[Code of Federal Regulations]
[Title 40, Volume 24]
[Revised as of July 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 40CFR258.74]

[Page 428-438]
 
                   TITLE 40--PROTECTION OF ENVIRONMENT
 
         CHAPTER I--ENVIRONMENTAL PROTECTION AGENCY (CONTINUED)
 
PART 258_CRITERIA FOR MUNICIPAL SOLID WASTE LANDFILLS--Table of Contents
 
                 Subpart G_Financial Assurance Criteria
 
Sec. 258.74  Allowable mechanisms.

    The mechanisms used to demonstrate financial assurance under this 
section must ensure that the funds necessary to meet the costs of 
closure, post-closure care, and corrective action for known releases 
will be available whenever they are needed. Owners and operators must 
choose from the options specified in paragraphs (a) through (j) of this 
section.
    (a) Trust Fund. (1) An owner or operator may satisfy the 
requirements of this section by establishing a trust fund which conforms 
to the requirements of this paragraph. The trustee must be an entity 
which has the authority to act as a trustee and whose trust operations 
are regulated and examined by a Federal or State agency. A copy of the 
trust agreement must be placed in the facility's operating record.
    (2) Payments into the trust fund must be made annually by the owner 
or operator over the term of the initial permit or over the remaining 
life of the MSWLF unit, whichever is shorter, in the case of a trust 
fund for closure or post-closure care, or over one-half of the estimated 
length of the corrective action program in the case of corrective action 
for known releases. This period is referred to as the pay-in period.
    (3) For a trust fund used to demonstrate financial assurance for 
closure and post-closure care, the first payment into the fund must be 
at least equal to the current cost estimate for closure or post-closure 
care, except as provided in paragraph (k) of this section, divided by 
the number of years in the pay-in period as defined in paragraph (a)(2) 
of this section. The amount of subsequent payments must be determined by 
the following formula:


Next Payment = [CE - CV]/Y


where CE is the current cost estimate for closure or post-closure care 
(updated for inflation or other changes), CV is the current value of the 
trust fund, and Y is the number of years remaining in the pay-in period.
    (4) For a trust fund used to demonstrate financial assurance for 
corrective action, the first payment into the trust fund must be at 
least equal to one-half of the current cost estimate for corrective 
action, except as provided in paragraph (k) of this section, divided by 
the number of years in the corrective action pay-in period as defined in 
paragraph (a)(2) of this section. The amount of subsequent payments must 
be determined by the following formula:


Next Payment = [RB - CV]/Y


where RB is the most recent estimate of the required trust fund balance 
for corrective action (i.e., the total costs that will be incurred 
during the second half of the corrective action period), CV is the 
current value of the trust fund, and Y is the number of years remaining 
in the pay-in period.
    (5) The initial payment into the trust fund must be made before the 
initial receipt of waste or before the effective date of the 
requirements of this section (April 9, 1997, or October 9, 1997 for 
MSWLF units meeting the conditions of Sec. 258.1(f)(1)), whichever is 
later, in the case of closure and post-closure care, or no later than 
120 days after the corrective action remedy has been selected in 
accordance with the requirements of Sec. 258.58.
    (6) If the owner or operator establishes a trust fund after having 
used one or more alternate mechanisms specified in this section, the 
initial payment into the trust fund must be at least the amount that the 
fund would contain if the trust fund were established initially and 
annual payments made according to the specifications of this paragraph 
and paragraph (a) of this section, as applicable.
    (7) The owner or operator, or other person authorized to conduct 
closure, post-closure care, or corrective action activities may request 
reimbursement from the trustee for these expenditures. Requests for 
reimbursement will be granted by the trustee only if sufficient funds 
are remaining in the trust fund to cover the remaining costs of closure, 
post-closure care, or corrective

