incorporated by reference in Section 4 of 401 KAR 34:080.

      (3) The owner or operator who uses a surety bond to satisfy the requirements of this administrative regulation shall also establish a standby trust fund. Under the terms of the bond, all payments made thereunder shall be deposited by the surety directly into the standby trust fund in accordance with instructions from the cabinet. This standby trust fund shall meet the requirements specified in Section 3 of this administrative regulation, except that:

      (a) An originally signed duplicate of the Trust Agreement for Closure and Postclosure Assurance shall be submitted to the cabinet with the Financial Guarantee Bond to Demonstrate Closure and/or Postclosure Care; and

      (b) Until the standby trust fund is funded pursuant to the requirements of this administrative regulation, the following are not required by these administrative regulations:

      1. Payments into the trust fund as specified in Section 3 of this administrative regulation;

      2. Updating of Schedule A of the Trust Agreement for Closure and Postclosure Assurance to show current postclosure cost estimates;

      3. Annual valuations as required by the Trust Agreement for Closure and Postclosure Assurance; and

      4. Notices of nonpayment as required by the Trust Agreement for Closure and Postclosure Assurance.

      (4) The bond shall guarantee that the owner or operator will:

      (a) Fund the standby trust fund in an amount equal to the penal sum of the bond before the beginning of final closure of the facility; or

      (b) Fund the standby trust fund in an amount equal to the penal sum within fifteen (15) days after an order to begin final closure issued by the secretary becomes final, or within fifteen (15) days after an order to begin final closure is issued by a circuit court or other court of competent jurisdiction; or

      (c) Provide alternate financial assurance as specified in this administrative regulation, and obtain the cabinet's written approval of the assurance provided, within ninety (90) days after receipt by both the owner or operator and the cabinet of a notice of cancellation of the bond from the surety.

      (5) Under the terms of the bond, the surety shall become liable on the bond obligation when the owner or operator fails to perform as guaranteed by the bond.

      (6) The penal sum of the bond shall be in an amount at least equal to the amount of the current postclosure cost estimate, except as provided in Section 9 of this administrative regulation.

      (7) Whenever the current postclosure cost estimate increases to an amount greater than the penal sum, the owner or operator, within sixty (60) days after the increase, shall either cause the penal sum to be increased to an amount at least equal to the current postclosure cost estimate and submit evidence of such increase to the cabinet, or obtain other financial assurance as specified in this administrative regulation to cover the increase. Whenever the current postclosure cost estimate decreases, the penal sum may be reduced to the amount of the current postclosure cost estimate following written approval by the cabinet.

      (8) Under the terms of the bond, the surety may cancel the bond by sending notice of cancellation by certified mail to both the owner or operator and to the cabinet. Cancellation shall 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 the cabinet, as evidenced by return receipt.

      (9) The owner or operator may cancel the Financial Guarantee Bond to Demonstrate Closure and/or Postclosure Care if the cabinet has given prior written consent. The cabinet shall provide such written consent when:

      (a) An owner or operator substitutes alternate financial assurance as specified in this administrative regulation; or

      (b) The cabinet releases the owner or operator from the requirements of this administrative regulation in accordance with Section 12 of this administrative regulation.

 

      Section 5. Postclosure Letter of Credit. (1) An owner or operator may satisfy the requirements of this administrative regulation by obtaining an irrevocable standby letter of credit which conforms to the requirements of this section and by submitting the letter to the cabinet. The issuing institution shall 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.

      (2) The Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care shall be executed on DEP Form 6035D incorporated by reference in Section 4 of 401 KAR 34:080. The owner or operator may use his own document, provided the language is identical to that specified in DEP Form 6035D. However, the Trust Agreement for Closure and Postclosure Assurance required to be filed with the Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care shall be executed on the form incorporated by reference in Section 4 of 401 KAR 34:080.

