ILLINOIS POLLUTION CONTROL BOARD
April
4, 1985
IN THE MATTER OF:
)
FINANCIAL ASSURANCE FOR CLOSURE
)
R84-22B
AND POST—CLOSbRE CARE OF WASTE
DISPOSAL SITES
(TEMPORARY RULES)
FINAL ORDER.
ADOPTED
RULE
(R84—22B)
OPINION OF THE BOARD
(by J, Anderson)
This Opinion supports the Order
of April
4, 1985 adopting
temporary regulations
in R84—22B.
Public Act 83—775 became effective on Septemter
24, 1983.
Provisions of this law, which
are fully set out below, prohibited
certain non—hazardous waste disposal operations after March
1,
1985 without a performance bond or other
security for
the purpose
of
insuring closure
of t~esite and post—closure care
in
accordance with the Environmental Protection Act’ and Board
rules0
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,
On June 8,
1984 the Board opened this Docket for
the purpose
of promulgating regulations
implementing P.A.
83—775.
On ~uly
19, 1984 the Board proposed such as amendments
to Part
807
The
proposal appeared at
8 Ill.
Reg.
14145, August 10,
1984.
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
The Board held
five
hearings
as follows:
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
Ill,
Rev.
Stat. 1983,
ch,
111 1/2, pars. 1001
et
seq.
2Unless otherwise indicated,
references
to “Sections”
or
“Part~”are
to Illinois Administrative Code, Title 35.
~The Board appreciates
the assistance of Morton
F,
Dorothy
in drafting
these regulations
and
this accompanying Opinion,
and
of Marili McFawn in conducting
the hearings.
63-413
—2—
The following witnesses testified,
with the primary area
of
testimony indicated:
1.
Morton Dorothy, Pollution Control Board,
concerning
the
overall outline of the proposal
(R.
12).
2.
Douglas Andrews, P.E.,
testifying on behalf of the
Illinois Chapter
of
the National Solid Waste Management
Association
(NSWMA),
concerning
the number and sizes
of
sites
(R, 171),
3.
Gary Me~L~er,counsel
to the Illinois Commissioner of
Banks
at~Vi Trusts, concerning
trust funds and letters of
credit
(~.
206).
4.
Kenneth Smith,
Deputy Director
of the Illinois
Department
of Insurance,
concerning insurance and bonds
(R. 220).
5.
Carol Lee, from the United States Environmental
Protection Agen’y
(USEPA), testifying on behalf of
NSWMA, concerning self—insurance
(R.
232).
6.
Paul Bailey,
ICF,
Inc.,
testifying
at the behest
of the
Board,
concerning self—insurance
CR.
282).
7.
Thomas Golz,
from USEPA,
testifying at the behest of the
Board, concerning self—insurance
(R.
531),
8.
James W.
Morgan, testifying at
the
behest
of the Board,
concerning
the Wisconsin financial assurance program
(R, 568)~
9.
Charles Johnson,
Technical Director of
the NSWMA,
concerning
interim closure plan rules
(R.
633).
10.
Joseph Benedict, John Sexton Contractors,
Inc.,
concerning
interim closure plan rules
(R.
655),
11,
Patrick Lynch, P,E.,
testifying at
the behest
of the
Board,
concerning closure plans and cost estimates
(R.
681).
12.
David
C.
Beck, P.E.,
testifying on behalf of NSWMA,
concerning closure plans and cost estimates
(R.
761,
1032).
13,
James Ambroso,
~and & Lakes Company,
testifying on
behalf
of NSWMA concerning self—insurance
(R.
793).
14.
Larry
Eastep,
P.E.,
from the Illinois Environmental
Protection Agency (IEPA or Agency),
concerning closure
plans
and cost estimates and implementation
(R.
846).
63-414
—.2)—
15.
Sally
S. Whalen,
Illinois Manufacturers Association,
concerning on—site exemptions and legislative intent
(R.
938).
16.
John L.
~irby,
‘~xecutiveDirector,
Illinois Solid Waste
Assocat~on(IS~A)
,
con.~erninginterim rules
(R. 1001),
Following
the
first notice
arid hearings the
Board received
the
following
wri~~en
public
cc’ciment:
1.
Illinois
2)esart’~ent
of
Insurance,
August
10,
1984.
2.
Cecos
Intern~tiona1,
September
7,
1984.
3.
DuPage
County
Forest
Preserve
District,
September
19,
19 34.
4.
GRCDA,
Iri~ernationa1
Association
of
~aste
~1anayement
ProfeseiortaLs,
September
7,
1984.
5.
Surety Association of Illinois, October
13, 1984.