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action, and if justification and documentation of the cost is placed in 
the operating record. The owner or operator must notify the State 
Director that the documentation of the justification for reimbursement 
has been placed in the operating record and that reimbursement has been 
received.
    (8) The trust fund may be terminated by the owner or operator only 
if the owner or operator substitutes alternate financial assurance as 
specified in this section or if he is no longer required to demonstrate 
financial responsibility in accordance with the requirements of 
Sec. Sec. 258.71(b), 258.72(b), or 258.73(b).
    (b) Surety Bond Guaranteeing Payment or Performance. (1) An owner or 
operator may demonstrate financial assurance for closure or post-closure 
care by obtaining a payment or performance surety bond which conforms to 
the requirements of this paragraph. An owner or operator may demonstrate 
financial assurance for corrective action by obtaining a performance 
bond which conforms to the requirements of this paragraph. The bond must 
be effective before the initial receipt of waste or before the effective 
date of the requirements of this section (April 9, 1997, or October 9, 
1997 for MSWLF units meeting the conditions of Sec. 258.1(f)(1)), 
whichever is later, in the case of closure and post-closure care, or no 
later than 120 days after the corrective action remedy has been selected 
in accordance with the requirements of Sec. 258.58. The owner or 
operator must notify the State Director that a copy of the bond has been 
placed in the operating record. The surety company issuing the bond 
must, at a minimum, be among those listed as acceptable sureties on 
Federal bonds in Circular 570 of the U.S. Department of the Treasury.
    (2) The penal sum of the bond must be in an amount at least equal to 
the current closure, post-closure care or corrective action cost 
estimate, whichever is applicable, except as provided in Sec. 
258.74(k).
    (3) Under the terms of the bond, the surety will become liable on 
the bond obligation when the owner or operator fails to perform as 
guaranteed by the bond.
    (4) The owner or operator must establish a standby trust fund. The 
standby trust fund must meet the requirements of Sec. 258.74(a) except 
the requirements for initial payment and subsequent annual payments 
specified in Sec. 258.74 (a)(2), (3), (4) and (5).
    (5) Payments made under the terms of the bond will be deposited by 
the surety directly into the standby trust fund. Payments from the trust 
fund must be approved by the trustee.
    (6) Under the terms of the bond, the surety may cancel the bond by 
sending notice of cancellation by certified mail to the owner and 
operator and to the State Director 120 days in advance of cancellation. 
If the surety cancels the bond, the owner or operator must obtain 
alternate financial assurance as specified in this section.
    (7) The owner or operator may cancel the bond only if alternate 
financial assurance is substituted as specified in this section or if 
the owner or operator is no longer required to demonstrate financial 
responsibility in accordance with Sec. 258.71(b), Sec. 258.72(b) or 
Sec. 258.73(b).
    (c) Letter of credit. (1) An owner or operator may satisfy the 
requirements of this section by obtaining an irrevocable standby letter 
of credit which conforms to the requirements of this paragraph. The 
letter of credit must be effective before the initial receipt of waste 
or before the effective date of the requirements of this section (April 
9, 1997, or October 9, 1997 for MSWLF units meeting the conditions of 
Sec. 258.1(f)(1)), whichever is later, in the case of closure and post-
closure care, or no later than 120 days after the corrective action 
remedy has been selected in accordance with the requirements of Sec. 
258.58. The owner or operator must notify the State Director that a copy 
of the letter of credit has been placed in the operating record. The 
issuing institution must be an entity which has the authority to issue 
letters of credit and whose letter-of-credit operations are regulated 
and examined by a Federal or State agency.
    (2) A letter from the owner or operator referring to the letter of 
credit by number, issuing institution, and date, and providing the 
following information: Name, and address of the facility, and the amount 
of funds assured, must

[[Page 430]]

