ILLINOIS POLLUTION

CONTROL

BOARD

November 21, 1985

N

THE

MATTER OF:

)

)

FINANCIAL ASSURANCE FOR

CLOSURE

)

R84~22C

~D POST-CLOSURE CARE OF

WASTE )

OISPOSAL SITES (ECONOMIC

IMPACT )

OF TEMPORARY REGULATIONS AND

)

AIX)PTION OF FINAL REGULATIONS) )

Final Order, Adopted Rule

(R84-22C),

OPINION OF THE BOARD (by J.

Anderson)

This Opinion

supports the Order of this same day adopting

permanent regulations to

replace temporary regulations adopted

prior to the filing/of an

economic impact study~

Public Act 83-775 became

effective on September

24, 1983.

Provisions of this

law, which are fully set out below,

prohibited

certain non—hazardous waste

disposal operations after March 1,

985 without a performance bond

or other security for the

purpose

oF insuring closure of the site

and post~c1osurecare in

accordance with the Environmental

Protection Act’

and Board

rules, Section 21.1(b) of the Act

required the Board to adopt by

January

1, 1985 rules which

specified the type and

amount

of

the

bonds or

other securities,

Gn June S., 1.984 the

Board opened this Docket for the purpose

of

promulgating regulations

implementing P,A~ 83-775,

On ~uly

1.9,

1954

the

Board proposed such as amendments to Part 807 The

proposal appeared at 8

Ill. Reg. 14145, August 10, 198/4,

On August 2, 1984 the

Board authorized the hearing oFficer

to seek outside expertise

to assist in developing the

record.

Another Board Assistant, who

had not been directly involved ~in

development of the

proposal and testimony, acted as hearing

officer at the formal

hearings.3

1”Act”: Ill. Rev. Stat.

1983, ch, 111

1/2,

pars. 10011 et seq.

2Unless otherwise indicated,

references to “Sections” or “Parts”

ar:? to Illinois Administrative

Code, Title 35,

3The Board appreciates the

assistance

of Morton F, Dorothy in

‘irafting these

regulations and this accompanying Opinion, and

of

Kathleen Crowley in

her responsibilities ss Hearing Officer,

66~463

---

-2-

The Board held five hearings

as folitows:

1. September 7, 1984,

Chicago

2. September 17, 1984,

Springfield

3. September 24, 1984,

Chicago

4. September 28, 1984, Carbondale

5,

October

9, 1984,

Springfield

The following witnesses testified,

with the primary area of

estimony indicated:

1.

Morton Dorothy,

Pollution Con~:ro1L Board, concerning the

overall outline of the

proposel (R. 12)

2. Douglas Andrews, P.E.,

testifying on behalf

of the

Illinois Chapter of

the Natbonel So~id Waste

Management

Association (NSWMA),

concerning the enuber and sizes of

sites (R. 171).

3, Gary Medler, counsel to the

Illinois Commissioner

o

Banks end Trusts,

concerning trust funds and letters of

credit (R. 206).

4. Kenneth Smith, Deputy

Director of the

Illinois

Department of Insurance,

concerning insurance

(R. 220).

5. Carol Lee, from the United

States fnvironment~l

Proteccion Agency (USEPA),

testifying on

behalf of

NSWMA, concerning

self-insurance (FL

232)~

6. Paul Bailey, ICF, Inc., testif’Lrn~ ~Lhe

behest.

of the

Golz,concerningfrom USEPA,

self-insurancetestifying(FL

at2hZ)the0 behest of the

Board, concerning

self—insurance (R~

531)~

8. James

W. Morgan, testifying at the behest of the Board,

concerning the Wisconsin

finenc:Ln1. essurance

program

(R.

568).

9. Charles Johnson, Technical

Director of the NSWMA,

concerning interim closure

plun rules (FL 633),

10. Joseph Benedict, John

Sexton Contractors,

Inc.,

concerning interim closure

p:Lan rules (R,~ 655).

11, Patrick Lynch, P.E,,

testifyin

at the behe~t

of the

Board, concerning closure

plans and cost estimates

(R. 681).

12, David C, Beck, P,E,, testifvrnn IsInif pE NSWMA,

concerning closure plans and

‘u~tIme :es

(R. 761.,

1032).

66-464

---

13. James Ambroso, Land & Lakes Company, testifying on

behalf

of

NSWMA

14. Larry Eastep, P.E., from the Illinois Environmental

Protection Agency CIEPA or Agency), concerning closure

2, Cecos International, September 7, 1984.

3.

DuPage

County Forest Preserve District, September 19,

1984.

6. Chicago Association of Commerce & Industry, October 19

and

25, 1984.

7. Jan

Sexton

8. Granite City Steel Division of National Steel

Corporation, Interlake Inc., Keystone Steel & Wire

Company,

LTV

Steel Company, Northwestern Steel & Wire

Company, and United States Steel Corporation, October

66-465

---

—4.-

11. NSWMA, October 26 and 30, l984..~

The Board was required to. adopt rules by January 1, 1985;

yet, it. had not received an economic impact study. ThereFore, on

December 27, 1984 the Board adopted emergency rules, and sent

t~rnporaryrules to second notice pursuant to Section 27(b) ani

27(c) oF the Act. The Board split the docket into Subdockets

R84-22A and R84-22B, with the former reserved for the emergency

rules and the latter for the temporary rules. The existing

record in R84-22 was incorporated into each Subdocket.

The emergency rules were accepted for fi.iing and became

effective on January 3, 1985. (9 111. Reg~741, January 13,

1985). in an Order dated January 10, 1985, the Board

corrected

~inerror in Section 807.624 (9 Iii. Reg~1:162, January 25, 1985).

The second notice in R84—22B was received by the Joint

Committee on Administrative Rules (JCAR) on January 24, 1985.

Although the second notice period ended on March 1l~1985, JCAR

did

not consider the proposal until March 19, 1985,

JCAR recommended that the Board seek clarifying legislation,

as to whether the amount of the bond is to be related to the

design and volume of the entire site, or just the disposal unit

as

one might conclude from the use of “facility” in the final

sentence of Section 21.1(b). The Board’s interpretation gives

greater weight to the requirement of Section 21.1(a) that the

bond be “for the purpose of insuring closure of the site.”

On April 18, 1985 the Board opened this docket, R84-22C for

the purpose of conducting economic impact hearings and revising

the temporary regulations as necessary in response to the

hearings. The Board also opened Docket~R84-22D’~F~i~ purpose

of addressing any remaining issues, including possible ambiguous

~ireasnoted by the JCAR staff,

4A public comment also was filed on April 1, 1985 by the Illinois

Chapter of National Solid Wastes Management Association

(NSWMA). This comment was untimely filed for Board

consideration, as it was received well after the end of the First

Notice period and commencement of the Second Notice period in

R84-22B. As noted in the Board’s April 4, 1984 Opinion in R84-

228, p. 3, note 4, and in the April 18, 1985 Order establishing

dockets R84-2.ZC and R84-22D, NSWMA’s concerns may be asserted in

docket R84-22D. See also the Order of October 10, 1,984 in R8L+—

22D, soliciting draft proposals addressing issues other

than

those raised by JCAR in R84-22B,

will appear below this matter

has been before

JCAR two times,

in R84-22B and in R84-22C. In this

0pinion.~

except where

otherwise i~dicateLj references to JCAR or

staff

actions or

comments reter to

K~4-LL~.

66~466

---

—5—

The temporary rules were adopted on April 4, 1985 in R84-

22B. They were filed with the Secretary of State on April 29,

L~85. They appeared at 9 Iii. Reg. 6722, May 10, 1985. The

~oard proposed to readopt the temporary

rules as permanent rules

in R84-22C at 9 Iii. Reg. 6598, May 10, 1985.

The Board received the final copy of the Economic Impact

Study from the Department of Energy and Natural Resources (DENR),

as approved by the Economic and Technical Advisory Committee, on

May 29, 1985. The Board conducted two economic impact hearing,s

as follows:

6. June 21, 1985, Springfield

7. July 2.~ 1985, Chicago

At the economic impact hearings the Board received testimony

from Dr. George Tolley, Mr. William Zeiler and Mr. Miguel Garcia

of RCF, Inc., the EcIS contractor, (R, 1049, 1063, 1129) The

Board also received testimony from Mr. Larry Eastep concerning

the extent of compliance with the emergency and temporary rules.

(R. 1100) The Board received no written public comment following

the economic impact hearings.

For the reasons discussed in detail hereafter, based on the

EcIS and the other evidence in the public hearing record, the

Board finds that these rules impose no adverse economic impact on

the people of the State.

On September 5, 1985 the Board adopted an Opinion and Order

sending the temporary rules adopted in R84-22B to second notice

as permanent rules without change. The second notice in R84-22C

was received by JCAR on September 13, 1985. The matter appeared

on JCAR’s agenda for its October 16 meeting, at which time ~JCAR

requested that the Board withhold filing the rules until after

JCAR’s November 14 meeting. The 45-day period for JCAR action

ended on October 28, 1985. However, the Board withheld filing of

the rules as requested by JCAR. A Board representative attended

the November 14 JCAR meeting. On November 18, 1985, the Board

received a letter of no objection from JCAR, In an Order adopted

this same day, the Board directed the Clerk to arrange for the

refiling without change of the temporary rules adopted in R84-22B

as permanent rules in this docket R84-22C.

In a related matter, on October 10, 1985, the Board proposed

for first notice, in R84-22D, to amend the temporary and

permanent rules in response to JCAR comments received in

connection with R84-228.

At. the outset, the Board notes that the scope of the pending

R84-17 proceedings, or any other proceedings concerning “Chapter

7 and 9,” is not intended

to be limited

by

any overlapping

issues

that may have been addressed in

this R84—~22 proceeding.

66-467

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—6--

STATUTORY PROVISIONS

The non-hazardous waste permit requirement is contained in

Section 21(d) of the Act, which reads as follows:

No person shall:***

d.

Conduct any waste—storage, waste-treatment,

or waste—

disposal operations:

1. Without a permit granted by the Agency or in

violation of any conditions imposed by such permit,

including periodic reports and full access to

adequate records and the inspection of facilities,

as may be necessary to assure compliance with this

Act. and with regulations and standards adopted

thereunder; provided, however, that no permit shall.

be required for any person conducting a waste-

storage, waste-treatment, or waste-disposal

operation for wastes generated by such person’s own

activities which are stored, treated, or disposed

within the site where such wastes are generated;

or,

2. In violation of any regulations or standards

adopted by the Board under this Act.

The relevant portions of P.A. 83-775 are contained in

Section 21.1 of the Act, which reads as follows:

a. No person other than the State of Illinois, its agencies

and institutions, or a unit of local government shall

conduct any waste disposal operation on or after March

1, 1985, which requires a permit under subsection

(d) of

Section 21 of this Act, unless such person has

posted

witti the Agency a performance bond or other security f~or

the purpose of insuring closure of the site and post-

closure care in accordance with this Act and regulations

adopted thereunder.

h.

On or before January 1, 1985, the Board shall adopt

regulations to promote the purposes of this Section.

