OAR 340-094-0145
Financial Assurance Mechanisms

(1)

The financial assurance mechanism shall restrict the use of the financial assurance so that the financial resources may be used only to guarantee that closure, post-closure or corrective action activities will be performed, or that the financial resources can be used only to finance closure, post-closure or corrective action activities.

(2)

The financial assurance mechanism shall provide that the Department or a party approved by the Department is the beneficiary of the financial assurance.

(3)

A permittee may use one financial assurance mechanism for closure, post-closure and corrective action activities, but the amount of funds assured for each activity must be specified.

(4)

A permittee may demonstrate financial assurance for closure, post-closure and corrective action by establishing more than one mechanism per facility, except that mechanisms guaranteeing performance rather than payment may not be combined with other instruments.

(5)

The financial assurance mechanism shall be worded as specified by the Department, unless a permittee uses an alternative financial assurance mechanism pursuant to subsection (6)(i) of this rule. The Department retains the authority to approve the wording of an alternative financial assurance mechanism.

(6)

Allowable Financial Assurance Mechanisms. A permittee shall provide only the following forms of financial assurance for closure and post-closure activities:

(a)

A trust fund established with 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 and meeting criteria in 40 CFR §258.74(a). The purpose of the trust fund is to receive and manage any funds that may be paid by the permittee and to disburse those funds only for closure, post-closure maintenance or corrective action activities which are authorized by the Department. The permittee shall notify the Department, in writing, before any expenditure of trust fund moneys is made, describing and justifying the activities for which the expenditure is to be made. If the Department does not respond to the trustee within 30 days after receiving such notification, the expenditure is deemed authorized and the trustee may make the requested reimbursements;

(b)

A surety bond guaranteeing payment into a standby closure or post-closure trust fund issued by a surety company listed as acceptable in Circular 570 of the U.S. Department of the Treasury. The standby closure or post-closure trust fund must be established by the permittee. The purpose of the standby trust fund is to receive any funds that may be paid by the permittee or surety company. The penal sum of the bond must be in an amount at least equal to the current closure or post-closure care cost estimate, as applicable. The bond must guarantee that the permittee will either fund the standby trust fund in an amount equal to the penal sum of the bond before the site stops receiving waste or within 15 days after an order to begin closure is issued by the Department or by a court of competent jurisdiction; or that the permittee will provide alternate financial assurance acceptable to the Department within 90 days after receipt of a notice of cancellation of the bond from the surety. The surety shall become liable on the bond obligation if the permittee fails to perform as guaranteed by the bond. The surety may not cancel the bond until at least 120 days after the notice of cancellation has been received by both the permittee and the Department. If the permittee has not provided alternate financial assurance acceptable to the Department within 90 days of the cancellation notice, the surety must pay the amount of the bond into the standby trust account;

(c)

A surety bond guaranteeing performance of closure, post-closure or corrective action activities issued by a surety company listed as acceptable in Circular 570 of the U.S. Department of the Treasury. A standby trust fund must also be established by the permittee. The purpose of the standby trust fund is to receive any funds that may be paid by the surety company. The bond must guarantee that the permittee will either perform final closure, post-closure maintenance or corrective action activities, as applicable, or provide alternate financial assurance acceptable to the Department within 90 days after receipt of a notice of cancellation of the bond from the surety. The surety shall become liable on the bond obligation if the permittee fails to perform as guaranteed by the bond. The surety may not cancel the bond until at least 120 days after the notice of cancellation has been received by both the permittee and the Department. If the permittee has not provided alternate financial assurance acceptable to the Department within 90 days of the cancellation notice, the surety must pay the amount of the bond into the standby trust account;

(d)

An irrevocable letter of credit issued by 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. A standby trust fund must also be established by the permittee. The purpose of the standby trust fund is to receive any funds deposited by the issuing institution resulting from a draw on the letter of credit. The letter of credit must be irrevocable and issued for a period of at least one year and shall be automatically extended for at least one year on each successive expiration date unless the issuing institution notifies both the permittee and the Department at least 120 days before the current expiration date. If the permittee fails to perform closure and post-closure activities according to the closure plan and permit requirements, or to perform the selected remedy described in the corrective action report, of if the permittee fails to provide alternate financial assurance acceptable to the Department within 90 days after notification that the letter of credit will not be extended, the Department may draw on the letter of credit;

(e)

