Kan. Admin. Regs. § 28-18a-23

Current through Register Vol. 43, No. 41, October 10, 2024

Section 28-18a-23 - Financial assurance for swine facility closure

(a) On or before July 1, 1999 and annually thereafter before January 1 of each year, each operator of a swine facility with an animal unit capacity of 3,725 or more shall provide evidence, satisfactory to the department, that the operator has the financial ability to cover the cost of closure of the swine facility, as required by the department.

(b) For new construction or new expansion of a swine facility with a proposed animal unit capacity of 3,725 or more, the swine operator shall provide evidence, satisfactory to the department, that the operator has the financial ability to cover the cost of closure of the proposed new construction or expansion at the time the application is submitted to the department for review.

(c) Each operator of a swine facility with an animal unit capacity of 3,725 or more shall submit, as a part of the evidence provided to the department, a detailed written estimate in current dollars of the cost to close the swine facility in a manner acceptable to the department. The estimate shall be prepared by a professional engineer or consultant approved by the department.

(d) Each operator shall develop an estimate of the cost to close the swine facility as follows:

(1) The estimate shall be based on the cost charged by a third party to collect and dispose of all swine or other process wastes stored or retained at the swine facility, excluding the swine waste-retention lagoons or ponds, at a specifically identified off-site application area.

(2) All waste management and pollution control system components shall be assumed to be at maximum capacity.

(3) The costs attributable to the swine waste-retention lagoons or ponds shall be excluded from the estimate.

(e) Each swine operator shall increase the closure cost estimate and the amount of financial assurance provided if any change in the facility closure plan or in operation increases the maximum cost of closure at any time.

(f) Each swine operator shall provide continuous financial assurance coverage for closure until the department determines the facility closure to be acceptable.

(g) Mechanisms used to demonstrate financial assurance shall ensure that the funds necessary to meet the cost to close the swine facility, pursuant to K.A.R. 28-18-22 (d), are accessible to the department in a timely fashion when needed. In establishing financial assurance for the facility closure, swine operators shall utilize any of the following options:

(1) Trust fund;

(2) surety bond guaranteeing payment or performance;

(3) letter of credit;

(4) insurance;

(5) self-insurance; or

(6) use of multiple mechanisms.

(h) Each operator that utilizes a trust fund shall meet the following requirements.

(1) Provide for a trustee. The trustee 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. A copy of the trust agreement shall be provided to the department.

(2) Provide authority for the department or person authorized by the department to implement the closure to request and obtain from the trustee reimbursement for closure expenditures. Requests for reimbursement shall be granted by the trustee, to the limit of the funds in the trust fund and proper documentation of the incurred costs are provided.

(3) Maintain the trust fund. The operator shall maintain the trust fund until an alternative financial assurance mechanism is approved by the department and is in place, or shall cease operations and close out the facility before the trust fund is terminated or if the operator is no longer required to demonstrate financial responsibility.

(i) Each swine operator that utilizes a surety bond guaranteeing payment or performance shall meet all of the following requirements:

(1) Obtain a surety bond, with the penal sum of the bond in an amount at least equal to the estimated facility closure cost;

(2) provide the department with a copy of the bond;

(3) obtain the bond from a company that is licensed to issue bonds in Kansas;

(4) provide in the bond that the surety shall become liable on the bond obligation when the operator fails to perform as guaranteed by the bond;

(5) establish a standby trust fund;

(6) provide that payments made under the terms of the bond shall be deposited by the surety directly into the standby trust fund. Payments from the trust fund shall be made by the trustee to the limit of the bond amount when proper documentation of the incurred costs are provided; and

(7) obtain a bond providing that the surety may cancel the bond by sending notice of cancellation by certified mail to the operator and the department at least 120 days in advance of the cancellation. If the surety cancels the bond, the facility shall obtain alternative financial assurance before the cancellation or shall cease operations and close out the facility before the cancellation date of the bond, unless the operator is no longer required to demonstrate financial responsibility.

(j) Each swine operator that utilizes a letter of credit shall meet the following requirements:

(1) Obtain an irrevocable standby letter of credit by which the issuing institution shall be an entity that has authority to issue letters of credit and whose letter of credit operations are regulated by a federal or state agency. The letter of credit shall be in a form that constitutes an unconditional promise to pay and shall be in a form negotiable by the department;

(2) provide the department with a copy of the letter of credit. Information contained in the letter of credit or provided by the operator shall include the name, location, and permit number of the facility and the amount of funds assured;

(3) provide an irrevocable letter of credit issued for a period of at least one year in an amount at least equal to the current cost estimate for closure of the facility. The letter of credit shall provide that the expiration date shall be automatically extended for a period of at least one year, unless the issuing institution has canceled the letter of credit by sending notice of cancellation by certified mail to the operator and department 120 days in advance of cancellation. If the letter of credit is canceled by the issuing institution, the owner shall obtain alternative financial assurance before the cancellation or shall cease operations and close out the facility before the cancellation date of the letter of credit, unless the operator is no longer required to demonstrate financial responsibility; and

(4) cancel the letter of credit only if alternative financial assurance, approved by the department, is substituted or if the operator is no longer required to demonstrate financial responsibility.

(k) Each operator that utilizes insurance shall meet all of the following requirements:

(1) Obtain insurance coverage for a period of at least one year in an amount at least equal to the current cost estimate for closure of the facility;

(2) obtain insurance from an insurer authorized to sell insurance in Kansas;

(3) provide the department with a copy of the insurance policy;

(4) ensure that the insurance policy guarantees that funds shall be available to close the facility in the event the operator is unable or unwilling to close the facility in accordance with the facility closure plan approved by the department;

(5) ensure that the insurance policy provides that the insurer is responsible for the payment of the department or person authorized to close the facility. Payments by the insurer for the policy shall be made by the insurer to the limit of the policy amount when proper documentation of the incurred costs are provided;

(6) ensure that the insurance policy provides that the insurer cannot cancel, terminate, or fail to renew the policy except for failure to pay the premium. The automatic renewal of the policy shall, 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 operator and the department 120 days in advance of the cancellation;

(7) if the insurer cancels the policy, obtain alternative financial assurance before the cancellation, or cease operations and close out the facility before the cancellation date of the insurance policy, unless the operator is no longer required to demonstrate financial responsibility; and

(8) cancel the insurance policy only if alternative financial assurance, approved by the department, is substituted or if the operator is no longer required to demonstrate financial responsibility.

(l) To establish evidence of financial ability for self-insurance, each swine operator shall meet the following requirements:

(1) Submit a financial statement, prepared by a certified public accountant, listing tangible assets and total liabilities of the swine operator. The assets shall not include the value of the swine at the facility. The financial statement shall include a general release, by the swine operator, providing the department with authorization for verification with banks or other financial institutions; and

(2) provide an indication on the financial statement of whether or not the tangible assets, less the total liabilities, are satisfactory to cover the estimated cost of closure. The financial statement shall note the estimated cost of closure utilized.

(m) Each swine operator that utilizes multiple financial assurance mechanisms shall meet the following requirements:

(1) Use only the financial assurance mechanisms provided for in this regulation; and

(2) provide that the total coverage of all the financial mechanisms utilized provides an amount at least equal to the current cost estimate for closure of the facility.

Kan. Admin. Regs. § 28-18a-23

Authorized by K.S.A. 1997 Supp. 65-171d, as amended by L. 1998, ch. 143, sec. 1; implementing L. 1998, ch. 143, sec. 12 [K.S.A. 1998 Supp. 65-1,189] ; effective Jan. 15, 1999.