9VAC25-650 Closure Plans and Demonstration of Financial Capability

REGULATIONS

Vol. 31 Iss. 21 - June 15, 2015

TITLE 9. ENVIRONMENT

STATE WATER CONTROL BOARD

Chapter 650

Fast-Track Regulation

Title of Regulation: 9VAC25-650. Closure Plans and Demonstration of Financial Capability (amending 9VAC25-650-10, 9VAC25-650-30, 9VAC25-650-50, 9VAC25-650-60, 9VAC25-650-100, 9VAC25-650-110, 9VAC25-650-120, 9VAC25-650-170; adding 9VAC25-650-124, 9VAC25-650-127; repealing 9VAC25-650-190).

Statutory Authority: §§ 62.1-44.15 and 62.1-44.18:3 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: July 15, 2015.

Effective Date: July 30, 2015.

Agency Contact: Melissa Porterfield, Department of Environmental Quality, 629 East Main Street, P.O. Box 1105, Richmond, VA 23218, telephone [phone], FAX [phone], or email [e-mail].

Basis: The State Water Control Board is directed by § 62.1-44.18:3 of the Code of Virginia to adopt regulations that require privately owned sewerage systems and sewerage treatment works that discharge more than 1,000 gallons per day and less than 40,000 gallons per day to develop closure plans and provide financial assurance for closure of the sewerage systems or sewage treatment works. The State Water Control Board previously adopted this regulation in 2001.

Purpose: The purpose of the regulation is to ensure that owners or operators of privately owned sewerage systems and sewerage treatment works that discharge between 1,000 gallons and 40,000 gallons per day are capable of continuing to treat sewage and are capable of properly closing facilities. These smaller sewage systems and sewage treatment works are private companies providing a service to paying customers. The financial stability of the business to continue to properly operate a sewage system or sewage treatment works directly relates to the business's ability to properly treat sewage before it is discharged into state waters.

Virginia law requires plans to be developed by the owner of these smaller sewage systems or sewage treatment works to abate, control, prevent, remove, or contain any substantial or imminent threat to public health or the environment that is reasonably likely to occur if such facility ceases operations and to demonstrate financial capability to implement the plan. Virginia law specifies that a trust fund, bond, corporate guarantee, or other mechanism deemed appropriate by the board may be used to demonstrate financial assurance.

When the regulation was originally adopted, smaller sewage systems or sewage treatment works were owned by smaller entities that had limited financial resources. For that reason, the corporate guarantee specified in the statute was not included in the regulation as a financial assurance option. Over the years, some of the smaller sewage systems or sewage treatment works have been purchased by or have become operated by larger companies that have additional financial resources available to them. The larger companies have more financial resources and would potentially be able to demonstrate financial assurance through the use of a corporate financial test and corporate guarantee. Many other agency regulations allow the use of the corporate financial test and corporate guarantee to demonstrate financial assurance and the regulation is being amended to include this option for those entities that qualify to use the financial test and corporate guarantee.

The regulation is being updated to be consistent with state law and other water regulations. Definitions in the regulation are being amended to be consistent with terms defined in other water regulations. Citations within the regulation are also being updated with current citations.

Rationale for Using Fast-Track Process: This regulatory amendment is anticipated to be noncontroversial since it adds additional financial assurance mechanisms to the regulation, thereby providing the regulated community with additional options for meeting the requirement to provide financial assurance. The corporate financial test and the corporate guarantee are financial assurance mechanisms that are used in other agency regulations to demonstrate financial assurance; therefore, it is believed that the addition of these additional mechanisms will be noncontroversial.

The other changes being made to the regulation will make the regulation consistent with other regulations, either through making the defined terms consistent with other water regulations or by updating outdated citations with current regulatory citations.

Substance: The regulation is being amended to include the corporate financial test and the corporate guarantee. The amendment includes the addition of new sections with details concerning the requirements of the corporate financial test and the corporate guarantee. Definitions pertaining to the corporate financial test and the corporate guarantee have also been added to the regulation.

Issues: The primary advantage to the regulated community is the additional methods the regulated community will have to choose from concerning how they demonstrate financial assurance. There is no disadvantage to the regulated community since the financial mechanisms that are currently in the regulation to demonstrate financial assurance will continue to be available to demonstrate financial assurance.

The Commonwealth and the agency will not receive any advantages from the regulatory changes. The agency will be required to periodically monitor the financial stability of the operators using the corporate financial test and the corporate guarantee. The agency is already monitoring the financial stability of companies using the corporate guarantee and corporate guarantee when this mechanism is used in other regulatory programs.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The State Water Control Board (Board) proposes to: 1) clarify that the corporate financial test and the corporate guarantee may be used as mechanisms to demonstrate financial assurance, 2) add detail on requirements for the corporate financial test and the corporate guarantee, and 3) add definitions and clarifying language that do not substantially change requirements.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. The purpose of this regulation is to ensure that owners or operators of privately owned sewerage systems and sewerage treatment works that discharge between 1,000 gallons and 40,000 gallons per day are capable of continuing to treat sewage and are capable of properly closing facilities. These smaller sewage systems and sewage treatment works are private companies providing a service to paying customers. The financial stability of the business to continue to properly operate a sewage system or sewage treatment works directly relates to the businesss ability to properly treat sewage before it is discharged into state waters.

Code of Virginia § 62.1-44.18:3 requires plans to be developed by the owner of these smaller sewage systems or sewage treatment works to abate, control, prevent, remove, or contain any substantial or imminent threat to public health or the environment that is reasonably likely to occur if such facility ceases operations and to demonstrate their financial capability to implement the plan. The statute specifies that a trust fund, bond, corporate guarantee, or other mechanism deemed appropriate by the board may be used to demonstrate financial assurance.

When the regulation was originally adopted, smaller sewage systems or sewage treatment works were owned by smaller entities that had limited financial resources. For that reason, the corporate guarantee specified in the statute was not included in the regulation as a financial assurance option. Over the years, some of the smaller sewage systems or sewage treatment works have been purchased by or have become operated by larger companies that have additional financial resources available to them. The larger companies have more financial resources and would potentially be able to demonstrate financial assurance through the use of a corporate financial test or corporate guarantee. For some firms this may be a lower cost manner of demonstrating financial assurance.

Clarifying in this regulation that the use of a corporate financial test or a corporate guarantee may be used to demonstrate financial assurance may result in some firms newly choosing one of these methods, particularly if it is less costly. This clarification introduces no new cost. Thus the proposed amendments produce a net benefit.

Businesses and Entities Affected. This regulation affects privately owned sewerage systems and sewerage treatment works that discharge more than 1,000 gallons per day and less than 40,000 gallons per day. The Department of Environmental Quality estimates that there are 40 such entities in the Commonwealth. Due to the small capacity of the sewage systems and sewage treatment works, it is likely that most businesses regulated by this regulation are small businesses.

Localities Particularly Affected. The proposed amendments do not disproportionately affect particular localities.

Projected Impact on Employment. The proposed amendments will not significantly affect employment.

Effects on the Use and Value of Private Property. Clarifying that the use of a corporate financial test or a corporate guarantee may be used to demonstrate financial assurance may result in some firms newly choosing one of these methods. This may result in cost savings and consequently a moderate increase in value for some privately owned sewerage systems and sewerage treatment works.

Small Businesses: Costs and Other Effects. Clarifying that the use of a corporate financial test or a corporate guarantee may be used to demonstrate financial assurance may result in some small firms newly choosing one of these methods. This may result in cost savings.

Small Businesses: Alternative Method that Minimizes Adverse Impact. The proposed amendments will not create an adverse impact for small businesses.

Real Estate Development Costs. The proposed amendments will not significantly affect real estate development costs.

