regulatory impact analysis 15a ncac 13b .0546, .1105 ... · “financial assurance” is defined as...

REGULATORY IMPACT ANALYSIS

15A NCAC 13B .0546, .1105, .1111, .1628, AND SECTION .1800 FINANCIAL ASSURANCE REQUIREMENTS FOR SOLID WASTE MANAGEMENT FACILITIES

October 11, 2019

General Information

Agency Environmental Management Commission

Department: Department of Environmental Quality, Division of Waste Management, Solid Waste Section

Contact: Jessica Montie Environmental Program Consultant Solid Waste Section Rule-Making Contact [email protected] (919) 707-8247

Sarah Rice Environmental Program Consultant Solid Waste Section Financial Assurance Contact [email protected] (919) 707-8287

Title of Rule Section:

Financial Assurance Requirements for Solid Waste Management Facilities

Citation: 15A NCAC 13B .0546, .1105, .1111, .1628, and Proposed .1801 - .1806

Authority: G.S. 130A-294; 130A-295.2; 150B-21.3A

Impact Summary:

Requires expenditure or distribution of State funds: No Impacts local government expenditures or revenues: No Local government net cost increase or cost savings: NA Substantial economic impact: No Federal requirement: State program approval for 40 CFR 258

mailto:[email protected]:[email protected]

Proposed Rule-Making Schedule

Date Action

7/10/2019 GWWMC Meeting: Approval of proposed text to go to EMC.

9/12/2019 EMC Meeting: Approval of rule text and impact analysis for public comment.

10/15/2019 Rules published in NC Register and Agency website

Comment Period Begins.

10/30/2019 Earliest date for public hearing.

12/16/2019 Comment Period Ends.

1/9/2020 EMC Meeting: Approval of Hearing Officer’s Report and Adoption of Rules.

2/20/2020 RRC meeting: Approval of rule text

3/1/2020 Earliest effective date for rules.

Baseline It is the responsibility of the Department of Environmental Quality Division of Waste Management (Division) Solid Waste Section (Section) to regulate how solid waste is managed within the State under the statutory authority of the Solid Waste Management Act, Article 9 of Chapter 130A of the General Statutes. Rules governing solid waste management adopted under this authority are codified at Title 15A, Subchapter 13B of the North Carolina Administrative Code. Pursuant to G.S. 130A-294(a)(4), the Division also has the authority to develop a permit system governing the establishment and operation of solid waste management facilities (SWMFs) through permit conditions. SWMFs are those facilities that are permitted by the Division to manage solid waste in accordance with 15A NCAC 13B. SWMFs include landfills for the disposal of solid waste through burial on land, and also includes other facility types that manage solid waste through methods that may not be final disposal or burial on land, such as transfer stations, mixed waste processing, or composting. The term SWMF does not include hazardous waste management facilities that are permitted by the Division’s Hazardous Waste Section in accordance with 15A NCAC 13A. The State financial assurance requirements for hazardous waste management facilities are governed separately under the authority of G.S. 130A-295.04. G.S. 130A-295.2 establishes requirements for financial responsibility of SWMFs, and SWMFs would still be required to establish financial assurance utilizing the mechanisms pursuant to 40 CFR 258.74 (July 1, 2010 Edition), even in the absence of the rules in Subchapter 13B. The term “financial responsibility” includes financial qualifications and financial assurance. “Financial qualifications” is defined as the ability of an applicant or permit holder to pay the costs of proper design, construction, operation, and maintenance

of the facility. “Financial assurance” is defined as the ability of an applicant or permit holder to pay the costs of assessment and remediation in the event of a release of pollutants from a facility, closure of the facility in accordance with all applicable requirements, and post-closure monitoring and maintenance of the facility. G.S. 130A-295.2(f) states:

“The applicant and permit holder for a solid waste management facility shall establish financial assurance by a method or combination of methods that will ensure that sufficient funds for closure, post-closure maintenance and monitoring, and any corrective action that the Department may require will be available during the active life of the facility, at closure, and for any post-closure period of time that the Department may require even if the applicant or permit holder becomes insolvent or ceases to reside, be incorporated, do business, or maintain assets in the State. Rules adopted by the Commission shall allow a business entity that is an applicant for a permit or a permit holder to establish financial assurance through insurance, irrevocable letters of credit, trusts, surety bonds, corporate financial tests, or any other financial device as allowed pursuant to 40 Code of Federal Regulations § 258.74 (July 1, 2010 Edition), or any combination of the foregoing shown to provide protection equivalent to the financial protection that would be provided by insurance if insurance were the only mechanism used. Assets used to meet the financial assurance requirements of this section shall be in a form that will allow the Department to readily access funds for the purposes set out in this section. Assets used to meet financial assurance requirements of this section shall not be accessible to the permit holder except as approved by the Department. Where a corporate financial test is used that is substantially similar to that allowed under 40 Code of Federal Regulations § 258.74 (July 1, 2010 Edition), the assets shall be presumed both to be readily accessible by the Department and not otherwise accessible to the permit holder.”

If the funds reserved for financial assurance are never required to be used by the permittee or the Department, the funds would revert to the permittee once the permittee is released from the requirement to maintain financial assurance. In addition, reserving funds for financial assurance does not prevent the permittee from earning interest on those funds. Therefore, the amount of money reserved for financial assurance is not a direct cost to the permittee, but is only a cost in that the requirement to establish financial assurance restricts immediate access to the funds. There is also a cost to the permittee in fees paid to the financial institution if a financial institution is needed to establish some of the financial assurance mechanisms such as trusts or bonds. These costs are a part of existing statute and rule, and the proposed rule changes do not affect these direct costs. History In 1989, the General Assembly adopted the Solid Waste Management Act, Article 9 of Chapter 130A of the General Statutes (S.L. 1989 Chapter 784, SB111). The Act included Part 2B – the Scrap Tire Disposal Act, and also the adoption of G.S. 130A-309.27 which established general requirements for financial responsibility for landfills for the disposal of solid waste. In 1990, Scrap Tire Management Rules, 15A NCAC 13B .1100, were

codified, and Rule .1111 “Financial Responsibility Requirements” established specific requirements for financial responsibility for scrap tire collection sites, including scrap tire landfills. In 1993, the municipal solid waste landfill facility (MSWLF) Rules, 15A NCAC 13B Section .1600, were codified based on the US EPA MSWLF federal regulations (40 CFR 258). Due to the adoption of the MSWLF Rules, the Division requested and was granted program approval by the US EPA to implement the MSWLF Program. In 1994, Rule .1628 “Financial Assurance Rule” was codified and established requirements for financial assurance for MSWLFs consistent with 40 CFR 258. In 2007, the construction and demolition landfill facility (C&DLF) Rules, 15A NCAC 13B .0531 - .0547, were codified, including Rule .0546 “Financial Assurance Requirements for C&DLF Facilities and Units” that established requirements for financial assurance for C&DLFs that were generally consistent with Rule .1628 for MSWLFs. Also in 2007, the North Carolina General Assembly adopted legislation (Session Law 2007-550) that established financial responsibility requirements, including financial qualifications and financial assurance, for all SWMFs in G.S. 130A-295.2. This statute required that SWMFs establish financial assurance for closure of the facility, post closure activities for landfills, and for any corrective action that the SWMF is required to conduct to ensure that funds would be available to the Division to conduct these activities even if the applicant or permit holder becomes insolvent or ceases to reside, be incorporated, do business, or maintain assets in the State. The statute also required sanitary landfills, a subset of SWMFs that includes MSWLFs, C&DLFs, and industrial landfills (including landfills for the sole disposal of scrap tires) to establish financial assurance to set aside funds for any potential assessment and corrective action in the future that may occur. In 2011, the General Assembly adopted legislation (S.L. 2011-262) to amend G.S. 130A-295.2 to specify that the financial devices or mechanisms used to establish financial assurance shall be financial devices allowed pursuant to 40 CFR 258.74 (July 1, 2010 edition). Necessity of Proposed Rule Changes Existing rules 15A NCAC 13B .0546, .1111, and .1628 are required to be readopted in accordance with G.S. 150B-21.3A by the deadline established by the Rules Review Commission of April 30, 2021. The Division is proposing to consolidate the financial assurance requirements in these three Rules into the proposed new 15A NCAC 13B Section .1800 “Financial Assurance Requirements for Solid Waste Management Facilities”, amend Rules .0546, .1105, and .1628 to refer to the applicable statutes for financial responsibility and to the proposed new Section .1800, and to repeal Rule .1111. The rationale for consolidating the existing Rules into one Section is to establish a Section of Rules for financial assurance within Subchapter 13B that can be applied to all SWMF types permitted in accordance with Subchapter 13B that are required to establish financial assurance to be consistent with the statutory requirements in G.S. 130A-295.2, instead

of retaining multiple individual financial assurance Rules that each apply to one facility type. Summary of Proposed Rule Changes Proposed changes to the requirements for financial assurance with this rule making action are as follows:

1. to consolidate financial assurance requirements into one Section that can be applied to all SWMF facility types permitted in accordance with Subchapter 13B as described above;

2. to clarify the SWMF types permitted by the Division that are required to establish financial assurance;

3. to request that minimal status information on active and closed portions of the facility be submitted with the cost estimates for annual mechanism renewals;

4. to request that minimal status information on current corrective action program activities be submitted with the updated cost estimate every five years to determine the amount of funds for current corrective action activities that need to be completed.