be included with the letter of credit in the operating record.
    (3) The letter of credit must be irrevocable and issued for a period 
of at least one year in an amount at least equal to the current cost 
estimate for closure, post-closure care or corrective action, whichever 
is applicable, except as provided in paragraph (k) of this section. The 
letter of credit must provide that the expiration date will be 
automatically extended for a period of at least one year unless the 
issuing institution has cancelled the letter of credit by sending notice 
of cancellation by certified mail to the owner and operator and to the 
State Director 120 days in advance of cancellation. If the letter of 
credit is cancelled by the issuing institution, the owner or operator 
must obtain alternate financial assurance.
    (4) The owner or operator may cancel the letter of credit only if 
alternate financial assurance is substituted as specified in this 
section or if the owner or operator is released from the requirements of 
this section in accordance with Sec. 258.71(b), Sec. 258.72(b) or 
Sec. 258.73(b).
    (d) Insurance. (1) An owner or operator may demonstrate financial 
assurance for closure and post-closure care by obtaining insurance which 
conforms to the requirements of this paragraph. The insurance must be 
effective before the initial receipt of waste or before the effective 
date of the requirements of this section (April 9, 1997, or October 9, 
1997 for MSWLF units meeting the conditions of Sec. 258.1(f)(1)), 
whichever is later, in the case of closure and post-closure care, or no 
later than 120 days after the corrective action remedy has been selected 
in accordance with the requirements of Sec. 258.58. At a minimum, the 
insurer must be licensed to transact the business of insurance, or 
eligible to provide insurance as an excess or surplus lines insurer, in 
one or more States. The owner or operator must notify the State Director 
that a copy of the insurance policy has been placed in the operating 
record.
    (2) The closure or post-closure care insurance policy must guarantee 
that funds will be available to close the MSWLF unit whenever final 
closure occurs or to provide post-closure care for the MSWLF unit 
whenever the post-closure care period begins, whichever is applicable. 
The policy must also guarantee that once closure or post-closure care 
begins, the insurer will be responsible for the paying out of funds to 
the owner or operator or other person authorized to conduct closure or 
post-closure care, up to an amount equal to the face amount of the 
policy.
    (3) The insurance policy must be issued for a face amount at least 
equal to the current cost estimate for closure or post-closure care, 
whichever is applicable, except as provided in paragraph (k) of this 
section. The term face amount means the total amount the insurer is 
obligated to pay under the policy. Actual payments by the insurer will 
not change the face amount, although the insurer's future liability will 
be lowered by the amount of the payments.
    (4) An owner or operator, or any other person authorized to conduct 
closure or post-closure care, may receive reimbursements for closure or 
post-closure expenditures, whichever is applicable. Requests for 
reimbursement will be granted by the insurer only if the remaining value 
of the policy is sufficient to cover the remaining costs of closure or 
post-closure care, and if justification and documentation of the cost is 
placed in the operating record. The owner or operator must notify the 
State Director that the documentation of the justification for 
reimbursement has been placed in the operating record and that 
reimbursement has been received.
    (5) Each policy must contain a provision allowing assignment of the 
policy to a successor owner or operator. Such assignment may be 
conditional upon consent of the insurer, provided that such consent is 
not unreasonably refused.
    (6) The insurance policy must provide that the insurer may not 
cancel, terminate or fail to renew the policy except for failure to pay 
the premium. The automatic renewal of the policy must, at a minimum, 
provide the insured with the option of renewal at the face amount of the 
expiring policy. If there is a failure to pay the premium, the insurer 
may cancel the policy by sending notice of cancellation by certified 
mail to the owner and operator and to the

[[Page 431]]

State Director 120 days in advance of cancellation. If the insurer 
cancels the policy, the owner or operator must obtain alternate 
financial assurance as specified in this section.
    (7) For insurance policies providing coverage for post-closure care, 
commencing on the date that liability to make payments pursuant to the 
policy accrues, the insurer will thereafter annually increase the face 
amount of the policy. Such increase must be equivalent to the face 
amount of the policy, less any payments made, multiplied by an amount 
equivalent to 85 percent of the most recent investment rate or of the 
equivalent coupon-issue yield announced by the U.S. Treasury for 26-week 
Treasury securities.
    (8) The owner or operator may cancel the insurance policy only if 
alternate financial assurance is substituted as specified in this 
section or if the owner or operator, is no longer required to 
demonstrate financial responsibility in accordance with the requirements 
of Sec. 258.71(b), Sec. 258.72(b) or Sec. 258.73(b).
    (e) Corporate financial test. An owner or operator that satisfies 
the requirements of this paragraph (e) may demonstrate financial 
assurance up to the amount specified in this paragraph (e):
    (1) Financial component. (i) The owner or operator must satisfy one 
of the following three conditions:
    (A) 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
    (B) A ratio of less than 1.5 comparing total liabilities to net 
worth; or
    (C) A ratio of greater than 0.10 comparing the sum of net income 
plus depreciation, depletion and amortization, minus $10 million, to 
total liabilities.
    (ii) The tangible net worth of the owner or operator must be greater 
than: (A) The sum of the current closure, post-closure care, corrective 
action cost estimates and any other environmental obligations, including 
guarantees, covered by a financial test plus $10 million except as 
provided in paragraph (e)(1)(ii)(B) of this section.
    (B) $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 State Director.
    (iii) 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 as described in paragraph (e)(3) 
of this section.
    (2) Recordkeeping and reporting requirements. (i) The owner or 
operator must place the following items into the facility's operating 
record:
    (A) A letter signed by the owner's or operator's chief financial 
officer that:
    (1) 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 this part 258, cost 
estimates required for UIC facilities under 40 CFR part 144, if 
applicable, cost estimates required for petroleum underground storage 
tank facilities under 40 CFR part 280, if applicable, cost estimates 
required for PCB storage facilities under 40 CFR part 761, if 
applicable, and cost estimates required for hazardous waste treatment, 
storage, and disposal facilities under 40 CFR parts 264 and 265, if 
applicable; and
    (2) Provides evidence demonstrating that the firm meets the 
conditions of either paragraph (e)(1)(i)(A) or (e)(1)(i)(B) or 
(e)(1)(i)(C) of this section and paragraphs (e)(1)(ii) and (e)(1)(iii) 
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, with the potential 
exception for qualified opinions