Legal Mandate. General: The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Code of Virginia and Executive Order Number 17 (2014). Section 2.2-4007.04 requires that such economic impact analyses determine the public benefits and costs of the proposed amendments. Further the report should include but not be limited to:

• the projected number of businesses or other entities to whom the proposed regulatory action would apply,

• the identity of any localities and types of businesses or other entities particularly affected,

• the projected number of persons and employment positions to be affected,

• the projected costs to affected businesses or entities to implement or comply with the regulation, and

• the impact on the use and value of private property.

Small Businesses: If the proposed regulatory action will have an adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include:

• an identification and estimate of the number of small businesses subject to the proposed regulation,

• the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the proposed regulation, including the type of professional skills necessary for preparing required reports and other documents,

• a statement of the probable effect of the proposed regulation on affected small businesses, and

• a description of any less intrusive or less costly alternative methods of achieving the purpose of the proposed regulation.

Additionally, pursuant to § 2.2-4007.1, if there is a finding that a proposed regulation may have an adverse impact on small business, the Joint Commission on Administrative Rules is notified at the time the proposed regulation is submitted to the Virginia Register of Regulations for publication. This analysis shall represent DPB's best estimate for the purposes of public review and comment on the proposed regulation.

Agency's Response to Economic Impact Analysis: The Department of Environmental Quality has reviewed the economic impact analysis prepared by the Department of Planning and Budget and has no comment.

Summary:

The amendments include (i) adding the corporate financial test and the corporate guarantee as mechanisms to demonstrate financial assurance, (ii) updating regulation text for consistency with state law, and (iii) updating definitions and citations.

Part I
Definitions

9VAC25-650-10. Definitions.

The following words and terms when used in this regulation shall have the following meanings unless the context clearly indicates otherwise:

"Active life" means the length of time a facility discharges to state waters or is subject to regulation under the Virginia Pollution Pollutant Discharge Elimination System (VPDES) Permit Regulation (9VAC25-31).

"Anniversary date" means the date of issuance of a financial mechanism.

"Assets" means all existing and all probable future economic benefits obtained or controlled by a particular entity.

"Board" means the State Water Control Board.

"Ceases operations" means to cease conducting the normal operation of a facility under circumstances in which it is reasonable to expect that such operation will not be resumed by the owner at the facility. The term shall not include the sale or transfer of a facility in the ordinary course of business or a permit transfer in accordance with board regulations. Ceases operations shall include, but not be limited to, the following:

1. Bankruptcy or insolvency of the owner or operator or suspension or revocation of a charter or license to operate the facility or to furnish sewer services;

2. Failure to operate and maintain a facility in accordance with the Operations and Maintenance Manual for the facility, such that a substantial or imminent threat to public health or the environment is created;

3. Failure to comply with the requirements of the VPDES permit for the facility, such that a substantial or imminent threat to public health or the environment is created;

4. Notification of termination of service by a utility providing electricity or other resource essential to the normal operation of the facility.

"Closure plan" means a plan to abate, control, prevent, remove, or contain any substantial or imminent threat to public health or the environment that is reasonably likely to occur if a facility ceases operations.

"Current annual inflation factor" means the annual inflation factor derived from the most recent implicit price deflator for gross national product published by the U.S. Department of Commerce in its Survey of Current Business.

"Current closure cost estimate" means the most recent of the estimates prepared in accordance with the requirements of this chapter.

"Current dollars" means the figure represented by the total of the cost estimate multiplied by the current annual inflation factor.

"CWA" means the Clean Water Act (33 USC § 1251 et seq.) (formerly referred to as the Federal Water Pollution Control Act or Federal Water Pollution Control Act Amendments of 1972) Public Law 92-500, as amended by Public Law 95-217, Public Law 95-576, Public Law 96-483, and Public Law 97-117, 33 USC § 1251 et seq. or any subsequent revisions thereto.

"Department" means the Virginia Department of Environmental Quality.

"Director" means the Director of the Department of Environmental Quality, or an authorized representative.

"Discharge" when used without qualification means the discharge of a pollutant.

"Facility" or "activity" means any VPDES point source or treatment works treating domestic sewage or any other facility or activity (including land or appurtenances thereto) that is subject to regulation under the VPDES program.

"Facility closure plan" means a facility closure plan prepared in accordance with 9VAC5-585-140 9VAC25-790-120 E 3.

"Local government" means a municipality, county, city, town, authority, commission, school board, political subdivision of a state, or other special purpose local government which provides essential services.

"Owner or operator" means the owner or operator of any facility or activity subject to regulation under the VPDES program.

"Parent corporation" means a corporation that directly owns at least 50% of the voting stock of the corporation that is the facility owner or operator; the latter corporation is deemed a "subsidiary" of the parent corporation.

"Permit" means an authorization, certificate, license, or equivalent control document issued by the board to implement the requirements of this chapter. For the purposes of this chapter, permit includes coverage issued under a VPDES general permit. Permit does not include any permit which has not yet been the subject of final board agency action, such as a draft permit or proposed permit.

"Person" means an individual, corporation, partnership, association, a governmental body, a municipal corporation, or any other legal entity.

"Point source" means any discernible, defined and discrete conveyance, including, but not limited to, any pipe, ditch, channel, tunnel, conduit, well, discrete fissure, container, rolling stock, concentrated animal feeding operation, landfill leachate collection system, vessel or other floating craft, from which pollutants are or may be discharged. This term does not include return flows from irrigated agricultural or agricultural storm water stormwater run off.

"Pollutant" means dredged spoil, solid waste, incinerator residue, filter backwash, sewage, garbage, sewage sludge, munitions, chemical wastes, biological materials, radioactive materials (except those regulated under the Atomic Energy Act of 1954, as amended (42 USC § 2011 et seq.)), heat, wrecked or discarded equipment, rock, sand, cellar dirt, and industrial, municipal, and agricultural waste discharged into water. It does not mean:

1. Sewage from vessels; or

2. Water, gas, or other material which is injected into a well to facilitate production of oil or gas, or water derived in association with oil and gas production and disposed of in a well if the well used either to facilitate production or for disposal purposes is approved by the board, and if the board determines that the injection or disposal will not result in the degradation of ground or surface water resources.

"Pollution" means such alteration of the physical, chemical or biological properties of any state waters as will, or is likely to, create a nuisance or render such waters (i) harmful or detrimental or injurious to the public health, safety or welfare, or to the health of animals, fish or aquatic life; (ii) unsuitable with reasonable treatment for use as present or possible future sources of public water supply; or (iii) unsuitable for recreational, commercial, industrial, agricultural, or for other reasonable uses; provided that: (i) an alteration of the physical, chemical, or biological property of state waters, or a discharge or a deposit of sewage, industrial wastes or other wastes to state waters by any owner which by itself is not sufficient to cause pollution, but which, in combination with such alteration of, or discharge or deposit to state waters by other owners, is sufficient to cause pollution; (ii) the discharge of untreated sewage by any owner into state waters; and (iii) contributing to the contravention of standards of water quality duly established by the board, are "pollution" for the terms and purposes of this chapter.

"Private residence" means any building, buildings, or part of a building owned by a private entity which serves as a permanent residence where sewage is generated. Private residences include, but are not limited to, single family homes, town houses, duplexes, condominiums, mobile homes, and apartments. Private residences do not include hotels, motels, seasonal camps, and industrial facilities that do not also serve as residences.

"Privately owned sewerage system" means any device or system that is:

1. Used in the treatment (including recycling and reclamation) of sewage. This definition includes sewers, pipes, pump stations or other conveyances only if they convey wastewater to a privately owned sewerage system; and

2. Not owned by the United States, a state, or a local government.

"Publicly owned treatment works (POTW)" or "POTW" means any device or system used in the treatment (including recycling and reclamation) of sewage a treatment works as defined by § 212 of the CWA, which is owned by a state or municipality (as defined by § 502(4) of the CWA). This definition includes any devices and systems used in the storage, treatment, recycling, and reclamation of municipal sewage or industrial wastes of a liquid nature. It also includes sewers, pipes, or other conveyances only if they convey wastewater to a POTW providing treatment treatment plant. The term also means the municipality as defined in § 502(4) of the CWA, which has jurisdiction over the indirect discharges to and the discharges from such a treatment works.