5. to extend deadlines for local governments to submit annual cost estimate updates and mechanism renewals from 60 days to 180 days after the close of their fiscal year;

6. to provide a secondary option for approval of mechanisms for corporations if no corporate seal is available;

7. to update rules to be consistent with statutory changes due to S.L. 2015-241 Section 14.20.(a) as modified by S.L. 2015-286 Section 4.9(a) that allow sanitary landfills and transfer stations to apply for permits for the life of the site instead of five-year increments;

8. to incorporate by reference the requirements for allowable mechanisms directly from the July 2010 edition of 40 CFR 258 instead of including the CFR language in rule;

9. to add mechanism templates for the use of the corporate financial test and the corporate guarantee as the financial assurance mechanism; and to update the mechanism templates to state that the funds set aside are intended to be used for potential assessment and corrective action in addition to closure, post closure, and current corrective action programs; and

10. to update addresses and websites, to remove unnecessary and outdated language, and to make technical corrections.

Impact Analysis

1. Consolidation of Financial Assurance Requirements into Section .1800

(a) Description and Rationale The Division is proposing to consolidate financial assurance requirements in existing Rules .0546, .1111, and .1628 into one Section .1800 that can be applied to all SWMF facility types permitted in accordance with Subchapter 13B. The existing rules in Subchapter 13B establish financial assurance requirements for C&DLFs, scrap tire collection facilities, and MSWLFs in Rules .0546, .1111, and .1628, respectively. G.S. 130A-295.2 requires that all SWMFs establish financial assurance; therefore, the requirements in these three existing rules are being consolidated into one new Section .1800, and revised to allow the rules to be directly applicable to all SWMFs permitted in accordance with Subchapter 13B to be consistent with the statute requirements. All of the minimum requirements applicable to MSWLFs in Rule .1628 remain in proposed Section .1800, as is required to maintain compliance with 40 CFR 258 (July 1, 2010 edition). Existing Rules .0546 and .1628 apply to MSWLFs and C&DLFs, which are required to conduct specific closure requirements when the landfills cease accepting waste, conduct a 30-year post closure care period after completing closure requirements that involves environmental monitoring and care of the landfill cap and leachate management. Issues discovered during the active life or post-closure period may also result in the Division requiring assessment and corrective action programs for landfills. SWMFs that are not sanitary landfills and would not have any waste remaining on site after closure would have fewer requirements for closure, and are not required to conduct a post-closure care period, and therefore would not be required to undertake a corrective action program during post-closure or maintain potential assessment and corrective action. Proposed Section .1800 clarifies the differences in requirements for sanitary landfill facilities and SWMFs that are not landfills. Existing Rule .1111 applies to scrap tire collection sites and establishes a minimum per tire cost for financial assurance, and has specific amounts required for liability insurance based on the number of tires on site. These cost requirements were effective in 1990. In August 2016 during the comment period for the periodic review of existing rules report for Subchapter 13B, the Division received a comment from the regulated community regarding Rule .1111. The comment requested that this rule be amended to allow the Division “the flexibility to consider factors such as availability and distance to a disposal facility in setting financial assurance for collection sites” and offered some language for this Rule. This comment is being addressed by combining the financial assurance requirements into one Section that applies to all SWMFs, which will change the requirements for scrap tire collection sites by allowing the owner or operator of these sites to prepare and submit a cost estimate for a third party to remove and properly dispose of the maximum amount of waste tires allowed on site by the permit conditions to determine the amount required for financial assurance, instead of using a flat rate per tire. The

requirement for liability insurance is being amended by moving the requirement to Rule .1105 and removing mention of specific dollar amounts and requiring that the permit applicant provide proof of their liability insurance for financial qualifications during the permit application process. (b) Costs and Benefits Private Industry and Local Government-Owned Facilities The proposed rule changes allow private industries that own/operate scrap tire collection sites to provide cost estimates for site closure instead of using a flat rate per tire, which will allow them flexibility in determining the cost, and allow them to use best management practices and available options to reduce costs to provide a more accurate amount of financial assurance. Note that local governments are not required to establish financial assurance for scrap tire collection sites, in existing rule or proposed rule, therefore any scrap tire collection sites owned/operated by local governments are not affected by the rule changes. Also, scrap tire landfills are required to provide cost estimates for financial assurance as current practice like other sanitary landfills, so the rule changes do not affect these landfills. There are four active scrap tire collection sites (processing facilities) in North Carolina that are owned/operated by private industry that calculate the financial assurance amount using the flat rate per tire, and may be affected by the rule changes. The proposed rule is estimated to decrease the amount of financial assurance required to be reserved for these four facilities by between $50,000 and $360,000, which reduces the burden on the permittees. Note again that this is not a direct cost savings, but just a benefit in that funds in this amount would be available to the permittees immediately instead of being reserved for future use. The fees paid directly to the financial institutions to establish and/or maintain the mechanisms does not change as a result of the rule changes. Even though the decrease in reserved funds decreases the amount of money available to the Department if the Department has to hire a third party to clean up the site in the future, since the cost estimate is based on the actual cost for clean-up, it is expected that the amount reserved will be sufficient to clean up the site. The cost estimates still require approval from the Department which should minimize risks to public health and the environment. The proposed changes will also provide clarity to industry and local governments on facilities types that are not required to establish financial assurance, and clear direction on how to comply with the statute requirements in G.S. 130A-295.2. In existing rule, facilities that were not MSWLFs, C&DLFs, or scrap tire facilities complied with G.S. 130A-295.2 by following the 40 CFR 258.74 requirements for allowable mechanisms and the mechanism template wording provided in Rule .1628, however the language in the CFR and Rule .1628referred to MSWLFs and requirements specific to MSWLFs, and did not describe directly the requirements for other facility types. The proposed rule language should provide the lacking direction. Some of the requirements as described in 40 CFR 258.74 and in existing Rules .0546 and .1628 are worded to be specific to landfills, whereas many of the solid waste management facilities are not landfills. Existing Rule .1628 requires that closure cost estimates be calculated based on closure of the largest permitted unit at the landfill at any

time during the active life of the facility, however there are no units to close at a facility that is not a landfill. The proposed rules provide a procedure for calculating a closure cost estimate by estimating the cost to clean up the maximum amount of waste allowed to be on site in the permit for facilities that are not landfills. This is what is currently done in practice since the procedures described in existing Rule .1628 are not possible for facilities that are not landfills. Existing Rules .0546 and .1628 also contain requirements for landfills to establish financial assurance for environmental monitoring and maintenance activities during the 30-year post-closure care period for the waste that will remain on site, and any corrective action programs that may be required because of environmental monitoring results or other issues during the active life or post-closure care period. Facilities that are not landfills are not burying waste and are required to remove all waste from the site before facility closure, therefore no post-closure care period is required, and any impacts from waste would be prevented or minimized, so it is unlikely that a corrective action program would be needed. The proposed rules clarify that financial assurance for facilities that are not landfills is required only for closure costs, and this is what is currently done in practice since the post-closure care and corrective action program requirements are generally not applicable. State Government The proposed changes should provide clarification and clear direction to Division employees on how to apply financial assurance requirements to SWMFs that are not MSWLFs, or C&DLFs to comply with G.S. 130A-295.2, and on handling financial assurance for scrap tire collection sites since they will now be handled consistent with other SWMFs. The clarification may minimally reduce staff time spent determining the path forward and answering questions and providing guidance and technical assistance for permit applicants and renewals on financial assurance.