6.
Chicago Association of Commerce
& Industry, October
19,
1984.
7.
John Sexton Contractors, October
19,
1984.
8.
Granite
City
Steel Division of National Steel
Corporaticri, Intar1a~eInc., ~(eystoneSteel
& Wire
Company,
LC~7
C:’~sl
Cnnany, Northwestern Steel
& Wire
Company, and
United Ctates Steel
Corporation, October
25,
1934.
9.
Illinois
Po’ier
Company,
October
25,
1984.
10.
Agency,
October
26,
1934.
11.
NSWMA,
October
25.
4A public comment also was filed
on April
1,
1985
by
the
Illinois Chapter
of National Solid T7astes Management Association
(NSWMA).
This comment
sias
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.
The
Administrative Procedures
Act
(APA) provides that “After
commencement of the
Second Notice period,
no substantive change
may be made
to
a proposed rulemaking unless
it
is made
in
response to an objection
or suggestion
of the joint Committee.”
(See Section 5.Ol(b)(3)
of the APA.)
The Board notes
that
it
will be opening Dockets to consider
amendments
to this regulation
shortly after receiving the Economic Impact Study.
63-415
—4—
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
temporary rules to second notice pursuant to Section 27(b) and
27(c) of the Act.
The Board split the docket into Subdockets
R84—22A and R84—228, 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 filing
and
became
effective on January 3, 1985.
The second notice was received by
the Joint Committee on Administrative Rules
(JCAR)
on January 24,
1985.
Although the second notice period ended on March 11, 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.’
The Board will file the rules with a number of changes
recommended by the
JCAR
staff.
The more important changes are
discussed below in connection with the provisions affected.
In
addition, the Board has agreed to suggest other changes at the
economic impact hearings.
There are a number of issues which, although they were not
addressed in this Docket adequately to allow the Board to adopt
regulations, appear to merit further consideration.
These
include self—insurance for commercial disposal sites, financial
guarantees by units of local government
and
establishment of a
risk pool to which operators could contribute, instead of
providing individual financial assurance.
The Board will shortly
open a new docket
and
solicit proposals addressing these issues.
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.
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:
83-416
—5---
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 institution~,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
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 this Act and regulations
adopted thereunder.
b.
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
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 d4rection of the Agency for the purposes
for which such performance bond or
other security was
issued,
d.
The Agency
is authorized
to enter
into such contracts
and agreements
as
it may deem necessary to carry out the
63-417
—6—
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
action taken under
this Section.
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
a cause of action by
the State
for any other penalty or
relief provided by
this Act or any other
law.
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 assurance
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,
self—insurance.
R8 4—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—17.
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.
SCOPE OF REGULATIONS
The rules primarily affect persons:
1)
who conduct
a
“i~isposal”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
63-418
—7-
3)
who receive waste for disposal or indefinite storage on
or after March 1, 1985; and
4)
who are not a governmental unit.
Persons with permits who conduct other types of waste
management operations, such as treatment and storage, will have
to comply with the general c1o~urerules.
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 stop accepting waste for disposal or indefinite
storage by March 1, 1985, will not be required to provide
financial assurance
(Section 807.601).
The governmental units exemption applies only to persons
which ‘conduct’ waste di’posal operations.
Private contractors
who conduct operations on a site owned by local government must
provide financial assurance (Section 807.601).
P0MM-IN PROVISIONS
Under the rules operators had three choices on March 1,
1985.
They could avoid the financial assurance requirement 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, ~ndwho derive less than half
their revenue from waste disposal operations.
Self—insurance
will be available to few,
if any, sites, since on—site disposal
generally is not subject to the permit or financial assurance
requirement.
The Board has provided self—insurance as an option
for any on—site operator which might be subject to the permit
requirement, or for diversified firms which also conduct waste
disposal operations.
OTHER FINANCIAL MECHANISMS
63-419
—8—
Several alternative financial
mechanisms
were
suggested
at
the 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,
A
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~theBoard 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
fund.
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.
StJBPART 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
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,
16, 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”
63-420
—9—
“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
is 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 assurance
(R. 17).
The definition
is taken from Section
3 of
the Act, with the
final sentence added:
“As used in this Part,
‘disposals
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 th~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).
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
demonstrating 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, the 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”.
63-421
—10—
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 c~hazardous waste here assures that waste which
is
exempt from thc tection 21(d) permit
is within the Section
21(f)
RCRA permit requirement
(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 he
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 :Lnfiltration
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
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)
ot the Act,
The “owner”
is not necessarily the
operator
(R. 18,~23),
63-422
—11—
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~l04
“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 bee’ 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
a
“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).
