1. A. The owner or operator of a CCR facility for which a financial demonstration under R18-13-1703 is required by this Chapter may use any one or a combination of the following mechanisms to cover the financial assurance obligations under R18-13-1703(A):

   1. 1. Financial test for self-assurance. If an owner or operator uses a financial test for self-assurance, the owner or operator shall not consolidate the financial statement with a parent or sibling company. The owner or operator shall make the demonstration in either subsection (1)(a) or (b) and submit the information required in subsection (1)(c):

      1. a. The owner or operator may demonstrate:

         1. i. One of the following:

            1. (1) A ratio of total liabilities to net worth less than 2.0 and a ratio of current assets to current liabilities greater than 1.5;
            2. (2) A ratio of total liabilities to net worth less than 2.0 and a ratio of the sum of net annual income plus depreciation, depletion, and amortization to total liabilities greater than 0.1; or
            3. (3) A ratio of the sum of net annual income plus depreciation, depletion, and amortization to total liabilities greater than 0.1 and a ratio of current assets to current liabilities greater than 1.5;
         2. ii. The net working capital and tangible net worth of the owner or operator each are at least six times the closure, post-closure and corrective action cost estimates; and
         3. iii. The owner or operator has assets in the U.S. of at least 90 percent of total assets or six times the closure, post-closure and corrective action cost estimates; or

      2. b. The owner or operator may demonstrate:

         1. i. The owner or operator’s senior unsecured debt has a current investment-grade rating as issued by Moody’s Investor Service, Inc.; Standard and Poor’s Corporation; or Fitch Ratings;
         2. ii. The tangible net worth of the owner or operator is at least six times the closure, post-closure and corrective action cost estimates; and
         3. iii. The owner or operator has assets in the U.S. of at least 90 percent of total assets or six times the closure, post-closure and corrective action cost estimates; and

      3. c. The owner or operator shall submit:

         1. i. A letter signed by the owner or operator’s chief financial officer that identifies the criterion specified in subsection (1)(a) or (b) and used by the owner or operator to satisfy the financial assurance requirements of this Section, an explanation of how the owner or operator meets the criterion, and certification of the letter’s accuracy, and
         2. ii. A statement from an independent certified public accountant verifying that the demonstration submitted under subsection (1)(c)(i) is accurate based on a review of the owner or operator’s financial statements for the latest completed fiscal year or more recent financial data and no adjustment to the financial statement is necessary.

   2. 2. Performance surety bond. The owner or operator may use a performance surety bond if all the following conditions are met:

      1. a. The company providing the performance bond is listed as an acceptable surety on federal bonds in Circular 570 of the U.S. Department of the Treasury;
      2. b. The bond provides for performance of all the covered items listed in R18-13-1703(A) by the surety, or by payment into a standby trust fund of an amount equal to the penal amount if the owner or operator fails to perform the required activities;
      3. c. The penal amount of the bond is at least equal to the amount of the cost estimate developed in R18-13-1703(A) if the bond is the only method used to satisfy the requirements of this Section or a pro-rata amount if used with another financial assurance mechanism;
      4. d. The surety bond names the Arizona Department of Environmental Quality as beneficiary;
      5. e. The original surety bond is submitted to the Director;
      6. f. Under the terms of the bond, the surety is liable on the bond obligation when the owner or operator fails to perform as guaranteed by the bond; and
      7. g. The surety payments under the terms of the bond are deposited directly into the Standby Trust Fund.

   3. 3. Certificate of deposit. The owner or operator may use a certificate of deposit if the following conditions are met:

      1. a. The owner or operator submits to the Director one or more certificates of deposit made payable to or assigned to the Department to cover the owner or operator’s financial assurance obligation or a pro-rata amount if used with another financial assurance mechanism;
      2. b. The certificate of deposit is insured by the Federal Deposit Insurance Corporation and is automatically renewable;
      3. c. The bank assigns the certificate of deposit to the Arizona Department of Environmental Quality;
      4. d. Only the Department has access to the certificate of deposit; and
      5. e. Interest accrues to the owner or operator during the period the owner or operator gives the certificate as financial assurance, unless the interest is required to satisfy the requirements in R18-13-1703(A).

   4. 4. Trust fund. The owner or operator may use a trust fund if the following conditions are met:

      1. a. The trust fund names the Arizona Department of Environmental Quality as beneficiary, and

      2. b. The trust is initially funded in an amount at least equal to:

         1. i. The cost estimate for the items submitted under R18-13-1703(A),
         2. ii. The amount specified in a compliance schedule approved in a CCR facility permit, or
         3. iii. A pro-rata amount if used with another financial assurance mechanism.

   5. 5. Letter of credit. The owner or operator may use a letter of credit if the following conditions are met:

      1. a. The financial institution issuing the letter is regulated and examined by a federal or state agency;
      2. b. The letter of credit is irrevocable and issued for at least one year in an amount equal to the cost estimate submitted under R18-13-1703(A) or a pro rata amount if used with another financial assurance mechanism. The letter of credit provides that the expiration date is automatically extended for a period of at least one year unless the issuing institution has canceled the letter of credit by sending notice of cancellation by certified mail to the owner or operator and the Director 90 days in advance of cancellation or expiration. The owner or operator shall provide alternate financial assurance within 60 days of receiving the notice of expiration or cancellation;
      3. c. The financial institution names the Arizona Department of Environmental Quality as beneficiary for the letter of credit; and
      4. d. The letter is prepared by the financial institution and identifies the letter of credit issue date, expiration date, dollar sum of the credit, the name and address of the Department as the beneficiary, and the name and address of the owner or operator.