[[Page 432]]

provided in the next sentence. The Director of an approved State may 
evaluate qualified opinions on a case-by-case basis and allow use of the 
financial test in cases where the Director deems that the matters which 
form the basis for the qualification are insufficient to warrant 
disallowance of the test. If the Director of an approved State does not 
allow use of the test, the owner or operator must provide alternate 
financial assurance that meets the requirements of this section.
    (C) If the chief financial officer's letter providing evidence of 
financial assurance includes financial data showing that owner or 
operator satisfies paragraph (e)(1)(i)(B) or (e)(1)(i)(C) of this 
section that are different from data in the audited financial statements 
referred to in paragraph (e)(2)(i)(B) of this section or any other 
audited financial statement or data filed with the SEC, then a special 
report from the owner's or operator's independent certified public 
accountant to the owner or operator is required. The special report 
shall be based upon an agreed upon procedures engagement in accordance 
with professional auditing standards and shall describe 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, the findings of that comparison, and the reasons for any 
differences.
    (D) If the chief financial officer's letter provides a demonstration 
that the firm has assured for environmental obligations as provided in 
paragraph (e)(1)(ii)(B) of this section, then the letter shall include a 
report from the independent certified public accountant that verifies 
that all of the environmental obligations covered by a financial test 
have been recognized as liabilities on the audited financial statements, 
how these obligations have been measured and reported, and that the 
tangible net worth of the firm is at least $10 million plus the amount 
of any guarantees provided.
    (ii) An owner or operator must place the items specified in 
paragraph (e)(2)(i) of this section in the operating record and notify 
the State Director that these items have been placed in the operating 
record before the initial receipt of waste or before the effective date 
of the requirements of this section (April 9, 1997 or October 9, 1997 
for MSWLF units meeting the conditions of Sec. 258.1(f)(1)), whichever 
is later in the case of closure, and post-closure care, or no later than 
120 days after the corrective action remedy has been selected in 
accordance with the requirements of Sec. 258.58.
    (iii) After the initial placement of items specified in paragraph 
(e)(2)(i) of this section in the operating record, the owner or operator 
must annually update the information and place updated information in 
the operating record within 90 days following the close of the owner or 
operator's fiscal year. The Director of a State may provide up to an 
additional 45 days for an owner or operator who can demonstrate that 90 
days is insufficient time to acquire audited financial statements. The 
updated information must consist of all items specified in paragraph 
(e)(2)(i) of this section.
    (iv) The owner or operator is no longer required to submit the items 
specified in this paragraph (e)(2) or comply with the requirements of 
this paragraph (e) when:
    (A) He substitutes alternate financial assurance as specified in 
this section that is not subject to these recordkeeping and reporting 
requirements; or
    (B) He is released from the requirements of this section in 
accordance with Sec. 258.71(b), Sec. 258.72(b), or Sec. 258.73(b).
    (v) If the owner or operator no longer meets the requirements of 
paragraph (e)(1) of this section, the owner or operator must, within 120 
days following the close of the owner or operator's fiscal year, obtain 
alternative financial assurance that meets the requirements of this 
section, place the required submissions for that assurance in the 
operating record, and notify the State Director that the owner or 
operator no longer meets the criteria of the financial test and that 
alternate assurance has been obtained.
    (vi) The Director of an approved State may, based on a reasonable 
belief that the owner or operator may no

