California Department of Resources Recycling and Recovery (CalRecycle) 

Regulations: Title 14, Natural Resources--Division 7, CIWMB

Chapter 6. Permitting of Waste Tire Facilities and Waste Tire Hauler Registration and Tire Manifests

Article 9. Financial Assurance Requirements for Closure of A Major Waste Tire Facility

Section 18470. Scope and Applicability.

(a) This Article requires operators of major waste tire facilities to demonstrate adequate financial ability to conduct closure activities.

(b) Operators of all major waste tire facilities, except state and federal operators, shall comply with the requirements of this Article upon application for issuance of a major waste tire facilities permit pursuant to Chapter 6, Article 1, section 18420.

Note:

Authority cited: Section 40502 and 42820, Public Resources Code.
Reference: Section 42821, Public Resources Code.


Section 18471. Definitions.

(a) When used in this Article, the following terms shall have the meanings given below:

(1) "Current Closure Cost Estimate" means the most recent estimate prepared in accordance with Chapter 6, Article 6, section 18442.

(2) "Depository Trust Fund" means the fund established in conjunction with a surety bond or letter of credit and that meets the requirements of section 18474 of this Article.

(3) "Enterprise Fund" means a fund established to account for the financing of self-supporting activities of a government unit that renders services on a user-fee basis.

(4) "Government Securities" means financial obligations issued by a federal, state or local government, including general obligation bonds, revenue bonds, and certificates of participation.

(5) "Letter of Credit" means a contract by which the issuing institution promises to extend credit on behalf of an operator to the Board or its designee, on presentation of the mechanism in accordance with its terms.

(6) "Provider of financial assurance" means an entity, other than an operator, that provides financial assurance to an operator of a major waste tire facility, including but not limited to a trustee, an institution issuing a letter of credit, or a surety company.

(7) "Surety Bond" means a contract by which a surety company promises that, if the operator fails to perform required closure activities, the surety company will be liable for the operator's responsibilities as specified by the bond.

(8) "Trust fund" means a contract by which the operator transfers assets to a trustee to hold, on behalf of the Board or its designee, to pay closure costs.

Note:

Authority cited: Section 40502 and 42820, Public Resources Code.
Reference: Section 42821, Public Resources Code.


Section 18472. Closure Cost Estimate Adjustments.

(a) An operator shall increase the closure cost estimate when changes to the closure plan increase the cost of closure.

(b) An operator may reduce the closure cost estimate when changes to the closure plan decrease the cost of closure. The request for reduction shall be submitted with an application for renewal or revision of the permit for approval by the Board or its designee.

(c) Each year, an operator shall submit to the Board or its designee, a report calculating the increase in the closure cost estimate due to the inflation factor for the previous calendar year. The inflation factor is derived from the annual Implicit Price Deflator for Gross National Product as published annually by the U.S. Department of Commerce, in its Survey of Current Business. The inflation factor is the result of dividing the latest annual published deflator by the deflator for the previous year. The operator shall adjust the closure cost estimate for inflation within 60 days of the anniversary date of the establishment of the financial mechanism for closure costs. The operator shall increase the monetary amount of the financial mechanism based on this inflation factor.

(d) The mechanism(s) used to demonstrate financial responsibility shall be updated, no more than 60 days after a change in the amount of the current closure cost estimate covered by the mechanism(s).

Note:

Authority cited: Section 40502 and 42820, Public Resources Code.
Reference: Section 42821, Public Resources Code.


Section 18473. Acceptable Mechanisms and Combination of Mechanisms.

(a) Subject to the limitation of subsection (c) of this section, an operator shall use any one or any combination of the mechanisms specified which are defined in the following sections of this Article:

(1) Section 18474, Trust Fund

(2) Section 18475, Surety Bond

(3) Section 18476, Letter of Credit

(4) Section 18477, Government Securities

(5) Section 18478, Enterprise Fund

(6) Section 18478.5 State Approved Mechanism

(b) If a combination of mechanisms are used, the operator shall designate one mechanism as "primary" and all others as "excess" coverage.

(c) If an operator uses a trust fund in combination with a surety bond or letter of credit, the trust fund may be used as the depository trust fund for the other mechanisms.

(d) An operator shall not combine a performance bond with any other mechanism(s).

Note:

Authority cited: Section 40502 and 42820, Public Resources Code.
Reference: Section 42821, Public Resources Code.


Section 18474. Trust Fund.

(a) An operator may establish a trust fund to meet the requirements of this Article. The trust agreement shall be submitted to the Board or its designee as an originally signed duplicate. The trustee shall be an entity which has the authority to act as a trustee, and whose trust operations are regulated and examined by a federal or state agency.