   6. 6. Insurance policy. The owner or operator may use an insurance policy if the following conditions are met:

      1. a. The insurance is effective before signature of the permit or substitution of insurance for other extant financial assurance instruments posted with the Director;
      2. b. The insurer is authorized to transact the business of insurance in the state and has an AM BEST Rating of at least a B+ or the equivalent;
      3. c. The owner or operator submits a copy of the insurance policy to the Department;
      4. d. The insurance policy guarantees that funds are available to pay costs for all items listed under R18-13-1703(A) without a deductible. The policy also guarantees that once cleanup steps begin that the insurer will pay out funds to the Director or other entity designated by the Director up to an amount equal to the face amount of the policy;
      5. e. The policy guarantees that while closure, post-closure, or corrective action activities are conducted the insurer will pay out funds to the Director or other entity designated by the Director up to an amount equal to the face amount of the policy;
      6. f. The insurance policy is issued for a face amount at least equal to the current cost estimate submitted to the Director for performance of all items listed under R18-13-1703(A) or a pro-rata amount if used with another financial assurance mechanism. Actual payments by the insurer will not change the face amount, although the insurer’s future liability is reduced by the amount of the payments, during the policy period;
      7. g. The insurance policy names the Arizona Department of Environmental Quality as additional insured;
      8. h. The policy contains a provision allowing assignment of the policy to a successor owner or operator. The transfer of the policy is conditional upon consent of the insurer and the Department; and
      9. i. The insurance policy provides that the insurer does not cancel, terminate, or fail to renew the policy except for failure to pay the premium. The automatic renewal of the policy, at a minimum, provides the insured with a renewal option at the face amount of the expiring policy. If the owner or operator fails to pay the premium, the insurer may cancel the policy by sending notice of cancellation by certified mail to the owner or operator and to the Director 90 days in advance of the cancellation. If the insurer cancels the policy, the owner or operator shall provide alternate financial assurance within 60 days of receiving the notice of cancellation.
   7. 7. Cash deposit. The owner or operator may use a cash deposit if the cash is deposited with the Department to cover the financial assurance obligation under R18-13-1703(A).

   8. 8. Guarantees.

      1. a. The owner or operator may use guarantees to cover the financial assurance obligations under R18-13-1703(A) if the following conditions are met:

         1. i. The owner or operator submits to the Department an affidavit certifying that the guarantee arrangement is valid under all applicable federal and state laws. If the owner or operator is a corporation, the owner or operator shall include a certified copy of the corporate resolution authorizing the corporation to enter into an agreement to guarantee the owner or operator’s financial assurance obligation;
         2. ii. The owner or operator submits to the Department documentation that explains the substantial business relationship between the guarantor and the owner or operator;
         3. iii. The owner or operator demonstrates that the guarantor meets conditions of the financial mechanism listed in subsection (1). For purposes of applying the criteria in subsection (1) to a guarantor, substitute “guarantor” for the term “owner or operator” as used in subsection (1);
         4. iv. The guarantee is governed by and complies with state law;
         5. v. The guarantee continues in full force until released by the Director or replaced by another financial assurance mechanism listed under subsection (1);
         6. vi. The guarantee provides that, if the owner or operator fails to perform closure, post-closure care or corrective action of a facility covered by the guarantee, the guarantor shall perform or pay a third party to perform closure, post-closure care or corrective action, as required by the permit, or establish a fully funded trust fund as specified under subsection (4) in the name of the owner or operator; and
         7. vii. The guarantor names the Arizona Department of Environmental Quality as beneficiary of the guarantee.

      2. b. Guarantee reporting. The guarantor shall notify or submit a report to the Department within 30 days of:

         1. i. An increase in financial responsibility during the fiscal year that affects the guarantor’s ability to meet the financial demonstration;
         2. ii. Receiving an adverse auditor’s notice, opinion, or qualification; or
         3. iii. Receiving a Department notification requesting an update of the guarantor’s financial condition.
   9. 9. An owner or operator may use a financial assurance mechanism not listed in subsections (1) through (8) if approved by the Director.
2. B. Loss of coverage. If the Director believes that an owner or operator will lose financial capability under this Section, the owner or operator shall, within 30 days from the date of receipt of the Director’s request, submit evidence that the financial demonstration under R18-13-1703 is being met or provide an alternative financial assurance mechanism.
3. C. Financial assurance mechanism substitution. An owner or operator may substitute one financial assurance mechanism for another if the substitution is approved by the Director through a permit modification or other Department approval.

Historical Note

New Section made by final rulemaking at 31 A.A.R. 1363 (April 25, 2025), effective date June 1, 2025 (Supp. 25-2).