No. 35156 (Amendment): Rule R311-212. Administration of the Petroleum Storage Tank Loan Fund

(Amendment)

DAR File No.: 35156
Filed: 08/15/2011 07:50:10 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Underground Storage Tank (UST) owners who install new USTs or perform UST system upgrades are often required, before the work begins, to make a partial payment to the UST installer who will perform the work. The UST owner may apply for a loan from the Petroleum Storage Tank loan fund to pay for most of the cost of the work, but currently the loan proceeds are paid to the owner after the work is done. The rule change will allow for an initial loan disbursement to be paid to the borrower (the UST owner) before the work is done. This will help the UST owner make the up-front payment to the installer and minimize the owner's financial hardship. The rule changes also add requirements to ensure that the borrower performs the work in a timely manner when an initial disbursement is made. Other changes are made to clarify that a loan repayment schedule is specific to a loan, rather than to a borrower, and to make rule wording clearer.

Summary of the rule or change:

Adds a provision to allow for an initial disbursement of part of the approved loan amount to be made before the start of the work at the site. Establishes time frames for starting and completing the work when an initial disbursement is made. Specifies how interest that accrues on the initial disbursement will be paid back. Changes the reference to creation of a repayment schedule to make the repayment schedule specific to the loan rather than to the borrower. Makes minor wording changes for clarity. Modifies the loan application form to provide a space in which the loan applicant may request an initial loan disbursement.

State statutory or constitutional authorization for this rule:

• Section 19-6-105
• Section 19-6-405.3
• Section 19-6-403

Anticipated cost or savings to:

the state budget:

No anticipated cost or savings--The proposed changes provide for part of a loan from the Petroleum Storage Tank loan fund to be paid before the work is done. This would result in only a minor change to the current loan approval and repayment process, and would not impact state budget. Other changes are procedural or for clarification, and would have no cost or savings associated with them.

local governments:

No costs or savings are anticipated--The changes provides for an initial payment of part of the borrower's approved loan before the work is done, and make other minor changes for clarity.

small businesses:

No costs or savings are anticipated--The changes provides for an initial payment of part of the borrower's approved loan before the work is done, and make other minor changes for clarity.

persons other than small businesses, businesses, or local governmental entities:

No costs or savings are anticipated--The changes provides for an initial payment of part of the borrower's approved loan before the work is done, and make other minor changes for clarity.

Compliance costs for affected persons:

No compliance costs are anticipated--The change allows for an initial disbursement of part of the loan amount to be made separately from the main disbursement, and makes minor wording changes.

Comments by the department head on the fiscal impact the rule may have on businesses:

The rule could allow some underground tank owners to apply for and receive a loan because they would not be required to make the initial payment to the installer out of their own funds. Small businesses could more readily upgrade tanks and install better leak prevention and leak detection equipment. Upgrading or replacing tanks with newer ones that are less likely to leak should have a positive impact on tank owners by reducing the number of leaks. Better monitoring equipment will help find leaks sooner and reduce the impact on the tank owner and the environment. Paying back the accrued interest on the initial loan disbursement should be manageable, and the rule allows for modification of the interest payment if necessary.

Amanda Smith, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Environmental Quality
Environmental Response and RemediationRoom First Floor
195 N 1950 W
SALT LAKE CITY, UT 84116-3085

Direct questions regarding this rule to:

• Gary Astin at the above address, by phone at 801-536-4103, by FAX at 801-359-8853, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

10/03/2011

Interested persons may attend a public hearing regarding this rule:

• 09/19/2011 10:00 AM, DEQ, 195 N 1950 W, Room 1015, Salt Lake City, UT

This rule may become effective on:

10/17/2011

Authorized by:

Brent Everett, Director

RULE TEXT

R311. Environmental Quality, Environmental Response and Remediation.

R311-212. Administration of the Petroleum Storage Tank Loan Fund.

R311-212-1. Definitions.

Definitions are found in Section R311-200.

 

R311-212-2. Loan Application Submittal.