      (3) An owner or operator who uses a Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care to satisfy the requirements of this administrative regulation shall also establish a standby trust fund. Under the terms of the Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care, all amounts paid pursuant to a draft by the cabinet shall be deposited by the issuing institution directly into the standby trust fund in accordance with instructions from the cabinet. This standby trust fund shall meet the requirements of the trust fund specified in Section 3 of this administrative regulation, except that:

      (a) An originally signed duplicate of the Trust Agreement for Closure and Postclosure Assurance shall be submitted to the cabinet with the Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care; and

      (b) Unless the standby trust fund is funded pursuant to the requirements of this administrative regulation, the following are not required by these administrative regulations:

      1. Payments into the trust fund as specified in Section 3 of this administrative regulation;

      2. Updating the Schedule A of the Trust Agreement for Closure and Postclosure Assurance to show current postclosure cost estimates;

      3. Annual valuations as required by the Trust Agreement for Closure and Postclosure Assurance; and

      4. Notices of nonpayment as required by the Trust Agreement for Closure and Postclosure Assurance.

      (4) The Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care shall be accompanied by a letter from the owner or operator referring to the Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care by number, issuing institution, and date, and providing the following information: the EPA identification number, name, and address of the facility, and the amount of funds assured for postclosure care of the facility by the Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care.

      (5) The Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care shall be irrevocable and issued for a period of at least one (1) year. The Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care shall provide that the expiration date will be automatically extended for a period of at least one (1) year unless, at least 120 days before the current expiration date, the issuing institution notifies both the owner or operator and the cabinet by certified mail of a decision not to extend the expiration date. Under the terms of the Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care, the 120 days will begin on the date when both the owner or operator and the cabinet have received the notice, as evidenced by the return receipts.

      (6) The Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care shall be issued in an amount at least equal to the current postclosure cost estimate, except as provided in Section 9 of this administrative regulation.

      (7) Whenever the current postclosure cost estimate increases to an amount greater than the amount of the credit during the operating life of the facility, the owner or operator, within sixty (60) days after the increase, shall either cause the amount of the credit to be increased so that it at least equals the current postclosure cost estimate and submit evidence of such increase to the cabinet, or obtain other financial assurance as specified in this administrative regulation to cover the increase. Whenever the current postclosure cost estimate decreases during the operating life of the facility, the amount of the credit may be reduced to the amount of the current postclosure cost estimate following written approval by the cabinet.

      (8) During the period of postclosure care, the cabinet may approve a decrease in the amount of the Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care if the owner or operator demonstrates to the cabinet that the amount exceeds the remaining cost of postclosure care.

      (9) Following a final administrative determination pursuant to KRS 224.46-520 that the owner or operator has failed to perform postclosure care in accordance with the approved postclosure plan and other permit requirements, the cabinet may draw on the Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care.

      (10) If the owner or operator does not establish alternate financial assurance as specified in this administrative regulation and obtain written approval of such alternate assurance from the cabinet within ninety (90) days after receipt by both the owner or operator and the cabinet of a notice from the issuing institution that it has decided not to extend the Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care beyond the current expiration date, the cabinet shall draw on the letter of credit. The cabinet may delay the drawing if the issuing institution grants an extension of the term of credit. During the last thirty (30) days of any such extension, the cabinet shall draw on the Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care if the owner or operator has failed to provide alternate financial assurance as specified in this administrative regulation and obtain written approval of such financial assurance from the cabinet.

      (11) The cabinet shall return the Irrevocable Standby Letter of Credit for Closure and/or Postclosure Care to the issuing institution for termination when:

      (a) An owner or operator substitutes alternate financial assurance as specified in this administrative regulation; or

      (b) The cabinet releases the owner or operator from the requirements of this administrative regulation in accordance with Section 11 of this administrative regulation.

 

      Section 6. Postclosure Insurance. (1) An owner or operator may satisfy the requirements of this administrative regulation by obtaining postclosure insurance which conforms to the requirements of this section and submitting a certificate of such insurance to the cabinet. By October 8, 1982, the owner or operator shall submit to the cabinet a letter from an insurer stating that the insurer is considering issuance of postclosure insurance conforming to the requirements of this section to the owner or operator. By January 8, 1983, the owner or operator shall submit the certificate of insurance to the cabinet or establish other financial assurance as specified in this administrative regulation. Each insurance policy providing primary coverage shall be issued by an insurer who is authorized to transact insurance in Kentucky except as KRS 304.11-030 provides otherwise. Each insurance policy providing excess coverage shall be issued by an insurer who is authorized to transact insurance in a state.

      (2) The Certificate of Insurance for Closure or Postclosure Care shall be executed on DEP Form 6035E incorporated by reference in Section 4 of 401 KAR 34:080.