(b) The trust agreement shall be worded as specified by using form CIWMB 140 "Trust Agreement" (12/91) which is incorporated herein by reference; and also shall contain the original signature of the grantor and the trustee. (See Appendix A.)

(c) The initial deposit to the trust fund shall be at least equal to the current closure cost estimate.

(d) If the value of the fund is at any time less than the amount of the current estimate, the operator shall either deposit an amount into the fund so that the value of the fund at least equals the amount of the current closure cost estimate, or obtain other financial assurance, as specified in this Article, to cover the difference.

(e) If at any time, the value of the trust fund plus the amount of coverage demonstrated by other mechanisms is greater than the closure cost estimate based on the maximum quantity of waste tires permitted for storage, the operator may request in writing that the Board or its designee authorize the release of the excess funds. After receiving such a request, the Board or ts designee shall review the request and, if any excess funds are verified, shall instruct the trustee to release the funds.

(f) After the Board or its designee has approved final closure, an operator or any other person authorized by the Board to perform closure, may request reimbursement for closure expenditures by submitting to the Board for review, documentation of those expenditures, including but not limited to tire receipts. After receiving the documentation for closure activities, the Board or its designee shall determine whether the closure expenditures are in accordance with the closure plan or otherwise justified. After the Board or its designee has approved final closure, the Board or its designee shall instruct the trustee, in writing, to reimburse the fund to the grantor.

(g) The Board or its designee shall agree to termination of the trust when:

(1) An operator substitutes alternate financial assurance as specified in section 18479 of this Article; or

(2) The Board or its designee releases the operator from the requirements of this Article in accordance with section 18482.

Note:

Authority cited: Section 40502 and 42820, Public Resources Code.
Reference: Section 42821, Public Resources Code.


Section 18475. Surety Bond.

(a) An operator may establish a surety bond to meet the requirements of this Article. The surety company issuing the bond shall, at a minimum, be among those listed as acceptable sureties on federal bonds in the most recent issuance of Circular 570 of the U.S. Department of the Treasury.

(b) The surety bond shall be worded as specified by using one of the following forms which are incorporated by reference;

(1) Form CIWMB 141 (1/92) " Performance Bond," which is incorporated herein by reference, for a surety bond guaranteeing performance (See Appendix A.); or

(2) Form CIWMB 142 (1/92) "Financial Guarantee Bond," which is incorporated herein by reference, for a surety bond guaranteeing payment. (See Appendix A.)

(c) An operator who uses a surety bond to satisfy the requirements of this Article, or the surety who issues the bond, shall also establish a depository trust fund which meets the requirements of section 18474 of this Article if:

(1) An operator fails to demonstrate alternate financial assurance within 60 days after receiving notice of cancellation of the mechanism;

(2) An operator fails to perform closure in accordance with the applicable approved closure plan and permit requirements when required to do so by the Board or its designee; or

(3) A surety fails to perform such activities on behalf of the operator. This applies to the performance bond only.

(d) Under the terms of the bond, all payments made from the bond shall be deposited by the surety directly into the depository trust fund.

(e) A surety company shall become liable under the terms of the bond, if the Board or its designee determines that the operator has failed to perform closure as guaranteed by the bond.

(f) Under the terms of the bond, a surety may cancel the bond by sending notice of cancellation by certified mail to the operator and the Board or its designee. Cancellation shall not take effect until 120 days after the date of receipt of the notice of cancellation by both the operator and the Board or its designee, as evidenced by the return receipts.

(g) An operator may cancel a bond by sending written notice to the Surety(ies), provided, however, that no such notice shall become effective until the Surety(ies) receive(s) written authorization from the Board or its designee to terminate the bond.

Note:

Authority cited: Section 40502 and 42820, Public Resources Code.
Reference: Section 42821, Public Resources Code.


Section 18476. Letter of Credit.

(a) An operator may establish a letter of credit to meet the requirements of this section. The issuing institution shall be an entity which has the authority to issue letters of credit and whose letter of credit operations are regulated and examined by a federal or state agency.

(b) The letter of credit shall be worded as specified by using form CIWMB 143 "Irrevocable Letter of Credit for closure Costs" (12/91) which is incorporated herein by reference. (See Appendix A.)

(c) The letter of credit shall be accompanied by a letter from the operator identifying the number, issuing institution, and date of issuance of the letter of credit; and the name, address, facility number, and amount of funds assured by the letter of credit for closure for each major waste tire facility.

(d) An operator who uses a letter of credit to satisfy the requirements of this Article or the issuing institution shall also establish a depository trust fund which meets the requirements of section 18474 of this Article if:

(1) An operator fails to demonstrate alternate financial assurance within 60 days after receiving notice of cancellation of the mechanism; or

(2) An operator fails to perform closure in accordance with the applicable approved closure plan and permit requirements when required to do so by the Board or its designee.