(a) Application for a loan shall be made on forms incorporated in Section R311-212-10, in accordance with Subsection 19-6-405.3(7). Loan applications shall be accepted during application periods designated by the Executive Secretary.

(b) As long as loan funds are available at least one application period shall be designated each fiscal year. Additional funds available through repayment of existing loans shall be loaned according to priorities from the most recent application period.

(c) Applications must be received by the Executive Secretary by 5:00 p.m. on the last day of a given application period.

(d) Loan applications received outside the application period shall be invalid.

 

R311-212-3. Eligibility Review.

(a) The Executive Secretary shall determine if the applicant meets the eligibility criteria stated in Subsections 19-6-405.3(3), 19-6-405.3(4), 19-6-405.3(5) and 19-6-405.3(6).

(b) To meet the eligibility requirements of 19-6-405.3(4) the applicant must, for all facilities for which the applicant requests a loan, demonstrate current compliance with all state and federal UST laws, rules and regulations, including compliance with all requirements for remediation of facilities with leaking underground storage tanks, or must be able to achieve compliance with the loan proceeds.

(c) To meet the eligibility requirements of 19-6-405.3(4) the applicant must meet the following for all facilities owned or operated by the applicant for which the applicant does not request a loan:

(1) The applicant has demonstrated current compliance with all state and federal UST laws, rules and regulations, including compliance with all requirements for remediation of facilities with leaking underground storage tanks;

(2) All regulated underground petroleum storage tanks owned by the applicant have met the requirements of Section 19-6-412(2) and have a current certificate of compliance;

(3) The applicant has paid all underground storage tank registration fees, interest and penalties which have been assessed; and

(4) The applicant has paid all applicable petroleum storage tank fees, interest and penalties which have been assessed.

(d) To meet the requirements of Section 19-6-405.3(3), the loan request must be for the purpose of:

(1) Upgrading petroleum USTs;

(2) replacing USTs; or

(3) Permanently closing USTs. If an applicant requests a loan for closing USTs which will be replaced by above-ground storage tanks, the loan, if approved, will be only for closing the USTs. The security pledged by the applicant for a loan to replace USTs with above-ground storage tanks shall be subject to the limitations in R311-212-6.

 

R311-212-4. Prioritization of Loan Applications.

(a) When determined by the Executive Secretary to be necessary, all applications received during a designated application period shall be prioritized by total points assigned. Ten points shall be given for each item that applies to the applicant or the facility for which the loan is requested:

(1) The applicant has less than $1,000,000 annual gross income and fewer than five full-time employee equivalents and is not owned or operated by any person not meeting the income and employee criteria.

(2) The applicant's income is derived solely from operations at UST facilities.

(3) The applicant owns or operates no more than two facilities.

(4) The facility is located in a U.S. Census Bureau population unit containing fewer than 5,000 people.

(5) There are no more than three operating retail outlets selling motor fuel within 15 miles road distance in all directions.

(6) Loan proceeds will be used solely for replacing or upgrading USTs.

(7) All USTs at the facility are greater than 15 years old.

(b) One point shall be given for each road mile of distance from the facility to the nearest operating retail outlet selling motor fuel, to a maximum of 30 points.

(c) Applications which receive the same number of points shall be sub-prioritized according to the date postmarked or the date delivered to the Executive Secretary by any other method.

(d) Applications shall remain in priority order regardless of availability of funds until a new application period is declared. When a new application period begins, priority order of applications which have not been reviewed terminates. An applicant whose application has not been reviewed or an applicant whose application has not been approved because the applicant has not satisfied the requirements of Subsections 19-6-405.3(3) through (6), loses eligibility to apply for a loan and must submit a new application in the subsequent period to be considered for a loan in that period.

 

R311-212-5. Loan Application Review.

(a) The applicant shall ensure that the loan application is complete. The completed application with supporting documents shall contain all information required by the application. If the applicant does not submit a complete application within 60 days of eligibility approval, the applicant's eligibility approval shall be forfeited, and the applicant must re-apply.