      (3) The postclosure insurance policy shall be issued for a face amount at least equal to the current postclosure cost estimate, except as provided in Section 9 of this administrative regulation. Actual payments by the insurer shall not change the face amount, although the insurer's future liability shall be lowered by the amount of the payments.

      (4) The postclosure insurance policy shall guarantee that funds will be available to provide postclosure care of the facility whenever the postclosure care period begins. The policy shall also guarantee that once postclosure care begins, the insurer will be responsible for paying out funds, up to an amount equal to the face amount of the policy, upon the direction of the cabinet to such party or parties as the cabinet specifies.

      (5) An owner or operator or any other person authorized to perform postclosure care may request reimbursement for postclosure expenditures by submitting itemized bills to the cabinet. Within sixty (60) days after receiving bills for postclosure care activities, the cabinet shall instruct the insurer to make reimbursements in such amounts as the cabinet specifies in writing, if the cabinet determines that the postclosure expenditures are in accordance with the approved postclosure plan or otherwise justified. If the cabinet does not instruct the insurer to make such reimbursements, he shall provide the owner or operator with a detailed written statement of reasons.

      (6) The owner or operator shall maintain the policy in effect until the cabinet consents to termination of the policy by the owner or operator as specified in subsection (11) of this section. Failure to pay the premium, without substitution of alternate financial assurance as specified in this administrative regulation, shall constitute a significant violation of these administrative regulations, warranting such remedy as the cabinet deems necessary. Such violation shall be deemed to begin upon receipt by the cabinet of a notice of future cancellation, termination, or failure to renew due to nonpayment of the premium, rather than upon the date of expiration.

      (7) Each 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 such consent is not unreasonably refused.

      (8) The 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 elect to cancel, terminate, or fail to renew the policy by sending notice by certified mail to the owner or operator and the cabinet. Cancellation, termination, or failure to renew may not occur, however, during the 120 days beginning with the date of receipt of the notice by the cabinet and the owner or operator, as evidenced by the return receipts. Cancellation, termination, or failure to renew may not occur and the policy will remain in effect in the event that on or before the date of expiration:

      (a) The cabinet deems the facility abandoned; or

      (b) Interim status is terminated or revoked; or

      (c) Closure is ordered by the cabinet or a circuit court or other court of competent jurisdiction; or

      (d) The owner or operator is named as debtor in a voluntary or involuntary proceeding under Title 11 (Bankruptcy), U.S. Code; or

      (e) The premium due is paid.

      (9) Whenever the current postclosure cost estimate increases to an amount greater than the face amount of the policy during the operating life of the facility, the owner or operator, within sixty (60) days after the increase, shall either cause the face amount to be increased to an amount at least equal to the current postclosure cost estimate and submit evidence of such increase to the cabinet, or obtain other financial assurance as specified in this administrative regulation to cover the increase. Whenever the current postclosure cost estimate decreases during the operating life of the facility, the face amount may be reduced to the amount of the current postclosure cost estimate following written approval by the cabinet.

      (10) Commencing on the date that liability to make payments pursuant to the policy accrues, the insurer shall thereafter annually increase the face amount of the policy. Such increase shall be equivalent to the face amount of the policy, less any payments made, multiplied by an amount equivalent to eighty-five (85) percent of the most recent investment rate or of the equivalent coupon-issue yield announced by the U.S. Treasury for twenty-six (26) week Treasury securities.

      (11) The cabinet shall give written consent to the owner or operator that he may terminate the insurance policy when:

      (a) An owner or operator substitutes alternate financial assurance as specified in this administrative regulation; or

      (b) The cabinet releases the owner or operator from the requirements in accordance with Section 11 of this administrative regulation.