"Sewage" means the water-carried human wastes from residences, buildings, industrial establishments, or other places together with such industrial wastes, underground, surface, storm, or other water, as may be present.

"Special order" means an order of the board issued under the provisions of § 62.1-44.15:1.1 of the Code of Virginia, which require that an owner file with the board a plan to abate, control, prevent, remove, or contain a substantial and imminent threat to public health or the environment that is likely to occur if the facility ceases operations.

"Signature" means the name of a person written with his own hand.

"State waters" means all water, on the surface and under the ground, wholly, or partially within, or bordering the Commonwealth, or within its jurisdiction, including wetlands.

"Substantial business relationship" means the extent of a business relationship necessary under applicable Virginia law to make a guarantee contract incident to that relationship valid and enforceable. A "substantial business relationship" shall arise from a pattern of recent and ongoing business transactions, in addition to the guarantee itself, such that a currently existing business relationship between the guarantor and the owner or operator is demonstrated to the satisfaction of the director.

"Tangible net worth" means the tangible assets that remain after deducting liabilities; such assets would not include intangibles such as goodwill and rights to patents or royalties.

"Treatment works" means any devices and systems used in for the storage, treatment, recycling, or reclamation of sewage or combinations of sewage and industrial wastes, including pumping, power, and other equipment, and their appurtenances, and any works, including land that will be an integral part of the treatment process, or is used for an integral part of the treatment process, or is used for ultimate disposal of residues resulting from such treatment. liquid industrial waste, or other waste or necessary to recycle or reuse water, including intercepting sewers, outfall sewers, sewage collection systems, individual systems, pumping, power and other equipment and their appurtenances; extensions, improvements, remodeling, additions, or alterations thereof; and any works, including land that will be an integral part of the treatment process or is used for ultimate disposal of residues resulting from such treatment; or any other method or system used for preventing, abating, reducing, storing, treating, separating, or disposing of municipal waste or industrial waste, including waste in combined sewer water and sanitary sewer systems.

"Virginia Pollution Pollutant Discharge Elimination System (VPDES) Permit" means a document issued by the board pursuant to 9VAC25-31-10 et seq., authorizing, under prescribed conditions, the potential or actual discharge of pollutants from a point source to surface waters and the use of biosolids or disposal of sewage sludge. Under the approved state program, a VPDES permit is equivalent to an NPDES permit.

9VAC25-650-30. Applicability.

A. This regulation applies to all persons who own or operate permitted or unpermitted privately owned sewerage systems subject to the Virginia Pollution Pollutant Discharge Elimination System (VPDES) Permit Regulation (9VAC25-31) that treat sewage generated by private residences and discharge more than 1,000 gallons per day and less than 40,000 gallons per day to state waters.

B. Owners or operators of privately owned sewerage systems must demonstrate annually financial assurance in accordance with the requirements of this chapter.

Part III
Closure Plans and Financial Assurance Criteria

9VAC25-650-50. General purpose and scope.

A. Any owner or operator of a privately owned sewerage system subject to this regulation shall file with the board a plan to abate, control, prevent, remove, or contain any substantial imminent threat to public health or the environment that is reasonably likely to occur if such facility ceases operations. Such plan shall be referred to as a closure plan. The closure plan shall include a detailed written estimate of the cost to implement the plan. The owner or operator shall file a closure plan and associated cost estimate for the facility with the board concurrently with the owner's or operator's first VPDES permit application for issuance or reissuance for the facility submitted subsequent to December 5, 2001. Closure plans and cost estimates filed with the board shall be reviewed by the owner or operator and updated as necessary at the end of each VPDES permit term. Revised and updated closure plans shall be filed with the board concurrently with each subsequent VPDES permit application.

B. Closure plans and cost estimates shall be subject to review by the board. The owner or operator shall be notified in writing within 60 days of receipt of the closure plan and cost estimate of the board's decision to approve or disapprove the proposed closure plan and cost estimate. If the board disapproves the closure plan or cost estimate, the board shall notify the owner or operator as to what measures, if any, the owner or operator may take to secure approval. If the owner or operator submits a closure plan that is not approvable by the board, the board may, at its sole discretion, promulgate a closure plan and cost estimate for the facility, subject to appeal by the owner or operator only as to content under the Virginia Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia).

C. Closure plans shall be implemented when the board has determined, at its sole discretion, that the facility has ceased operations. The owner or operator of a privately owned facility shall notify the board within 24 hours of the facility ceasing operations as defined in this chapter.

D. In order to assure that the costs associated with protecting public health and the environment are to be recovered from the owner or operator in the event that a facility subject to this regulation ceases operation, the owner or operator of such facility shall submit to the board one or a combination of the financial assurance mechanisms described in this chapter. Financial assurance mechanisms shall be in amounts calculated as the inflation-adjusted cost estimate using the procedures set forth in this chapter.

E. In the case of new facilities or increased discharges from existing facilities, the selected financial assurance mechanism or mechanisms shall be filed with the board no less than 90 days prior to the discharge or increased discharge to state waters. In the case of existing facilities with a valid VPDES permit on December 5, 2001, the financial assurance mechanism or mechanisms shall be filed with the board within 30 days of the date of board approval of the closure plan and cost estimate.

F. The board may disapprove the proposed evidence of financial assurance if the mechanism or mechanisms submitted do not adequately assure that funds will be available for implementation of the closure plan. The owner or operator shall be notified in writing of the board's decision to approve or disapprove the proposed mechanism. If the board disapproves the financial assurance mechanism, the board shall notify the owner or operator as to what measures, if any, the owner or operator may take to secure approval.

G. Closure plans, cost estimates, and financial assurance mechanisms shall remain in place for the active life of the facility and for the time required to complete the activities specified in the closure plan.

9VAC25-650-60. Closure plans.

A. The owner or operator of a privately owned sewerage system subject to this chapter shall provide a closure plan which abates, controls, prevents, removes, or contains any substantial threat to public health or the environment that is reasonably likely to occur if the facility ceases operations.

B. Closure plans shall be submitted to the board by the owner or operator concurrently with its application for a VPDES permit for the facility or as otherwise required by special order. Existing closure plans filed with the board shall be reviewed by the owner or operator, modified as necessary, and resubmitted to the board concurrently with an owner's or operator's application for a reissued VPDES permit. The submittal shall include a written summary of the results of the review and any modifications to the closure plan.

C. Closure plans shall consist of one or more of the following:

1. The cessation of the discharge of pollutants to state waters, followed by closure of the facility in accordance with the facility closure plan prepared in accordance with 12VAC5-585-140 9VAC25-790-120 E 3 and approved by the Virginia Department of Health department. Where no Virginia Department of Health approved facility closure plan exists, one shall be prepared in accordance with the requirements of 12VAC5-585-140 and submitted as part of the closure plan.

2. Connection to an alternative treatment works, such as a POTW, including rerouting of all influent flow, followed by closure of the VPDES permitted facility in accordance with the facility closure plan prepared in accordance with 12VAC5-585-140 9VAC25-790-120 E 3 and approved by the Virginia Department of Health department. Where no Virginia Department of Health approved facility closure plan exists, one shall be prepared in accordance with the requirements of 12VAC5-585-140 and submitted as part of the closure plan.

3. Transfer of the facility to a local government, provided that written agreement of the receiving local government to obtain a VPDES permit and operate and maintain the facility in accordance with the VPDES permit and all other applicable laws and regulations, is obtained and included as part of the closure plan.