[[Page 433]]

longer meet the requirements of paragraph (e)(1) 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 (e)(2) of this section. If the 
Director of an approved State finds that the owner or operator no longer 
meets the requirements of paragraph (e)(1) of this section, the owner or 
operator must provide alternate financial assurance that meets the 
requirements of this section.
    (3) Calculation of costs to be assured. When calculating the current 
cost estimates for closure, post-closure care, 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 paragraph (e), the owner or operator must include cost estimates 
required for municipal solid waste management facilities under this 
part, as well as cost estimates required for the following environmental 
obligations, if it assures them through a financial test: obligations 
associated with UIC facilities under 40 CFR part 144, petroleum 
underground storage tank facilities under 40 CFR part 280, PCB storage 
facilities under 40 CFR part 761, and hazardous waste treatment, 
storage, and disposal facilities under 40 CFR parts 264 and 265.
    (f) Local government financial test. An owner or operator that 
satisfies the requirements of paragraphs (f)(1) through (3) of this 
section may demonstrate financial assurance up to the amount specified 
in paragraph (f)(4) of this section:
    (1) Financial component. (i) The owner or operator must satisfy 
paragraph (f)(1)(i)(A) or (B) of this section as applicable:
    (A) If the owner or operator has outstanding, rated, general 
obligation bonds that are not secured by insurance, a letter of credit, 
or other collateral or guarantee, it must have a current rating of Aaa, 
Aa, A, or Baa, as issued by Moody's, or AAA, AA, A, or BBB, as issued by 
Standard and Poor's on all such general obligation bonds; or
    (B) The owner or operator must satisfy each of the following 
financial ratios based on the owner or operator's most recent audited 
annual financial statement:
    (1) A ratio of cash plus marketable securities to total expenditures 
greater than or equal to 0.05; and
    (2) A ratio of annual debt service to total expenditures less than 
or equal to 0.20.
    (ii) The owner or operator must prepare its financial statements in 
conformity with Generally Accepted Accounting Principles for governments 
and have its financial statements audited by an independent certified 
public accountant (or appropriate State agency).
    (iii) A local government is not eligible to assure its obligations 
under Sec. 258.74(f) if it:
    (A) Is currently in default on any outstanding general obligation 
bonds; or
    (B) Has any outstanding general obligation bonds rated lower than 
Baa as issued by Moody's or BBB as issued by Standard and Poor's; or
    (C) Operated at a deficit equal to five percent or more of total 
annual revenue in each of the past two fiscal years; or
    (D) Receives an adverse opinion, disclaimer of opinion, or other 
qualified opinion from the independent certified public accountant (or 
appropriate State agency) auditing its financial statement as required 
under paragraph (f)(1)(ii) of this section. However, the Director of an 
approved State may evaluate qualified opinions on a case-by-case basis 
and allow use of the financial test in cases where the Director deems 
the qualification insufficient to warrant disallowance of use of the 
test.
    (iv) The following terms used in this paragraph are defined as 
follows:
    (A) Deficit equals total annual revenues minus total annual 
expenditures;
    (B) Total revenues include revenues from all taxes and fees but does 
not include the proceeds from borrowing or asset sales, excluding 
revenue from funds managed by local government on behalf of a specific 
third party;
    (C) Total expenditures include all expenditures excluding capital 
outlays and debt repayment;
    (D) Cash plus marketable securities is all the cash plus marketable 
securities

[[Page 434]]