(b) All costs incurred in processing the application including appraisals, title reports, or UCC-1 releases shall be the responsibility of and paid for by the applicant. The Executive Secretary may require payment of costs in advance. The Executive Secretary shall not reimburse costs which have been expended, even if the loan fails to close, regardless of the reason.

(c) The review and approval of the application shall be based on information provided by the applicant, and:

(1) review of any and all records and documents on file;

(2) verification of any and all information provided by the applicant;

(3) review of credit worthiness and security pledged; and

(4) review of a site construction work plan.

(d) The applicant must close the loan within 30 days after the Executive Secretary mails the loan documents for the applicant's signature. If the applicant fails to close the loan within this time period, the approval is forfeited and the applicant must re-apply. An exception to the 30 day period may be granted by the Executive Secretary if the closing is delayed due to circumstances beyond the applicant's control.

 

R311-212-6. Security for Loans.

(a) When an applicant applies for a loan of greater than $30,000, the loan applicant must pledge for security personal or real property which meets or exceeds the following criteria:

(1) The loan amount may not be greater than 80 percent of the value of the applicant's equity in the security for cases where the Department obtains a first mortgage position, or

(2) The loan amount may not be greater than 60 percent of the value of the applicant's equity in the security for cases where the Department obtains a second mortgage position.

(b) The applicant shall provide acceptable documentation of the value of the property to be used as security using:

(1) a current written appraisal, performed by a State of Utah certified appraiser;

(2) a current county tax assessment notice, or

(3) other documentation acceptable to the Executive Secretary.

(c) A title report on all real property and a UCC-1 clearance on all personal property used as security shall be submitted to the Executive Secretary by a title company or appropriate professional person approved by the Executive Secretary.

(d) When the title report indicates an existing lien or encumbrance on real property to be used as security, the existing lien holders may subordinate their interest in favor of the Department. The Department shall accept no less than a second mortgage position on real property pledged for loan security.

(e) Whenever a corporation seeks a loan, its principals must guarantee the loan personally.

(f) The applicant must provide a complete financial statement with cash flow projections for debt service.

(g) Above ground storage tanks and real property on which they are located shall not be acceptable as security.

(h) Underground storage tanks and the real property on which they are located shall not be acceptable as security unless:

(1) The UST facility offered for security has not had a petroleum release which has not been properly remediated; and

(2) The applicant provides documentation to demonstrate the UST facility is currently in compliance with the loan eligibility requirements set forth in R311-212-3.

(i) If a loan is made without security, the maximum loan repayment period shall be seven years.

 

R311-212-7. Procedure for Making Loans.

(a) Loan funds shall be obligated after all documents to secure a loan are complete, processed, and appropriately signed by the applicant and the Executive Secretary.

(b) [Loan proceeds shall be disbursed to the applicant after closing documents are processed, work at the site is completed, and all paperwork and notifications have been received by the Executive Secretary.]The Executive Secretary may approve a borrower's request for one initial disbursement of loan proceeds to the borrower after the loan is closed, and before work begins. The initial disbursement shall be for no more than 40 per cent of the approved loan amount. Disbursement of the remaining loan proceeds, or disbursement of the entire loan proceeds if no initial disbursement is made, shall be made after work at the site is completed, and all paperwork and notifications have been received by the Executive Secretary.

(1) If an initial loan disbursement is made, the borrower shall begin work on the project no later than 60 days, or another time period approved by the Executive Secretary, following the initial disbursement. Disbursement of the remaining loan proceeds shall be made no later than 180 days, or another time period approved by the Executive Secretary, following the initial disbursement.

(2) Funds disbursed through an initial disbursement under Subsection R311-212-7(b) shall begin to accrue interest at 3% per annum on the day they are disbursed. The interest accumulated on these funds from the date of the initial disbursement until the date of the final loan disbursement shall be repaid in full with the first loan payment made by the borrower after the final disbursement, or as otherwise approved by the Executive Secretary.

(3) If work is not initiated or completed within the time periods established in Subsection R311-212-7(b)(1), the loan balance shall be paid within 30 days of notice provided by the Executive Secretary.