2. Exemptions in Rule .1801(a) (a) Description and Rationale Proposed Rule .1801(a) clarifies the solid waste management facilities that are exempt from the financial assurance requirements of Section .1800, and puts into rule what is currently handled via the permitting process. The existing rules in Subchapter 13B establish financial assurance requirements for C&DLFs, scrap tire collection facilities, and MSWLFs in Rules .0546, .1111, and .1628, respectively. The requirements in existing Rule .1628 are consistent with the requirements in 40 CFR 258.74. Following the changes to G.S. 130A-295.2 in 2007 and 2011 requiring that all SWMFs establish financial assurance using the allowable mechanisms described in 40 CFR 258.74, the Division has been working to determine the types of facility permits that need to establish financial assurance, and update permits as they come up for renewal by referring to 40 CFR 258.74 for allowable mechanisms, and referring to Rule .1628 for the general procedural requirements and the mechanism templates.

(b) Costs and Benefits The proposed language will provide clarity and direction on the facility types that are exempted from the requirement to establish financial assurance for reasons described in the Rule. However, the Rule still allows the Division the ability to require financial assurance for facilities that would normally be exempted in the proposed rule based on compliance history, which allows protection for the environment and NC citizens. The exemptions in Subparagraphs (1) and (2) are existing exemptions, because these facilities (C&DLFs and MSWLFs) were exempted in existing rule from having to comply with the requirements in Rules .0531 - .0547 and Section .1600 if they closed/stopped receiving waste prior to the given dates, including the requirements for financial assurance in Rules .0546 and .1628. Septage management facilities have never been required to establish financial assurance in practice since the septage waste is either contained in a tank or land-applied, so generally there is no waste or minimal waste on site at any given time that would need to be cleaned up at facility closure, therefore any cost estimate we could have required for financial assurance would have been minimal or nothing at all. Facilities that accept only yard waste, land clearing waste, and inert debris, and small Type 3 compost facilities have also never been required to establish financial assurance in practice because they do not accept waste that has an increased potential for harm to the public health or the environment, and are generally operated on a smaller scale than other solid waste management facilities. Also, much of material on site at processing facilities may be viewed as a product or as having the potential to be processed into a product with a beneficial use; therefore costs for closure of these facility types is minimal, and the risks imposed by any waste remaining on-site is minimal. 3. Submittal of additional information on status of active and closed portions of sanitary landfills, Rule .1801 (a) Description and Rationale The proposed language in Rule .1801(h) provides annual verification of the cost estimates at life-of-site permitted facilities for the prior year and the upcoming year’s financial assurance mechanisms by requesting information on the facilities activities conducted and portions of the facilities that are or will be closed or active. The request for additional information will allow internal assessment of proposed permitted facility timeline vs estimated cost vs annual tonnage for a more accurate cost estimate and environmental liability of permitted facilities in North Carolina. When the Session Laws 2015-241 and -286 allowed for permits to be issued for the life-of-site instead of every five years there were no direct provisions to allow for reviews of environmental liability cost estimates for financial assurance since the statutes refer to five year permitting phases. Pursuant to 130A-295.2(d), which states in part: “The Department may require an applicant for a permit for a solid waste management facility to provide cost estimates for site investigation; land acquisition, including financing terms and land ownership; design; construction of each five-year phase, if applicable; operation; maintenance; closure; and post-closure monitoring and maintenance of the facility to the Department. The Department may allow an applicant to demonstrate its financial qualifications for only the first five-year phase of the facility. If the Department allows an

applicant for a permit to demonstrate its financial qualification for only the first five-year phase of the facility, the Department shall require the applicant or permit holder to demonstrate its financial qualification for each successive five-year phase of the facility when applying for a permit to construct each successive phase of the facility.” and (g), which states: “In order to continue to hold a permit under this Article, a permit holder must maintain financial responsibility and must provide any information requested by the Department to establish that the permit holder continues to maintain financial responsibility.” The facilities are proposed to annually provide within 180 days prior to renewal of financial assurance a current description of the phases, cells, and units that are still open or have been closed within the past year associated with the financial assurance mechanism (ex. July 2018 – June 2019 for a mechanism renewing June 2019), and also the phases, cells, and units that are predicted to be opened, remain active, or will be closed during the upcoming year associated with the financial assurance mechanism (ex. July 2019 – June 2020 for a mechanism renewing in June 2019). (b) Cost and Benefits The Division expects that the submittal of this information can be done via e-mail and should not take more than 1-2 hours to compile the information since it would already need to be done to generate the cost estimate that is required to be submitted by existing rule, and submit the email to the Division. If the submittal is done by a consultant or local government employee with a staff billing rate of $80.00 per hour, the submittal would cost between $80.00 and $160.00 per facility per year. The submittal of updated information has the potential to provide a benefit to permitted facilities because it may justify a reduction in the amount of financial assurance required, but at the same time it may also justify an increase in the amount of financial assurance. The costs either way are difficult to estimate since it would depend entirely on the specific situation and the facility. A more accurate cost estimate reduces risk to public health and the environment if the State, at any given time, has access to a reserved amount of financial assurance that accurately reflects the current state of the facility, and waste amounts on-site at the facility within a one-year time-frame, ensuring that the correct amount of funds will always be available for closure and post-closure care. Private Industry: The following are the number of private industry sanitary landfills that are currently permitted with a life-of-site permit that would require additional reporting in the proposed rule to substantiate environmental liability cost estimates. 17 Life-of-Site Industrial Sanitary Landfills – Rules .0504 - .0505 12 Life-of-Site Construction and Demolition Landfills – Rules .0531 - .0547 7 Life-of-Site Municipal Solid Waste Landfill Facilities – Section .1600 2 Life-of-Site Scrap Tire Landfill – Rules .0504 - .0505 and Section .1100 The annual statewide cost for these 38 private industry facilities would be between

$3,040.00 and $6,080.00. Local Government: The following are the local government sanitary landfills that are currently permitted with a life-of-site permit that would require additional reporting in the proposed rule to substantiate environmental liability cost estimates. 39 Life-of-Site Construction and Demolition Landfills – Rules .0531 - .0547 35 Life-of-Site Municipal Solid Waste Landfill Facilities – Section .1600 The annual statewide cost for these 74 local government facilities would be between $5,920.00 and $11,840.00.

4. Submittal of additional information on status of corrective action activities Rule.1804

(a) Description and Rationale The proposed language in Rule .1804(a)(1) requires cost estimates of the corrective action program be updated every five years, clarifies corrective action remedies, cost, and cost remaining to allow the requirement of financial assurance cost to be as accurate as possible. Should the facility want to decrease or need to increase corrective action costs associated with financial assurance, they now have an avenue to do so. (b) Costs and Benefits Facilities in corrective action programs currently are required to submit corrective action reports every five years to verify the effectiveness of the corrective actions. This information is proposed to be submitted within this existing report as additional information to substantiate the cost estimates provided for the annual mechanism renewals, and is not expected to add any costs, but would provide the benefit to the Division of having a means to verify and track costs of remedies for future use. Sanitary Landfills that are currently in corrective action monitoring and would require additional reporting for financial assurance. Private Sector: 2 Construction and Demolition Landfills – Rules .0531 - .0547 1 Scrap Tire Monofill Facility – Section .1100 Local Government: 16 Construction and Demolition Landfills – Rules .0531 - .0547 4 Municipal Solid Waste Landfill Facilities – Section .1600 Municipal solid waste landfills that accepted waste after October 1, 1993 or construction and demolition landfills that were operating past 2007 are required to supply financial assurance mechanisms for corrective action plans. 5. Extension of deadlines for local government submittals, Rules .1802 - .1804

(a) Description and Rationale The proposed language in Rules .1802(b)(1), .1803(b)(1), and .1804(b)(1) extends the deadlines in existing rule up to five (5) months. This allows the local governments time to finalize their audited Comprehensive Annual Financial Report (CAFR) and then submit either a local government test or capital reserve fund mechanism. Existing rules .1628(b)(1)(B), .1628(c)(1)(B), .1628(d)(1)(A) require that owners and operators using the local government financial test update their cost estimates for closure, post-closure, and corrective action for inflation within 30 days of the close of the local government's fiscal year, and before submission of updated mechanisms to the Division. Local governments and municipalities per Rule have thirty days to submit their financial assurance mechanism to the Section. This is usually not attainable as some of the data for the local government test comes from the audited annual financial information report (AFIR). The AFIR is due to the State by the end of October. The Division was getting multiple request for extensions between November and January. The Division is proposing to move the deadline for the local government test and the capital reserve test to December 31st of each year to allow time for completion of an audited AFIR and submittal of the test. (b) Costs and Benefits The proposed rule changes would not add any costs to local or state governments or private industry but will relieve the burden on local governments to meet the earlier deadline, and will reduce Division employee time spent processing extensions. 6. Options for mechanism approval if no corporate seal is available, Rule .1805 (a) Description and Rationale The proposed language in Rule .1805(c) provides an option for companies that do not use or have corporate seals to certify a financial assurance mechanism without a seal. Existing Rule .1628 does not have an alternate to resolve this problem. (b) Costs and Benefits The proposed language is not expected to add any costs, but will provide clarification to corporations and Division staff on how to approve a corporate mechanism without a corporate seal. 7. Life of Site permit changes