4. Contract operation of the facility for a period of two years after initial implementation of the closure plan, regardless of the date of initial implementation. Contract operation shall be by a named private company or other entity licensed to operate wastewater treatment facilities in the Commonwealth of Virginia and licensed to operate the specific facility to which the closure plan applies. A closure plan consisting of or including contract operation shall include a written, signed contract executed by the contract operator, contingent only upon approval of the closure plan by the board. The contract shall specify that the contract operator shall operate the facility for the term of the contract in accordance with the terms and conditions of the owner's or operator's VPDES permit for the facility. The contract shall also specify that the contract operator shall assume, without exception, all responsibilities and liabilities associated with the facility's discharge to state waters and with the owner's or operator's VPDES permit in the event the closure plan is implemented. The owner or operator of the facility and the owner of the private company or entity contracted to operate the facility under the closure plan shall not be the same person.

5. An alternative plan which will abate, control, prevent, remove, or contain any substantial or imminent threat to public health or the environment that is reasonably likely to occur if the facility ceases operations.

D. Closure plans shall designate and authorize a named third party who, upon notification by the board, will implement the closure plan. The closure plan shall include written agreement by the named third party, bearing that person's signature, to implement the closure plan in accordance with the requirements of the closure plan for the duration of the VPDES permit term. Where the closure plan includes contract operation of the facility, the named third party may be the contract operator.

E. Closure plans may not consist of the transfer or sale of the facility to another private entity which also would be subject to this regulation.

9VAC25-650-100. Surety Bond bond.

A. An owner or operator may satisfy the requirements of this chapter by obtaining a surety bond that conforms to the requirements of this section and by submitting an originally signed duplicate of the bond to the board. The surety company issuing the bond shall be licensed to operate as a surety in the Commonwealth of Virginia and be among those listed as acceptable sureties on federal bonds in the latest Circular 570 of the U.S. Department of the Treasury.

B. The surety bond shall be on surety company letterhead and worded as follows, except that instructions in parentheses shall be replaced with the relevant information and the parentheses deleted.

PERFORMANCE BOND

Date bond executed: _____________

Period of coverage: _____________

Effective date: _____________

Principal: (legal name and address of owner or operator) _____________

Type of organization: (insert "individual" "joint venture," "partnership," "corporation," or appropriate identification of type of organization) _____________

State of incorporation (if applicable): _____________

Surety: (name(s) and business address) _____________

Scope of Coverage:

(List the name of and the address where the private sewage treatment facility assured by this mechanism is located. List the coverage guaranteed by the bond: operation, maintenance, and closure of the privately owned sewage treatment facility)

Penal sum of bond: $ _____________

Surety's bond number: _____________

Know All Persons by These Presents, that we, the Principal and Surety(ies), hereto are firmly bound to the Department of Environmental Quality, Commonwealth of Virginia, ("DEQ") in the above penal sum for the payment of which we bind ourselves, our heirs, executors, administrators, successors, and assigns jointly and severally; provided that, where the Surety(ies) are corporations acting as co-sureties, we, the Sureties, bind ourselves in such sums jointly and severally only for the purpose of allowing a joint action or actions against any or all of us, and for all other purposes each Surety binds itself, jointly and severally with the Principal, for the payment of such sums only as is set forth opposite the name of such Surety, but if no limit of liability is indicated, the limit of liability shall be the full amount of the penal sum.

Whereas said Principal is required under § 62.1-44.18:3 of the State Water Control Law of the Code of Virginia to provide financial assurance to implement a plan to abate, control, prevent, remove, or contain any substantial or imminent threat to public health or the environment that is reasonably likely to occur if such facility ceases operations (closure plan);

Now, therefore, the conditions of the obligation are such that if the Principal shall faithfully implement the closure plan in accordance with the Director of the DEQ's instructions to implement the plan for the facility described above, or if the Principal shall provide alternate financial assurance, acceptable to DEQ and obtain the Director's written approval of such assurance, within 60 days after the date the notice of cancellation is received by the Director of the DEQ from the Surety(ies), then this obligation shall be null and void; otherwise it is to remain in full force and effect.

The Surety(ies) shall become liable on this bond when the Principal has failed to fulfill the conditions described above. Upon notification by the Director of the DEQ that the owner or operator has failed to fulfill the conditions above or that the DEQ has determined that the facility has ceased operations, the Surety(ies) shall either implement the closure plan or forfeit the full amount of the penal sum as directed by the Director of the DEQ under 9VAC25-650-140.

The liability of the Surety(ies) shall not be discharged by any payment or succession of payments hereunder, unless and until such payment or payments shall amount in the penal sum shown on the face of the bond, but in no event shall the obligation of the Surety(ies) hereunder exceed the amount of said penal sum.

The Surety(ies) may cancel the bond by sending notice of cancellation by certified mail to the Principal and to the Director of the DEQ, Commonwealth of Virginia, 629 East Main Street, Richmond, Virginia 23219, provided, however, that cancellation shall not occur (1) during the 120 days beginning on the date of receipt of the notice of cancellation by the Principal and Director of the DEQ as shown on the signed return receipt; or (2) while a compliance procedure is pending.

In Witness Thereof, the Principal and Surety(ies) have executed this Bond and have affixed their seals on the date set forth above.

The persons whose signatures appear below hereby certify that they are authorized to execute this surety bond on behalf of the Principal and Surety(ies) and that the wording of this surety bond is identical to the wording specified in 9VAC25-650-100 B as such regulations were constituted on the date this bond was executed.

PRINCIPAL

(Signature(s))

(Name(s))

(Title(s))

(Corporate seal)

CORPORATE SURETY(IES)

(Name and address)

State of Incorporation:

Liability limit: $ _______________

(Signature(s))

(Name(s) and title(s))

(Corporate seal)

(For every co-surety, provide signature(s), corporate seal, and other information in the same manner as for Surety above.)

Bond premium: $ ______________

C. Under the terms of the bond, the surety will become liable on the bond obligation when the owner or operator fails to perform as guaranteed by the bond.

D. The bond shall guarantee that the owner or operator or any other authorized person will:

1. Implement the closure plan in accordance with the approved closure plan and other requirements in any permit for the facility;

2. Implement the closure plan following an order to do so issued by the board or by a court.

E. The surety bond shall guarantee that the owner or operator shall provide alternate financial assurance as specified in this article part within 60 days after receipt by the board of a notice of cancellation of the bond from the surety.

F. If the approved cost estimate increases to an amount greater than the amount of the penal sum of the bond, the owner or operator shall, within 60 days after the increase, cause the penal sum of the bond to be increased to an amount at least equal to the new estimate or obtain other financial assurance, as specified in this article part to cover the increase. Whenever the cost estimate decreases, the penal sum may be reduced to the amount of the cost estimate following written approval by the board. Notice of an increase or decrease in the penal sum shall be sent to the board by certified mail within 60 days after the change.

G. The bond shall remain in force for its term unless the surety sends written notice of cancellation by certified mail to the owner or operator and to the board. Cancellation cannot occur, however:

1. During the 120 days beginning on the date of receipt of the notice of cancellation by the board as shown on the signed return receipt; or

2. While an enforcement procedure is pending.

H. The surety shall provide written notification to the board by certified mail no less than 120 days prior to the expiration date of the bond, that the bond will expire and the date the bond will expire.

I. In regard to implementation of a closure plan either by the owner or operator, by an authorized third party, or by the surety, proper implementation of a closure plan shall be deemed to have occurred when the board determines that the closure plan has been completed. Such implementation shall be deemed to have been completed when the provisions of the facility's approved closure plan have been executed and the provisions of any other permit requirements or enforcement orders relative to the closure plan have been complied with.