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 repi’ced by the preferred term “waste
management”.
Section 807.104
“Storage” and “Treatment”
63-423
—12—
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,
27).
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 be
appropriate
in this paragraph.
The Board originally proposed
to delete para.
(j),
which
created a third party appeal right which was ruled
invalid,
since
it was not specifically authorized
by statute,
in Landfill Inc.
v.
Illinois Pollution Control Board,
74
Ill.
2d 541,
387 N.E.
2d
258
(1978).
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 ~
receipt of waste
(Section 807.602).
63-424
—13—
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 needs to
show compliance with applicable
“Board” regulations.
Section 807.206
Permit Conditions
Section 2l(d)(l)
contains
a specific authorization for
permit conditions involving
reports, access to records and
inspections.
This has been added to the existing general
language of Secnion 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.
The 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
prior
to receipt of
the final volume
of waste
(Section
807. 505);
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).
Sectior~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
(R.
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
63-425
—14—
s~odificationof
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 ~ake affirmative
action1
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
Porpose, Scope and Applicability
Subpart E establishes general rules on closure and post—
closure care which are supplemented by the sanitary
landfill
closure and post—clocure 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 no~ required
to have Section 21(d) permits
are not required
to prepare plans,
or
to provide financial
assurance
(R.
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
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
daysfollowing the placement of refuse in
a
final
lift.
807.313
Prohibition on discharge of contaminants
63-426
—15—
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 plat.
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”
(R.
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
(R.
56,
ill).
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 permitted sites.
This
is what
is required
in the RCRA interim status rules
at 35
Ill. Mm. 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
be
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
63-427
—16—
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 807.3l6(a)(10),
(a)(l4),
(a)(l5)(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
(R.
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 ~perating 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
(R.
119, 286,
363,
416,
430,
688,
719,
756,
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.
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
(R.
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
(R.
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
5The 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.
63-428
—17-
specify certain Nareasu pursuant to Section 807.507.
The
operator could then prepare separate plans and cost 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, i~entifyingthe situation in which the greatest
exposure would: occur
•
The operator could then post a bond in the
amount required to close the site at the point of greatest
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,
where it will be available during inspection of the site.
Section 807.504
Amendment of Closure Plan
This Section is similar S Section 724.212(b) in the RCRA
rules.
It specifies the situations in which the owner or
operator must .revise the closure plan:
1.
Modification in the operating plans or site design
affecting closure.
2.
Temporary suspension of waste acceptance, or reduction
or increase in volume.
3.
Change in the expected year of closure, or the year in
which the cost of premature closure will be the
greatest.
Under Section 807.209 the operator would be allowed to file
an application to modify at afly
time.
Section 807.504 is not
intended to limit the operator’s right to amend, but to state
certain situations in which he must amend.
The second and third situations under which the closure plan
must be amended are directed in part at sites which go into a
temporary or partial shutdown which is not provided for in the
closure plan.
Violations of ~ection807.504(b) or
(c) could be
alleged if activity slowed or ceased at the site without an
amended plan.
Section 807.50k allows the operator to provide a
temporary shutdown plan which will not trigger the need to amend
the closure plan.
Existing Spction 807.316(a)(l2) requires the
operator to specify expected quantities of waste in the
application.
The proposal hag been modified to specifically
state that changes, reductions or increases which are authorized
by the permit do not trigger the requirement to amend
(R.
72,
91,
93, 366, 374,
496, 688, 780, 786).
03-429
—18—
Section 807.505
Notice
of Closure and Final Amendment to Plan
Section 807,505(a)
requires the operator
to give notice
to
the Agency within
30 days after receipt of the
final volume of
waste.
Violation of this section could be alleged
in a situation
in which
an operator abandoned a site without notice,
Section 807,505(b)
requires any final amendment
to the
closure plan to
be filed
at least
180 days before receipt of
the
final volume.
The Agency would be allowed
to act on the late
application, but violation could be alleged
in an enforcement
action.
This requirement serves
two purposes.
First,
it should
ensure that the Agency will have adequate time to review these
applications.
Second,
it encourages operators
to maintain a
realistic closure plan which
is up—to—date with current
operations
so that
it could actually be executed
in the event
of
unexpected cessation of operations
(R,
74,
82,
938).
Whether an operator must send
a notice of partial closure
depends on whether
the site has been divided
into areas
under
Section 807.507
(R, 430,
687),
If there are such areas,
the
operator must send notices as though they were separate sites,
Otherwise,
notice need not be sent until
final closure
is
reached,
However, such partial closure activities would have to
proceed according to the permit.
