ILLINOIS POLLUTION CONTROL BOARD
April
6,
1995
IN THE
MATTER
OF:
)
)
PETITION OF WASTE MANAGEMENT
)
OF ILLINOIS, INC. FOR AN
)
ADJUSTED STANDARD FROM 35
)
AS 94-12
Ill. Adm. Code Sections
)
(Adjusted Standard-Land)
807.665(b) and 811.714(b).
)
BARBARA
B. GUIBORD, WILLIAMS
AND
ZEVNIK, PC. APPEARED ON BEHALF
OF PETITIONER;
ROBERT J. SCHERSCHLIGT, ASSISTANT COUNSEL, APPEARED ON BEHALF OF
THE ILLINOIS ENVIRONMENTAL PROTECTION AGENCY;
DAVE MARTIN, ASSISTANT STATE’S ATTORNEY, APPEARED ON BEHALF OF
CHRISTIAN COUNTY SOLID WASTE MANAGEMENT.
OPINION AND ORDER OF THE BOARD
(by G.
T. Girard):
This matter is before the Board on a petition for an
adjusted standard filed by Waste Management of Illinois (WMI).
WMI
asks that the Board grant an adjusted standard to the Board’s
rule of general applicability for financial assurance found at 35
Ill. Adm. Code 807.665(b)
and 811.714(b).
That requirement
provides that in order to utilize an insurer to satisfy solid
waste disposal facility financial assurance for closure and post—
closure care, the insurer “shall be licensed to transact the
business of insurance by the Illinois Department of Insurance
pursuant to the Illinois Insurance Code”.
WHI
filed its petition on June 29,
1994.
The Illinois
Environmental Protection Agency (Agency)
filed a response to the
petition instanter on July 11,
1994.
WMI
waived hearing; however
on July 18,
1994, the Board received a request for a hearing
which was held on October 25,
1994.
Based upon the record and upon review of the factors
involved in the consideration of adjusted standards, the Board
finds that
WHI
has demonstrated that factors relating to
WMI
are
“substantially and significantly different from the factors
relied upon by the Board in adopting the general regulation”.
Accordingly, the request for adjusted standard is granted with
conditions for the reasons discussed below.
ADJUSTED STANDARD PROCEDURE
The Board’s responsibility in this matter arises from the
Environmental Protection Act
(Act)
(415 ILCS 5/1 et seq.).
The
Board is charged therein to “determine,
define and implement the
environmental control standards applicable in the State of
Illinois”
(415 ILCS 5/5(b)) and to “grant
***
an adjusted
2
standard for persons who can justify such an adjustment”
(415
ILCS 5/28/1(a)).
More generally, the Board’s responsibility in
this matter is based on the system of checks and balances
integral to Illinois environmental governance:
the Board is
charged with the rulemaking and principal adjudicatory functions,
and the Agency is responsible for carrying out the principal
administrative duties.
The Act provides that a petitioner may request, and the
Board may impose, an environmental standard that is different
from the standard that would otherwise apply to the petitioner as
the consequence of the operation of a rule of general
applicability.
Such a standard is called an adjusted standard.
The general procedures that govern an adjusted standard
proceeding are found at Section 28.1 of the Act and within the
Board’s procedural rules at 35 Ill. Adm. Code 106.
Where, as here,
the regulation of general applicability does
not specify a level of justification required for a petitioner to
qualify for an adjusted standard, the Act at Section 28.1(c)
specifies four demonstrations that must be made by a successful
petitioner:
1)
Factors relating to that petitioner are substantially
and significantly different from the factors relied
upon by the Board in adopting the general regulation
applicable to that petitioner;
2)
The existence of those factors justifies an adjusted
standard;
3)
The requested standard will not result in environmental
or health effects substantially or significantly more
adverse than the effects considered by the Board in
adopting the rule of general applicability; and
4)
The adjusted standard is consistent with any applicable
federal law.
RULES OF GENERAL APPLICABILITY
The Board’s rules at 35 Ill. Adm. Code 811.665(b) provide
that:
The insurer must be licensed to transact business of
insurance by the Illinois Department of Insurance.