held by the local government on the last day of a fiscal year, excluding 
cash and marketable securities designated to satisfy past obligations 
such as pensions; and
    (E) Debt service is the amount of principal and interest due on a 
loan in a given time period, typically the current year.
    (2) Public notice component. The local government owner or operator 
must place a reference to the closure and post-closure care costs 
assured through the financial test into its next comprehensive annual 
financial report (CAFR) after the effective date of this section or 
prior to the initial receipt of waste at the facility, whichever is 
later. Disclosure must include the nature and source of closure and 
post-closure care requirements, the reported liability at the balance 
sheet date, the estimated total closure and post-closure care cost 
remaining to be recognized, the percentage of landfill capacity used to 
date, and the estimated landfill life in years. A reference to 
corrective action costs must be placed in the CAFR not later than 120 
days after the corrective action remedy has been selected in accordance 
with the requirements of Sec. 258.58. For the first year the financial 
test is used to assure costs at a particular facility, the reference may 
instead be placed in the operating record until issuance of the next 
available CAFR if timing does not permit the reference to be 
incorporated into the most recently issued CAFR or budget. For closure 
and post-closure costs, conformance with Government Accounting Standards 
Board Statement 18 assures compliance with this public notice component.
    (3) Recordkeeping and reporting requirements. (i) The local 
government owner or operator must place the following items in the 
facility's operating record:
    (A) A letter signed by the local government's chief financial 
officer that:
    (1) Lists all the current cost estimates covered by a financial 
test, as described in paragraph (f)(4) of this section;
    (2) Provides evidence and certifies that the local government meets 
the conditions of paragraphs (f)(1)(i), (f)(1)(ii), and (f)(1)(iii) of 
this section; and
    (3) Certifies that the local government meets the conditions of 
paragraphs (f)(2) and (f)(4) of this section.
    (B) The local government's independently audited year-end financial 
statements for the latest fiscal year (except for local governments 
where audits are required every two years where unaudited statements may 
be used in years when audits are not required), including the 
unqualified opinion of the auditor who must be an independent, certified 
public accountant or an appropriate State agency that conducts 
equivalent comprehensive audits;
    (C) A report to the local government from the local government's 
independent certified public accountant (CPA) or the appropriate State 
agency based on performing an agreed upon procedures engagement relative 
to the financial ratios required by paragraph (f)(1)(i)(B) of this 
section, if applicable, and the requirements of paragraphs (f)(1)(ii) 
and (f)(1)(iii) (C) and (D) of this section. The CPA or State agency's 
report should state the procedures performed and the CPA or State 
agency's findings; and
    (D) A copy of the comprehensive annual financial report (CAFR) used 
to comply with paragraph (f)(2) of this section or certification that 
the requirements of General Accounting Standards Board Statement 18 have 
been met.
    (ii) The items required in paragraph (f)(3)(i) of this section must 
be placed in the facility operating record as follows:
    (A) In the case of closure and post-closure care, either before the 
effective date of this section, which is April 9, 1997, or prior to the 
initial receipt of waste at the facility, whichever is later, or
    (B) In the case of corrective action, not later than 120 days after 
the corrective action remedy is selected in accordance with the 
requirements of Sec. 258.58.
    (iii) After the initial placement of the items in the facility's 
operating record, the local government owner or operator must update the 
information and place the updated information in the operating record 
within 180 days

[[Page 435]]

following the close of the owner or operator's fiscal year.
    (iv) The local government owner or operator is no longer required to 
meet the requirements of paragraph (f)(3) of this section when:
    (A) The owner or operator substitutes alternate financial assurance 
as specified in this section; or
    (B) The owner or operator is released from the requirements of this 
section in accordance with Sec. 258.71(b), 258.72(b), or 258.73(b).
    (v) A local government must satisfy the requirements of the 
financial test at the close of each fiscal year. If the local government 
owner or operator no longer meets the requirements of the local 
government financial test it must, within 210 days following the close 
of the owner or operator's fiscal year, obtain alternative financial 
assurance that meets the requirements of this section, place the 
required submissions for that assurance in the operating record, and 
notify the State Director that the owner or operator no longer meets the 
criteria of the financial test and that alternate assurance has been 
obtained.
    (vi) The Director of an approved State, based on a reasonable belief 
that the local government owner or operator may no longer meet the 
requirements of the local government financial test, may require 
additional reports of financial condition from the local government at 
any time. If the Director of an approved State finds, on the basis of 
such reports or other information, that the owner or operator no longer 
meets the requirements of the local government financial test, the local 
government must provide alternate financial assurance in accordance with 
this section.
    (4) Calculation of costs to be assured. The portion of the closure, 
post-closure, and corrective action costs for which an owner or operator 
can assure under this paragraph is determined as follows:
    (i) If the local government owner or operator does not assure other 
environmental obligations through a financial test, it may assure 
closure, post-closure, and corrective action costs that equal up to 43 
percent of the local government's total annual revenue.
    (ii) If the local government assures other environmental obligations 
through a financial test, including those associated with UIC facilities 
under 40 CFR 144.62, petroleum underground storage tank facilities under 
40 CFR Part 280, PCB storage facilities under 40 CFR Part 761, and 
hazardous waste treatment, storage, and disposal facilities under 40 CFR 
Parts 264 and 265, it must add those costs to the closure, post-closure, 
and corrective action costs it seeks to assure under this paragraph. The 
total that may be assured must not exceed 43 percent of the local 
government's total annual revenue.
    (iii) The owner or operator must obtain an alternate financial 
assurance instrument for those costs that exceed the limits set in 
paragraphs (f)(4) (i) and (ii) of this section.
    (g) Corporate Guarantee. (1) An owner or operator may meet the 
requirements of this section by obtaining a written guarantee. 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. The guarantor must 
meet the requirements for owners or operators in paragraph (e) of this 
section and must comply with the terms of the guarantee. A certified 
copy of the guarantee must be placed in the facility's operating record 
along with copies of the letter from the guarantor's chief financial 
officer and accountants' opinions. 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. If the guarantor is a firm with a 
``substantial business relationship'' with the owner or operator, this 
letter must describe this ``substantial business relationship'' and the 
value received in consideration of the guarantee.
    (2) The guarantee must be effective and all required submissions 
placed in the operating record before the initial receipt of waste or 
before the effective date of the requirements of this section (April 9, 
1997 or October 9, 1997 for