A closure or post-closure insurance policy issued by an insurer who is licensed to transact the business of insurance or is eligible as an excess or surplus lines insurer in one or more states. The insurance policy must guarantee that funds will be available to complete final closure and post-closure maintenance of the site. The policy must also guarantee that the insurer will be responsible for paying out funds for reimbursement of closure and post-closure expenditures that are in accordance with the closure or post-closure plan or otherwise justified. The permittee shall notify the Department, in writing, before any expenditure of insurance policy moneys is made, describing and justifying the activities for which the expenditure is to be made. If the Department does not respond to the insurer within 30 days after receiving such notification, the expenditure is deemed authorized and the insurer may make the requested reimbursements. The policy must provide that the insurance is automatically renewable and that the insurer may not cancel, terminate or fail to renew the policy except for failure to pay the premium. If there is a failure to pay the premium, the insurer may not terminate the policy until at least 120 days after the notice of cancellation has been received by both the permittee and the Department. Termination of the policy may not occur and the policy must remain in full force and effect if: the Department determines that the land disposal site has been abandoned; or the Department has commenced a proceeding to modify the permit to require immediate closure; or closure has been ordered by the Department, Commission or a court of competent jurisdiction; or the permittee is named as debtor in a voluntary or involuntary proceeding under Title 11 (Bankruptcy), U.S. Code; or the premium due is paid. The permittee is required to maintain the policy in full force and effect until the Department consents to termination of the policy when alternative financial assurance is provided or when the permit is terminated;

(f)

Corporate guarantee. A private corporation meeting the financial test may provide a corporate guarantee that funds are available for closure, post-closure or corrective action activities, and that those activities will be completed according to the closure or post-closure plan, permit requirements or selected remedy described in the corrective action report, as applicable. A qualifying private corporation may guarantee its own obligations, the obligations of a corporate parent, sibling or subsidiary, and the obligations of a firm with which it has a substantial business relationship. A corporation guaranteeing the obligations of a firm with which it has a substantial business relationship must certify that it possesses such relationship and that it is issuing the guarantee as an act incident to that relationship, and must specify any compensation received for its issuance of such guarantee. To qualify, a private corporation must meet the criteria of either paragraph (A) or (B) of this subsection:

(A)

Financial Test. To pass the financial test, the permittee must have:
(i)
Two of the following three ratios: A ratio of total liabilities to tangible net worth less than 1.5; a ratio of the ([sum of net income plus depreciation, depletion, and amortization] minus $10 million) to total liabilities greater than 0.1; or a ratio of current assets to current liabilities greater than 1.5;
(ii)
Net working capital equal to at least four times and tangible net worth equal to at least six times the sum of the current cost estimates covered by the test;
(iii)
Tangible net worth of at least $10 million exclusive of the costs being guaranteed; and
(iv)
Assets in the United States amounting to at least the sum of the current closure, post-closure and corrective action cost estimates covered by the test, plus any other environmental obligations guaranteed by permittee.

(B)

Alternative Financial Test. To pass the alternative financial test, the permittee must have:
(i)
Tangible net worth of at least $10 million exclusive of the costs being guaranteed; and
(ii)
Two of the following three ratios:

(I)

Times Interest Earned ([earnings before interest and taxes] divided by interest) of 2.0 or higher;

(II)

Beaver’s Ratio of 0.2 or higher ([internally generated cash] divided by [total liabilities]). Internally generated cash is obtained from taxable income before net operating loss, plus credits for fuel tax and investment in regulated investment companies, plus depreciation plus amortization plus depletion, plus any income on the books not required to be reported for tax purposed if it is likely to be recurring, minus income tax expenses. Total liabilities includes all long- and short-term debt; or

(III)

Altman’s Z-Score of 2.9 or higher.