(a) Description and Rationale The Division is general is proposing changes to language to accommodate the switch to life of site permitting in statute, removing references to five year phases and permit renewals. (b) Costs and Benefits

This rule change is not expected to have any costs, and would only have the benefit of making the rule requirements consistent with statute and provide clarification on requirements for life-of-site permits. 8. Changes to allowable mechanisms - Rule .1805 (a) Description and Rationale Proposed Rule .1805 for allowable mechanisms will differ from Rule .1628(e) in that it directly incorporates the requirements from 40 CFR 258.74 for allowable mechanisms and establishes any additional requirements or variations not included in the CFR, and is applicable to all solid waste management facility types pursuant to G.S. 130A-295.2, instead of applying only to municipal solid waste landfills as set forth in 40 CFR 258.74 and Rule .1628. Additional mechanism rule references are included in .1805(e)(1) through .1805(e)(8). All solid waste management facilities have been required to establish financial assurance utilizing the allowable mechanisms in the July 10, 2010 edition of 40 CFR 258.74 pursuant to G.S. 130A-295.2(f), therefore the only impacts to the facilities that are not MSWLFs due to these rule changes are where the proposed rule differs from the CFR. However, in practice, since the statute change in 2007, the Division has followed or had the SWMFs follow the requirements in Rule .1628 when establishing financial assurance to be consistent, or because that is the way the financial institutions were practicing, or due to logic. For example, the rule states that a surety company shall be licensed to do business in NC specifically, but this requirement doesn’t change procedures, since it is not possible or legal otherwise to hire a surety company to do business in NC that is not licensed to do so. Where the Department requires documentation to be submitted, we would require that documentation be submitted for approval of the mechanism regardless, because it is necessary to determine compliance with the rule or the CFR. The additional proposed requirements that were included within .1805(e)(1) through .1805(e)(8) in addition to those in 40 CFR 258.74 will expedite the evaluation of the financial assurance mechanisms as they are submitted to the Division, and update the rules to be consistent with what the Division currently does in practice and what financial institutions currently require. The differences in each mechanism from 40 CFR 258.74 are described further in the table below.

Allowable Mechanisms Proposed Change in Bold Text

Trust Fund - .1805(e)(1) Set forth in 40 CFR 258.74(a)

Surety Bonds - .1805(e)(2)

As set forth in 40 CFR 258.74(b), except:

(B) the surety company listed on the Circular 570 of the US Department of Treasury shall be a surety allowed to do

business in North Carolina

(C) Bonding companies writing a bond over the underwriting limit shall issue documentation of

Allowable Mechanisms Proposed Change in Bold Text

reinsurance, coinsurance, or other methods to the Department.

(E) the liability limit shall be equal to or greater than the penal sum and shall be adjusted annually.

Letter of Credit - .1805(e)(3)

As set forth in 40 CFR 258.74(c)

Insurance - .1805(e)(4) As set forth in 40 CFR 258.74(d)

Corporate Financial Test - .1805(e)(5)

As set forth in 40 CFR 258.74(e)

Local Government Test - .1805(e)(6)

As set forth in 40 CFR 258.74(f), except:

(A) Public entities utilizing bond ratio test shall submit a copy of the bond showing proof of current bond

rating.

Corporate Guarantee - .1805(e)(7)

As set forth in 40 CFR 258.74(g)

Capital Reserve Fund - .1805(e)(8)

Updated to be inclusive of SWMFs instead of MSWLF only.

Existing Rule .1628(e)(1)(A) through (I) are allowable mechanisms that very closely mimic 40 CFR 258.74 (July 1, 2010 edition). The corporate financial test, corporate guarantee, and the local government guarantee were listed in Rule .1628 as optional mechanisms but no specific requirements were provided, although a facility would have been able to follow the requirements for these mechanisms in 40 CFR 258.74, if needed. (b) Costs and Benefits The proposed changes to mechanisms are not expected to incur any costs, but are intended to update the language to reflect current practices and provide clarification. 9. Changes to mechanisms templates - Rule .1806 (a) Description and Rationale Proposed Rule .1806 establishes the wording of the templates to be used for each mechanism, and is being recodified from existing Rule .1628(e)(2). Owners and operators of SWMFs may need to make minor changes to the wording of their mechanisms to be consistent with the rule changes upon their next annual mechanism renewal if the wording is in conflict with the proposed templates. Not all changes are applicable to all facilities; for example, a SWMF that is not a sanitary landfill would not need to include a line item for potential assessment and corrective action since they are not required to establish financial assurance for this, and a corporation that has a corporate seal would not need to revise to add the reference to Rule .1805(c) regarding the corporate seal substitute. The proposed changes allow for generalization of ratio indicators within the local government test instead of having line items that directly correspond to the local government’s annual financial information report (AFIR) line items. This was done

because the formatting of the AFIR changed and may change again in the future, and the AFIR lines items no longer corresponded directly to the local government test. This proposed rule also adds mechanism language for use of corporate test and corporate guarantees if they are used as the financial mechanism. In response to requests to utilize these two corporate mechanisms, the Division created mechanism templates for the corporate financial test and corporate guarantee to comply with 40 CFR 258.74 and associated federal registers. The Division has been utilizing these templates over the previous 5 years, and has added these templates to proposed Rule .1806. Below is a summary of the changes to the wording of the templates as compared to the existing wording in Rule .1628(e)(2).

Allowable Mechanism Templates

Proposed Change

Trust Agreement - .1806(1)

Added potential assessment and corrective action to be part of the total aggregate amount to be funded by the trust.

Inserted the rule reference of .1805(c), should a corporation not have a corporate seal.

Surety Bond - Performance Bond - .1806(2) : For closure, post-

closure, corrective action plans, and potential assessment and

corrective action costs

Added potential assessment and corrective action as a line item for potential costs.


Surety Bond - Payment Bond - .1806(3) : For closure or post-

closure


Letter of Credit -.1806(4) Rule references were updated.

Insurance - .1806(5) Rule references were updated.

Corporate Financial Test -.1806(6)

New template based on 40 CFR 258.74 (e)(5), federal register, and USEPA guidance, and in use within the last 5 years although existing rule has no template for this mechanism.

Local Government Test -.1806(7) Removed AFIR references as the references changed. Counties know where to pull data from for ratio indicator of financial strength test.

Corporate Guarantee - .1806 (8)

New Template based on 40 CFR 258.74 (e)(7), federal register, and USEPA guidance, and in use within the last 5 years although existing rule has no template for this mechanism.

Special Report - .1806 (9)

New Template for supplemental special report for certified public accountant (CPA) based on both 40CFR 258.74(e)(5) and (e)(7) to satisfy Alternative III, #2. - see. 40 CFR 258.74(g)(2)(A)(2)(C) or proposed .1806(9)

Allowable Mechanism Templates

Proposed Change

Capital Reserve Fund Resolution - .1806 (10)

Rule references were updated.

(b) Costs and Benefits The proposed changes to mechanism templates are not expected to incur any costs since facilities are required by existing and proposed rule to renew/update their financial assurance mechanisms annually, and can simply update the language to match the proposed rule at the time of renewal. The changes are intended to update the language to reflect current practices and provide clarification. Conclusion

• The proposed changes to financial assurance requirements in this rule-making action may have an effect on private industries that own or operate sanitary landfills with life-of-site permits from the requirement to submit additional minimal information in support of the cost estimates that are required to be submitted by existing rule. However, the per facility cost for this change is only $80.00 to $160.00 per year. The annual statewide cost for 38 private industry facilities would be between $3,040.00 and $6,080.00.

• The proposed changes to financial assurance requirements with this rule-making action may have a minimal effect on local government in staff time that own or operate sanitary landfills with life-of-site permits from the requirement to submit additional minimal information in support of the cost estimates that are required to be submitted by existing rule. However, this change is not generally expected to affect the expenditures or revenues of local governments, since the per facility cost is only $80.00 to $160.00 per year. The annual statewide cost for 74 local government facilities would be between $5,920.00 and $11,840.00.

