ILLINOIS POLLUTION CONTROL BOARD

December 14,

1994

THE

MATTER

OF:

)

PETITION OF BROWNING-FERRIS

)

INDUSTRIES OF ILLINOIS,

 INC.;

)

BROWNING-FERRIS INDUSTRIES OF

)

 AS 94-13

IOWA,

 INC.;

 AND, BFI MODERN

)

 (Adjusted Standard)

LANDFILL,

 INC. FOR

ADJUSTED

)

STANDARD FROM 35 Iii.

 Adin.

)

Code Section 811.714(b)

)

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 Browning-Ferris Industries of

Illinois, Inc., Browning—Ferris Industries of Iowa,

 Inc., and BFI

Modern Landfill,

 Inc.

 (hereinafter known collectively as

petitioner or BFI).

 BFI 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 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”.

BFI filed its petition on June 30,

 1994.

 The Illinois

Environmental

Protection

Agency

(Agency)

filed

response

the

petition

instanter

August

1994.

BFI

waived

hearing

and

the

Board did not receive a request for a hearing, so no hearing was

held.

Based

upon

the

record

and

upon

review

the

factors

involved

the

consideration

adjusted

standards,

the

Board

finds

that

BFI

has

failed

demonstrate

that

factors

relating

BFI 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

denied for the reasons discussed below.

ADJUSTED

STANDARD

PROCEDURE

The

Board’s

responsibility

this

matter

arises

from

the

Environmental

Protection

Act

(Act)

(415

ILCS

5/1

seq.).

The

Board

charged

therein

“determine,

define

and

implement

the

environmental

control

standards

applicable

the

State

Illinois”

(415

ILCS

5/5(b))

and

“grant

adjusted

standard for

persons

who

can

justify

such

adjustment”

(415

ILCS

5/28/1(a)).

generally,

the

Board’s

responsibility

this

matter

based

the

system

checks

and

balances

integral

Illinois

environmental

governance:

the

Board

charged

with

the

rulemaking

and

principal

 adjudicatory functions,

2

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 Iii.

 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 811.714 provide in

pertinent part that:

a)

 An owner or operator may satisfy the requirements of

this Subpart by obtaining closure and postclosure 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.

 E215 ILCS

5/.

et.

 seq.).

3

The Board originally adopted this provision in 1990,

 in the

Board’s rulemaking proceeding In the Matter of:

 Development.

Operatina and Re~ortinaRequirements 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.

 Adin. Code Part 811 and 8141.

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.)

FACILITY DESCRIPTION

BFI is one of the largest publicly held companies engaged in

the business of waste.

 (Pet.

 at 3.)

 BFI owns or operates over

100 municipal and industrial waste solid waste landfills,

including several in Illinois.

 (Pet.

 at 3.)

 BFI is seeking the

adjusted standard for five Illinois facilities.

 BFI has been

actively involved with both the USEPA and the Board in the

development of regulations for the operation of solid waste

1

 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

facilities,

 including the provisions for financial assurance.

(Pet.

 at 3.)

BFI explains that the five Illinois facilities are currently

utilizing a financial test/corporate guarantee for the

demonstration of financial responsibility.

 (Pet.

 at 15.)

On

January 20,

 1993,

 BFI informed the Agency that it desired to

utilize insurance policies issued by a “captive” insurer.

 (Pet.

at 15.)

 BFI has established Global Indemnity Assurance Company

(Global) a wholly—owned captive insurance company to issue

insurance policies to satisfy facility closure/post—closure

financial assurance obligations.

 (Id.)

 Global is incorporated

and domiciled in the state of Colorado.

 (Pet. at 15.)

 On March

4,

 1994, the Agency denied BFI’s request to use a “captive”

insurer because Global is not licensed in Illinois.

 (Id.)

BFI states that Global was capitalized by BFI in accordance

with Colorado legislation that prevents the parent of a wholly-

owned captive from avoiding liability through the voluntary

dissolution of the captive.

 (Pet.

 at 16.)

 According to the

 petitioner,

 Colorado legislation protects the rights of

policyholders to the surplus by requiring certain assets be held

in a qualified financial institution “in a strong iron box which

requires two distinct and different keys to unlock it”

 (C.R.S.

Section 10—3-210).

 BFI asserts that the assets can be removed

only under very specific circumstances.

 (Pet.

 at 16.)