Without limiting the generality of this authority, such

regulations may, among other things, prescribe the type

and amount of the performance bonds or other securities

required under subsection (a) of this Section, and the

conditions under which the State is entitled to collect

monies from such performance bonds or other

securities. The bond amount shall be directly related

to the design and volume of the waste disposal facility.

c. There is hereby created within the State Treasury a

special fund to be known as the “Landfill Closure and

Post-Closure Fund~. Any monies forfeited to the State

66~488

---

-7—

of Illinois from any performance bond or other security

required under this Section shall be placed in the

“Landfill Closure and Post-Closure Fund” and shall, upon

approval by the Governor and the Director, be used by

and under the direction of the Agency for the.purposes

for which such performance bond or other security was

4. The Agency is authorized to enter into such contracts

and agreements as it may deem necessary to carry out the

purposes of this Section. Neither the State, nor the

Director, nor any State employee shall be liable for any

damages or injuries arising out of or resulting from any

e. The Agency shall have the authority to approve or

disapprove any performance bond or other security posted

pursuant to subsection (a) of this Section.. Any person

whose performance bond or other security is’ disapproved

by the Agency may contest the disapproval as a permit

denial appeal pursuant to Section 40 of this Act.

f. The Agency

may

establish such procedures as it may .deem

necessary for the purpose of implementing and executing

its responsibilities under this Section.

g. Nothing in this Section shall

bar

the State for any other penalty or relief provided by

OVERVIEW

The following is a brief summary of the rules and major

issues. A detailed discussion appears below.

The rules implement the bond requirement of Section 21.1 of

the

Act

by requiring the preparation of closure and post-closure

care plans,

and

cost estimates based on these plans. The

operator is required to provide financial assurace in an amount

equal to the cost estimate. Financial assurance can be given by

several mechanisms, including a trust fund, surety bond,. letter

of credit, closure insurance, and, for non-commercial sites,

1184—17

The rules rely on the existing closure and post-closure care

requirements for sanitary landfills in Part 807. These are

subject to revision in R84-l7. Operators will be required to

base cost estimates on the existing regulations pending

modification. Operators may be required to update plans in the

future to meet new regulations, and to provide additional

financial assurance.

86-469

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—8—

SCOPE OF REGULATIONS

The rules primarily affect persons:

1) who conduct a “disposal” operation or an “indefinite

storage” operation; and

2)

who are required to have a permit (Section 21(d) of the

Act and Section 807.601); and

3) who receive waste for disposal or indefinite storage on

or after March 1, 1985; and

4) who

are

not a governmental unit.

Versons with permits who conduct other types of waste.

management operations, such as treatment and storage, will have

to comply with the general closure rules.

Those who have Section

21(d) permits will be required to file closure plans with their

next permit modification application (Section 807.205).

Persons who conduct waste management operations but are

exempt from the permit requirement must comply with the

general

closure rules, but need not prepare plans or provide financial

assurance (Section 807,501).

Sites which stopped accepting waste for disposal or

indefinite storage by March 1, 1985, will not be required to

provide financial absuratlee (Section 807,601),

The governmental units exemption applies only to persons

which “conduct” waste disposal operations.

Private contractors

who conduct operations on a site owned by local government must

provide financial assurance (Section 807.601).

PHASE-IN PROVISIONS

Under the rules operators had three choices on March 1,

1985, They could avoid the financial assurance requireiiient by

ceasing to accept waste and initiating closure pursuant to

existing permit conditions.

Alternatively,

they could provide

financial assurance either by preparing a closure and post-

closure care plan and cost estimate, or by submitting a cost

estimate based on the interim formula (Section 807.624).

Operators who utilized the interim formula will be required

to prepare closure and post-closure care plans and cost estimates

with the next application to modify the permit, or by March 1,

1988 at the latest,

SELF- INSURANCE

The Board has limited self—- insurance to those operators who

meet the USEPA financial test, and who derive less than half

66-470

---

—9--

their revenue from waste

disposal operations.

Self-insurance

will

be available to few sites, since on-site disposal generally

i~s not subject

to the permit or financial assurance

requirement. The Board has provided self-insurance as an option

For any on-site operators which might be subject to the permit

requirement, or for diversified firms which also conduct waste

.lisposal operations.

OTHER FINANCIAL MECHANISMS

Several alternative

financial

mechanisms were

suggested at

~he hearings. These included an escrow account, a savings

account, a cash deposit with the Agency and a risk pool (R. 194,

237, 240, 242, 248, 279, 288).

The escrow

account is similar to a trust,

and should be

available from~ basically

the same banks at a similar cost, t’~

savings account in the Agency’s name would not be secure in the

absence of a formal trust agreement

stating the trustee’s duties

and preventing the operator’s creditors from seizing

the account,

A cash deposit with the Agency might be a very desirable

mechanism.

It would save operators administrative

costs, and

give the State greater security. However, the landfill closure

and

post-closure fund can receive only

money which

is

“forfeited,”

and cannot refund money following proper closure by

the operator. If the Board were to allow use of the fund as a

pooled trust fund, there would be a possibility that the money

would be treated as general revenue to the State, and be

unavailable for closure of any site in the absence of an

appropriation.

Another possibility is establishment

of a

risk pool to which

each operator contributes during the active life

of the site.

The Board lacks the authority to create a fund in the State

Treasury, and to

obligate the State to pay money out of such a

ft,vncL In addition, this would require continuing oversight of

rates and an administrative apparatus to collect premiums and

handle

claims, each of which would require express authority and

an appropriation.

NUMBER OF SITES AFFECTED

The EcIS identified 209 landfills, Of these, 14~ were

privately owned and operated. Another nine were municipally

owned and privately operated. The EcIS was based on these 152

sites thought to be subject to the financial assurance

requirement. (R. 1064, 1149; EcIs p. 54) The Agency believes

that around 168 sites are subject to

the

financial assurance

requirement. (R. 1104)

66-471

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-10-

ECONOMIC IMPACT

The following is a summary of the economic impact of the

financial assurance regulations and requirement.

More detailed

discussions of various aspects of the economic impact is

included

with the detailed disucssion of the rules which follows, In

particular, the closure and post-closure care cost elements are

discussed with the Board’s interim formula, and the costs of the

instruments are discussed with each type of instrument.

The EcIS attempted to quantify the costs of the financial

assurance requirement of Section 21.1 of the Act rather than the

costs and benefits of the financial assurance rules.

The

costs

of the financial assurance requirement itself would have been

incurred regardless of the Board rules, and so properly should

have formed the baseline of the study. From a review of the

study and hearings the Board has not been able to identify any

costs or benefits associated with the way the Board implemented

the financial assurance requirement apart from the cost of the

financial assurance requirement itself. The Board therefore

determines that there is no adverse economic impact on the people

of the State.

The EcIS did estimate the costs and benefits of the

financial assurance requirement itself. These are summarized as

follows.

The contractor reviewed the 209 sites to determine their

daily volume of waste received, open acres and total site

acreage. (EcIS p. 54) The aggregate closure and post-closure

care cost to the 152 sites subject to financial assurance was

determined using the Board’s interim formula and using the

contractor’s own formula. The aggregate cost estimate under the

interim formula was nearly $18.6 million, and, under the

contractor’s formula, nearly $9.0 million, (EcIS p. 59, 64) This

would result in a financial assurance cost of around $450,000

during 1985, assuming the most likely mix of financial

instruments? (EelS p. 66) This would reduce to around $230,000

per year by 1988 when all sites should have cost estimates based

on plans, which the study determined would result in lower cost

estimates. (EelS 66).

The study concluded that the Agency would spend around

S15,000 to $61,000 per year administering the financial assurance

proram. (EcIS p.67) The study

did not attempt to quantify the

benefits of the financial assurance requirement. (EelS p.76; R.

1062, 1088)

SUBPART A:

GENERAL PROVISIONS

Section 807.104 “Abandonment”

“Abandonment” means the failure to initiate closure within

30 days after receipt of the “final volume of waste”,

Section

86-472

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—11—

807.503 requires the operator to give notice to the Agency of

receipt of a final volume within 30 days; Section 807.506

-

requires the operator to initiate closure within the same time

period. Abandonment is a condition which triggers liability by

financial institutions (Sections 807.662 et seq.) (R. L6, 117,

141, 429, 496, 688, 965).

Section 807.104

“Compaction”

A definition of “treatment” appears below.

“Treatment”

includes “reduction in volume.” The Board

has referenced the

definition of “treatment” in the definition of “compaction”

(R. 16, 933).

Section 807.104

“Development”

“Facility” has been changed to “unit” to agree

with

terminology which is described below (R. 16).

Section 807.104 “Disposal”

Section 21(d) of the Act requires ‘—a permit for anyone who

conducts a “waste-storage, waste-treatment, or waste-disposal

operation.” with certain exemptions. Section 21.1(a) prohibits

the conduct of any waste disposal operation, for which a permit

j~required, without a performance bond or other security, The

definition of disposal is therefore essential tO the scope of the

permit requirement and to the decision as to which sites must

provide financial acsurance (R. 17).

The definition is taken from Section 3 of the Act, with the

Final sentence added: “As used in this

Part, ‘disposal’ includes

methods of

storage

or

treatment in

which there is no certain plan

to remove wastes or waste residues from the storage or treatment

unit to another unit for ultimate disposal.” “Indefinite storage”

has been defined below to cover situations

in which there is a

plan, but there may be technical or economic obstacles to

actually implementing the plan. Persons who store waste with no

plan for disposal, or with an unworkable plan, will have to

provide financial assurance as though they were operating

disposal sites (R. 428, 434, 439, 445, 447, 456, 462, 960).

Section 807.104 “Facility”

As used presently in Part 807 “facility” refers to a portion

of a “site” used for a regulated activity. This conflicts with

the usage in the RCRA program in which a “facility” is roughly

equivalent to the entire “site” (Section 720.110). The Board has

replaced “facility” with “unit” as the preferred term to be used

when

referring to a portion of a “site” (R. 17).

88-473

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—12—

Section 807.104 “Final Volume of Waste”

A quantity of waste is assumed to be the “final volume” if

the operator receives no additional waste within 30 days

thereafter. The operator can overcome the presumption by

(lemonstrati-ng that he expects additional waste (R. 429).

Receipt

of the final volume starts the 30 day

period in which the

operator must notify the Agency and initiate closure (Sections

807,505 and 807.506). Failure to do so is “abandonment” which is

a condition triggering liability by a financial institution

(Sections 807.662 et seq.).

Abandonment of a general waste site is likely to consist of

cessation of activity because of financial difficulty,

or, in the

case of very small sites,

che

death or illness of a sole

proprietor. The site will be left unattended, with open dumping

of refuse without compaction or daily cover (R. 786, 966). Such

waste would

not be received “by the operator”, and would not

affect the question of whether an earlier volume was a “final

volume”.

Section 807.104 “Hazardous Waste”

This definition controls the exclusion of “hazardous waste”

from the

permit requirement

of

Section 21(d) of the Act. The

Board has incorporated the elaborate definition of Part 721.

This definition is

not identical to the definition in the Act.

The

Board was obliged to adopt the Part 721 definition pursuant

to Section 22.4(a) of the Act. It fixes the scope of the RCRA

permit requirement of Section 21(f) of the Act. Utilizing the

same definition of

hazardous waste •here assures that hazardous

waste which is exempt from the Section 21(d) permit is within the

Sect-ion 21(f) RCRA permit requi~rement--(R. 17).

Section 807,104 “Indefinite Storage”

“Indefinite storage” is a type of “treatment” or “storage”

in which the operator has a plan to remove wastes or residues

from the unit, but technical or economic considerations may make

it difficult to remove the wastes or residues prior ~to closure.