• The proposed changes to financial assurance requirements with this rule-making action will provide clarity to current and future state (Division) employees by providing a clear understanding of financial assurance requirements; more accurate and current mechanism template language; a clear option for corporations that do not have a corporate seal; updates, current status, and direction on cost estimates for facilities that have life-of-site permits or are in a corrective action program; all of which will provide more timely and efficient processing of financial assurance documents. The proposed changes are not expected to require an expenditure or distribution of State funds subject to the State Budget Act.

• The proposed changes to financial assurance requirements with this rule-making action are not expected to have an aggregate annual impact to all affected parties of greater than or equal to $1 million.

• The proposed rule changes are not expected to impact risks to NC citizens and the environment. Regulatory compliance and monitoring of facilities will not change, and will continue to be enforced by the Division through annual inspections and review of annual facility reports. Consolidation of financial

assurance requirements in existing Rules .0546, .1111, and .1628 into proposed Section .1800. gives citizens and financial institutions more clarity and understanding of the requirements for all SWMFs in establishing and maintaining financial assurance for facility closure and post-closure and protection of the environment.

• The proposed rule changes are not expected to affect federal program approval for MSWLFs as the amendments to 15A NCAC Section .1628 and transfer of most requirements in to proposed Section .1800 do not cause any requirements to be less stringent than the federal requirements, and in fact directly incorporate the 40 CFR 258.74 requirements for allowable mechanisms in proposed Rule .1805.

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15A NCAC 13B .0546 is proposed for readoption with substantive changes as follows: 1

2

15A NCAC 13B .0546 FINANCIAL ASSURANCE REQUIREMENTS FOR C&DLF FACILITIES AND 3

UNITS 4

(a) Owners and operators of construction and demolition landfill facilities permitted by the Division in accordance 5

with this Subchapter shall comply with the financial responsibility requirements set forth in G.S. 130A-295.2. 6

(b) Owners and operators of construction and demolition landfill facilities operating after January 1, 2007 and 7

permitted by the Division in accordance with this Subchapter shall comply with the financial assurance requirements 8

set forth in Section .1800 of this Subchapter. 9

(a) Owners and operators of C&DLF facilities and units must provide proof of financial assurance in accordance 10

with the financial responsibility for landfills adopted pursuant to G.S. 130A-294(b) and 130A-309.27. 11

(b) Owners and operators of C&DLF facilities and units permitted under these Rules must provide proof of 12

financial assurance to ensure closure of the site in accordance with these Rules and to cover closure, post-closure, 13

and corrective action of the landfill. Financial assurance may be demonstrated through surety bonds, insurance, 14

letters of credit, a funded trust, or local government financial test. Documentation of financial assurance must be 15

kept current, and updated annually as required by changes in these Rules, changes in operation of the site, and 16

inflation. 17

(c) Owners and operators of C&DLF facilities and units must demonstrate the following minimum amounts of 18

financial assurance for closure and post-closure care: 19

(1) The owner and operator must have a written estimate, in current dollars, of the cost of hiring a 20

third party to close the entire area of all C&DLF units, which have received permits to operate, at 21

any time during the active life in accordance with the closure plan required under Rule .0543 of 22

this Section. A copy of the closure cost estimate must be placed in the C&DLF's closure plan and 23

the operating record. 24

(A) The cost estimate must equal the cost of closing the entire area of all C&DLF units, 25

which have received permits to operate, at any time during the active life when the extent 26

and manner of its operation would make closure the most expensive, as indicated by its 27

closure plan as set forth in Rule .0543 of this Section. 28

(B) During the active life of the C&DLF, the owner and operator must annually adjust the 29

closure cost estimate for inflation within 60 days prior to the anniversary date of the 30

establishment of the financial instrument(s). For owners and operators using the local 31

government financial test, the closure cost estimate must be updated for inflation within 32

30 days after the close of the local government's fiscal year and before submission of 33

updated information to the Division. 34

(C) The owner and operator must increase the closure cost estimate and the amount of 35

financial assurance provided under Subparagraph (2) of this Paragraph if changes to the 36

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closure plan or C&DLF unit conditions increase the maximum cost of closure at any time 1

during the remaining active life. 2

(D) The owner or operator may reduce the closure cost estimate and the amount of financial 3

assurance provided under Subparagraph (2) of this Paragraph if the cost estimate exceeds 4

the maximum cost of closure at any time during the remaining life of the C&DLF unit. 5

Prior to any reduction of the closure cost estimate or the amount of financial assurance by 6

the owner or operator, a written justification for the reduction must be submitted to the 7

Division for review. The Division shall date and stamp the justification "approved" if the 8

conditions of this paragraph are met. The reduction justification and the Division 9

approval must be placed in the C&DLF's operating record. No reduction of the closure 10

cost estimate or the amount of financial assurance shall be allowed without Division 11

approval. 12

(2) The owner and operator of each C&DLF unit must establish financial assurance for closure of the 13

C&DLF unit in compliance with Paragraph (a) of this Rule. The owner and operator must provide 14

continuous coverage for closure until released from financial assurance requirements by 15

demonstrating compliance with Rule .0543 of this Section for final closure certification. 16

(3) The owner and operator must have a written estimate, in current dollars, of the cost of hiring a 17

third party to conduct post-closure care for the C&DLF unit(s) in compliance with the post-closure 18

plan developed under Rule .0543 of this Section. The post-closure cost estimate used to 19

demonstrate financial assurance in Subparagraph (2) of this Paragraph must account for the total 20

costs of conducting post-closure care, including annual and periodic costs as described in the post-21

closure plan over the entire post-closure care period. The post-closure cost estimate must be 22

placed in the operating record. 23

(A) The cost estimate for post-closure care must be based on the most expensive costs of 24

post-closure care during the post-closure care period. 25

(B) During the active life of the C&DLF unit(s) and during the post-closure care period, the 26

owner and operator must annually adjust the post-closure cost estimate for inflation 27

within 60 days prior to the anniversary date of the establishment of the financial 28

instrument(s). For owners and operators using the local government financial test, the 29

post-closure cost estimate must be updated for inflation within 30 days after the close of 30

the local government's fiscal year and before submission of updated information to the 31

Division. 32

(C) The owner and operator must increase the post-closure care cost estimate and the amount 33

of financial assurance provided under Subparagraph (2) of this Paragraph if changes in 34

the post-closure plan or C&DLF unit(s) conditions increase the maximum costs of post-35

closure care. 36

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(D) The owner or operator may reduce the post-closure cost estimate and the amount of 1

financial assurance provided under Subparagraph (2) of this Paragraph if the cost 2

estimate exceeds the maximum costs of post-closure care remaining over the post-closure 3

care period. Prior to any reduction of the post-closure cost estimate by the owner or 4

operator, a written justification for the reduction shall be submitted to the Division for 5

review. The Division shall date and stamp the justification "approved" if the conditions of 6

this paragraph are met. The written justification and the Division approval must be placed 7

in the C&DLF operating record. No reduction of the post-closure cost estimate shall be 8

allowed without Division approval. 9

(4) The owner and operator of each C&DLF unit must establish, in a manner in accordance with 10

Paragraph (a) of this Rule, financial assurance for the costs of post-closure care as required under 11

Rule .0543 of this Section. The owner and operator must provide continuous coverage for post-12

closure care until released from financial assurance requirements for post-closure care by 13

demonstrating compliance with Rule .0543 of this Section. Maintenance of financial assurance in 14

the required amounts in Subparagraphs (c)(1) and(c)(2) of this Rule does not in any way limit the 15

responsibility of owners and operators for the full costs of site closure and clean-up, the expenses 16

of any on-site or off-site environmental restoration necessitated by activities at the site, and 17

liability for all damages to third parties or private or public properties caused by the establishment 18

and operation of the site. 19

(5) An owner and operator of a C&DLF unit required to undertake a corrective action program under 20

Rule .0545 of this Section must have a written estimate, in current dollars, of the cost of hiring a 21

third party to perform the corrective action. The corrective action cost estimate must account for 22

the total costs of corrective action activities as described in the corrective action program for the 23

entire corrective action period. The owner and operator must notify the Division that the estimate 24

has been placed in the operating record. 25

(A) The owner and operator must annually adjust the estimate for inflation within 60 days 26

prior to the anniversary date of the establishment of the financial instrument(s) until the 27

corrective action program is completed in accordance with Rule .0545(m) of this Section. 28

