No. 40757 (Amendment): Rule R311-212. Administration of the Petroleum Storage Tank Loan Program

(Amendment)

DAR File No.: 40757
Filed: 09/09/2016 07:22:39 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

When an underground storage tank (UST) owner/operator applies for a loan from the Petroleum Storage Tank Loan Program for closing, replacing, or upgrading USTs, the division director may make an initial disbursement of up to 40% of the approved loan amount to the applicant after the loan is approved and before the work is done. To avoid making an initial disbursement that is more than the amount the applicant's contractor requires as an initial payment from the applicant, the rule is changed to state that the initial disbursement may be for the lesser of 40% of the approved loan amount or the amount that the contractor requires up front from the customer (the loan applicant). The loan application form is also changed to reflect the clarification of the amount of the initial disbursement.

Summary of the rule or change:

Section R311-212-7 is changed to specify that an initial disbursement of loan proceeds to an applicant for a PST loan, paid to the applicant after the loan is approved and prior to the start of work, may be for the lesser of 40% of the approved loan amount or the amount the contractor who will perform the work requires as an initial payment from the customer (the loan applicant). Similar wording is added to the loan application form, and the new form is incorporated by reference.

Statutory or constitutional authorization for this rule:

• Section 19-6-105
• Section 19-6-403
• Section 19-6-409

This rule or change incorporates by reference the following material:

• Updates Loan Application, published by DERR, 07/14/2016

Anticipated cost or savings to:

the state budget:

None--The amount saved due to the lower initial disbursement is paid after the work is completed as the final disbursement of the loan proceeds.

local governments:

None--If a local government, as a UST owner/operator, applies for a PST loan, the proposed change clarifies the amount of the loan that can be paid to the applicant before the work is done. The change does not alter the total loan amount or alter the costs to the applicant.

small businesses:

None--If a small business, as a UST owner/operator, applies for a PST loan, the proposed change clarifies the amount of the loan that can be paid to the applicant before the work is done. The change does not alter the total loan amount or alter the costs to the applicant.

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

None--If a person, as a UST owner/operator, applies for a PST loan, the proposed change clarifies the amount of the loan that can be paid to the applicant before the work is done. The change does not alter the total loan amount or alter the costs to the applicant. Non-fiscal impacts are that the ability to receive part of the loan proceeds before starting the work helps the applicant meet contractor requirements and may encourage UST owner/operators to remove or upgrade older USTs, reducing the number and severity of releases from UST systems.

Compliance costs for affected persons:

None--The proposed change clarifies the amount of the loan that can be paid to the applicant up front. It does not alter the total loan amount or alter the costs to the applicant.

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

The rule change does not have any fiscal impact on businesses.

Alan Matheson, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Office 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:

10/31/2016

Interested persons may attend a public hearing regarding this rule:

• 10/17/2016 02:00 PM, Department of Environmental Quality, 195 North 1950 West, Room 1015, Salt Lake City, UT

This rule may become effective on:

01/01/2017

Authorized by:

Brent Everett, Director

RULE TEXT

R311. Environmental Quality, Environmental Response and Remediation.

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

R311-212-1. Definitions.

Definitions are found in Rule R311-200.

 

R311-212-2. Declaration of Loan Application Periods, and Loan Application Submittal.

(a) Application for a loan shall be made on forms incorporated in Section R311-212-10, in accordance with Subsection 19-6-409(9). Loan applications shall be accepted during application periods designated by the Director.

(b) At least one application period shall be designated each calendar year if, on January 1,:

(1) the current balance due for all outstanding loans is less than twenty-five per cent of the cash balance of the Petroleum Storage Tank Trust Fund, and

(2) the cash balance of the Petroleum Storage Tank Trust Fund exceeds $10,000,000.

(c) If the requirements of Subsections R311-212-2(b)(1) and (b)(2) are not met on January 1, but are met at a later time in the calendar year, the Director may designate an application period.

(d) An open application period will close if:

(1) the current balance due for all outstanding loans exceeds twenty-five per cent of the cash balance of the Petroleum Storage Tank Trust Fund, or

(2) the cash balance of the Petroleum Storage Tank Trust Fund is less than $10,000,000.

(e) If an open application period closes as required by Subsection R311-212-2(d), loan applications currently under review when the application period closes may be renewed when a new application period opens, unless the applicant must re-apply as required by Subsection R311-212-5(a).

(f) Applications must be received by the Director by 5:00 p.m. on the last day of the application period.

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

 

R311-212-3. Eligibility Review.

(a) The Director shall determine if the applicant meets the eligibility criteria stated in Subsections 19-6-409(5), 19-6-409(6), 19-6-409(7), and 19-6-409(8).

(b) To meet the eligibility requirements of 19-6-409(6) 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 19-6-409(6) 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 19-6-409(5), 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 Director 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 Director 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 19-6-409(5) through (8), 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 Director may require payment of costs in advance. The Director 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 Director conveys 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 Director 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 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 Director.

(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 Director by a title company or appropriate professional person approved by the Director.

(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 Director.

(b) The Director 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 the lesser of[no more than] 40 per cent of the approved loan amount or the amount required by the borrower's contractor as an initial payment before work is done. 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 Director.

(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 Director, 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 Director, following the initial disbursement.

(2) 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 Director.

(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 Director shall establish a repayment schedule for each loan based on the financial situation and income circumstances of the borrower and the term of loans allowed by Subsection 19-6-409(8)(b)(ii). 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 shall be due on a date established by the Director. Subsequent installment payments 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 Director shall apply loan payments received first to penalty, next to interest and then to principal.

(d) Loan payments may be made in advance, and 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 Director 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 Director 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 Director'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 Subsection R311-206-7(e) shall not be considered as grounds for default for USTs which are permanently closed.

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

(c) The Director 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 Rule R311-212, and shall be used by the Director for making loans.

(1) Loan Application version [7/29/14]7/14/16

(2) Balance Sheet version 7/29/14

(3) Loan Agreement version 7/29/14

(4) Corporate Authorization version 7/29/14

(5) Promissory Note version 7/29/14

(6) Extension and Modification of Promissory Note Agreement version 7/29/14

(7) Security Agreement version 7/29/14

(8) Hypothecation Agreement version 7/29/14

(9) General Pledge Agreement version 7/29/14

(10) Assignment version 7/29/14

(11) Assignment of Account version 7/29/14

(12) Trust Deed version 7/29/14

(13) Trust Deed Note version 7/29/14

(14) Extension and Modification of Trust Deed Note Agreement version 7/29/14

(b) The Director may require or allow the use of other forms that are consistent with these rules as necessary for the loan approval process. The Director 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: [October 10, 2014]2016

Notice of Continuation: April 10, 2012

Authorizing, and Implemented or Interpreted Law: 19-6-105; 19-6-403; 19-6-409

---