Section 807.506
Initiation of Closure
This requires that the operator commence treatment,
removal
or disposal of all wastes from the site in accordance with the
closure plan within 30 days after receipt of the
final volume of
waste.
This rule serves
two purposes.
First,
it establishes
a
time frame
for closure
to be considered by the Agency
in
reviewing
a closure plan.
Second,
a violation could
be alleged
if an operator abandoned a site
(R. 75, 367,
959).
The operator
of an
indefinite storage must either initiate
removal of wastes and waste residues,
or must initiate closure
in
accordance with the contingent closure plan.
Section 807.507
Partial Closure
Paragraph
(a)
allows
the operator
to file an application
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
CR.
51,
78,
92,
142,
363, 430,
433,
688,
957).
The Board construes Section 21.1 as
requiring financial
assurance for closure
of any treatment or
storage units
associated with
a disposal unit which are located on the same
63-430
—19—
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 th~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
(R,
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
(R.
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
(R.
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.
683).
The Agency may control such usage by permit condition.
Section 807.523
Post—closure Care Plan
No general standard for post—closure care has been
proposed.
The operator will have to prepare a plan showing how
he would comply ~iiththe post—closure care provisions specified
in the rules specific to each type of disposal facility.
Presently these would only be the rules applicable
to sanitary
landfills
(R.
77,
369, 449, 458).
Operators
of indefinite storage units must provide a
contingent post—closure care plan which will have to be executed
if
the operator fails
to remove all wastes and waste residues on
closure
CR. 369, 448, 455),
Section 807.524
Implementation and Completion of Post—closure
Care Plan
63-431
—20—
The operator of
a disposal site must implement the post—
closure care plan commencing with certification of closure
(R.
77,
371).
The operator
of an indefinite storage unit must
implement the contingent post—closure care plan unless
the Agency
determines
that he removed all wastes and waste residues during
the closure period.
The Agency is to certify
that the post—closure care period
has ended when it 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 p~eriodfor
sanitary landfills is determined from
the existing Subpart C
rules
(R.
371).
SUBPART
F:
FINANCIAL ASSURANCRE FOR CLOSURE
AND POST—CLOSURE CARE
Section 807.600
Purpose, Scope
and Applicability
This Subpart provides the method by which the operator gives
“financial
assurance”
tO
satisfy the requirement
of Section 21,1
of the Act.
The operator prepares closure and post—closure care
plans pursuant
to Subpart
E.
Operators
of non—governmental
disposal sites prepare cost estimates based on these plans.
They
must 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 person has provided financial assurance in
accordance with this Subpart”.
The Subpart defines and imple-
ments the first—quoted language.
The Section also states
the requirement
to obtain 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
63-432
—21—
expressly
(R.
53,
64,
686, 782,
943).
JCAR considered this
matter
and did not object
to the Board’s interpretation of the
statute.
Paragraph
(b)
interprets the requirement
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
sites
and future
sites.
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
financial assurance prior
to waste
receipt.
Plans and cost
estimates must
be provided with the permit application.
The
Agency will issue
the operating permit with requirements to
provide financial assurance as conditions,
including
a
requirement
to tender financial assurance prior
to receipt of
waste,
There
is nothing
to keep the operator from tendering the
financial assurance prior
to permit issuance
(R.
35,
262,
390,
460,
938).
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 ~downor
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 cancellation 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,
but have been grouped
in the emergency rules,
Section 807.604
Release of Financial Institution
There
are three
types of releases which were provided with
each instrument
in the proposal.
These have been grouped into
separate sections
for
each type of release:
Section
807.604
Release of financial institution following
a
substitution of financial assurance or
release
of
the operator.
807.606
Release of the operator upon completion of
closure and post—closure care,
807.661
Partial release of financial institution
et
seq.
following
a reduction
in cost estimate,
63-433
—22—
Partial release following completion of closure
is to be
treated as a reduction in the cost estimate by reducing to zero
the closure cost element.
section 807.605
Application of Proceeds and Appeal
There are basically two extreme enforcement situations whiOh
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 arrange for closure.
In the
complex situation,
the operator
is on the 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 dlosure
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 (R. 116, 965).
The financial assurance instruments are governed
by, the
general Illinois law pertaining to trusts, bonds, etc.
If the
conditions of the insttument obtain
and
the Agency gives the
required notices, but the financial institution 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 a condition precedent.
However an enforcement action
may be necessary to establish that the condition of the financial
instrument has obtained.
Section 807.605(c) lists seven Agency actions which are
deemed permit denials.