(c) Loan proceeds shall not be used to pay underground storage tank registration fees, penalties, or interest assessed under Section 19-6-408 or petroleum storage tank fees, penalties, or interest assessed under Section 19-6-411.

(d) Loans shall not be made for work which is performed before the applicant's loan application is approved and the loan is closed.

 

R311-212-8. Servicing the Loans.

(a) The Executive Secretary shall establish a[ loan] repayment schedule for each [borrower]loan based on the financial situation and income circumstances of the borrower and [within] the term of loans allowed by Subsection 19-6-405.3(6)(e). Loans shall be amortized with equal payment amounts and payments shall be of such amount to pay all interest and principal in full.

(b) The initial installment payment [is]shall be due on a date established by the Executive Secretary. Subsequent installment payments [are]shall be due on the first day of each month. A notice of payment and due date shall be sent for each subsequent payment. Non-receipt of the statement of account or notice of payment shall not be a defense for non-payment or late payment.

(c) The Executive Secretary shall apply loan payments received first to penalty, next to interest and then to principal.

(d) Loan payments may be made in advance , and [or] the remaining principal balance of the loan may be paid in full at any time without penalty.

(e) Notices of late payment penalty assessed with amounts of penalty and the total payment due shall be sent to the borrower.

(f) The penalty for late loan payments shall be 10 percent of the payment due. The penalty shall be assessed and payable on payments received by the Executive Secretary more than five days after the due date. A penalty shall be assessed only once on a given late payment. Payments shall be considered received the day of the U.S. Postal Service post mark date or receipted date for payments delivered to the Executive Secretary by methods other than the U.S. Postal Service. If a loan payment check is returned due to insufficient funds, a service charge in the amount allowed by law shall be added to the payment amount due.

(g) Notice of loans paid in full shall be sent after all penalties, interest and principal have been paid.

(h) Releases of the Executive Secretary's interest in security shall be prepared and sent to the borrower or filed for public notice as applicable.

 

R311-212-9. Recovering on Defaulted Loans.

(a) Loans may be considered in default when two consecutive payments are past due by 30 days or more, when the applicant's ability to receive payments for claims against the fund lapses, or if the certificate of compliance lapses or is revoked. Lapsing under section R311-206-7(e) shall not be considered as grounds for default for USTs which are permanently closed.

(b) The Executive Secretary may declare the full amount of the defaulted loan, penalty, and interest immediately due.

(c) The Executive Secretary need not give notice of default prior to declaring the full amount due and payable.

(d) The borrower shall be liable for attorney's fees and collection costs for defaulted loans whether incurred before or after court action.

 

R311-212-10. Forms.

(a) The forms dated and listed below, on file with the Department, are incorporated by reference as part of Section R311-212, and shall be used by the Executive Secretary for making loans.

(1) Loan Application version [08/19/10]06/21/11

(2) Balance Sheet version 04/02/04

(3) Loan Commitment Agreement version 06/15/95

(4) Corporate Authorization version 06/15/95

(5) Promissory Note version 06/15/95

(6) Extension and Modification Agreement version 06/15/95

(7) Security Agreement version 06/15/95

(8) Hypothecation Agreement 06/15/95

(9) General Pledge Agreement 06/15/95

(10) Assignment 06/15/95

(11) Assignment of Account 06/15/95

(12) Trust Deed

(i) property with underground storage tanks version 06/15/95; or

(ii) property without underground storage tanks version 06/15/95.

(b) The Executive Secretary may require or allow the use of other forms that are consistent with these rules as necessary for the loan approval process. The Executive Secretary may change these forms for administrative purposes provided the revised forms remain consistent with the substantive provisions of the adopted forms.

 

R311-212-11. Rules in Effect.

(a) The rules in effect on the closing date of the loan and the forms signed by the parties shall govern the parties.

 

KEY: hazardous substances, petroleum, underground storage tanks

Date of Enactment or Last Substantive Amendment: [February 14, ]2011

Notice of Continuation: April 18, 2007

Authorizing, and Implemented or Interpreted Law: 19-6-105; 19-6-403; 19-6-405.3

 

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