SECTION 37.8061. Corporate Financial Test for Municipal Solid Waste Facilities

An owner or operator may satisfy the requirements of financial assurance for closure, post closure, or corrective action by obtaining a corporate financial test or a corporate financial test and corporate guarantee, which conforms to the requirements of this section, in addition to the requirements specified in Subchapters A and B of this chapter (relating to General Financial Assurance Requirements and Financial Assurance Requirements for Closure, Post Closure, and Corrective Action).

(1) To pass this test, the owner or operator must satisfy one of the following three conditions:

(A) the owner or operator must have a current bond rating for its senior unsecured 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;

(B) a ratio of total liabilities to net worth less than 1.5; or

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

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

(A) the sum of the current cost estimates, and any other environmental obligations under the Texas Commission on Environmental Quality (TCEQ) or other federal or state environmental regulations, including guarantees, covered by a financial test, plus $10 million, except as provided in subparagraph (B) of this paragraph; or

(B) $10 million in tangible net worth plus the amount of any guarantees that have not been recognized as liabilities on the financial statements provided all of the current cost estimates 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 executive director.

(3) The owner or operator must have assets located in the United States amounting to at least the sum of the current cost estimates, and any other environmental obligations covered by a financial test as described in paragraph (8) of this section.

(4) To demonstrate that the requirements of the test are being met, the owner or operator shall submit the following items to the executive director:

(A) a letter signed by the owner's or operator's chief financial officer worded identically to the wording specified in §37.8071 of this title (relating to Wording of Financial Assurance Mechanisms) that:

(i) lists all the current cost estimates covered by a financial test, including, but not limited to, cost estimates required for municipal solid waste management facilities under Chapter 330 of this title (relating to Municipal Solid Waste) and 40 Code of Federal Regulations (CFR) Part 258; cost estimates required for underground injection control (UIC) facilities under Chapter 331 of this title (relating to Underground Injection Control) and 40 CFR Part 144; cost estimates required for petroleum underground storage tank facilities under Chapter 334 of this title (relating to Underground and Aboveground Storage Tanks) and 40 CFR Part 280; cost estimates required for polychlorinated biphenyl (PCB) storage facilities under 40 CFR Part 761; and cost estimates required for hazardous waste treatment, storage, and disposal facilities under Chapter 335 of this title (relating to Industrial Solid Waste and Municipal Hazardous Waste) and 40 CFR Parts 264 and 265; and

(ii) provides evidence demonstrating that the firm meets the conditions of either paragraph (1)(A) or (B) or (C) of this section and paragraphs (2) and (3) of this section;

(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. 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. An adverse opinion, disclaimer of opinion, or other qualified opinion will be cause for disallowance by the executive director. The executive director may evaluate qualified opinions on a case-by-case basis and allow use of the financial test in cases where the executive director deems that the matters which form the basis for the qualification are insufficient to warrant disallowance of the test. If the executive director does not allow use of the test, the owner or operator must provide alternate financial assurance that meets the requirements of this section; and

(C) a special report which is based upon an agreed procedures engagement in accordance with professional auditing standards which:

(i) describes the procedures performed in comparing the data in the chief financial officer's letter derived from the independently audited year-end financial statements for the latest fiscal year with the amounts in such financial statements;

(ii) states the findings of that comparison and the reasons for any differences; and

(iii) includes a report from the independent certified public accountant verifying that all of the environmental obligations covered by a financial test have been recognized as liabilities on the audited financial statements, verifying how these obligations have been measured and reported, and verifying that the tangible net worth of the firm is at least $10 million plus the amount of any guarantees provided. This report is required if the chief financial officer's letter has assured for environmental obligations as provided in paragraph (2)(B) of this section.

(5) After the initial submission of items specified in paragraph (4) of this section, the owner or operator must annually send updated information to the executive director within 90 days following the close of the owner's or operator's fiscal year. This information shall consist of all items specified in paragraph (4) of this section. An additional 45 days may be provided to an owner or operator who can demonstrate that 90 days is insufficient time to acquire audited financial statements.

(6) If the owner or operator no longer meets the requirements of paragraphs (1) - (3) of this section, the owner or operator shall send notice to the executive director of intent to establish alternate financial assurance as specified in this subchapter and provide the alternate financial assurance mechanism within 120 days following the close of the owner's or operator's fiscal year.

(7) The executive director may, based on a reasonable belief that the owner or operator may no longer meet the requirements of paragraphs (1) - (3) of this section, require at any time the owner or operator to provide reports of its financial condition in addition to or including current financial test documentation as specified in paragraph (4) of this section. If the executive director finds, on the basis of such reports or other information, that the owner or operator no longer meets the requirements of paragraphs (1) - (3) of this section, the owner or operator must provide alternate financial assurance as specified in this subchapter within 30 days after notification of such a finding.

(8) When calculating the current cost estimates for closure, post closure, or corrective action, or the sum of the combination of such costs to be covered, and any other environmental obligations assured by a financial test referred to in this section, the owner or operator must include cost estimates required for municipal solid waste management facilities under Chapter 330 of this title and 40 CFR Part 258. The owner or operator must also include current cost estimates required for the following environmental obligations, if the owner or operator assures them through a financial test: obligations including, but not limited to, UIC facilities under Chapter 331 of this title and 40 CFR Part 144; petroleum underground storage tank facilities under Chapter 334 of this title and 40 CFR Part 280; PCB storage facilities under 40 CFR Part 761; and hazardous waste treatment, storage, and disposal facilities under Chapter 335 of this title and 40 CFR Parts 264 and 265.

Source Note: The provisions of this §37.8061 adopted to be effective March 21, 2000, 25 TexReg 2347; amended to be effective Februay 13, 2003, 28 TexReg 1196