For owners and operators using the local government financial test, the corrective action 29

cost estimate must be updated for inflation within 30 days after the close of the local 30

government's fiscal year and before submission of updated information to the Division. 31

(B) The owner and operator must increase the corrective action cost estimate and the amount 32


the corrective action program or C&DLF unit conditions increase the maximum costs of 34

corrective action. 35

(C) The owner or operator may reduce the corrective action cost estimate and the amount of 36


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estimate exceeds the maximum remaining costs of corrective action. Prior to any 1

reduction of the corrective action cost estimate by the owner or operator, a written 2

justification for the reduction must be submitted to the Division for review. The Division 3

shall date and stamp the justification "approved" if the conditions of this Paragraph are 4

met. The reduction justification and the Division approval must be placed in the 5

C&DLF's operating record. No reduction of the corrective action cost estimate shall be 6

allowed without Division approval. The reduction justification and the Division approval 7

must be placed in the C&DLF's operating record. 8

(6) The owner and operator of each C&DLF unit required to undertake a corrective action program 9

under Rule .0545 of this Section must establish, in a manner in accordance with Paragraph (a) of 10

this Rule, financial assurance for the most recent corrective action program. The owner or operator 11

must provide continuous coverage for corrective action until released from financial assurance 12

requirements for corrective action by demonstrating compliance with Rule .0545(m) of this 13

Section. 14

15

History Note: Authority G.S. 130A-294; G.S. 130A-295.2(b); 16

Eff. January 1, 2007.2007; 17

Readopted Eff. March 1, 2020. 18

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15A NCAC 13B .1105 is proposed for amendment as follows: 1

2

15A NCAC 13B .1105 PERMIT REQUIRED 3

(a) No person, other than a person exempted by G.S. 130A-309.57(d), shall establish, operate or maintain, or allow 4

to be established, operated or maintained upon land owned, leased, or otherwise controlled by that person, a scrap 5

tire collection site or scrap tire disposal site unless a permit for the site has been obtained from the Division. 6

(b) Applications for permits submitted in accordance with Rule .1106 of this Section shall be forwarded to the 7

Division of Waste Management, Solid Waste Section, 1646 Mail Service Center, Raleigh, North Carolina 27699-8

1646. 9

(c) A permit is issued to the permit applicant for a particular site and shall not be transferable. 10

(d) Trailers and covered roll-off containers used as scrap tire collection facilities are exempt from the requirements 11

of Rule .1106(c)(1), (c)(2), (c)(4), and (c)(6) of this Section. .1106(c) of this Section with the exception of 12

Subparagraphs (c)(3) and (c)(5) of this Rule. 13

(e) Scrap tire collection sites permitted by the Division in accordance with this Subchapter that are not operated by 14

local governments shall comply with the financial responsibility requirements set forth in G.S. 130A-295.2 and the 15

financial assurance requirements set forth in Section .1800 of this Subchapter. A demonstration of financial 16

qualifications for operation of a site shall include documentation that the facility has liability coverage for potential 17

property damage and bodily injury to third parties that may result from a fire occurring at the site. operated by units 18

of local government are exempt from the financial responsibility requirements established in Rule .1111 of this 19

Section. 20

21

History Note: Authority G.S. 130A-309.57; 22

Eff. October 1, 1990; 23

Readopted Eff. December 1, 2018.2018; 24

Amended Eff. March 1, 2020. 25

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15A NCAC 13B .1111 is proposed for readoption as a repeal as follows: 1

2

15A NCAC 13B .1111 FINANCIAL RESPONSIBILITY REQUIREMENTS 3

4

History Note: Authority G.S. 130A-294(b); 130A-309.27; 5

Eff. October 1, 1990.1990; 6

Repealed Eff. March 1, 2020. 7

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15A NCAC 13B .1628 is proposed for readoption with substantive changes as follows: 1

2

15A NCAC 13B .1628 FINANCIAL ASSURANCE RULE REQUIREMENTS FOR MSWLF FACILITIES 3

AND UNITS 4

(a) Owners and operators of municipal solid waste landfills facilities permitted by the Division in accordance with 5

this Subchapter that received waste on or after October 9, 1993 shall comply with the financial responsibility 6

requirements set forth in G.S. 130A-295.2. 7

(b) Owners and operators of municipal solid waste landfills facilities permitted by the Division in accordance with 8

this Subchapter shall comply with the financial assurance requirements set forth in Section .1800 of this Subchapter. 9

(a) Applicability and Effective Date. 10

(1) The requirements of this Rule apply to owners and operators of all MSWLF units that receive 11

waste on or after October 9, 1993, except owners or operators who are State or Federal 12

government entities whose debts and liabilities are the debts and liabilities of a State or the United 13

States. 14

(2) The requirements of this Rule are effective April 9, 1994. 15

(3) MSWLF units owned and operated by units of local government or public authorities may elect to 16

use a Capital Reserve Fund as described in Paragraph (e)(1)(I) of this Rule. 17

(4) Owners and operators of all MSWLF units shall submit detailed cost estimates for closure and 18

post-closure in accordance with Rule .1629 of this Section and this Rule; and, if necessary, for 19

corrective action programs in accordance with Rule .1637 of this Section and this Rule. 20

(5) Under this Rule, when documents are required to be placed in the operating record of a MSWLF 21

unit, three copies shall be forwarded to the Division. 22

(6) When allowable mechanisms as specified in Paragraph (e) of this Rule are used in combination to 23

provide financial assurance for closure, post-closure or corrective action, no more than one 24

allowable mechanism shall be provided by the same financial institution or its corporate entities. 25

(b) Financial Assurance for Closure. 26

(1) The owner or operator shall have a detailed written estimate, in current dollars, of the cost of 27

hiring a third party to close the largest area of all MSWLF units at any time during the active life 28

in accordance with the closure plan required under Rule .1629 of this Section. A copy of the 29

closure cost estimate shall be placed in the MSWLF's closure plan and the operating record. 30

(A) The cost estimate shall equal the cost of closing the largest area of all MSWLF units at 31

any time during the active life when the extent and manner of its operation would make 32

closure the most expensive, as indicated by its closure plan as set forth in Rule .1629 of 33

this Section. 34

(B) During the active life of the MSWLF unit, the owner or operator shall annually adjust the 35

closure cost estimate for inflation within 60 days prior to the anniversary date of the 36

establishment of the financial instrument(s). For owners and operators using the local 37

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government financial test, the closure cost estimate shall be updated for inflation within 1

30 days after the close of the local government's fiscal year and before submission of 2

updated information to the Division. 3

(C) The owner or operator shall increase the closure cost estimate and the amount of financial 4

assurance provided under Subparagraph (2) of this Paragraph if changes to the closure 5

plan or MSWLF unit conditions increase the maximum cost of closure at any time during 6

the remaining active life. 7

(D) The owner or operator may reduce the closure cost estimate and the amount of financial 8

assurance provided under Subparagraph (2) of this Paragraph if the cost estimate exceeds 9

the maximum cost of closure at any time during the remaining life of the MSWLF unit. 10

Prior to any reduction of the closure cost estimate by the owner or operator, a written 11

justification for the reduction shall be submitted to the Division. No reduction of the 12

closure cost estimate shall be allowed without Division approval. The reduction 13

justification and the Division approval shall be placed in the MSWLF's operating record. 14

(2) The owner or operator of each MSWLF unit shall establish financial assurance for closure of the 15

MSWLF unit in compliance with Paragraph (e) of this Rule. The owner or operator shall provide 16

continuous coverage for closure until released from financial assurance requirements by 17

demonstrating compliance with Rule .1627(c) of this Section for final closure certification. 18

(c) Financial Assurance for Post-Closure Care. 19

(1) The owner or operator shall have a detailed written estimate, in current dollars, of the cost of 20

hiring a third party to conduct post-closure care for the MSWLF unit in compliance with the post-21

closure plan developed under Rule .1629 of this Section. The post-closure cost estimate used to 22

demonstrate financial assurance in Subparagraph (2) of this Paragraph shall account for the total 23

costs of conducting post-closure care, including annual and periodic costs as described in the post-24

closure plan over the entire post-closure care period and be placed in the operating record. 25

(A) The cost estimate for post-closure care shall be based on the most expensive costs of 26

post-closure care during the post-closure care period. 27

(B) During the active life of the MSWLF unit and during the post-closure care period, the 28

owner or operator shall annually adjust the post-closure cost estimate for inflation within 29

60 days prior to the anniversary date of the establishment of the financial instrument(s). 30

For owners and operators using the local government financial test, the post-closure cost 31

estimate shall be updated for inflation within 30 days after the close of the local 32


