62-673.640. Financial Assurance

(1) Applicability. As a condition for the issuance of a permit to construct, operate, expand, modify, or close a phosphogypsum stack system, the owner or operator shall provide proof of financial assurance for the cost of closure of the system, as estimated in accordance with subsection (2) of this rule, by using one or more of the financial assurance mechanisms listed in subsections (4) and (5) of this rule (in any combination). Such proof of financial assurance must be submitted within 60 days of the owner or operator’s fiscal year end, and annually thereafter.

(2) Closure cost estimates.

(a) The owner or operator shall estimate and report separately the costs of terminal closure, including closing, long-term care, and water management, for the phosphogypsum stack system, based on the stack system configuration as of the end of its useful life. The annual cost of long-term care shall be multiplied by 50 years for a total long term care cost. If the phosphogypsum stack system is undergoing closure or has been closed in accordance with a closure permit pursuant to Rule 62-673.600, F.A.C., the annual cost of long-term care shall be multiplied by the number of years remaining in the 50 year period to reflect the number of years that the stack has been closed. Owners or operators using the financial assurance mechanism identified in subparagraph 62-673.640(4)(a)8., F.A.C., additionally shall estimate and report closure costs for its Florida phosphogypsum stack systems in accordance with the methodology established by Statement of Financial Accounting Standard No. 143. The owner or operator shall submit the estimates on Form 62-673.900(4)(j), together with all supporting documentation, to the Department for approval along with the proof of financial assurance. The costs shall be estimated by a professional engineer registered in the State of Florida in accordance with provisions of Chapter 471, F.S., for a third party performing the work, on a per unit basis, with the source of estimates indicated.

(b) Closing costs shall include estimated costs of cover material, topsoil, seeding, fertilizing, mulching, labor, and any other costs of compliance with Rules 62-673.610 and 62-673.620, F.A.C.

(c) Long-term care costs shall include land surface care, surface water and groundwater monitoring, collection and analysis, and any other costs of compliance with Rule 62-673.630, F.A.C.

(d) Water management costs shall include the costs of implementing the site-specific water management plan specified in paragraph 62-673.600(3)(b), F.A.C. These costs shall be calculated on the basis of the cost of treatment and subsequent disposal of the process wastewater under an appropriate permit.

(3) Required financial assurance submittals.

(a) During the life of the phosphogypsum stack system, the owner or operator shall submit annually a closure cost estimate that is adjusted for inflation and changes in the closing, water management, and long-term care plan. Such adjustments shall be made either by recalculating the cost of closure, water management, and long-term care, in current dollars, or using an inflation factor derived from the most recent Implicit Price Deflator for Gross National Product published by the U.S. Department of Commerce in its Survey of Current Businesses. Owners or operators using the financial assurance mechanism identified in subparagraph 62-673.640(4)(a)8., F.A.C., also shall estimate and report closure costs for its Florida phosphogypsum stack systems in accordance with the methodology established by Statement of Financial Accounting Standard No. 143. The owner or operator shall re-estimate the closure costs in conjunction with the issuance or renewal of the permit.

1. If the owner or operator, or any entity providing the corporate guarantee no longer meets the requirements of the financial test being used, or another financial mechanism being used no longer remains valid, then the owner or operator must notify the Department of its intent to establish an alternate financial assurance within 10 days of failure of the financial assurance mechanism provided. Within 30 days of failure to meet the financial assurance mechanism provided, the owner or operator, or the entity providing the corporate guarantee, shall provide alternate financial assurance as specified in this rule. The Department may require reports of financial condition in addition to those specified in this rule based on a reasonable belief that the owner or operator, or any entity providing the corporate guarantee, no longer meets the requirements of the financial test being used, or another financial mechanism being used no longer remains valid. If the Department finds, on the basis of such reports or other information, that the requirements of the financial test being used are no longer being met, or that another financial mechanism being used does not remain valid, then the owner or operator, or the entity providing the corporate guarantee, shall provide alternate financial assurance as specified in this rule within 30 days after notification of such finding.