The Board’s rules at 35 Ill. Adm. Code 811.714 provide in
pertinent part that:
3
a)
An owner or operator may satisfy the requirements of
this Subpart by obtaining closure and post—closure care
insurance which conforms to the requirements of this
Section and submitting an executed duplicate original
of such insurance policy to the Agency.
b)
The insurer shall be licensed to transact the business
of insurance by the Illinois Department of Insurance
pursuant to the Illinois Insurance Code (Ill. Rev.
Stat.
1991,
ch.
73,
pars.
613 et.
seq.
(215 ILCS 5/1
et.
seq.).
The Board originally adopted this provision in 1990,
in the
Board’s rulemaking proceeding In the Matter of:
Development.
Operating and Reporting Requirements for Non—Hazardous Waste
Landfills,
R88-7,
114 PCB 483,
(August 17,
1990)’.
The Board in
R88—7 developed and adopted comprehensive statewide regulations
concerning the operation of landfills.
The financial assurance
provisions were one small section of these regulations.
The
Board has since amended the landfill regulations to include the
provisions adopted by the USEPA under the Resource Conservation
and Recovery Act
(RCRA)
Subtitle D in R93-10 RCRA Subtitle D
Amendments
(Amendments to 35 Ill. Adm. Code Part 811 and 814).
In adopting the RCRA Subtitle D requirements the Board
proceeded pursuant to Sections 7.2 and 22.4 of the Act.
Under
Section 7.2 of the Act, the Board may only adopt those
regulations identical-in-substance to the regulations adopted by
the USEPA.
In R93-10, the Board specifically responded to a
comment from the Agency regarding financial assurance through the
insurance mechanism.
The Agency commented on the differences
between the Board’s landfill regulations and the federal
requirements.
The Board stated:
To the extent the Illinois regulations specify the
person who must regulate the trustee,
issuer of a
letter of credit or the insurer, without more the Board
perceives that the Illinois regulations go beyond the
scope of the federal regulations.
Without regard to
the Agency’s assertions that most Illinois sites have
provided financial assurance that does not comply with
the requirement, the Board cannot amend these
provisions in the way requested without a proposal from
the Agency that would initiate a “regular” rulemaking
on the merits.
(R93-10, September 15,
1993 at 18.)
j
References to the Board’s prior rulemaking proceedings
will be cited as “R
@@,
date at
_“;
the petition will be cited
as “Pet.
at
.“;
the Agency response will be cited as “Ag.
Rec.
at
“.
4
FACILITY DESCRIPTION
WMI
is a solid waste management company which owns and
operates a number of waste disposal facilities throughout
Illinois.
(Pet. at 5.)
Since early 1991, closure and post-
closure insurance has been issued by National Guaranty,
a wholly—
owned subsidiary of WMX Technologies.
(Pet.
at 2.)
WMX
Technologies,
Inc.
is the parent corporation for WMI.
(Id.)
For
the past three years the Agency has accepted the insurance
policies issued by National Guaranty from
WMI
as being in
compliance with the Board’s regulations.
(Pet.
at 3.)
National Guaranty was established in 1989 to provide
insurance coverage to the its parent WMX Technologies, Inc and
affiliated companies.
(Pet 5—6.)
National Guaranty provides
primarily surety bonds and financial assurance policies written
on a claims—made basis and the policies relate specifically to
the basic operations of WMX.
(Pet.
at 6.)
National Guaranty is
known as a “surplus lines carrier” based on the type of coverage
National Guaranty underwrites.
(Id.)
Surplus lines carriers
underwrite coverage which “is excess or surplus to the ‘admitted’
or traditional insurance market, that is, coverage which licensed
or admitted carriers are not prepared to underwrite”.
(Id.)
WMI
asserts that because of the 30—year minimum time frame
required for closure/post—closure insurance, the traditional
insurance market remains essentially unwilling to underwrite
closure and post—closure coverage.
(Pet.
at 6.)
WMI
argues that
the closure/post—closure coverage is the type of coverage
traditionally handled by surplus carriers.
(Id.)
If facilities
cannot use insurance issued by surplus carriers to meet financial
assurance, as a practical matter insurance will not be available
for closure/post—closure coverage.
(Pet. at 6.)
National Guaranty is “fully authorized to operate in the
State of Illinois under the statutory S
plus Lines Exemption,
215 ILCS 5/445”.
(Pet.
at 7.)
Nationa
uaranty is required to
operate through a licensed surplus line~ gent or broker.