(C) The owner or operator shall increase the post-closure care cost estimate and the amount 34


the post-closure plan or MSWLF unit conditions increase the maximum costs of post-36

closure care. 37

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(D) The owner or operator may reduce the post-closure cost estimate and the amount of 1


estimate exceeds the maximum costs of post-closure care remaining over the post-closure 3

care period. Prior to any reduction of the post-closure cost estimate by the owner or 4

operator, a written justification for the reduction shall be submitted to the Division. No 5

reduction of the post-closure cost estimate shall be allowed without Division approval. 6

The reduction justification and the Division approval shall be placed in the MSWLF's 7

operating record. 8

(2) The owner or operator of each MSWLF unit shall establish, in a manner in accordance with 9

Paragraph (e) of this Rule, financial assurance for the costs of post-closure care as required under 10

Rule .1629 (c) of this Section. The owner or operator shall provide continuous coverage for post-11

closure care until released from financial assurance requirements for post-closure care by 12

demonstrating compliance with Rule .1627(d) of this Section. 13

(d) Financial Assurance for Corrective Action. 14

(1) An owner or operator of a MSWLF unit required to undertake a corrective action program under 15

Rule .1637 of this Section shall have a detailed written estimate, in current dollars, of the cost of 16

hiring a third party to perform the corrective action. The corrective action cost estimate shall 17

account for the total costs of corrective action activities as described in the corrective action 18

program for the entire corrective action period. The owner or operator shall notify the Division 19

that the estimate has been placed in the operating record. 20

(A) The owner or operator shall annually adjust the estimate for inflation within 60 days prior 21

to the anniversary date of the establishment of the financial instrument(s) until the 22

corrective action program is completed in accordance with Rule .1637(f) of this Section. 23

For owners and operators using the local government financial test, the corrective action 24

cost estimate shall be updated for inflation within 30 days after the close of the local 25


(B) The owner or operator shall increase the corrective action cost estimate and the amount of 27

financial assurance provided under Subparagraph (2) of this Paragraph if changes in the 28

corrective action program or MSWLF unit conditions increase the maximum costs of 29

corrective action. 30

(C) The owner or operator may reduce the corrective action cost estimate and the amount of 31


estimate exceeds the maximum remaining costs of corrective action. Prior to any 33

reduction of the corrective action cost estimate by the owner or operator, a written 34

justification for the reduction shall be submitted to the Division. No reduction of the 35

corrective action cost estimate shall be allowed without Division approval. The reduction 36

justification and the Division approval shall be placed in the MSWLF's operating record. 37

10 of 79

(2) The owner or operator of each MSWLF unit required to undertake a corrective action program 1

under Rule .1637 of this Section shall establish, in a manner in accordance with Paragraph (e) of 2

this Rule, financial assurance for the most recent corrective action program. The owner or 3

operator shall provide continuous coverage for corrective action until released from financial 4

assurance requirements for corrective action by demonstrating compliance with Rule .1637(f) and 5

(g) of this Section. 6

(e) Allowable Mechanisms. 7

(1) The mechanisms used to demonstrate financial assurance under this Rule shall ensure that the 8

funds necessary to meet the costs of closure, post-closure care, and corrective action for known 9

releases shall be available whenever they are needed. Owners and operators shall choose from the 10

options specified in Parts (A) through (I) of this Paragraph. 11

(A) Trust Fund. 12

(i) An owner or operator may satisfy the requirements of this Paragraph by 13

establishing a trust fund which conforms to the requirements of this Part. The 14

trustee shall be an entity which has the authority to act as a trustee and whose 15

trust operations are regulated and examined by a Federal or State agency. A 16

copy of the trust agreement shall be placed in the facility's operating record. 17

(ii) Payments into the trust fund shall be made annually by the owner or operator 18

over the term of the initial permit or over the remaining life of the MSWLF unit, 19

in the case of a trust fund for closure or post-closure care, or over one-half of the 20

estimated length of the corrective action program in the case of corrective action 21

for known releases. This period is referred to as the pay-in period. 22

(iii) For a trust fund used to demonstrate financial assurance for closure and 23

post-closure care, the first payment into the fund shall be at least equal to the 24

current cost estimate for closure or post-closure care, except as provided in Part 25

(J) of this Paragraph, divided by the number of years in the pay-in period as 26

defined in Part (A)(ii) of this Paragraph. The amount of subsequent payments 27

shall be determined by the following formula: 28

29

Next Payment = CE-CV 30

Y 31

32

where CE is the current cost estimate for closure or post-closure care (updated 33

for inflation or other changes), CV is the current value of the trust fund, and Y is 34

the number of years remaining in the pay-in period. 35

(iv) For a trust fund used to demonstrate financial assurance for corrective action, 36

the first payment into the trust fund shall be at least equal to one-half of the 37

current cost estimate for corrective action, except as provided in Part (J) of this 38

Paragraph. The amount of subsequent payments shall be determined by the 39

following formula: 40

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1

Next Payment = CE-CV 2

Y 3

4

where CE is the current cost estimate for corrective action (updated for inflation 5

or other changes), CV is the current value of the trust fund, and Y is the number 6

of years remaining in the pay-in period. 7

(v) The initial payment into the trust fund shall be made before the initial receipt of 8

waste or before the effective date of this Rule (April 9, 1994), whichever is later, 9

in the case of closure and post-closure care, or no later than 120 days after the 10

corrective action remedy has been selected in accordance with the requirements 11

of Rule .1636 of this Section. Subsequent payments shall be made no later than 12

30 days after each anniversary date of the first payment. 13

(vi) If the owner or operator establishes a trust fund after having used one or more 14

alternate mechanisms specified in this Paragraph, the initial payment into the 15

trust fund shall be at least the amount that the fund would contain if the trust 16

fund were established initially and annual payments made according to the 17

specifications of this Part. 18

(vii) The owner or operator, or other person authorized to conduct closure, 19

post-closure care, or corrective action activities may request reimbursement 20

from the trustee and Division for these expenditures. Requests for 21

reimbursement shall be granted only if sufficient funds are remaining in the trust 22

fund to cover the remaining costs of closure, post-closure care, or corrective 23

action, and if justification and documentation of the cost is placed in the 24

operating record. The owner or operator shall document in the operating record 25

that reimbursement has been received. 26

(viii) The trust fund may be terminated by the owner or operator only if the owner or 27

operator substitutes alternate financial assurance as specified in this Rule or if no 28

longer required to demonstrate financial responsibility in accordance with the 29

requirements of Paragraph (b)(2), (c)(2) or (d)(2) of this Rule. 30

(ix) The trust agreement shall be accompanied by a formal certification of 31

acknowledgement. Schedule A of the trust agreement shall be updated within 32

60 days after any change in the amount of the current cost estimate covered by 33

the agreement. 34

(B) Surety Bond Guaranteeing Payment or Performance. 35

(i) An owner or operator may demonstrate financial assurance for closure or 36

post-closure care by obtaining a payment or performance surety bond which 37

conforms to the requirements of this Part. An owner or operator may 38

demonstrate financial assurance for corrective action by obtaining a 39

performance bond which conforms to the requirements of this Part. The bond 40

12 of 79

shall be effective before the initial receipt of waste or before the effective date of 1

this Rule, (April 9, 1994), whichever is later, in the case of closure and 2

post-closure care, or no later than 120 days after the corrective action remedy 3

has been selected in accordance with the requirements of Rule .1636 of this 4

Section. The owner or operator shall place a copy of the bond in the operating 5

record. The surety company issuing the bond shall, at a minimum, be among 6

those listed as acceptable sureties on Federal bonds in Circular 570 of the U.S. 7

Department of the Treasury which is incorporated by reference including 8

subsequent amendments and editions. Copies of this material may be inspected 9

or obtained at the Department of Environment, Health, and Natural Resources, 10

Division of Solid Waste Management, 401 Oberlin Road, Raleigh, North 11

Carolina at no cost. 12

(ii) The penal sum of the bond shall be in an amount at least equal to the current 13

closure, post-closure care or corrective action cost estimate, whichever is 14

applicable, except as provided in Paragraph (e)(1)(J) of this Rule. 15

(iii) Under the terms of the bond, the surety shall become liable on the bond 16

obligation when the owner or operator fails to perform as guaranteed by the 17

bond. 18

(iv) The owner or operator shall establish a standby trust fund. The standby trust 19

fund shall meet the requirements of Paragraph (e)(1) (A) of this Rule except the 20

requirements for initial payment and subsequent annual payments specified in 21

Paragraph (e)(1)(A)(ii), (iii), (iv) and (v) of this Rule. 22

(v) Payments made under the terms of the bond shall be deposited by the surety 23

directly into the standby trust fund. Payments from the trust fund shall be 24

approved by the trustee and Division. 25

(vi) Under the terms of the bond, the surety may cancel the bond by sending notice 26

of cancellation by certified mail to the owner and operator and to the Division 27