Wastes are presumed to be in indefinite storage if they remain in

a unit for more than one year. The operator is required to

prepare contingent closure and post-closure care plans and

provide financial assurance in an amount sufficient to close the

indefinite storage unit as a disposal unit.

This definition closes a loophole in the proposal which

would have allowed an operator to avoid the financial assurance

requirement by declaring disposal to be storage. Two examples

would include speculative recycling of a waste which may someday

become valuable, and operation of a percolation and infiltration

lagoon. In the first case, if the

waste becomes

valuable it will

be sold. However, to satisfy the intent of Section 21.1, the

operator must provide financial assurance to close the

86-474

---

-13-

accumulated waste as a landfill if the waste cannot be sold and

it is too expensive or difficult to remove it to a landfill. In

the second case, wastes are pumped to an unlined lagoon for

treatment or storage without periodic removal of wastes or

residues, some of which may migrate into underlying soils. It is

likely that such a lagoon will have to be closed as a landfill

because of the cost and technical difficulties of removal (R.

362, 428, 434, 439, 445, 447, 456, 462, 506, 687, 960).

Section 807.104 “Modification”

“Facility” has been changed to “unit” (R. 18).

Section 807.104 “Operator”

The “operator” is the person who conducts a waste treatment,

storage or disposal operation which requires a permit pursuant to

Section 21(d) of the Act. The “owner” is not necessarily the

operator (R. 18, 23).

Section 807,104

“Owner”

The “owner” owns the land on which someone conducts a waste

treatment, storage or disposal operation. If there is no other

person conducting operations, the “owner” is also the “operator”

and subject to

the

permit requirement of Section 21(d) of the Act

(R. 18, 23). This language was modified pursuant to JCAR staff

comments.

Section 807.104 “Refuse”

“Refuse~has been replaced with the preferred term “waste”,

which is used in Section 21(d).

Section 807,104

“Salvaging”

“Solid waste” has been replaced with the preferred term

“waste”,

Section 807.104 Scavenging”

“Facility” has been replaced with the preferred term “unit”.

Section 807.104 “Site”

The definition has been modified to make it clear that the

term “site” refers to the area around a regulated “unit” and that

~ “site” may include one

or more such “units”.

The definition of “site” is important in the on-site

exemption from the Section 21(d) permit requirement. No permit

is required for a “unit” which is on the same piece of real

estate as the operation which generated the “waste” and which is

under the control of the same entity which generated the waste

(R. 19, 22).

66-475

---

-14-

Section 807.104 “Solid Waste”

This is modified to reflect the preferred term “waste”.

Section 807.104 “Solid Waste Disposal”

This concept has been replaced by the definitions of

“disposal” and “waste”, the terms used in Section 21(d) of the

Act.

Section

807.104

“Solid Waste Management”

This has been replaced by the

preferred term “waste

management”.

Section 807.104 “Storage” and ~Treatment”

These definitions are taken from Section 3 of the Act. They

are used in Section 21(d) to fix the scope of the permit

requirement.

Section 807.104 “Unit”

This term replaces “facility”. The phrase “device,

mechanism, equipment or area” is taken from the old definition of

“facility”. The rest of the definition has been reworded to read

“used for storage, treatment or disposal of waste” to agree with

the terminology of Section 21(d) of the Act (R. 21, 24,

2.7).

Section 807.104 “Waste”

This definition fixes the scope of the permit requirement of

Section 21(d) of the Act insofar as subject matter is

concerned. The definition is taken from Section 3 of the Act.

At the request of the JCAR staff citations to statutes and

regulations have been added.

Section 807.104 “Waste Management”

This definition is taken from the old definition of “solid

waste management”. The terminology has been Changed’ to refer to

“storage, treatment or disposal of waste” to reflect the

terminology of Section 21(d) of the Act. This is a generic term

for any activity subject to the permit requirement.

SUBPART B: WASTE PERMITS

Section 807.205 Applications for Permit

At

the request of the JCAR staff, the term “facility” has

been removed from para. (a). Either “unit” or “site” would he

appropriate in this paragraph.

66-476

---

—15—

The Board originally proposed to delete para.

(j),

which

created

a third party appeal right which was ruled invalid, since

i~t was not specifically authorized by statute, in LandfiLl Inc.

v. Tilinois

Pollution Control Board, 74 111. 2d 541, 387 N.E. 2d

‘23r11g78). However, the Act has since been amended to add

certain third party appeal rights to Title X. The Board

therefore retained para.

(j)

in the second notice order, but

prefaced

it

with

the phrase “If specifically authorized by

statute.” Pursuant to JCAR staff comments, the Board has

stricken the phrase “adversely affected by the issuance of a

permit” from the old language. This appeared to place a

condition on statutory rights of appeal.

Paragraph (1) requires that applications contain a closure

plan and a post—closure care plan showing how the operator will

provide closure and post-closure care in accordance with all

applicable regulations,

which will be discussed below (R. 35,

953). Original cost estimates will also be required with the

application (R. 361). Actual financial assurance need not be

tendered until

just prior to receipt of waste (Section 807.602).

The Board has modified para. (1) pursuant to JCAR staff

comments. Whether an application must contain plans and cost

estimates depends on Subparts E and F. The operator needi~

to

show compliance with applicable “Board” regulations.

Section

807.206 Permit Conditions

Secticn 21(d)(1) contains

a specific authorization for

permit conditions involving reports, access to records and

inspections. This has been added to

the existing general

language of Section 807.206(a), which is derived from Section

39(a) of the Act (R.

37).

Section 807.206(c) contains a listing of permit conditions,

related to financial assurance, which must be

in

all permits.

T1ie conditions are as follows with the related Section indicated:

1,

A closure plan (Section 807.503);

2~

For disposal sites, a post-closure

care plan (Section

807,523);

3. A requirement that the operator notify the Agency within

30 days after receiving a final volume of waste (Section

807,505);

4. A requirement that the operator commence execution of

the closure plan within 30 days after the site receives

its final volume of waste (Section 807.506);

5. A requirement that the operator file any final

application to modify the closure plan at least 180 days

orior to receipt of the final volume of waste (Section

807.505);

66-477

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—16—

6. A requirement to provide financial assurance in an

amount equal to the current cost estimate (Sections

807.601 and 807.603);

7. A requirement to update the current cost estimate every

other year (Section 807.623).

Section 807.209 Permit Revision

Section 807.209(b) provides that a permittee may request

modification at any

time by filing

an application reflecting the

modification. This appears to be the existing Agency

interpretation

CR. 42, 362, 941).

Section 807.214 Revised Cost Estimates

This Section relates to the biennial cost adjustment of

Section 807.623~ Cost adjustments which do not result from

modification of a closure or post-closure care plan are a special

type of permit application in which the operator needs to provide

only minimal information, This provision does not require the

Agency to take affirmative action, However, the Agency can deny

the application within 90 days if the cost estimate does not

relate to the plan or if the Agency does not agree with the costs

(R. 951).

SUBPART E: CLOSURE AND POST-CLOSURE CARE

Section 807,501 Purpose, Scope and Applicability

Subpart E establishes general rules on closure and post-

closure care which are supplemented by the sanitary landfill

closure and post-closure care rules of Subpart C. Subpart E

requires that operators of sites with permits prepare closure and

post-closure care plans which will become permit conditions. The

plans will form the basis of the cost estimate of Subpart F,

which fixes the amount of financial assurance which must be

provided.

Sites which are not required to have Section 21(d) permits

are not required to prepare plans, or to provide financial

assurance CR. 68, 85, 90). Existing sites which are required to

have a permit may elect to utilize the formula of Section 807.624

in lieu of preparing plans and a cost estimate to meet the March

1, 1985 date, Such sites will be required to provide closure

plans with the

next

modification application or

by March 1, 1988

(Sections 807.205 and 807.624).

Section 807.502 Closure Performance Standard

This Section contains the general standard for closure of a

waste management site, The operator must close the site in a

manner: which minimizes the need for further maintenance; and

86-478

---

—17—

which controls~ minimizes or eliminates, post-closure release of

waste, waste constituents, leachate, contaminated rainfall, or

waste decomposition products to the groundwater or surface waters

or to the atmosphere to the extent necessary to prevent threats

to human health or the environment (R. 69, 166).

This general standard is supplemented by the specific

closure requirements for sanitary landfills which are listed

below. All waste management sites must meet the general closure

standard, but only sanitary landfills need meet the following

specific rules (R, 69, 95, 154, 682, 953):

Section

807.305

A total of two feet of final cover within 60

days following the placement of refuse in a

final lift,

807.313

Prohibition

on discharge of contaminants

807.314(e)

Adequate measures to monitor and control

leachate

807.315

Prohibition on damage to waters of the State.

807.316

Closure plan required in application.

807.318

Monitoring of gas, water and settling for

three years after closure; maintenance

during

the three year period; filing of a piat.

The closure standard requires closure so as to prevent post--

closure release of “waste constituents” and “waste decomposition

products”. This is not to be construed as an absolute

prohibition on release of water or gas from the completed

landfill.

Control is required only “to the extent necessary to

prevent threats to human

health or the environment” CR. 166,

955),

The closure performance standard, which is a minimal

standard

to avoid gross pollution, applies to all sites, whether

required to have a permit or not

CR. 56, 111).

Section 807.503 Closure Plan

The closure and post-closure care plans will become

conditions of the site permits. Modification of the plans will

require permit modification. The Agency can deny a permit

because of deficiencies in the plans, or it can issue a permit

with modified plans.

A possible alternative is a rule which just requires

preparation

and maintenance of

a

plan

even by permit~:ed sites.

This is what is

required in the RCRA

interim status rules at 35

66-479

---

-18-

Ill. Adm. Code 725,212. This alternative has been rejected for

two reasons. First, in a scheme where permits are actually

required, it seems unwise to leave an element so essential

to

protection of the environment out of the permit. Second, because

the plan is essential to the cost estimate and amount of

financial assurance, prior Agency review is necessary to

accomplish the purposes of Section 21.1 of the Act (R. 71, 99,

848, 850). However, the Board has allowed cost estimates based

on a formula without plans during the initial transition period

(Section 807.624). During the next three years operators will he

required to formalize plans only with the first permit

modifications.

In addition to forming the basis for the cost estimate, the

plans form the basis for the determination as to whether a site

is a treatment or storage unit on the one hand, or a disposal

unit or indefinite storage

unit on the other. Under the

definitions in the

Act and Section 807.104, treatment and storage

involve temporary placement of waste, while disposal involves

permanent

placement, or loss of the

waste into the background.

Indefinite storage involves

storage

under circumstances in which

costs

or technical difficulties will force closure as a disposal

unit. Only

sites with disposal units and indefinite storage

units are required

to

provide financial assurance.

Existing Sections 807.316(a)(1O), (a)(14), (a)(15)(A) and

(a)(15)(K) require virtually the same material in sanitary

landfill applications as is required in

the proposed closure plan

rules. However, these are usually not brought together into a

single portion of a permit identified as a closure plan CR. 685,

697, 715, 725),

The operator must prepare a closure plan detailing steps

necessary for final closure at the end of the intended operating

life and a plan for premature final closure at the point in the

intended gperating life when the cost of closure will be the

greatest. Although these could coincide, some landfills would

be expected to reach the point of maximum cost exposure early in

their operating life CR. 119, 286, 363, 416, 430, 688, 719, 7.56,

763, 780, 848, 854), The plan for premature closure forms the

basis of the cost estimate.