The closure/post-closure policies written by Global would

respond in the event that BFI failed to pay for its closure/post-

closure obligations, according to petitioner.

 However, BFI

maintains there is little likelihood of BFI’s failure to respond

due to the Company’s financial strength and conservative

investment and expenditure practices.

 (Pet. at 16.)

BFI also states that the Colorado Division of Insurance is

accredited by the National Association of Insurance Commissioners

and was one of the first states to be accredited.

 (Pet.

 at 16.)

BFI points out that the Colorado agency requires all captives to

provide, among other things, detailed information regarding

capitalization, risk exposure, rate adequacy and investment

philosophy, and biographical affidavits of all executive

officers, directors and organizers as a precondition to approval.

(Pet. at 16—17.)

BFI argues that:

Colorado’s conservative captive regulatory climate and its

status as an accredited state provide adequate safeguards to

ensure captive solvency.

 One cannot be assured that

 captives domiciled in non—accredited states meet similar

standards.

 In addition, by also utilizing a bond-ratings

criterion for the use of a non—commercial policy, the

5

proposed standard is consistent with the U.S. EPA’S

statement that a company’s “bond rating incorporates an

evaluation of its financial management practices.

 Bond

ratings are widely used as a measure of credit risk

associated with a long-term general obligation debt

instrument”.

 58 Fed. Reg. 68,353,

 68,356

 (Dec.

27,

 1993).

(Pet. at 17.)

The petitioner also maintains that although commercial

insurers are often licensed in multiple states, single—parent

captive insurers typically are licensed in only the state of

domicile.

 (Pet. at 11.)

 BFI asserts that captive insurers write

insurance for property and/or liability that is located in other

states without obtaining licenses in multiple jurisdictions.

(Id.)

 BFI argues that the existing standard places an undue

hardship on single parent captive insurers by requiring the

parent company to maintain multiple licenses when the parent in

fact controls the risk which is covered and controls the captive.

(Pet.

 at 11—12.)

RELIEF REQUESTED

BFI requests that the Board grant the present petition for

an adjusted standard, and that the Board include the following

language in its order granting this petition:

(b)

 Licensing:

(1)

 The insurer shall be licensed to transact the

business of insurance by the Illinois Department

of Insurance pursuant to the Illinois Insurance

Code, or

121

 For the solid waste disposal facilities identified

as IEPA site numbers 0978020002

 (Lake County-

Wintrop Harbor/BFI #2); 1418210001.

 (Ogle County-

Davis Junction;BFI); 1610400007, 1989—15—de—op

(BFI—Quad Cities Sanitary Landfill); 1630100003

(BFI Modern Landfills); and 043010004

(Bloomingdale Mallard Lake Landfill), the insurer

must be licensed to transact the business of

insurance, or e1ic~ibleto provide insurance as an

excess or surplus lines insurer,

 in one or more

states.

 In addition, the applicant. in order to

utilize a non—commercial insurance ~o1icy, must

demonstrate a current rating of AAA. AA, A or BBB

for its most recent bond issuance as issued by

Standard and Poor, or a rating of Aaa,

 Aa. A or

Baa as issued by Moody’s.

6

BFI maintains that the requested adjusted standard is based

on the federal standard found at 40 C.F.R. 258.74(d),

 as well as

an additional requirement that petitioner must,

 in order to

utilize a non—commercial insurance policy, demonstrate possession

of a current rating of AAA,

AA,

 A, or BBB for its most recent

bond issuance as issued by Standard and Poor, or a rating of Aaa,

Aa,

 A, or Baa, as issued by Moody’s.

 The bond—rating requirement

is based on the standard utilized in Section 811.715(e) (1) (B) (i),

Ill. Adm.

 Code.

 (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 BFI that the adjusted standard is consistent

with federal law.

 (Ag. Rec. at 4.)

 However, the Agency does not

believe the petitioner has established that the factors relating

to petitioner are substantially and significantly different from

the factors relied upon by the Board in adopting the rule of

general applicability.

 (Ag. Rec. st 3-4.)

The Agency argues that the points raised in the petition

“for the most part, convey the Petitioner’s assessment of the

federal financial responsibility requirements”.

 (Ag. Rec. at 2.)

The Agency further states that the petitioner

 is suggesting that

an adjusted standard is “justified merely because the Illinois

regulation of general applicability is inconsistent with the

federal financial assurance regulations”.