 

      Section 7. Financial Test with Corporate Guarantee for Postclosure Care. (1) An owner or operator may satisfy the requirements of this administrative regulation by demonstrating that he passes a financial test as specified in this section. To pass this test the owner or operator shall meet the criteria of either paragraph (a) or (b) of this subsection:

      (a) The owner or operator shall have:

      1. Two (2) of the following three (3) ratios: a ratio of total liabilities to net worth less than two (2.0); a ratio of the sum of net income plus depreciation, depletion, and amortization to total liabilities greater than one-tenth (0.1); and a ratio of current assets to current liabilities greater than one and five-tenths (1.5); and

      2. Net working capital and tangible net worth each at least six (6) times the sum of the current closure and postclosure cost estimates and the current plugging and abandonment cost estimates; and

      3. Tangible net worth of at least $10 million; and

      4. Assets in the United States amounting to at least ninety (90) percent of his total assets or at least six (6) times the sum of the current closure and postclosure cost estimates and the current plugging and abandonment cost estimates.

      (b) The owner or operator shall have:

      1. A current rating for his 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; and

      2. Tangible net worth at least six (6) times the sum of the current closure and postclosure cost estimates and the current plugging and abandonment cost estimates; and

      3. Tangible net worth of at least $10 million; and

      4. Assets located in the United States amounting to at least ninety (90) percent of his total assets or at least six (6) times the sum of the current closure and postclosure cost estimates and the current plugging and abandonment cost estimates.

      (2) The phrase "current closure and postclosure cost estimates" as used in subsection (1) of this section refers to the cost estimates required to be shown in paragraphs 1 to 4 of the letter from the owner's or operator's chief financial officer. The phrase "current plugging and abandonment cost estimates" as used in subsection (1) of this section refers to the cost estimates required to be shown in paragraphs 1 to 4 of the letter from the owner's or operator's chief financial officer (see 40 CFR 144.70(f).

      (3) To demonstrate that he meets this test, the owner or operator shall submit the following three (3) items to the cabinet:

      (a) A Letter from Chief Financial Officer executed on DEP Form 6035F or DEP Form 6035G incorporated by reference in Section 4 of 401 KAR 34:080, signed by the owner's or operator's chief financial officer; and

      (b) A copy of the independent certified public accountant's report on examination of the owner's or operator's financial statements for the latest completed fiscal year; and

      (c) A special report from the owner's or operator's independent certified public accountant to the owner or operator stating that:

      1. He has compared the data which the letter from the chief financial officer specifies as having been derived from the independently audited, year-end financial statements for the latest fiscal year with the amounts in such financial statements; and

      2. In connection with that procedure, no matters came to his attention which caused him to believe that the specified data should be adjusted.

      (4) The owner or operator may obtain an extension of the time allowed for submission of the documents specified in subsection (3) of this section if the fiscal year of the owner or operator ends during the ninety (90) days prior to October 8, 1982 and if the year-end financial statements for that fiscal year will be audited by an independent certified public accountant. The extension will end no later than ninety (90) days after the end of the owner's or operator's fiscal year. To obtain the extension, the owner's or operator's chief financial officer shall send, by October 8, 1982, a letter to the cabinet. This letter from the chief financial officer shall:

      (a) Request the extension;

      (b) Certify that he has grounds to believe that the owner or operator meets the criteria of the financial test;

      (c) Specify for each facility to be covered by the test the EPA identification number, name, address, and the current closure and postclosure cost estimates to be covered by the test;

      (d) Specify the date ending the owner's or operator's latest complete fiscal year before October 8, 1982;

      (e) Specify the date, no later than ninety (90) days after the end of such fiscal year, when he will submit the documents specified in subsection (3) of this section; and

      (f) Certify that the year-end financial statements of the owner or operator for such fiscal year will be audited by an independent

certified public accountant.

      (5) After the initial submission of items specified in subsection (3) of this section, the owner or operator shall send updated information to the cabinet within ninety (90) days after the close of each succeeding fiscal year. This information shall consist of all three (3) items specified in subsection (3) of this section.

      (6) If the owner or operator no longer meets the requirements of subsection (1) of this section, he shall send notice to the cabinet of intent to establish alternate financial assurance as specified in this administrative regulation. The notice shall be sent by certified mail within ninety (90) days after the end of the fiscal year for which the year-end financial data show that the owner or operator no longer meets the requirements. The owner or operator shall provide alternate financial assurance within 120 days after the end of such fiscal year.

      (7) The cabinet may, based on a reasonable belief that the owner or operator may no longer meet the requirements of subsection (1) of this section, require reports of financial condition at any time from the owner or operator in addition to those specified in subsection (3) of this section. If the cabinet finds, on the basis of such reports or other information, that the owner or operator no longer meets the requirements of subsection (1) of this section, the owner or operator shall provide alternate financial assurance as specified in this administrative regulation within thirty (30) days after notification of such a finding.