The possibility of a default by a

landfill operated according to the rules and permit conditions up

to the end of its intended operating life is remote (R. 684, 725,

756). The primary risk intended to be addressed is that of

premature closure by a landfill which has not been properly

operated.

The premature closure plan should give a better

indication of the cost

involved in such closure.

point in the intended

operating life when the cost of

closure will be the greatest is referred to as the “point of

maximum exposure’ or the “point of maximum cost exposure” in this

Opinion.

66-480

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—19—

The closure plan must specify both the year of intended

closure and the year in which the cost of closure is expected to

be greatest. These are important to determination of the pay-in

period if financial assurance is provided through a trust fund

CR. 364, 431, 683, 687).

The operator must include a temporary shutdown plan if the

operator wants a permit which would authorize temporary

suspension of waste acceptance prior to final closure CR. 51,

78). A seasonal operation or one which could be affected by

strikes should apply for a temporary shutdown plan. The language

was modified pursuant to JCAR staff comments to

use

“suspension

of waste acceptance” in the rules.

Temporary shutdown is to be distinguished from partial

shutdown which involves closure of a portion of a site while

operations are ongoing on another portion CR. 51, 78, 92, 142,

363, 430. 688). Partial shutdown

may

be addressed two ways.

First, the operator can ask that the permit be modified to

specify certain “areas” pursuant to Section 807.307. The

operator could then prepare separate plans and coat estimates for

each area, providing financial assurance when waste is first

disposed in each area, and obtaining release with respect to

closure costs when closure is completed. Alternatively, the

operator could allow for the opening and closing of units in a

single plan, identifying the situation in which the greatest cost

exposure would occur. The operator could then post a bond in the

amount required to close the site at the point of greatest cost

exposure.

The proposal required that, a copy of the closure plan be

kept at the site so that it would be available to the Agency

inspectors. This could impose a hardship in that many general

waste sites lack a permanent structure which would be a suitable

repository. The Board has modified the proposal to require the

plan to be maintained at a location, approved in the permit,

Section 807.504 Amendment of Closure Plan

This Section is similar to Section 724.212Cb) in the RCRA

rules. It specifies the situations in which the owner or

operator must revise the closure plan:

*

3.

greatest.

66-481

---

-20-

Under Section 807.209 the operator ~‘ald be eH.~

I’

an application

to

modify at any .ime. Section 807.504 $

;it’nded

‘

1i~rit

!i~

operator’s rig to am’

,

but

at I

c.. Latn

jqi’ua’in’ in

which he must amend.

F’i’ ;2cend

,•,

I third situations under

a”

•

‘

the

must

be

amended are directed in

part

at sites which ~o into

t

temporary nr partial .qhutdown which is not provided I.r

ii’ flu’

closure plan. Violations of Section 807.504(b) or Cc)

eoizi

I

hr

ill aged if activity slowed or

ceased at the site without in

‘n’nded plan. Section 807.503 allows the operator to prov

i.!.’

iprary shutdown plan which will not trigger the need

t~

mien’

the ‘losure plan. Existing Section 807.3161a)C12) requir~’~‘s3

‘~.

tator

to

specify expected quantities of waste In the

‘:

Itcation. The proposal has been modified to speeificail

te that changes, reductions or increases which are au

n

by

the

permit do not trigger the requirement to amend CR.

93,

‘a,

374, 496, 688, 780, 786).

Section 807.505 Notice of Closure and Final

~mnndmenL

~n

I~

ir

Section 807.505(a) requires the operator to give

not te~to

the Agency within 30 days after

receipt of the final vol‘ime

‘t

4aste. Violation of this section could be alleged Ln a s-. uittoe~

in which an operator abandoned a site without notice.

Section 807.505(b) requires any final amendment to dia

•flosure plan to be filed at least 180 days befpre receipt o: the

final volume. The Agency would be allowed to act on the late

application, but violation could be alleged in an enforcement

ir

au. This requirement serves two purposes. First,

it

should

~.‘ns.sre that the Agency will

have adequate time to review these

t

•.

:ions. Second, it encourages operators to maintain a

rea~cte closure plan which is up—to-date with current

operati)ns so that it could actually be executed in the event of

unexpected cessation of operations CR.

74,

82, 938).

Whether an operator must send a notice of partial closure

Japends on whether the site has been divided into areas undet

3.3.tlton 807.507 CR. 430, 687). If there are such areas, the

operator must send notices as though they were separate

siteq.

Otherwise, notice need not be sent until final closure is

reached. However, such partial closure activities would have

to

Se:tjon 807.506 Initiation of Closure

This requires

that

the operator commence tteatment, removal

‘°ure plan within 30 days after receipt ~? the fLna~ volume of

This

rule

cerves two purposes. First, it establishes a

-

“me tc”

.loea~eto be conside...! y the Agency in

~3ii~wJ

-

a

c.. asure ;an. Second, a violation could be alleged

66-482

---

-

2.1

The operator

of an indefinite storage unit must either

initiate removal of wastes and waste residues, or

must

initiate

cTosure in accordance with the contingent closure plan.

Section 807.507 Partial Closure

Paragraph (a) allows the

operator to file an applicat:ion

with the Agency dividing the site into areas,

Each area must

include at least one entire unit,

If the permit specifies such

areas, the Agency

is to treat them as separate sites for purposes

oF

financial

assurance. This means separate closure plans and

cost estimates. The operator could provide separate financial

assurance for each

area,

or could lump pursuant to Section

807.642 (R.

5i~78, 92, 142, 363, 430, 433, 688, 957),

The Board construes Section 2.1.1 as requiring financial

assurance for closure of any treatment or storage units

associated with a disposal unit which are located on

the

same

site, JCAR considered this, but made no objection. However, it

recommended that the Board seek legislative clarification,

Paragraph (b) prevents the use of the area mechanism to evade the

requirement of financial assurance for associated treatment and

storage units, Although they could be placed in separate areas,

Financial assurance would have to be provided.

An operator can group units which are already closed into

areas which are already in post-closure care. The Agency should

not require closure plans or

cost estimates for these areas.

However, paragraph

Cc)

provides that post-closure

care continues

until the entire site is closed. The operator cannot use this

mechanism to cut short the post-closure

care for the site

required by Subpart C.

The proposal contained a section specifying duties of the

operator during closure. This has been dropped

as

inconsistent

with Section 807.502 CR. 75, 367, 372).

Section 807.508 Certification of Closure

When closure is

completed the operator and his

engineer

provide an affidavit to the Agency. When the Agency determines

that the site has

been

closed in accordance with

the plan, it

notifies

the operator of the

date on which the post-closure care

period begins

CR. 76, 144, 155,

163, 165, 368, 421, 959),

The Board

has dropped

from the proposal a requirement that

the operator

specify the

locations of special waste in the as-

built plans CR, 163, 165, 368, 688).

Section 807.509

Use

of Waste

Following Closure

After closure

an operator may accept waste as authorized in

the closure plan.

Operators often utilize construction

debris

as

,part

of cover material

or for subsidence

and erosion control (R.

o83), The

Agency may control such usage

by permit condition.

66~483

---

-22-

Section 807.523 Post-closure Care Plan

N~o

general standard for post—closure care has been

proposed.

The operator will have to prepare a plan

shOW:Lflg

how

he

would

comply with the post-closure care provisions specified

in

the

rules specific to each type

of disposal facil:ity.

presently these

would only be

the rules applicable to

sanitary

L-indfills CR. 77, 369, 449, 458).

Operators

of indefinite storage units must provide ~

contingent post--closure care plan which will have to be executed

ii the operator fails to remove all wastes and

waste

residues on

closure CR. 36~). £448, 455),

Section 807 .52’~ Implementation and Completion of post-closure

Care Plan

The opera~:orof a disposal site must implement the post-

closure care

~

commencing with certification of closure

(R. 77, 371).

Tho

operator of an indefinite storage

unit must

implement the cor~:ingent post-closure care plan unless

the Agency

determines that ho removed all wastes and waste res idties

dur ing

the

closure period.

The Agency

~S

to certify that the post-closure care period

has ended when ir.. determines that the post-closure care plan has

been completed and

that the site will not cause future

violations. The length of the post-closure care period for

sanitary

landfills is determined from the existing Subpart C

rules (R. 371).

SUBPART F:

FINANCIAL ASSURANCRE

FOR CLOSURE

AND POST-CLOSURE CARE

3ection 807.600

Purpose, Scope and Applicability

HfinancialThis

Subpartassurance”providesto

satisfythe

methodthe

requirementby

which theof operatorSection

21.1gives

of the Act. The operator prepares closure and post-closure care

pians

pursuant to Subpart E. Operators of non-governmental

disposal sites prepare cost estimates based on these plans. They

i-iust provide financial assurance

in an amount equal to the cost

estimate. Several mechanisms are provided by which the financial

assurance can be given.

Section 807.601

Requirement

to Obtain Financial

Assurance

This Section paraphrases Section 21.1(a) oF the Act.

The

phrase “unless such person has posted with the Agency a

performance bond or other security for the purpose of insuring

closure of the site and post-closure care in accordance with the

Act and regulations adopted thereunder” has been replaced with

~‘unless such

pooson

has provided financial assurance in

accordance

with ch:Ls

Subpart”. The Subpart defines and

implements the ~irst-quoted language.

66-484

---

—23-

The Section also states the requirement to çbtain financial

assurance for an indefinite storage unit. This is defined,

in

Section 807.104. As is explained above, these units must be

required to provide financial assurance to satisfy the purposes

of Section 21.1 of the Act.

Paragraph (a) includes the local government exemption taken

from Section 21.1(a) of the Act. The Board construes this

exemption to apply only when the governmental unit is actually

conducting waste

disposal operations: that is, when the

governmental unit is the ‘operator” If the governmental unit is

the “owner” of the site, but another person “conducts” waste

disposal on the site, the other person must provide financial

assurance for closure. A proviso has been added to state this

expressly CR. 53, 64, 686, 782, 943). SCAR considered this

matter and did iot object to the Board’s interpretation of the

statute.

Paragraph Cb) interprets the requiçement to provide

financial assurance by March 1, 1985. Sites which accept waste

for disposal or indefinite storage after

that

date will be

required to provide financial assurance, including both existing

Section 807.602 Time for Submission of Financial Assurance

Sites existing on March 1, 1985 must provide’financial

assurance by that date. Future sites will be required to provide

rinancial assurance prior to waste receipt. Plans and dost

estimates must be provided with the permit application. The

Agency will issue the operating.’permit with requireánts to

provide financial assurance as conditions, including a

requirement to tender financial assurance prior to redeipt of

waste. There is nothing to keep the operator from tendering

the

financial assurance prior to permit issuance CR. 35, 262, 390,

Section 807.603 Upgrading Financial Assurance

The operator has 90 days to increase the amount of financial

assurance if the cost estimate goes up or if the value of a trust

fund goes down or if the operator is disqualified from self-

insurance. Otherwise, the operator must maintain the financial

assurance at least equal to the cost estimate at all times. For

example, the operator must anticipate the cancellatipn or

termination of financial instruments and substitute alternative

instruments in advance of cancellation or termination’. These

provisions were with Sections 807.661 et seq. in the proposal,

06485

---

Section 807,604 Release of Financial Institution

There are three types of releases which were provided with

~ach instrument in the proposal. These have been grouped into

substitution of financial assurance or release of

and post-closure care.

807 .661 Partial release of financial institution

et seq. following a reduction in cost estimate.