(C)

The permittee shall demonstrate that it passes the financial test at the time the financial assurance plan is filed and reconfirm that annually 90 days after the end of the corporation’s fiscal year by submitting the following items to the Department:
(i)
A letter signed by the permittee’s chief financial officer that:

(I)

Provides the information necessary to document that the permittee passes the financial test;

(II)

Guarantees that the funds are available to finance closure, post-closure or corrective action activities according to the closure or post-closure plan, permit requirements or selected remedy described in the corrective action report, as applicable;

(III)

Guarantees that the closure, post-closure or corrective action activities will be completed according to the closure or post-closure plan, permit requirements or selected remedy described in the corrective action report, as applicable;

(IV)

Guarantees that a substitute financial mechanism acceptable to the Department will be fully funded within 30 days after either service of a Final Order assessing a civil penalty from the Department for failure to adequately perform closure or post-closure activities according to the closure or post-closure plan and permit, or the selected remedy described in the corrective action report, as applicable, or service of a written notice from the Department that the permittee no longer meets the criteria of the financial test;

(V)

Guarantees that the permittee’s chief financial officer will notify the Department within 15 days any time that the permittee no longer meets the criteria of the financial test or is named as debtor is a voluntary or involuntary proceeding under Title 11 (Bankruptcy), U.S. Code; and

(VI)

Acknowledges that the corporate guarantee is a binding obligation on the corporation and that the chief financial officer has the authority to bind the corporation to the guarantee.
(ii)
A copy of the independent certified public accountant’s (CPA) report on examination of the permittee’s financial statements for the latest completed fiscal year;
(iii)
An agreed-upon procedures letter prepared in accordance with standards established by the American Institute of Certified Public Accountants from the permittee’s independent CPA in which the CPA either specifies that the figures used in determining that the corporation meets the requirements of the corporate financial test are the same as the figures in the corporation’s independently audited year-end financial statements for the latest fiscal year or explains any deviation therein to the satisfaction of the Department;
(iv)
A list of any facilities in Oregon or elsewhere for which the permittee is using a similar financial means test to demonstrate financial assurance.

(D)

The Department may, based on a reasonable belief that the permittee no longer meets the criteria of the financial test, require reports of the financial condition at any time from the permittee in addition to the annual report. If the Department finds, on the basis of such reports or other information, that the permittee no longer meets the criteria of the financial test, the permittee shall fully fund a substitute financial assurance mechanism acceptable to the Department within 30 days after notification by the Department.

(g)

Local Government Financial Test. A local government permittee that satisfies the requirements of 40 CFR, §258.74(f)(1)–(3) may demonstrate financial assurance up to the amount specified in 40 CFR, §258.74(f)(4): The provisions of 40 CFR, §258.74(f)(1)(i) and 40 CFR, §258.74(f)(1)(i)(A) are deleted.

(h)

Local Government Guarantee. A permittee that satisfies the requirements of 40 CFR, §258.74(h)(1) and (2) may demonstrate financial assurance for closure, post-closure, and corrective action by obtaining a written guarantee provided by a local government: The local government guarantee mechanism is allowed only to the extent permitted by the Oregon Constitution.

(i)

Alternative Financial Assurance. Alternative forms of financial assurance, such as state-approved trust fund or a pledge of revenue, may be proposed by the permittee, subject to the review and approval of the Director. The applicant must be able to prove to the satisfaction of the Department that the level of security is equivalent to subsections (a)–(h) of this section, that the criteria of OAR 340-094-0140 (Financial Assurance Criteria)(4)(e) and sections (1)–(4) of this rule and the performance standards in 40 CFR, §258.74(1) are met, except that the pay-in period of a state-approved trust fund for closure or post-closure care may be over the remaining life of the municipal solid waste landfill unit. Submittal of an alternative financial assurance mechanism to the Department for review and approval shall include third-party certification as specified in OAR 340-094-0140 (Financial Assurance Criteria)(7).

(7)

Allowable Financial Assurance Mechanism for Corrective Action. A permittee shall provide one of the following forms of financial assurance for corrective action: a trust fund, a surety bond guaranteeing performance of corrective action, an irrevocable letter of credit, a corporate guarantee, local government financial test, local government guarantee, or alternative forms of financial assurance, pursuant to subsections (6)(a), (c), (d), (f), (g), (h), or (i) of this rule, respectively. Unless specifically required by a mutual agreement and order pursuant to ORS 465.325 (Agreement to perform removal or remedial action), the surcharge provisions of ORS 459.311 (Charge for remedial action or removal) shall not be used to meet the financial assurance requirements of this rule for financial assurance for corrective action.
NOTE: Formats containing the standard wording for financial assurance mechanisms as required by OAR 340-094-0145 (Financial Assurance Mechanisms)(4) may be obtained from the Department.

Source: Rule 340-094-0145 — Financial Assurance Mechanisms, .

Last Updated

Jun. 8, 2021

Rule 340-094-0145’s source at