9VAC25-650-110. Letter of Credit credit.

A. An owner or operator may satisfy the requirements of this chapter by obtaining an irrevocable standby letter of credit that conforms to the requirements of this section and by submitting an originally signed duplicate of the letter of credit to the board. The issuing institution shall be an entity that has the authority to issue letters of credit in the Commonwealth of Virginia and whose letter-of-credit operations are regulated and examined by a federal agency or the State Corporation Commission.

B. The letter of credit shall be on financial institution letterhead and worded as follows, except that instructions in parentheses are to be replaced with the relevant information and the parentheses deleted.

IRREVOCABLE STANDBY LETTER OF CREDIT

(Name and address of issuing institution)

Beneficiary:

Director

Department of Environmental Quality (DEQ)

P.O.Box 1105

Richmond, Virginia 23218

629 E. Main Street

Richmond, Virginia 23218 23219

Dear Sir or Madam: We hereby establish our Irrevocable Standby Letter of Credit No.________ in your favor, at the request and for the account of (owner or operator name) of (address) up to the aggregate amount of (in words) U.S. dollars, ($(insert dollar amount)), available upon presentation of

(1) your sight draft, bearing reference to this letter of credit, No._______ and

(2) your signed statement reading as follows:

"I certify that the amount of the draft is payable pursuant to regulations issued under authority of § 62.1-44.18:3 of the Code of Virginia."

This letter of credit may be drawn on to implement the closure plan for the facility identified below in the amount of (in words) ($(insert dollar amount)). (Name of facility and address of the facility assured by this mechanism, and number of hookups served by the system.)

This letter of credit is effective as of (date) and shall expire on (date), but such expiration date shall be automatically extended for a period of (at least the length of the original term) on (expiration date) and on each successive expiration date, unless, at least 120 days before the current expiration date, we notify the Director of the DEQ and the owner or operator by certified mail that we have decided not to extend this letter of credit beyond the current expiration date. In the event that the owner or operator is so notified, any unused portion of the credit shall be available upon presentation of your sight draft for 120 days after the date of receipt by the Director of the DEQ and the owner or operator, as shown on the signed return receipt.

Whenever this letter of credit is drawn on under and in compliance with the terms of this credit, we shall duly honor such draft upon presentation to us, and we shall submit the amount of the draft directly to DEQ in accordance with your instructions.

We certify that the wording of this letter of credit is identical to the wording required in 9VAC25-650-110 B as such regulations were constituted on the date shown immediately below.

Attest:

(Signature(s) and title(s) of official(s) of issuing institution)

(Date)

This credit is subject to (insert "the most recent edition of the Uniform Customs and Practice for Documentary Credits, published by the International Chamber of Commerce," or "the Uniform Commercial Code").

C. The letter of credit shall be irrevocable and issued for a period of at least one year in an amount at least equal to the current cost estimate for implementation of the closure plan. The letter of credit shall provide that the expiration date will be automatically extended for a period of at least one year. If the issuing institution decides not to extend the letter of credit beyond the current expiration date it shall, at least 120 days before the expiration date, notify both the owner or operator and the board by certified mail of that decision. The 120-day period will begin on the date of receipt by the board as shown on the signed return receipt. Expiration cannot occur, however, while an enforcement procedure is pending. If the letter of credit is canceled by the issuing institution, the owner or operator shall obtain alternate financial assurance to be in effect prior to the expiration date of the letter of credit.

D. Whenever the approved cost estimate increases to an amount greater than the amount of credit, the owner or operator shall, within 60 days of the increase, cause the amount of credit to be increased to an amount at least equal to the new estimate or obtain other financial assurance as specified in this article part to cover the increase. Whenever the cost estimate decreases, the letter of credit may be reduced to the amount of the new estimate following written approval by the board. The issuing institution shall send the notice of an increase or decrease in the amount of the credit to the board by certified mail within 60 days of the change.

E. Following a determination by the board that the owner or operator has failed to provide alternate financial assurance within 60 days after the date the notice of cancellation is received by the owner or operator or has ceased operations at the facility or has failed to implement the closure plan in accordance with the approved plan or other permit or special order requirements, the board will draw on the letter of credit.

F. The owner or operator may cancel the letter of credit only if alternate financial assurance acceptable to the board is substituted as specified in this article part or if the owner or operator is released by the board from the requirements of this chapter.

G. The board shall return the original letter of credit to the issuing institution for termination when:

1. The owner or operator substitutes acceptable alternate financial assurance for implementation of the closure plan as specified in this article part; or

2. The board notifies the owner or operator that he is no longer required by this article part to maintain financial assurance for implementation of the closure plan for the facility.

9VAC25-650-120. Certificate of Deposit deposit.

A. An owner or operator may satisfy the requirements of this chapter, wholly or in part, by assigning all rights, title and interest of a certificate of deposit to the board, conditioned so that the owner or operator shall comply with the approved facility closure plan filed for the facility. The issuing institution shall be an entity that has the authority to issue certificates of deposit in the Commonwealth of Virginia and whose operations are regulated and examined by a federal agency or the State Corporation Commission (Commonwealth of Virginia). The owner or operator must submit the originally signed assignment and the originally signed certificate of deposit, if applicable, to the board.

B. The assignment shall be on financial institution letterhead and worded as follows, except that instructions in parentheses shall be replaced with the relevant information and the parentheses deleted.

ASSIGNMENT OF CERTIFICATE OF DEPOSIT ACCOUNT

City,______________________________ 20______________________________

FOR VALUE RECEIVED, the undersigned assigns all right, title and interest to the Virginia Department of Environmental Quality, Commonwealth of Virginia and its successors and assigns the Virginia Department of Environmental Quality the principal amount of the instrument, including all monies deposited now or in the future to that instrument, indicated below:

__If checked here, this assignment includes all interest now and hereafter accrued.

Certificate of Deposit Account No.

This assignment is given as security to the Virginia Department of Environmental Quality in the amount of ____________________ Dollars ($____________________).

Continuing Assignment. This assignment shall continue to remain in effect for all subsequent terms of the automatically renewable certificate of deposit.

Assignment of Document. The undersigned also assigns any certificate or other document evidencing ownership to the Virginia Department of Environmental Quality.

Additional Security. This assignment shall secure the payment of any financial assurance obligations of the (name of owner/operator) to the Virginia Department of Environmental Quality for closure activities at the (facility name and permit number) located (physical address).

Application of Funds. The undersigned agrees that all or any part of the funds of the indicated account or instrument may be applied to the payment of any and all financial assurance obligations of (name of owner/operator) to the Virginia Department of Environmental Quality for closure activities at the (facility name and address). The undersigned authorizes the Virginia Department of Environmental Quality to withdraw any principal amount on deposit in the indicated account or instrument including any interest, if indicated, and to apply it in the Virginia Department of Environmental Quality's discretion to fund closure at the (facility name) or in the event of (name of owner or operator)'s failure to comply with the regulation entitled Closure Plans and Demonstration of Financial Capability, 9VAC25-650-10 et seq. The undersigned agrees that the Virginia Department of Environmental Quality may withdraw any principal and/or interest from the indicated account or instrument without demand or notice. The undersigned agrees to assume any and all loss of penalty due to federal regulations concerning the early withdrawal of funds. Any partial withdrawal of principal or interest shall not release this assignment.

The party or parties to this Assignment set their hand or seals, or if corporate, has caused this assignment to be signed in its corporate name by its duly authorized officers and its seal to be affixed by authority of its Board of Directors the day and year above written.

SEAL

(Owner)

(Print name)

SEAL

(Owner)

(Print name)

THE FOLLOWING SECTION IS TO BE COMPLETED BY THE BRANCH OR LENDING OFFICE:

The signature(s) as shown above compare correctly with the name(s) as shown on record as owner(s) of the Certificate of Deposit indicated above. The above Assignment has been properly recorded by placing a hold in the amount of $____________________for the benefit of the Virginia Department of Environmental Quality.