Partial release following completion of closure is to be

treated as a reduction in the cost estimate by reducing to zero

Section 807.605 Application of Proceeds and Appeal

There are basically two extreme enforcement situations which

could arise involving closure. In the simple situation the

operator is bankrupt or

has

simply abandoned the site and it will

clearly be up to the Agency to arrangs for closure. In the

complex situation, the operator is onthe site, but the Agency

alleges violation of the rules and believes that closure is

necessary to protect the environment. • In the complex situation

an enforcement action must be brought before the Board. If the

Agency proved a violation, the Board could order that a closure

plan be implemented, and that the proceeds of financial assurance

be available for execution of the plan. In the simpler case this

would be a needless formality CR. 116, 965).

The financial assurance instruments are governed by the

general Illinois law pertaining to trusts, bonds, etc. If the

conditions of the instrument obtain and ths Agency gives the

required notices, but the financial inititution refuses to pay,

the Agency should sue in Circuit Court, or whatever court may be

appropriate. The filing of an enforcement action is not

necessarily

$

condition precedent. However an enforcement action

may be necessary to establish that the condition of the financial

instrument has obtained.

Section 807.605Cc) lists seven Agency actions which are

deemed permit denials. These are tantamount to disapproval of a

bond and are appealable as provided in Sections 5Cd) and 21.1(e)

of the Act. The necessity for Circuit Court resolution of these

66-486

---

-25-

Section 807.606 Release of the Operator

The Agency is required to release the operator from the

requirement to maintain financial assurance for closure within 60

days

after receipt of affidavits from the operator and

his

engineer that the site

has been closed

according to the plan.

Paragraph (b)

includes a similar provision for post-closure care

(R. 118, 161, 384). The Agency can withhold release if it has

reason to believe the closure has not been in accordance with

the

plan, or that continued post-closure care is required by the

rules,

Section 807.620 Current Cost Estimate

The proposal differs from the RCRA rules in that under the

hoard

rules cost estimates for closure and post-closure care are

contaLned

into a single cost estimate. The operator must

give

financial

assurance in this amount. This reduces the volume of

rules, but creates possible problems relating to release of

closure assurance (R. 118, 384, 967). The rules do not prevent

an

operator from providing separate financial assutance for

closure and post-closure care. The operator could obtain release

of the financial assurance for closure by modifying the cost

estimate on closure, reducing to zero the closure cost estimate.

Section 807.621 Cost Estimate for Closure

The operator is required to maintain a written estimate of

the cost or closing the site. The cost estimate will be a permit

condition, although revision of a cost estimate can be

accomplished under Section 807.214 without filing a complete

application (R. 119, 143, 385, 450).

The operator must estimate the “current cost”

ot~

closing the

site assuming the work were to be

done tomorrow. This is not to

be discounted for the time lag to expected closure, nor is there

to

be an allowance for potential earnings of sums set aside for

closure, or for inflation, These matters are addressed through

pcriodic revision of cost estimates and evaluations of trust

funds (R. 457). The term “current dollars” used in the proposal

has been removed at the request of the JCAR staff, because of

possible confusion on

this point.

The operator must revise the closure cost estimate whenever

a change in the closure plan

increases the cost of closure. The

operator must also update the cost estimate at least once every

two years (Section 807.623).

The cost estimate must be based on the steps necessary for

premature final closure of the site at the time in its intended

operating life when the cost of closure would be greatest, or at

the end of its intended operating life, whichever cost is

greatest.

As provided in Section 807.503, the operator must plan

for both of

these contingencies in the closure plan (R. 119,

385,

66-487

---

—26-

688, 719, 756). Once the

point of maximum cost exposure has

passed, the operator can revise the plan to reflect any decrease’!

maximum future exposure.

The cost estimate must be based on third party costs: the

operator must assume that the Agency will contract w!Lh an

unrelated party to implement the closure plan. This will

probably be the situation if the operator becomes bankrupt or

abandons the site, so that the third party cost assumption forms

a better estimate of the potential liability (R. 304, 309, 385,

396, 454, 522, 700, 785, 1139),

The cost e~tirnatemay not include an allowance for salvage

value for waste or equipment, or the resale value of the

completed landfill. These items are speculative, and the value

may depend on whether the site has been properly operated and

closed, Since

the proceeds would be applied in a situation in

which the operator had failed in one of these areas,

the

salvage

value should not

be included in the estimate (R.

304, 307, 385).

The rule details the elements which go into the cost

estimate (R. 690, 849). This rule does not require that sites

provide these items on closure. However, they must be included

in the estimate if required for closure of the site.

The most important cost elements

are the area to receive

final cover

and the cost of obtaining and placing

the cover. If

an operator has an identified source of adequate cover on the

site, his closure cost estimate will likely be much less than an

operator who will have to purchase and transport cover to the

s±t:~(R. 690, 700, 719, 762, 1056, 1059, 1165).

The closure plan and cost estimate should only address the

activities which are to be done at the point of premature or

final closure. Activities which are done in construction or

normal operation of the site in anticipation

of closure should be

addressed in the construction or operating permit. The operator

should not be

required to pay for a closure activity and still

maintain

financial assurance for that activity.

Section 807.622 Cost Estimate for Post-Closure Care

The cost estimate for post-closure care is based on the

annual cost of monitoring and maintenance times the number of

years of post-closure care required. For sanitary landfills this

is three years (R. 120, 150, 386).

The cost estimate is based on the expected costs of post-

closure care as disclosed in the post-closure care plan (R. 120,

138). There is no provision for contingency funding to pay for

unanticipated costs such as might result from a liner failure or

retrofitting of a leachate collection system. Nor is there any

provision for third party liability insurance. Section 21.1 of

the

Act

is limited to financial assurance for the expected (~OsLS

of closure and post--closure care.

66- 488

---

-27-

The major cost elements include cover stabilization and

groundwater monitoring. The operator should estimate the

percentage of the cover which will require remed~.alaction to

control erosion or subsidence each year. The number of

parameters and frequency of groundwater monitoring should be

specified by the Agency in the permit (R. 385, 690, 700, 719,

724, 849).

Section 807.623 Biennial Revision of Cost Estimate

The proposal required the operator to adjust the cost

estimate for inflation on an annual basis based on the CNP

deflator,

Several revisions to the inflation adjustment

provisions were suggested at the hearings. These included:

1.

Prospective inflation adjustment at

the Out8et, in which

the operator projects an inflation

rate at the outset

throughout the expected operating life (R. 120, 693,

968).

2. Annual prospective adjustments

based on last year’s

inflation rate (R. 386, 397, 422, 424, 453, 457).

The problem with long-term prospective inflation adjustment

is that the formulas are very involved and the result is no

better than the inflation forecast. The Agency would have to

review economic forecasts. There would also have to be a

;r~echanism for reviewing the projected closure cost against actual

inflation, and a requirement of modification if they got too far

out of line.

Short-term prospective adjustment requires the operator to

estimate the cost today, then determine the cost to close in one

year, assuming the inflation rate in the coming year will equal

the rate during the preceding year. The cost to close in one

year would then become today’s cost estimate. This approach

reflects reality rather well, in that the operator is more likely

to close a year later than on the date the estimate is prepared

and last year’s inflation is a good estimate of next year’s.

However, it is likely to introduce a lot of confusion to gain an

adjustment which may be less than the other uncertainties

involved,

The Board has determined to utilize a biennial review of the

cost estimates, with adjustments to reflect actual changes in

cost elements. This gets the Agency totally out of the business

of reviewing inflation figures, and into reviewing actual costs

with which it should have ongoing experience. It would be

helpful if the Agency compiled current unit cost figures from

permits for distribution

to the public.

The biennial update will not be nearly so burdensome as an

annual update (R. 693). Also, the Board has provided an

abbreviated application mechanism for the revised cost estimates

~bich do not result from

a change in the plans (Section 807.214).

66-489

---

-28--

The operator is required to update the cost estimate at

Least once every two years,. If the operator updates the cost

estimate in connection with a permit modification before revision

is

due, the two years starts over.

Section 807.624 Interim Formula for Cost Estimate

The permanent structure of the rules follows the site-

specific plan/cost estimate approach. This has many advantages,

including the ability to accommodate site-specific factors, the

specification of duties on closure, and financial incentives to

adopt

operating modes with less cost exposure (R. 188, 290,

639). However, there were not enough engineers in the State to

prepare the needed plans and cost estimates by March 1,

nor

enough employees at the Agency to review the submissions (R. 179,

694, 768, 774, 7799 850,

852.,

876, 902). The Board therefore

adopted a formula which, although

it gives only

a crude estimate

of potential costs, can be used as an interim measure

to fix the

amount

The

of

EelS

financial

includes

assurance

formulas

0

which appear to relate total site

area and maximum open area to daily volume, based on the results

of a mailed survey, a review of the permit files and a 1981

inventory of sites. The formulas are on p. 57 of the Eels. Note

that “log” is intended to mean “natural logarithm”. (R. 1086)

It would be possible to write a rule basing cost estimates

on daily volume using these formulas, instead of requiring plans

bind

cost estimates. There are fundamental problems with such an

approach, and there is doubt as to whether the formulas are

valid,

If the formulas were written into the rules, the program

would lose the benefits of the site-specific plans and cost

estimates discussed above, In particular, there would be an

incentive to design landfills so as to take advantage of the

formulas, with no assurance as to whether the design would

actually result in a lower closure and post-closure care èost.

Furthermore, the formulas were

used by the contractor only

for interpolation purposes, not as a substitute for available

data. (R. 1165, 1167) The formulas have not been tested well

enough to base the rules on them. The data on maximum open area

was drawn from a small number of sites, and represents the

operators’ subjective estimates without field verification. (R.

1170, 1176, 1179) The formula for total site area appears to

give results two or three times larger than expected. (R. 1163)

Each operator will be required to file a closure plan and

cost estimate whenever he files the next application to modify

the permit. Plans and estimates will be required for all sites

by March 1, 1988. Operators will be allowed the option of

providing a plan and cost estimate initially, which they should

do if the formula disadvantages them (R. 880).

66-490

---

—29-

The cost estimate based on the formula will serve as a cost

estimate under the rules, The requirements to close in

accordance with

the plans will be understood to mean in

accordance with the existing permit conditions and closure and

post-closure care regulations for financial assurance instruments

based

on the formula.

The formula cannot be used to calculate financial assurance

under the RCRA rules.

The most important element of the cost estimate is the area

which will need final

cover, There are several considerations

affecting the

projection of this area, The first is the area

which is presently in need of final cover. This necessitates a

brief discussion of types of cover. Existing Section 807.305

provides for three types of cover:

a) Daily Cover

-

a compacted layer of at least 6 inches of

suitable material shall be placed on all exposed refuse

at the end of each day of operation.

b) Intermediate Cover

-

at the end of each day of

operation, in all but the final lift of a sanitary

landfill, a compacted layer of at least 12 inches of

suitable material shall be placed on all surfaces of the

landfill where no additional refuse will be deposited

within 60 days.

c) Final Cover

-

a compacted layer of not less than two

feet of suitable material shall be placed over the

entire surface of each portion of the final Lift not

later than 60 days following the placement oC refuse in

the final lift, unless a different schedule has been

authorized in the operating permit.

The Board construes Section 807.305 to mean that a total of

.~

least two feet of cover must be over the waste when closure is

completed (In re

Ch, 7, R72-5, 8 PCB

695, July 31, 1973; IEPA v.

