R315-309-9. Corporate Financial Test

  (1) The terms used specifically in Section R315-309-9 are defined as follows.

  (a) "Assets" means all existing and probable future economic benefits obtained or controlled by a particular entity.

  (b) "Current assets" means cash or other assets or resources commonly identified as those which are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business.

  (c) "Current liabilities" means obligations whose liquidation is reasonably expected to require the use of existing resources properly classifiable as current assets or the creation of other current liabilities.

  (d) "Current plugging and abandonment cost estimate" means the most recent of the estimates prepared in accordance with 40 CFR 144.62(a), (b), and (c) (2001) which is adopted and incorporated by reference.

  (e) "Independently audited" means an audit performed by and independent certified public accountant in accordance with generally accepted auditing standards.

  (f) "Liabilities" means probable future sacrifices of economic benefits arising from present obligations to transfer assets or provide services to other entities in the future as a result of past transactions or events.

  (g) "Net working capital" means current assets minus current liabilities.

  (h) "Net worth" means total assets minus total liabilities and is equivalent to owner's equity.

  (i) "Tangible net worth" means the tangible assets that remain after deducting liabilities; such assets would not include intangibles such as goodwill and rights to patents or royalties.

  (2) A corporate owner or operator of a solid waste facility may demonstrate financial assurance up to the current cost estimate as required by Subsection R315-309-2(3) for closure and post-closure care and the cost estimate required by Subsection R315-309-2(5) for corrective action, if required, by meeting the following requirements.

  (a) The owner or operator must satisfy one of the following three conditions:

  (i) a current rating for its senior unsubordinated debt of AAA, AA, A, or BBB as issued by Standard and Poor's or Aaa, Aa, A, or Baa as issued by Moody's; or

  (ii) a ratio of less than 1.5 comparing total liabilities to net worth: or

  (iii) a ratio of greater than 0.10 comparing the sum of net income plus depreciation, depletion and amortization, minus $10 million, to total liabilities.

  (b) The tangible net worth of the owner or operator must be greater than:

  (i) the sum of the current closure, post-closure care, and corrective action cost estimates and any other environmental obligation, including guarantees, covered by a financial test plus $10 million except as provided in Subsection R315-309-9(2)(b)(ii);

  (ii) $10 million in net worth plus the amount of any guarantees that have not been recognized as liabilities on the financial statements provided all of the current closure, post-closure care, and corrective action costs and any other environmental obligations covered by a financial test are recognized as liabilities on the owner's or operator's audited financial statements, and subject to the approval of the Director.

  (c) The owner or operator must have assets located in the United States amounting to at least the sum of current closure, post-closure care, corrective action cost estimates and any other environmental obligations covered by a financial test.

  (3) The owner or operator must place the following items into the facility's operating record and submit a copy of these items to the Director for approval:

  (a) a letter signed by the owner's or operator's chief financial officer that:

  (i) lists all current cost estimates for closure, post-closure care, corrective action, and any other environmental obligations covered by a financial test; and

  (ii) provides evidence demonstrating that the firm meets the conditions of Subsection R315-309-9(2)(a)(i), or (a)(ii), or (a)(iii) and Subsections R315-309-9(2)(b) and (c); and

  (b) a copy of the independent certified public accountant's unqualified opinion of the owner's or operator's financial statements for the latest completed fiscal year.

  (i) To be eligible to use the financial test, the owner's or operator's financial statements must receive an unqualified opinion from the independent certified public accountant.

  (ii) The Director may evaluate qualified opinions on a case-by-case basis and allow use of the financial test where the Director deems the matters which form the basis for the qualification are insufficient to warrant disallowance of the test.

  (c) If the chief financial officer's letter providing evidence of financial assurance includes financial data showing that the owner or operator satisfies Subsection R315-309-9(2)(a)(i) or (ii) that are different from data in the audited financial statements or data filed with the Securities and Exchange Commission, then a special report from the owner's or operator's independent certified public accountant is required. The special report shall:

  (i) be based upon an agreed upon procedures engagement in accordance with professional auditing standards;

  (ii) describe the procedures performed in comparing the data in the chief financial officer's letter derived from the independently audited, year-end financial statements;

  (iii) describe the findings of that comparison; and

  (iv) explain the reasons for any differences.

  (d) If the chief financial officer's letter provides a demonstration that the firm has assured environmental obligations as provided in Subsection R315-309-9(2)(b)(ii), then the letter shall include a report from the independent certified public accountant that:

  (i) verifies that all of the environmental obligations covered by a financial test have been recognized as liabilities on the audited financial statements;

  (ii) explains how these obligations have been measured and reported; and

  (iii) certifies that the tangible net worth of the firm is at least $10 million plus the amount of all guarantees provided.