Under
Illinois law the broker or agent must es
bush that diligent
efforts have been made to place the cove.
~ewith admitted
insurance companies before the coverage c
be placed with a
surplus lines carrier.
(Id.)
Also under
1.inois law, National
Guaranty “must meet stringent capital stai
rds and other
regulatory requirements imposed upon surpl
lines carriers doing
business in Illinois.”
(Pet.
at 8.)
WMI
maintains that surplus lines insur
~e can provide
financial assurance that is just as reliable
ts that provided by
other mechanisms authorized in the regulatic
.
(Pet.
at 6-7.)
In support of this position,
WNI
points out
t under Illinois
5
law surplus lines standards require a policy holder surplus of at
least
$5 million.
(Pet.
at 8.)
WMI
states that National
Guaranty’s surplus is in excess of $170 million and far exceeds
capital requirements of many licensed insurance carriers.
(Pet.
at 8.)
RELIEF REQUESTED
WMI
is seeking an adjusted standard from 35 Ill. Adm. Code
807.665(b)
and 811.714(b)
to allow National Guaranty to provide
financial assurance insurance for WMI’s facilities in Illinois.
Specifically,
WMI
is asking that the standard for
WMI
state:
financial assurance would include closure and post—closure
financial assurance from an insurance carrier which is
licensed to transact business of insurance by the Illinois
Department of Insurance or is eligible to provide insurance
as an excess or surplus lines insurer in the State of
Illinois.
(Pet at 9.)
AGENCY RESPONSE
The Agency asserts that the petitioner has correctly stated
the level of justification required for this adjusted standard to
be granted, and also appropriately does not discuss the
quantitative and qualitative impacts on the environment.
The
Agency agrees with
WMI
that the adjusted standard is consistent
with federal law.
(Ag. Rec. at 2.)
The Agency “concedes” that it has allowed
WMI
to use captive
insurance for the past three years to meet the financial
assurance requirements of Sections 807.665(b)
and 811.714(b).
(Ag. Rec. at 2.)
The Agency in general supports the granting of
an adjusted standard and recommends that the standard be
conditioned on WMX Technologies,
Inc. being required to pass the
financial test of 35 Ill. Adm. Code 811.7l5(b)(3).
(Ag. Rec. at
4.)
The Agency is not suggesting that
WMI
be required to provide
a bond or promise to pay in accordance with Section 811.715
(C).
(Id.)
Rather, the Agency suggests that WMX Technologies,
Inc.
annually be required to meet the financial requirements of
Section 811.715(e) (1) as provided in Section 811.715(e)(2).
(Ag.
Rec. at 4.)
Thus, the Agency is recommending that the adjusted
standard include a condition which will require
WMX
Technologies
to annually provide documentation of its financial status.
The Agency does not challenge the sufficiency of National
Guaranty’s capitalization at this time.
However, the Agency is
concerned that the financial position of National Guaranty could
deteriorate in the future.
Therefore, the Agency is recommending
the above mentioned condition.
(Id.)
COMPLIANCE
ALTERNATIVES
6
WMI
has begun to use the “Financial Test/Corporate Guaranty”
mechanism for financial assurance while seeking this adjusted
standard.
WMI
asserts that the use of the “Financial
Test/Corporate Guaranty”,
as provided in Section 811.715, will
cost “approximately $95,000 more per year than insurance from
National Guaranty”.
(Pet. at 9 citing Affidavit at para.
10.)
WMI
argues that these costs constitute an undue burden on the
parent company WMX because the increased costs do not “result in
any corresponding increased protection for the environment”.
(Pet. at 9.)
HEALTH AND
ENVIRONMENTAL
EFFECTS
WMI
maintains
that
the
granting
of
the
adjusted standard
will
have
“no
adverse environmental impact or health effects”.
(Pet.
at
14.)
WMI
states
that
if
there
is
concern
over
the
viability of a surplus lines carrier, National Guaranty is
sufficiently capitalized and has “established a three—year
‘track
record’
in Illinois to allay such concern”.
(Pet.
at 10—11.)
CONCLUSION
Section 28.1(c)
of the Act requires that in order for a
petitioner to receive an adjusted standard the petitioner must
demonstrate that:
Factors relating to that petitioner are substantially
and significantly different from the factors relied
upon by the Board in adopting the general regulation
applicable to that petitioner.
