1. The storage operator shall demonstrate and maintain financial responsibility as determined by the commission that meets the following conditions:

a. The qualifying financial responsibility instrument used must be from the following list of qualifying instruments:

(1) Trust funds;

(2) Surety or cash bonds;

(3) Letter of credit;

(4) Insurance;

(5) Self-insurance (i.e., financial test and corporate guarantee);

(6) Escrow account; or

(7) Any other instrument the commission finds satisfactory.

b. The qualifying financial responsibility instrument must be sufficient to cover the cost of:

(1) Corrective action that meets the requirements of section 43-05-01-05.1;

1. (2) Injection well plugging that meets the requirements of section 43-05-01-11.5;
2. (3) Postinjection site care and facility closure that meets the requirements of section 43-05-01-19; and
3. (4) Emergency and remedial response that meets the requirements of section 43-05-01-13.- c. The qualifying financial responsibility instrument must be sufficient to address endangerment of underground sources of drinking water.
4. d. The qualifying financial responsibility instrument must comprise protective conditions of coverage.
5. (1) Protective conditions of coverage must include at a minimum cancellation, renewal, and continuation provisions; specifications on when the provider becomes liable following a notice of cancellation if there is a failure to renew with a new qualifying financial responsibility instrument; and requirements for the provider to meet a minimum rating, minimum capitalization, and ability to pass the bond rating when applicable.
6. (2) Cancellation. The storage operator shall provide that its financial mechanism may not cancel, terminate, or fail to renew except for failure to pay such financial instrument. If there is a failure to pay the financial instrument, the financial institution may elect to cancel, terminate, or fail to renew the instrument by sending notice by certified mail to the storage operator and the commission. The cancellation must not be final for one hundred twenty days after receipt of cancellation notice. The storage operator shall provide an alternate qualifying financial responsibility demonstration within sixty days of notice of cancellation, and if it is not acceptable or possible, any funds from the instrument being canceled must be released to the commission within sixty days of notification by the commission.
7. (3) Renewal. The storage operator shall renew all qualifying financial responsibility instruments, if an instrument expires, for the entire term of the geologic sequestration project. The instrument must be automatically renewed as long as the storage operator has the option of renewal at the face amount of the expiring instrument. The automatic renewal must, at a minimum, provide the storage operator with the option of renewal at the face amount of the expiring financial instrument.
8. (4) Cancellation, termination, or failure to renew may not occur and the financial instrument will remain in full force and effect in the event that on or before the date of expiration:
   1. (a) The commission deems the facility abandoned;
   2. (b) The permit is terminated or revoked or a new permit is denied;
   3. (c) Closure is ordered by the commission or a United States district court or other court of competent jurisdiction;
   4. (d) The storage operator is named as debtor in a voluntary or involuntary proceeding under title 11 (bankruptcy), United States Code; or
   5. (e) The amount due is paid.
9. e. The qualifying financial responsibility instrument is subject to the commission's approval.

(1) The commission shall consider and approve the qualifying financial responsibility demonstration for all the phases of the geologic sequestration project prior to issuing a storage facility permit.

(2) The storage operator shall provide any updated information related to its qualifying financial responsibility instrument on an annual basis and, if there are any changes, the commission must evaluate, within a reasonable time, the qualifying financial responsibility demonstration to confirm that the instrument used remains adequate. The storage operator shall maintain financial responsibility requirements regardless of the status of the commission's review of the financial responsibility demonstration.

(3) The commission may disapprove the use of a financial instrument if it determines that it is not sufficient to meet the requirements of this section.

f. Upon the commission's approval, the storage operator may demonstrate financial responsibility by using one or multiple qualifying financial responsibility instruments for specific phases of the geologic sequestration project.

If the storage operator combines more than one instrument for a specific geologic sequestration phase (e.g., well plugging), such combination must be limited to instruments that are not based on financial strength or performance (i.e., self-insurance or performance bond), for example trust funds, surety bonds guaranteeing payment into a trust fund, letters of credit, escrow account, and insurance. In this case, it is the combination of mechanisms, rather than the single mechanism, which must provide financial responsibility for an amount at least equal to the current cost estimate.

g. When using a third-party instrument to demonstrate financial responsibility, the storage operator shall provide proof that the third-party providers either have passed financial strength requirements based on credit ratings; or have met a minimum rating, minimum capitalization, and ability to pass the bond rating when applicable.

h. The storage operator using certain types of third-party instruments shall establish a standby trust to enable the commission to be party to the financial responsibility agreement without the commission being the beneficiary of any funds. The standby trust fund must be used along with other qualifying financial responsibility instruments (e.g., surety bonds, letters of credit, or escrow accounts) to provide a location to place funds if needed.

i. If the storage operator uses a surety bond or cash bond to satisfy its financial responsibility requirements, the storage operator shall be the principal on the bond and each surety bond must be executed by a responsible surety company authorized to transact business in North Dakota.

j. If the storage operator uses an escrow account to satisfy its financial responsibility requirements, the account must segregate funds sufficient to cover estimated costs for geologic sequestration financial responsibility from other accounts and uses.

k. If the storage operator or its guarantor uses self-insurance to satisfy its financial responsibility requirements, the storage operator shall:

(1) Meet a tangible net worth of an amount approved by the commission;

(2) Have a net working capital and tangible net worth each at least six times the sum of the current well plugging, postinjection site care, and facility closure cost;