2. If the owner or operator demonstrates to the Department that the value of the financial mechanism (excluding seasonal, cyclical or periodic changes in value) exceeds the total amount of the closure cost estimate, then the Department will allow the owner or operator to reduce the value of the financial mechanism to reflect the new estimate.

(b) The owner or operator, and any entity providing a corporate guarantee, shall prepare balance sheets, income statements, and cash flow statements, according to generally accepted accounting principles within the United States and reported in United States dollars. The owner and operator, and any entity providing a corporate guarantee, shall submit such information to the Department quarterly within 65 days of the end of each fiscal quarter. Cash flow for purposes of confirming quarterly qualification of the financial test shall be based on the sum of the most recent four quarters’ cash flow from operations.

(c) The owner or operator, and any entity providing a corporate guarantee, shall submit an audited financial statement annually along with the annually adjusted closure cost estimate within 90 days of the entity’s fiscal year end. When an owner or operator and its corporate guarantor file consolidated financial statements, the audited annual financial statements of the parent guarantor shall constitute responsive audited financial statements of each for purposes of this paragraph.

(d) Any owner or operator, or any entity providing a corporate guarantee, in default on any of its financial obligations shall report such default to the Department within ten business days of discovery, notice or determination. Financial obligations shall include loans, bonds, or other credit instruments.

(4) Approved financial assurance mechanisms. An owner or operator may use one or more of the following financial assurance mechanisms, in any combination, to meet the requirements of subsection (1) of this rule: letter of credit, insurance, guarantee bond, performance bond, cash deposit arrangement, or financial test or corporate guarantee as defined in subsection (5) of this rule. Proof of financial assurance shall be submitted annually within 90 days of the end of the fiscal year, unless otherwise required more frequently elsewhere by Rule 62-673.640, F.A.C. The financial information shall be submitted on forms provided by the Department in accordance with the requirements of subsection (6) of this rule.

(a) Cash Deposit Arrangement.

1. A cash deposit arrangement, as used in this subsection, means a trust fund, business or statutory trust, escrow account, or similar cash deposit entity whereby a fiduciary holds and invests funds deposited by the owner or operator, which funds shall be expended upon direction or approval from the Department, and only for the purpose of directly implementing all or some portion of phosphogypsum stack system closure requirements of that particular owner or operator. If the cash deposit arrangement is a trust fund, it must be submitted on Form 62-673.900(4)(a).

2. If the owner or operator uses a cash deposit arrangement as a financial assurance mechanism, the trustee, escrow agent, or other fiduciary of such an arrangement shall be an entity that has the authority to act as a trustee and whose trust operations are regulated and examined by a federal or state agency. The owner or operator may either fund the trust through (a) monthly, quarterly, or annual cash deposits in accordance with subparagraph (4)(a)8. of this rule, or (b) by a single cash deposit to the extent that payment of the costs of closure are not covered by any other means. If the financial test is used in conjunction with the cash deposit arrangement, the amount in the cash deposit arrangement shall be credited against the costs of closure used in the financial test.

3. Any cash deposit arrangement must be established for the sole benefit of the Department and qualify to be free of claims of or against the owner or operator in a bankruptcy case or proceeding. A cash deposit arrangement may not be pledged or hypothecated for any other debt or obligation.

4. The trustee of any cash deposit arrangement shall discharge his duties with the care, skill, prudence, and diligence under the circumstances that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.

5. Neither the fund entity nor the trustee thereof shall be a related party to the owner, operator, or any affiliate thereof.

6. The existence of a cash deposit arrangement shall not affect the primary responsibility and obligation of the owner or operator to fund and perform closure of the facility.

7. Subject to pre-approval by the Department, the owner or operator may use funds in a cash deposit arrangement to reimburse or to pay directly the costs of closure; and to the extent the costs of closure have been paid or otherwise reduced, the aggregate amount of the cash deposit arrangement shall be reduced.