These are tantamount to disapproval of a
bond
and
are appealable as provided in Sections 5(d) and 21.1(e)
of the Act.
The necessity for Circuit Court resolution of these
disputes is avoided by providing an appeal route
(R. 118, 141).
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
Board rules cost estimates for closure
and
post—closure care are
contained 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
—23—
closure assurance
(R. 118, 384, 967).
The rulet do not prevent
an operator from providing separate financial assurance for
cl9sure 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 of 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’ of closing the
site assuming the work was to be done tomarrow.
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
periodic revision of c’st 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 chinge 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 CR. 119, 385,
688, 719, 756).
Once the point of maximum cost exposure has
passed, the operator can revise the plan to reflect any decreased
maximum future exposure.
The cost estimate must be based on third party costs:
the
operator must assume that the Agency will contract with 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).
The cost estimate may 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
CR. 304, 307, 385).
83.485
—24—
The rule details the elements which go into the cost
estimate
(R.
690,
84~9).
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
site
(R,
690,
7O0,~ 719,
762).
The closure plan and cost estimate should
only address
the
activities which are
to be done at the point of premature or
final closure,
Acti~~ities
which
are done
in construction or
normal operation o~. 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
Cos~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 costs
of closure and post~ciosurecare.
The major cost elements include cover
stabilization and
groundwater monitoring.
The operator should estimate the
percentage of the cover which will require remedial action
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 GNP
deflator.
Several
revisions to the inflation adjustment
provisions were suggested
at
the hearings.
These included:
1.
Prospective inflation adjustment
at the outset,
in which
the operator projects an inflation rate at
the outset
63-436
—25—
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
mechanism for reviewing the projected closure cost against actual
inflation,
and ~ 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
which do not result from a change
in the plans
(Section 807.214).
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 exposure
(R,
188,
290, 689).
However, there
are 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,
63-437
—26—
768,
774,
779,
850,
852,
876, 902).
The Board will therefore
adopt
a formula which,
although it gives only a crude estimate of
potential costs, can be used as
an interim measure to fix the
amount of
financial assurance.
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 willbe
allowed the option of providing
a plan and cost estimate
initially, which they should do
if the formula disadvantages them
(R.
880).
The cost esti:~tebased
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 e’~istingpermit conditions
and closure and
post—closure care reç~u1ationsfor financial assurance instruments
based on the formula
The formula cannot
be used to calculate
financial assurance
under
the RCRA ru1es.~
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 corn acted 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 of 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
at least
two feet of cover must be over the waste when closure
is
completed
(In
re Ch.7,
R72—5,
8 P03 695, July
31, 1973;
IEPA v.
Giachini, POE 77—143;
33 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,
63-438
—27—
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 will allow deduction from the presently
affected area only the area which has 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
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—soecific 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.
t.~ynchsuggested a formula which predicts the amount
of
exposed
refuse genera’~’rdafter
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 be possible
to determine both of these
from the site
permit
(Section 807.316).
If the permit
is not up—to—date,
it
should be possible to measure the actual depth, and determine the
actual receipts in recent years.
The formula
is
as follows, 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
peoole
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,
735).
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 which could
be created within three years.
However,
this cannot exceed
the
total permitted area which has not received final
cover
as of
January 1,
1985.
63-439
—28—
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.
693,
762,
847).
The
Board received
three
estimates
of
this
cost:
Cost per
Cub~jard
$1.00
R.
692,
698
1.30
IL
763,
768,
771,
783
2.30
IL
847,
891,
897
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
four
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 on a contract recently let by the
Agency
for
the
Broverman/Taylorville
landfill which
is being
closed
with
State
funds
(8
Ill.
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.
t-Iowever,
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 Theodore
T3aker d/b/a Taylorville
Landfill, PCB 76—114,
23 P03 123, November
10, 1977;
Fifth
District, penalty reduced
(Rule
23 Order),
May 25, 1979).
For
purposes
of
the
interim rule
the Board will accept $1.30/cubic
yard
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
$4,160
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:
Cost
per
acre
$500
R.
763
$832
II.
692
$1235
(Ex.
18)
The Board will
accept the $832/acre
figure
as
the
best
estimate of
the cost
of establishing a vegetative cover.
63-440
—29--
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 percentage
of
the
total cover area which requires repair each
year
(P).
The Board has received two estimates:
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 careperiod.
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.
18).
Permits should specify certain 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.
694).
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.
63-441
—30—
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)
The post—closure cost estimate
is:
PCCE ~ 3((CPA)(P)(A) + (600)(M))
750A
+
1800M
The complete cost estimate
is:
CE
5750A + 1800M
The number of wells
(M)
cannot be
less than three.