1. (3) Have assets located in the United States amounting to at least ninety percent of total assets or at least six times the sum of the current well plugging, postinjection site care, and facility closure cost; and
2. (4) Must submit a report of its bond rating and financial information annually.l. In addition to the requirements in subdivision k, the storage operator shall either:- (1) Have a bond rating test of AAA, AA, A, or BBB as issued by Standard & Poor's, or Aaa, Aa, A, or Baa as issued by Moody's; or
3. (2) Meet all of the following five financial ratio thresholds:
4. (a) A ratio of total liabilities to net worth less than 2.0;
5. (b) A ratio of current assets to current liabilities greater than 1.5;
6. (c) A ratio of the sum of net income plus depreciation, depletion, and amortization to total liabilities greater than 0.1;
7. (d) A ratio of current assets minus current liabilities to total assets greater than -0.1; and
8. (e) A net profit (revenues minus expenses) greater than zero.m. The storage operator who is not able to meet corporate financial test criteria in the preceding provision, may arrange a corporate guarantee by demonstrating that its corporate parent meets the financial test requirements on its behalf. The parent's demonstration that it meets the financial test requirement is insufficient if it has not also guaranteed to fulfill the obligations for the storage operator.n. If the storage operator uses an insurance policy to satisfy its financial responsibility requirements, the insurance policy must be obtained from a third-party provider.2. The requirement to maintain commission-approved qualifying financial responsibility and resources is directly enforceable regardless of whether the requirement is a condition of the permit.- a. The storage operator shall maintain qualifying financial responsibility and resources until the commission approves project completion.
9. b. The storage operator may be released from a financial instrument in the following circumstances:
10. (1) The storage operator has completed the phase of the geologic sequestration project for which the financial instrument was required and has fulfilled all its financial obligations as determined by the commission, including obtaining financial responsibility for the next phase of the geologic sequestration project, if required;
11. (2) The storage operator has submitted a replacement financial instrument and received written approval from the commission accepting the new financial instrument and releasing the storage operator from the previous financial instrument; or
12. (3) The commission approves project completion.

1. 3. The storage operator shall have a detailed written estimate, in current dollars, of the cost of performing corrective action on wells in the area of review, plugging the injection well, postinjection site care and facility closure, and emergency and remedial response.

1. a. The cost estimate must be performed for each phase separately and must be based on the costs to the commission of hiring a third party to perform the required activities. A third party is a party who is not within the corporate structure of the storage operator;

2. b. During the active life of the geologic sequestration project, the storage operator shall adjust the cost estimate for inflation within sixty days prior to the anniversary date of the establishment of the financial instrument used to comply with this section and provide this adjustment to the commission. The storage operator shall also provide to the commission written updates of adjustments to the cost estimate within sixty days of any amendments to the area of review and corrective action plan, the injection well plugging plan, the postinjection site care and facility closure plan, and the emergency and remedial response plan;

3. c. Any decrease or increase to the initial cost estimate is subject to the commission's approval. During the active life of the geologic sequestration project, the storage operator shall revise the cost estimate no later than sixty days after the commission has approved the request to modify the area of review and corrective action plan, the injection well plugging plan, the postinjection site care and facility closure plan, and the emergency and remedial response plan, if the change in the plan increases the cost. If the change to the plans decreases the cost, any withdrawal of funds is subject to the commission's approval. Any decrease to the value of the financial responsibility instrument must first be approved by the commission. The revised cost estimate must be adjusted for inflation; and

4. d. Whenever the current cost estimate increases to an amount greater than the face amount of a financial instrument currently in use, the storage operator, within sixty days after the increase, shall either cause the face amount to be increased to an amount at least equal to the current cost estimate and submit evidence of such increase to the commission, or obtain other qualifying financial responsibility instruments to cover the increase. Whenever the current cost estimate decreases, the face amount of the financial assurance instrument may be reduced to the amount of the current cost estimate only after the storage operator has received written approval from the commission.

2. 4. The storage operator shall notify the commission by certified mail of adverse financial conditions that may affect the operator's ability to carry out its obligations under state and federal laws.

1. a. If the storage operator or the third-party provider of a qualifying financial responsibility instrument is named as the debtor in a bankruptcy proceeding, the notice to the commission must be made within ten days after commencement of the proceeding;

2. b. A guarantor of a corporate guarantee shall make the notification required in subdivision a if the guarantor is named as debtor, as required under the terms of the corporate guarantee; and

3. c. The storage operator who fulfills its financial responsibility requirements by obtaining a trust fund, surety bond, letter of credit, escrow account, or insurance policy will be deemed to be without the required financial assurance in the event of bankruptcy of the trustee or issuing institution, or a suspension or revocation of the authority of the trustee institution to act as trustee of the institution issuing the trust fund, surety bond, letter of credit, escrow account, or insurance policy. The storage operator shall establish other financial assurance within sixty days after such an event.

5. The storage operator shall provide an adjustment of the cost estimate to the commission within sixty days of notification by the commission, if the commission determines during the annual evaluation of the qualifying financial responsibility instrument that the most recent demonstration is no longer adequate to cover the operator's obligations under state and federal laws.

6. The use and length of pay-in periods for trust funds or escrow accounts are subject to the commission's approval. The storage operator may make periodic deposits into a trust fund or escrow account throughout the operational period in order to ensure sufficient funds are available to carry out the required activities on the date on which they may occur. The commission shall take into account project-specific risk assessments, projected timing of activities (e.g., postinjection site care), and interest accumulation in determining whether sufficient funds are available to carry out the required activities.