(e) Under the terms of the letter of credit, all payments made from the letter of credit shall be deposited by the financial institution issuing the letter of credit, directly into the depository trust fund.

(f) The letter of credit shall:

(1) Be irrevocable and issued for a period of at least one year; and

(2) Provide that the expiration date will be automatically extended for a period of at least one year unless, at least 120 days before the current expiration date, the issuing institution notifies both the operator and the Board or its designee by certified mail of a decision not to extend the expiration date. Under the terms of the letter of credit, the 120 days shall begin on the date when both the operator and the Board or its designee have received the notice, as evidenced by the return receipts.

Note:

Authority cited: Section 40502 and 42820, Public Resources Code.
Reference: Section 42821, Public Resources Code.


Section 18477. Government Securities.

(a) Government securities may be used to cover closure costs only for major waste tire facilities operated by government agencies.

(b) The terms of issuance of government securities shall specify that proceeds from the sale of the securities shall be deposited into a financial assurance mechanism that meets the requirements of Section 18478(d) of this Article.

(c) The securities shall have been issued and the proceeds deposited into the financial assurance mechanism that provides equivalent protection to a trust fund by meeting the following requirements:

(1) Proceeds from the sale of securities shall be used exclusively to pay for closure activities;

(2) The financial operations of the provider of the financial assurance are regulated by a federal or state agency, or the provider is otherwise certain to maintain and disburse the assured funds properly;

(3) If the provider of financial assurance has authority to invest revenue deposited into the mechanism, the provider shall exercise investment discretion similar to a trustee; and

(4) The mechanism meets other requirements that the Board determines are necessary to ensure that the assured funds shall be available in a timely manner.

Note:

Authority cited: Section 40502 and 42820, Public Resources Code.
Reference: Section 42821, Public Resources Code.


Section 18478. Enterprise Fund.

(a) The enterprise fund may be used to cover closure costs only for major waste tire facilities operated by government agencies.

(b) The enterprise fund shall dedicate its revenue exclusively or with exclusive first priority to financing closure activities.

(c) The enterprise fund shall be established and the documents shall be worded as specified by using form CIWMB 144 "Enterprise Fund for Financial Assurances" (3/92), which is incorporated herein by reference. (See Appendix A.) The wording, however, may be modified to accommodate special circumstances on a case-by-case basis, as approved by the Board or its designee.

(d) Revenue generated by an enterprise fund shall be deposited into a financial assurance mechanism which:

(1) Provides equivalent protection to a trust fund as described in section 18474 of this Article;

(2) Shall be funded within five years as described in Section 18474 of this Article;

(3) Is used exclusively to finance closure activities and shall remain inviolate against all other claims, including any claims by the operator, the operator's governing body, and the creditors of the operator and its governing body;

(4) Authorizes the Board or its designee to direct the provider of financial assurance to pay closure costs if the Board or its designee determines that the operator has failed to perform closure activities covered by the mechanism;

(5) Is maintained by a provider whose financial operations are regulated by a federal or state agency, or the provider is otherwise certain to maintain and disburse the assured funds properly;

(6) Is maintained by a provider who has authority to invest revenue deposited into the mechanism. The provider shall exercise investment discretion similar to a trustee; and

(7) Meets other requirements that the Board determines are necessary to ensure that the assured amount of funds shall be available for closure activities in a timely manner.

Note:

Authority cited: Section 40502 and 42820, Public Resources Code.
Reference: Section 42821, Public Resources Code.


Section 18478.5 State Approved Mechanism.

(a) An operator may satisfy the requirements of this Chapter by obtaining any other mechanism that meets the following criteria, and that is approved by the Board.

(1) The financial assurance mechanism(s) must ensure that the amount of funds assured is sufficient to cover the costs assured when needed;

(2) The financial assurance mechanism(s) must ensure that the funds will be available in a timely fashion when needed;

(3) The financial assurance mechanism(s) must be obtained by the operator before the first waste is received at a new facility and before any other financial mechanism is cancelled at existing facilities. The financial mechanism must be maintained until the operator is released from the financial assurance requirements under this Chapter.

(4) The financial assurance mechanism(s) must be legally valid, binding, and enforceable under the California and Federal law.

Note:

Authority cited: Section 40502 and 42820, Public Resources Code.
Reference: Section 40502 and 42821, Public Resources Code.


Section 18479. Substitution of Mechanisms by Operator.

(a) An operator may substitute any alternate financial assurance mechanism(s) acceptable to the Board or its designee as specified in this Article, provided that at all times the operator maintains an effective mechanism or combination of mechanisms that satisfies the requirements of section 18473 of this Article, and informs the Board of such substitution.

(b) After obtaining alternate financial assurance, an operator may request that the Board or its designee terminate or authorize the termination of a financial assurance mechanism. The operator shall submit such a request in writing with evidence of alternate financial assurance.