Section 8Q7.640
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
S.
Closure insurance
6.
Self—insurance
(for non—commercial sites
only).
Section 807.641
Us’ of Multiple Financial Mechanisms
The Operator may use
a combination of trust funds,
forfeiture bonds,
letters of
credit and closure
insurance to give
financial 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
63-442
—31—
The Board has allowed a multiple unrelated operator’s
trust
fund
in which several operators contribute
to
a single trust.
This
should
reduce
each
operator’s share of the administrative
cost
of
maintaining
the
trust.
The trust works
just like Section 807.661,
with
a few
exceptions.
The trustee must maintain books which show each
site’s 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
for each site.
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
w:L11
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
assurance.
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 he regulated by the Illinois
Commissioner
of
Banks
and
Trusts.
Out—of—state
firms
must
comply
with
the
Foreign
Corporations
as
Fiduciaries
Act
(Ill.
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
such
that
funds
will
be
available
for
closure
(R.
206,
215).
The Board will specify the form of trust agreements
in
Appendix A
(R.
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
(R.
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
63-443
—32—
avoid requiring immediate full funding for sites
which may
already be at the point
of maximum closure cost,
and yet
to
assure reasonably prompt funding
for all sites
(IL
388,
398,
782).
It
is necessary to specify limits since Illinois permits
are of
indefinite duration
(IL
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
(R.
244,
474).
The trustee must evaluate the trust annually.
The trustee
will
be obliged
to invest the funds under
the terms of the
agreement.
The annual evaluation will reflect the losses or
gains.
The
operator
will
have
90 days
to make up any shortfall
resulting
from
evaluation
(Section
807.603).
The
operator
can
also request release of profits
in excess of
the cost estimate
(Section 807.661(e)).
The evaluation date can be moved up
for
the convenience of the operator or trustee.
Under para.
(g)(2)
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 been deleted.
The
related language
in Section
807.665(f)
has
also
been
dropped.
The proposal was drawn from 40 CFR 264.143(a).
The other
changes from the proposal include the following:
1.
Time for submission by new facilities has been moved
to
Section 807.602.
2.
Requirement
to update
the trust agreement with
a change
in the cost estimate has been deleted.
3.
Provisions
on
release
have
been moved
to Sections
807.604
and
807.606.
Section 807.662
Surety Bond Guaranteeing Payment
The operator may satisfy the financial assurance requirement
by tendering
a surety bond guaranteeing that the operator will
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
63-444
—33—
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
(R.
221,
227)
The Board will specify the form of bonds
in Appendix A
(R.
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 22.1(c)
of the Act,
Deletion of the standby trust
fund
will
save
costs
for the regulated community
(IL
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 b?comes 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.
The surety does not directly guarantee that the operator
will comply with Board regulations and permit conditions
in
operation
of
the
site,
If the
Agency
believes
a
site
is
poorly
operated,
it must file an enforcement action to obtain
a finding
of violation,
If the order directs closure
of the site,
the
surety becomes liable only
if the operator fails to close
as
ordered.
The fourth condition of default would occur when the
operator starts
to close the site but fails
to complete the job
as specified in the closure and post—closure care plans.
This
is
similar
to
a construction contract bond
in which
the surety
63-445
—34—
becomes liable
if the contractor fails to build a building
according to specifications.
The amount of the bond must be at least equal to the cost
estimate.
The Agency must approve
a
reduction in the
amount
whenever the cost estimate decreases.
However, the operator must
first request the reduction,
and the surety is not obliged to
agree to it.
If the Agency disagrees with the reduction in the
cost estimate,
it should reject the cost estimate pursuant to
Section 807.214.
If it accepts a reduced cost estimate,
it must
approve a reduction in the bond amount.
This language has been
clarified pursuant to
JCAR
comments.
Similar changes have been
made in Section’s 807.663(f)(2) and 807.664(f)(2).
The proposal was drawn from 40 CFR 264.143(b)
but differs in
one respect.
That Section allows for cancellation of the bond by
the surety on a 120-day notice to the Agency
Ma
the operator,
but makes the failure to obtain other financial assurance in a
90—day period a condition leading to liability by the surety.
Surety companies object to this open—ended liability CR. 796).
In order to attempt to make bonds more available to operators,
the Board has specified that bonds be for at least four years,
but has dropped the provisions making cancellation a condition
leading to liability.
The four years would provide assurance for
a reasonable period of time during which the Agency could file an
enforcement action and obtain a closure order if operations
turned bad.
Four years seems to be within the range of
construction projects.