WMI
has established that National Guaranty is a viable
company capable of providing adequate financial assurance in
Illinois.
WMI
has shown that use of a mechanism other than
National Guaranty would be more costly with no additional benefit
to the health or environment in Illinois.
Therefore, the Board
will grant the adjusted standard to WMI.
The Board is however
also going to include the conditions recommended by the Agency.
The Board believes that it the conditions are necessary to insure
that National Guaranty remains a viable surplus lines carrier.
On March 22,
1995,
the Board received a filing in this
proceeding which indicated that
WMI
would be required to purchase
non-refundable insurance on March 31,
1995.
The filing indicated
that
WMI
had asked the Agency for an extension of that date.
As
a general rule the Board grants an adjusted standard effective as
of the date of the Board decision.
However, the Board has
granted retroactive relief in variance proceedings where unusual
or extraordinary circumstances exist.
DM1. Inc.
v.
EPA, PCB 90-
227, 128 PCB 241 (December 19,
1991).
The Board is convinced
that such extraordinary circumstances exist here.
The purchase
of non—refundable insurance would be a significant financial
7
expense when in effect there is only six days between March 31
and today’s date.
Further, the Board’s
own
schedule was such
that a decision after the March 22, 1995, filing and today was
not practicable.
Therefore, the Board will grant the adjusted
standard effective March 31,
1995.
The Board notes that the Board has recently granted an
adjusted standard to the financial assurance requirements at 35
Ill. Adm. Code 811.710 and 811.713.
(In the Matter of:
Petition
of Winnebago Reclamation Service,
Iric, AS94—11,
(December 1,
1994)
(Winneba~o).)
In Winnebago, the petitioner set forth
several factors which were substantially and significantly
different from those considered by the Board when adopting the
general rule.
Those factors included the fact that the
petitioner had already supplied financial assurance to the USEPA
and the fact that the petitioner was under a consent decree.
The Board has also recently declined to grant an adjusted
standard in Browning—Ferris Industries of Illinois.
Inc..
Browning—Ferris Industries of Iowa. Inc..
and BFI Modern
Landfill.
Inc., AS 94—13
(December 14,
1994).
In that case the
Board found that:
BFI has presented the type of information which could lead
to a rule change; however such a change, absent a showing of
substantially and significantly different factors,
is not
appropriate for the adjusted standard proceeding.
The
factors related by BFI,
in part, were considered by the
Board as recently as the Board’s proceeding in R93—1O.
Therefore,
the Board denies BFI’s request for an adjusted
standard.
As stated above,
WMI
has demonstrated that the factors
relating to
WMI
are substantially and significantly different
than those relied on by the Board in adopting the financial
assurance standards.
Therefore, the Board will grant the
adjusted standard with conditions.
This opinion constitutes the Board findings of facts and
conclusion of law.
ORDER
The Board grants the following adjusted standard to Waste
Management of Illinois effective March 31,
1995:
1.
Instead of the Board’s rules of general applicability
for financial assurance found at 35 Ill. Adm. Code
807.665(b)
and 811.714(b), the following shall apply:
Financial assurance would include closure and post—
closure financial assurance from an insurance carrier
8
which is licensed to transact business of insurance by
the Illinois Department of Insurance or is eligible to
provide insurance as an excess or surplus lines insurer
in the State of Illinois.
2.
WMX Technologies,
Inc. shall annually pass the
financial test of 35 Ill.
Adm. Code 811.715(b) (3);
specifically providing annual proof that WMX
Technologies, Inc. meets the financial test set forth
at 35 Ill. Adm. Code 811.715(e) (1).
Board Member J. Theodore Meyer dissents.
IT IS SO ORDERED.
Section 41 of the Environmental Protection Act (415 ILCS
5/40.1) provides for the appeal of final Board orders within 35
days of service of this decision.
The Rules of the Supreme Court
of Illinois establish filing requirements.
(But see also,
35
Ill. Adm. Code 101.246, Motions for Reconsideration.)
I, Dorothy N. Gunn,
Clerk of the Illinois Pollution Control
Board, hereby certify that the above opinion and order was
adopted on the
~
day of
___________________,
1995, by a
vote of
_____.
~Tfr~Z~
4c.
Dorothy M.,4unn, Clerk
Illinois ~llution
Control Board