8. The owner or operator of a phosphogypsum stack system may demonstrate financial assurance for the cost of closure of the system by making deposits into a cash deposit account in accordance with the following schedule:

a. Within 60 days of the fiscal year end following July 2, 2005, the owner or operator shall make an initial cash deposit in an amount equal to at least 20% of the funding obligation.

b. Within one year after the initial cash deposit, the owner or operator shall deposit an amount sufficient to bring the balance in the cash deposit account to at least 36.5% of the funding obligation.

c. Within two years after the initial cash deposit, the owner or operator shall deposit an amount sufficient to bring the balance in the cash deposit account to at least 50.5% of the funding obligation.

d. Within three years after the initial cash deposit, the owner or operator shall deposit an amount sufficient to bring the balance in the cash deposit account to at least 62% of the funding obligation.

e. Within four years after the initial cash deposit, the owner or operator shall deposit an amount sufficient to bring the balance in the cash deposit account to at least 70% of the funding obligation.

f. Within five years after the initial cash deposit, the owner or operator shall deposit an amount sufficient to bring the balance in the cash deposit account to at least 75% of the funding obligation.

g. Within six years after the initial cash deposit, the owner or operator shall deposit an amount sufficient to bring the balance in the cash deposit account to at least 80% of the funding obligation.

h. Within seven years after the initial cash deposit, the owner or operator shall deposit an amount sufficient to bring the balance in the cash deposit account to at least 85% of the funding obligation.

i. Within eight years after the initial cash deposit, the owner or operator shall deposit an amount sufficient to bring the balance in the cash deposit account to at least 90% of the funding obligation.

j. Within nine years after the initial cash deposit, the owner or operator shall deposit an amount sufficient to bring the balance in the cash deposit account to at least 95% of the funding obligation.

k. Within ten years after the initial cash deposit, the owner or operator shall deposit an amount sufficient to bring the balance in the cash deposit account to at least 100% of the funding obligation.

l. Annually thereafter, the owner or operator shall maintain a balance in the cash deposit account in an amount equal to 100% of the funding obligation.  For purposes of this subparagraph, the term “funding obligation” shall mean the asset retirement obligation calculated for the Florida phosphogypsum stack system in accordance with the methodology established by Statement of Financial Accounting Standards No. 143.

9. Once the Department determines that the purpose of such cash deposit arrangement has been accomplished, the Department shall authorize the trustee to return to the grantor any funds remaining in the trust, escrow account, or other cash deposit arrangement.

10. The owner or operator may terminate the cash deposit arrangement upon providing a substitute financial assurance mechanism that has been approved and accepted by the Department.  The trustee of the cash deposit arrangement may disburse the funds to the owner or operator, once the Department accepts a substitute financial assurance mechanism.

(b) Surety Bond.  If the owner or operator uses a performance or guarantee bond as a financial mechanism, the surety must be listed as an approved surety under the U.S. Treasury Department’s Circular 570.  If the status of the surety changes to “suspended” or “terminated” under Circular 570, the owner or operator shall notify the Department within 10 days of such event.

(c) Insurance.  If the owner or operator uses insurance as a financial mechanism, neither the owner nor operator, nor any affiliate thereof, shall be a related party to the insurer.  Further, any such insurer must have a “secured” financial strength rating of B+ or better by A.M. Best.

(d) If the owner or operator uses a letter of credit as a financial assurance mechanism, neither the owner nor operator, nor any affiliate thereof, shall be a related party to the issuer.  The letter of credit shall be provided by a financial institution that is federally insured.

(e) Any owner or operator using one of the mechanisms listed in this section is required to notify the Department within 10 days of the cancellation, disqualification, revocation or failure of the instrument, mechanism or issuing authority, and provide alternative financial assurance within 30 days thereafter.  Nothing herein shall relieve a financial institution of its obligation to provide the Department with notice when it intends to cancel a financial assurance mechanism.

(5) Financial test or corporate guarantee.