Giachini, PCB 77-143;

3~3

PCB 547, May 24, 1979).

Many landfills apply intermediate cover to completed areas,

leaving final cover to closure of the entire site. Others apply

Final cover as

soon as an area or trench is completed (R. 768,

789, 798, 853, 855, 857, 869, 878, 904, 908, 910). Intermediate

cover is subject to erosion

if

it is not seeded and maintained

(R. 858). It is difficult to judge the depth and sufficiency of

the intermediate cover (R. 870, 905, 910). Because of the need

to base the formula on simple facts not likely to be subject to

dispute, the Board allowed deduction from the presently affected

area only the area which had received full final cover.

Most sites plan to apply final cover to much of the site

before final acceptance of

waste, such that only a very small

area is expected

to

remain on closure (R.

787). As has been

66-491

---

-30-

discussed above, the financial assurance requirement needs to be

based on closure at the point in the expected operating life when

the cost of premature closure would be the greatest, which may

not

correspond with the expected final closure. However, it is

not possible to determine the point of maximum cost exposure

without review of a site—specific plan. The formula has to use a

method for computing the maximum exposure with reference to facts

which are not likely to be subject to dispute.

Mr. Lynch suggested a formula which predicts the amount of

exposed refuse generated after a certain number of years, (Y),

based on the average depth (AD) of the landfill and the annual

volume of waste (AWR) received (R. 691, 703, 717, 723). It

should

he possible to determine both of these from the site

permit (Section 807.316). It

the permit is not up-to-date, it

should be

possible to measure the actual depth, and determine the

a~tualreceipts in recent years. The formula is

;is

fTollow~, with

the area in acres:

A

=

(Y)(AWR)

(3200)

(AD~)

It is necessary

to specify a value for Y, the number of

years of waste accumulation, Y is a projection of the number of

years which would elapse between the cessation of normal cover

activities by the operator and the initiation of site closure by

an Agency contractor. The formula will give the area to be

covered assuming people continue to dump at the same rate after

the operator stops covering. During this period the operator’s

non-compliance would come to the Agency’s attention, inspections

would be conducted, letters sent, enforcement initiated, hearings

held, an order entered and appealed, and a contract let. Based

on past experience, this would likely take three years (R. 671,

718, 729, 785). The Board has therefore assigned a value of

three to Y in the formula.

The acreage requiring cover is computed by adding the

presently exposed area to the projected exposed area whic.h could

he created within three years.

However, this cannot exceed the

total permitted area which has not received final cover as of

January 1,

1985.

The next major element in the formula is the cost per acre

(CPA). Most of this is the cost per cubic yard for cover

material. Ideally this should include the cost to purchase the

cover, lift it, transport it, spread and grade it (R. 698, 762,

847),

The Board received

three estimates of this cost:

Cost per

Cubic yard

$1.00

R. 692, 698

1.30

R. 763, 768, 771, 783

2.30

R, 847, 891, 897

86-492

---

-31-

These costs all assume that

cover material is available

within a short distance of the site (R. 692, 771, 847, 861). If

the cover must

be

transported a great distance, the cost would be

tour to five times greater (R. 692), The Board is prepared to

assume for purposes of the interim rule that

a source of cover

material is readily available at each site.

The $2.30 figure is based ~n a contract recently let by the

Agency for the Broverman/Taylorville landfill which is being

closed with State funds (8 Iii. Reg. 23951, December 14, 1984).

In many respects this may be the best estimate of

what it might

cost the Agency to close a

site

in the future.

However, this

landfill was a hazardous waste site with a

large uncovered area

which was never operated in

accordance

with the regulations (IEPA

v. Harold Broverman and Theodora

Baker d/b/a Taylorville

Landffll, PC~~6-1I4, ~P~123~November 10, 1977; Fifth

Wistrict, penalty reduced (Rule 23 Order), May 25, 1979). For

purposes of the interim rule the Board will accept $1.30/cubic

/ard as the best estimate of the cost of cover.

It takes around 3200 cubic yards of material to cover an

acre to a depth of two feet (R. 763, 692). At $1.30 per cubic

yard, this results in S4,160 per acre. The cost of establishing

vegetation must be added to this, Although the rules do not

explicitly require the operator to establish vegetation, it is

necessary to stabilize the cover against erosion (R. 692, 763,

893). If vegetation were omitted from the closure cost,it would

be necessary to include a greater allowance for erosion in the

post-closure care cost.

The

Board has received three estimates of the cost of

establishing vegetative cover:

$500

R, 763

S832

R. 69~2

$1235

(Ex, 18)

The Board will accept the $832/acre figure as the best

estimate of the cost of establishing a

vegetative cover.

Together with the cost of cover material, the cost per acre to

cover is approximately $5000/acre, which the Board will utilize

as the value for CPA in the formula.

There are other elements which would go into a complete

closure plan and cost estimate (R, 892, 900). However, it does

not appear feasible or necessary to include them in the interim

formula.

The post-closure

care cost formula includes the annual cost

of subsidence and erosion repair, and the cost of groundwater

monitoring (R. 693, 764, 858). Subsidence

and

erosion depends on

the p?xcent~2e~f

the

total cover area which

requires repair each

year

u’i. ir~e

t~oara has received two

estimates:

66-493

---

-32-

2

R. 764

5

R, 693

The Board has accepted 5 as the percentage of the total

cover which will require repair during each year of the post--

closure care period.

The other element of

post—closure care cost is the cost of

sampling groundwater. The rule assumes that monitoring wells

will be constructed during the operating life of the site, so

that no allowance has been made for construction (R.

777).

The

sampling cost depends

on the number of wells, the frequency of

sampling and the number of parameters analyzed. All of

the

witnesses agreed on quarterly sampling (R. 692, 765, Ex.

18).

Two witnesses suggested formulas Involving

a cost per well,

while

the Agency suggested requiring four wells (R. 692, 765, Ex.

1~). Permits should specify cert;ain well locations (R. 777,

Section 807,3l6(a)(15)(A)). However

it is possible that some

sites

may not have wells specified~

A minimal program involves

one well upgradient to establish the background water quality,

and two wells downgradient

to

detect

leaks. The Board has

therefore specified three as

a minimal number of wells

to

be used

in the formula. Any greater number actually existing or

specified in the permit will be included in the formula.

A basic permit should require analysis for alkalinity,

boron, chloride, pH, residue on evaporation, specific conduc-

tance, sulfate and total organic carbon (R. 765, 894). The cost

of basic

sampling and analysis is about $150 per sampling

(R.

692, 724, 765, 777). The Agency reports a range of $133 to $696

per sampling with an average of $288 per sampling (Ex. 18). The

higher costs appear to result from analysis beyond the eight

basic parameters (R. 894).

The Board accepts $150 per sampling as a good estimate of

the basic sampling cost, With four samplings per year, this

works out to $600 per well per year.

To recapitulate, the interim formula for the cost estimate

is as follows.

The area requiring cover (A)

is the sum of the

existing exposed area plus the potential future exposed area

according to the following formula:

A A(Existing)

+

3 AWR

3200 AD

A cannot be greater than the total permitted area which has

not

received final cover.

The closure cost estimate is:

CCE = (CPA)(A) ($5000/acre)(A)

66-494

---

PCCE

3CCCPA)(P)CA)

+ C600)CM))

-

750k

+

180011

The complete cost estimate is:

CE

-

5750k

+

180011

The number of wells

CM) cannot be less than three.

The EcIs computed cost estimates by a comparable formula.

The study formula estimated the area

requiring cover based on a

survey instead of the daily volume interim formula used above.

Also, the study used the total site area to estimate the

maintenance

and

monitoring costs.

The EcIS estimated the area requiring cover primarily

through a survey mailed to each

site, including those not thought

to be subject to financial assurance CR. 1065, 1083, 1170, 1173,

1179). The contractor developed a formula relating daily volume

to

open

area for the sites which responded to the survey CR.

1086, EcIS p. 57). For most sites the study used the open area

computed from the daily volume according to the formula CR.

1176).

The EcIS estimated the closure cost at $5,971.20/acre.

This

is based on $2.60

per

cubic yard for cover material, plus

$808/acre for seeding and fertilizing CR. 1057, 1059; EcIS p.

49).

The EcIS based maintenance of the site on the total area of

the site.

CR. 1059, EcIS p. 49). The site area was drawn from

the contractor’s survey, Agency permit files and a 1981 inventory

of landfills CR. 1066). For some sites the total areas were

estimated from the daily volume according to a formula drawn from

the sites for which data was available CR. 1165).

The maintenance cost estimate assumed that 3.5 of the total

site area required

replacement of cover, and

5

of the total site

required seeding and fertilizing each year for three years CR.

1057, 1059, 1086, 1129, 1164, EcIS 50). The study also includes

$25/acre/year for mowing. This works out to $155.76/acre/year,

or $467 for maintenance for three years of the entire site area

CR. 1059, EcIS 52).

The EcIS based monitoring cost also on the total site

area. The study assumed a minimum of four wells for sites

smaller than 10 acres, plus one well for each additional twenty

acres up to

100

acres. Thereafter,

one additional well was

assumed for each 50 acres CR. 1057, 1059, 1080, 1082; EcIS p.

50).

---

The EcIS assumed a cost of $150 per sampling. Four

samplings per year over a three-year period results in an $1,800

monitoring cost per well (R. 1059, EcIS p.49).

The EcIS included only aggregate amounts without displaying

its cost estimates

for individual sites. At the hearing, the

contractor presented

average values for the data (R. 1077,

1153). A typical

site is as follows (Ex. C-2i:

Maximum open area

Daily waste received

Total site acreage

Monitoring Wells

2.9 acres

1592 cubic yards

64 acres

6

Applying the EcIS cost estimate formula, one gets:

Closure S~971,20 x 2,9 =

Maintenance 467.00 x 64

=

Monitoring i~800

x 6

=

Cost Estimate

$17,316.48

29,888.00

10,800.00

$58,004.48

This is approximately equal to the average cost estimate

derived by dividing the aggregate cost of $8,900,000 by 152

sites.

Section 807.640

Mechanisms for Financial Assurance

The operator may use any of the following mechanisms:

1. Trust fund

2, Forfeiture bond

3.

Performance bond

4. Letter of Credit

5. Closure insurance

6. Self-insurance

(for non-commercial sites only).

Section 807.641 Use of Multiple Financial Mechanisms

The operator may use a combination of trust funds,

Corfeiture bonds, letters of credit and closure insurance

to

give

Linancial assurance ‘for a site. Performance bonds and self-

insurance

cannot be used in combinations.

Section 807.642

Use of a Financial Mechanism for Multiple

Sites

The operator may use a single mechanism to provide financial

assurance for more than one site.

The amount

is the sum of

the

cost estimates

for the sites.

Section 807.643 Trust Fund for Unrelated Sites

The Board

has allowed a

multiple unrelated operatorts trust~

fund

in which several operators contribute to a single trust.

68-486

---

-35-

This should reduce each operator’s share of the admlntstrative

cost of maintaining the trust. CR. 1055)

The trust works just like Section 807.661, with a few

exceptions.