 (Ag. Rec. at 3.)

The Agency also expresses concern with the financial

condition of Global and that a deterioration of the financial

condition could affect the environment.

 The Agency states that

if the Board grants the adjusted standard a condition that the

parent company demonstrate annually that it satisfies the

financial test set forth at 35 Ill. Adm. Code 811.715(b) (3) be

included.

 The Agency then states that it “recommends” that the

Board grant the adjusted standard.

 (Ag. Rec. at 6.)

COMPLIANCE ALTERNATIVES

The petitioner states that there are five approaches to

demonstrate financial assurance for disposal facilities under the

Board’s regulations.

 Those five are trust funds, surety bond for

performance, surety bond for payment, a letter of credit and

self—insurance.

 The petitioner states that the compliance

alternatives are “either essentially unavailable or are highly

restrictive”.

 (Pet.

 at 18.)

 BFI argues that restrictive

financial responsibility requirements can have adverse

7

consequences including abandonment of facilities before closing

them.

 (Id.)

BFI states with regards to trust funds that “it is widely

recognized that trust funds are not a cost—effective mechanism

for the demonstration of financial responsibility.”

 (Pet.

 at 19)

According to BFI the primary disadvantage is that the trustee fee

expense

 is significantly greater for long-term obligations than

for short-term.

 (Id.)

 Regarding letters of credit, BFI

maintains that such a mechanism “typically does not permit firms

to build—up assurance in the letter of credit over time” and

surety bonds are difficult to obtain for long-term obligations.

(Pet. at 20.)

BFI points out that the current provisions for self-

insurance are adapted from the RCRA Subtitle C program, which the

USEPA is currently in the process of revising.

 (Pet. at 20-21.)

According to BFI in order to self—insure the company:

(1)

 a net worth of $10 million, net worth and

tangible net worth both at least six times the

amount of coverage sought, satisfaction of one of

three financial ratios, and at least 90

 of assets

(or six times the amount of liability coverage)

located in the United States; or

 (2) a current

investment quality bond rating, net worth

 of at

least $10 million and six times the amount of

liability coverage located in the United States.

(Pet.

 at 21 citing 40 CFR 264.143,

 264.145,

265.143 and 265.145.)

HEALTH AND ENVIRONMENTAL EFFECTS

BFI maintains that the granting of the adjusted standard

will have

 rio environmental effect.

 BFI states that granting the

adjusted standard will not “affect to any degree any day-to-day

operation, design standard, maintenance procedure, or closure or

post-closure operation and inspection requirement of the

designated facilities”.

 (Pet.

 at 26.)

The Agency agrees that the granting of the adjusted standard

will have no adverse environmental or health effects.

 (Ag. Rec.

at 5.)

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:

8

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.

BFI has provided substantial information regarding the history of

the regulations at both the federal and state level.

 BFI has

explained the differences between the federal financial assurance

requirements and the state financial assurance requirements.

BFI

has even described a potential hardship for captive insurers.

However, the Board finds that BFI has not demonstrated that the

factors relating to BFI are different than those considered by

the Board when adopting the rule of general applicability.

The Board recognized the differences between the federal and

state regulations when the Board adopted the Subtitle D

regulations.

 (quoted in relevant part,

 supra,

p.

3.)

 The Board

suggested that a change in the rule of general applicability

might be appropriate; however, the identical-in-substance

rulemaking was not the forum to proceed with such a change.

 Therefore, the Board invited a proposal for regular rulemaking.

(R93—10, September 15,

 1993 at 18.)

 In addition, 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. mc, AS94—

11,

 (December 1,

 1994)

 (Winnebago).)

 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.

In the instant matter, 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 R93-10.

Therefore, the Board denies BFI’s request for an adjusted

standard.

ORDER

The Board hereby denies the request of Browning—Ferris

Industries of Illinois, Inc.,

 Browning—Ferris Industries of Iowa,

Inc.,

 and BFI Modern Landfill, Inc for an adjusted standard from

35 Ill. Adm. Code 811.714.

IT IS SO ORDERED.

9

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 M. Gunn,

 Clerk of the Illinois Pollution Control

Board, hereby cerbif

 hat the abov~opinion and order was

adopted on the

 day of

___________________,

 1994, by a

vote of

~

Ill

 Control Board