Proof of financial responsibility is made by showing to the satisfaction of the department of water resources that the permittee has the ability to respond in damages to liability which might reasonably result from the operation for which the permit is sought. Proof of financial responsibility may be shown by:

1. Presentation to the department of proof of a prepaid noncancelable insurance policy against such liability, in an amount approved by the department.

2. Filing with the department a corporate surety bond, cash, or negotiable securities in an amount approved by the department.