__If checked here, the accrued interest on the Certificate of Deposit indicated above has been maintained to capitalize versus being mailed by check or transferred to a deposit account.

I certify that the wording of this Assignment is identical to the wording required in 9VAC25-650-120 B as such regulations were constituted on the date shown immediately below.

(Signature)

(Date)

(Print name)

(Title)

C. The amount of the certificate of deposit shall be at least equal to the current closure cost estimate for the facility for which the permit application has been filed or any part thereof not covered by other financial assurance mechanisms. The owner or operator shall maintain the certificate of deposit and assignment until all activities required by the approved facility closure plan have been completed.

D. The owner or operator shall be entitled to demand, receive and recover the interest and income from the certificate of deposit as it becomes due and payable as long as the market value of the certificate of deposit plus any other mechanisms used continue to at least equal the amount of the current closure cost estimate.

E. Following a determination by the board that the owner or operator has ceased operations at the facility or has failed to complete closure activities in accordance with the approved facility closure plan or other permit or special order, the board shall cash the certificate of deposit.

F. Whenever the approved closure cost estimate increases to an amount greater than the amount of the certificate of deposit, the owner or operator shall, within 60 days of the increase, cause the amount of the certificate of deposit to be increased to an amount at least equal to the new estimate or obtain other financial assurance as specified in this chapter to cover the increase. Whenever the cost estimate decreases, the owner or operator may reduce the amount of the certificate of deposit to the new estimate following written approval by the board. The owner or operator must submit a certificate of deposit and assignment reflecting the new cost estimate within 60 days of the change in the cost estimate.

G. The board shall return the original assignment and certificate of deposit, if applicable, to the issuing institution for termination when:

1. The owner or operator substitutes acceptable alternate financial assurance for implementation of the closure plan as specified in this chapter; or

2. The board notifies the owner or operator that he the owner or operator is no longer required by this Chapter chapter to maintain financial assurance for implementation of the closure plan for the facility.

9VAC25-650-124. Corporate financial test.

A. An owner or operator may satisfy the requirements for financial assurance by demonstrating that he passes a financial test as specified in this section. To pass this test the owner or operator shall meet the following criteria:

1. Financial component.

a. The owner or operator shall satisfy one of the following three conditions:

(1) Supply documentation demonstrating that the owner or operator has a current rating for its senior unsubordinated debt of AAA, AA, A, or BBB as issued by Standard and Poor's or Aaa, Aa, A or Baa as issued by Moody's;

(2) A ratio of less than 1.5 comparing total liabilities to net worth; or

(3) A ratio of greater than 0.10 comparing the sum of net income plus depreciation, depletion, and amortization, minus $10 million, to total liabilities.

b. The tangible net worth of the owner or operator shall be greater than the sum of the current closure plan cost estimates and any other environmental obligations covered by a financial test plus $10 million.

c. The owner or operator shall have assets located in the United States amounting to at least the sum of current closure plan cost estimates and any other environmental obligations covered by a financial test as described in subdivision 3 of this subsection.

2. Reporting requirements.

a. To demonstrate that the owner or operator meets the financial component, the owner or operator shall submit the following items to the director and place copies of the items in the facility's operating record:

(1) An original letter signed by the owner's or operator's chief financial officer or managing member and worded as specified in 9VAC25-650-124 B.

(2) A copy of the independent certified public accountant's unqualified opinion of the owner's or operator's financial statements for the latest completed fiscal year except as provided in subdivision (a) of this subdivision A 2 a (2):

(a) To be eligible to use the financial test, the owner's or operator's financial statements referenced in subdivision 2 a (2) of this subsection shall receive an unqualified opinion from the independent certified public accountant. An adverse opinion, disclaimer of opinion, or other qualified opinion will be cause for disallowance. The director may evaluate qualified opinions on a case-by-case basis and allow use of the financial test in cases where the director deems that the matters which form the basis for the qualification are insufficient to warrant disallowance of the test. If the director does not allow use of the test, the owner or operator shall provide alternate financial assurance as specified in this part.

(b) (Reserved.)

(3) A copy of the owner's or operator's audited financial statements for the latest completed fiscal year.

(4) If the chief financial officer's or managing member's letter providing evidence of financial assurance includes financial data that are different from data in the audited financial statements referred to in subdivision 2 a (2) of this subsection or any other audited financial statement or data filed with the Securities Exchange Commission (SEC), a special report from the owner's or operator's independent certified public accountant to the owner or operator is required stating that:

(a) He has compared the data in the chief financial officer's or managing member's letter derived from the independently audited, year-end financial statements for the latest fiscal year with the amounts in such financial statements; and

(b) In connection with that examination, no matters came to his attention which caused him to believe that the data in the chief financial officer's or managing member's letter should be adjusted.

(5) A certification from the corporation's chief financial officer or managing member stating the method for funding closure costs and the amount currently designated for closure costs in the corporation's financial statements worded as specified in 9VAC25-650-124 B.

b. If the owner or operator changes the financial assurance mechanism to corporate financial test from any other mechanism, the owner or operator shall submit the items specified in subdivision 2 a of this subsection at least 60 days before the date that the former assurance expires.

c. After the initial submission of items specified in subdivision 2 a of this subsection, the owner or operator shall update the information and submit updated information to the director within 90 days following the close of the owner's or operator's fiscal year. This information must consist of all five items specified in subdivision 2 a of this subsection.

d. The owner or operator is no longer required to submit the items specified in subdivision 2 a of this subsection when:

(1) The owner or operator substitutes alternate financial assurance as specified in this part; or

(2) The owner or operator is released from the requirements of this part by the director.

e. If the owner or operator no longer meets the requirements of subdivision 1 of this subsection, the owner or operator shall, within 120 days following the close of the owner's or operator's fiscal year, obtain alternative financial assurance that meets the requirements of this part, notify the director that the owner or operator no longer meets the criteria of the financial test and submit the alternate assurance documentation.

f. The director may require reports of financial condition at any time from the owner or operator in addition to those specified in subdivision 2 a of this subsection. If the director finds, on the basis of such reports or other information, that the owner or operator no longer meets the requirements of subdivision 1 of this subsection, the owner or operator shall provide alternate financial assurance as specified in this part within 30 days after notification of such a finding.

g. The director may disallow use of this test on the basis of qualifications in the opinion expressed by the independent certified public accountant in his report on examination of the owner's or operator's financial statements (see subdivision 2 a (2) (a) of this subsection). An adverse opinion or a disclaimer of opinion will be cause for disallowance. The director will evaluate other qualifications on an individual basis. The owner or operator shall provide alternate financial assurance as specified in this part within 30 days after notification of the disallowance.

3. Calculation of costs to be assured. When calculating the current cost estimates for closure, and any other environmental obligations assured by a financial test referred to in subdivision 1 of this subsection, the owner or operator must include cost estimates required for closure plans for privately owned sewerage systems under this part, as well as cost estimates required for the following environmental obligations, if it assures them through financial test obligations associated with underground injection control (UIC) facilities under 40 CFR 144.62; petroleum underground storage tank facilities under 9VAC25-590-10 et seq.; above ground storage tank facilities under 9VAC25-640-10 et seq.; polychlorinated biphenyls (PCB) storage facilities under 40 CFR Part 761; hazardous waste treatment, storage, and disposal facilities under 40 CFR Parts 264 and 265; and municipal solid waste management facilities under 9VAC20-70.

B. The wording of the letter from the chief financial officer or managing member shall be as follows, except that instructions in parentheses shall be replaced with the relevant information and the parentheses deleted.