[[Page 436]]

MSWLF units meeting the conditions of Sec. 258.1(f)(1), whichever is 
later, in the case of closure and post-closure care, or in the case of 
corrective action no later than 120 days after the corrective action 
remedy has been selected in accordance with the requirements of Sec. 
258.58.
    (3) The terms of the guarantee must provide that:
    (i) If the owner or operator fails to perform closure, post-closure 
care, and/or corrective action of a facility covered by the guarantee, 
the guarantor will:
    (A) Perform, or pay a third party to perform, closure, post-closure 
care, and/or corrective action as required (performance guarantee); or
    (B) Establish a fully funded trust fund as specified in paragraph 
(a) of this section in the name of the owner or operator (payment 
guarantee).
    (ii) The guarantee will remain in force for as long as the owner or 
operator must comply with the applicable financial assurance 
requirements of this Subpart unless the guarantor sends prior notice of 
cancellation by certified mail to the owner or operator and to the State 
Director. Cancellation may not occur, however, during the 120 days 
beginning on the date of receipt of the notice of cancellation by both 
the owner or operator and the State Director, as evidenced by the return 
receipts.
    (iii) If notice of cancellation is given, the owner or operator 
must, within 90 days following receipt of the cancellation notice by the 
owner or operator and the State Director, obtain alternate financial 
assurance, place evidence of that alternate financial assurance in the 
facility operating record, and notify the State Director. If the owner 
or operator fails to provide alternate financial assurance within the 
90-day period, the guarantor must provide that alternate assurance 
within 120 days of the cancellation notice, obtain alternative 
assurance, place evidence of the alternate assurance in the facility 
operating record, and notify the State Director.
    (4) If a corporate guarantor no longer meets the requirements of 
paragraph (e)(1) of this section, the owner or operator must, within 90 
days, obtain alternative assurance, place evidence of the alternate 
assurance in the facility operating record, and notify the State 
Director. 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.
    (5) The owner or operator is no longer required to meet the 
requirements of this paragraph (g) when:
    (i) The owner or operator substitutes alternate financial assurance 
as specified in this section; or
    (ii) The owner or operator is released from the requirements of this 
section in accordance with Sec. 258.71(b), Sec. 258.72(b), or Sec. 
258.73(b).
    (h) Local government guarantee. An owner or operator may demonstrate 
financial assurance for closure, post-closure, and corrective action, as 
required by Sec. Sec. 258.71, 258.72, and 258.73, by obtaining a 
written guarantee provided by a local government. The guarantor must 
meet the requirements of the local government financial test in 
paragraph (f) of this section, and must comply with the terms of a 
written guarantee.
    (1) Terms of the written guarantee. The guarantee must be effective 
before the initial receipt of waste or before the effective date of this 
section, whichever is later, in the case of closure, post-closure care, 
or no later than 120 days after the corrective action remedy has been 
selected in accordance with the requirements of Sec. 258.58. The 
guarantee must provide that:
    (i) If the owner or operator fails to perform closure, post-closure 
care, and/or corrective action of a facility covered by the guarantee, 
the guarantor will:
    (A) Perform, or pay a third party to perform, closure, post-closure 
care, and/or corrective action as required; or
    (B) Establish a fully funded trust fund as specified in paragraph 
(a) of this section in the name of the owner or operator.
    (ii) The guarantee will remain in force unless the guarantor sends 
notice of cancellation by certified mail to the owner or operator and to 
the State Director. Cancellation may not occur, however, during the 120 
days beginning on the date of receipt of the notice of