The trustee must maintain books which show each

site1s account. The evaluation is made on the date of creation

of! the trust, regardless of the dates each site joined. Payments

out of the trust for a specific site are only from the account

Section 807.644

RCRA Financial Assurance

The operator is not required to give financial assurance

under Part 807 if he demonstrates that the RCRA closure and post-

closure plans will result in closure and post-closure care in

accordance with the requirements of Part 807, and that he has

provided

adequate RCRA financial assurance. If there are closure

activities required under Part 807 which are not required under

the RCRA rules, the operator can either include the Part 807

activities in the RCRA plan and increase the RCRA financial

assurance,

or provide a separate Part 807 plan and financial

Section 807.661 Trust Fund

The operator may satisfy the financial assurance requirement

by establishing a trust fund for the benefit of the Agency. The

trustee receives annual payments during the operating life of the

site.

Upon closure the trustee pays out as directed by the

Agency. The trustee pays the operator if he closes the site, or,

alternatively, pays the Agency’s contractor.

The

trustee must be an entity with authority to act as a

trustee. Illinois firms must be regulated by the Illinois

Commissioner of Banks and Trusts. Out-of-state firms must comply

with the Foreign Corporations

as Fiduciaries Act CIlt. Rev. Stat.

1983, ch. 17, par. 2801 et seq.).

The Agency should reject

financial assurance in the form of a

trust unless the trustee

complies with these requirements. Limiting

trustees to those

supervised by the Commissioner of Banks and Trusts provides

assurance

that

the

trustee will carry out its duties in a manner

The Board will specify the form of trust agreements in

Appendix A CR. 123, 390).

The Operator must make a

payment

into the trust fund each

year during the ‘pay-in period,’ which is equal to the number of

years remaining until the site

reaches the point in its operating

life at which the cost of premature closure would be the greatest

CR. 688, 757). The Board

has also specified that the pay-in

period be not less than three nor more than ten years, so as to

avoid requiring immediate full funding for sites which may

already be at the point of maximum closure cost, and yet to

68-497

---

-36-

assure reasonably prompt funding for all sites CR. 388, 398, 782,

1092, 1132). It is necessary to specify limits since Illinois

pnmits are of indefinite duration CR. 688).

An operator who elects to utilize the trust fund mechanism

has an obligation to the State to fund the trust and to provide

closure and post-closure care in accordance with these rules.

Closure and post-closure care costs are a necessary expense

associated with landfill operations. This expense should be

recognized during the operating life of the site, rather than

being postponed to the time of actual closure CR. 244, 474).

The trustee must evaluate the trust annually. The trustee

will be obliged to invest the funds under the terms of the

agreement. CR. 1093, 1137) The annual

evaluation will reflect

the losses or gains. CR.

1138) The operator will have 90 days to

make up any shortfall resulting from evaluation CSect ion

807.603).

The

operator can also request

release of profits in

excess of the cost estimate CSection 807.661(e)). The evaluation

date can be moved up for the convenience of the operator or

trustee.

Under paragraph (g)C2) the Agency has 60 days to determine

whether expenditures are in accordance with the plan. If so, it

instructs trustee to reimburse the

person providing closure.

Pursuant to JCAR staff comments, the phrase ‘or are otherwise

justified’ has keen deleted. The related language in Section

807.665Cf) hasalso been dropped.

The proposal was drawn from 40 CFR 264.143Ca).

The other

1.

2.

in the cost

3. Provisions on

807.604 and 807.606.

The EcIS

concluded that the one-operator trust fund would be

the most expensive mechanism CR. 1055, 1061, EcIS p. 19, 41).

This is in part because the banks surveyed charge large fees and

pay

low interest on the trust corpus CR. 1093, 1137). Annual

fees average about 6.33 percent of the cost estimate CR. 1061).

Also, the study failed to pick up the changes in the pay-in

period in the December 27 Order (1095, 1132). Actually, of the

91 sites which

had

complied with the temporary rules by the time

of the economic impact hearings, 36 utilized trusts CR. 1101).

68-498

---

Section 807.662

Surety Bond Guaranteeing Payment

The operator may satisfy the financial assurance requirement

by tendering a surety bond guaranteeing that the

operator wilt

close the site in accordance with the plan or the surety will pay

the amount of the bond which is based on

the current cost

estimate.

This mechanism assumes that the operator will provide

closure, with the surety liable only on default.

The surety company must be licensed by the Illinois

Department of Insurance. The Agency should reject bonds in which

the surety is not so licensed.

This requirement will assure

oversight of the financial institution to insure that funds will

be available when needed. This requirement will not restrict the

number of surety companies available significantly since the

majority of sureties

acceptable in Circular 570 of the U. S.

Department of the Treasury are licensed in Illinois CR. 221,

The Board will specify the form of bonds in Appendix A CR.

123, 461, 465).

The Board has eliminated the requirement of a standby trust

fund to receive payments made under the bond. Any such

payments

will

be placed in the landfill closure and post-closure fund

where they may be earmarked for application to the site

pursuant

to Section 22.1Cc) of the Act. Deletion of the standby trust

fund will save costs for the regulated community CR. 390, 461).

The bond must guarantee that the operator will provide

closure and post-closure care in accordance with the plans in the

permit. The surety becomes

liable when the operator: abandons

the site as defined in

Section 807.104; becomes bankrupt; fails

to initiate closure at the time the Board or a court orders

closure to begin; or,

initiates closure,

but

fails to complete

closure

and post-closure care in accordance with the plans.

Abandonment occurs when the operator fails to initiate

closure within 30

days after receiving a final volume of waste.

If no waste is received within a 30-day period,

the operator must

demonstrate that it expects additional waste (Section 807.104).

Bankruptcy renders

it highly unlikely that an operator will

be able

to perform closure and post-closure care. It has

therefore been listed as a condition triggering the surety’s

liability.

Abandonment and bankruptcy represent simple factual

situations which do not directly involve the question of whether

the operator is in compliance with environmental regulations. If

the

surety refuses to pay on notice, the Agency should

sue

in

Circuit Court, which would make the determination as to whether

the abandonment or bankruptcy

had

in fact taken place.

66-499

---

38-

The surety .lo ~ n

d ctly giarantee that the operator

will comply with Boci.J

re a

aoas and permit conditions in

operation of the sste~

-!

t

Agency believes a site is poorly

operated, it must file

-

.l¼rementaction to obtain a finding

of violation. If the

C

.ei tsr ts closure of the

site, the

surety becomes liable onl3 -f t e operator fails to close as

ordered.

The fourth condit oi ‘1 ef at todd occur when the

operator starts to closc

tn. ...te tat fails to complete the job

as specified in the c1o~ ‘s

a: o

‘losure care plans. This is

similar to a constructi~

tr

b ~d in which the surety

becomes liable if the c

~

ca

oiL to build a building

According to specificat

The amount of tie

m st be

a least equal to the cost

estimate. The Agency r

•

a

•

ove a reduction in

the

amount

whenever the cost esttma

S.c oses

However, the operator

must

first request the reduct

a 3

hc surety is not obliged to

agree to it. If the Ag

i. aaees with the reduction in the

cost estimate, it should

-

cost estimate pursuant to

Section 807.214. If it a

tp

s

reduced cost estimate, it must

approve a reduction in ti.. bond atount. This language has been

clarified pursuant to

JCfl

commerts. Similar changes have been

made in Section’s 807.b63 th” and 807.664(f)C2).

The proposal was dra

a

..icn

40 (SR 264.143(b) but differs in

one respect. That Section

cli.

s

i r cancellation of the bond by

the surety on a 120-day notice to the Agency and the operator,

but makes the failure to obtai,r other financial assurance in a

90-day period a conditi.or

lc.sd

o liability by the surety.

Surety companies object to tnt opat-ended liability CR. 796, R.

1097, EcIS, A-i, 14). Ir order to attempt to make bonds more

available to operators, s

a d as specified that bonds be for

at least four years, but ~

u~. eQ

the provisions making

cancellation a condition lea

p

o liability. The four years

would provide assurance f’r

t

reasonable period of time during

which the Agency coald

in a forcement action and obtain a

closure order if opers~iorb

* •

d bad. Four years seems to be

within the range of cons- ‘ic

r 1rojects. This

change does

leave the State in an expo ed position if

the operator does not

provide additional asaurarce

•rmination of a bond. According

to the second telephor°

s

z’e conducted for the EcIS, this

modification did not sataf

the suretys’ objections (EcIS A-30).

The Board has pri

‘

ided

r

si

automatic twelve-month

extension of the surety s liatisli y if the operator fails to

provide substitute financial aautance. The Agency should file

an enforcement action ategi.

n

tailure to provide financial

assurance if it wishes to er ‘ire

mpletion of the proceedings

The following ~rov4

e

r~~osaJhave boon moved to

other Sections:

0

---

-39-

1.

When financial

~.

2. Requirement

t

:

ta.t~

4.

Release of finan

•

Section 807.663

The perforniarce bo

except that the surey

and post-closure care p1

performance bond is spec-

Act. However, the Stab.

The EcIS conclude

expensive mechanisms to

no acceptance fee ana ha.

cost estimate CR. i056,

were not restricted to re

the 91 sites which had p

of the EcIS hearings, on.

(,.a anteeing Performance

•

)

cal ~o the forfeiture bond

‘e p ion of implementing the closure

i

s cad of paying the penal sum. The

arformance of closure CR. 392).

bor s could be one of the less

c al assurance since they involved

o arnual fcc of around 2.1

of the

1.31 EcIS p. 40). Also, bonds

r customers CR. 1140).

However, of

.4 financial assurance by the time

rae actually used bonds CR. 1101,

The operator may sati

he financial assurance requirnment

by obtaining

a letter of c

.t ro. a financial institution.

The letter of credit a..

Si

ia.. to a bond in that it assumes that

the operator will provide

-

xc

If he fails, the Agency

writes a draft against tic

a

t-... of credit and presents it for

payment through banking ‘t. .ca.

The

issuing institution pays

the draft, and then attetpts L,

collect from the operator the

amounts paid like a bar

.

The Agency snould

IC

er

tnancial assurance in the form or

letters of credit froi ins~

-

ion which do not meet one of

these criteria which crit.e so ate intended to provide assurance

that the financial insti utson will be managed in such a way that

funds will be available I ‘

-

osure. Although FDIC and FSLC do

not actually insure lett.e...

r. ...rsdit their oversight provides

some assurance of continu

-

f .he financial institution CR.

The Board viii spe

o etters of credit in

Letter

.

...

cit

The financial i sti

to issue letters of 4rea

be regulated by the Ills

it must be insured b)

FDTt.

a.

ust be an

entity with authority

Its letter-of-credit operations must

r iasioner of Banks and Trusts, or

FSLIC

---

-4

-I—

The Agency is a iowA

operator fails to £ zde

accordance with ~he pia

.~

conditions as for a

~

As it did

vi.

tic

letters of credit

u c

has deleted the p c.r,s~.dc.

on the letter of cx

i.

:1

additional financi

a

‘

The EcIS conc d t~a -era of credit should be widely

used instrument bet

e

c a. o acceptance fee and an annual

premium of only at 1.b c o the cost estimate CR. 1054,

1061, 1097, 1136, Y

,

F 1’

9) The letter of credit was

actually used by 3’ of 1 sites itch had provided financial

assurance by the tiau. o te cc somic impact hearings CR. 1101).

The operator may saL.,f

the if narcial assurance requirament

by providing closure

iisuran. wi h the Agency as a

beneficiary. Closure insurance is similar to a trust fund in

that payment is not de eidei cn sr default of the operator:

the insurance compa:

~

£

‘te operator voluntarily

closes the

site and 1c tin. wrk.