This change does leave the State in an
exposed position if the operator does not provide additional
assurance on termination of a bond.
The Board has provided for an automatic twelve—month
extension of the surety’s liability if the operator fails to
provide substitute financial assurance.
The Agency should file
an enforcement action alleging only failure to provide financial
assurance if it wishes to ensure completion of the proceedings
during the twelve—month period.
The following provisions of the proposal have been moved to
other Sections:
1.
When financial assurance must be submitted;
2.
Requirement to increase the amount of financial
assurance;
3.
Release of operator;
4.
Release of financial institution.
Section 807.663
Surety Bond Guaranteeing Pecfotnnce
The performance bond is identical to the forfeiture bond
except that the surety has the option of implementing the closure
63-446
—35—
and post—closure care plans instead of paying the penal sum.
The
performance bond is specifically mentioned in Section 22.1 of the
Act.
However, the State may encounter difficulties in
supervising a surety in the performance of closure
(R. 392).
section 807.664
Letter of Credit
The operator may satisfy the financial assurance requirement
by obtaining a letter of credit from a financial institution.
The letter of credit is similar to a bond in that it assumes that
the operator will provide closure.
If he fails, the Agency
writes a draft against the letter of credit and presents it for
payment through banking channels.
The issuing institution pays
the draft, and then attempts to collect from the operator the
amounts paid like a loan.
The financial institution must be an entity with authority
to issue letters of credit.
Its letter—of—credit operations must
be regulated by the Illinois Commissioner of Banks and Trusts, or
it must be insured by FDIC or FSLIC.
The Agency should reject financial assurance in the form of
letters of credit from institutions which do not meet one of
these criteria, which criteria are intended to provide assurance
that the financial institution will be managed in such a way that
funds will be available for closure.
Although FDIC and FSLIC do
not actually insure letters of credit, their oversight provides
some assuramce of continuity of the financial institution
(R.
208,
213.,
216).
The Board will specify forms for letters of credit in
Appendix A.
The Board has deleted the proposed requirement of a standby
trust fund.
Any payments under a letter of credit will go into
the landfill closure and post—closure fund in the State Treasury
pursuant to Section 21.1 of the Act.
This should reduce
compliance costs
(R. 390, 461).
The Agency is allowed to draw on the letter of credit if the
operator fails to provide closure and post—closure care in
accordance with the plans.
The Agency may draw under the same
conditions as for a bond.
As it did with the bonds, the Board has provided that
letters of credit are irrevocable for at least four years, but
has deleted the proposed conditions allowing the Agency to draw
on the letter of
credi.t if the operator fails to provide
additional financial assurance on notice of cancellation.
Section 807.665
Closure Insurance
63-447
—36—
The operator may satisfy the
financial assurance requirement
by providing closure insurance with the Agency as
a
beneficiary.
Closure
insurance
is
similar
to
a
trust fund in
that payment
is not dependent on
any
default
of
the
operator:
the
insurance
company
pays
even
if
the
operator
voluntarily
closes
the
site
and
does
the
work.
The
insurance company must
be licensed
to transact the
business of
insurance by the Illinois Department
of
Insurance,
The Agency should reject
as financial assurance any insurance
from
a firm which
is not so licensed,
Oversight by the
Department of Insurance
is necessary to assure that the
insurance
company is managed
in such a way that funds will be available for
closure
(R.
221,
391).
The closure
insurance policy must
be approved by the
Department of Insurance
(R.
223,
225,
228),
The insurance company becomes liable to pay out on the
policy whenever:
the operator abandons the site;
the operator
becomes bankrupt;
the Board orders
the site closed;
the operator
notifies the Agency that
it is
initiating closure;
or,
the
operator
initiates closure.
The insurer must pay out funds at
the direction of the Agency to whomever
is providing closure and
post—closure care,
An insurance policy can he cancelled only for failure
to pay
the premium.
As closure a~proachesthe operator builds equity in
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
to
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
Ce) 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,
Section 807.666
Self—insurance for Non—commercial Sites
The Board has ad~~ed
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 22.1 of the Act requires a “performance bond or
other
security.”
The RCRA financial test alone does not meet this
63-448
—37—
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~sassets,
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
(~.
128,
281,
288,
316,
323,
332,
426).
The financial test
is intended to identify firms with
financial problnms 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).
USEPA
selected
15
financial
ratios
from
a
list of possible
ratios,
It arrived a~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—bankrupt firms
to
pass,
but is expected
to pass only 0.1
of firms which will later
enter bankruptcy
(R. 345).