[[Page 437]]

cancellation by both the owner or operator and the State Director, as 
evidenced by the return receipts.
    (iii) If a guarantee is cancelled, the owner or operator must, 
within 90 days following receipt of the cancellation notice by the owner 
or operator and the State Director, obtain alternate financial 
assurance, place evidence of that alternate financial assurance in the 
facility operating record, and notify the State Director. If the owner 
or operator fails to provide alternate financial assurance within the 
90-day period, the guarantor must provide that alternate assurance 
within 120 days following the guarantor's notice of cancellation, place 
evidence of the alternate assurance in the facility operating record, 
and notify the State Director.
    (2) Recordkeeping and reporting. (i) The owner or operator must 
place a certified copy of the guarantee along with the items required 
under paragraph (f)(3) of this section into the facility's operating 
record before the initial receipt of waste or before the effective date 
of this section, whichever is later, in the case of closure, post-
closure care, or no later than 120 days after the corrective action 
remedy has been selected in accordance with the requirements of Sec. 
258.58.
    (ii) The owner or operator is no longer required to maintain the 
items specified in paragraph (h)(2) of this section when:
    (A) The owner or operator substitutes alternate financial assurance 
as specified in this section; or
    (B) The owner or operator is released from the requirements of this 
section in accordance with Sec. 258.71(b), 258.72(b), or 258.73(b).
    (iii) If a local government guarantor no longer meets the 
requirements of paragraph (f) of this section, the owner or operator 
must, within 90 days, obtain alternative assurance, place evidence of 
the alternate assurance in the facility operating record, and notify the 
State Director. If the owner or operator fails to obtain alternate 
financial assurance within that 90-day period, the guarantor must 
provide that alternate assurance within the next 30 days.
    (i) State-Approved mechanism. An owner or operator may satisfy the 
requirements of this section by obtaining any other mechanism that meets 
the criteria specified in Sec. 258.74(1), and that is approved by the 
Director of an approved State.
    (j) State assumption of responsibility. If the State Director either 
assumes legal responsibility for an owner or operator's compliance with 
the closure, post-closure care and/or corrective action requirements of 
this part, or assures that the funds will be available from State 
sources to cover the requirements, the owner or operator will be in 
compliance with the requirements of this section. Any State assumption 
of responsibility must meet the criteria specified in Sec. 258.74(l).
    (k) Use of multiple mechanisms. An owner or operator may demonstrate 
financial assurance for closure, post-closure, and corrective action, as 
required by Sec. Sec. 258.71, 258.72, and 258.73 by establishing more 
than one mechanism per facility, except that mechanisms guaranteeing 
performance rather than payment, may not be combined with other 
instruments. The mechanisms must be as specified in paragraphs (a), (b), 
(c), (d), (e), (f), (g), (h), (i), and (j) of this section, except that 
financial assurance for an amount at least equal to the current cost 
estimate for closure, post-closure care, and/or corrective action may be 
provided by a combination of mechanisms rather than a single mechanism.
    (l) The language of the mechanisms listed in paragraphs (a), (b), 
(c), (d), (e), (f), (g), (h), (i), and (j) of this section must ensure 
that the instruments satisfy the following criteria:
    (1) The financial assurance mechanisms must ensure that the amount 
of funds assured is sufficient to cover the costs of closure, post-
closure care, and corrective action for known releases when needed;
    (2) The financial assurance mechanisms must ensure that funds will 
be available in a timely fashion when needed;
    (3) The financial assurance mechanisms must be obtained by the owner 
or operator by the effective date of these requirements or prior to the 
initial receipt of solid waste, whichever is later, in the case of 
closure and post-closure care, and no later that 120 days

[[Page 438]]

after the corrective action remedy has been selected in accordance with 
the requirements of Sec. 258.58, until the owner or operator is 
released from the financial assurance requirements under Sec. Sec. 
258.71, 258.72 and 258.73.
    (4) The financial assurance mechanisms must be legally valid, 
binding, and enforceable under State and Federal law.

[56 FR 51029, Oct. 9, 1991, as amended at 58 FR 51547, Oct. 1, 1993; 60 
FR 40105, Aug. 7, 1995; 60 FR 52342, Oct. 6, 1995; 61 FR 60337, Nov. 27, 
1996; 63 FR 17729, Apr. 10, 1998]