Director

Department of Environmental Quality

P.O. Box 1105

Richmond, Virginia 23218

Dear (Sir, Madam):

I am the chief financial officer or managing member of (name and address of firm). This letter is in support of this firm's use of the financial test to demonstrate financial assurance, as specified in 9VAC25-650-124 of the Closure Plans and Demonstration of Financial Capability Regulation (9VAC25-650) ("Regulation").

(Fill out the following four paragraphs regarding privately owned sewerage systems (9VAC25-650), solid waste, regulated medical waste, yard waste composting, hazardous waste, underground injection (regulated under the federal program in 40 CFR Part 144, or its equivalent in other states), petroleum underground storage (9VAC25-590), above ground storage facilities (9VAC25-640) and PCB storage (regulated under 40 CFR Part 761) facilities and associated cost estimates. If your firm has no facilities that belong in a particular paragraph, write "None" in the space indicated. For each facility, include its name, address, permit number, if any, and current closure, post-closure care, corrective action or any other environmental obligation cost estimates. Identify each cost estimate as to whether it is for closure, post-closure care, corrective action or other environmental obligation.)

1. This firm is the owner or operator of the following facilities for which financial assurance is demonstrated through the corporate test specified in 9VAC25-650-124 or its equivalent in other applicable regulations. The current closure plan cost estimates covered by the test are shown for each facility:

2. This firm guarantees, through the corporate guarantee specified in 9VAC25-650-124, the financial assurance for the following facilities owned or operated by subsidiaries of this firm. The current closure plan cost estimates so guaranteed are shown for each facility:

3. This firm, as owner or operator or guarantor, is demonstrating financial assurance for the following facilities through the use of a financial test. The current closure plan cost estimates covered by such a test are shown for each facility:

4. This firm is the owner or operator of the following privately owned sewerage systems for which financial assurance is not demonstrated through the financial test or any other financial assurance mechanism. The current closure plan cost estimates for the facilities which are not covered by such financial assurance are shown for each facility:

This firm (insert "is required" or "is not required") to file a Form 10K with the Securities and Exchange Commission (SEC) for the latest fiscal year.

The fiscal year of this firm ends on (month, day). The figures for the following items marked with an asterisk are derived from this firm's independently audited, year-end financial statements for the latest completed fiscal year, ended (date).

1) Sum of current closure, post-closure care, corrective action, or other environmental obligations cost estimates (total of all cost estimates shown in the four paragraphs above.)		$_______________
2) Tangible net worth*		$_______________
3) Total assets located in the United States*		$_______________
		YES	NO
Line 2 exceeds line 1 by at least $10 million?		____	____
Line 3 exceeds line 1 by at least $10 million?		____	____

(Fill in Alternative I if the criteria of 9VAC25-650-124 A 1 a (1) are used. Fill in Alternative II if the criteria of 9VAC25-650-124 A 1 a (2) are used. Fill in Alternative III if the criteria of 9VAC25-650-124 A 1 a (3) are used.)

ALTERNATIVE I

Current bond rating of this firm's senior unsubordinated debt and name of rating service
Date of issuance of bond
Date of maturity of bond

ALTERNATIVE II

4) Total liabilities* (if any portion of the closure, post-closure care, corrective action, or other environmental obligations cost estimates is included in total liabilities, you may deduct the amount of that portion from this line and add that amount to line 5.)	$_______________
5) Net worth*	$_______________
	YES	NO
Is line 4 divided by line 5 less than 1.5?	____	____

ALTERNATIVE III

6) Total liabilities*		$_______________
7) The sum of net income plus depreciation, depletion, and amortization minus $10 million*		$_______________
		YES	NO
Is line 7 divided by line 6 less than 0.1?		____	____

I hereby certify that the wording of this letter is identical to the wording in 9VAC25-650-124 B of the Closure Plans and Demonstration of Financial Capability Regulation as such regulation is constituted on the date shown immediately below.

(Signature)

(Name)

(Title)

(Date)

C. Certification of funding.

CERTIFICATION OF FUNDING

I certify the following information details the current plan for funding closure at the privately owned sewerage systems listed below.

Facility permit #
Source for funding closure
Name of locality or corporation
Signature
Printed name
Title
Date

9VAC25-650-127. Corporate guarantee.

A. An owner or operator may meet the requirements of this part by obtaining a written guarantee, referred to in this section as "corporate guarantee." The guarantor shall be the direct or higher-tier parent corporation or direct or higher-tier parent company of the owner or operator, a firm whose parent corporation or parent company is also the parent corporation or parent company of the owner or operator, or a firm with a "substantial business relationship" with the owner or operator.

B. Financial component. The guarantor shall meet the requirements for owners or operators in 9VAC25-650-124 and shall comply with the terms of the corporate guarantee.

C. Reporting requirements.

1. The wording of the corporate guarantee shall be identical to the wording specified in 9VAC25-650 127 G. The corporate guarantee shall accompany the items sent to the director as specified in 9VAC25-650-124 A 2. A copy of the guarantee and other items listed in of 9VAC25-650-124 A 2 shall be placed in the facility's operating record.

2. If the guarantor's parent corporation is also the parent corporation of the owner or operator, the letter shall describe the value received in consideration of the guarantee. If the guarantor is a firm with a "substantial business relationship" with the owner or operator, this letter shall describe this "substantial business relationship" and the value received in consideration of the guarantee.

3. If the owner or operator changes the financial assurance mechanism to corporate guarantee from any other mechanism, the guarantor shall submit the required items 60 days before the former mechanism expires.

D. The terms of the corporate guarantee shall provide that:

1. If the owner or operator fails to perform final closure of a facility covered by the corporate guarantee in accordance with the closure plan and other permit or order requirements whenever required to do so, the guarantor shall:

a. Perform, or pay a third party to perform, closure as required (performance guarantee); or

b. Establish a fully funded trust fund as specified in 9VAC25-650-90 in the name of the owner or operator (payment guarantee).

2. The corporate guarantee will remain in force unless the guarantor sends a prior notice of cancellation by certified mail to the owner or operator and to the director. Cancellation may not occur, however, during the 120 days beginning on the date of receipt of the notice of cancellation by both the owner or operator and the director, as evidenced by the return receipts.

3. If a guarantee is canceled, the owner or operator must within 90 days following receipt of the cancellation notice by the owner or operator obtain alternate financial assurance and submit the required documentation to the director.

4. If the owner or operator fails to provide alternate financial assurance as specified in this part and to obtain the written approval of such alternate assurance from the director within 90 days after the receipt by both the owner or operator and the director of a notice of cancellation of the corporate guarantee from the guarantor, the guarantor will provide such alternate financial assurance in the name of the owner or operator within 120 days of issuing the cancellation notice.

E. If a corporate guarantor no longer meets the requirements of subdivision 1 of 9VAC25-650-124, the owner or operator must, within 90 days following the close of the guarantor's fiscal year, obtain alternative assurance and submit the required documentation to the director. If the owner or operator fails to provide alternate financial assurance within the 90-day period, the guarantor must provide that alternate assurance within 120 days following the close of the guarantor's fiscal year, obtain alternative assurance, and submit the necessary documentation to the director.

F. The owner or operator is no longer required to submit the items specified in this section when:

1. The owner or operator substitutes alternate financial assurance; or

2. The owner or operator is released from the requirements by the director.

G. The wording of the corporate guarantee shall be as follows, except that instructions in parentheses shall be replaced with the relevant information and the parentheses deleted.

CORPORATE GUARANTEE

Guarantee made this (date) by (name of guaranteeing entity), a business corporation or company organized under the laws of the state of (insert name of state), herein referred to as guarantor. This guarantee is made on behalf of the (owner or operator) of (business address), which is (one of the following: "our subsidiary"; "a subsidiary of (name and address of common parent corporation or parent company) of which guarantor is a subsidiary"; or "an entity with which the guarantor has a substantial business relationship, as defined in Part I of the Closure Plan and Demonstration of Financial Capability Regulation 9VAC25-650") to the Virginia Department of Environmental Quality ("Department"), obligee, on behalf of the (owner or operator) of (business address).