In choosing the financial
test, USEPA sought
to minimize the
sum of the public and private costs,
reasoning that increased
costs
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
(R.
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
(R.
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
(R.
270,
312,
315,
330),
To meet the financial test,
an operator must have
a tangible
net worth which
is:
1.
At least six
times
the current cost estimate;
and
2.
At least $10,000,000.
63-449
—38—
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 (R. 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.
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 wel& as
disposal facilities,
and applies on—site as well as off—site.
Off—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 large
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
(R. 315,
347,
351, 354, 419).
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 50,
but has used disposal as a criterion.
Therefore a
firm
also involved in commercial waste treatment may
be eligible for the financial test.
63-450
~
—39—
‘iarticipants suggestnd
-t
~nstat the hearinga and in the
9n’)lic
connnts.
‘Th3
c’u~asto2 test
was
that
tha
tangible
net
r.p’~e~’3
2~c’3’Y3
the ‘not
rttnte
CR.
796; NSfl coa~aatof October
25,
t9911.
Since the rot est&nate ts not treate-3 as a liability
in computing
tnjible net worth,
it is possible that a firm could
meet
this
test
tad
±nnr1tety ‘1eclare bankruptcy simply by
recognizing its obttgntio~‘n ~vovtieclosure an’1 post—closure
care as a liability
C~ppen4±’t
t).
This would be thort of the
three years prediction needed to inke certain that the operator
has sufficient assets to provile
ttternate financtal assurance at
the
tV’te it fi~t:itls
the
test.
It may be porn’fle to nn’ntvuct
ft
financIal test whic’i
commercial disposal operntt-’t’o co’ttl neet.
3ovever, the
participants in this ru1o~t’c~q
‘nne
forward
with
ao firn
evidence sugq’nti~gthe n5tltt7 of any test to predict the
failure of inch firma sn!ft’~.’ntlyfar in advance that alternate
financial assurance coutl “a 7’~7ided.
Participants have pvo7tded evidence that snall landfills may
not be able to obt~inftnnct~lassurance,
and nay hence have to
close
(R. 174, l’)5).
t’a:ticty?ants hsve suggested a financial
test as a way of a7ntlt!g such closures, which wo’~l4be a
hardship on the ‘public
in none areas of the State, as well as
operators.
Bows-nv, such small operations are arguably the ones
most likely to ‘ncone ‘ankrupt.
Part 104 and Title Vt of the Act provide a variance
mechanism by which operators uhich experience arbitrary or
unreasonable hardship may trI~orarilyavoid the bond requirement.
The RCRA rules provide that a parent corporitien
can
guarantee the operator’s cost estimate if the parent raea:s
the
financial test.
The ‘3oi:i
h~q
s’pectfted a forn on
73ffl”~
the
parent’s guarantee nust be made.
This is simil-tr ta the
forfeiture bond form.
The EcRA rules
lt’!tit the rorporste guarantee to parent
corporations which ~wnnrc than 50
of the operator’s voting
stock
C40 CFR 264..41C
ifl.
The ‘3oard has dropped the 50
requirement,
but
continues to require some ownership interest in
the operator.
flnrelat’rl fins offering this type of guarantee
are in the business of w:ittng surety bonds, and should be
licensed by the Depart’nnt of Insurance
CR. 221, 227, 245, 271,
280, 324).
The Board has continued to limtt 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).
63-451
—40—
The
Board
has
made
several
changes
to
the
self—insurance
provision pursuant
to
JCAR
staff comments.
The
Board
has
added
definition of “generally accepted accounting practices,”
This
incorporates Accountina
Standards,
published by
the
~inanciai
~ccounting Standards
Board,
B.igh Ridge Park,
Stanford, CT
06905.
The Board has also modified the definition
c~
“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
Anoendix A, Illustration
I,
Alternative
I,
line 15,
and
in
40
CFP. t5~,143(f)(i)(A),
which
was
the
source
of the financial
toot,
The
BoarJ
has corrected
this
:dursuant
to
JCAR staff comment~
The Board
has also reworded the !rovisions
of
Section
807,666(g)
concerning
qualified
ooinions.
The
Agency
must
disallow the test
if the onerator~saccountant gives
an adverse
ocinion
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 Bcard’s Order
of
Anril
4, 1985.
3. Theodore Meyer concurred and B.
Forcade dissented,
I, Dorothy M. Gunn,
Clerk of
the
Illinois Pollution Control
Board, hereby certify
that
the above Opinion
was
adopted
on
the
~
day
of
~
_____,
1935 by a vote of
!/
/
~orothy M.
‘Gunn,
Clerk
Illinois
Pollution Control Board
63-452