      (8) The cabinet may disallow use of this test on the basis of qualifications in the opinion expressed by the independent certified public accountant in his report on examination of the owner's or operator's financial statements (see subsection (3) of this section). An adverse opinion or a disclaimer of opinion shall be cause for disallowance. The cabinet shall evaluate other qualifications on an individual basis. The owner or operator shall provide alternate financial assurance as specified in this administrative regulation within thirty (30) days after notification of the disallowance.

      (9) During the period of postclosure care, the cabinet may approve a decrease in the current postclosure cost estimate for which this test demonstrates financial assurance if the owner or operator demonstrates to the cabinet that the amount of the cost estimate exceeds the remaining cost of postclosure care.

      (10) The owner or operator is no longer required to submit the items specified in subsection (3) of this section when:

      (a) An owner or operator substitutes alternate financial assurance as specified in this administrative regulation; or

      (b) The cabinet releases the owner or operator from the requirements of this administrative regulation by terminating the financial requirements in accordance with Section 11 of this administrative regulation.

      (11) An owner or operator may meet the requirements of this administrative regulation by obtaining a written guarantee. The guarantor shall 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 shall meet the requirements for owners or operators in subsections (1) through (9) of this section and shall comply with the terms of the corporate guarantee. The Corporate Guarantee for Closure or Postclosure Care shall be executed on DEP Form 6035H1 incorporated by reference in Section 4 of 401 KAR 34:080. A certified copy of the guarantee shall accompany the items sent to the cabinet as specified in subsection (3) of this section. One (1) of these items shall be the Letter from Chief Financial Officer executed on DEP For 6035F. If the guarantor's parent corporation is also the parent corporation of the owner or operator, the letter shall 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 shall describe this substantial business relationship and the value received in consideration of the guarantee. The terms of the corporate guarantee shall provide that:

      (a) If the owner or operator fails to perform postclosure care of a facility covered by the corporate guarantee in accordance with the postclosure plan and other interim status requirements whenever required to do so, the guarantor shall do so or establish a trust fund as specified in Section 3 of this administrative regulation in the name of the owner or operator.

      (b) The corporate guarantee shall remain in force unless the guarantor sends notice of cancellation by certified mail to the owner or operator and to the cabinet. 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 the cabinet, as evidenced by the return receipts.

      (c) If the owner or operator fails to provide alternate financial assurance as specified in this administrative regulation and obtain the written approval of such alternate assurance from the cabinet within ninety (90) days after receipt by both the owner or operator and the cabinet of a notice of cancellation of the corporate guarantee from the guarantor, the guarantor shall provide such alternate financial assurance in the name of the owner or operator.

 

      Section 8. Cash Account and Certificates of Deposit. (1) An owner or operator shall satisfy the requirements of this administrative regulation by submitting to the cabinet a bond guaranteeing compliance with KRS Chapter 224 and administrative regulations promulgated pursuant thereto. The bond shall be supported by a cash account or certificate(s) of deposit. The cash account or the certificate(s) of deposit shall be held in escrow pursuant to an escrow agreement. The bank or other financial institution holding the cash account or certificate(s) of deposit in escrow shall be regulated and examined by a federal or state agency.

      (2) The Hazardous Waste Site or Facility Bond to Demonstrate Closure and/or Postclosure Care shall be executed on DEP Form 6035I incorporated by reference in Section 4 of 401 KAR 34:080. The Escrow Agreement to Demonstrate Closure and/or Postclosure Care for the cash account or certificate(s) of deposit shall be executed on DEP Form 6035J incorporated by reference in Section 4 of 401 KAR 34:080.

      (3) The cabinet shall be the beneficiary of the Escrow Agreement to Demonstrate Closure and/or Postclosure Care for the cash account or certificate(s) of deposit. The cabinet shall be empowered to draw upon the funds if the owner or operator fails to perform postclosure care in accordance with the postclosure care plan and other permit requirements.

      (4) The sum of the cash account or certificate(s) of deposit shall be in an amount at least equal to the amount of the current postclosure cost estimate, except as provided in Section 9 of this administrative regulation.