The insurance

c

s y ru

be licensed to transa”t the

business of insura

‘.e

m.soss Department of Insurance.

The Agency should re cc a irancial. assurance any insurance

from a firm which ic n so I ensed. Oversight by the

Department of Ins’-r

-

i’ t.

essary to assure that the insurance

company is managea ii .

-

a ray that funds will be available for

closure CR. 221, 3)1

The closure a

•

*

3~

ic iust be approved by the

Department of Insurai

R. 23, 22! 228).

The insurar’cs

c

~

t.3

es liable to pay out on the

policy whenever:

t

c opc.rator aoandons the site; Lhe operator

becomes bankrupt;

ti

Board crders the site closed; the operator

notifies the Ager” t~a it -s initiating closure; or, the

operator initiate0 do xc.

lie

ir’urer must pay out funds at

the direction of

tn.

Agen:y to ciomeve: is providing closure or

post-closure care.

The Board ha ~ d

it

c

‘

oposed requirement

of a

standby

trust fund. Any p mer s i

.

a letter of credit will go into

the iindfill closu

..

ard

ct.r

Los ire fund in the State Treasury

pursuant to Section 21 1

of

tic Act. This should reduce

compliance costs CR 39 461).

dra or the letter of credit if the

-

re and post-closure care in

t-r at least four years,

r

~ e otice of cancellation.

but

Section 807.665 C1ob se

lioutaire

An insura.c

-

the premium.

.s

-‘

•

c lied or.y for failure to pay

-he operator builds equity in

‘a

---

~41~

the policy

which

he is entitled to on

closure. The insurer must

give the Agency 120 days~ notice before

cancellation for

non—

payment of the premium. The insurer cannot

cancel if the premium

due is paid

by the

operator or the

Agency.

The proposal

specified abandonment, bankruptcy, etc. as

conditions preventing cancellation, These

have been reworded

t

be consistent

with the rest of the proposal and have been stated

with the guarantee of the policy. If the insurer becomes liable

under paragraph (e) during the cancellation grace period, it

continues to be liable after the period has ended,

The proposal provided specifically that failure to pay the

premium

was a

violation of the regulations. This has been

dropped as unnecessary. If the failure to pay results in

inadequate financial assurance, the operator will be in violation

oF Section 21.1 of the Act and Section 807,601.

The EcIS concluded that closure insurance would not he

utilized because no companies would write the insurance, and that:

annual premiums would range from 7 percent to 15 percent of the

cost estimate (R. 1056, EcIS p. 41). None of the 91 sites which

had provided financial assurance by the time of the EcIS hearings

used closure insurance

(R.

1101).

Section 807.666

Self—insurance

for Non—commercial

Sites

The Board

has added a self—insurance provision to the

proposal. The rule is largely drawn from the federal RCRA

Financial test of 40 CFR 264,143(e),

Section Z2.l of the Act requires a “performance bond or

other security.” The RCRA financial test alone does not meet this

description. The Board has therefore required operators seeking

to use the financial test to provide a bond without surety. The

assets of the firm will be sufficient security if the operator

meets

the financial test and other requirements of the Section.

The bond without surety will place the State in a better position

as a creditor in the event of the operator’s bankruptcy. The

bond will provide a liquidated amount which the State can claim

against the operator~s assets, Furthermore, the language of the

bond places

the burden

of proof on the operator to prove that he

provided closure and post—closure care in accordance with the

bond conditions (R, 128, 281, 288, 316, 323, 332, 426).

The financial test is intended to identify firms with

financial problems sufficiently far in advance so that the firm

still has assets to provide alternate financial assurance

(R. 311).

The

test balances reliability against availability:

the test attempts to exclude all firms which will

become

bankrupt,

and to pass all firms which will not become bankrupt

(R. 318).

---

-42-

USEPA selected 15 financial ratios from a list of possible

ratios.

It arrived at the financial test after testing these 15

against samples of bankrupt and non-bankrupt firms. The USEPA

financial test

is expected to allow 96 of non-banktupt firms to

pass, but is expected to pass only 0.1 of firms which will later

enter bankruptcy CR. 345).

In choosing the financial test,

USEPA sought

to minimize the

sum of the public and private costs, reasoning that increased to

operators were passed on to the public. The balancing involved

public and private administrative costs as well as possible

public costs from unfunded closure CR. 320).

The RCRA financial test is capable of predicting impending

bankruptcy sufficiently far in advance that the firm should have

sufficient assets to provide alternate financial assurance

at

the

time it fails the test, even if its financial condition is

rapidly deteriorating CR. 311, 319, 353, 415, 517).

The financial test includes alternate provisions involving

bond ratings for firms with publicly-held debt and ratios which

can be used by firms without ratings. The bond rating test is

often used by public utilities, which have trouble meeting the

ratio tests, but which are financially sound CR. 270, 312, 315,

To meet the financial test, an operator must have a tangible

2. At least $10,000,000.

The $10,000,000 tangible net worth requirement is related to

the probability that a firm will become bankrupt: exclusion of

firms with a lesser tangible net worth reduces the frequency of

bankruptcy by fifty percent CR. 239, 247, 281, 312, 326, 331,

343, 355, 509). The requirement of a tangible net worth at least

six times the cost estimate is an indicator of whether a firm is

large enough to complete the closure and post-closure care to

which it has obligated itself CR. 239, 312, 326, 328, 330, 355,

509).

The operator is also required to provide an opinion from a

certified public accountant. An adverse opinion or disclaimer

will be cause for disallowance. Other qualifications

may

result

in disallowance of the test CR. 240, 268, 313, 518).

A more stringent financial test could be constructed.by

adding a requirement that the ratio of net fixed assets to total

assets be greater than 0.3. The Wisconsin financial test

incorporates this ratio CR. 346, 350, 352, 516, 525). The Board

sees no need to make the test more stringent.

88404

---

-43—

The RCRA test is based on studies of the bankruptcy rates

for firms other than commercial disposal

firms CR. 232, 347, 415,

503). The RCRA

financial assurance requirement applies to

hazardous waste treatment and storage facilities, as well as

disposal facilities, and applies on-site

as well as off-site.

0ff-site hazardous

waste disposal facilities are only a tiny

fraction of the RCRA universe, which consists mostly of

manufacturing concerns managing their own waste CR. 332, 417).

The Illinois financial assurance requirement under consideration

applies almost entirely to off-site disposal CSections 2lCd) and

21.1 of the Act).

Firms which meet the financial test tend to be Jorge

diversified companies. However, if the test were applied only to

firms in any specialized line of business, the State would be

subject to greater risk because the economy could turn against

that specialized line, resulting in a large number of unfunded

closures. The firms which could use the test under this proposal

would be almost entirely engaged in a single line of business:

commercial waste disposal. Furthermore, these firms are in a

highly regulated area with high exposure to rapidly changing

regulations. The firms are all exposed to major liability for

potential environmental damage they may be causing CR. 315, 367,

351, 356, 619).

The Board has restricted use of the financial test to firms

which are not engaged in commercial waste disposal. This is

defined in terms of whether the firm derives more than 50 of its

gross revenue from waste disposal activities. The definition

suggested at the hearing was more than 80 of gross revenue in

waste management activities CR. 352). The Board has lowered the

percentage to 30, but has used disposal as a criterion.

Therefore a firm also involved in commercial waste treatment may

be eligible for the financial test.

Participants suggested a test at the hearings and in the

public comments. The suggested test was that the tangible net

worth exceed the cost estimate CR. 796; NSWMA comment of October

26, 1984). Since the cost estimate is not treated as a liability

in computing tangible net worth, it is possible that a firm could

meet this test and immediately declare bankruptcy simply by

recognizing its obligation to provide closure and post-closure

care as a liability (Appendix A). This would be short of the

three years prediction needed to make certain that the operator

has sufficient assets to provide alternate financial assurance at

the time it first fails the test.

It may be possible to construct a financial test which

commercial disposal operations could meet. However, the

participants in this rulemaking came forward with no firm

evidence suggesting the ability of any test to predict the

failure of such firms sufficiently far in advance that alternate

financial assurance could be provided.

66-505

---

—44—

Participants have provided evidence that small landfills may

not be able to obtain financial assurance, and may hence have to

close CR. 174, 186). Participants have suggested a financial

test as a way of avoiding such closures, which would be a

hardship on the public in some areas of the State, as well as

operators. However, for the reasons noted above, operations with

a smaller tangible net worth and the ones most likely to become

bankrupt.

Part 104 and Title IX of the Act provide a variance

mechanism by which operators which experience arbitrary or

Following the merit hearings it appeared that the

$10,000,000 tangible net worth test and the gross revenue test

would allow few, if any, disposal sites to utilize self-

insurance. The EcIS reached the same conclusion CR. 1098, EcIS

p. 34). However, of the 91 sites which

had

provided financial

assurance by the time of the EcIS hearings, 16 utilized self-

insurance CR. 1101, Ex. C-3).

The Board has received no requests for variances since the

emergency rules were adopted. 91 out of an estimated 168 sites

had provided financial assurance by the time of the EcIS hearings

CR. 1101, 1104, Ex. C-3). The sites which

had

not complied are

smaller sites, including sites receiving only construction debris

CR. 1105).

The RCRA rules provide that a parent corporation can

guarantee the operator’s cost estimate if the parent meets the

financial test. The Board has specified a form on which the

parent’s guarantee must be made. This is similar to the

forfeiture bond form.

The RCRA rules

limit the corporate guarantee to parent

corporations which own more than 50 of the operator’s voting

stock C40

CFR

264.l4lCd)). The Board has dropped the 50

requirement,

but

continues to require some ownership interest in

the operator. Unrelated firms offering this type of guarantee

are in the business of writing surety bonds, and should be

licensed by the Department of Insurance CR. 221, 227, 245, 271,

The Board has continued to limit financial tests and

guarantees to corporations.. The financial tests are geared

toward corporate accounting practices, and no one has proposed a

test applicable to individuals. Furthermore, there is a chance

that an individual will die, leaving the State in a position in

which it would have to claim against the assets of an estate CR.

246, 272).

The Board made several changes to the self-insurance

provision pursuant to

SCAR

staff comments. The Board has added

definition of “generally accepted accounting practices.” This

66-506

---

incorporates ~

published

by the Financial

Accounting Standards

Board, High Ridge Park, Stanford, CT

06905. The Board has also modified the definition of “tangible

net worth” to read more like the other definitions.

The first ratio test in Section

807,666(e)(1)(A)(i)

was

wrong in the

second

notice rules. It

read

“3.0” instead of

“2.0”, which

was used

in Appendix

A, Illustration

I, Alternative

1, line 15, and in 40 CFR 264~l43(f)(i)(A), which was the source

of the financial test, The Board corrected this pursuant to JCAR

staff comment.

The

Board has also reworded the provisions

of Section

807.666(g)

concerning

qualified opinions. The Agency must

disallow the test if the operator~s accountant gives an adverse

opinion or a disclaimer of opinion. The

effect

of other

qualifications

depends

on whether

they relate to the numbers used

in the test, and

whether, in light of the qualifications, the

operator has demonstrated that it meets the test.

This Opinion supports the Board~s Final

Order, Adopted Rule

of this same day.

I, Dorothy M. Gunn,

Clerk

of the Illinois Pollution Control

Board, hereby certify

that the above

Opinion was adopted on

the

~

day of

1985

by a vote of

Illinois Pollution Control Board

66~507