120 days in advance of cancellation. If the surety cancels the bond, the owner or 28

operator shall obtain alternate financial assurance as specified in this Rule. 29

(vii) The owner or operator may cancel the bond only if alternate financial assurance 30

is substituted as specified in this Rule or if the owner or operator is no longer 31

required to demonstrate financial responsibility in accordance with Paragraph 32

(b)(2), (c)(2) or (d)(2) of this Rule. 33

(C) Letter of Credit. 34

(i) An owner or operator may satisfy the requirements of this Paragraph by 35

obtaining an irrevocable standby letter of credit which conforms to the 36

requirements of this Part. The letter of credit shall be effective before the initial 37

13 of 79

receipt of waste or before the effective date of this Rule (April 9, 1994), 1

whichever is later, in the case of closure and post-closure care, or no later than 2

120 days after the corrective action remedy has been selected in accordance with 3

the requirements of Rule .1636 of this Section. The owner or operator shall 4

place a copy of the letter of credit in the operating record. The issuing 5

institution shall be an entity which has the authority to issue letters of credit and 6

whose letter of credit operations are regulated and examined by a Federal or 7

State agency. 8

(ii) A letter from the owner or operator referring to the letter of credit by number, 9

issuing institution, and date, and providing the following information: name and 10

address of the facility, and the amount of funds assured, shall be included with 11

the letter of credit in the operating record. 12

(iii) The letter of credit shall be irrevocable and issued for a period of at least one 13

year in an amount at least equal to the current cost estimate for closure, 14

post-closure care or corrective action, whichever is applicable, except as 15

provided in Paragraph (e)(1)(J) of this Rule. The letter of credit shall provide 16

that the expiration date shall be automatically extended for a period of at least 17

one year unless the issuing institution has canceled the letter of credit by sending 18

notice of cancellation by certified mail to the owner and operator and to the 19

Division 120 days in advance of cancellation. If the letter of credit is canceled 20

by the issuing institution, the owner or operator shall obtain alternate financial 21

assurance. 22

(iv) The owner or operator may cancel the letter of credit only if alternate financial 23

assurance is substituted as specified in this Rule or if the owner or operator is 24

released from the requirements of Paragraph (b)(2), (c)(2) or (d)(2) of this Rule. 25

(v) The owner or operator shall establish a standby trust fund. The standby trust 26

fund shall meet the requirements of Paragraph (e)(1)(A) of this Rule except the 27

requirements for initial payment and subsequent annual payments specified in 28

Paragraph (e)(1)(A)(ii), (iii), (iv) and (v) of this Rule. 29

(vi) Payments made under the terms of the letter of credit shall be deposited by the 30

issuing institution directly into the standby trust fund. Payments from the trust 31

fund shall be approved by the trustee and the Division. 32

(D) Insurance. 33

(i) An owner or operator may demonstrate financial assurance for closure and 34

post-closure care by obtaining insurance which conforms to the requirements of 35

this Part. The insurance shall be effective before the initial receipt of waste or 36

before the effective date of this Rule, (April 9, 1994), whichever is later. At a 37

14 of 79

minimum, the insurer shall be licensed to transact the business of insurance, or 1

eligible to provide insurance as an excess or surplus lines insurer, in North 2

Carolina. The owner or operator shall place a copy of the insurance policy in 3

the operating record. 4

(ii) The closure or post-closure care insurance policy shall guarantee that funds shall 5

be available to close the MSWLF unit whenever final closure occurs or to 6

provide post-closure care for the MSWLF unit whenever the post-closure care 7

period begins, whichever is applicable. The policy shall also guarantee that 8

once closure or post-closure care begins, the insurer shall be responsible for the 9

paying out of funds to the owner or operator or other person authorized to 10

conduct closure or post-closure care, up to an amount equal to the face amount 11

of the policy. 12

(iii) The insurance policy shall be issued for a face amount at least equal to the 13

current cost estimate for closure or post-closure care, whichever is applicable, 14

except as provided in (e)(1)(J) of this Rule. The term "face amount" means the 15

total amount the insurer is obligated to pay under the policy. Actual payments 16

by the insurer shall not change the face amount, although the insurer's future 17

liability shall be lowered by the amount of the payments. 18

(iv) An owner or operator, or any other person authorized to conduct closure or 19

post-closure care, may receive reimbursements for closure or post-closure 20

expenditures, whichever is applicable. Requests for reimbursement shall be 21

granted by the insurer only if the remaining value of the policy is sufficient to 22

cover the remaining costs of closure or post-closure care, and if justification and 23

documentation of the cost is placed in the operating record. The owner or 24

operator shall document in the operating record that reimbursement and Division 25

approval has been received. 26

(v) Each policy shall contain a provision allowing assignment of the policy to a 27

successor owner or operator. Such assignment may be conditional upon consent 28

of the insurer, provided that such consent is not unreasonably refused. 29

(vi) The insurance policy shall provide that the insurer may not cancel, terminate or 30

fail to renew the policy except for failure to pay the premium. The automatic 31

renewal of the policy shall, at a minimum, provide the insured with the option of 32

renewal at the face amount of the expiring policy. If there is a failure to pay the 33

premium, the insurer may cancel the policy by sending notice of cancellation by 34

certified mail to the owner and operator and to the Division 120 days in advance 35

of cancellation. If the insurer cancels the policy, the owner or operator shall 36

obtain alternate financial assurance as specified in this Rule. 37

15 of 79

(vii) For insurance policies providing coverage for post-closure care, commencing on 1

the date that liability to make payments pursuant to the policy accrues, the 2

insurer shall thereafter annually increase the face amount of the policy. Such 3

increase shall be equivalent to the face amount of the policy, less any payments 4

made, multiplied by an amount equivalent to 85 percent of the most recent 5

investment rate or of the equivalent coupon-issue yield announced by the U.S. 6

Treasury for 26-week Treasury securities. 7

(viii) The owner or operator may cancel the insurance policy only if alternate financial 8

assurance is substituted as specified in this Rule or if the owner or operator is no 9

longer required to demonstrate financial responsibility in accordance with the 10

requirements of Paragraph (b)(2), (c)(2) or (d)(2) of this Rule. 11

(E) Corporate Financial Test. 12

[Reserved] 13

(F) Local Government Financial Test. An owner or operator of a MSWLF which is a unit of 14

local government may satisfy the requirements of this Paragraph by demonstrating that it 15

meets the requirements of the local government financial test as specified in this Part. 16

Financial terms used in this Part are to be interpreted consistent with generally accepted 17

accounting principles. The test consists of a financial component, a public notice 18

component, and a record-keeping and reporting component. A unit of local government 19

shall satisfy each of the three components annually to pass the test. 20

(i) Financial Component. In order to satisfy the financial component of the test, a 21

unit of local government shall meet the criteria of either (I) or (II) of this 22

Subpart and in addition shall meet the conditions outlined in (III) of this 23

Subpart. 24

(I) A ratio of the current cost estimates for closure, post-closure, corrective 25

action, or the sum of the combination of such costs to be covered, and 26

any other environmental obligations assured by a financial test, to total 27

revenue [as stated on the Local Government Commission's Annual 28

Financial Information Report (AFIR) Part 2] less than or equal to 0.43; 29

a ratio of operating cash plus investments (as stated on the AFIR Part 7) 30

to total operating expenditures (as stated on the AFIR Part 4 Columns a 31

and b and Part 5 for municipalities or Part 5 excluding educational 32

capital outlays for counties) greater than or equal to 0.05; and a ratio of 33

annual debt service (as stated on the AFIR Part 4 Section I) to total 34

operating expenditures less than or equal to 0.20. 35

(II) A current bond rating of Baa or above as issued by Moody's, BBB or 36

above as issued by Standard & Poor's, BBB or above as issued by 37

Fitch's, or 75 or above as issued by the Municipal Council; a ratio of 38

16 of 79

the current cost estimates for closure, post-closure, corrective action, or 1

the sum of the combination of such costs to be covered, and any other 2

environmental

regulatory impact analysis 15a ncac 13b .0546, .1105 ... · “financial assurance” is defined as...

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