Recitals:

1. Guarantor meets or exceeds the financial test criteria in 9VAC25-650-124 and agrees to comply with the reporting requirements for guarantors as specified in 9VAC25-650-127 of the Closure Plan and Demonstration of Financial Capability Regulation ("Regulation").

2. (Owner or operator) owns or operates the following sewage treatment plant(s) covered by this guarantee: (List for each facility: name, address, and permit number, if any.)

3. "Closure plans" as used below refer to the plans maintained as required by the Regulation.

4. For value received from (owner or operator), guarantor guarantees to the Department that in the event that (owner or operator) fails to perform closure of the above facility(ies) in accordance with the closure plan and other (requirements of the) permit or (the order) whenever required to do so, the guarantor shall do so or establish a trust fund as specified in 9VAC25-650-90 in the name of (owner or operator) in the amount of the current closure plan cost estimates.

5. Guarantor agrees that if, at the end of any fiscal year before termination of this guarantee, the guarantor fails to meet the financial test criteria, guarantor shall send within 90 days, by certified mail, notice to the director and to (owner or operator) that guarantor intends to provide alternate financial assurance as specified in 9VAC25-650, in the name of (owner or operator). Within 120 days after the end of such fiscal year, the guarantor shall establish such financial assurance unless (owner or operator) has done so.

6. The guarantor agrees to notify the director by certified mail of a voluntary or involuntary proceeding under Title 11 (Bankruptcy) of the United States Code, naming guarantor as debtor, within 10 days after commencement of the proceeding.

7. Guarantor agrees that within 30 days after being notified by the director of a determination that guarantor no longer meets the financial test criteria or that guarantor is disallowed from continuing as a guarantor of closure, guarantor shall establish alternate financial assurance as specified in 9VAC25-650 in the name of (owner or operator) unless (owner or operator) has done so.

8. Guarantor agrees to remain bound under this guarantee notwithstanding any or all of the following: amendment or modification of the closure plan, amendment or modification of the permit, amendment or modification of the order, the extension or reduction of the time of performance of closure, or any other modification or alteration of an obligation of the owner or operator pursuant to the Regulation or § 62.1-44.18:3 of the Code of Virginia.

9. Guarantor agrees to remain bound under this guarantee for so long as (owner or operator) shall comply with the applicable financial assurance requirements of the Regulation for the above-listed facilities, except as provided in paragraph 10 of this agreement.

10. (Insert the following language if the guarantor is (a) a direct or higher-tier parent corporation or company or (b) a firm whose parent corporation or parent company is also the parent corporation or parent company of the owner or operator:) Guarantor may terminate this guarantee by sending notice by certified mail to the Director of the Department of Environmental Quality and to the (owner or operator), provided that this guarantee may not be terminated unless and until (the owner or operator) obtains and the director approves alternate financial assurance coverage complying with the requirements of 9VAC25-650. (Insert the following language if the guarantor is a firm qualifying as a guarantor due to its "substantial business relationship" with the owner or operator:) Guarantor may terminate this guarantee 120 days following the receipt of notification of cancellation through certified mail by the director and by (the owner or operator).

11. Guarantor agrees that if (owner or operator) fails to provide alternate financial assurance as specified in the Regulation and obtain written approval of such assurance from the director within 90 days after a notice of cancellation by the guarantor is received by the director from guarantor, guarantor shall provide such alternate financial assurance in the name of (owner or operator).

12. Guarantor expressly waives notice of acceptance of this guarantee by the Department or by (owner or operator). Guarantor also expressly waives notice of amendments or modifications of the closure plan and of amendments or modifications of the facility permit(s) or order.

I hereby certify that the wording of this guarantee is identical to the wording in 9VAC25-650-127 G of the Closure Plan and Demonstration of Financial Capability Regulation as such regulation was constituted on the date shown immediately below.

(Name of guarantor)
Effective date
(Authorized signature for guarantor)
(Name of person signing)
(Title of person signing)
Signature of witness or notary

9VAC25-650-170. Cancellation or renewal by a provider of financial assurance.

A. Except as otherwise provided, a provider of financial assurance may cancel or fail to renew an assurance mechanism by sending a notice of termination by certified mail to the owner or operator. Termination of a surety bond or a letter of credit may not occur until 120 days after the date on which the owner or operator receives the notice of termination, as evidenced by the return receipt.

B. If a provider or of financial assurance cancels or fails to renew for reasons other than incapacity of the provider as specified in 9VAC25-650-180, the owner or operator shall obtain alternate coverage as specified in this section and shall submit to the board the appropriate original forms listed in 9VAC25-650-90, 9VAC25-650-100, 9VAC25-650-110, or 9VAC25-650-120, 9VAC25-650-124, or 9VAC25-650-127 documenting the alternate coverage within 60 days after receipt of the notice of termination. If the owner or operator fails to obtain alternate coverage within 60 days after receipt of the notice of termination, the owner or operator shall immediately notify the board of such failure and submit:

1. The name and address of the provider of financial assurance;

2. The effective date of termination; and

3. A copy of the financial assurance mechanism subject to the termination maintained in accordance with this chapter.

9VAC25-650-190. Incremental funding. (Repealed.)

A. Incremental funding of the amount of financial assurance required may be allowed at the sole discretion of the board for existing facilities discharging in compliance with a current VPDES permit on December 5, 2001. Incremental funding of the amount of financial assurance required shall not be allowed for new or expanded discharges. Incremental funding of the amount of financial assurance shall not be allowed where a mechanism is already in place. Incremental funding of the amount of financial assurance required shall be considered only upon written request by the owner or operator. The board may allow incremental funding of closure cost estimates under the following conditions:

1. The board determines that closure plan implementation cost estimates are complete and accurate and the owner or operator has submitted a statement from a registered professional engineer so stating; and

2. The facility has been in operation, discharging to state waters, for a period of at least five years prior to December 5, 2001, in accordance with a VPDES permit issued by the board; and

3. The board finds the facility is substantially in compliance with its VPDES permit conditions, and has been substantially in compliance with its VPDES permit conditions for a period of at least one permit term (five years) prior to the effective date of the owner's or operator's current VPDES permit; and

4. The board determines that the facility is not within five years of the expected facility life and there are no foreseeable factors that will shorten the estimate of facility life (to include facility upgrade or expansion); and

5. A schedule for funding the total amount of the approved cost estimate through the financial assurance mechanism within five years of the initial date required under this regulation is provided by the owner or operator and approved by the board. This period is hereafter referred to as the "pay-in period."

B. Incremental funding shall be, at a minimum, in accordance with the approved schedule as follows:

1. Payments into the financial assurance mechanism shall be made annually during the pay-in period by the owner or operator until the amount of financial assurance equals the total amount of the approved cost estimate, adjusted for inflation.

2. Annual payments into the financial assurance mechanism shall not be less than 20% of the approved inflation-adjusted cost estimate, and shall continue until the amount of financial assurance equals the amount of the total approved cost estimate.

3. In no case shall the pay-in period exceed five years.

4. Incremental funding cost estimates must be adjusted annually to reflect inflation and any change in the cost estimate.

C. The owner or operator shall submit a request for incremental funding of the amount of financial assurance, including documentation justifying the request in accordance with the requirements of this section, to the board in conjunction with the cost estimate submitted in accordance with the requirements of this chapter. The board shall review such requests by the owner or operator and inform the owner or operator of approval or disapproval of the request for incremental funding in conjunction with approval or disapproval of the cost estimate.

VA.R. Doc. No. R15-3993; Filed May 27, 2015, 11:27 a.m.