(c) Following written approval by the Board or its designee, the operator may cancel a financial assurance mechanism by giving notice to the provider of financial assurance.

Note:

Authority cited: Section 40502 and 42820, Public Resources Code.
Reference: Section 42821, Public Resources Code.


Section 18480. Bankruptcy or Other Incapacity of an Operator or Provider of Financial Assurance.

(a) Within 10 days after commencement of a voluntary or involuntary proceeding under the Bankruptcy Code, Title 11, U.S.C. sections 101-1330 in which:

(1) The operator is named as debtor. The operator shall notify the Board or its designee by certified mail of such commencement.

(2) A provider of financial assurance is named as debtor, such provider shall notify the operator and the Board or its designee by certified mail of such commencement.

(b) An operator shall be deemed to be without the financial assurances in the event of bankruptcy of its provider, or in the event of a suspension or revocation of the authority of the provider to issue such coverage. If such an event occurs, the operator shall demonstrate, to the Board or its designee, alternate coverage as specified in this Article within 60 days after receiving notice of the event. If the operator fails to obtain alternate coverage within 60 days, the operator shall notify the Board or its designee within 10 days of such failure.

Note:

Authority cited: Section 40502 and 42820 , Public Resources Code.
Reference: Section 42821, Public Resources Code.


Section 18481. Recordkeeping and Reporting Requirements.

(a) An operator shall maintain evidence of all financial assurance mechanisms until the operator is released from the requirements of this Article, as specified in section 18482. This evidence shall be maintained at each major waste tire facility, whenever possible, or at an alternate, designated location approved by the Board or its designee and which is accessible to the operator, and available for the Board or its designee to review.

(b) An operator shall maintain the following types of evidence of financial assurance:

(1) Trust Fund. An operator using a trust fund shall maintain a copy of the trust agreement and statements verifying the current balance of the fund.

(2) Surety Bond. An operator using a surety bond shall maintain a copy of the bond and any amendments to the bond.

(3) Letter of Credit. An operator using a letter of credit shall maintain a copy of the letter of credit and any amendments to the letter of credit.

(4) Government Securities. An operator using government securities shall maintain a copy of the following:

(A) All official resolutions, forms, letters or other pertinent documents generated to issue the securities;

(B) The terms of issuance of the securities; and

(C) With respect to the financial assurance mechanism into which proceeds from the issuance are deposited, the information listed in subsection (5)(C)1., 2., and 3. of this section.

(5) Enterprise Fund. An operator using a enterprise fund shall maintain a copy of the following:

(A) All official resolutions, forms, letters, or other pertinent documents generated to establish the fund;

(B) The annual financial statements of the fund; and

(C) With respect to the financial assurance mechanism into which enterprise fund revenue is deposited:

  1. The mechanism, which shall identify the major waste tire facility(ies) and the current closure cost estimates covered by the mechanism;
  2. A letter from an authorized officer of the institution maintaining the mechanism, identifying the amount of coverage provided by the mechanism as of the date of its establishment and each anniversary date of establishment; and
  3. Documentation that the mechanism meets the requirements of section 18478(d) of this Article.

(c) An operator shall submit current evidence of financial responsibility, as described in subsection (b) of this section, to the Board or its designee:

(1) Whenever a financial assurance mechanism is established or amended.

(A) In the case of a trust fund, letter of credit or surety bond, such documentation shall include the original mechanisms or amendments;

(B) In the case of government securities such documentation shall include the information as specified in subsection (b)(4)(C) of this section.

(C) In the case of the enterprise fund such documentation shall include the information as specified in subsection (b)(5)(C) of this section.

(2) When a closure plan is required to be submitted as required in Article 6, or when the amendment of a cost estimate is required to be submitted as required in Articles 6 or 9; or

(3) If an operator fails to increase the balance of a trust fund or an enterprise fund in accordance with section 18474(c) of this Article.

Note:

Authority cited: Section 40502 and 42820, Public Resources Code.
Reference: Section 42821, Public Resources Code.


Section 18482. Release from Financial Assurance Requirements for Closure Costs.

(a) After approving the closure of a major waste tire facility as specified in Article 6 of Chapter 6, the Board or its designee shall notify the operator in writing, that the operator is no longer required by this Article to maintain financial assurance for closure of a particular facility; or

(b) When operational control of a major waste tire facility is transferred, the existing operator shall remain subject to the requirements of this Article until the new operator provides acceptable financial assurances to the Board or its designee. The Board or its designee shall notify the previous operator in writing that they are no longer required to maintain financial assurance for closure of that particular facility.

Note:

Authority cited: Section 40502 and 42820, Public Resources Code.
Reference: Section 42821, Public Resources Code.

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