      (5) After each interest period is completed, whenever the current closure cost estimate changes, the owner or operator shall compare the new estimate with the trustee's most recent annual valuation of the cash accounts or the certificate(s) of deposit. If the value of the cash accounts or the certificate(s) of deposit is less than the amount of the new estimate, the owner or operator, within sixty (60) days of the change in the cost estimate, shall either deposit an amount into the cash account or the certificate(s) of deposit so that its value after this deposit at least equals the amount of the current closure cost estimate, or obtain other financial assurance as specified in this section to cover the difference.

      (6) If the value of the cash account or the certificate(s) of deposit is greater than the total amount of the current closure cost estimate, the owner or operator may submit a written request to the cabinet for release of the amount in excess of the current closure cost estimate.

      (7) Under the terms of the cash account or certificate(s) of deposit, the bank or financial institution may cancel the cash account or certificate(s) of deposit by sending notice of cancellation by certified mail to the owner or operator and to the cabinet. Cancellation shall 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 the cabinet, as evidenced by return receipt.

      (8) The cabinet shall agree to termination of the cash account or certificate of deposit when:

      (a) An owner or operator substitutes alternate financial assurance as specified in this administrative regulation; or

      (b) The cabinet releases the owner or operator from the requirements of this administrative regulation in accordance with Section 11 of this administrative regulation.

      (9) An owner or operator or any other person authorized to conduct postclosure may request reimbursement for postclosure expenditures by submitting itemized bills to the cabinet. Within sixty (60) days after receiving bills for postclosure activities, the cabinet may instruct the bank or financial institution to make reimbursements in those amounts as the cabinet specifies in writing if the cabinet determines that the postclosure expenditures are in accordance with the postclosure plan or otherwise justified.

 

      Section 9. Use of Multiple Financial Mechanisms. An owner or operator may satisfy the requirements of this administrative regulation by establishing more than one (1) financial mechanism per facility. These mechanisms are limited to trust funds, surety bonds, letters of credit, insurance, cash accounts and certificate(s) of deposit. The mechanisms shall be as specified in Sections 3, 4, 5, 6, and 8, respectively, of this administrative regulation except that it is the combination of mechanisms rather than the single mechanism which shall provide financial assurance for an amount at least equal to the current postclosure cost estimate. If an owner or operator uses a trust fund in combination with a surety bond or a letter of credit, he may use the trust fund as the standby trust fund for the other mechanisms. A single standby trust fund may be established for two (2) or more mechanisms. The cabinet may use any or all of the mechanisms to provide for postclosure care of the facility.

 

      Section 10. Use of a Financial Mechanism for Multiple Facilities. An owner or operator may use a financial assurance mechanism specified in this administrative regulation to meet the requirements of this administrative regulation for more than one (1) facility of which he is the owner or operator provided the facilities are all within the Commonwealth. Evidence of financial assurance submitted to the cabinet shall include a list showing for each facility the EPA identification number, name, address, and the amount of funds for postclosure care assured by the mechanism. The amount of funds available through the mechanism shall be no less than the sum of funds that would be available if a separate mechanism had been established and maintained for each facility. In directing funds available through the mechanism for postclosure care of any of the facilities covered by the mechanism, the cabinet may direct only the amount of funds designated for that facility, unless the owner or operator agrees to the use of additional funds available under the mechanism.

 

      Section 11. Release of the Owner or Operator from the Requirements of this Administrative Regulation. Within sixty (60) days after approving certifications from the owner or operator and an engineer that the postclosure care period has been completed in accordance with the approved postclosure plan, the cabinet shall notify the owner or operator in writing that he is no longer required by this administrative regulation to maintain financial assurance for postclosure care of that unit, unless the cabinet has reason to believe that postclosure care has not been in accordance with the approved postclosure plan. The cabinet shall provide the owner or operator a detailed written statement of any such reason to believe that postclosure care has not been in accordance with the approved postclosure plan. (10 Ky.R. 223; Am. 582; eff. 12-2-83; 14 Ky.R. 1454; eff. 3-10-88; 20 Ky.R. 1231; 1972; eff. 3-14-94; 23 Ky.R. 710; eff. 3-12-97.)