  (e) The items required by Subsection R315-309-9(3) are to be submitted to the Director and copies placed in the facility's operating record as follows:

  (i) in the case of closure and post-closure care, for a new facility or a lateral expansion of an existing facility, before the initial receipt of waste;

  (ii) in the case of closure and post-closure care, for an existing facility, in accordance with the effective dates specified in Subsection R315-309-1(3)(a); and

  (iii) in the case of corrective action, in accordance with the schedule specified in Subsection R315-309-1(3)(b).

  (4) A firm must satisfy the requirements of the financial test at the close of each fiscal year by submitting the items required in Subsection R315-309-9(3) as part of the facility's annual report required by Subsection R315-302-2(4).

  (5) If the firm no longer meets the requirements of the corporate financial test it shall, within 120 days following the close of the firm's fiscal year:

  (a) obtain alternative financial assurance that meets the requirements of R315-309-1(1); and

  (b) submit documentation of the alternative financial assurance to the Director and place copies of the documentation in the facility's operating record.

  (c) The Director, based on a reasonable belief that the firm may no longer meet the requirements of the corporate financial test, may require additional reports of financial condition from the firm at any time. If the Director finds that the firm no longer meets the requirements of the corporate financial test, firm shall be required to provide alternative financial assurance on a schedule established by the Director.

  (6) Corporate Guarantee.

  (a) A corporate owner or operator of a solid waste facility may demonstrate financial assurance for closure, post-closure care, and corrective action by obtaining a written guarantee provided by a corporation.

  (i) The guarantor must be the direct or higher-tier parent corporation of the owner or operator, a firm whose parent corporation is also the parent corporation of the owner or operator, or a firm with a substantial business relationship with the owner or operator.

  (ii) The firm shall meet the requirements of the corporate financial test in Section R315-309-9 and shall comply with the terms of the written guarantee as specified in Subsections R315-309-3(6)(b) and (c).

  (A) A certified copy of the guarantee along with copies of the letter from the guarantor's chief financial officer and accountant's opinions must be submitted to the Director and placed in the facility's operating record.

  (B) If the guarantor's parent corporation is also the parent corporation of the owner or operator, the letter from the guarantor's chief financial officer must describe the value received in consideration of the guarantee.

  (C) If the guarantor is a firm with a substantial business relationship with the owner or operator, the letter from the chief financial officer must describe this substantial business relationship and the value received in consideration of the guarantee.

  (b) The guarantee must be effective for closure and post-closure care:

  (i) for a new facility or a lateral expansion of an existing facility, before the initial receipt of waste;

  (ii) for an existing facility, in accordance with the effective dates specified in Subsection R315-309-1(3)(a); and

  (iii) for corrective action, in accordance with the schedule specified in Subsection R315-309-1(3)(b).

  (c) The guarantee shall provide that if the owner or operator fails to perform closure, post-closure care, or corrective action of a facility covered by the guarantee, the guarantor will:

  (i) perform, or pay a third party to perform, closure, post-closure, or corrective action as required; or

  (ii) establish a fully funded trust fund as specified in Section R315-309-4 in the name of the owner or operator.

  (d) The guarantee will remain in force unless the guarantor sends notice of cancellation by certified mail to the owner or operator and to the Director. Cancellation may not occur until 120 days after the date the notice is received by the Director.

  (e) If the guarantee is canceled, the owner or operator shall, within 90 days following the receipt of the cancellation notice:

  (i) obtain alternate financial assurance that meets the requirements of Subsection R315-309-1(1);

  (ii) submit documentation of the alternate financial assurance to the Director; and

  (iii) place copies of the documentation of the alternate financial assurance in the facility's operating record.

  (iv) If the owner or operator fails to provide alternate financial assurance within the 90 day period, the guarantor must provide the alternate financial assurance within 120 days following the guarantor's notice of cancellation, submit documentation of the alternate financial assurance to the Director for review and approval, and place copies of the documentation in the facility's operating record.

  (f) If a corporate guarantor no longer meets the requirements of the corporate financial test as specified in Section R315-309-9:

  (i) the owner or operator must, within 90 days, obtain alternate financial assurance; and

  (ii) submit documentation of the alternate financial assurance to the Director and place copies of this documentation in the facility's operating record.

  (iii) If the owner or operator fails to provide alternate financial assurance within the 90-day period, the guarantor must provide that alternate assurance within the next 30 days.