(a) In lieu of, or in addition to, the financial mechanisms described in subsection (4) of this rule, an owner or operator may use a financial test or corporate guarantee to meet the requirements of subsection (1) of this rule. These shall be submitted on forms provided by the Department in accordance with the requirements of subsection (6) of this rule.  For purposes of this subsection, “total liabilities” shall equal those reported on the applicable balance sheet, “tangible net worth” shall equal net worth less any intangible assets reported on the applicable balance sheet, “total assets” shall equal those reported on the applicable balance sheet, and “asset retirement obligation” shall equal the total amount of the liability for asset retirements as reported on the balance sheet.  For purposes of this subsection, “closure obligation” means either the estimated cost of closure as required by this subsection, or the total asset retirement obligation reported on the permittee’s annual financial statement, whichever is greater. An owner or operator may use the financial test as a financial mechanism if the asset retirement obligation reported on the balance sheet includes the current closure cost estimate as required by this subsection, including the cost to implement the site specific water management plan, and if the asset retirement obligation includes all retirement obligations of the owner or operator in Florida and the rest of the world. To pass the financial test, the owner, operator or guarantor shall meet the criteria of either subparagraph 62-673.640(5)(a)1. or 2., F.A.C., as follows, for that portion of the closure obligation not covered by another financial assurance mechanism:

1. The owner, operator or guarantor must have:

a. A ratio equal to or less than 1.50 comparing total liabilities to tangible net worth;

b. A ratio equal to or greater than 0.10 comparing cash flow from operations to total liabilities for the current year, a ratio equal to or greater than 0.10 comparing cash flows from operations to total liabilities, averaged over the current and preceding fiscal year, or a ratio of current assets to current liabilities greater than 1.5 for the current fiscal year;

c. Tangible net worth at least six times the closure obligation; and

d. Tangible assets located in the United States totaling at least ten times the closure obligation.

2. The owner, operator or guarantor must have:

a. A current bond rating applicable to the most recently issued unsecured bond, with a remaining maturity of at least five years and a cumulative maturity value of the greater of $100 million or 5% of the company’s total assets, of the owner or operator, that has an investment grade rating defined as a BBB- rating or better, from Standards and Poor’s or Fitch IBCA/Duff & Phelps bond rating service or a Baa3 rating or better from Moody’s bond rating service, as determined and assigned by at least one of these bond rating services;

b. Tangible net worth at least two times the closure obligation; and

c. Tangible assets located in the United States totaling at least five times the closure obligation.

(b) All reported figures shall be in United States dollars, determined in accordance with generally accepted accounting principles within the United States.  All entities using the financial test shall provide the Department with a copy of their audited financial statements together with the required financial assurance statements.  Financial assurance statements and audited financial statements shall be submitted to the Department within 90 days of the entity’s fiscal year end.  Failure to meet these requirements shall disqualify the entity from using the financial test in subsection (6) for the next four quarters.  No entity that has received an adverse opinion, a disclaimer of opinion or a “going concern qualification” to the opinion on the subject audited financial statements shall qualify to use the financial test. Any entity that has qualified for the financial test, but which subsequently no longer meets the test or receives a revision to its audit opinion that would disqualify the entity from using the financial test, shall report the same to the Department within ten days and provide alternative financial assurance within 30 days thereafter.

(c) If the Department determines that specific events have occurred that make it reasonable to expect that the owner or operator no longer meets the requirements above, it shall require the owner or operator to demonstrate that it continues to meet the requirements of the financial test. These events include default under a financial obligation or an adverse change in the bond rating that lowers the rating below investment grade of any of the owner’s obligations. If the owner or operator submits two consecutive quarterly financial statements, as required in paragraph (3)(b) of this rule, each indicating that the owner or operator does not meet the financial test, it shall prepare and submit an audited financial statement covering the previous 12 months or provide an alternate financial assurance mechanism. If the Department finds that the owner or operator does not meet the financial test, the Department shall require that a financial mechanism other than the financial test be used. Any entity using the financial test shall notify the Department within 10 days of any event of default under its financial obligations, any waiver, restructuring or deferral of loan or bond provisions to prevent or avoid an event of default, or downgrading of the bond rating of any bond of the owner or operator.

(d) An owner or operator using the financial test may ask to supplement its financial assurance by one or more of the financial mechanisms specified in subsection (4) of this rule if it cannot meet one of the financial test criteria. If the financial test is used along with another financial assurance mechanism, the closure obligation to be met by the financial test will be reduced by the amount assured by the other financial mechanisms.

(6) 40 C.F.R. Part 264 Subpart H (revised as of July 1, 2000), which contains EPA’s rules on financial requirements for owners and operators of hazardous waste facilities is hereby adopted and incorporated by reference, except:

(a) The following sections of 40 C.F.R. Part 264 Subpart H are specifically not adopted as part of this rule:

1. 264.140(a); 264.140(b); 264.140(d); 264.141(a); 264.141(e); 264.142(b); 264.142(c); 264.144(b); 264.144(c); 264.147; 264.149; 264.150 and 264.151.

2. All references to 40 C.F.R. Part 265.

3. All references to sections or subparts of 40 C.F.R. 264 not contained in Subpart H.

4. All references to EPA Regions.

5. All references to RCRA or Section 3008 of RCRA.

(b) References to 40 C.F.R. 264.143(f)(1) and 264.145(f)(1) shall mean subsection 62-673.640(5), F.A.C. References in 40 C.F.R. 264 Subpart H to the United States Environmental Protection Agency (EPA) shall mean the State of Florida Department of Environmental Protection; to Regional Administrator shall mean the Secretary of the Department; to RCRA permits shall mean phosphogypsum stack system permits; to post-closure care/post-closure cost estimate shall mean long-term care/long-term cost estimate; to EPA identification number shall mean the Department identification number; to hazardous waste shall mean phosphogypsum; to hazardous waste treatment, storage or disposal facilities shall mean phosphogypsum stack systems; to Section 3008 of RCRA shall mean Department Agency Action; and to one or more states means in the State of Florida.

(c) The series of financial assurance forms, Forms 62-673.900(4)(a)-(j), which are adopted and incorporated herein by reference, shall be used when submitting proof of financial assurance under this rule. These forms may be obtained by contacting the appropriate district office or by writing the Department of Environmental Protection, Bureau of Mine Reclamation, 2051 East Dirac Drive, Tallahassee, Florida 32310-3760.

1. Form 62-673.900(4)(a), Phosphogypsum Stack System Trust Fund Agreement to Demonstrate Closure, Water Management and/or Long-Term Care Financial Assurance, effective 7-2-05.

2. Form 62-673.900(4)(b), Phosphogypsum Stack System Standby Trust Fund Agreement to Demonstrate Closure, Water Management and/or Long-Term Care Financial Assurance, effective 7-2-05.

3. Form 62-673.900(4)(c), Phosphogypsum Stack System Irrevocable Standby Letter of Credit, effective 7-2-05.

4. Form 62-673.900(4)(d), Phosphogypsum Stack System Insurance Certificate to Demonstrate Closure, Water Management and/or Long-Term Care Financial Assurance, effective 7-2-05.

5. Form 62-673.900(4)(e), Phosphogypsum Stack System Financial Guarantee Bond to Demonstrate Closure, Water Management and/or Long-Term Care Financial Assurance, effective 7-2-05.

6. Form 62-673.900(4)(f), Phosphogypsum Stack System Performance Bond to Demonstrate Closure, Water Management and/ or Long-Term Care Financial Assurance, effective 7-2-05.

7. Form 62-673.900(4)(g), Phosphogypsum Stack System Letter from Chief Financial Officer to Demonstrate Closure, Water Management and/or Long-Term Care Financial Assurance, effective 7-2-05.

8. Form 62-673.900(4)(h), Phosphogypsum Stack System Corporate Guarantee, effective 7-2-05.

9. Form 62-673.900(4)(i), Financial Assurance Tests for Closure, Water Management and/or Long-Term Care Costs, effective 7-2-05.

10. Form 62-673.900(4)(j), Phosphogypsum Stack System Closure, Water Management and Long‑Term Care Cost Estimate, effective 7-2-05.

Specific Authority 403.061, 403.4154, 403.704 FS. Law Implemented 403.4154, 403.707 FS. History–New 3-25-93, Formerly 17-673.640, Amended 1-16-97, 7-2-05.